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EXHIBIT 10.29    
  

AMENDED
AND RESTATED CREDIT AGREEMENT 

dated
as of May 7, 2001, 

among

ACTIVISION, INC.,

and certain of its Domestic Subsidiaries 

THE
LENDERS NAMED HEREIN, 

and 

PNC
BANK, NATIONAL ASSOCIATION,

as Administrative Agent, Collateral Agent and Issuing Bank 

 
 

TABLE OF CONTENTS    
  

	ARTICLE I	 	1
	

SECTION 1.01.	
 	

Defined Terms	
 	

1
	SECTION 1.02.	 	Terms Generally	 	20
	

ARTICLE II	
 	

20
	

SECTION 2.01.	
 	

Commitments; Formula Amount	
 	

20
	SECTION 2.02.	 	Loans	 	21
	SECTION 2.03.	 	Procedure for Revolving Credit Borrowings	 	22
	SECTION 2.04.	 	Disbursement of Loans	 	23
	SECTION 2.05.	 	Manner of Borrowing and Payment	 	23
	SECTION 2.06.	 	Evidence of Debt	 	24
	SECTION 2.07.	 	Statement of Account	 	25
	SECTION 2.08.	 	Fees	 	25
	SECTION 2.09.	 	Interest on Loans	 	26
	SECTION 2.10.	 	Default Interest	 	26
	SECTION 2.11.	 	Termination and Reduction of Commitments	 	26
	SECTION 2.12.	 	Repayment of Borrowings	 	27
	SECTION 2.13.	 	Prepayment	 	27
	SECTION 2.14.	 	Mandatory Prepayments	 	27
	SECTION 2.15.	 	Illegality	 	28
	SECTION 2.16.	 	Increased Costs	 	28
	SECTION 2.17.	 	Basis For Determining Interest Rate Inadequate or Unfair	 	29
	SECTION 2.18.	 	Capital Adequacy	 	30
	SECTION 2.19.	 	Indemnity	 	30
	SECTION 2.20.	 	Pro Rata Treatment	 	31
	SECTION 2.21.	 	Sharing of Setoffs	 	31
	SECTION 2.22.	 	Payments	 	31
	SECTION 2.23.	 	Taxes	 	31
	SECTION 2.24.	 	Assignment of Commitments Under Certain Circumstances; Duty to Mitigate	 	32
	SECTION 2.25.	 	Defaulting Lender	 	33
	SECTION 2.26.	 	Letters of Credit	 	34
	

ARTICLE III	
 	

40
	

SECTION 3.01.	
 	

Organization; Powers	
 	

40
	SECTION 3.02.	 	Authorization	 	40
	SECTION 3.03.	 	Enforceability	 	41
	SECTION 3.04.	 	Governmental Approvals	 	41
	SECTION 3.05.	 	Financial Statements	 	41
	SECTION 3.06.	 	No Material Adverse Change	 	41
	SECTION 3.07.	 	Title to Properties; Possession Under Leases	 	42
	SECTION 3.08.	 	Subsidiaries	 	42
	SECTION 3.09.	 	Litigation; Compliance with Laws	 	42
	SECTION 3.10.	 	Agreements	 	42
	SECTION 3.11.	 	Federal Reserve Regulations	 	42
	SECTION 3.12.	 	Investment Company Act; Public Utility Holding Company Act	 	43
	SECTION 3.13.	 	Use of Proceeds	 	43
	SECTION 3.14.	 	Tax Returns	 	43
	SECTION 3.15.	 	No Material Misstatements	 	43
	SECTION 3.16.	 	Employee Benefit Plans	 	43
	SECTION 3.17.	 	Environmental Matters	 	44
	SECTION 3.18.	 	Insurance	 	44

	SECTION 3.19.	 	Security Documents	 	44
	SECTION 3.20.	 	Location of Real Property and Leased Premises	 	45
	SECTION 3.21.	 	Labor Matters	 	45
	SECTION 3.22.	 	Solvency	 	46
	SECTION 3.23.	 	Year 2000	 	46
	SECTION 3.24.	 	Letters of Credit	 	46
	

ARTICLE IV	
 	

46
	

SECTION 4.01.	
 	

All Credit Events	
 	

46
	SECTION 4.02.	 	Restatement Effective Date	 	47
	

ARTICLE V	
 	

48
	

SECTION 5.01.	
 	

Existence; Businesses and Properties	
 	

48
	SECTION 5.02.	 	Insurance	 	48
	SECTION 5.03.	 	Obligations and Taxes	 	49
	SECTION 5.04.	 	Financial Statements, Reports, etc.	 	49
	SECTION 5.05.	 	Litigation and Other Notices	 	51
	SECTION 5.06.	 	Employee Benefits	 	52
	SECTION 5.07.	 	Maintaining Records; Access to Properties and Inspections	 	52
	SECTION 5.08.	 	Use of Proceeds	 	52
	SECTION 5.09.	 	Compliance with Environmental Laws	 	52
	SECTION 5.10.	 	Preparation of Environmental Reports	 	52
	SECTION 5.11.	 	Audits	 	53
	SECTION 5.12.	 	Further Assurances	 	53
	SECTION 5.13	 	Government Receivables	 	53
	SECTION 5.14	 	Intellectual Property	 	53
	SECTION 5.15	 	Blocked Accounts	 	54
	SECTION 5.16	 	Receivables	 	55
	

ARTICLE VI	
 	

56
	

SECTION 6.01.	
 	

Indebtedness	
 	

57
	SECTION 6.02.	 	Liens	 	57
	SECTION 6.03.	 	Sale and Lease-Back Transactions	 	58
	SECTION 6.04.	 	Investments, Loans and Advances	 	58
	SECTION 6.05.	 	Mergers, Consolidations, Sales of Assets and Acquisitions	 	61
	SECTION 6.06.	 	Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends	 	62
	SECTION 6.07.	 	Transactions with Affiliates	 	62
	SECTION 6.08.	 	[Intentionally omitted]	 	62
	SECTION 6.09.	 	Interest Coverage Ratio	 	62
	SECTION 6.10.	 	Fixed Charge Coverage Ratio	 	63
	SECTION 6.11.	 	[Intentionally omitted]	 	63
	SECTION 6.12.	 	[Intentionally omitted]	 	63
	SECTION 6.13.	 	Minimum Tangible Net Worth	 	63
	SECTION 6.14.	 	Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-laws and Certain Other Agreements, etc	 	63
	SECTION 6.15.	 	Limitation on Creation of Subsidiaries	 	63
	SECTION 6.16.	 	Business	 	64
	SECTION 6.17.	 	Fiscal Year; Accounting Changes	 	64
	

ARTICLE VII	
 	

64
	

ARTICLE VIII	
 	

66
	

ARTICLE IX	
 	

69

	

SECTION 9.01.	
 	

Notices	
 	

69
	SECTION 9.02.	 	Survival of Agreement	 	70
	SECTION 9.03.	 	Binding Effect	 	70
	SECTION 9.04.	 	Successors and Assigns	 	70
	SECTION 9.05.	 	Expenses; Indemnity	 	73
	SECTION 9.06.	 	Right of Setoff	 	74
	SECTION 9.07.	 	Applicable Law	 	74
	SECTION 9.08.	 	Waivers; Amendment	 	75
	SECTION 9.09.	 	[Intentionally Deleted]	 	75
	SECTION 9.10.	 	Entire Agreement	 	75
	SECTION 9.11.	 	WAIVER OF JURY TRIAL; CONSEQUENTIAL DAMAGES	 	76
	SECTION 9.12.	 	Severability	 	76
	SECTION 9.13.	 	Counterparts	 	76
	SECTION 9.14.	 	Headings	 	76
	SECTION 9.15.	 	Jurisdiction; Consent to Service of Process	 	76
	SECTION 9.16.	 	Confidentiality	 	77
	SECTION 9.17.	 	Delivery of Notes	 	77

 
 

AMENDED AND RESTATED CREDIT AGREEMENT    
  

    AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 7, 2001, among ACTIVISION PUBLISHING, INC.,
a Delaware corporation ("Activision"), ACTIVISION, INC., a Delaware corporation ("Activision
Holdings"), ACTIVISION VALUE PUBLISHING, INC., a Minnesota corporation (formerly Head Games Publishing, Inc.)
("Value") and EXPERT SOFTWARE, INC., a Delaware corporation ("Expert"; each of Activision,
Activision Holdings, Value and Expert, a "Borrower" and collectively, "Borrowers"), the Lenders (as
defined in Article I), PNC BANK, NATIONAL ASSOCIATION, a national banking association, as issuing bank (in such capacity, the "Issuing Bank"),
and as administrative agent (in such capacity, the "Administrative Agent") and collateral agent (in such capacity, the
"Collateral Agent") for the Lenders. 

    WHEREAS,
the Borrowers, certain financial institutions, including the Lenders, and the Administrative Agent are parties to the Existing Credit Agreement (such term and each other
capitalized term used but not defined herein having the meaning given it in Article I), and wish to amend and restate the Existing Credit Agreement on the terms set forth herein; 

    WHEREAS,
in connection with such amendment and restatement, certain lenders under the Existing Credit Agreement and the Syndication Agent (as defined in the Existing Credit Agreement)
will cease to be lenders to the Borrowers, the Term Loans (under and as defined in the Existing Credit Agreement) will be repaid in full, and the Total Revolving Credit Commitment will be reduced on
the Restatement Effective Date. 

    Accordingly,
the parties hereto agree as follows: 

 
 

ARTICLE I    
    
    Definitions

    SECTION
1.01.  Defined Terms.  As used in this Agreement, the following terms shall have the meanings
specified below: 

    "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. 

    "ABR Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance
with the provisions of Article II. 

    "Acquired Debt" shall mean Indebtedness of an Acquired Entity existing at the time of a Permitted Acquisition which was not incurred in
contemplation of such Permitted Acquisition, is Indebtedness permitted under Section 6.01 and, if owed by a Domestic Subsidiary, the terms of such Indebtedness permit the Domestic Subsidiary to
become a party to the Subsidiary Guarantee Agreement, the Pledge Agreement and the Security Agreement, to grant to the Collateral Agent a first priority Lien on its assets and to make loans, dividends
and other distributions to Activision and, if owed by a Foreign Subsidiary, is not Guaranteed by any Loan Party. 

    "Acquired Entity" shall have the meaning set forth in Section 6.04(h). 

    "Activision" shall mean Activision Publishing, Inc., a Delaware corporation, formerly known as Activision, Inc. 

    "Activision Holdings" shall mean Activision, Inc., a Delaware corporation, formerly known as Activision Holdings, Inc. 

    "Adjusted EBITDA" of a person for any period shall mean (a) EBITDA for such period  plus (b) the aggregate amortization with respect to Development Costs for
such period which are not otherwise included as amortization expenses
in calculating EBITDA in accordance with GAAP, minus (c) the principal amount of loans made during such period to officers and employees
permitted under Section 6.04(n), to the extent not included in calculating EBITDA in accordance with GAAP. 

 

    "Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. 

    "Administrative Questionnaire" shall mean an Administrative Questionnaire in such form as may be supplied from time to time by the
Administrative Agent. 

    "Advance Rates" shall have the meaning assigned to such term in Section 2.01(a). 

    "Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the person specified; provided, however, that for purposes of
Section 6.07, the term "Affiliate" shall also include any person that directly or indirectly owns 5% or more of any class of Equity Interests of the person specified or that is an officer or
director of the person specified. 

    "Agent Fees" shall have the meaning assigned to such term in Section 2.08(b). 

    "Aggregate Revolving Credit Exposure" shall mean the aggregate amount of the Lenders' Revolving Credit Exposures. 

    "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the greater of (a) the Base Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Base Rate or the
Federal Funds Rate shall be effective on the effective date of such change in the Base Rate or the Federal Funds Rate, respectively. The term "Base
Rate" shall mean the base commercial lending rate of PNC as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the
effective date of any change in such rate. This rate of interest is determined from time to time by PNC as a means of pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest actually charged by PNC to any particular class or category of customers of PNC. 

    "Asset Sale" shall mean the sale, transfer or other disposition (by way of merger or otherwise, and including any casualty event or
condemnation that results in the receipt of any insurance or condemnation proceeds) by any Borrower or any of the Subsidiaries to any person other than a Borrower or any Subsidiary Guarantor of
(a) any Equity Interests of any of the Subsidiaries or (b) any other assets of a Borrower or any of its Subsidiaries (other than (i) inventory, excess, damaged, obsolete or worn
out assets, scrap and Permitted Investments, in each case disposed of in the ordinary course of business, (ii) assets transferred for an aggregate purchase price not exceeding $1,000,000 in any
four
consecutive fiscal quarters of the Borrowers, (iii) dispositions between or among Foreign Subsidiaries or (iv) license, distribution or development agreements entered into in the
ordinary course of business which do not transfer all or substantially all of the rights owned by a Borrower or its Subsidiary), provided that any asset
sale or series of related asset sales described in clause (b) above having a value not in excess of $250,000 shall be deemed not to be an "Asset Sale" for purposes of this Agreement. 

    "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the
Administrative Agent, in the form approved by the Administrative Agent. 

2

 

    "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America. 

    "Blocked Accounts" shall have the meaning set forth in Section 5.15. 

    "Borrower Guarantee Agreement" shall mean the Borrower Guarantee Agreement substantially in the form of Exhibit M to the
Existing Credit Agreement, made by the Borrowers in favor of the Collateral Agent for the benefit of the Secured Parties. 

    "Borrowers" shall mean Activision Holdings, Activision, Value, Expert and any other Subsidiary of Activision Holdings which becomes a
Borrower hereunder. 

    "Borrowers' Account" shall have the meaning given such term in Section 2.07. 

    "Borrowing" shall mean a group of Loans of a single Type made by the Lenders on a single date and as to which a single Interest Period
is in effect. 

    "Borrowing Agent" shall mean Activision. 

    "Borrowing Base Availability" shall mean that amount determined under clauses (i) and (ii)(A) of the definition of
Formula Amount contained in Section 2.01(a). 

    "Borrowing Request" shall mean a request by the Borrowing Agent on behalf of a Borrower in accordance with the terms of
Section 2.03 and substantially in the form of Exhibit C to the Existing Credit Agreement, or such other form as shall be approved by the Administrative Agent. 

    "Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by
law to close; provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London and New York interbank markets. 

    "Capital Expenditures" shall mean, for any period and with respect to any person, the aggregate amount of all expenditures during such
period by such person that (a) would be classified as capital expenditures in accordance with GAAP or are made in property that is the subject of a synthetic lease to which such person becomes
a lessee party during such period but excluding any such expenditure made (i) to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss,
destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds or condemnation awards relating to any such damage, loss, destruction or condemnation,
(ii) with proceeds from the sale or exchange of property to the extent utilized to purchase functionally equivalent property or equipment or (iii) as the purchase price of any Permitted
Acquisition; and (b) constitute Development Costs. 

    "Capital Lease Obligations" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance
sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. 

    "Cash Collateral" shall mean money or Permitted Investments in the possession of the Collateral Agent (including in the Investment
Account) as collateral hereunder or under any other Loan Document and in which the Collateral Agent has a first priority perfected Lien. 

    "Cash Components" shall mean, with respect to any Permitted Acquisition, the cash expenditures and (without duplication) Indebtedness
(including Acquired Indebtedness) incurred in connection therewith. 

    "Casualty" shall have the meaning set forth in each of the Mortgages. 

3

 

    "Casualty Proceeds" shall have the meaning set forth in each of the Mortgages. 

    "Change in Control" shall be deemed to have occurred if (a) any person or group (within the meaning of
Rule 13d-5 of the Securities Exchange Act of 1934, as amended, as in effect on the date hereof) shall own directly or indirectly, beneficially or of record, shares representing more
than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Activision Holdings, (b) a majority of the seats (other than vacant seats) on the
board of directors of Activision Holdings shall at any time be occupied by persons who were neither (i) nominated by the board of directors of Activision Holdings, nor (ii) appointed by
directors so nominated, or (c) any change in control (or similar event, however denominated) with respect to Activision Holdings or any of its Subsidiaries shall occur under and as defined in
any indenture or agreement in respect of Indebtedness in an aggregate principal amount in excess of $2,000,000 to which Activision Holdings or any of its Subsidiaries is a party, or
(d) Activision ceases to be a wholly-owned Subsidiary of Activision Holdings, or (e) any Subsidiary of Activision which is a Borrower or UK Sub ceases to be a wholly-owned Subsidiary of
Activision. 

    "Change in Law" shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement,
(b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by
any Lender or the Issuing Bank (or, for purposes of Section 2.15, by any lending office of such Lender or by such Lender's or the Issuing Bank's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. 

    "Closing Date" shall mean June 22, 1999. 

    "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 

    "Collateral" shall mean all the "Collateral" as defined in any Security Document and shall also include any Mortgaged Properties, but
shall exclude "Margin Stock" (as defined in Regulation U of the Board). 

    "Commitment" shall mean, with respect to any Lender, such Lender's Revolving Credit Commitment. 

    "Commitment Fee" shall have the meaning assigned to such term in Section 2.08(a). 

    "Commitment Increase" shall have the meaning assigned to such term in Section 2.30. 

    "Condemnation" shall have the meaning set forth in each of the Mortgages. 

    "Condemnation Proceeds" shall have the meaning set forth in each of the Mortgages. 

    "Confidential Information Memorandum" shall mean the Confidential Information Memorandum of Activision dated April 1999. 

    "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "Controlling" and  "Controlled" shall have
meanings correlative thereto. 

    "Convertible Subordinated Note Documents" shall mean the Convertible Subordinated Notes, the Convertible Subordinated
Note Indenture and all other documents executed and delivered with respect to the Convertible Subordinated Notes or the Convertible Subordinated Note Indenture. 

    "Convertible Subordinated Note Indenture" shall mean the Indenture dated as of December 22, 1997, between Activision and
State Street Bank and Trust Company of California, N.A., as trustee, as 

4

 

in effect on the Closing Date and as thereafter amended from time to time in accordance with the requirements hereof and thereof. 

    "Convertible Subordinated Notes" shall mean Activision's 63/4% Convertible Subordinated Notes due 2005 issued pursuant
to the Convertible Subordinated Note Indenture. 

    "Credit Event" shall have the meaning assigned to such term in Section 4.01. 

    "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. 

    "Default Rate" shall have the meaning set forth in Section 2.10. 

    "Defaulting Lender" shall have the meaning set forth in Section 2.25(a). 

    "Depository Accounts" shall have the meaning set forth in Section 5.15. 

    "Development Costs" shall mean prepaid or guaranteed royalties paid to independent software developers, license fees paid to holders of
intellectual property rights and expenses incurred for product development, in each case to the extent such amounts are capitalized in accordance with the Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed". 

    "Dilution Reserve" shall mean the percentage of dilution of Receivables for the most recent 12 months as determined in the most
recent audit by the Administrative Agent less 5% multiplied by the amount of Eligible Receivables. 

    "Dollars" or "$" shall mean lawful money of the United States of America. 

    "Domestic Subsidiaries" shall mean all Subsidiaries incorporated or organized under the laws of the United States of America, any State
thereof or the District of Columbia. 

    "EBITDA" for any person for any period shall mean the Net Income of such person for such period, to which shall be added back, to the
extent deducted in calculating Net Income for such period (a) the Interest Expense of such person for such period, (b) all charges against income for foreign, Federal, state and local
income taxes of such person for such period, (c) the aggregate depreciation expense of such person for such period, and (d) the aggregate amortization expense of such person for such
period, each such component determined in accordance with GAAP. 

    "Eligible Inventory" shall mean and include, with respect to each Borrower, Inventory owned by such Borrower (excluding (a) work
in process, (b) Inventory not located at a facility owned or leased by a Borrower in the U.S. or a warehouse located in the U.S., (c) Inventory on consignment and (d) components),
valued at the lower of cost or market value, determined on a first-in-first-out basis, which is not, in the Administrative Agent's Permitted Discretion, obsolete,
slow moving or unmerchantable and which the Administrative Agent, in its Permitted Discretion, shall not deem ineligible Inventory, based on such considerations as the Administrative Agent may from
time to time in its Permitted Discretion deem appropriate, including, without limitation, whether the Inventory is subject to a perfected, first priority security interest in favor of the Collateral
Agent, subject to no
other Lien, and whether the Inventory conforms to all standards imposed by any governmental agency, division or department thereof which has regulatory authority over such goods or the use or sale
thereof applicable. Eligible Inventory shall include all Inventory in-transit for which title has passed to the Borrower, which is insured to the full value thereof, under policies for
which the Collateral Agent is a loss payee and for which the Administrative Agent shall have in its possession (a) all negotiable bills of lading properly endorsed and (b) all
non-negotiable bills of lading issued in the Administrative Agent's name. 

5

 

    "Eligible Receivables" shall mean and include with respect to each Borrower each Receivable of such Borrower arising in the ordinary
course of such Borrower's business and which the Administrative Agent, in its Permitted Discretion, shall deem to be an Eligible Receivable, based on such considerations as the Administrative Agent
may from time to time in its Permitted Discretion deem appropriate. A Receivable shall not be deemed eligible unless such Receivable is subject to the Collateral Agent's first priority perfected
security interest and no other Lien (other than a Permitted Lien on terms acceptable to the Administrative Agent in its Permitted Discretion and for which adequate reserves have been established), and
is evidenced by an invoice or other documentary evidence satisfactory to the Administrative Agent. In addition, no Receivable shall be an Eligible Receivable if: 

    (a) it
arises out of a sale made by a Borrower to an Affiliate of such Borrower or to a Person controlled by an Affiliate of such Borrower; 

    (b) it
is due or unpaid more than one hundred twenty (120) days after the original invoice date or more than sixty (60) days after the due date; 

    (c) fifty
percent (50%) or more of the Receivables from such Customer are not deemed Eligible Receivables hereunder; 

    (d) any
covenant, representation or warranty contained in this Agreement or the Security Agreement with respect to such Receivable has been breached in any material
respect; 

    (e) the
Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now
or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing; 

    (f)  the
sale is to a Customer not domiciled in the United States of America or Canada unless the sale is on letter of credit, guaranty or acceptance terms, or backed
by credit insurance, in each case acceptable to the Administrative Agent in its Permitted Discretion; 

    (g) the
sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or
any other similar repurchase or return basis (other than return rights customary in the Borrower's business) or is evidenced by chattel paper; 

    (h) the
Administrative Agent believes, in its Permitted Discretion, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer's financial inability to pay; 

    (i)  the
Customer is the United States of America or Canada, any state or province or any department, agency or instrumentality of any of them, unless the Borrower
assigns its right to payment of such Receivable to the Administrative Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727  et seq. and 41 U.S.C.
Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances; 

    (j)  the
goods giving rise to such Receivable have not been shipped and delivered to the Customer or the services giving rise to such Receivable have not been fully
performed by the Borrower or the Receivable otherwise does not represent a final sale; 

6

  

    (k) the
Receivables of the Customer exceed a credit limit determined by the Administrative Agent, in its Permitted Discretion, to the extent such Receivable exceeds
such limit; 

    (l)  the
Receivable is subject to any unwaived offset, deduction, defense, dispute, or counterclaim, the Customer is also a creditor or supplier of a Borrower or the
Receivable is contingent in any respect or for any reason; 

    (m) the
Borrower has made any agreement with the Customer for any deduction therefrom, except for discounts or allowances made in the ordinary course of business, all
of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto; 

    (n) any
return, rejection or repossession of the merchandise has occurred but only to the extent of the portion of the Receivable relating to the returned, rejected or
repossessed goods; 

    (o) such
Receivable is not payable to a Borrower; 

    (p) such
Receivable is not otherwise satisfactory to the Administrative Agent in its Permitted Discretion; 

    (q) the
Borrower has not observed and complied with all laws of the jurisdiction in which the Customer or the Receivable is located which, if not observed or complied
with, would deny the Borrower access to the courts of such jurisdiction; 

    (r) the
Receivable arises out of sales of Inventory for which the Borrower acts solely as a collection agent; 

    (s) Receivables
from original equipment manufacturers or licensees unless such Receivables arise out of an invoice issued for shipment of goods on normal trade terms;
or 

    (t)  the
Receivable is owed by Kaboom. 

    "environment" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land
surface or subsurface strata, the workplace or as otherwise defined in any Environmental Law. 

    "Environmental Claim" shall mean any written accusation, allegation, notice of violation, claim, demand, order, directive, cost
recovery action or other cause of action by, or on behalf of, any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or
death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or
non-accidental Releases), (b) exposure to any Hazardous Material, (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material or
(d) the violation or alleged violation of any Environmental Law or Environmental Permit. 

    "Environmental Law" shall mean any and all applicable present and future treaties, laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of
natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901  et seq., the Federal
Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. § 1251 et
seq., the Clean Air Act 

7

 

of 1970, as amended 42 U.S.C. § 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. § 2601  et seq., the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. § 651 et
seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et
seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. § 300(f) et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. § 5101 et seq., and any similar or implementing state, local or foreign law, and all amendments or regulations
promulgated under any of the foregoing. 

    "Environmental Permit" shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by
or from any Governmental Authority pursuant to any Environmental Law. 

    "Equity Interests" shall mean shares of capital stock, partnership interests, membership interests in a limited liability company,
beneficial interests in a trust or other equity ownership interests in a person. 

    "Equity Issuance" shall mean any issuance or sale by Activision Holdings or any Subsidiary of any Equity Interests of Activision
Holdings or any Subsidiary, as applicable, or any obligations convertible into or exchangeable for, or giving any Person a right, option or warrant to acquire, such Equity Interests or such
convertible or exchangeable obligations, except in each case for (a) any issuance or sale to a Borrower or any Subsidiary, (b) any issuance of directors' qualifying shares,
(c) sales or issuances of common stock of Activision Holdings to management or key employees of Activision Holdings or any Subsidiary or Kaboom under any employee stock option or stock purchase
plan or employee benefit plan in existence from time to time or other stock options from time to time granted to employees or directors, or in connection with license, distribution or development or
other similar agreements, (d) conversion of the Convertible Subordinated Notes into common stock of Activision Holdings, (e) issuance of common stock (or options or warrants to purchase
common stock) of Activision Holdings as consideration for any Permitted Acquisition, and (f) other issuances of Equity Interests for non-cash or no consideration. 

    "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. 

    "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with any Borrower, is treated as a
single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer
under Section 414 of the Code. 

    "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued
thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by a Borrower or any of its ERISA Affiliates of
any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of any
notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability with respect to the withdrawal from any Plan or Multiemployer Plan; (g) the receipt by a Borrower or any of its ERISA Affiliates of any notice, or the receipt by any Multiemployer
Plan from a Borrower or any of its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; or (h) any Foreign Benefit Event. 

    "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans. 

8

 

    "Eurodollar Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II. 

    "European Distribution Subsidiaries" shall mean Combined Distribution (Holdings) Limited, PDQ Distribution Limited, CentreSoft Limited,
NBG EDV Handels und Verlags GmbH & Co. KG, Target Software Vertriebs GmbH, CD Contact Data GmbH, Contact Data N.V., and Contact Data Belgium NV and their respective successors and
assignors and any other Foreign Subsidiary engaged primarily in the business of distributing a Borrower's and other persons' products in Europe. 

    "Event of Default" shall have the meaning assigned to such term in Article VII. 

    "Excluded Taxes" shall mean, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any
payment to be made by or on account of any obligation of a Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by
the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located,
(b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which a Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrowers under Section 2.24(a)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such
Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.23(e), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrowers with respect to
such withholding tax pursuant to Section 2.23(a). 

    "Existing Credit Agreement" shall mean the Credit Agreement dated as of June 21, 1999, among the Borrowers, the lenders party
thereto, Credit Suisse First Boston, acting through its New York Branch, as Syndication Agent, and PNC Bank, National Association, as Administrative Agent and Collateral Agent, as amended or otherwise
modified from time to time prior to the Restatement Effective Date. 

    "Existing Letter of Credit" shall mean each letter of credit previously issued for the account of Activision or its Domestic
Subsidiaries pursuant to the Existing Credit Agreement that is outstanding on the Restatement Effective Date. 

    "Expert" shall mean Expert Software, Inc., a Delaware corporation. 

    "Federal Funds Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or if such rate is not so published for any day which is a Business Day, the average of quotations for such day on such transactions received by PNC from three Federal funds brokers of
recognized standing selected by PNC. 

    "Fee Letter" shall mean the Fee Letter dated concurrently herewith, between Activision, the Administrative Agent and the Collateral
Agent. 

    "Fees" shall mean the Commitment Fees, the Agent Fees, the L/C Participation Fees and the Issuing Bank Fees. 

    "Financial Officer" of any corporation shall mean the chief financial officer, principal accounting officer, Treasurer or Controller of
such corporation. 

    "Fixed Charge Coverage Ratio" with respect to any person for any period shall mean the ratio of (a) Adjusted EBITDA of such
person plus, in the case of any Borrower (and without duplication of any amounts included in the Borrowers' Net Income) the amount of dividends or loans
or repayments of 

9

 

loans actually received from its Foreign Subsidiaries during such period less the amount of loans or capital contributions made to the Foreign
Subsidiaries during such period to (b) Fixed Charges for such period. 

    "Fixed Charges" with respect to any person for any period shall mean, without duplication, the sum of (a) Interest Expense for
such period, plus (b) payments on long term Indebtedness (including Capital Lease Obligations) of such person for such period,  plus(c) Capital
Expenditures made by such person during such period, plus (d) taxes paid
in cash by such person during such period. 

    "Foreign Benefit Event" shall mean, with respect to any Foreign Pension Plan, (a) the existence of unfunded liabilities in
excess of the amount permitted under any applicable law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (b) the failure to make the required
contributions or payments, under any applicable law, on or before the due date for such contributions or payments, (c) the receipt of a notice by a Governmental Authority relating to the
intention to terminate any such Foreign Pension Plan or to appoint a trustee or similar official to administer any such Foreign Pension Plan, or alleging the insolvency of any such Foreign Pension
Plan and (d) the incurrence of any liability in excess of $2,000,000 (or the Dollar equivalent thereof in
another currency) by a Borrower or any of its Subsidiaries under applicable law on account of the complete or partial termination of such Foreign Pension Plan or the complete or partial withdrawal of
any participating employer therein, or (e) the occurrence of any transaction that is prohibited under any applicable law and could reasonably be expected to result in the incurrence of any
liability by the Borrower or any of its Subsidiaries, or the imposition on a Borrower or any of its Subsidiaries of any fine, excise tax or penalty resulting from any noncompliance with any applicable
law, in each case in excess of $2,000,000 (or the Dollar equivalent thereof in another currency). 

    "Foreign Lender" shall mean any Lender that is organized under the laws of a jurisdiction other than that in which a Borrower is
located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. 

    "Foreign Pension Plan" shall mean any plan, fund (including any super annuating fund) or other similar program established or
maintained outside the United States by a Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of such Borrower or such Subsidiaries residing outside the United
States, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment,
and which plan is not subject to ERISA or the Code. 

    "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic Subsidiary. 

    "Formula Amount" shall have the meaning set forth in Section 2.01(a). 

    "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis. 

    "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or
regulatory body. 

    "Granting Lender" shall have the meaning specified in Section 9.04(i). 

    "Guarantee" of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other person (the "primary obligor") in any manner, whether directly or indirectly,
and including any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to
purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligation, (b) to
purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment of such Indebtedness or other 

10

 

obligation or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation; provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. 

    "Hazardous Materials" shall mean all explosive or radioactive substances or wastes, hazardous or toxic substances or wastes,
pollutants, solid, liquid or gaseous wastes, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls
("PCBs") or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law. 

    "Hedging Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, foreign
exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect against fluctuations in interest or currency exchange rates and not entered into for
speculation. 

    "Indebtedness" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon
which interest charges are customarily paid, (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such
person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien
on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all
Capital Lease Obligations of such person, (i) all obligations of such person in respect of Hedging Agreements and (j) all obligations of such person as an account party in respect of
letters of credit and bankers' acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner. Prepaid or guaranteed royalties
to independent software developers, license fees paid or guaranteed to holders of intellectual property rights and expenses incurred for product development, whether or not capitalized, are not
Indebtedness hereunder. 

    "Indemnified Taxes" shall mean Taxes other than Excluded Taxes. 

    "Indemnity, Subrogation and Contribution Agreement" shall mean the Indemnity, Subrogation and Contribution Agreement, substantially in
the form of Exhibit D to the Existing Credit Agreement, among the Borrowers, the Subsidiary Guarantors and the Collateral Agent. 

    "Individual Formula Amount" shall mean, at the date of determination thereof, with respect to each Borrower an amount equal
to: (a) up to the Receivables Advance Rate of the sum of Eligible Receivables of such Borrower less its Dilution Reserve,  plus (b) up to the
Inventory Advance Rate of the value of Eligible Inventory of such Borrower;  plus (c) the product of (i) the aggregate amount of outstanding Trade L/C Exposure of such Borrower  times (ii) the Inventory Advance Rate, plus (d) Cash Collateral of such Borrower,  minus (e) such other
reserves as the Administrative Agent in its Permitted Discretion deems proper and necessary from time to time. 

    "Intercompany Note" shall mean the demand promissory note in the original principal amount of approximately $23,000,000 from UK Sub to
Activision evidencing the obligations of UK Sub to Activision, which is secured by the UK Charge Documents. 

    "Interest Coverage Ratio" with respect to any person for any period shall mean the ratio of Adjusted EBITDA of such person for such
period to the Interest Expense of such person for such period. 

11

 

    "Interest Expense" with respect to any person for any period shall mean the total cash interest expense of such person (including
amortization of deferred financing fees, premiums or interest rate protection agreements and original issue discounts) for such period determined in accordance with GAAP. 

    "Interest Payment Date" shall mean (a) with respect to any ABR Loan, the last Business Day of each month, and (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more
than three months' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing, and, in addition, the
date of any prepayment of a Eurodollar Borrowing or conversion of a Eurodollar Borrowing to an ABR Borrowing. 

    "Interest Period" shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending
on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrowing Agent may
elect (or such other period thereafter as the Borrowing Agent may request and all the Lenders with Loans included in such Borrowing may agree);  provided, however, that if any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended
to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day.
Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. 

    "Investment Account" shall mean a cash collateral account maintained by the Collateral Agent invested in Permitted Investments and
under the control of the Collateral Agent. 

    "Inventory" with respect to any person shall mean and include all of its now owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind,
nature or description which are or might be used or consumed in its business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other
documents representing them. 

    "Inventory Advance Rate" shall have the meaning set forth in Section 2.01(a)(ii) hereof. 

    "Issuing Bank" shall mean as the context may require, (a) PNC Bank, National Association, with respect to Letters of Credit
issued by it, (b) with respect to each Existing Letter of Credit, the Lender that issued such Existing Letter of Credit, (c) any other Lender that may become an Issuing Bank pursuant to
Section 2.26(h) or (j), with respect to Letters of Credit issued by such Lender, or (d) collectively, all the foregoing. 

    "Issuing Bank Fees" shall have the meaning assigned to such term in Section 2.08(c). 

    "Joinder Agreement" shall mean a Borrower Joinder Agreement substantially in the form attached hereto as Exhibit E to the
Existing Credit Agreement executed by Activision Holdings or any Domestic Subsidiary which becomes a Borrower hereunder. 

    "Kaboom" shall mean Kaboom.com, Inc., a Delaware corporation, and a wholly-owned subsidiary of Activision Holdings. 

    "L/C Commitment" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.26. 

    "L/C Disbursement" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit. 

12

 
    "L/C Exposure" shall mean at any time of determination, the sum of (a) the Trade L/C Exposure and (b) the Standby L/C
Exposure and "L/C Exposure" of a Borrower shall mean the sum of (a) the Trade L/C Exposure with respect to Trade Letters of Credit issued for the account of such Borrower and the Standby L/C
Exposure with respect to Standby Letters of Credit issued for the account of such Borrower. 

    "L/C Participation Fee" shall have the meaning assigned to such term in Section 2.06(c). 

    "Lenders" shall mean (a) the financial institutions listed on Schedule 2.01 (other than any such financial institution
that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance. 

    "Letter of Credit" shall mean Trade Letters of Credit, Standby Letters of Credit and any Existing Letter of Credit. 

    "LIBO Rate" shall mean for any Eurodollar Borrowing for the then current Interest Period relating thereto the interest rate per annum
determined by PNC by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by PNC in accordance with its
usual procedures (which determination shall be conclusive absent manifest error) to be the eurodollar rate two (2) Business Days prior to the first day of such Interest Period for an amount
comparable to such Eurodollar Borrowing and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Reserve Percentage. 

    "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security
interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with
respect to such securities. 

    "Loan Documents" shall mean this Agreement, the Letters of Credit, the Borrower Guarantee Agreement, the Subsidiary Guarantee
Agreement, the Security Documents, the Indemnity, Subrogation and Contribution Agreement, any Joinder Agreement and any and all agreements, instruments and documents now or hereafter executed by a
Borrower or a Subsidiary Guarantor and delivered to the Administrative Agent, the Issuing Bank or any Lender in connection with this Agreement or the Existing Credit Agreement. 

    "Loan Parties" shall mean the Borrowers and the Subsidiary Guarantors. 

    "Loans" shall mean the Revolving Loans. 

    "Margin Stock" shall have the meaning assigned to such term in Regulation U. 

    "Master Note" shall mean any demand promissory note evidencing loans from a Loan Party to a Foreign Subsidiary. 

    "Material Adverse Effect" shall mean a material adverse effect on (a) the condition, operations, assets, business or prospects
of the Loan Parties, taken as a whole, or on Activision Holdings and its Subsidiaries, taken as a whole; (b) the ability of the Loan Parties taken as a whole to pay or perform the Obligations
in accordance with the terms thereof; (c) the value of the Collateral or the Collateral Agent's Liens on the Collateral or the priority of such Liens; (d) the validity or enforceability
of any Loan Document (other than with respect to a Subsidiary which is not a Material Subsidiary) or (e) the practical realization of the benefits of the Administrative Agent's, the Collateral
Agent's and each Lender's rights and remedies under this Agreement and the other Loan Documents. 

13

 

    "Material Contract" shall mean any and all contracts or agreements of a Borrower or any Domestic Subsidiary involving amounts remaining
to be paid in excess of $1,000,000. 

    "Material Subsidiary" shall mean any Subsidiary which has assets with a book value in excess of $5,000 as of the date of determination. 

    "Merger Agreement" shall mean the Amended and Restated Agreement and Plan of Merger dated as of April 19, 1999, by and among
Activision, Sub and Expert, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. 

    "Mortgaged Properties" shall mean the owned real properties and leasehold and subleasehold interests of the Loan Parties at the time
subject to the Mortgages. 

    "Mortgages" shall mean the mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, modifications and other
security documents delivered pursuant to Section 5.12, each in form and substance satisfactory the Administrative Agent. 

    "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA. 

    "Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the cash proceeds (including cash proceeds subsequently
received (as and when received) in respect of noncash consideration initially received), net of (i) selling expenses (including reasonable broker's fees or commissions, legal fees, transfer and
similar taxes and the Borrowers' good faith estimate of income taxes paid or payable in connection with such sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any
liabilities under any indemnification obligations associated with such Asset Sale (provided that, to the extent and at the time any such amounts are
released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for
borrowed money which is secured by the asset sold in such Asset Sale and which is repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset or repayments of
the Revolving Loans) and (b) with respect to any issuance or disposition of Indebtedness or any Equity Issuance, the cash proceeds thereof, net of all taxes and customary fees, commissions,
costs and other expenses incurred in connection therewith. Notwithstanding the foregoing, Net Cash Proceeds shall not include any amounts received by the Borrowers or any Subsidiary in respect of any
casualty or condemnation to the extent Borrower or such Subsidiary uses the amounts so received within 180 days of the receipt thereof to rebuild, restore or replace the property subject to
such casualty or condemnation. 

    "Net Income" shall mean, for any period, net income or loss of the Loan Parties for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded (a) the income of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by the Subsidiary of that income is prohibited by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or
governmental regulation applicable to the Subsidiary except to the extent that dividends or distributions are actually paid in compliance therewith, (b) the income (or loss) of any person
accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with a Loan Party or the date that person's assets are acquired by a Loan Party, and (c) the income of any
Subsidiary which is not a wholly owned Subsidiary except to the extent that dividends or distributions are actually paid to a Loan Party. 

    "New Lenders" shall have the meaning assigned to such term in Section 2.30. 

    "Obligations" shall mean and include any and all of each Borrower's Indebtedness and/or liabilities to the Administrative Agent, the
Collateral Agent, the Issuing Bank or Lenders or any corporation that directly or indirectly controls or is controlled by or is under common control with the Administrative Agent, the Collateral
Agent, the Issuing Bank or any Lender of every kind, nature and description, direct or indirect, secured or unsecured, joint, several, joint and several, absolute or contingent, due or 

14

 

to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, any and all of any Borrower's Indebtedness and/or liabilities under this Agreement, the other Loan
Documents or under any other agreement between the Administrative Agent, the Collateral Agent, the Issuing Bank or Lenders and any Borrower and all obligations of any Borrower to the Administrative
Agent, the Collateral Agent, the Issuing Bank or Lenders to perform acts or refrain from taking any action. 

    "Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. 

    "Payment Office" shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of
the Administrative Agent, if any, which it may designate by notice to the Borrowing Agent and to each Lender to be the Payment Office. 

    "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. 

    "PNC" shall mean PNC Bank, National Association. 

    "Perfection Certificate" shall mean the Perfection Certificate substantially in the form of Annex 2 to the Security Agreement. 

    "Permitted Acquisition" shall have the meaning assigned to such term in Section 6.04(h). 

    "Permitted Discretion" means the Administrative Agent's reasonable and good faith judgment based upon any factor which the
Administrative Agent believes in good faith (a) could reasonably be expected to adversely affect the value of any Collateral, the enforceability or priority of the Collateral Agent's Liens or
the amount that the Lenders would be likely to receive upon a liquidation of the Collateral; (b) suggests that any report of Collateral or financial information is incomplete, inaccurate or
misleading in any material respect; (c) could reasonably be expected to create a Default or Event of Default or increase the likelihood of an insolvency or bankruptcy proceeding. In exercising
such judgment with respect to matters relating to the determination of Eligible Inventory and Eligible Receivables, changes in advance rates or the imposition, increase or reduction of reserves, the
Administrative Agent may reasonably take into account factors included in the definitions of Eligible Inventory and Eligible Receivables, as well as changes in concentration of risk of Receivables,
changes in collection history and dilution, changes in demand for and pricing of Inventory, and other changes in the value of the Inventory or Receivables that tend to increase the credit risk of
lending to the Borrowers on the security of Inventory or Receivables. The burden of establishing lack of good faith shall be on the Borrowers. 

    "Permitted Investments" shall mean any of the following: 

    (a) direct
obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; 

    (b) investments
in commercial paper maturing within 180 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from Standard & Poor's Ratings Service or from Moody's Investors Service, Inc.; 

    (c) investments
in certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by
or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank 

15

 

organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000; 

    (d) fully
collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria of clause (c) above; and 

    (e) such
other investments that are acceptable to the Administrative Agent. 

    "person" shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company,
partnership or government, or any agency or political subdivision thereof. 

    "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of
ERISA or Section 412 of the Code or Section 307 of ERISA, and in respect of which the Borrowers or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. 

    "Pledge Agreement" shall mean the Pledge Agreement, substantially in the form of Exhibit F to the Existing Credit Agreement,
between the Borrowers, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties, together with any pledge or similar agreement required or advisable under the
laws of any foreign jurisdiction to perfect the pledge the stock of the Foreign Subsidiaries. 

    "Pro Rata Percentage" of any Revolving Credit Lender at any time shall mean the percentage of the Total Revolving Credit Commitment
represented by such Lender's Revolving Credit Commitment. 

    "Receivables" of a person shall mean and include all of its accounts, contract rights, instruments (including those evidencing
indebtedness owed to it by its Affiliates), documents, chattel paper, general intangibles relating to accounts, drafts and acceptances, and all other forms of obligations owing to such person arising
out of or in connection with the sale or lease of Inventory or the rendition of services, all guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created,
and whether or not specifically sold or assigned to the Administrative Agent or Collateral Agent hereunder. 

    "Receivables Advance Rate" shall have the meaning set forth in Section 2.01(a)(i) hereof. 

    "Register" shall have the meaning given such term in Section 9.04(d). 

    "Regulation T" shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations
thereunder or thereof. 

    "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations
thereunder or thereof. 

    "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations
thereunder or thereof. 

    "Related Fund" shall mean, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank
loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. 

    "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the environment. 

    "Remedial Action" shall mean (a)"remedial action" as such term is defined in CERCLA, 42 U.S.C. Section 9601(24), and
(b) all other actions required by any Governmental Authority or voluntarily 

16

 

undertaken to: (i) cleanup, remove, treat, abate or in any other way address any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health, welfare or the environment; or (iii) perform studies and investigations in
connection with, or as a precondition to, (i) or (ii) above. 

    "Repayment Date" shall have the meaning given such term in Section 2.12. 

    "Repurchase Amount" shall mean an amount equal to the sum of (i) the net cash proceeds received by Activision Holdings from the
exercise of stock options or warrants since June 8, 2000 plus (ii) the net cash proceeds received by Activision Holdings since
June 8, 2000 from any other Equity Issuances plus (iii) the value of the common stock of Activision Holdings issued since the Restatement
Effective Date, or additional paid in capital since such date, as a result of the conversion of any Convertible Subordinated Notes less
(iv) payments made since June 8, 2000 in connection with any repurchase or redemption of Convertible Subordinated Notes or capital stock;  provided that no more than $10,000,000 of Revolving
Loans may be used to fund the Repurchase Amount. 

    "Required Lenders" shall mean, at any time, Lenders having Loans, L/C Exposure and unused Revolving Credit Commitments representing at
least a majority of the sum of all Loans outstanding, L/C Exposure and unused Revolving Credit Commitments at such time, subject, however, to the provisions of Section 2.25 with respect to
Defaulting Lenders. 

    "Responsible Officer" of any corporation shall mean any executive officer or Financial Officer of such corporation and any other
officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. 

    "Restatement Effective Date" shall mean the date on which this Agreement becomes effective in accordance with its terms. 

    "Restructure Date" shall mean May 7, 2001. 

    "Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving Loans. 

    "Revolving Credit Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder
as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Revolving Credit Commitment, as applicable, as the same may be (a) reduced
from time to time pursuant to Section 2.11 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 2.30 or 9.04. 

    "Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all
outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender's L/C Exposure. 

    "Revolving Credit Lender" shall mean a Lender with a Revolving Credit Commitment. 

    "Revolving Credit Maturity Date" shall mean June 21, 2002. 

    "Revolving Loans" shall mean the revolving loans made by the Lenders to the Borrowers pursuant to Section 2.01. Each Revolving
Loan shall be a Eurodollar Loan or an ABR Loan. 

    "Schedule of Receivables" shall mean, as to each Borrower, a detailed aged trial balance of all then existing Receivables of
such Borrower in form and substance satisfactory to the Administrative Agent, specifying in each case the names, addresses, face amount and dates of invoice(s) for each Customer obligated on a
Receivable so listed and, if requested by the Administrative Agent, copies of proof of delivery and customer statements and the original copy of all documents, including, without limitation, repayment
histories and present status reports, and such other matters and information relating to the status of the Receivables and/or the Customers so scheduled as the Administrative Agent may from time to
time reasonably request. 

17

  

    "Schedule of Payables" shall mean, as to each Borrower, a detailed aged listing of such Borrower's existing accounts payable,
specifying the names of each creditor and the amount owed to such creditor and such matters and information relating to the status of such Borrower's accounts payable so scheduled as the
Administrative Agent may from time to time reasonably request. 

    "Seasonal Advance" shall have the meaning set forth in Section 2.01. 

    "Secured Parties" shall have the meaning assigned to such term in the Security Agreement. 

    "Security Agreement" shall mean the Security Agreement, substantially in the form of Exhibit G to the Existing Credit Agreement,
among the Borrowers, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties. 

    "Security Documents" shall mean the Mortgages, the Security Agreement, the Pledge Agreement and each of the security agreements,
mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.12. 

    "Settlement Date" shall mean the Restatement Effective Date and thereafter Wednesday of each Week unless such day is not a Business Day
in which case it shall be the next succeeding Business Day. 

    "SPC" shall have the meaning specified in Section 9.04(i). 

    "Standby L/C Exposure" shall mean, at any time of determination, the sum of (a) the aggregate undrawn amount of all outstanding
Standby Letters of Credit and (b) the aggregate amount that has been drawn under any Standby Letter of Credit but for which the Issuing Bank or the Lenders, as the case may be, have not been
reimbursed by the Borrowers at such time. 

    "Standby Letter of Credit" shall mean (a) each irrevocable letter of credit issued pursuant to
Section 2.26(a) under which the Issuing Bank agrees to make payments for the account of a Borrower, on behalf of such Borrower, in respect of obligations of such Borrower incurred
pursuant to contracts made or performances undertaken or to be undertaken or like matters relating to contracts to which a
Borrower is or proposes to become a party in the ordinary course of such Borrower's business and (b) each Existing Letter of Credit. 

    "Statutory Reserves" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and
any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate, or other fronting office making or holding a Loan) is subject with
respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as defined in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any
reserve percentage. 

    "Sub" shall mean Expert Acquisition Corp., a Delaware corporation. 

    "Subordinated Debt" shall mean unsecured Indebtedness of Activision which has a maturity date at least one year after the Revolving
Credit Maturity Date, no principal payments due prior to one year after the Revolving Credit Maturity Date and is otherwise on terms and conditions set forth on Exhibit K to the Existing Credit
Agreement. 

    "subsidiary" shall mean, with respect to any person (herein referred to as the
"parent"), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, 

18

 

owned, controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent and that is consolidated with such person in accordance with GAAP. 

    "Subsidiary" shall mean any subsidiary of Activision Holdings, excluding, however,
Kaboom and any of its subsidiaries. 

    "Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee Agreement, substantially in the form of Exhibit H to the
Existing Credit Agreement, made by the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the Secured Parties. 

    "Subsidiary Guarantor" shall mean each Subsidiary listed on Schedule 1.01(a), and each other Subsidiary that is or becomes a
party to the Subsidiary Guarantee Agreement. 

    "Tangible Net Worth" for any person shall mean, at a particular date (a) the aggregate amount of all assets of such person as
may be properly classified as such in accordance with GAAP consistently applied, excluding such assets as are properly classified as intangible assets under GAAP and assets evidencing any receivable
from or investments in any Affiliate less (b) the sum of (i) the aggregate amount of all liabilities of such person and (ii) the
sum of Development Costs and the value of warrants issued by Activision Holdings, to the extent that such amount exceeds $40,000,000. 

    "Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority. 

    "Terminating Lender" shall mean a party that is a "Lender" under the Existing Credit Agreement as of the Restatement Effective Date but
not a Lender hereunder. 

    "Total Debt" at any time and with respect to any person shall mean the total Indebtedness of such person at such time (excluding
Indebtedness of the type described in clause (i) of the definition of such term). 

    "Total Revolving Credit Commitment" shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at
such time. 

    "Trade L/C Exposure" shall mean, at any time of determination, the sum of (a) the aggregate undrawn amount of all outstanding
Trade Letters of Credit, (b) the aggregate unpaid amount of all accepted usance drafts drawn under Letters of Credit and (c) the aggregate amount that has been drawn under any Trade
Letter of Credit but for which the Issuing Bank or the Lenders, as the case may be, have not been reimbursed by the Borrowers at such time. 

    "Trade Letter of Credit" shall mean each sight or usance commercial documentary letter of credit issued by the Issuing Bank for the
account of a Borrower pursuant to Section 2.26(a) for the purchase of goods in the ordinary course of business. 

    "Transactions" shall have the meaning assigned to such term in Section 3.02. 

    "Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the
Loans comprising such Borrowing is determined. For purposes hereof, the term "Rate" shall include the Adjusted LIBO Rate and the Alternate Base Rate. 

    "UK Sub" shall mean Activision UK, Ltd., a corporation organized under the laws of England and Wales. 

    "UK Charge Documents" shall mean the various pledge and security agreements securing the Intercompany Note. 

    "Undrawn Availability" at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount or
(ii) the Total Revolving Credit Commitment minus (b) the sum of (i) the 

19

 

Aggregate Revolving Credit Exposure, plus (ii) all amounts due and owing to the Loan Parties' trade creditors which are outstanding more than
60 days after the due date, plus (iii) fees and expenses for which Borrowers are liable but which have not been paid or charged to
Borrowers' Account. 

    "Week" shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the
following Tuesday. 

    "wholly owned subsidiary" of any person shall mean a subsidiary of such person of which securities (except for directors' qualifying
shares) or other ownership interests representing 100% of the equity or 100% of the ordinary voting power or 100% of the general partnership interests are, at the time any determination is being made,
owned, controlled or held by such person or one or more wholly owned subsidiaries of such person or by such person and one or more wholly owned subsidiaries of such person. 

    "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. 

    SECTION
1.02.  Terms Generally.  The definitions in Section 1.01 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles
and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this
Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided, however, that if the
Borrowing Agent notifies the Administrative Agent that the Borrowers wish to amend any covenant in Article VI or any related definition to eliminate the effect of any change in GAAP occurring
after the date of this Agreement on the operation of such covenant (or if the Administrative Agent notifies the Borrowing Agent that the Required Lenders wish to amend Article VI or any related
definition for such purpose), then the Borrowers' compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrowers and the Required Lenders. 

 
 

ARTICLE II    
    
    The Credits    
  

    SECTION
2.01.  Commitments; Formula Amount.  (a)  Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make Revolving Loans to the Borrowers, at any time and from time to time on or after
the Restatement Effective Date and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Credit Commitment of such Lender in accordance with the terms hereof, in
an aggregate principal amount at any time outstanding that will not result in such Lender's Revolving Credit Exposure exceeding the lesser of (x) such Lender's Revolving Credit Commitment and
(y) such Lender's Pro Rata Percentage of an amount equal to the sum of the following (the "Formula Amount"): 

     (i) up
to 85%, subject to the provisions of Section 2.01(c) hereof ("Receivables Advance Rate"), of the
sum of (A) Eligible Receivables of the Borrowers less (B) the Dilution Reserve, plus

20

 

    (ii) up to the lesser of (A) the sum of (a) the lesser of (x) 50%, subject to the provisions of Section 2.01(c) hereof, of the value
of Eligible Inventory of the Borrowers and (y) 85%, subject to the provisions of Section 2.01(c) hereof, of the orderly liquidation value of Eligible Inventory of Borrowers, as
determined by appraisals satisfactory to Administrative Agent (in either case, the "Inventory Advance
Rate" and together with the Receivables Advance Rate, the "Advance Rates") and (b) the product of (x) the Trade
L/C Exposure for Inventory for which title has not yet passed to the Borrower times (y) the Inventory Advance Rate, or (B) the greater of (a) $15,000,000 or (b) forty
percent (40%) of the Borrowing Base Availability in the aggregate at any one time, minus

    (iii) the
L/C Exposure, plus

    (iv) from
August 15 to November 15, an amount not in excess of $5,000,000 (any Revolving Loan under this clause (iv), a
"Seasonal Advance"); plus

    (v) Cash
Collateral; minus

    (vi) such
other reserves as the Administrative Agent may deem proper and necessary from time to time in its Permitted Discretion. 

    (b) Each
Revolving Credit Lender agrees, severally and not jointly, to make Revolving Loans to each Borrower in aggregate amounts outstanding at any time not greater
than such Lender's Pro Rata Percentage of such Borrower's Individual Formula Amount less such Borrower's L/C Exposure. 

    (c) The
Advance Rates may be increased (subject to consents required by Section 9.08) or decreased by the Administrative Agent at any time and from time to time
in the exercise of its Permitted Discretion; provided, however, that (i) any decrease in any
Advance Rate shall only be effective on the fifth day after the Administrative Agent has given the Borrowing Agent notice of such decrease and (ii) any increase or decrease in the Receivables
Advance Rate shall only apply to Eligible Receivables created and assigned to the Administrative Agent after such change in Advance Rate becomes effective, but any increase or decrease in the
Inventory Advance Rate shall apply to all Eligible Inventory whether then owned or thereafter acquired. Each Borrower consents to any such increases or decreases and acknowledges that decreasing the
Advance Rates or increasing the reserves may limit or restrict Revolving Loans or Letters of Credit requested by the Borrowing Agent. 

    (d) For
purposes of calculating the Formula Amount, Individual Formula Amount, Eligible Inventory, and Eligible Receivables, the Receivables and Inventory acquired in
any Permitted Acquisition shall not be included until such time as the Administrative Agent has performed an audit with results satisfactory to it in its Permitted Discretion. 

    SECTION
2.02.  Loans.  (a)  Each Loan shall be made as part of a Borrowing consisting of
Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however,
that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to
lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans
deemed made pursuant to Section 2.03(a), the Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1,000,000 or (ii) equal
to the remaining available balance of the applicable Commitments. 

    (b) Subject
to Sections 2.15 and 2.17, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrowing Agent may request pursuant to
Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan;  provided that any exercise of such
option shall not 

21

 

affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time;  provided, however, that the Borrowers shall not be entitled to request any Borrowing that, if made,
would result in more than five Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings made by a Borrower having different Interest Periods, regardless of
whether they commence on the same date, shall be considered separate Borrowings. 

    (c) Notwithstanding
any other provision of this Agreement, the Borrowing Agent shall not be entitled to request any Revolving Credit Borrowing if the Interest Period
requested with respect thereto would end after the Revolving Credit Maturity Date. 

    SECTION
2.03.  Procedure for Revolving Credit Borrowings.  (a) The Borrowing Agent on behalf of any
Borrower may notify the Administrative Agent prior to 1:00 p.m., New York time, on a Business Day of a Borrower's request to make, on that day, a Revolving Credit Borrowing hereunder. Should
any amount required to be paid as interest hereunder, or as fees or other charges under this Agreement or any other agreement with the Administrative Agent, the Collateral Agent or Lenders, or any L/C
Disbursement, or with respect to any other Obligation, become due, same shall be deemed a request for a Revolving Credit Borrowing as of the date such payment is due, in the amount required to pay in
full such interest, fee, charge or Obligation under this Agreement or any other agreement with the Administrative Agent, the Collateral Agent or Lenders, and such request shall be irrevocable. The
Administrative Agent is hereby irrevocably authorized, in its sole discretion, to make Revolving Loans from time to time, or to charge Borrowers' Account, to pay any interest, fees or other amounts
(including any L/C Disbursement) for which payment is due under this Agreement, or at any time after the occurrence of an Event of Default to cash collateralize the L/C Exposure. 

    (b) Notwithstanding
the provisions of Section 2.03(a) above, in the event a Borrower desires to make a Eurodollar Borrowing, the Borrowing Agent shall
give the Administrative Agent at least three (3) Business Days' prior written notice, specifying (i) the date of the proposed Borrowing (which shall be a Business Day), (ii) the
amount on the date of such Revolving Credit Borrowing, which amount shall be an integral multiple of $1,000,000, and (iii) the duration of the first Interest Period therefor. No
Eurodollar Borrowing shall be made available to the Borrowers during the continuance of a Default or an Event of Default. 

    (c) The
Borrowing Agent shall elect the initial Interest Period applicable to a Eurodollar Borrowing by its notice of borrowing given to the Administrative Agent
pursuant to Section 2.03 (a) or by its notice of conversion given to the Administrative Agent pursuant to Section 2.03(d), as the case may be. The Borrowing Agent shall elect the
duration of each succeeding Interest Period by giving irrevocable written notice to the Administrative Agent of such duration not less than three (3) Business Days prior to the last day of the
then current Interest Period applicable to such Eurodollar Borrowing. If the Administrative Agent does not receive timely notice of the Interest Period elected by the Borrowing Agent, the applicable
Borrower shall be deemed to have elected to convert to an ABR Loan, subject to Section 2.03(d) hereinbelow. 

    (d) Provided
that no Default or Event of Default shall have occurred and be continuing, the Borrowing Agent may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar Loan, or on any Business Day with respect to ABR Loans, convert any such Loan into a Loan of another type in the same aggregate principal amount;  provided
that any conversion of a Eurodollar Loan shall be made only on the last Business Day of the then current Interest Period applicable to such
Eurodollar Loan. If a Borrower desires to convert a Loan, the Borrowing Agent shall give the Administrative Agent not less than three (3) Business Days' prior written notice to convert from an
ABR Loan to a Eurodollar Loan or one (1) Business Day's prior written notice to convert from a Eurodollar Loan to an ABR Loan, specifying the date of such conversion, the Loans to be converted
and if the conversion is from an ABR Loan to a Eurodollar 

22

 

Loan, the duration of the first Interest Period therefor. After giving effect to each such conversion, there shall not be outstanding more than five (5) Eurodollar Borrowings, in the aggregate. 

    SECTION
2.04.  Disbursement of Loans.  All Loans shall be disbursed from whichever office or other place
the Administrative Agent may designate from time to time and, together with any and all other Obligations of the Borrowers to the Administrative Agent, the Collateral Agent or Lenders, shall be
charged to the Borrowers' Account on the Administrative Agent's books. The Borrowers may use the Revolving Loans by borrowing, prepaying and reborrowing, all in accordance with the terms and
conditions hereof. The proceeds of each Revolving Credit Borrowing requested by a Borrower or deemed to have been requested by or on behalf of a Borrower under Section 2.03(a) hereof
shall, with respect to requested Revolving Credit Borrowings to the extent Lenders make such Revolving Credit Borrowings, be made available to such Borrower on the day so requested by way of credit to
such Borrower's operating account at PNC, in immediately available federal funds or other immediately available funds or, with respect to Revolving Credit Borrowings deemed to have been requested by
the Borrowers, be disbursed to the Administrative Agent to be applied to the outstanding Obligations giving rise to such deemed request. 

    SECTION
2.05.  Manner of Borrowing and Payment.  (a)  Each Revolving Credit Borrowing shall
be advanced according to the applicable Pro Rata Percentages of the Revolving Credit Lenders. 

    (b) Each
payment (including each prepayment) by a Borrower on account of the principal of and interest on the Revolving Loans shall be applied to the Revolving Loans of
such Borrower according to the applicable Pro Rata Percentages of the Revolving Credit Lenders. Except as expressly provided herein, all payments (including prepayments) to be made by the Borrowers on
account of principal, interest and fees shall be made without set off or counterclaim and shall be made to the Administrative Agent on behalf of the Lenders to the Payment Office, in each case on or
prior to 1:00 P.M., New York time, in Dollars and in immediately available funds. 

    (c) (i) Notwithstanding
anything to the contrary contained in Sections 2.03 or 2.05 (a) and (b) hereof, commencing with the first Business Day
following the Restatement Effective Date, each Revolving Loan shall be advanced by the Administrative Agent and each payment by the Borrowers on account of Revolving Loans shall be applied first to
those Revolving Loans advanced by the Administrative Agent. On or before 1:00 P.M., New York time, on each Settlement Date commencing with the first Settlement Date following the Restatement
Effective Date, the Administrative Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving Loans made by the Administrative Agent during the
preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Loans during such preceding Week, then each Lender shall provide the Administrative Agent with
immediately available funds in an amount equal to its applicable Pro Rata Percentage of the difference between (w) such Revolving Loans and (x) such repayments and (II) if the
aggregate amount of repayments applied to outstanding Revolving Loans during such Week exceeds the aggregate amount of new Revolving Credit Loans made during such Week, then the Administrative Agent
shall provide each Lender with immediately available funds in an amount equal to its applicable Pro Rata Percentage of the difference between (y) such repayments and (z) such Revolving
Loans. 

    (ii) Each
Lender shall be entitled to earn interest at the rate applicable to the rate on the outstanding Revolving Loans which it has funded. 

    (iii) Promptly
following each Settlement Date, the Administrative Agent shall submit to each Lender a certificate with respect to payments received and Revolving Loans
made during the Week immediately preceding such Settlement Date. Such certificate of the Administrative Agent shall be conclusive in the absence of manifest error. 

23

 

    (d) Unless
the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Pro Rata Percentage of the Revolving Loans available to the Administrative Agent, the Administrative Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to the
Administrative Agent on the next Settlement Date and, in reliance upon such assumption, make available to the Borrowers a corresponding amount. The Administrative Agent will promptly notify the
Borrowing Agent of its receipt of any such notice from a Lender. If such amount is made available to the Administrative Agent on a date after such next Settlement Date, such Lender shall pay to the
Administrative Agent on demand an amount equal to the product of (i) the daily average Federal Funds Rate (computed on the basis of a year of 360 days) during such period as quoted by
the Administrative Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive, in the absence of manifest
error. If such amount is not in fact made available to the Administrative Agent by such Lender within three (3) Business Days after such Settlement Date, the Administrative Agent shall be
entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Loans hereunder, on demand from the applicable Borrower;  provided, however, that the Administrative Agent's right to such recovery shall not prejudice or
otherwise adversely affect the Borrower's rights (if any) against such Lender. 

    SECTION
2.06.  Evidence of Debt.  (a)  Each Borrower hereby unconditionally and jointly and
severally promises to pay to the Administrative Agent on the Revolving Credit Maturity Date (or earlier termination of the Revolving Credit Commitments) for the account of each Revolving Credit
Lender, the then unpaid principal amount of each Revolving Loan made by such Lender to Borrowers. 

    (b) Each
Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from
each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid such Lender from time to time under this Agreement. 

    (c) The
Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iii) the amount of any sum
received by the Administrative Agent hereunder from the Borrowers or any Subsidiary Guarantor and each Lender's share thereof. 

    (d) The
entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima
facie evidence of the existence and amounts of the obligations therein recorded; provided,  however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the
obligations of the Borrowers to repay the Loans in accordance with their terms. 

    (e) Any
Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrowers shall execute and deliver to such Lender a
promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrowers. Notwithstanding any other provision
of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after any assignment of all or part of
such interests pursuant to
Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns. 

24

 
    SECTION 2.07.  Statement of Account.  (a)  The Administrative Agent shall maintain, in
accordance with its customary procedures, a loan account ("Borrowers' Account") in the name of the Borrowers in which shall be recorded the date and
amount of each Borrowing, each L/C Disbursement and the date and amount of each payment in respect thereof; provided,  however, the failure by the
Administrative Agent to record the date and amount of any Borrowing or L/C Disbursement shall not adversely affect the
Administrative Agent or any Lender. Each month, the Administrative Agent shall send to the Borrowing Agent a statement showing the accounting for the Borrowings made, payments made or credited in
respect thereof, and other transactions between the Administrative Agent and the Borrowers during such month. The monthly statements shall be deemed correct and binding upon the Borrowers in the
absence of manifest error and shall constitute an account stated between Lenders and Borrowers unless the Administrative Agent receives a written statement of the Borrowers' specific exceptions
thereto within thirty (30) days after such statement is received by the Borrowers. The records of the Administrative Agent with respect to Borrowers' Account shall be conclusive evidence absent
manifest error of the amounts of Loans and other charges thereto and of payments applicable thereto. 

    (b) Any
sums expended by the Administrative Agent or any Lender due to a Borrower's failure to perform or comply with its obligations under this Agreement or any Loan
Document may be charged to Borrowers' Account as a Revolving Loan and added to the Obligations. 

    SECTION
2.08.  Fees.  (a)  The Borrowers jointly and severally agree to pay to each Lender,
through the Administrative Agent, on the last day of March, June, September and December in each year and on each date on which any Commitment of such Lender shall expire or be
terminated as provided herein, a commitment fee (a "Commitment Fee") equal to 1/4 of 1% per annum on the daily unused amount of the
Commitments of such Lender during the preceding quarter (or other period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which the Commitments of such
Lender shall expire or be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fee due to each Lender shall
commence to accrue on the date hereof and shall cease to accrue on the date on which the Commitment of such Lender shall expire or be terminated as provided herein. 

    (b) The
Borrowers jointly and severally agree to pay to the Administrative Agent and Collateral Agent, for its own account, the fees set forth in the Fee Letter at the
times and in the amounts specified therein (the "Agent Fees"). 

    (c) The
Borrowers jointly and severally agree to pay (i) to each Revolving Credit Lender, through the Administrative Agent, on the last Business Day of March,
June, September and December of each year and on the date on which the Revolving Credit Commitment of such Lender shall be terminated as provided herein, a fee (an
"L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of the average daily aggregate L/C Exposure (excluding the portion thereof
attributable to unreimbursed
L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which all Letters of Credit have
been canceled or have expired and the Revolving Credit Commitments of all Lenders shall have been terminated) at a rate equal to (x) in the case of the Standby L/C Exposure, 2.75% per annum,
and (y) in the case of the Trade L/C Exposure, 1.375% per annum, and (ii) to the Issuing Bank with respect to each Letter of Credit a fronting, issuance and drawing fee equal to .25% per
annum on the face amount of all outstanding Letters of Credit, payable quarterly in arrears and on the Revolving Credit Maturity Date or the date on which all Letters of Credit have been canceled or
have expired and the Revolving Credit Commitments of all Lenders shall have been terminated (the "Issuing Bank Fees"). All L/C Participation Fees and
Issuing Bank Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. 

25

 

    (d) On the Restatement Effective Date, the Borrowers jointly and severally agree to pay the Administrative Agent for the ratable benefit of the Lenders an accommodation
fee of $150,000. 

    (e) All
Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders,
except that the Issuing Bank Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances. 

    SECTION
2.09.  Interest on Loans.  (a)  Subject to the provisions of Section 2.10,
the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate
Base Rate is determined by reference to the Base Rate and over a year of 360 days at all other times and calculated from and including the date of such Borrowing to but excluding the date of
repayment thereof) at a rate per annum equal to the Alternate Base Rate plus 1.25%. 

    (b) Subject
to the provisions of Section 2.10, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus 2.25%. 

    (c) Interest
on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable
Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. 

    (d) In
no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under law. In the event interest and other charges as
computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount shall be first applied to any unpaid principal balance owed by the Borrowers, and if the then
remaining excess amount is greater than the previously unpaid principal balance, Lenders shall promptly refund such excess amount to the Borrowers and the provisions hereof shall be deemed amended to
provided for such permissible rate. 

    SECTION
2.10.  Default Interest.  Upon and after the occurrence of an Event of Default and during the
continuation thereof, (i) the Obligations other than Eurodollar Loans shall bear interest at the rate otherwise applicable to ABR Loans plus two percent (2%) per annum and
(ii) Eurodollar Loans shall bear interest at the rate otherwise applicable to Eurodollar Loans plus two percent (2%) per annum (as applicable, the "Default
Rate"). 

    SECTION
2.11.  Termination and Reduction of Commitments.  (a)  The Revolving Credit
Commitments, and the L/C Commitment shall automatically terminate on the Revolving Credit Maturity Date. 

    (b) Upon
at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent, the Borrowers may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Revolving Credit Commitments; provided,  however, that (i) each partial reduction of
the Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and (ii) the
Total Revolving Credit Commitment shall not be reduced to an amount that is less than the sum of the Aggregate Revolving Credit Exposure at the time. 

    (c) Each
reduction in the Revolving Credit Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments. The
Borrowers shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the Commitment Fees on the amount of the Commitments so
terminated or reduced accrued to but excluding the date of such termination or reduction. 

26

 

    SECTION
2.12.  Repayment of Borrowings.  (a)  The Revolving Loans shall be due and payable
in full on the Revolving Credit Maturity Date subject to earlier prepayment as herein provided. 

    (b) With
respect to any deposits in any lockbox or Blocked Account, the Borrowers recognize that the amounts evidenced by checks, notes, drafts or any other items of
payment relating to and/or proceeds of Collateral may not be collectible by the Administrative Agent on the date received. In consideration of the Administrative Agent's agreement to conditionally
credit Borrowers' Account as of the Business Day on which the Administrative Agent receives those items of payment, the Borrowers agree that, in
computing the charges under this Agreement, all items of payment shall be deemed applied by the Administrative Agent on account of the Obligations on the Business Day the Administrative Agent receives
such payments via wire transfer or electronic depository check. The Administrative Agent is not, however, required to credit Borrowers' Account for the amount of any item of payment which is
unsatisfactory to the Administrative Agent and the Administrative Agent may charge Borrowers' Account for the amount of any item of payment which is returned to the Administrative Agent unpaid. 

    (c) All
payments of principal, interest and other amounts payable hereunder, or under any of the other Loan Documents, shall be made to the Administrative Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to the
Administrative Agent. The Administrative Agent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by charging Borrowers' Account or by making Revolving Loans
as provided in Section 2.02(a) hereof. 

    (d) Borrowers
shall pay principal, interest, and all other amounts payable hereunder, or under any related agreement, without any deduction whatsoever, including, but
not limited to, any deduction for any setoff or counterclaim. 

    SECTION
2.13.  Prepayment.  (a)  The Borrowers shall have the right at any time and from
time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) in
the case of Eurodollar Loans, or written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) on or prior to the date of prepayment in the case of ABR Loans, to
the Administrative Agent before 1:00 p.m., New York City time; provided, however, that each
partial prepayment shall be in an amount that is an integral multiple of $1,000,000. 

    (b) Each
notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and
shall commit the Borrowers to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.13 shall be subject to Section 2.19 but
otherwise without premium or penalty. All prepayments under this Section 2.13 shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment. 

    SECTION
2.14.  Mandatory Prepayments.  (a)  In the event of any termination of all the
Revolving Credit Commitments in accordance with this Agreement, the Borrowers shall, on the effective date of such termination, repay or prepay all outstanding Revolving Credit Borrowings and replace
all outstanding Letters of Credit and/or deposit an amount equal to 105% of the L/C Exposure in cash in a cash collateral account established with the Collateral Agent for the benefit of the Secured
Parties and/or provide an irrevocable letter of credit in form and substance reasonably acceptable to the Administrative Agent from a bank reasonably acceptable to the Administrative Agent. In the
event of any partial reduction of the Revolving Credit Commitments, then (i) at or prior to the effective date of such reduction, the Administrative Agent shall notify the Borrowers and the
Revolving Credit Lenders of the Aggregate Revolving Credit Exposure after giving effect thereto and (ii) if the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit
Commitment after 

27

 

giving effect to such reduction or termination, then the Borrowers shall, on the effective date of such reduction or termination, repay or prepay Revolving Credit Borrowings and/or replace or cash
collateralize outstanding Letters of Credit in an amount sufficient to eliminate such excess. 

    (b) If
on any date the Aggregate Revolving Credit Exposure shall exceed the Formula Amount, or the Revolving Loans to a Borrower plus the L/C Exposure of such Borrower
shall exceed the Individual Formula Amount, the Borrowers shall on such date repay or prepay Revolving Credit Borrowings and/or replace or cash collateralize outstanding L/C Exposure in an amount
sufficient to eliminate such excess. Any such excess amount shall constitute part of the Obligations and be secured by the Collateral. 

    (c) Without
duplication of any prepayment or repayment required under Section 2.14(b), not later than the third Business Day following the completion of any
Asset Sale, Activision shall repay or prepay the Revolving Credit Borrowings and/or cash collateralize outstanding L/C exposure in an amount equal to the lesser of (i) any prepayment required
under Section 2.14(b) as a result of such Asset Sale and (ii) 50% of the Net Cash Proceeds of such Asset Sale, and the Revolving Credit Commitments shall be permanently reduced by
any amount repaid or prepaid under this Section 2.14(c). 

    (d) The
Borrowing Agent shall deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.14, (i) a certificate
signed by a Financial Officer of the Borrowing Agent setting forth in reasonable detail the calculation of the amount of such prepayment and (ii) to the extent practicable, at least three days
prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to
be prepaid. All prepayments of Borrowings under this Section 2.14 shall be subject to Section 2.19, but shall otherwise be without premium or penalty. 

    SECTION
2.15.  Illegality.  Notwithstanding any other provision hereof, if any applicable law, treaty,
regulation or directive, or any change therein or in the interpretation or application thereof, shall make it unlawful for any Lender (for purposes of this subsection (g), the term
"Lender" shall include any Lender and the office or branch where any Lender or any corporation or bank controlling such Lender makes or maintains any
Eurodollar Loans) to make or maintain its Eurodollar Loans, the obligation of Lenders to make Eurodollar Loans hereunder shall forthwith be canceled and the Borrower shall, if any affected Eurodollar
Loans are then outstanding, promptly upon request from the Administrative Agent, either pay all such affected Eurodollar Loans or convert such affected Eurodollar Loans into ABR Loans. If any such
payment or conversion of any Eurodollar Loan is made on a day that is not the last day of the Interest Period applicable to such Eurodollar Loan, the Borrowers shall pay the Administrative Agent upon
the Administrative Agent's request, such amount or amounts as may be necessary to compensate Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Loan as a
result of such payment or conversion, including (but not limited to) any interest or other amounts payable by Lenders to lenders of funds obtained by Lenders in order to
make or maintain such Eurodollar Loan. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by any Lender to the Borrowing Agent shall be conclusive absent
manifest error. 

    SECTION
2.16.  Increased Costs.  In the event that any applicable law, treaty or governmental regulation,
or any change therein or in the interpretation or application thereof, or compliance by any Lender (for purposes of this Section 3.7, the term
"Lender" shall include the Administrative Agent or any Lender and any corporation or bank controlling the Administrative Agent or any Lender) and the
office or branch where the Administrative Agent or any Lender (as so defined) makes or maintains any 

28

 

Eurodollar Loans with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority, shall: 

    (a) subject
the Administrative Agent or any Lender to any tax of any kind whatsoever not currently applicable with respect to this Agreement or any Loan Document or
change the basis of taxation of payments to the Administrative Agent or any Lender of principal, fees, interest or any other amount payable hereunder or under any Loan Documents (except for any
imposition or changes in the rate of tax on the overall net income of the Administrative Agent or any Lender by the jurisdiction in which it maintains its principal office); 

    (b) impose,
modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of,
Loans or loans by, or other credit extended by, any office of the Administrative Agent or any Lender, including (without limitation) pursuant to Regulation D of the Board of Governors of the
Federal Reserve System; or 

    (c) impose,
modify or hold applicable on the Administrative Agent or any Lender or the London interbank Eurodollar market any other condition with respect to this
Agreement or any Loan Document; 

and
the result of any of the foregoing is to increase the cost to the Administrative Agent or any Lender of making, renewing or maintaining its Loans hereunder by an amount that the Administrative
Agent or such Lender reasonably deems to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Loans by an amount that the
Administrative Agent or such Lender reasonably deems to be material, then, in any case the Borrowers shall promptly pay the Administrative Agent or such Lender, upon its demand, such additional amount
as will compensate the Administrative Agent or such Lender for such additional cost or such reduction, as the case may be, provided that the foregoing
shall not apply to increased costs which are reflected in the Adjusted LIBO Rate. The Administrative Agent or such Lender shall certify the amount of such
additional cost or reduced amount to the Borrowers, and such certification shall be conclusive absent manifest error. 

    SECTION
2.17.  Basis For Determining Interest Rate Inadequate or Unfair.  In the event that the
Administrative Agent or any Lender shall have determined that: 

    (a) reasonable
means do not exist for ascertaining the LIBO Rate for any Interest Period; or 

    (b) Dollar
deposits in the relevant amount and for the relevant maturity are not available in the London interbank Eurodollar market, with respect to an outstanding
Eurodollar Loan, a proposed Eurodollar Borrowing, or a proposed conversion of an ABR Loan into a Eurodollar Loan; 

then
the Administrative Agent shall give the Borrowing Agent prompt written, telephonic or telegraphic notice of such determination. If such notice is given, (i) any such requested Eurodollar
Loan shall be made as an ABR Borrowing, unless the Borrowing Agent shall notify the Administrative Agent no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
date of such proposed Borrowing, that its request for such Borrowing shall be canceled, (ii) any ABR Loan or Eurodollar Loan which was to have been converted to an affected type of Eurodollar
Loan shall be continued as or converted into an ABR Loan, or, if the Borrowing Agent shall notify the Administrative Agent, no later than 10:00 a.m. (New York City time) two (2) Business
Days prior to the proposed conversion, shall be maintained as an unaffected type of Eurodollar Loan and (iii) any outstanding affected Eurodollar Loans shall be converted into an ABR Loan, or,
if Borrower shall notify the Administrative Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the last Business Day of the then current Interest Period
applicable to such affected Eurodollar Loan, shall be converted into an unaffected type of Eurodollar Loan on the last Business Day of the then current Interest Period for such affected Eurodollar
Loans. Until such notice has been withdrawn, 

29

 

Lenders shall have no obligation to make an affected type of Eurodollar Loan or maintain outstanding affected Eurodollar Loans and the Borrowers shall not have the right to convert an ABR Loan or an
unaffected type of Eurodollar Loan into an affected type of Eurodollar Loan. 

    SECTION
2.18.  Capital Adequacy.  In the event that the Administrative Agent or any Lender shall have
determined that any applicable law, rule, regulation or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Administrative Agent or any Lender (for purposes of this
Section 2.18, the term "Lender" shall include the Administrative Agent or any Lender and any corporation or bank controlling the Administrative
Agent or any Lender) and the office or branch where the Administrative Agent or any Lender (as so defined) makes or maintains any Eurodollar Loans with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the
Administrative Agent or any Lender's capital as a consequence of its obligations hereunder to a level below that which the Administrative Agent or such Lender could have achieved but for such
adoption, change or compliance (taking into consideration the Administrative Agent's and each Lender's policies with respect to capital adequacy) by an amount deemed by the Administrative Agent or any
Lender to be material, then, from time to time, the Borrowers shall pay upon demand to the Administrative Agent or such Lender such additional amount or amounts as will compensate the Administrative
Agent or such Lender for such reduction. In determining such amount or amounts, the Administrative Agent or such Lender may use any reasonable averaging or attribution methods. The protection of this
Section shall be available to the Administrative Agent and each Lender regardless of any possible contention of invalidity or inapplicability with respect to the applicable law, regulation or
condition. A certificate of the Administrative Agent or a Lender setting forth such amount or amounts as shall be necessary to compensate the Administrative Agent or such Lender with respect to this
Section 2.18 when delivered to the Borrowing Agent shall be conclusive absent manifest error. 

    SECTION
2.19.  Indemnity.  The Borrowers shall jointly and severally indemnify the Administrative Agent,
the Collateral Agent and each Lender against any loss or expense that the Administrative Agent, the Collateral Agent and such Lender may sustain or incur as a consequence of (a) any event,
other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal
of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with
respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any
Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrowing Agent hereunder (any of
the events referred to in this clause (a) being called a "Breakage Event") or (b) any default in the making of any payment or
prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its cost of
obtaining funds for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would
have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for
such period. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.19 shall be delivered to the Borrowers and shall
be conclusive absent manifest error. 

30

 
    SECTION 2.20.  Pro Rata Treatment.  Each payment or prepayment of principal of any Borrowing, each
payment of interest on the Loans, each payment of the Commitment Fees and L/C Participation Fees, each reduction of the Revolving Credit Commitments and each conversion of any Borrowing to or
continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have
expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans). Each Lender agrees that in computing such Lender's portion of any Borrowing to be made
hereunder, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing to the next higher or lower whole dollar amount. 

    SECTION
2.21.  Sharing of Setoffs.  Each Lender agrees that if it shall, through the exercise of a right
of banker's lien, setoff or counterclaim against any Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result of which the unpaid principal portion of its Revolving Loans and participations in L/C Disbursements
shall be proportionately less than the unpaid principal portion of the Revolving Loans and participations in L/C Disbursements of any other Lender, it shall be deemed simultaneously to have purchased
from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Revolving Loans and L/C Exposure, as the case may be of such other
Lender, so that the aggregate unpaid principal amount of the Revolving Loans and L/C Exposure and participations in Revolving Loans and L/C Exposure held by each Lender shall be in the same proportion
to the aggregate unpaid principal amount of all Revolving Loans and L/C Exposure then outstanding as the principal amount of its Revolving Loans and L/C Exposure prior to such exercise of banker's
lien, setoff or counterclaim or other event was to the principal amount of all Revolving Loans and L/C Exposure outstanding prior to such exercise of banker's lien, setoff or counterclaim or other
event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant
to this Section 2.21 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the
purchase price or prices or adjustment restored without interest. The Borrowers expressly consent to the foregoing arrangements and agree that any Lender holding a participation in a Revolving Loan or
L/C Disbursement deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrowers to such Lender by
reason thereof as fully as if such Lender had made a Loan directly to the Borrowers in the amount of such participation. 

    SECTION
2.22.  Payments.  Except as otherwise expressly provided herein, whenever any payment (including
principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. 

    SECTION
2.23.  Taxes.  (a)  Any and all payments by or on account of any obligation of the
Borrowers or any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes;  provided that if a Borrower or any
Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the
sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or
such Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party shall 

31

 

make such deductions and (iii) the Borrower or such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. 

    (b) In
addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. 

    (c) The
Borrowers shall jointly and severally indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the
Borrowers or any Loan Party hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrowing Agent by a Lender, or by the Administrative Agent on its behalf or on behalf of
a Lender, shall be conclusive absent manifest error. 

    (d) As
soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrowers or any other Loan Party to a Governmental Authority, the Borrowers
shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or
other evidence of such payment reasonably satisfactory to the Administrative Agent. 

    (e) Any
Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Borrower is located, or any
treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrowing Agent (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrowers as will permit such payments to be made without
withholding or at a reduced rate, provided
that such Foreign Lender has received written notice from the Borrowing Agent advising it of the availability of such exemption or reduction and supplying all applicable documentation. 

    SECTION
2.24.  Assignment of Commitments Under Certain Circumstances; Duty to
Mitigate.  (a)  In the event (i) any Lender or the Issuing Bank delivers a certificate requesting compensation pursuant to
Section 2.16, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.15 or (iii) the Borrowers are required to pay any additional amount to any Lender
or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank pursuant to Section 2.23, the Borrowers may, at their sole expense and effort (including with
respect to the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender or the Issuing Bank and the Administrative Agent, require such Lender or the Issuing
Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement
to an assignee that shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that
(x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrowers shall have
received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, of the Issuing Bank), which consent shall not unreasonably be withheld, and
(z) the Borrowers or such assignee shall have paid to the affected Lender or the Issuing Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued
to the date of such payment on the outstanding Loans or L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all Fees and other amounts accrued for the account of such Lender or
the Issuing Bank hereunder (including 

32

 

any amounts under Section 2.15 and Section 2.16); provided further that, if prior to any such transfer and assignment the circumstances or
event that resulted in such Lender's or the Issuing Bank's claim for compensation under Section 2.16 or notice under Section 2.15 or the amounts paid pursuant to Section 2.23, as
the case may be, cease to cause such Lender or the Issuing Bank to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the
consequences specified in Section 2.15, or cease to result in amounts being payable under Section 2.23, as the case may be (including as a result of any action taken by such Lender or
the Issuing Bank pursuant to paragraph (b) below), or if such Lender or the Issuing Bank shall waive its right to claim further compensation under Section 2.14 in respect of such
circumstances or event or shall withdraw its notice under Section 2.15 or shall waive its right to further payments under Section 2.20 in respect of such circumstances or event, as the
case may be, then such Lender or the Issuing Bank shall not thereafter be required to make any such transfer and assignment hereunder. 

    (b) If
(i) any Lender or the Issuing Bank shall request compensation under Section 2.16, (ii) any Lender or the Issuing Bank delivers a notice
described in Section 2.15 or (iii) the Borrowers are required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the
Issuing Bank, pursuant to Section 2.23, then such Lender or the Issuing Bank shall use reasonable efforts (which shall not require such Lender or the Issuing Bank to incur an unreimbursed loss
or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be
significant) (x) to file any certificate or document reasonably requested in writing by the Borrowers or (y) to assign its rights and delegate and transfer its obligations hereunder to
another of its offices,
branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.16 or enable it to withdraw its notice pursuant to Section 2.15 or would
reduce amounts payable pursuant to Section 2.23, as the case may be, in the future. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender or the Issuing
Bank in connection with any such filing or assignment, delegation and transfer. 

    SECTION
2.25.  Defaulting Lender.  (a)  Notwithstanding anything to the contrary contained
herein, in the event any Lender (x) has refused (which refusal constitutes a breach by such Lender of its obligations under this Agreement) to make available its portion of any Revolving Credit
Borrowing or reimbursement for drawings under Letters of Credit or (y) notifies either the Administrative Agent or the Borrowers that it does not intend to make available its portion of any
Revolving Credit Borrowing or reimbursement (if the actual refusal would constitute a breach by such Lender of its obligations under this Agreement) (each, a "Lender
Default" ), all rights and obligations hereunder of such Lender (a "Defaulting Lender") as to which a Lender Default is in
effect and of the other parties hereto shall be modified to the extent of the express provisions of this Section 2.25 while such Lender Default remains in effect. 

    (b) Revolving
Credit Borrowings shall be incurred pro rata from Lenders (the "Non-Defaulting Lenders") which
are not Defaulting Lenders based on their respective Pro Rata Percentages, and no Pro Rata Percentage of any Lender or any Pro Rata Percentage of any Revolving Credit Borrowings required to be
advanced by any Lender shall be increased as a result of such Lender Default. Amounts received in respect of principal of any type of Revolving Loans shall be applied to reduce the applicable
Revolving Loans of each Lender pro rata based on the aggregate of the outstanding Revolving Loans of that type of all Lenders at the time of such application;  provided that such amount shall not be
applied to any Revolving Loans of a Defaulting Lender at any time when, and to the extent that, the aggregate
amount of Revolving Loans of any Non-Defaulting Lender exceeds such Non-Defaulting Lender's Pro Rata Percentage of all Revolving Loans then outstanding. 

33

 

    (c) A Defaulting Lender shall not be entitled to give instructions to the Administrative Agent or the Collateral Agent or to approve, disapprove, consent to or vote on
any matters relating to this Agreement and the Loan Documents. All amendments, waivers and other modifications of this Agreement and the Loan Documents may be made without regard to a Defaulting
Lender and, for purposes of the definition of "Required Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have Loans
outstanding. 

    (d) Other
than as expressly set forth in this Section 2.25, the rights and obligations of a Defaulting Lender (including the obligation to indemnify the
Administrative Agent or the Collateral Agent) and the other parties hereto shall remain unchanged. Nothing in this Section 2.25 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Loan Documents, shall alter such obligations, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which
Borrowers, the Administrative Agent, the Collateral Agent or any Lender
may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder. 

    (e) In
the event a Defaulting Lender retroactively cures to the satisfaction of the Administrative Agent the breach which caused a Lender to become a Defaulting Lender,
such Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as a Lender under this Agreement. 

    SECTION
2.26.  Letters of Credit.  (a)  The Borrowing Agent on behalf of a Borrower may
request the issuance of a Letter of Credit for its own account or the account of a Borrower, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time
to time while the Revolving Credit Commitments remain in effect. This Section shall not be construed to impose an obligation upon the Issuing Bank to issue any Letter of Credit that is inconsistent
with the terms and conditions of this Agreement. 

    (b) In
order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrowing Agent shall hand deliver or
telecopy to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) the Administrative Agent's form of letter of credit
application or the Issuing Bank's form of Letter of Credit Application, completed to the satisfaction of the Administrative Agent or the Issuing Bank, respectively, or a notice identifying the Letter
of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrowers shall be deemed to represent
and warrant that, after giving effect to such issuance, amendment, renewal or extension (i) the L/C Exposure shall not exceed the lesser of $80,000,000 and the Total Revolvling Credit
Commitment, (ii) the Aggregate Revolving Credit Exposure shall not exceed the lesser of (x) the Total Revolving Credit Commitment, and (y) the Formula Amount in effect at such
time and (iii) the outstanding principal amount of Revolving Loans of any Borrower plus such Borrower's L/C Exposure shall not exceed the Borrower's Individual Formula Amount. 

    If
the Issuing Bank is not the Administrative Agent, the Administrative Agent will notify the Issuing Bank via phone, confirmed by telecopy, of changes in availability to issue
Letters of Credit under the facility, and the Issuing Bank will notify the Administrative Agent via phone, confirmed by telecopy, of any changes in outstanding balances of Letters of Credit it has
issued. No new Letter of Credit shall be issued, and no existing Letter of Credit shall be amended, renewed or 

34

 

extended, by the Issuing Bank until the Administrative Agent shall have approved, via phone, confirmed by telecopy, such issuance, amendment, renewal or extension. 

    (c) No
Letter of Credit shall be issued with a stated expiration date or latest maturity date of the accepted draft if a usance letter of credit later than the earlier
of (i) the close of business on the date that is five Business Days prior to the Revolving Credit Maturity Date and (ii) the close of business on the date that is
(x) 270 days after the date of issuance of such Letter of Credit in the case of a Trade Letter of Credit and (y) 12 months after the date of issuance of such Letter of
Credit in the case of a Standby Letter of Credit. Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts or acceptances of usance drafts when presented for
honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date or latest maturity date in the case of usance drafts
not later than five Business Days prior to the Revolving Credit Maturity Date. Each Letter of Credit shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, and any amendments or revision thereof adhered to by the Issuing Bank and, to the extent not inconsistent therewith, the laws of the State
of New York. 

    (d) By
the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each
Revolving Credit Lender, and each such Lender hereby acquires from the applicable Issuing Bank, a participation in such Letter of Credit equal to such Lender's Pro Rata Percentage of the aggregate
amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement made by the Issuing
Bank and not reimbursed by the Borrowers (or, if applicable, another party pursuant to its obligations under any other Loan Document). Each Revolving Credit Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the
occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. 

    (e) All
disbursements or payments with respect to Letters of Credit shall be deemed to be Revolving Credit Borrowings consisting of ABR Loans and shall bear interest at
the ABR Rate. 

    (f)  The
Borrowers' obligations to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of: 

     (i) any
lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein; 

    (ii) any
amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document; 

    (iii) the
existence of any claim, setoff, defense or other right that a Borrowers, any other party guaranteeing, or otherwise obligated with, such Borrowers, any
Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other
person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction; 

35

  

    (iv) any
draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; 

    (v) payment
by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit;
and 

    (vi) any
other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other person or any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrowers' obligations
hereunder. 

    Without
limiting the generality of the foregoing, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrowers hereunder to reimburse L/C
Disbursements will not be excused by the gross negligence or willful misconduct of the Issuing Bank. However, the foregoing shall not be construed to excuse the Issuing Bank from liability to the
Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by
the Borrowers that are caused by the Issuing Bank's gross negligence or willful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms
thereof; it is understood that the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information
to the contrary and, in making any payment under any Letter of Credit (i) the Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all
matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such
draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any
other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever
and (ii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute willful
misconduct or gross negligence of the Issuing Bank. 

    (g) The
Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The
Issuing Bank shall as promptly as possible give telephonic notification, confirmed by telecopy, to the Administrative Agent and the Borrowing Agent of such demand for payment and whether the Issuing
Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not
relieve the Borrowers of their obligation to reimburse the Issuing Bank and the Revolving Credit Lenders with respect to any such L/C Disbursement. 

    (h) The
Issuing Bank may resign at any time by giving 90 days' prior written notice to the Administrative Agent, the Lenders and the Borrowers but such
resignation shall not be effective until a successor is appointed. Subject to the next succeeding paragraph, upon the acceptance of any appointment as the Issuing Bank hereunder by a Lender that shall
agree to serve as successor Issuing Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Bank and the retiring Issuing Bank
shall be discharged from its obligations to issue additional Letters of Credit hereunder. At the time such removal or resignation shall become effective, the Borrowers shall pay all accrued and unpaid
fees pursuant to Section 2.08(c)(ii). The acceptance of any appointment as the Issuing Bank hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in
a form 

36

 

satisfactory to the Borrowers and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Lender shall have all the rights and obligations of the
previous Issuing Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term "Issuing Bank" shall be deemed to refer to such
successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation or removal of the Issuing Bank hereunder, the
retiring Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement and the other Loan Documents with respect to Letters
of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit. 

    (i)  If
any Event of Default shall occur and be continuing, the Borrowers shall, on the Business Day the Borrowing Agent receives notice from the Administrative Agent
or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the
aggregate undrawn amount of all outstanding Letters of Credit) of an Event of Default and of the amount to be deposited, deposit in an account with the Collateral Agent, for the benefit of the
Revolving Credit Lenders, an amount in cash equal to 105% of the L/C Exposure as of such date or provide one or more letters of credit, in form and substance reasonably satisfactory to the
Administrative Agent and from a bank acceptable to the Administrative Agent for such amount in lieu of or to replace such cash deposit. Such deposit or letter of credit shall be held by the Collateral
Agent as collateral for the payment and performance of the Obligations. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits in Permitted Investments, which investments shall be made at the option and sole discretion of the Collateral Agent, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Administrative Agent
to reimburse the Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be held for the satisfaction of the reimbursement obligations of the Borrowers for the L/C
Exposure at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Credit Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit), be applied to satisfy the Obligations. If the Borrowers are required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrowers within three Business Days after all
Events of Default have been cured or waived. 

    (j)  The
Borrowers may, at any time and from time to time with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and such
Lender, designate one or more additional Lenders to act as an issuing bank under the terms of this Agreement. Any Lender designated as an issuing bank pursuant to this paragraph (k) shall be
deemed (in addition to being a Lender) to be the Issuing Bank with respect to Letters of Credit issued or to be issued by such Lender, and all references herein and in the other Loan Documents to the
term "Issuing Bank" shall, with respect to such Letters of Credit, be deemed to refer to such Lender in its capacity as Issuing Bank. 

    (k) The
Existing Letters of Credit shall be deemed to be Letters of Credit issued hereunder, and on the Restatement Effective Date each Revolving Credit Lender shall be
deemed to have been granted and acquired a participation therein pursuant to paragraph (d) above. 

    (l)  In
connection with the issuance of any Letter of Credit, the Borrowers shall jointly and severally indemnify, save and hold the Administrative Agent, each Lender
and each Issuing Bank harmless from any loss, cost, expense or liability, including, without limitation, payments made by 

37

 

the Administrative Agent, any Lender or any Issuing Bank and expenses and reasonable attorneys' fees incurred by the Administrative Agent, any Lender or Issuing Bank arising out of, or in connection
with, any Letter of Credit to be issued or created for any Borrower. The Borrowers shall be bound by the Administrative Agent's or any Issuing Bank's regulations and good faith interpretations of any
Letter of Credit issued or created for Borrowers' Account, although this interpretation may be different from its own; and neither the Administrative Agent, nor any Lender, nor any Issuing Bank nor
any of their correspondents shall be liable for any error, negligence, or mistakes, whether of omission or commission, in following the applicable Borrowers' instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or in issuing or paying any Letter of Credit, except for the Administrative Agent's, any Lender's, any Issuing Bank's or
such correspondents' willful misconduct or gross negligence. 

    (m) If
the Administrative Agent is not the Issuing Bank of any Letter of Credit, Borrower shall authorize and direct the Issuing Bank to deliver to the Administrative
Agent all instruments, documents, and other writings and property received by the Issuing Bank pursuant to the Letter of Credit and to accept and rely upon the Administrative Agent's instructions and
agreements with respect to all matters arising in connection with the Letter of Credit and the application therefor 

    (n) In
connection with all Letters of Credit issued or caused to be issued by the Administrative Agent under this Agreement, each Borrower hereby appoints the
Administrative Agent, or its designee, as its attorney, with full power and authority (i) to sign and/or endorse such Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign such Borrower's name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department
("Customs") in the name of such Borrower or the Administrative Agent or the Administrative Agent's designee, and to sign and deliver to Customs
officials powers of attorney in the name of such Borrower for such purpose; and (iv) to complete in such Borrower's name or the Administrative Agent's, or in the name of the Administrative
Agent's designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof. Neither the Administrative Agent nor its attorneys will be
liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for the Administrative Agent's or its attorney's willful misconduct. This power, being coupled with an
interest, is irrevocable as long as any Letters of Credit remain outstanding. 

    SECTION
2.27.  Borrowing Agency Provisions.  (a)  Each Borrower hereby irrevocably
designates the Borrowing Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances
now or hereafter required hereunder, on behalf of such Borrower or Borrowers, and hereby authorizes the Administrative Agent to pay over or credit all loan proceeds hereunder in accordance with the
request of the Borrowing Agent. 

    (b) The
handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to the Borrowers and at their request. Neither the Administrative Agent, the Collateral Agent, nor any Lender shall incur liability to any Borrower as a result thereof. To induce the
Administrative Agent, the Collateral Agent and Lenders to do so and in consideration thereof, each Borrower hereby indemnifies the Administrative Agent, the Collateral Agent and each Lender and holds
the Administrative Agent, the Collateral Agent and each Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against the
Administrative Agent, the Collateral Agent or any Lender by any Person arising from or incurred by reason of the handling of the financing arrangements of the Borrowers as provided herein, reliance by
the Administrative Agent, the Collateral Agent or any Lender on any request or instruction from the Borrowing Agent or any other action taken by the Administrative Agent, the Collateral Agent or any
Lender 

38

 

with respect to this Section 2.27, except due to willful misconduct or gross (not mere) negligence by the indemnified party. 

    (c) Subject
to Section 2.29, all Obligations shall be joint and several, and each Borrower shall make payment upon the maturity of the Obligations by
acceleration or otherwise, and such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearance granted by the Administrative Agent,
the Collateral Agent or any Lender to any Borrower, failure of the Administrative Agent, the Collateral Agent or any Lender to give any Borrower notice of
borrowing or any other notice, any failure of the Administrative Agent, the Collateral Agent or any Lender to pursue or preserve its rights against any Borrower, the release by Agent or any Lender of
any Collateral now or thereafter acquired from any Borrower, and such agreement by each Borrower to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by the
Administrative Agent, the Collateral Agent or any Lender to the other Borrowers or any Collateral for such Borrower's Obligations or the lack thereof. 

    SECTION
2.28.  Waiver of Subrogation.  Each Borrower expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution of any other claim which such Borrower may now or hereafter have against the other Borrowers or other person directly or contingently liable for the
Obligations hereunder, or against or with respect to the other Borrowers' property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or
performance of this Agreement, until termination of this Agreement and repayment in full of the Obligations. 

    SECTION
2.29.  Borrower Guarantee Agreement.  The Obligations of the Borrowers as joint and several
obligors shall be subject to all the terms, conditions, waivers and agreements contained in the Borrower Guarantee Agreement. 

    SECTION
2.30.  Increases in Total Revolving Credit Commitment.  The Borrowers have requested that the
Total Revolving Credit Commitment be increased to $100,000,000, and the Administrative Agent has agreed to use its best efforts to find one or more additional financial institutions
("New Lenders") to become parties to this Agreement with Revolving Credit Commitments not in excess of $22,000,000 in the aggregate (the
"Commitment Increase"). Such New Lenders shall be selected by the Administrative Agent and the Borrowers shall pay to the Administrative Agent such
customary fees and expenses in connection with syndicating the Commitment Increase as may be necessary, in the reasonable judgment of the Administrative Agent, to achieve a successful syndication, and
no portion of such fees shall be allocable to any Lender other than the Administrative Agent and any New Lender. The Administrative Agent shall have no liability to the Borrowers or the Lenders if the
Administrative Agent is unable to successfully syndicate the Commitment Increase. If the Administrative Agent is able to successfully syndicate the Commitment Increase, the Commitment Increase (or so
much thereof as shall have been syndicated, as notified to the Borrowers and the Lenders by the Administrative Agent) shall become effective on the date specified by the Administrative Agent;  provided, however, that (i) no Default or Event of Default shall exist on such date, both before and after giving effect to the Commitment
Increase, (ii) the New Lenders shall have entered into one or more joinder agreements, in form and substance satisfactory to the Administrative Agent, to become Lenders hereunder,
(iii) the Borrowers shall have paid all fees and expenses in connection with the syndication and arrangement of the Commitment Increase, (iv) the Borrowers shall have executed and
delivered to the Administrative Agent for the benefit of the New Lenders promissory notes in the amount of the respective portion of the Commitment Increase, and (v) the Borrowers shall have
delivered or caused to be delivered to the Administrative Agent such legal opinions, certificates and other documents as the Administrative Agent may reasonably request. On the effective date of the
Commitment Increase, subject to the satisfaction of the foregoing conditions, (x) Schedule 2.01 shall be amended to reflect the reallocated Revolving Credit Commitments, and 

39

 

(y) each New Lender shall become a Lender hereunder and under the other Loan Documents. In no event shall the Total Revolving Credit Commitments exceed $100,000,000 without the consent of all
Lenders. 

    SECTION
2.31  Realignment of the Revolving Credit Commitments on the Restatement Effective Date.  In
order to effect a realignment of the Revolving Credit Commitments of the Lenders, after the Terminating Lenders shall have ceased to become parties to this Agreement, the Borrowers and each Lender
agree as follows, notwithstanding the provisions of any Loan Document: 

    (a) On
the Restatement Effective Date, each outstanding Eurodollar Loan owing to each Lender and each Terminating Lender shall be converted to an ABR Loan, and the
Borrowers agree to pay to each Lender and each Terminating Lender any amount that may be owing under the Existing Credit Agreement as a result of any conversion on any date other than the last day of
an Interest Period. On the Restatement Effective Date, the Borrowers shall pay all accrued interest on any Eurodollar Loan so converted, and any accrued fees under the Existing Credit Agreement. 

    (b) On
the Restatement Effective Date, subject to the satisfaction of the conditions in this Agreement, the Administrative Agent, the Lenders and the Terminating
Lenders shall, among themselves, purchase or sell such interests in the Revolving Loans and Revolving Credit Commitments in such amounts as shall be necessary so that, after giving effect thereto, the
Revolving Loans and Revolving Credit Commitments will be held by the Lenders ratably in proportion to the Revolving Credit Commitments of all Lenders set forth on Schedule 2.01. The Borrowers
shall take such actions as the Administrative Agent may reasonably request (including the execution and delivery of new promissory notes) to facilitate the realignment of the Revolving Credit
Commitments. 

    (c) Upon
completion of the foregoing realignment, each outstanding Revolving Loan under the Existing Credit Agreement shall be a Revolving Loan outstanding under this
Agreement, and shall be comprised of Revolving Loans made by each Lender in proportion to its Pro Rata Percentage of the Total Revolving Credit Commitment. 

 
 

ARTICLE III    
    
    Representations and Warranties

    The
Borrowers represent and warrant to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders that: 

    SECTION
3.01  Organization; Powers.  The Borrowers and each of the Subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on
its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except
where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations
under each of the Loan Documents and each other agreement or instrument contemplated hereby to which it is or will be a party and, in the case of the Borrowers, to borrow hereunder. 

    SECTION
3.02  Authorization.  The execution, delivery and performance by each Loan Party of each of the
Loan Documents and the consummation of the transactions contemplated by the Loan Documents (including the borrowings hereunder) (collectively, the  "Transactions") (i) have been duly authorized by
all requisite corporate and, if required, stockholder action and (ii) will not
(x) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of any
Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which 

40

 

any Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (y) be in conflict with, result in a breach of or constitute (alone or with notice
or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other
instrument or (z) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by any Borrowers or any Subsidiary (other than
any Lien created hereunder or under the Security Documents). 

    SECTION
3.03  Enforceability.  This Agreement has been duly executed and delivered by each Borrower and
constitutes, and each other Loan Document when executed and delivered by the each Loan Party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against such
Loan Party in accordance with its terms. 

    SECTION
3.04  Governmental Approvals.  No action, consent or approval of, registration or filing with or
any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (i) the filing of Uniform Commercial Code financing statements and filings
with the United States Patent and Trademark Office and the United States Copyright Office, (ii) recordation of the Mortgages and (iii) such as have been made or obtained and are in full
force and effect. 

    SECTION
3.05  Financial Statements.  (a)  The Borrowers have heretofore furnished to the
Lenders Activision's consolidated balance sheets and statements of income, stockholder's equity and cash flows (i) as of and for the fiscal year ended March 31, 1998, audited by and
accompanied by the opinion of KPMG Peat Marwick LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended
December 31, 1998, certified by its chief financial officer. Such financial statements present fairly the financial condition and results of operations and cash flows of Activision and its
consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of Activision and its consolidated
Subsidiaries as of the dates thereof required to be disclosed therein in accordance with GAAP. Such financial statements were prepared in accordance with GAAP applied on a consistent basis. 

    (b) Activision
has heretofore delivered to the Lenders its unaudited pro forma consolidated balance sheet and statements of income, stockholder's equity and cash flows
as of March 31, 1999, prepared giving effect to the Transactions as if they had occurred, with respect to such balance sheet, on such date and, with respect to such other financial statements,
on the first day of the 12-month period ending on such date. Such pro forma financial statements have been prepared in good faith by the Borrowers, based on the assumptions used to prepare
the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Borrowers on the date hereof and on the Restatement Effective Date to be
reasonable), are based on the best information available to the Borrowers as of the date of delivery thereof, accurately reflect all adjustments required to be made to give effect to the Transactions
and presents fairly on a pro forma basis the estimated consolidated financial position of Activision and its consolidated Subsidiaries as of such date and for such period, assuming that the
Transactions had actually occurred at such date or at the beginning of such period, as the case may be. 

    SECTION
3.06  No Material Adverse Change.  There has been no material adverse change in the business,
results of operations, property, condition (financial or otherwise) or prospects of the Borrowers and the Subsidiaries, taken as a whole, since December 31, 1998. 

41

  

    SECTION
3.07  Title to Properties; Possession Under Leases.  (a)  Each of the Borrowers and
the Subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and tangible assets (including all Mortgaged Property), except for minor defects in
title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and
assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02. 

    (b) Each
of the Borrowers and the Subsidiaries has complied in all material respects with all obligations under all material leases or warehousing agreements to which
it is a party and all such leases or warehousing agreements are in full force and effect. Each of the Borrowers and the Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases. 

    (c) No
Borrower has received any notice of, nor has any knowledge of, any pending or contemplated condemnation proceeding affecting the Mortgaged Properties or any sale
or disposition thereof in lieu of condemnation. 

    (d) No
Borrower nor any of the Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any
Mortgaged Property or any interest therein. 

    SECTION
3.08  Subsidiaries.  Schedule 3.08 sets forth as of the Restatement Effective Date a list
of all Subsidiaries and the percentage ownership interest of the Borrowers or their Subsidiaries therein. The shares of capital stock or other ownership interests so indicated on Schedule 3.08
are fully paid and non-assessable and are owned by the applicable Borrower or Subsidiary, directly or indirectly, free and clear of all Liens, other than Liens in favor of the Collateral
Agent and Liens disclosed in Schedule 6.02. 

    SECTION
3.09  Litigation; Compliance with Laws.  (a)  Except as set forth on
Schedule 3.09, there are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrowers, threatened
against or affecting any Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) as to which
there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. 

    (b) Neither
any Borrower nor any of the Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of
their material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building
permits) or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority,
where such violation or default could reasonably be expected to result in a Material Adverse Effect. 

    SECTION
3.10  Agreements.  (a)  Neither any Borrower nor any of the Subsidiaries is a party
to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. 

    (b) Neither
any Borrower nor any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any Material Contract, where such default could reasonably be expected to result in a Material Adverse Effect. 

    SECTION
3.11  Federal Reserve Regulations.  (a)  Neither the Borrowers nor any of the
Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. 

42

 

    (b) No
part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for
any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X. 

    SECTION
3.12  Investment Company Act; Public Utility Holding Company Act.  Neither any Borrower nor any
Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935. 

    SECTION
3.13  Use of Proceeds.  The Borrowers will use the proceeds of the Loans only for working capital
and other general corporate purposes and will request the issuance of Letters of Credit only to support obligations incurred in the ordinary course of business. In no event may any Seasonal Advance be
used to purchase any Equity Interests of Activision Holdings or any of its Subsidiaries (or options, warrants or other rights to acquire such Equity Interests) or to make any investments under
Section 6.04(l) hereof. 

    SECTION
3.14  Tax Returns.  Each of the Borrowers and the Subsidiaries has filed or caused to be filed
all Federal, state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all taxes due and payable by it and all assessments received by it,
except taxes that are being contested in good faith by appropriate proceedings and for which the applicable Borrowers or such Subsidiary, as applicable, shall have set aside on its books adequate
reserves. 

    SECTION
3.15  No Material Misstatements.  None of (a) the Confidential Information Memorandum or
(b) any other written information, report, financial statement, exhibit or schedule furnished by the Borrowers to the Administrative Agent or any Lender in connection with the Loan Documents or
included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that to the extent any such
information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrowers represent only that they acted in good faith and utilized reasonable
assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. 

    SECTION
3.16  Employee Benefit Plans.  (a)  Each of the Borrowers and its ERISA Affiliates
is in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in material liability of the Borrowers or any of their ERISA Affiliates.
The present value of all benefit liabilities under each Plan (based on those assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the fair
market value of the assets of such Plan, and the present value of all benefit liabilities of all underfunded Plans (based on those assumptions used to fund each such Plan) did not, as of the last
annual valuation dates applicable thereto, exceed the fair market value of the assets of all such underfunded Plans. 

    (b) Each
Foreign Pension Plan is in compliance in all material respects with all requirements of law applicable thereto and the respective requirements of the governing
documents for such plan except to the extent such non-compliance could not reasonably be expected to result in a Material Adverse Effect. With respect to each Foreign Pension Plan, none of
the Borrowers, any Affiliates or any of their directors, officers, employees or agents has engaged in a transaction that subjects any Borrower or any of its Subsidiaries, directly or indirectly, to a
material tax or civil penalty. With respect to each Foreign Pension Plan, reserves have been established in the financial statements furnished to the Lenders in respect of any unfunded liabilities in
accordance with 

43

 

applicable law and prudent business practice or, where required, in accordance with ordinary accounting practices in the jurisdiction in which such Foreign Pension Plan is maintained. The aggregate
unfunded liabilities, with respect to such Foreign Pension Plans could not reasonably be expected to result in a Material Adverse Effect. There are no actions, suits or claims (other than
routine claims for benefits) pending or threatened against any Borrower or any of its Affiliates with respect to any Foreign Pension Plan that could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect. 

    SECTION
3.17  Environmental Matters.  Except as set forth in Schedule 3.17: 

    (a) The
properties owned or operated by the Borrowers and the Subsidiaries (the "Properties") do not contain any
Hazardous Materials in amounts or concentrations which (i) constitute, or constituted a violation of, (ii) require Remedial Action under, or (iii) could give rise to liability
under, Environmental Laws, which violations, Remedial Actions and liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; 

    (b) The
Properties and all operations of the Borrowers and the Subsidiaries are in compliance, and in the last six years have been in compliance, with all Environmental
Laws and all necessary Environmental Permits have been obtained and are in effect, except to the extent that such non-compliance or failure to obtain any necessary permits, in the
aggregate, could not reasonably be expected to result in a Material Adverse Effect; 

    (c) There
have been no Releases or threatened Releases at, from, under or proximate to the Properties or otherwise in connection with the operations of the Borrowers or
the Subsidiaries, which Releases or threatened Releases, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; 

    (d) Neither
any Borrowers nor any of the Subsidiaries has received any notice of an Environmental Claim in connection with the Properties or the operations of any
Borrowers or the Subsidiaries or with regard to any person whose liabilities for environmental matters any Borrower or any Subsidiary has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, which, in the aggregate, could reasonably be expected to result in a Material Adverse Effect, nor do the Borrowers or the Subsidiaries have reason to believe that any
such notice will be received or is being threatened; and 

    (e) Hazardous
Materials have not been transported from the Properties, nor have Hazardous Materials been generated, treated, stored or disposed of at, on or under any
of the Properties in a manner that could give rise to liability under any Environmental Law, nor have the Borrowers or the Subsidiaries retained or assumed any liability, contractually, by operation
of law or otherwise, with respect to the generation, treatment, storage or disposal of Hazardous Materials, which transportation, generation, treatment, storage or disposal, or retained or assumed
liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect. 

    SECTION
3.18  Insurance.  Schedule 3.18 sets forth a true, complete and correct description of all
insurance maintained by the Borrowers or by the Borrowers for their Subsidiaries as of the date hereof and the Restatement Effective Date. As of each such date, such insurance is in full force and
effect and all premiums have been duly paid. The Borrowers and their Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry
practice. 

    SECTION
3.19  Security Documents.  (a)  The Pledge Agreement is effective to create in
favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement) and, when the
Collateral is delivered to the Collateral Agent (or in the case of Foreign Subsidiaries in Germany, the Netherlands and the United Kingdom, when pledge agreements complying with applicable foreign
laws are executed and delivered), the Pledge Agreement shall constitute a fully perfected first priority Lien on, and 

44

 

security interest in, all right, title and interest of the pledgors thereunder in such Collateral, in each case prior and superior in right to any other person. 

    (b) The
Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable
security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection
Certificate, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than the
Intellectual Property, as defined in the Security Agreement), in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02. 

    (c) When
the Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Security Agreement shall
constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in the Intellectual Property (as defined in the Security Agreement), in each
case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the grantors after the date hereof). 

    (d) The
Mortgages are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all
of the Loan Parties' right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are filed in the appropriate offices in the jurisdictions in
which the Mortgaged Properties are located the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged
Property and the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by
Section 6.02. 

    (e) The
UK Charge Documents are effective to create in favor of Activision a legal, valid and enforceable security interest in and charge over the personal property
assets of UK Sub described therein and, when Form 395 is filed in the Companies House in the United Kingdom, such UK Charge Documents shall constitute a fully perfected Lien on, and security
interest on all right, title and interest of UK Sub in such personal property assets prior and superior in right to any other person. 

    SECTION
3.20  Location of Real Property and Leased
Premises.  (a)  Schedule 3.20(a) lists completely and correctly as of the Restatement Effective Date all real property owned by the
Loan Parties and the addresses thereof. The Loan Parties own in fee all the real property set forth on Schedule 3.20(a). 

    (b) Schedule 3.20(b) lists
completely and correctly as of the Restatement Effective Date all real property leased by the Loan Parties and all locations of
Collateral and the addresses thereof. The Loan Parties have valid leases in or valid warehouse agreements with respect to all the real property set forth on Schedule 3.20(b) except to
the extent set forth on such Schedule. 

    SECTION
3.21  Labor Matters.  As of the date hereof and the Restatement Effective Date, there are no
strikes, lockouts or slowdowns against any Borrower or any Subsidiary pending or, to the knowledge of the Borrowers, threatened. The hours worked by and payments made to employees of any Borrower and
the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters. All payments due from the Borrowers
or any Subsidiary, or for which any claim may be made against any Borrowers or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have 

45

 

been paid or accrued as a liability on the books of such Borrower or such Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on
the part of any union under any collective bargaining agreement to which any Borrower or any Subsidiary is bound. 

    SECTION
3.22  Solvency.  Immediately after the consummation of the Transactions to occur on the
Restatement Effective Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the assets of each
Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party will be
greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become
absolute and matured; (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and
(d) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted
following the Restatement Effective Date. 

    SECTION
3.23  Year 2000.  No further programming or reprogramming is required to permit the proper
functioning, in and following the year 2000, of (a) the Borrowers' and their Subsidiaries' computer systems and (b) equipment containing embedded microchips (including systems and
equipment supplied by others or with which the Borrowers' or their Subsidiaries' systems interface). The cost to the Borrowers and their Subsidiaries of the reasonably foreseeable consequences of the
year 2000 to the Borrowers and their Subsidiaries (including reprogramming errors and the failure of others' systems or equipment) will not result in a Material Adverse Effect. The computer and
management information systems of the Borrowers and their Subsidiaries are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, sufficient to permit
the Borrowers and its Subsidiaries to conduct their business without Material Adverse Effect. 

    SECTION
3.24  Letters of Credit.  The Existing Letters of Credit are the only letters of credit issued
for the account of the Borrowers or any of its Domestic Subsidiaries that are outstanding immediately prior to the Restatement Effective Date. 

 
 

ARTICLE IV    
    
    Conditions of Lending

    The
obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions: 

    SECTION
4.01  All Credit Events.  On the date of each Borrowing, and on the date of each issuance,
amendment, extension or renewal of a Letter of Credit (each such event being called a "Credit Event"): 

    (a) The
Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 (or such notice shall have been deemed given in
accordance with Section 2.03) or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a notice
requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by Section 2.26(b). 

    (b) The
representations and warranties set forth in Article III hereof and in each other Loan Document shall be true and correct in all material respects on and
as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which
case they shall have been true and correct as of such earlier date. 

46

 

    (c) The Borrowers and each other Loan Party shall be in compliance in all material respects with all the terms and provisions set forth herein and in each other Loan
Document on its part to be observed or performed, and at the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing, or would exist after
giving effect to the Loan to be made or Letter of Credit to be issued on such date. 

    Each
Credit Event shall be deemed to constitute a representation and warranty by the Borrowers on the date of such Credit Event as to the matters specified in paragraphs
(b) and (c) of this Section 4.01. 

    SECTION
4.02  Restatement Effective Date.  On the Restatement Effective Date (or, as specifically
indicated below, prior to the date hereof): 

    (a) This
Agreement shall have been executed and delivered by each Lender and each Borrower, and the Administrative Agent shall have received satisfactory evidence of
such execution and delivery. 

    (b) The
Borrower shall have executed and delivered to each Lender requesting the issuance of a promissory note a note payable to the order of such Lender in the
amount of its Revolving Credit Commitment. 

    (c) The
Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Bank, a favorable written opinion of Robinson Silverman Pearce
Aronsohn & Berman LLP, counsel for the Loan Parties, (A) dated the Restatement Effective Date, (B) addressed to the Issuing Bank, the Administrative Agent, the Collateral
Agent and the Lenders, and (C) covering such matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request, and the Borrowers hereby request
such counsel to deliver such opinions. 

    (d) All
legal matters incident to this Agreement, the Borrowings and extensions of credit hereunder and the other Loan Documents shall be satisfactory to the Lenders,
to the Issuing Bank and to the Administrative Agent. 

    (e) The
Administrative Agent shall have received (i) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Restatement Effective
Date and certifying (A) that the certificate or articles of incorporation and bylaws of such Loan Party have not been amended since June 8, 2000 (or attaching any amendments since such
date), and (B) as to the incumbency and specimen signature of
each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (ii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (i) above; and (iii) such other documents as the Lenders, the Issuing Bank or the
Administrative Agent may reasonably request. 

    (f)  The
Administrative Agent shall have received a certificate, dated the Restatement Effective Date and signed by an officer of the Borrowers, confirming compliance
with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01. 

    (g) The
Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Restatement Effective Date, including, any amounts owing
under Section 2.31 as a result of the realignment of the Revolving Credit Commitments and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrowers hereunder or under any other Loan Document. 

    (h) Each
of the Subsidiary Guarantors shall have duly executed and delivered to the Collateral Agent a consent to this Agreement. 

47

  

    (i)  The
Term Loans (under and as defined in, the Existing Credit Agreement), and all accrued interest thereon, shall have been paid in full. 

    (j)  The
Administrative Agent shall have received all other documents, agreements and certificates as the Administrative Agent or any Lender shall reasonably request. 

 
 

ARTICLE V    
    
    Affirmative Covenants

    The
Borrowers covenant and agree with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and
interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each Borrower will, and will cause each of the Subsidiaries to: 

    SECTION
5.01  Existence; Businesses and Properties.  (a)  Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05. 

    (b) Do
or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; maintain and operate such business in substantially the manner in which it is presently
conducted and operated or in a manner reasonably related to present operations; comply in all material respects with all applicable laws, rules, regulations (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Mortgaged Properties) and decrees and orders of any Governmental
Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried
on in connection therewith may be properly conducted at all times. 

    SECTION
5.02  Insurance.  The Loan Parties shall bear the full risk of any loss of any nature whatsoever
with respect to the Collateral. At the cost and expense of the Loan Parties in amounts and with carriers reasonably acceptable to the Administrative Agent, the Loan Parties shall (a) keep all
insurable properties and properties in which any Loan Party has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to the business of the Loan Parties including, without limitation, business interruption
insurance and marine and air cargo insurance, (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to the business of the Loan Parties
insuring against larceny, embezzlement or other criminal misappropriation of insured's officers and employees who may either singly or jointly with others at any time have access to the assets or
funds of such Loan Party either directly or through authority to draw upon such funds or to direct generally the disposition of such assets; (c) maintain public and product liability insurance
against claims for personal injury, death or property damage suffered by others; (d) maintain all such worker's compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which such Loan Party is engaged in business; (e) furnish the Administrative Agent with (i) copies of all policies and evidence of the maintenance of such policies by
the renewal thereof at least thirty (30) days before any expiration date, and (ii) appropriate loss payable endorsements in form and substance reasonably satisfactory to the
Administrative Agent, naming the Administrative Agent as a co-insured and loss payee as its interests 

48

 

may appear with respect to all insurance coverage referred to in clause (a), and providing (A) that all proceeds thereunder shall be payable to the Administrative Agent, (B) no
such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and loss payable clauses may not be canceled,
amended or terminated unless at least thirty (30) days' prior written notice is given to the Administrative Agent. In the event of any loss thereunder, the carriers named therein hereby are
directed by the Administrative Agent and the applicable Loan Party to make payment for such loss to the Administrative Agent and not to such Loan Party and Administrative Agent jointly. If any
insurance losses are paid by check, draft or other instrument payable to any Loan Party and the Administrative Agent jointly, the Administrative Agent may endorse such Loan Party's name thereon and do
such Loan Party other things as the Administrative Agent may deem advisable to reduce the same to case. Following the occurrence of an Event of Default, the Administrative Agent is hereby authorized
to adjust and compromise claims under insurance coverage referred to in clauses (a), and (b). All loss recoveries received by the Administrative Agent upon any such insurance prior to the occurrence
of an Event of Default shall be applied to the Revolving Loans. Any surplus shall be paid by the Administrative Agent to Borrowers or applied as may be otherwise required by law. 

    SECTION
5.03  Obligations and Taxes.  Pay its Indebtedness and other obligations promptly and in
accordance with their terms and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its
property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such
properties or any part thereof; provided, however, that such payment and discharge shall not be required
with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrowers shall have set
aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend
collection of the contested obligation, tax, assessment or charge and enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk of forfeiture of such property. 

    SECTION
5.04  Financial Statements, Reports, etc.  In the case of the Borrowers, furnish to the
Administrative Agent and each Lender: 

    (a) within
90 days after the end of each fiscal year, the consolidated and consolidating balance sheet and related statements of income, stockholders' equity and
cash flows showing the financial condition of Activision Holdings and its consolidated Subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such
Subsidiaries during such year, and the balance sheet and related statement of income, stockholders' equity and cash flows showing the financial condition of Kaboom as of the close of such fiscal year
and the results of its operations during such year. The consolidated financial statements shall be audited by PriceWatershouseCoopers or other independent public accountants of recognized national
standing and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial
condition and results of operations of Activision Holdings and its consolidated Subsidiaries on a consolidated basis, or of Kaboom, as the case may be, in accordance with GAAP. In addition,
Development Costs and the amortization of Development Costs for such year shall be identified explicitly in the audited financial statements or in the notes thereto; 

    (b) within
45 days after the end of each fiscal quarter of each fiscal year, the consolidated and consolidating balance sheet and related statements of income,
stockholders' equity and cash flows showing the financial condition of Activision Holdings and its consolidated Subsidiaries, and of the Loan Parties, as of the close of such fiscal quarter and the
results of its operations and the operations of such Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, and the balance sheet and related statement of income,
stockholders' equity and cash flows 

49

 

showing the financial condition of Kaboom as of the close of such fiscal quarter and the results of its operations during such fiscal quarter and the then elapsed portion of the fiscal year, each
certified by a Financial Officer of Activision Holdings or Kaboom, as the case may be, as fairly presenting the financial condition and results of operations of the Loan Parties and Activision
Holdings and its consolidated Subsidiaries, or of Kaboom, as the case may be, in accordance with GAAP, subject to normal year-end audit adjustments; 

    (c) within
20 days after the end of each month, the consolidated and consolidating balance sheet and related statements of income, stockholder's equity and cash
flows showing the financial condition of the Loan Parties and of Activision Holdings and its consolidated Subsidiaries as of the close of such fiscal month and the results of its operations and the
operations of such Subsidiaries and of the Loan Parties during such fiscal month and the then elapsed portion of such fiscal year, all certified by one of its Financial Officers as fairly presenting
the financial condition and results of operations of the Loan
Parties and of Activision Holdings and its consolidated Subsidiaries in accordance with GAAP, subject to normal year-end audit adjustments; 

    (d) concurrently
with the delivery of financial statements under paragraph (b) above, a report in reasonable detail of amounts accrued and paid during
such quarter for royalties and fees under license, distribution or development agreements, in a form reasonably satisfactory to the Administrative Agent. 

    (e) concurrently
with any delivery of financial statements under paragraph (a) or (b) above, a certificate of the accounting firm (in the case of
paragraph (a)) or Financial Officer (in the case of paragraph (b)) opining on or certifying such statements (which certificate, when furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal interpretations) (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has
occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in reasonable detail
satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.09, 6.10, and 6.13; 

    (f)  within
90 days of the Restructure Date, an inventory appraisal, from an appraiser acceptable to the Administrative Agent and in form and substance
satisfactory to the Administrative Agent; 

    (g) promptly
after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Activision Holdings or
any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or
distributed to its shareholders, as the case may be; 

    (h) promptly
after the receipt thereof by any Borrower or any of its Subsidiaries, a copy of any "management letter" (whether in draft or final form) received by any
such person from its certified public accountants and the management's responses thereto; and 

    (i)  each
year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to clause (a) above, the
Borrowers shall deliver to the Administrative Agent a certificate of a Financial Officer of the Borrowers (i) setting forth the information required pursuant to Sections 1-4, 6 and
9 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most
recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed 

50

 

of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the
security interests under the Security Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements
to be filed within such period). 

    (j)  on
or before the fifteenth (15th) day of each month as and for the prior month (a) a Schedule of Receivables, (b) a
Schedule of Payables and (c) Inventory reports; provided, however, that during the period from September 1 to December 1 of
each year, the foregoing information shall be provided on each Thursday as and for the prior Week; and (d) a schedule, in form and substance satisfactory to the Administrative Agent, of all
Convertible Subordinated Notes converted to common stock, and all repurchases or redemptions of Convertible Subordinated Notes and common stock during such month and cumulatively. In addition, the
Borrowers will deliver to the Administrative Agent at least once every two weeks (or more frequently at the option of the Borrowers) or as the Administrative Agent may require, (i) confirmatory
assignment schedules, (ii) remittance schedules and (iii) schedules of credits to Receivables, each certified as complete and correct by a Financial Officer of the Borrowers. Borrowers
shall also deliver to the Administrative Agent at such intervals as the Administrative Agent may require: (i) copies of Customer invoices (ii) evidence of shipment or delivery and
(iii) such further schedules, documents and/or information regarding the Collateral as the Administrative Agent may require including, without limitation, trial balances and test verifications.
The Administrative Agent shall have the right to confirm and verify all Receivables by any manner and through any medium it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section are to be in form reasonably satisfactory to the Administrative Agent and executed by the Borrowers and delivered to the
Administrative Agent from time to time solely for the Administrative Agent's convenience in maintaining records of the Collateral, and any Borrower's failure to deliver any of such items to the
Administrative Agent shall not affect, terminate, modify or otherwise limit the Collateral Agent's Lien with respect to the Collateral. 

    (k) no
later than forty-five (45) days after the beginning of each fiscal year commencing with the fiscal year ending March 31, 2001, a month
by month projected operating budget and cash flow of Activision Holdings and of the Loan Parties for such fiscal year (including an income statement for each month and a balance sheet as at the end of
the last month in each fiscal quarter), such projections to be accompanied by a certificate signed by a Financial Officer of the Borrowers to the effect that such projections have been prepared on the
basis of sound financial planning practice consistent with past budgets and financial statements and that such officer has no reason to question the reasonableness of any material assumptions on which
such projections were prepared; provided that Borrowers will deliver a preliminary projected operating budget and cash flow for the fiscal year ending March 31, 2003 by April 1, 2002. In
addition, concurrently with the delivery of the financial statements referred to in clauses (a), (b) and (c) above the Borrowers will deliver a written report summarizing all material
variances from the budgets submitted by the Borrowers and a discussion and analysis by management with respect to such variances. 

    (l)  promptly,
from time to time, such other information regarding the operations, business affairs and financial condition of the Borrowers or any Subsidiary, or
compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. 

    SECTION
5.05  Litigation and Other Notices.  Furnish to the Administrative Agent, the Issuing Bank and
each Lender prompt written notice of the following: 

    (a) any
Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; 

51

 

    (b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity
or by or before any Governmental Authority, against any Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect; 

    (c) any
development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; 

    (d) any
event of default or event which, with notice or lapse of one or both would constitute an event of default under the Convertible Subordinated Note Documents or
any agreement with respect to Subordinated Debt; 

    (e) all
matters materially affecting the value, enforceability or collectibility of any portion of the Collateral, including, without limitation, any Loan Party's
reclamation or repossession of, or the returns to any Loan Party of, a material amount of goods or claims or disputes asserted by any Customer or other obligor; and 

    (f)  any
breach or default under any agreement under which a Loan Party is the licensee or distributor or any notice of intent to terminate any such agreement. 

    SECTION
5.06  Employee Benefits.  (a)  Comply in all material respects with the applicable
provisions of ERISA and the Code and (b) furnish to the Administrative Agent (i) as soon as possible after, and in any event within 10 days after any Responsible Officer of any
Borrower or any ERISA Affiliate knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event could reasonably be expected to result in liability of
the Borrowers in an aggregate amount exceeding $1,000,000, a statement of a Financial Officer of the Borrowers setting forth details
as to such ERISA Event and the action, if any, that the Borrowers propose to take with respect thereto. 

    SECTION
5.07  Maintaining Records; Access to Properties and Inspections.  Keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and all requirements of law are made of all dealings and transactions in relation to its business and activities. Each Loan
Party will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of
the Borrowers or any Subsidiary at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by
the Administrative Agent or any Lender to discuss the affairs, finances and condition of the Borrowers or any Subsidiary with the officers thereof and independent accountants therefor. 

    SECTION
5.08  Use of Proceeds.  Use the proceeds of the Loans and request the issuance of Letters of
Credit only for the purposes set forth in Section 3.13. 

    SECTION
5.09  Compliance with Environmental Laws.  Comply, and cause all lessees and other persons
occupying its Properties to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and Properties; obtain and renew all material
Environmental Permits necessary for its operations and Properties; and conduct any Remedial Action in accordance with Environmental Laws; provided,  however,
 that neither any Borrowers nor any of the Subsidiaries shall be required to undertake any Remedial Action to the extent that its obligation to
do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. 

    SECTION
5.10  Preparation of Environmental Reports.  If a Default caused by reason of a breach of
Section 3.17 or 5.09 shall have occurred and be continuing, at the request of the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such
request, at the expense of the Borrowers, an environmental site assessment report for the Properties which are the 

52

 

subject of such Default prepared by an environmental consulting firm acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any
compliance or Remedial Action in connection with such Properties. 

    SECTION
5.11  Audits.  From time to time upon the request of the Collateral Agent or the Required Lenders
through the Administrative Agent, permit the Collateral Agent or the Lenders to conduct evaluations and appraisals of (a) the Borrowers' practices in the computation of the Borrowing Base and
(b) the assets included in the Borrowing Base. In connection therewith, Borrowers shall pay the costs of the Collateral Agent's auditors in accordance with the Agent's Fee Letter. 

    SECTION
5.12  Further Assurances.  Execute any and all further documents, financing statements,
agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable
law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to
grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents and the UK Charge Documents. The Borrowers
will cause any subsequently acquired or organized Domestic Subsidiary which is a Material Subsidiary and any other Domestic Subsidiary which becomes a Material Subsidiary to execute a Subsidiary
Guarantee Agreement, Indemnity Subrogation and Contribution Agreement and each applicable Security Document in favor of the Collateral Agent. If any new Domestic Subsidiary is to become a Borrower
hereunder, it will execute and deliver a Joinder Agreement and the Borrower Guarantee Agreement, Indemnity, Subrogation and Contribution Agreement and the Security Agreement;  provided, however, that any new Borrower's Receivables and Inventory may not be included in calculating
the Formula Amount or Individual Formula Amount until the Administrative Agent has completed its audit with respect thereto with results satisfactory to it in its Permitted Discretion. In addition,
from time to time, the Borrowers will, at their cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with
respect to such of the assets and properties of the Loan Parties as the Administrative Agent or the Required Lenders shall designate (it being understood that it is the intent of the parties that the
Obligations shall be secured by substantially all the assets of the Borrowers and their Domestic Subsidiaries (including real and other properties acquired subsequent to the Closing Date)). Such
security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust and other instruments and documents in form and substance
satisfactory to the Collateral Agent, and the Borrowers shall deliver or cause to be delivered to the Lenders all such instruments and documents (including legal opinions, title insurance policies and
lien searches) as the Collateral Agent shall reasonably request to evidence compliance with this Section. The Borrowers agree to provide such evidence as the Collateral Agent shall reasonably request
as to the perfection and priority status of each such security interest and Lien. 

    SECTION
5.13  Government Receivables.  Notify the Administrative Agent immediately if any Receivables
arise out of contracts between any Borrower and the United States, any state or any department, agency or instrumentality of any of them and take all steps necessary to protect the Collateral Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other applicable state or local statutes or ordinances and deliver to the Administrative Agent appropriately endorsed any
instrument or chattel paper connected with any Receivable arising out of contracts between any Loan Party and the United States, any state or any department, agency of instrumentality of any of them. 

    SECTION
5.14  Intellectual Property.  (a)  Each Loan Party shall register or cause to be
registered (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, those intellectual property rights listed on
the exhibits to the Security Agreement within thirty (30) days of the date of this Agreement. Each Loan Party shall 

53

 

register or cause to be registered with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, those additional material intellectual property rights
developed or acquired by such Loan Party from time to time in connection with any product prior to the sale or licensing of such product to any third party, including without limitation revisions or
additions to the intellectual property rights listed on such exhibits, when such Loan Party reasonably determines that such registration is appropriate;  provided that such Loan Party shall in any case
register such additional patents, and/or copyrights as are developed or obtained in connection with any
product accounting for more than five percent (5%) of such Loan Party's gross revenues in any calendar quarter. Notwithstanding the foregoing, each Loan Party shall only be required to register
trademarks when such Loan Party reasonably determines that such registration is appropriate. 

    (b) Each
Loan Party shall execute and deliver such additional instruments and documents from time to time as the Collateral Agent shall reasonably request to perfect
the Collateral Agent's security interest in the Collateral consisting of Intellectual Property (as defined in the Security Agreement). 

    (c) Each
Loan Party shall (i) protect, defend and maintain the validity and enforceability of the Intellectual Property, (ii) use commercially reasonable
efforts to detect infringements of the Intellectual Property and promptly advise the Administrative Agent in writing of material infringements detected, and (iii) not allow any Intellectual
Property to be abandoned, forfeited or dedicated to the public without the written consent of the Required Lenders, which shall not be unreasonably withheld. 

    (d) The
Collateral Agent shall have the right, but not the obligation, to take, at Borrowers' sole expense, any actions that Borrowers are required to take under this
Section, but fail to take, after fifteen (15) days' notice to Borrowers. Borrowers shall reimburse and indemnify the Administrative Agent for all reasonable costs and reasonable expenses
incurred in the reasonable exercise of its rights under this Section. 

    SECTION
5.15  Blocked Accounts.  All proceeds of Collateral shall, at the direction of the Administrative
Agent, be deposited by the Loan Parties into a lock box account, dominion account or such other "blocked account" ("Blocked Accounts") with PNC or
another bank reasonably acceptable to the Administrative Agent, that enters into a Lock Box Agreement with the Administrative Agent in form and substance acceptable to the Administrative Agent. Each
Loan Party shall issue to the institution with which the Blocked Accounts are maintained an irrevocable letter of instruction directing said bank to transfer such funds so deposited in accordance with
a notice from the Administrative Agent to the Administrative Agent, either to any account maintained by the Administrative Agent at said bank or by wire transfer to appropriate account(s) of the
Administrative Agent. All funds deposited in such Blocked Accounts shall immediately become the property of the Administrative Agent and Borrowers shall obtain the agreement by such bank to waive any
offset rights against the funds so deposited (except any rights of PNC as a Lender hereunder). Neither the Administrative Agent, the Collateral Agent nor any Lender assumes any responsibility for such
"blocked account" arrangement, including without limitation, any claim of accord and satisfaction or release with respect to deposits accepted by any bank thereunder. Alternatively, the Administrative
Agent may establish depository accounts (the "Depository Accounts") in the name of the Administrative Agent at a bank or banks for the deposit of such
funds and the Loan Parties shall deposit all proceeds of Collateral or cause same to be deposited, in kind, in such Depository Accounts in lieu of depositing same to the Blocked Accounts. 

54

  

    All
funds in the Blocked Accounts or Depository Accounts shall be transferred daily to the Administrative Agent to be applied to outstanding Revolving Loans which are ABR Loans, and
applied to the Obligations as they become due. Any funds remaining after such application may be transferred, if all ABR Loans and all other Obligations then due have been paid in full, to the
Investment Account to be held as Cash Collateral hereunder and applied to the Obligations as they become due. From time to time the Administrative Agent shall, upon the request of the Borrowing Agent,
transfer funds from the Investment Account to Borrower's operating account, but Borrowers may not make investments in Permitted Investments other than those held in the Investment Account unless no
Revolving Loans are outstanding and, after any transfer of funds from the Investment Account, Undrawn Availability is at least $10,000,000 or such lesser amount to which the Administrative Agent
otherwise consents. 

    SECTION
5.16  Receivables.  (a)  Each of the Receivables shall be a bona fide and valid
account representing a bona fide indebtedness incurred by the Customer therein named and each of the Receivables proposed to be included as an Eligible Receivable is for a fixed sum as set forth in
the invoice relating thereto (provided immaterial or unintentional invoice errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated
terms of a Borrower, or work, labor or services theretofore rendered by a Borrower as of the date each Receivable is created. Same shall be due and owing in accordance with the applicable Borrower's
standard terms of sale without dispute, setoff or counterclaim except as may be stated on the Schedules of Receivables delivered by Borrowers to the Administrative Agent. 

    (b) Each
Customer, to the best of each Borrower's knowledge, as of the date each Receivable is created, is and will be solvent and able to pay all Receivables on which
the Customer is obligated in full when due or with respect to such Customers of any Borrower who are not solvent such Borrower has set up on its books and in its financial records bad debt reserves
adequate to cover such Receivables. 

    (c) Each
Borrower's chief executive office is located at the addresses set forth on Schedule 3.20(a) or (b) hereto. Until written notice is given
to the Administrative Agent by the Borrowing Agent of any other office at which any Borrower keeps its records pertaining to Receivables, all such records shall be kept at such executive office. 

    (d) Until
any Borrower's authority to do so is terminated by the Administrative Agent (which notice the Administrative Agent may give at any time following the
occurrence of an Event of Default), each Borrower will, at such Borrower's sole cost and expense, but on the Administrative Agent's behalf and for the Administrative Agent's account, collect as the
Administrative Agent's property and in trust for the Administrative Agent all amounts received on Receivables, and shall not commingle such collections with any Borrower's funds or use the same except
to pay Obligations. Each Borrower shall, upon request, deliver to the Administrative Agent, or deposit in the Blocked Account, in original form
and on the date of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness. 

    (e) At
any time following the occurrence of an Event of Default, the Administrative Agent shall have the right to send notice of the assignment of, and the Collateral
Agent's security interest in, the Receivables to any and all Customers or any third party holding or otherwise concerned with any of the Collateral. Thereafter, the Collateral Agent shall have the
sole right to collect the Receivables, take possession of the Collateral, or both. The Collateral Agent's actual collection expenses, including, but not limited to, stationery and postage, telephone
and telegraph, secretarial and clerical expenses and the salaries of any collection personnel used for collection, may be charged to Borrowers' Account and added to the Obligations. 

    (f)  The
Collateral Agent shall have the right to receive, endorse, assign and/or deliver in the name of the Collateral Agent or any Borrower any and all checks, drafts
and other instruments for the payment of money relating to the Receivables, and each Borrower hereby waives notice of 

55

 

presentment, protest and non-payment of any instrument so endorsed. Each Borrower hereby constitutes the Collateral Agent or its designee as such Borrower's attorney with power
(i) to endorse such Borrower's name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (ii) to sign such Borrower's name on any
invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments and verifications of Receivables; (iii) to send verifications of Receivables to any Customer;
(iv) to sign such Borrower's name on all financing statements or any other documents or instruments deemed necessary or appropriate by the Collateral Agent to preserve, protect, or perfect the
Collateral Agent's interest in the Collateral and to file same; (v) following an Event of Default, to demand payment of the Receivables; (vi) following an Event of Default, to enforce
payment of the Receivables by legal proceedings or otherwise; (vii) following an Event of Default, to exercise all of Borrowers' rights and remedies with respect to the collection of the
Receivables and any other Collateral; (viii)following an Event of Default, to settle, adjust, compromise, extend or renew the Receivables; (ix) following an Event of Default, to settle, adjust
or compromise any legal proceedings brought to collect Receivables; (x) following an Event of Default, to prepare, file and sign such Borrower's name on a proof of claim in bankruptcy or
similar document against any Customer, (xi) following an Event of Default, to prepare, file and sign such Borrower's name on any notice of Lien., assignment or satisfaction of Lien or similar
document in connection with the Receivables; and (xii) to do all other acts and things necessary to carry out this Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless constituting willful misconduct or
gross (not mere) negligence; this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid. The Collateral Agent shall have the right at any time following the
occurrence of an Event of Default to change the address for delivery of mail addressed to any Borrower to such address as the Collateral Agent may designate and to receive, open and dispose of all
mail addressed to any Borrower. 

    (g) Neither
the Administrative Agent, the Collateral Agent nor any Lender shall, under any circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof, or for any damage resulting therefrom.
Following the occurrence of an Event of Default the Administrative Agent may, without notice or consent from any Borrower, sue upon or otherwise collect, extend the time of payment of, compromise or
settle for cash, credit or upon any terms any of the Receivables or any other securities, instruments or insurance applicable thereto and/or release any obligor thereof. The Collateral Agent is
authorized and empowered to accept following the occurrence of an Event of Default the return of the goods represented by any of the Receivables, without notice to or consent by any Borrower, all
without discharging or in any way affecting any Borrower's liability hereunder. 

    (h) No
Borrower will, without the Administrative Agent's consent, compromise or adjust any material amount of the Receivables or extend the time for payment thereof or
accept any material returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as
have been heretofore customary in the business of such Borrower. 

 
 

ARTICLE VI    
    
    Negative Covenants

    The
Borrowers covenant and agree with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and
interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been canceled or have expired and all amounts
drawn thereunder 

56

 

have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, no Borrower will nor will it cause or permit any of the Subsidiaries to: 

    SECTION
6.01  Indebtedness.  Incur, create, assume or permit to exist any Indebtedness, except: 

    (a) Indebtedness
for borrowed money existing on the Closing Date and set forth in Schedule 6.01, but not any extensions, renewals or replacements of such
Indebtedness (unless otherwise permitted under this Section 6.01); 

    (b) Indebtedness
created hereunder and under the other Loan Documents; 

    (c) Indebtedness
evidenced by Capital Lease Obligations, or secured pursuant to Section 6.02(h), in each case so long as the aggregate principal amount of all
Indebtedness permitted to be outstanding under this paragraph (c) shall not exceed $5,000,000; 

    (d) Indebtedness
in favor of a Lender (or an Affiliate thereof) under one or more Hedging Agreements approved by the Administrative Agent (such approval not to be
unreasonably withheld); 

    (e) intercompany
Indebtedness of Activision and its Subsidiaries to the extent permitted by Sections 6.04(e), (g) and (o); 

    (f)  Indebtedness
with respect to any surety bonds required in the ordinary course of business of the Borrowers and the Subsidiaries,  provided that such Indebtedness shall not at any time exceed $250,000 in the
aggregate; 

    (g) Indebtedness
of the European Distribution Subsidiaries in an aggregate principal amount not to exceed $50,000,000 (or the equivalent thereof) at any time
outstanding, provided that such Indebtedness shall not be Guaranteed by any Loan Party other than through one or more Letters of Credit issued hereunder
to support such Indebtedness in a face amount not in excess of $9,000,000; 

    (h) Indebtedness
of Foreign Subsidiaries (other than the European Distribution Subsidiaries) in an aggregate principal amount not to exceed $15,000,000 (or the
equivalent thereof) at any time outstanding, provided such Indebtedness shall not be Guaranteed by any Loan Party; 

    (i)  other
unsecured Indebtedness of the Borrowers and the Subsidiaries in an aggregate principal amount not to exceed $5,000,000 at any time outstanding; 

    (j)  Subordinated
Debt in an aggregate principal amount which does not exceed at the time of incurrence $15,000,000 in outstanding principal amount; and 

    (k) Acquired
Debt in connection with a Permitted Acquisition. 

    SECTION
6.02  Liens.  Create, incur, assume or permit to exist any Lien on any property or assets
(including stock or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except: 

    (a) Liens
on property or assets of the Borrowers and its Subsidiaries existing on the date hereof and set forth in Schedule 6.02;  provided that such Liens shall secure only those obligations which they
secure on the date hereof and may not encumber Receivables; 

    (b) any
Lien created under the Loan Documents; 

    (c) Liens
for taxes not yet due or which are being contested in compliance with Section 5.03; provided that the
Lien shall have no effect on the priority of the Liens under the Loan Documents or the value of the Collateral and a stay of enforcement of any such Lien shall be in effect; 

57

 

    (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are
not due and payable or which are being contested in compliance with Section 5.03; 

    (e) Liens
(other than any Lien imposed by ERISA), pledges and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment
insurance and other social security laws or regulations; 

    (f)  deposits
to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; 

    (g) zoning
restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the
business of the Borrowers or any of its Subsidiaries; 

    (h) purchase
money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the
Borrowers or any Subsidiary; provided
that (i) such security interests secure Indebtedness permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within
90 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 85% of the lesser of the cost or the fair market value of such real property,
improvements or equipment at the time of such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of the Borrowers or any Subsidiary; 

    (i)  Liens
on assets of Foreign Subsidiaries; provided that (i) such Liens do not extend to, or encumber, assets
of the Borrowers or any of its Domestic Subsidiaries and (ii) such Liens secure only Indebtedness incurred by such Foreign Subsidiaries pursuant to Section 6.01 (g), (h) or (k);
and 

    (j)  Liens
granted to licensors by a Loan Party which encumber only the licensed intellectual property and inventory produced thereunder (but not any Receivables from
the sale, distribution or licensing thereof), are subordinated to the Liens of the Collateral Agent on terms and conditions satisfactory to the Collateral Agent and expressly permit the Liens granted
by the Loan Documents and the exercise of remedies thereunder. 

    SECTION
6.03  Sale and Lease-Back Transactions.  Enter into any arrangement, directly or
indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred unless (a) the sale of such property is permitted by
Section 6.05 and (b) the Capital Lease Obligations arising therefrom are permitted by Section 6.01(c). 

    SECTION
6.04  Investments, Loans and Advances.  Purchase, hold or acquire any Equity Interests, evidences
of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except: 

    (a) investments
by the Borrowers existing on the date hereof in the Equity Interests of the Subsidiaries and the investment by Activision Holdings in Kaboom existing on
the date hereof in an amount not in excess of $1,000; 

58

 

    (b) Permitted Investments held in the Investment Account and, if Undrawn Availability is at least $10,000,000 and there are no outstanding Revolving Loans (or such
lesser amount to which the Administrative Agent consents), other Permitted Investments; 

    (c) Receivables
owing to any Borrower or any of its Subsidiaries arising from sales of Inventory under usual and customary terms in the ordinary course of business; 

    (d) advances
not to exceed $500,000 outstanding at any time to employees of the Borrowers and the Subsidiaries to meet expenses incurred by such employees in the
ordinary course of business; 

    (e) any
wholly owned Subsidiary may make intercompany loans to a Borrower or any other wholly owned Subsidiary and any Borrower may make intercompany loans and advances
to any wholly owned Subsidiary; provided that any promissory notes evidencing such intercompany loans shall be pledged (and delivered) by the applicable
Borrower or the respective wholly owned Domestic Subsidiary that is the lender of such intercompany loan as Collateral pursuant to the Pledge Agreement; provided
further that (i) any Borrower or any Domestic Subsidiaries may make loans to and repay loans from any Foreign Subsidiaries pursuant to this
paragraph (e) only if, after giving effect thereto, the outstanding principal amount of all loans made by Foreign Subsidiaries to Activision during any Fiscal Year shall exceed the
principal of loans made by any Borrower and its Domestic Subsidiaries during such period and as of the end of each Fiscal Year the outstanding principal amount of loans made by Foreign Subsidiaries
shall exceed the outstanding principal amount of loans made by the Borrowers and their Domestic Subsidiaries by at least $4,000,000 and (ii) any loans made by any Foreign Subsidiaries to any
Borrower or any of its Domestic Subsidiaries pursuant to this paragraph (e) shall be unsecured and subordinated to the obligations of the Loan Parties pursuant to subordination
provisions in substantially the form of Exhibit J to the Existing Credit Agreement; and any loans made by any Loan Party to any Foreign Subsidiary shall be evidenced by one or more revolving
Master Notes pledged to the Collateral Agent pursuant to the Pledge Agreement. 

    (f)  the
Borrowers may establish Subsidiaries to the extent permitted by Section 6.15; 

    (g) the
Borrowers and the Domestic wholly owned Subsidiaries may make additional loans and advances to, or other investments in, Foreign Subsidiaries of the Borrowers
with the prior written consent of the Required Lenders; 

    (h) a
Borrower or any wholly owned Subsidiary may acquire substantially all the assets of, or more than 50% of the Equity Interests of, a person (such assets or such
person referred to herein as the "Acquired Entity" and any acquisition completed under this subsection 6.04(h) is a
"Permitted Acquisition"); provided that each of the following conditions is satisfied: 

     (i) the
Acquired Entity shall be a going concern and shall be in a line of business reasonably related to that of the Borrowers and their Subsidiaries as conducted
during the current and most recent calendar year; 

    (ii) the
Acquired Entity shall have approved such transaction; 

    (iii) the
Borrowers shall have delivered to the Administrative Agent at least 5 Business Days prior to consummation of the acquisition a certificate of a Financial
Officer demonstrating, in reasonable detail, that, at the time of such transaction (A) both before and after giving effect thereto, no Event of Default or Default shall have occurred and be
continuing or shall exist, (B) the Borrowers are in compliance with the covenants set forth in Sections 6.09, 6.10, and 6.13 as of the last day of the most recent fiscal quarter preceding such
acquisition, and would be in compliance on a pro forma basis with such covenants as of the last day of the month preceding such acquisition, and
(C) all calculations necessary to 

59

 

determine compliance with the conditions in clauses (vi) or (vii) below. All pro forma calculations required to be made pursuant to this
subsection 6.04(h) shall (i) include only those adjustments that would be permitted or required by Regulation S-X, (ii) be based on reasonably detailed written
assumptions which accompany the certificate and shall be acceptable to the Administrative Agent, and (iii) be certified by a Financial Officer as having been prepared in good faith based upon
reasonable assumptions; 

    (iv) the
Borrowers shall comply with Sections 5.12, 6.15 and the relevant provisions of the other Loan Documents with respect to the Acquired Entity and its assets or
any new Subsidiary formed to effect the acquisition; 

    (v) the
Borrowers shall have delivered to the Lenders consolidating financial statements for each Borrower, each Subsidiary and the Acquired Entity for the most recent
fiscal year and fiscal quarter prior to the date of acquisition in question, and the financial statements of the Acquired Entity for the most recent fiscal year prior to the date of acquisition in
question audited by an independent certified public accountant; provided that if the total amount expended (including the value of any Equity Issuance)
is less than $30,000,000 and the Cash Components for such acquisition are less than $15,000,000, the
Borrowers shall not be required to deliver financial statements for the Acquired Entity audited by an independent certified public accountant to the extent such statements have not been delivered to
the Borrowers or their subsidiaries; 

    (vi) for
any acquisition in which the Cash Components are no more than $4,000,000 for any individual acquisition or $13,000,000 in the aggregate since the Closing Date,
(a) the Fixed Charge Coverage Ratio of the Loan Parties for the four quarters ending on the last day of the most recent fiscal quarter preceding such acquisition was, and the Fixed Charge
Coverage Ratio of the Loan Parties for the 12 months ending on the last day of the month preceding such acquisition (such last day of the preceding month or such last day of the preceding
fiscal quarter, a "Measurement Date"), would be, on a pro forma basis, at least 1.0 to 1.0 and
(b) after giving effect to the acquisition, the actual Undrawn Availability at closing (calculated for these purposes without including the Inventory or Receivables of the Acquired Entity) is
at least the lesser of (x) $5,000,000 and (y) 10% of the sum of the amounts
calculated under clauses (i), (ii) and (v) of the definition of Formula Amount or if the Administrative Agent has completed its audit of the Acquired Entity with results satisfactory to
the Administrative Agent in its Permitted Discretion, the actual Undrawn Availability at closing calculated for the Borrowers and the Acquired Entity is at least $10,000,000; 

   (vii) for
any acquisition other than an acquisition described in clause (vi), (a) the Cash Components may be no more than $15,000,000 for any acquisition,
no more than $40,000,000 in any twelve month period, and no more than $60,000,000 since the Closing Date; (b) the Fixed Charge Coverage Ratio of the Loan Parties for the four quarters ending
the last day of the most recent fiscal quarter preceding such acquisition was, and the Fixed Charge Coverage Ratio of the Loan Parties for the 12 months ending on the last day of the month
preceding such acquisition would be, on a pro forma basis, at least the higher of (x) 1.1 to 1.0 or (y) the ratio required by
Section 6.10; and (c) after giving effect to the acquisition, the pro forma average daily Undrawn Availability at closing (calculated for
these purposes without including the Inventory or Receivables of the Acquired Entity) for the most recent January to June period would be greater than $15,000,000 or, if the
Administrative Agent has completed its audit of the Acquired Entity with results satisfactory to the Administrative Agent in its Permitted Discretion, the actual Undrawn Availability at closing
calculated for the Borrowers and the Acquired Entity is at least $20,000,000; 

60

  

   (viii) any
Indebtedness incurred in connection with the acquisition, including any Acquired Debt and any Subordinated Debt, must be permitted under Section 6.01;
and 

    (ix) in
no event may any Equity Issuance in connection with any acquisition exceed a number of shares of Activision common stock (or equivalents) equal to 40% of the
issued and outstanding common stock of Activision on such date and all Equity Issuances shall be of common equity or equivalents; 

    (i)  the
Borrowers may enter into Hedging Agreements to the extent permitted in Section 6.01(d); 

    (k) Activision
and the Subsidiaries may consummate the Transactions; 

    (l)  the
Borrowers may make investments in persons not constituting subsidiaries provided that (i) such person is
in a line of business reasonably related to the business of the Borrowers and their Subsidiaries, (ii) prior and after giving effect to such investment, Undrawn Availability (without giving
effect to clause (iv) of the definition of "Formula Amount" in Section 2.01) is an amount of at least 10% of the Formula Amount (without giving effect to such clause (iv)),
(iii) after giving effect to the investment and any Revolving Loans made on the acquisition date, no Seasonal Advance is outstanding and the Loan Parties are in compliance with the financial
covenants contained in this Agreement, (iv) the Cash Component of any single investment or series of related investments shall not exceed $5,000,000, (v) the Cash Component(s) of all
such investments in persons not constituting subsidiaries shall not exceed $15,000,000 in any twelve month period, and (vi) all capital stock or other equity interests acquired by a Borrower or
any other Loan Party shall be pledged to the Collateral Agent. 

    (m) the
Borrowers and their Subsidiaries may make advance payments of royalties under license or distribution agreements in the ordinary course of business; 

    (n) Activision
may make loans to directors and employees in connection with the granting of stock options or as incentive or bonus compensation; and 

    (o) loans
from Activision to UK Sub evidenced by the Intercompany Note may remain outstanding. 

    In
no event may any Loan Party make any investment in Kaboom after the Restatement Effective Date. 

    SECTION
6.05  Mergers, Consolidations, Sales of Assets and Acquisitions.  (a)  Merge into
or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or any substantial part of the assets of any Borrower (whether now owned or hereafter acquired) or any Equity Interest of any Subsidiary, or purchase, lease or otherwise acquire (in
one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that (i) the Borrowers and any Subsidiary may purchase and sell Inventory in
the ordinary course of business, (ii) the Borrowers or any wholly owned Subsidiary may make acquisitions permitted under Section 6.04 above, (iii) if at the time thereof and
immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (x) any wholly owned Subsidiary may merge into a Borrower in a transaction in which
the Borrower is the surviving corporation and (y) any wholly owned Subsidiary may merge into or consolidate with any other wholly owned Subsidiary in a transaction in which the surviving entity
is a wholly owned Subsidiary and no person other than a Borrower or a wholly owned Subsidiary receives any consideration, provided that if any such
merger described in this clause (y) shall involve a Domestic Subsidiary, the surviving entity of such merger shall be a Domestic Subsidiary; and (iv) any Subsidiary which is not a
Material Subsidiary may be wound up and dissolved. 

61

 

    (b) Engage
in any Asset Sale unless (i) such Asset Sale is for consideration at least 85% of which is cash, (ii) such consideration is at least equal to
the fair market value of the assets being sold, transferred, leased or disposed of, (iii) the fair market value of all assets sold, transferred, leased or disposed of pursuant to this
paragraph (b) and Section 6.05 of the Existing Credit Agreement shall not exceed (x) $10,000,000 in any fiscal year or (y) $20,000,000 in the aggregate and
(iv) the Net Cash Proceeds are applied as required by Section 2.14. 

    SECTION
6.06  Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends.
  (a)  Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or
a combination thereof, with respect to any of its Equity Interests or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire)
any of its Equity Interests or set aside any amount for any such purpose; provided, however, that any
wholly owned Subsidiary may declare and pay dividends or make other distributions to the holders of its Equity Interests, but other Subsidiaries which are not wholly owned may not make dividends or
distributions and provided further that, as long as no Default or Event of Default shall have occurred and be continuing or result therefrom, after the
Restatement Effective Date, Activision Holdings may purchase or redeem its capital stock for an aggregate amount which, if added to any funds used to redeem or purchase Convertible Subordinated Notes
permitted under Section 6.14(b), does not exceed the Repurchase Amount. In no event may any Seasonal Advance be used to make any purchase or redemption of its stock hereunder. 

    (b) Permit
its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability
of any such Subsidiary to (i) pay any dividends or make any other distributions on its Equity Interests or (ii) make or repay any loans or advances to a Borrower or the parent of such
Subsidiary except (w) for such encumbrances or restrictions existing under or by reason of (A) applicable law, (B) this Agreement and the other Loan Documents, (C) the
Convertible Subordinated Note Documents, (x) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of a Borrower or a Subsidiary of a
Borrower, (y) customary provisions restricting assignment of any agreement entered into by a Borrower or a Subsidiary in the ordinary course of business, and (z) any holder of a Lien
permitted by Section 6.02 may restrict the transfer of the asset or assets subject thereto. 

    SECTION
6.07  Transactions with Affiliates.  Except for transactions by or among Loan Parties, sell or
transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that: 

    (a) a
Borrower or any Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less
favorable to such Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties; 

    (b) dividends
may be paid to the extent provided in Section 6.06; 

    (c) loans
may be made and other transactions may be entered into between and among the Borrowers, the Subsidiaries and their respective Affiliates to the extent
permitted by Sections 6.01 and 6.04; 

    (d) a
Borrower or any Subsidiary may pay reasonable compensation to officers and directors in the ordinary course of business. 

    SECTION
6.08.  [Intentionally omitted].  

    SECTION
6.09  Interest Coverage Ratio.  Permit the Interest Coverage Ratio for (a) the
six-month period ending September 30, 1999, (b) the nine-month period ending December 31, 1999 or (c) any 

62

 

period of four consecutive fiscal quarters thereafter, in each case taken as one accounting period, ended on the last day of the applicable fiscal quarter to be less than 5.00 to 1.00 for the Loan
Parties on a consolidated basis. 

    SECTION
6.10  Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage Ratio of the Loan Parties on
a consolidated basis for any period of four consecutive fiscal quarters in each case taken as one accounting period, ending on the last day of any fiscal quarter ending during any period set forth
below to be less than 1.0 to 1.0: 

    SECTION
6.11.  [Intentionally omitted]  

    SECTION
6.12.  [Intentionally omitted]  

    SECTION
6.13  Minimum Tangible Net Worth.  (a)  Permit Tangible Net Worth of the Loan
Parties on a consolidated basis at any date set forth below to be less than the amount set forth opposite such date: 

	Fiscal Quarter
 
	 	Amount

	June 30, 2000	 	$	36,000,000
	September 30, 2000	 	$	40,000,000
	December 31, 2000	 	$	47,000,000
	March 31, 2001	 	$	52,000,000
	June 30, 2001	 	$	55,000,000
	September 30, 2001	 	$	60,000,000
	December 31, 2001	 	$	70,000,000
	March 31, 2002	 	$	78,000,000

    SECTION
6.14  Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-laws and Certain Other
Agreements, etc.  (a)  Amend or modify, or permit the amendment or modification of, any provision of existing Indebtedness or of any agreement
(including any purchase agreement, indenture, loan agreement or security agreement) relating thereto other than any amendments or modifications to Indebtedness which do not in any way materially
adversely affect the interests of the Lenders, (b) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or
any prepayment or redemption
as a result of any asset sale, change of control or similar event of, any Convertible Subordinated Notes, any Subordinated Debt, the Intercompany Note or any other Indebtedness that is
expressly subordinated to the Obligations; provided, however, that, as long as no Default or Event of Default shall have occurred and be continuing or
shall result therefrom, after the Restatement Effective Date Activision Holdings may redeem or purchase the Convertible Subordinated Notes for an aggregate amount which, if added to any funds used to
redeem or purchase capital stock of Activision Holdings permitted under Section 6.06(a) hereof, does not exceed the Repurchase Amount, but no Seasonal Advance may be used for such
redemption or purchase; (c) amend or modify, or permit the amendment or modification of, the Merger Agreement or any of the operating agreements entered into in connection therewith or any tax
sharing agreement, in each case except for amendments or modifications which are not in any way adverse in any material respect to the interests of the Lenders or (d) amend, modify or change
its Certificate of Incorporation (including by the filing or modification of any certificate of designation) or By-laws, or any agreement entered into by it, with respect to its Equity
Interests (including any shareholders' agreement), or enter into any new agreement with respect to its Equity Interests, other than any amendments, modifications or changes pursuant to this
clause (d) or any such new agreements pursuant to this clause (d) which do not in any way materially adversely affect the interests of the Lenders. 

    SECTION
6.15  Limitation on Creation of Subsidiaries.  Establish or create any additional Subsidiaries;  provided that the Borrowers may
establish or create one or more Subsidiaries of the 

63

 

Borrowers so long as (a) 100% of the Equity Interests of any new Domestic Subsidiary owned by a Loan Party (or all the Equity Interests of any new Foreign Subsidiary that is owned by any Loan
Party, except that not more than 65% of the voting Equity Interests of any such Foreign Subsidiary shall be required to be so pledged) is upon the creation or establishment of any such new Subsidiary
pledged and delivered to the Collateral Agent for the benefit of the Secured Parties under the Pledge Agreement and (b) upon the creation or establishment of any such new Domestic Subsidiary
such Domestic Subsidiary becomes a party to the applicable Security Documents in accordance with Section 5.12 and the other Loan Documents. 

    SECTION
6.16  Business.  With respect to Activision Holdings, engage in any business other than owning
Equity Interests in Activision and Kaboom and, subject to compliance with Section 5.12 hereof, such other Subsidiaries as may be organized from time to time and with respect to Activision and
other Subsidiaries, engage (directly or indirectly) in any business other than the businesses in which Activision and its Subsidiaries are engaged on the Closing Date and other businesses reasonably
related thereto. 

    SECTION
6.17  Fiscal Year; Accounting Changes.  Change its fiscal year end to a date other than
March 31 or make any change in accounting treatment and reporting practices except as required by GAAP. 

    SECTION
6.18  Minimum Undrawn Availability.  Other than during the period from August 15 to
November 15 in each year, permit Undrawn Availability at any time to be less than an amount equal to 5% of the Formula Amount. 

 
 

ARTICLE VII    
    
    Events of Default

    In
case of the happening of any of the following events ("Events of Default"): 

    (a) any
representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any
representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall
prove to have been false or misleading in any material respect when so made, deemed made or furnished; 

    (b) default
shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due
and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; 

    (c) default
shall be made in the payment of any interest on any Loan or any Fee or L/C Disbursement or any other amount (other than an amount referred to in
(b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days; 

    (d) default
shall be made in the due observance or performance by any Borrowers or any Subsidiary of any covenant, condition or agreement contained in
Section 5.01(a), 5.05 or 5.08 or in Article VI; 

    (e) default
shall be made in the due observance or performance by any Borrower or any Subsidiary or by UK Sub in any UK Charge Document of any covenant, condition or
agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days; 

    (f)  any
Loan Party or UK Sub shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness in a principal amount in
excess of $2,000,000, when and as the same shall become due and payable, or (ii) fail to observe or perform any other term, 

64

 

covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause,
or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due
prior to its stated maturity; 

    (g) an
involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of
any Borrower or any Subsidiary, or of a substantial part of the property or assets of any Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended,
or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official
for any Borrower or any Subsidiary or for a substantial part of the property or assets of any Borrower or a Subsidiary or (iii) the winding-up or liquidation of any Borrower or any
Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; 

    (h) any
Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Borrower or any Subsidiary or for a substantial part of the property or assets of any Borrower or any Subsidiary, (iv) file an answer
admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; 

    (i)  one
or more judgments for the payment of money in an aggregate amount in excess of $250,000 be rendered against any Borrower, any Loan Party or any combination
thereof, unless the same shall be contested in good faith, the Borrowers have established reserves reasonably satisfactory to the Administrative Agent and enforcement shall be effectively stayed,
satisfied, or discharged within forty (40) days or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrowers or any Loan Party to enforce any
such judgment; 

    (j)  an
ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other such ERISA Events, could reasonably be expected
to result in liability of the Borrowers and their ERISA Affiliates in an aggregate amount exceeding $2,000,000; 

    (k) any
security interest purported to be created by any Security Document or UK Charge Document shall cease to be, or shall be asserted by any Borrowers or any other
Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document security interest in the securities, assets or properties
covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates representing securities
pledged under the Pledge Agreement and except to the extent that such loss is covered by a lender's title insurance policy and the related insurer promptly after such loss shall have acknowledged in
writing that such loss is covered by such title insurance policy; 

    (l)  any
of the Obligations shall cease to constitute "Senior Indebtedness" under and as defined in the Convertible Subordinated Note Indenture, any Subordinated
Debt, the Intercompany Note or any Master Note; 

65

 

    (m) there shall have occurred a Change in Control; 

    (n) issuance
of a notice of Lien, levy, assessment, injunction or attachment against a material portion of the property of any Loan Party or UK Sub, or any portion of
the Collateral shall be seized or taken by any Governmental Agency or the title or right of any Loan Party which is the owner of any material portion, or the Collateral shall have become the subject
matter of any litigation which, in the opinion of the Required Lenders, could reasonably be expected upon final determination, to result in the impairment or loss of the security provided by the
Security Documents; 

    (o) termination
(other than as a result of any Asset Sale, merger or liquidation of a Subsidiary permitted hereunder) or breach of any Subsidiary Guarantee Agreement,
or any Subsidiary Guarantor attempts to terminate, challenge the validity of, or its liability under, any such Subsidiary Guarantee Agreement or UK Sub attempts to challenge the validity of, or its
liability under the Intercompany Note or any UK Charge Document; 

then,
and in every such event (other than an event with respect to any Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrowing Agent, take either or both of the following actions, at the same or different times:
(i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become
forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to any Borrower described in
paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding. 

    The
Administrative Agent shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies the Administrative Agent may at any time pursue,
relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of the Administrative Agent's or Collateral Agent's
or Lenders' rights hereunder. 

 
 

ARTICLE VIII    
    
    The Administrative Agent and the Collateral Agent

    In
order to expedite the transactions contemplated by this Agreement, PNC Bank, National Association, is hereby appointed to act as Administrative Agent and Collateral Agent on behalf
of the Lenders and the Issuing Bank (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the
"Agents"). Each of the Lenders and each assignee of any such Lender, hereby irrevocably authorizes the Agents to take such actions on behalf of such
Lender or assignee or the Issuing Bank and to exercise such powers as are specifically delegated to the Agents by the terms and provisions hereof and of the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including without limitation, collection of the Obligations) the Agents shall
not be required to exercise any discretion or take any action, but shall be required to act or to refrain from 

66

 

acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders (or as otherwise required by Section 9.08(b)), and such instructions
shall be binding; provided, however, that the Agents shall not be required to take any action which
exposes either of them to liability or which is contrary to this Agreement or the other Loan Documents or applicable law unless the Agents are furnished with an indemnification reasonably satisfactory
to each of them with respect thereto. The Administrative Agent is hereby expressly authorized by the Lenders and the Issuing Bank, without hereby limiting any implied authority, (a) to receive
on behalf of the Lenders and the Issuing Bank all payments of principal of and interest on the Loans, all payments in respect of L/C Disbursements and all other amounts due to the Lenders hereunder,
and promptly to distribute to each Lender or the Issuing Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrowers of any Event of
Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrowers or any other Loan Party pursuant to this Agreement or the other Loan Documents as
received by the Administrative Agent. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to
the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents. 

    Agents
shall have no duties or responsibilities except those expressly set forth in the Loan Documents. Neither the Agents nor any of their respective directors, officers, employees
or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or willful misconduct, or be responsible for any statement, warranty or
representation herein or in any Loan Document or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or
observance by the Borrowers or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the
due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents, instruments or agreements. The Agents shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any of the other Loan Documents, or to inspect the
properties, books or records of the Borrowers or any other Loan Party. The duties of the Agents as respects the Loans to the Borrowers shall be mechanical and administrative in nature; the Agents
shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon the Agents any obligations in respect of this Agreement except as expressly set forth herein. 

    The
Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders (or as otherwise required
by Section 9.08(b)) and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall,
in the absence of actual knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the
proper person or persons. Neither the Agents nor any of their respective directors, officers, employees or agents shall have any responsibility to the Borrowers or any other Loan Party on account of
the failure of or delay in performance or breach by any Lender or the Issuing Bank of any of its obligations hereunder or to any Lender or the Issuing Bank on account of the failure of or delay in
performance or breach by any other Lender or the Issuing Bank or the Borrowers or any other Loan Party of any of their respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. Each of the Agents may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected
by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in 

67

 

accordance with the advice of such counsel and the term "Lender" or any similar term shall, unless the context clearly otherwise indicates, include the Administrative Agent and the Collateral Agent in
its individual capacity as a Lender. 

    The
Agents shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether
coming into its possession before making of the Loans or at any time or times thereafter except as shall be provided by the Borrowers pursuant to the terms of this Agreement. The Agents shall not be
responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any agreement, document, certificate or a statement delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document, or of the financial condition of Borrowers, or be
required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the other Loan Documents or the financial condition of the
Borrowers or any of its subsidiaries, or the existence of any Event of Default or any Default. 

    Either
Agent may resign on sixty (60) days' written notice to each of the Lenders and the Borrowers and upon such resignation, the Required Lenders will promptly designate a
successor Administrative Agent or Collateral Agent, as the case may be, reasonably satisfactory to the Borrowers. 

    Any
such successor Administrative Agent or Collateral shall succeed to the rights, powers and duties of the Administrative Agent or Collateral Agent, and the term "the Administrative
Agent" or "the Collateral Agent" shall mean such successor Agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent. After any Agent's resignation, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent under this Agreement. 

    If
either Agent shall request instructions from Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Loan Document, such
Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Lenders; and neither Agent shall incur liability to any
person by reason of so refraining. Without limiting the foregoing, Lenders shall not have any right of action whatsoever against either Agent as a result of its acting or refraining from acting
hereunder in accordance with the instructions of the Required Lenders. 

    The
Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, order or other document or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person or entity, and, with
respect to all legal matters pertaining to this Agreement and the Loan Documents and its duties hereunder, upon advice of counsel selected by it. The Agents may employ agents and
attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by the applicable Agent with
reasonable care. 

    No
Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder or under the other Loan Documents, unless it has received notice
from a Lender or the Borrowers referring to this Agreement or the other Loan Documents, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event
that an Agent receives such a notice, it shall give notice thereof to the Lenders. The Agents shall take such action with respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided, that, unless and until the Agents shall have received such directions,
the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests
of Lenders. 

68

  

    The
Lenders hereby acknowledge that neither Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement
unless it shall be requested in writing to do so by the Required Lenders. 

    With
respect to the Loans made by it hereunder, each Agent in its individual capacity and not as Agent shall have the same rights and powers as any other Lender and may exercise the
same as though it were not an Agent, and the Agents and their Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrowers or any Subsidiary or
other Affiliate thereof as if it were not an Agent. 

    Each
Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share (based on the aggregate amount of its outstanding Revolving Credit Commitments
hereunder) of any expenses incurred for the benefit of the Lenders by the Agents, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders,
that shall not have been reimbursed by the Borrowers and (b) to indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on demand, in the amount of such
pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever
that may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action
taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrowers or any other Loan Party,  provided that no
Lender shall be liable to an Agent or any such other indemnified person for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Agent or any of its directors, officers, employees or agents. Each Revolving Credit Lender agrees to reimburse the Issuing Bank and its directors,
employees and agents, in each case, to the same extent and subject to the same limitations as provided above for the Agents. 

    Each
Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on
such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan
Document, any related agreement or any document furnished hereunder or thereunder. 

 
 

ARTICLE IX    
    
    Miscellaneous

    SECTION
9.01  Notices.  Notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: 

    (a) if
to the Borrowers or the Borrowing Agent, to Activision, Inc. at 3100 Ocean Park Blvd., Santa Monica, California 90405, Attention of Chief Financial
Officer (Telecopy No. 310-255-2191); 

    (b) if
to the Administrative Agent, to PNC Bank, National Association, Two Tower Center Boulevard, East Brunswick, New Jersey 08816, Attention of Ryan Peak (Telecopy
No. 732-220-4315) with a copy to PNC Bank, National Association, 2 North Lake Ave., Suite 940, Pasadena, California 91109, Attention of Albert Perez (Telecopy
No. 626-432-4589); and 

69

 

    (c) if to a Lender, to it at its address (or telecopy number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have become a party hereto. 

    Any
party may change the directions for delivery of notices hereunder by notice delivered in accordance with this Section 9.01. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or
on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this
Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. 

    SECTION
9.02  Survival of Agreement.  All covenants, agreements, representations and warranties made by
the Borrowers herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been
relied upon by the Lenders and the Issuing Bank and shall survive the making by the Lenders of the Loans and the issuance of Letters of Credit by the Issuing Bank, regardless of any investigation made
by the Lenders or the Issuing Bank or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount
payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. The provisions of
Sections 2.16, 2.18, 2.19, 2.23 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank. 

    SECTION
9.03  Binding Effect.  This Agreement shall become effective when it shall have been executed by
the Borrowers and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties
hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. 

    SECTION
9.04  Successors and Assigns.  (a)  Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrowers, the
Administrative Agent, the Issuing Bank or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. 

    (b) Each
Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case
of an assignment to a Lender or an Affiliate or Related Fund of such Lender, (x) the Borrowers and the Administrative Agent (and, in the case of any assignment of a Revolving Credit Commitment,
the Issuing Bank) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed); provided,  however,
 that the consent of the Borrowers shall not be required to any such assignment during the continuance of any Event of Default described in
subsection (g) or (h) of Article VII, and (y) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire remaining amount of such Lender's Commitment) or
such lesser amount as the Borrowers and the Administrative Agent may from time to time agree (such agreement to be conclusively evidenced by the execution of the related Assignment and Acceptance by
all the 

70

 

parties thereto), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together (except in the case of any assignment to
an Affiliate or a Related Fund) with a processing and recordation fee of $3,500 and (iii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in
each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid). 

    (c) By
executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with
each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any
adverse claim and that its Revolving Credit Commitment, and the outstanding balances of its Revolving Loans, in each case without giving effect to assignments thereof which have not become effective,
are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrowers or any Subsidiary or the performance or observance by the
Borrowers or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the
most recent financial statements referred to in Section 3.05(a) or delivered pursuant to Section 5.04 and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent,
such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. 

    (d) The
Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be conclusive and the Borrowers, the Administrative Agent, the Issuing
Bank, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register 

71

 

shall be available for inspection by the Borrowers, the Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 

    (e) Upon
its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect
of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of
the Borrowers, the Issuing Bank and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the Lenders and the Issuing Bank. No assignment shall be effective unless it has been recorded in the Register as
provided in this paragraph (e). 

    (f)  Each
Lender may without the consent of the Borrowers, the Issuing Bank or the Administrative Agent sell participations to one or more banks or other entities in
all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided,  however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained
in Sections 2.16 and 2.18 to the same extent as if they were Lenders and (iv) the Borrowers, the Administrative Agent, the Issuing Bank and the Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrowers relating
to the Loans or L/C Disbursements and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable
hereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans,
increasing or extending the Commitments or releasing any Subsidiary Guarantor or all or any substantial part of the Collateral). 

    (g) Any
Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04,
disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrowers furnished to such Lender by or on behalf of the Borrowers;  provided that, prior to
any such disclosure of information designated by the Borrowers as confidential, each such assignee or participant or proposed
assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information
on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16. 

    (h) Any
Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations
owed by such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for
such Lender as a party hereto. 

    (i)  Notwithstanding
anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special
purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the
Borrowers, the option to provide to the Borrowers all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrowers pursuant to this Agreement;  provided that
(i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making 

72

 

of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no
SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial
paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04, any SPC may
(i) with notice to, but without the prior written consent of, the Borrowers and the Administrative Agent and without paying any processing fee therefore, assign all or a portion of its
interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrowers and Administrative Agent) providing liquidity and/or credit support to or for the account
of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. 

    (j)  No
Borrower shall assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent, the Issuing Bank and each
Lender, and any attempted assignment without such consent shall be null and void. 

    (k) In
the event that Standard & Poor's Ratings Group, Moody's Investors Service, Inc., and Thompson's BankWatch (or InsuranceWatch Ratings Service, in
the case of Lenders that are insurance companies (or Best's Insurance Reports, if such insurance company is not rated by Insurance Watch Ratings Service)) shall, after the date that any Lender becomes
a Revolving Credit Lender, downgrade the long-term certificate deposit ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of
a Lender that is an insurance company (or B, in the case of an insurance company not rated by InsuranceWatch Ratings Service)), then the Issuing Bank shall have the right, but not the obligation, at
its own expense, upon notice to such Lender and the Administrative Agent, to replace (or to request the Borrowers to use their reasonable efforts to assist in the replacement of) such Lender with an
assignee (in accordance with and subject to the restrictions contained in paragraph (b) above), and such Lender hereby agrees to transfer and assign without recourse (in accordance with
and subject to the restrictions contained in paragraph (b) above) all its interests, rights and obligations in respect of its Revolving Credit Commitment to such assignee;  provided,
however, that (i) no such assignment shall conflict with any law, rule and
regulation or order of any Governmental
Authority and (ii) the Issuing Bank or such assignee, as the case may be, shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest
accrued to the date of payment on the Loans made by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. 

    SECTION
9.05  Expenses; Indemnity.  (a)  The Borrowers jointly and severally agree to pay
all out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, and the Issuing Bank in connection with the syndication of the credit facilities provided
for herein and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Administrative Agent, the Collateral Agent or any Lender in connection with the enforcement or
protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or Letters of Credit issued hereunder, including the fees, charges and
disbursements of counsel for the Administrative Agent and the Collateral Agent, and, in connection with any such 

73

 

enforcement or protection, the fees, charges and disbursements of any other counsel for the Administrative Agent, the Collateral Agent or any Lender. 

    (b) The
Borrowers jointly and severally agree to indemnify the Administrative Agent, the Collateral Agent, each Lender and the Issuing Bank, each Affiliate of any of
the foregoing persons and each of their respective directors, officers, trustees, employees and agents (each such person being called an "Indemnitee")
against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated
thereby, (ii) the use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or
not any Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release of Hazardous Materials on any property owned or operated by any Borrowers or any of the Subsidiaries, or
any Environmental Claim related in any way to any Borrowers or the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee. 

    (c) The
provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability
of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the
Collateral Agent, any Lender or the Issuing Bank. All amounts due under this Section 9.05 shall be payable on written demand therefor. 

    SECTION
9.06  Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender
or any affiliate of a Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or any affiliate of a Lender to or for the credit or the account of any Borrowers against any of
and all the obligations of the Borrowers now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender and its affiliate under this Section 9.06 are in addition to
other rights and remedies (including other rights of setoff) which such Lender may have. 

    SECTION
9.07  Applicable Law.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT
AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993
REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE
LAWS OF THE STATE OF NEW YORK. 

74

 

    SECTION 9.08  Waivers; Amendment.  (a)  No failure or delay of the Administrative Agent,
the Collateral Agent, any Lender or the Issuing Bank in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right
or power. The rights and remedies of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive
of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrowers or any other Loan Party
therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice or demand on the Borrowers in any case shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances. 

    (b) Neither
this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the
Borrowers and the Required
Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or
extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or any date for reimbursement of an L/C Disbursement, or waive or excuse any such
payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement or any Fees, without the prior written consent of each Lender affected thereby, (ii) change or
extend the Commitment or decrease or extend the date for payment of the Commitment Fees of any Lender without the prior written consent of such Lender, (iii) amend or modify the pro rata
requirements of Section 2.20, the provisions of Section 9.04(i), the provisions of this Section, the definition of the term "Required Lenders" or release any Subsidiary Guarantor or all
or any substantial part of the Collateral, without the prior written consent of each Lender (iv) amend or modify the protections afforded to an SPC pursuant to the provisions of
Section 9.04(i) without the written consent of such SPC, or (v) increase the Advance Rates above the Advance Rates in effect on the Restatement Effective Date, without the prior
written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, the Collateral Agent or the Issuing Bank hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Collateral Agent or the
Issuing Bank, respectively. 

    (c) In
the event that the Administrative Agent requests the consent of a Lender pursuant to this Section 9.08 and such Lender shall not respond or reply to the
Administrative Agent in writing within 5 days of delivery of such request, such Lender shall be deemed to have consented to the matter that was the subject of the request. In the event that the
Administrative Agent requests the consent of a Lender and such consent is denied, then PNC may, at its option, require such Lender to assign its interest in the Obligations to PNC or to another Lender
or to any other Person designated by the Administrative Agent (the "Designated Lender") for a price equal to the then outstanding principal amount
thereof plus accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid when collected from Borrowers. In the event that PNC elects to require any Lender to assign its
interest to PNC, or a Designated Lender, PNC will so notify such Lender in writing within 45 days following such Lender's denial, and such Lender will assign its interest to PNC or the
Designated Lender no later than 5 days following receipt of such notice pursuant to an Assignment and Acceptance Agreement executed by such Lender, PNC or the Designated Lender, as appropriate,
and the Administrative Agent. 

    SECTION
9.09.  [Intentionally Deleted]  

    SECTION
9.10  Entire Agreement.  This Agreement, the Fee Letter and the other Loan Documents constitute
the entire contract between the parties relative to the subject matter hereof. Any 

75

 

other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or
the other Loan Documents. 

    SECTION
9.11  WAIVER OF JURY TRIAL; CONSEQUENTIAL DAMAGES.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. Neither the Administrative Agent, the Collateral Agent nor any Lender, nor any
agent or attorney for any of them, shall be liable to any Borrowers or any other Loan Party for consequential damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations. 

    SECTION
9.12  Severability.  In the event any one or more of the provisions contained in this Agreement
or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 

    SECTION
9.13  Counterparts.  This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in
Section 9.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. 

    SECTION
9.14  Headings.  Article and Section headings and the Table of Contents used herein are
for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. 

    SECTION
9.15  Jurisdiction; Consent to Service of Process.  (a)  Each Borrower hereby
irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the
extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may otherwise have
to 

76

 

bring any action or proceeding relating to this Agreement or the other Loan Documents against any Borrowers or its properties in the courts of any jurisdiction. 

    (b) Each
Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 

    (c) Each
party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other manner permitted by law. 

    SECTION
9.16  Confidentiality.  The Administrative Agent, the Collateral Agent, the Issuing Bank, and
each of the Lenders agrees to keep confidential (and to use its best efforts to cause its respective agents and representatives to keep confidential) the Information (as defined below) and all copies
thereof, extracts therefrom and analyses or other materials based thereon, except that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender shall be permitted to disclose
Information (a) to such of its respective officers, directors, employees, agents, affiliates and representatives as need to know such Information, (b) to a potential assignee or
participant of such Lender or any direct or indirect contractual counterparty in any swap agreement relating to the Loans or such potential assignee's or participant's or counterparty's advisors who
need to know such Information (provided that any such potential assignee or participant or counterparty shall, and shall use its best efforts to cause its advisors to, keep confidential all such
information on the terms set forth in this Section 9.16, (c) to the extent requested by any regulatory authority, (d) to the extent otherwise required by applicable laws and
regulations or by any subpoena or similar legal process, (e) in connection with any suit, action or proceeding relating to the enforcement of its rights hereunder or under the other Loan
Documents or (f) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.16 or (ii) becomes available to the
Administrative Agent, the Issuing Bank, any Lender or the Collateral Agent on a nonconfidential basis from a source other than a Borrower. For the purposes of this Section,  "Information" shall mean all
financial statements, certificates, reports, agreements and information (including all analyses, compilations and studies
prepared by the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender based on any of the foregoing) that are received from any Borrower and related to such Borrower, any
Subsidiary, any shareholder of the Borrowers or any employee, customer or supplier of the Borrowers, other than any of the foregoing that were available to the Administrative Agent, the Collateral
Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its disclosure thereto by the Borrowers, and which are in the case of Information provided after the date hereof, clearly
identified
at the time of delivery as confidential. The provisions of this Section 9.16 shall remain operative and in full force and effect regardless of the expiration and term of this Agreement. 

    SECTION
9.17  Delivery of Notes .  Agent shall in good faith use commercially reasonable efforts to
request and obtain from each Lender and Terminating Lender the delivery of any promissory note evidencing the Term Loan made by such Lender or Terminating Lender. After receipt thereof, the
Administrative Agent shall immediately mark such promissory notes "cancelled" and return them to the Borrower as soon as reasonably practicable. Each Lender and the Administrative Agent on behalf of
each of the Terminating Lenders hereby confirms the cancellation and release of the Borrower's obligations under such promissory notes and agrees to indemnify and hold harmless the Borrowers from any
loss, damage, claim or liability (including reasonable fees and disbursements of its attorneys and all costs and expenses of enforcing this indemnity) arising out of the presentation of such
promissory notes by any person or entity to whom such Lender or Terminating Lender transferred, 

77

 

assigned, pledged, hypothecated, created a security interest in or otherwise encumbered such promissory note or related to the loss or theft of such note. 

[The
remainder of this page intentionally blank] 

78

 
    IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be duly executed by their respective authorized officers as of the day and year first
above written. 

	 	 	ACTIVISION, INC.,

a Delaware corporation
	

 	
 	

By	
 	

  
 Name:

Title:
	

 	
 	

ACTIVISION PUBLISHING INC.,

a Delaware corporation
	

 	
 	

By	
 	

  
 Name:

Title:
	

 	
 	

EXPERT SOFTWARE, INC.,

a Delaware corporation
	

 	
 	

By	
 	

  
 Name:

Title:
	

 	
 	

ACTIVISION VALUE PUBLISHING, INC.,

a Minnesota corporation
	

 	
 	

By	
 	

  
 Name:

Title:

79

 

    IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be duly executed by their respective authorized officers as of the day and year first
above written. 

	 	 	PNC BANK, NATIONAL ASSOCIATION,

individually and as Administrative Agent, Collateral Agent and Issuing Bank,
	

 	
 	

By	
 	

  
 Name:

Title:

80

 

    IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be duly executed by their respective authorized officers as of the day and year first
above written. 

	 	 	COMERICA BANK
	

 	
 	

By	
 	

  
 Name:

Title:

81

 

    IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be duly executed by their respective authorized officers as of the day and year first
above written. 

	 	 	GUARANTY BUSINESS CREDIT CORPORATION

d/b/a Fidelity Funding
	

 	
 	

By	
 	

  
 Name:

Title:

82

 

    IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be duly executed by their respective authorized officers as of the day and year first
above written. 

	 	 	LASALLE BANK NATIONAL ASSOCIATION
	

 	
 	

By	
 	

  
 Name:

Title:

83

 

    IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be duly executed by their respective authorized officers as of the day and year first
above written. 

	 	 	U.S. BANK NATIONAL ASSOCIATION
	

 	
 	

By	
 	

  
 Name:

Title:

84

  

	Schedule 1.01(a)	 	Subsidiary Guarantors
	Schedule 2.01	 	Lenders and Commitments
	Schedule 3.08	 	Subsidiaries
	Schedule 3.09	 	Litigation
	Schedule 3.17	 	Environmental Matters
	Schedule 3.18	 	Insurance
	Schedule 3.20(a)	 	Real Property Owned In Fee
	Schedule 3.20(b)	 	Leased Real Property
	Schedule 6.01	 	Outstanding Indebtedness on Closing Date
	Schedule 6.02	 	Liens Existing on Restatement Effective Date

85

QuickLinks

EXHIBIT 10.29

TABLE OF CONTENTS

AMENDED AND RESTATED CREDIT AGREEMENT

ARTICLE I Definitions

ARTICLE II The Credits

ARTICLE III Representations and Warranties

ARTICLE IV Conditions of Lending

ARTICLE V Affirmative Covenants

ARTICLE VI Negative Covenants

ARTICLE VII Events of Default

ARTICLE VIII The Administrative Agent and the Collateral Agent

ARTICLE IX Miscellaneous<PAGE>

                                                                    EXHIBIT 4.1

                                   DYAX CORP.

                                       and

                    American Stock Transfer & Trust Company,
                                  Rights Agent

                                Rights Agreement

                          Effective as of June 27, 2001

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                               PAGE
<S>               <C>                                                                                          <C>

Section 1.        Certain Definitions............................................................................1

Section 2.        Appointment of Rights Agent....................................................................4

Section 3.        Issue of Rights and Rights Certificates........................................................5

Section 4.        Form of Rights Certificates....................................................................6

Section 5.        Countersignature and Registration..............................................................7

Section 6.        Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
                  Destroyed, Lost or Stolen Rights Certificates..................................................7

Section 7.        Exercise of Rights; Purchase Price; Final Expiration Date of Rights............................8

Section 8.        Cancellation and Destruction of Rights Certificates...........................................10

Section 9.        Reservation and Availability of Shares........................................................10

Section 10.       Preferred Shares Record Date..................................................................11

Section 11.       Adjustment in Rights; Exchange of Rights; Certain Covenants...................................11

Section 12.       Certificate of Adjustment.....................................................................18

Section 13.       Consolidation, Merger or Sale or Transfer of Assets or Earning Power..........................18

Section 14.       Fractional Rights and Fractional Shares.......................................................21

Section 15.       Rights of Action..............................................................................22

Section 16.       Agreement of Right Holders....................................................................22

Section 17.       Rights Certificate Holder Not Deemed a Shareholder............................................23

Section 18.       Concerning the Rights Agent...................................................................23

Section 19.       Merger or Consolidation or Change of Name of Rights Agent.....................................24

Section 20.       Duties of Rights Agent........................................................................24

Section 21.       Change of Rights Agent........................................................................26

Section 22.       Issuance of New Rights Certificates...........................................................27

Section 23.       Redemption....................................................................................27

Section 24.       Notice of Certain Events......................................................................28

Section 25.       Notices.......................................................................................29

Section 26.       Supplements and Amendments....................................................................29

Section 27.       Successors....................................................................................30

Section 28.       Determinations and Actions by the Board of Directors..........................................30

Section 29.       Benefits of this Agreement....................................................................31
</TABLE>

                                      -i-

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                               PAGE
<S>               <C>                                                                                          <C>
Section 30.       Severability..................................................................................31

Section 31.       Governing Law.................................................................................31

Section 32.       Counterparts..................................................................................31

Section 33.       Descriptive Headings..........................................................................31
</TABLE>

                                      -ii-

<PAGE>

                                RIGHTS AGREEMENT

         Rights Agreement (this "AGREEMENT"), dated as of June 27, 2001, between
Dyax Corp., a Delaware corporation (the "COMPANY"), and American Stock Transfer
& Trust Company, (the "RIGHTS AGENT").

         WHEREAS, the Board of Directors of the Company (the "BOARD") has (i)
deemed it desirable and in the best interest of the Company and its shareholders
to adopt a shareholder rights plan, (ii) authorized and declared a dividend
distribution of one Right (as defined below) for each share of common stock, par
value $.01 per share, of the Company outstanding at the close of business on
June 27, 2001 (the "RECORD DATE"), and (iii) authorized and directed the
issuance of one Right (as such number may hereafter be adjusted pursuant to
Section 11 hereof) for each share of Common Stock issued between the Record Date
(whether originally issued or delivered from the Company's treasury) but prior
to the earliest of the "Distribution Date," the "Redemption Date" and the "Final
Expiration Date," each as defined in this Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:

         Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:

         (a) "ACQUIRING PERSON" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include the Company or any Company Affiliate. Notwithstanding the foregoing:

              (i) a Person shall not become an "Acquiring Person" solely as the
result of an acquisition of shares of Common Stock by the Company or any
Subsidiary which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the shares of Common Stock then outstanding as determined above; PROVIDED,
HOWEVER, that if a Person becomes the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding as determined above solely by reason of
such a share acquisition by the Company and such Person shall, after becoming
the Beneficial Owner of such Common Stock, become the Beneficial Owner of any
additional share of Common Stock by any means whatsoever (other than as a result
of the subsequent occurrence of a stock dividend or a subdivision of the Common
Stock into a larger number of shares or a similar transaction), then such Person
shall be deemed to be an "Acquiring Person;" and

              (ii) if a majority of the Board determines in good faith that a
Person who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1(a), has become such inadvertently, and
such Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this Section 1(a), then such
Person shall not be deemed to be an "Acquiring Person" for any purposes of this
Agreement. The determination of whether such Person's becoming an Acquiring
Person shall

<PAGE>

have been inadvertent and the determination of whether the divestment of
sufficient shares shall have been made as promptly as practicable shall be made
by the Board.

         (b) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and as in effect on the date of
this Agreement (the "EXCHANGE ACT").

         (c) A Person shall be deemed the "BENEFICIAL OWNER" of and shall be
deemed to "beneficially own" any securities:

              (i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;

              (ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing), or upon the exercise
of conversion rights, exchange rights, rights (other than the Rights at any time
prior to the occurrence of a Triggering Event, as hereinafter defined, but
thereafter including Rights acquired from and after the Distribution Date other
than Rights acquired pursuant to Section 3(c), 11(a)(vi) or 22 hereof), warrants
or options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, securities tendered pursuant to
a tender or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote or dispose of or "beneficial
ownership" (as defined in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act) of (including pursuant to any agreement, arrangement or
understanding, whether or not in writing); PROVIDED, HOWEVER, that a Person
shall not be so deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to vote such security
(1) arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations of the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or

              (iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B))
or disposing of any securities of the Company.

         (d) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
a day on which national banks are authorized or obligated by law or executive
order to close.

         (e) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M.,
Massachusetts time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 P.M., Massachusetts time, on the next succeeding
Business Day.

         (f) "COMMON STOCK" shall mean the common stock, par value $.01 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the

                                      -2-

<PAGE>

Company shall mean the capital stock of such Person with the greatest voting
power, or the equity securities or other equity interest having power to control
or direct the management of such Person, or, if such other Person is a
Subsidiary of another Person, the Person or Persons that ultimately controls
such first-mentioned Person.

         (g) "COMPANY AFFILIATE" shall mean any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan.

         (h) "DISTRIBUTION DATE" shall mean the earlier of (i) the close of
business on the tenth day after the Stock Acquisition Date (or, if the tenth day
after the Stock Acquisition Date occurs before the Record Date, the close of
business on the Record Date) (or such later date as may be determined by the
Board) or (ii) the close of business on the tenth Business Day (or such later
date as may be determined by the Board) after the date of the commencement of,
or of the first public announcement of the intention of, any Person (other than
the Company or any Company Affiliate) to commence, within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, a tender
or exchange offer the consummation of which would result in beneficial ownership
by a Person of 15% or more of all the then outstanding shares of Common Stock.

         (i) "FINAL EXPIRATION DATE" shall mean the close of business on June
27, 2011.

         (j) "PERSON" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.

         (k) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company.

         (l) "REDEMPTION DATE" shall mean the time at which Rights are redeemed
as provided in Section 23 hereof.

         (m) "RIGHT" shall mean a preferred share purchase right initially
representing the right to purchase one one-thousandth (1/1,000) of a share of
the Company's Series A Junior Participating Preferred Stock, upon the terms and
subject to the conditions set forth in this Agreement, and thereafter as
provided herein;

         (n) "STOCK ACQUISITION DATE" shall mean the first date of public
announcement by the Company that an Acquiring Person has become such.

         (o) "SUBSIDIARY" of any Person shall mean, with reference to any
Person, any corporation of which an amount of voting securities sufficient to
elect at least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.

         (p) "TRIGGERING EVENT" shall mean a Person becoming an Acquiring
Person.

                                      -3-
<PAGE>

         (q) The following terms shall have the meanings indicated in the
following Sections of this Agreement:

              (i)     "ACT" - Section 9(b).

              (ii)    "ADJUSTMENT SHARES" - Section 11(b).

              (iii)   "AGREEMENT" - Preamble.

              (iv)    "BOARD" - Preamble.

              (v)     "COMPANY" - Preamble and Section 13(a)

              (vi)    "CURRENT VALUE" - Section 11(c)(i).

              (vii)   "EXCHANGE ACT" - Section 1(b).

              (viii)  "EXCHANGE CONSIDERATION" - Section 11(c)(ii)(A).

              (ix)    "NASDAQ" - Section 11(d).

              (x)     "NYSE" - Section 11(d).

              (xi)    "PRINCIPAL PARTY" - Section 13(b).

              (xii)   "PURCHASE PRICE" - Sections 4, 7, 11(b) and 13(a).

              (xiii)  "RECORD DATE" - Preamble.

              (xiv)   "REDEMPTION PRICE" - Section 23(a)(i).

              (xv)    "RIGHTS AGENT" - Preamble and Section 2.

              (xvi)   "RIGHTS CERTIFICATE" - Section 3(c).

              (xvii)  "SECTION 13(A) EVENT" - Section 13(a).

              (xviii) "SPREAD" - Section 11(c).

              (xix)   "SUBSTITUTION PERIOD" - Section 11(c).

              (xx)    "TRADING DAY" - Section 11(d)(i).

Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof, shall, prior to the Distribution Date, also be
the holders of Common Stock) in accordance with the terms and conditions hereof,
and the Rights Agent hereby accepts such appointment. Upon prior written notice
to the Rights Agent, the Company may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable (the term "RIGHTS

                                      -4-
<PAGE>

AGENT" being used herein to refer, collectively, to the Rights Agent together
with any such co-Rights Agent).

         Section 3. ISSUE OF RIGHTS AND RIGHTS CERTIFICATES.

         (a) As promptly as practicable following the Record Date, the Company
will send a summary of this Agreement and the Rights by first-class, postage
prepaid mail to each record holder of shares of Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Company.

         (b) In addition to the Rights issued in respect of the shares of Common
Stock outstanding on the Record Date, Rights shall be issued in respect of all
shares of Common Stock that are issued after the Record Date but before the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date. From the Record Date until the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date, (i) the registered holders of the
shares of Common Stock outstanding from time to time shall be the registered
holders of the associated Rights, (ii) the Rights will be evidenced by the
certificates for Common Stock registered from time to time in the names of the
holders thereof (which certificates for Common Stock shall also be deemed to be
certificates for Rights) and not by separate certificates, (iii) the Rights will
be transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company), and (iv) the surrender for
transfer of any certificate representing shares of Common Stock shall also
constitute the transfer of the Rights associated with such shares of Common
Stock. In the event that the Company purchases or acquires any shares of Common
Stock on or after the Record Date but before the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date, any Rights associated
with such shares of Common Stock shall be deemed cancelled and retired so that
the Company shall not be entitled to exercise any Rights associated with the
Common Stock that are no longer outstanding. Certificates from time to time
representing shares of Common Stock issued or transferred after the Record Date
but before the earliest of the Distribution Date, the Redemption Date or the
Final Expiration Date shall bear the following legend:

                  "This certificate also evidences and entitles the holder
                  hereof to certain Rights as set forth in the Rights Agreement
                  between Dyax Corp. and American Stock Transfer & Trust Company
                  (the "RIGHTS AGENT") dated as of June 27, 2001 (as it may be
                  amended from time to time, the "RIGHTS AGREEMENT"), the terms
                  of which are hereby incorporated herein by reference and a
                  copy of which is on file at the principal executive offices of
                  Dyax Corp. Under certain circumstances, as set forth in the
                  Rights Agreement, such Rights will be evidenced by separate
                  certificates and will no longer be evidenced by this
                  certificate. The Rights Agent will mail to the holder of this
                  certificate a copy of the Rights Agreement, as in effect on
                  the date of mailing, without charge promptly after receipt of
                  a written request therefor. In certain circumstances set forth
                  in the Rights Agreement, Rights beneficially owned by
                  Acquiring Persons (as defined in the Rights Agreement) and any
                  subsequent holder of such Rights may become null and void."

                                       -5-

<PAGE>

         (c) As promptly as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of EXHIBIT A hereto (the "RIGHTS
CERTIFICATE"), evidencing one Right for each share of Common Stock so held. In
the event that an adjustment in the number of Rights per share of Common Stock
has been made pursuant to Section 11(a) hereof, at the time of distribution of
the Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.

         (d) Any Rights Certificate issued pursuant to this Section 3 or Section
22 hereof that represents Rights beneficially owned by an Acquiring Person or
any Associate or Affiliate thereof and any Rights Certificate issued at any time
upon the transfer of any Rights to an Acquiring Person or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate, and any Rights Certificate issued pursuant to Section 6, 7(d), 7(e),
11 or 22 hereof upon transfer, exchange, replacement or adjustment of any other
Rights Certificate referred to in this sentence, shall contain the following
legend:

                  The Rights represented by this Rights Certificate were issued
                  to a Person who was an Acquiring Person or an Affiliate or an
                  Associate of an Acquiring Person (as such terms are defined in
                  the Rights Agreement). This Rights Certificate and the Rights
                  represented hereby may become void in the circumstances
                  specified in the Rights Agreement, including Sections 7(e) and
                  11(b) thereof;

PROVIDED, HOWEVER, that the Rights Agent shall not be under any responsibility
to ascertain the existence of facts that would require the imposition of such
legend but shall be required to impose such legend only if instructed to do so
by the Company or if a holder fails to certify upon transfer or exchange in the
space provided on the Rights Certificate that such holder is not an Acquiring
Person or an Affiliate or Associate thereof.

         (e) Notwithstanding the requirements of this Section 3, the omission of
a legend shall not affect the enforceability of any part of this Agreement or
the rights of any holder of Rights.

         Section 4. FORM OF RIGHTS CERTIFICATES. The Rights Certificates (and
the forms of election to purchase Preferred Shares and of assignment to be
printed on the reverse thereof) shall each be substantially in the form set
forth as EXHIBIT A hereto, and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Sections 11 and 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
and on their face shall entitle the holders thereof to purchase such number of
one

                                      -6-

<PAGE>

one-thousandths of a Preferred Share as shall be set forth therein at the price
per one one-thousandth of a Preferred Share set forth therein (the "PURCHASE
PRICE"), but the number of such one one-thousandths of a Preferred Share and the
Purchase Price shall be subject to adjustment as provided herein.

         Section 5. COUNTERSIGNATURE AND REGISTRATION.

         (a) The Rights Certificate shall be executed on behalf of the Company
by its Chairman of the Board, Chief Executive Officer, President or any Vice
President, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificate shall be countersigned manually, or,
if permitted by the Company, by facsimile signature, by the Rights Agent and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificate, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificate had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Agreement any such person was not such an officer.

         (b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Rights Certificates.

         Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.

         (a) Subject to the provisions of Sections 7(e) and 14 hereof, at any
time after the close of business on the Distribution Date, and at or prior to
the close of business on the earlier of the Redemption Date or the Final
Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of one one-thousandths of a Preferred Share (or, following a Triggering Event,
Common Stock, other securities or property, as the case may be) as the Rights
Certificate or Rights Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purposes. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of

                                      -7-
<PAGE>

such Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall request. Thereupon the Rights Agent
shall (subject to Sections 7(e) and 14 hereof) countersign and deliver to the
person entitled thereto a Rights Certificate or Rights Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.

         (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
holder in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.

         (c) Notwithstanding any other provision hereof, the Company and the
Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidenced by Rights Certificates.

         Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; FINAL EXPIRATION DATE OF
RIGHTS.

         (a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restriction on exercisability
set forth in Section 23(a) hereof) in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate contained in the form of election to
purchase on the reverse side of the Rights Certificate duly executed, to the
Rights Agent at the principal offices of the Rights Agent, together with payment
of the aggregate Purchase Price for the Preferred Shares (or other shares,
securities or property, as the case may be) as to which the Rights are
exercised, at or prior to the earlier of the Redemption Date and the Final
Expiration Date.

         (b) The Purchase Price for each one one-thousandth of a Preferred Share
shall initially be $94.23 and shall be subject to adjustment from time to time
as provided in Sections 11 and 13 hereof and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.

         (c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate contained in
the form of election to purchase and the Rights Certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares (or other
shares, securities or property, as the case may be) to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder of
such Rights Certificate in accordance with Section 9 hereof in cash, or by
certified check or cashier's check payable to the order of the Company, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the Preferred Shares certificates for the
number of Preferred Shares to be purchased (and the Company hereby irrevocably

                                      -8-

<PAGE>

authorizes its transfer agent to comply with all such requests), or (B) if the
Company shall have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one
one-thousandths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, promptly deliver such cash
to or upon the order of the registered holder of such Rights Certificate. In the
event that the Company is obligated to issue other securities (including Common
Stock), pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.

         (d) In case the registered holder of any Rights Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights Certificate or to
his duly authorized assigns, subject to the provisions of Section 14 hereof.

         (e) Notwithstanding anything in this Agreement to the contrary, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such (and any subsequent transferees of such transferee), or
(iii) a transferee of an Acquiring Person (or such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding that has as a primary
purpose or effect the avoidance of this Section 7(e), shall become null and void
without any further action, and any holder (including any subsequent holder) of
such Rights shall thereupon have no rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
7(e) are complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure or inability to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.

         (f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such

                                      -9-

<PAGE>

exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall request.

         Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.

         Section 9. RESERVATION AND AVAILABILITY OF SHARES.

         (a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Shares (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) or any Preferred Shares (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) held in its treasury,
the number of Preferred Shares (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) that will be sufficient (in
accordance with the terms of this Agreement, including Section 11(c)(i) hereof)
to permit the exercise in full of all outstanding Rights. Prior to the
occurrence of a Triggering Event, the Company shall not be obliged to cause to
be reserved and kept available out of its authorized and unissued Common Stock
or shares of preferred stock (other than Preferred Shares), any such Common
Stock or any shares of preferred stock (other than Preferred Shares) to permit
exercise of outstanding Rights.

         (b) If then required by applicable law, the Company shall use its best
efforts to (i) file, either (A) as soon as practicable following the earliest
date after the occurrence of a Triggering Event as to which the consideration to
be delivered by the Company upon exercise of the Rights has been determined
pursuant to this Agreement or (B) as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933, as amended (the "ACT"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities and (B) the date of the expiration of the Rights. If then required by
applicable law, the Company will also take such action as may be appropriate
under the securities or "blue sky" laws of the various states. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of this Section 9(b), the exercisability of the
Rights in order to prepare and file such registration statement or to comply
with such blue sky laws. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended. Notwithstanding any provision of this Agreement

                                      -10-
<PAGE>

to the contrary, the Rights shall not be exercisable in any jurisdiction unless
the requisite qualification in such jurisdiction shall have been obtained.

         (c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
non-assessable shares.

         (d) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates or
of any Preferred Shares (or Common Stock and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
Common Stock and/or other securities, as the case may be) in a name other than
that of, the registered holder of the Rights Certificate evidencing Rights
surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Preferred Shares (or Common Stock and/or other
securities, as the case may be) upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.

         Section 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for Preferred Shares (or Common Stock and/or other securities, as
the case may be) is issued upon the exercise or exchange of Rights shall for all
purposes be deemed to have become the holder of record of the Preferred Shares
(or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which (a) the
Rights Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made or (b) an
exchange of Rights for Exchange Consideration under Section 11(c)(ii) is
effected; PROVIDED, HOWEVER, that if the date of such surrender and payment or
such exchange is a date upon which the Preferred Shares (or Common Stock and/or
other securities, as the case may be) transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Shares (or Common Stock and/or other securities, as the case may
be) transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled (in
such holder's capacity as such) to any rights of a shareholder of the Company
with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.

         Section 11. ADJUSTMENT IN RIGHTS; EXCHANGE OF RIGHTS; CERTAIN
COVENANTS. The Purchase Price, the number of Preferred Shares (or number and
kind of other shares of capital stock, as the case may be) covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.

                                      -11-
<PAGE>

         (a) ANTI-DILUTION ADJUSTMENTS; ADJUSTMENTS GENERALLY.

              (i) To preserve the actual or potential economic value of the
Rights, if at any time after the date of this Agreement there shall be any
change in the Common Stock or the Preferred Shares, whether by reason of stock
dividends, stock splits, recapitalizations, reclassifications, mergers,
consolidations, combinations or exchanges of securities, split-ups, split-offs,
spin-offs, liquidations, other similar changes in capitalization, any
distribution or issuance of cash, assets, evidences of indebtedness or
subscription rights, options or warrants to holders of Common Stock or Preferred
Shares, as the case may be (other than the Rights or regular quarterly cash
dividends) or otherwise, then, in each such event adjustments in the number of
Preferred Shares (or the number and kind of other securities) issuable upon
exercise of each Right, the Purchase Price and Redemption Price in effect at
such time (including the number of Rights or fractional Rights associated with
each share of Common Stock) shall be made if and as deemed appropriate by the
Board, such that following such adjustments such event shall not have had the
effect of reducing or limiting the benefits the holders of the Rights would have
had absent such event.

              (ii) If, as a result of an adjustment made pursuant to this
Section 11, the holder of any Right thereafter exercised shall become entitled
to receive any securities other than Preferred Shares, thereafter the number of
such securities so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Section 11(a)(i), and the provisions of
Sections 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly
as reasonably may be, on like terms to any such other securities.

              (iii) All Rights originally issued by the Company subsequent to
any adjustment made to the amount of Preferred Shares or other securities
relating to a Right shall evidence the right to purchase, for the Purchase
Price, the adjusted number and kind of securities purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.

              (iv) Irrespective of any adjustment or change in the Purchase
Price or the number of Preferred Shares or number or kind of other securities
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the terms which were expressed in
the initial Rights Certificates issued hereunder.

              (v) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 11(a) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share or the nearest ten-millionth of a Preferred Share
as the case may be. Notwithstanding the first sentence of this Section 11(a),
any adjustment required by this Section 11 shall be made no later than the
earliest of (A) three (3) years from the date of the transaction which requires
such adjustment, (B) the Redemption Date or (C) the Final Expiration Date.

                                      -12-
<PAGE>

              (vi) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(a)(vi),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.

              (vii) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
non-assessable Preferred Shares at such adjusted Purchase Price.

              (viii) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any (A) consolidation or subdivision of the
Preferred Shares, (B) issuance wholly for cash of any Preferred Shares at less
than the current market price, (C) issuance wholly for cash of Preferred Shares
or securities which by their terms are convertible into or exchangeable for
Preferred Shares, (D) dividends on Preferred Shares payable in Preferred Shares
or (E) issuance of rights, options or warrants referred to hereinabove in
Section 11(b), hereafter made by the Company to holders of its Preferred Shares
shall not be taxable to such shareholders.

              (ix) In any case in which action taken pursuant to Section
11(a)(i) requires that an adjustment be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Preferred Shares and/or other securities, if any, issuable upon such
exercise

                                      -13-
<PAGE>

over and above the Preferred Shares and/or other securities, if any, issuable
before giving effect to such adjustment; PROVIDED, HOWEVER, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional securities upon the
occurrence of the event requiring such adjustment.

         (b) INITIAL ADJUSTMENT UPON TRIGGERING EVENT. Upon the first occurrence
of a Triggering Event (except as otherwise provided in this Agreement), proper
provision shall be made so that each holder of a Right, except as provided below
and in Section 7(e) hereof, shall thereafter have a right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of Preferred Shares and subject to the provisions of
Section 11(a), such number of shares of Common Stock as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to the Triggering Event (whether or not such Right was then
exercisable), and dividing that product (which, following such Triggering Event,
shall be referred to as the "Purchase Price" for all purposes of this Agreement)
by (y) 50% of the then "current per share market price" of the Common Stock
(determined pursuant to Section 11(d)), on the date of the occurrence of the
Triggering Event (such number of shares being referred to herein as the
"ADJUSTMENT SHARES"). Notwithstanding the foregoing, upon the occurrence of the
Triggering Event, any Rights that are or were on or after the earlier of the
Distribution Date or the date of the Triggering Event beneficially owned by an
Acquiring Person (or any Associate or Affiliate of such Acquiring Person) or by
certain transferees of such Persons as specified in Section 7(e), shall become
void and any holder (including subsequent holders) of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Agreement. Rights Certificates issued with respect to Rights of such holders
shall bear the legend described in Section 3(d).

         (c) OTHER ADJUSTMENTS UPON OR FOLLOWING TRIGGERING EVENT.

              (i) USE OF COMMON EQUIVALENTS OR CASH. In the event that (x) the
total number of shares of Common Stock that are issued but not outstanding and
authorized but unissued (excluding shares of Common Stock reserved for issuance
pursuant to the specific terms of any indenture, option plan or other agreement)
is not sufficient to permit the exercise in full of the Rights in accordance
with Section 11(b) or 11(c)(ii) hereof or (y) the total number of shares of
Common Stock available for exercise of the Rights in accordance with Section
11(b) hereof is sufficient to permit the exercise in full of the Rights in
accordance with Section 11(b) but the Board determines that the exercise of the
Rights in accordance with Section 11(b) above will not afford adequate
protection to the shareholders of the Company and that shareholders should be
given an option to acquire a substitute for the Adjustment Shares, and subject
to such limitations as are necessary to prevent a default under any agreement
for money borrowed as presently constituted to which the Company is a party,
then the Board shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "CURRENT VALUE")
over (2) the Purchase Price (such excess, the "SPREAD"), and (B) with respect to
each Right, make adequate provision to substitute for, or provide an election to
acquire in lieu of, the Adjustment Shares, upon payment of the applicable
Purchase Price (which term shall include any reduced Purchase Price), any
combination of the following having an aggregate value equal to the Current
Value (such aggregate value to be determined by the Board based upon the advice
of a nationally recognized investment banking firm selected by the Board): (1)
voting and other

                                      -14-
<PAGE>

securities of one or more subsidiaries of the Company, (2) a reduction in the
Purchase Price, (3) Common Stock and/or other equity securities of the Company
and/or (4) debt securities of the Company and/or cash and other assets;
PROVIDED, HOWEVER, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
first occurrence of a Triggering Event, then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, Common Stock (to the extent available) and then,
if necessary, cash, which securities and/or cash in the aggregate are equal to
the Spread. If the Board shall determine in good faith that it is likely that
sufficient additional Common Stock could be authorized for issuance upon
exercise in full of the Rights, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days
following the first occurrence of a Triggering Event, in order that the Company
may seek shareholder approval for the authorization of such additional shares
(such period, as it may be extended, the "SUBSTITUTION PERIOD"). To the extent
that the Board determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(c)(i), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(c)(i), the value of the Common Stock
shall be the current per share market price (as determined pursuant to Section
11(d) hereof) of the Common Stock on the date of the first occurrence of a
Triggering Event.

              The provisions of this Section 11(c)(i) shall apply only to Common
Stock of the Company and shall not apply to the securities of any other Person.

              (ii) EXCHANGE OPTION.

                      (A) At any time after the occurrence of a Triggering Event
              and prior to the earlier of (i) the time any Person, together with
              all Affiliates and Associates of such Person, becomes the
              Beneficial Owner of 50% or more of the shares of Common Stock then
              outstanding and (ii) the occurrence of a Section 13(a) Event, the
              Board may, at its option, cause the Company to exchange
              mandatorily all or part of the then outstanding and exercisable
              Rights (which shall not include Rights that shall have become null
              and void pursuant to the provisions of Section 7(e) hereof) for
              consideration per Right consisting of one half of the securities
              that would be issuable, or cash or other assets with one half the
              value of the cash or other assets that would be issuable, at such
              time upon the exercise of one Right in accordance with Section
              11(b) or 11(c)(i), as the case may be (the consideration issuable
              per Right pursuant to this Section 11(c)(ii)(A) being the
              "EXCHANGE CONSIDERATION"). Any partial exchange shall be effected
              on a pro rata basis based on the number of Rights (other than
              Rights which have become void pursuant to the provisions of
              Section 7(e) hereof) held by each holder of Rights. If the Board
              elects to exchange all the Rights for Exchange Consideration
              pursuant to this Section 11(c)(ii)(A) prior to the physical
              distribution of the Rights Certificates, the Company may
              distribute the Exchange Consideration in lieu of distributing
              Rights Certificates, in which

                                      -15-
<PAGE>

              case for purposes of this Agreement holders of Rights shall be
              deemed to have simultaneously received and surrendered for
              exchange Rights Certificates on the date of such distribution.

                      (B) Immediately upon the action of the Board ordering the
              exchange of any particular Rights pursuant to this Section
              11(c)(ii) and without any further action and without any notice,
              the right to exercise those particular Rights shall terminate and
              the only right a holder shall have thereafter with respect to any
              of those particular Rights shall be to receive the Exchange
              Consideration. The Company shall promptly give public notice of
              any such exchange and in addition, the Company shall promptly mail
              a notice of any such exchange to all of the holders of such Rights
              in accordance with Section 25 of this Agreement; PROVIDED,
              HOWEVER, that the failure to give, any delay in giving or any
              defect in, such notice shall not affect the validity of such
              exchange. Each such notice of exchange will state the method by
              which the exchange of the Exchange Consideration for Rights will
              be effected and, in the event of any partial exchange, the number
              of Rights which will be exchanged. In the event the Exchange
              Consideration consists of Common Stock, the Company shall not be
              required to issue fractions of shares of Common Stock or to
              distribute certificates which evidence fractional shares of Common
              Stock. In lieu of such fractional shares of Common Stock, the
              Company shall pay to the registered holders of the Rights
              Certificates with regard to which such fractional shares of Common
              Stock would otherwise be issuable an amount in cash equal to the
              product derived by multiplying (x) the subject fraction, by (y)
              the last sale price of the Common Stock on the fifth Trading Day
              following the public announcement of the exchange by the Company,
              or, in case no such sale takes place on such day, the average of
              the closing bid and asked prices on such day, in either case on a
              when issued basis (taking into account the exchange), as reported
              in the principal consolidated transaction reporting system with
              respect to securities listed or admitted to trading on the Nasdaq
              National Market (or, if the Common Stock is not so listed or
              traded, then as determined in the manner provided in Section
              11(d)(i) for determining "current per share market price,"
              adjusted to take into account the exchange). In determining
              whether any particular holder shall be obligated to receive cash
              in lieu of a fractional share, the holder shall be entitled to
              have all Rights beneficially owned by such holder aggregated so
              that only one fractional share shall be attributable to all the
              Rights so beneficially owned.

         (d) COMPUTATION OF CURRENT MARKET PRICE.

              (i) For the purpose of any computation hereunder, other than
computations made pursuant to 11(c)(i) hereof, the "current per share market
price" of the Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date, and for purposes of computations made pursuant to Section 11(c)(i)
hereof, the "current per share market price" of the Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of such
Common Stock for the ten (10) consecutive Trading Days immediately following
such date; PROVIDED, HOWEVER, that in the event that the current per share
market price of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in such Common Stock or securities
convertible

                                      -16-
<PAGE>

into such Common Stock, or (B) any subdivision, combination or reclassification
of such Common Stock, and prior to the expiration of the requisite thirty (30)
or ten (10) Trading Day period, as the case may be, after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current market
price shall be appropriately adjusted to reflect the current market price per
share of Common Stock equivalent. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange (the
"NYSE") or, if the Common Stock is not listed or admitted to trading on the
NYSE, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations ("NASDAQ") system
or such other system then in use, or, if on any such date the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Common
Stock selected by the Board. If on any such date no market maker is making a
market in the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board shall be used. The term "TRADING DAY"
shall mean a day on which the principal national securities exchange on which
the Common Stock is listed or admitted to trading is open for the transaction of
business or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

              (ii) For the purpose of any computation hereunder, the "current
per share market price" of the Preferred Shares shall be determined in the same
manner as set forth above for Common Stock in Section 11(d)(i) (other than the
last sentence thereof). If the current per share market price of the Preferred
Shares of any series cannot be determined in the manner provided above, the
"current per share market price" of the Preferred Shares shall be conclusively
deemed to be the current per share market price of the shares of Common Stock
(appropriately adjusted to reflect any stock splits, stock dividends,
recapitalizations or similar transactions occurring after the date hereof)
multiplied by one hundred. If neither the Common Stock nor the Preferred Shares
are publicly held or so listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

         (e) CERTAIN COVENANTS. The Company covenants and agrees that, after the
Distribution Date, it:

              (i) will not, and shall not permit any Subsidiary to, (i)
consolidate with, (ii) merge with or into or (iii) sell or transfer, in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the

                                      -17-

<PAGE>

Company and its Subsidiaries (taken as a whole) to, any other Person (other than
a Subsidiary of the Company in one or more transactions that comply with Section
11(e)(ii) hereof) if at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect that would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights; and

              (ii) will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights, PROVIDED, HOWEVER, that the issuance of additional Rights pursuant
hereto, including by action of the Board under Section 22 hereof, shall not be
deemed to violate this Section 11(e)(ii).

         Section 12. CERTIFICATE OF ADJUSTMENT. Whenever an adjustment is made
as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare
a certificate setting forth such adjustment, and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Common Stock or the Preferred Shares a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.

         Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.

         (a) In the event that, following the Distribution Date, directly or
indirectly, any transactions specified in the following clause (i), (ii) or
(iii) of this Section 13(a) shall be consummated:

              (i) the Company shall consolidate with, or merge with and into,
any other Person (other than a subsidiary of the Company in one or more
transactions that comply with Section 11(e)(ii) hereof) and the Company shall
not be the continuing or surviving corporation of any such consolidation or
merger;

              (ii) any Person (other than a Subsidiary of the Company in one or
more transactions that comply with Section 11(e)(ii) hereof) shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property;
or

              (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company or any Subsidiary
of the Company in one or more transactions that comply with Section 11(e)(ii)
hereof); PROVIDED, HOWEVER, that this clause (iii) of Section 13(a) hereof shall
not apply to the pro

                                      -18-
<PAGE>

rata distribution by the Company of assets (including securities) of the Company
or any of its Subsidiaries to all holders of Common Stock of the Company in
accordance with each such holder's interest in such assets prior to the
distribution;

then, and in each such case (except as provided in Section 13(e) hereof), proper
provision shall be made so that (A) each holder of a Right (except as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradable shares of
Common Stock of the Principal Party (as hereinafter defined), not subject to any
rights of first refusal, redemption or repurchase, as shall be equal to the
result obtained by (1) multiplying the then current Purchase Price by the number
of one one-thousandths of a Preferred Share for which a Right is then
exercisable immediately prior to the first of any of the events described in
clauses (i), (ii) or (iii) of this Section 13(a) (a "SECTION 13(A) EVENT"), or,
if a Triggering Event has occurred prior to the Section 13(a) Event, multiplying
the number of such fractional shares for which a Right was exercisable
immediately prior to the first occurrence of a Triggering Event by the Purchase
Price immediately prior to such first occurrence, and (2) dividing that product
(which, following the Section 13(a) Event, shall thereafter be referred to as
the "Purchase Price" for all purposes of this Agreement) by 50% of the then
current per share market price of the Common Stock of such Principal Party
(determined pursuant to Section 11(d)) on the date of consummation of such
consolidation, merger, sale or transfer; (B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Agreement; (C) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13(a) Event; (D) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its shares of its Common Stock in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Stock thereafter deliverable upon the exercise of
the Rights; and (E) the provisions of Sections 11(b) and 11(c)(i) hereof shall
thereafter be of no effect following the first occurrence of a Section 13(a)
Event. The Company shall not enter into any transaction of the kind referred to
in this Section 13(a) if at the time of such transaction there are any rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.

         (b) "PRINCIPAL PARTY" shall mean

              (i) in the case of any transaction described in clause (i) or (ii)
of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and

              (ii) in the case of any transaction described in clause (iii) of
the first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;

                                      -19-

<PAGE>

PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stock of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.

         (c) If, for any reason, the Rights cannot be exercised for the Common
Stock of such Principal Party, then a holder of Rights will have the right to
exchange each Right for cash from such Principal Party in an amount equal to the
Purchase Price, as calculated pursuant to Section 13(a) above. If, for any
reason, the foregoing formulation cannot be applied to determine the cash amount
to which the holder of Rights is entitled, then a committee composed of one or
more of the members of the Board who were in office immediately before the
Section 13(a) Event shall determine such amount reasonably and in good faith.

         (d) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock, which have not been issued or reserved
for issuance, to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a), (b) and (c) of this Section
13 and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:

              (i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date; and

              (ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that one of the
transactions described in Section 13(a) hereof shall occur at any time after the
occurrence of a Triggering Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in Section
13(a).

         (e) Notwithstanding any other provision of this Agreement, no
adjustment to the number or kind of shares (or fractions of a share), cash or
other property for which a Right is exercisable or the number of Rights
outstanding or associated with any shares of Common Stock or any similar or
other adjustment shall be made or be effective if such adjustment would have the
effect of reducing or limiting the benefits the holders of the Rights would have
had absent

                                      -20-
<PAGE>

such adjustment, including, without limitation, the benefits under Sections 11
and 13, unless the terms of this Agreement are amended so as to preserve such
benefits, provided that this paragraph shall not prevent any change prior to the
Distribution Date permitted by Section 26(a) and provided that this Section
13(e) shall not be deemed to limit or impair the right to engage in an exchange
pursuant to Section 11(c)(ii).

         Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

         (a) The Company shall not be required to issue fractions of Rights
except prior to the Distribution Date as the Board may in its discretion
determine in effecting an adjustment in the number of Rights pursuant to Section
11(a) hereof, or to distribute Rights Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NYSE or,
if the Rights are not listed or admitted to trading on the NYSE, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted sale
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by Nasdaq or such other system then in
use or, if on any such date the Rights are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board. If on any such
date no such market maker is making a market in the Rights the fair value of the
Rights on such date as determined in good faith by the Board shall be used.

         (b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-thousandth of a Preferred Share, the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For purposes of
this Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(ii) hereof) for the Trading Day immediately prior to
the date of such exercise.

                                      -21-
<PAGE>

         (c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates that evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates, at the time such Rights are
exercised as herein provided, an amount in cash equal to the same fraction of
the current market value of one share of Common Stock. For purposes of
determining the cash equal of said fractional shares under this Section 14(c),
the current market value of one share of Common Stock shall be the closing price
of one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of such exercise.

         (d) The holder of a Right, by the acceptance of the Right, expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).

         Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, on his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

         Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

         (a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of shares of Common Stock;

         (b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;

         (c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company

                                      -22-
<PAGE>

or the Rights Agent) for all purposes whatsoever, and neither the Company nor
the Rights Agent, subject to Section 7(e) hereof, shall be affected by any
notice to the contrary; and

         (d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.

         Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.

         Section 18. CONCERNING THE RIGHTS AGENT.

         (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.

         (b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Rights
Certificate or certificate for the Preferred Shares, the Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document the Rights Agent believes in
good faith to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.

                                      -23-

<PAGE>

         Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.

         (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust business or shareholder services business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; PROVIDED, HOWEVER, that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.

         (b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.

         Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

         (a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such advice
or opinion.

         (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, the Treasurer or the Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.

                                      -24-
<PAGE>

         (c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.

         (d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.

         (e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 11(b) hereof) or any adjustment in the terms of the Rights (including
the manner, method or amount thereof) provided for in Sections 3, 11, 13 or 23,
or the ascertaining of the existence of facts that would require any such change
or adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt of a certificate furnished pursuant to Section 13
describing such change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares or shares of Common Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
Preferred Shares or shares of Common Stock will, when issued, be validly
authorized and issued, fully paid and non-assessable.

         (f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.

         (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
the Treasurer or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.

         (h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity. Nothing in
this paragraph shall exempt any of the above mentioned individuals or entities
from the provisions of this Agreement, including without limitation from
becoming an Acquiring Person.

         (i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents,

                                      -25-
<PAGE>

and the Rights Agent shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or misconduct;
PROVIDED, HOWEVER, reasonable care was exercised in the selection and continued
employment thereof.

         (j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.

         (k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2 on such
certificate attached to the form of assignment or form of election to purchase,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

         Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing, mailed to the Company and to each
transfer agent of the Common Stock or Preferred Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail or by electronic transmission. The Company may remove the Rights Agent or
any successor Rights Agent upon thirty (30) days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock or Preferred Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail or by electronic transmission. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a national banking association or a
corporation organized and doing business in good standing under the laws of the
United States or of any state of the United States that is authorized under such
laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided

                                      -26-
<PAGE>

for in this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.

         Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise, conversion or
exchange of securities hereafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; PROVIDED, HOWEVER, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance hereof.

         Section 23. REDEMPTION.

         (a) (i) The Board may, at its option, at any time prior to the earlier
of (A) the close of business on the tenth day following the Stock Acquisition
Date (or, if the tenth day after the Stock Acquisition Date occurs before the
Record Date, the close of business on the Record Date) (or such later date as
may be determined by the Board) or (B) the Final Expiration Date, redeem all,
but not less than, all the then outstanding Rights at a redemption price of
$.001 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "REDEMPTION
PRICE") and the Company may, at its option, pay the Redemption Price either in
shares of Common Stock (based on the "current per share market price," as
defined in Section 11(d) hereof, of the shares of Common Stock at the time of
redemption) or cash or a combination thereof; PROVIDED, HOWEVER, that if the
Board authorizes redemption of the Rights in either of the circumstances set
forth in clauses (i) and (ii) below, then such authorization shall require the
approval of two thirds of the directors of the Company then in office: (i) such
authorization occurs on or after the time a Person becomes an Acquiring Person
or (ii) such authorization occurs on or after the date of a change (resulting
from a proxy or consent solicitation) in a majority of the directors in office
at the commencement of such solicitation if any Person who is a participant in
such solicitation has stated (or, if upon the commencement of such solicitation,
a majority of the Board has determined in good faith) that such Person (or any
Affiliates or Associates) intends to take, or may consider taking, any action
which would result in such Person becoming an Acquiring Person or which would
cause the occurrence of a Triggering Event unless, concurrent with such
solicitation, such Person (or one or more of its Affiliates or Associates) is
making a cash tender offer pursuant to a Schedule 14D-1 (or any successor form)
not beneficially owned by such Person (or by its Affiliates or Associates).
Notwithstanding anything contained in this Agreement to the contrary, the Rights

                                      -27-
<PAGE>

shall not be exercisable pursuant to Section 11(b) or 11(c) at a time when the
Rights are then redeemable hereunder.

              (ii) Following the occurrence of a Stock Acquisition Date but
prior to any event described in Section 13(a), the Board may redeem all but not
less than all of the then outstanding Rights at the Redemption Price in
connection with any event, not involving an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, that either (A) is of the type specified in
Section 13(a) or (B) involves a Person merging into the Company or otherwise
combining with the Company, where the Company shall be the continuing or
surviving corporation of such merger or combination and the Common Stock of the
Company shall remain outstanding and not changed into or exchanged for stock or
other securities of any other Person or the Company or cash or any other
property.

         (b) In the case of a redemption permitted under Section 23(a),
immediately upon the action of the Board ordering the redemption of the Rights,
evidence of which shall have been filed with the Rights Agent, and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Within ten (10) days after
the action of the Board ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by providing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Any notice which is provided in the manner herein described shall
be deemed given, whether or not the holder receives the notice. Each such notice
of redemption shall state the method by which the payment of the Redemption
Price will be made.

         Section 24. NOTICE OF CERTAIN EVENTS. In case the Company shall
propose, at any time after the Distribution Date, (a) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend) or (b) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, or (c) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), or (d) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one transaction or a series of related
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person or Persons (other than
the Company or any Subsidiary of the Company in one or more transactions that
comply with Section 11(e)(ii) hereof), or (e) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Stock and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least twenty (20)
days prior to the record date for determining holders of the Preferred Shares
for

                                      -28-
<PAGE>

purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Stock and/or
Preferred Shares, whichever shall be the earlier.

         In case any Triggering Event or Section 13(a) Event shall occur, then,
in any such case, (i) the Company shall, as soon as practicable thereafter, give
to each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 25 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11 or 13 hereof, and (ii) all references in the preceding paragraph to
the Preferred Shares shall be deemed thereafter to refer, if appropriate, to
other securities.

         Section 25. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                           Dyax Corp.
                           One Kendall Square
                           Building 600, Suite 623
                           Cambridge, MA  02139
                           Attention:  President

With a copy to:            Palmer & Dodge LLP
                           One Beacon Street
                           Boston, MA  02108
                           Attention:  Nathaniel Gardiner

Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:

                           American Stock Transfer & Trust Company
                           6201 15th Avenue
                           Brooklyn, New York  11219
                           Attention:  Executive Vice President

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.

         Section 26. SUPPLEMENTS AND AMENDMENTS.

         (a) Prior to the Distribution Date and subject to the penultimate
sentence of this Section 26, the Company and the Rights Agent shall, if the
Company so directs, supplement or

                                     -29-
<PAGE>

amend any provision of this Agreement without the approval of any holders of
certificates representing Common Stock.

         (b) From and after the Distribution Date and subject to the penultimate
sentence of this Section 26, the Company and the Rights Agent shall, if the
Company so directs, supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder (which lengthening or shortening, following the first
occurrence of an event set forth in clauses (A) and (B) of the first clause of
Section 23(a)(i) hereof shall require the concurrence of two-thirds of the
directors of the Company then in office, or (iv) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); PROVIDED, HOWEVER, that this Agreement may not be
supplemented or amended pursuant to clause (iii) of this sentence to lengthen
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not redeemable or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights.

         (c) Upon the delivery of a certificate from an appropriate officer of
the Company, which states that the proposed supplement or amendment is in
compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of shares of Common Stock for which a Right is exercisable. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.

         Section 27. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

         Section 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. The
Board shall have the exclusive power and authority to administer this Agreement
and to exercise all rights and powers specifically granted to the Board or to
the Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) that
are done or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights Certificates
and all other parties, and (y) not subject the Board to any liability to the
holders of the Rights Certificates.

                                      -30-
<PAGE>

         Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of Common Stock).

         Section 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that, notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth day following the date of
such determination by the Board.

         Section 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the Commonwealth of Massachusetts and for all purposes shall be governed
by and construed in accordance with the laws of such commonwealth applicable to
contracts to be made and performed entirely within such commonwealth.

         Section 32. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

         Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

                                      -31-

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

[CORPORATE SEAL]                         DYAX CORP.

Attest

By: /s/ Nathaniel S. Gardiner            By: /s/ Henry E. Blair
    ----------------------------            ------------------------------------
    Name:  Nathaniel S. Gardiner            Name: Henry E. Blair
    Title: Secretary                        Title: President and Chief Executive
                                                   Officer

[CORPORATE SEAL]                         AMERICAN STOCK TRANSFER &
                                         TRUST COMPANY

Attest

By: /s/ Susan Silber                      By: /s/ Herbert J. Lemmer
    -----------------------------             ----------------------------------
     Name:  Susan Silber                      Name:  Herbert J. Lemmer
     Title: Assistant Secretary               Title: Vice President

<PAGE>

                                                                      EXHIBIT A

                           FORM OF RIGHTS CERTIFICATE

Certificate No. R-                                             _________ Rights

                  NOT EXERCISABLE AFTER JUNE 27, 2011, OR EARLIER IF REDEMPTION
                  OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER
                  RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
                  CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 7(e) AND 11(b) OF
                  THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN
                  ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS
                  AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
                  NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
                  CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING
                  PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON
                  (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS
                  RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
                  BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN THE RIGHTS
                  AGREEMENT, INCLUDING SECTION 7(e) AND SECTION 11(b)
                  THEREOF.](1)

                               Rights Certificate

                                   DYAX CORP.

         This certifies that __________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of June 27, 2001 (the "Rights Agreement"), between Dyax
Corp., a Delaware corporation (the "Company"), and American Stock Transfer &
Trust Company (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 p.m., Cambridge, Massachusetts time, on June 27, 2011, at the
office of the Rights Agent designated for such purposes, or at the office of its
successor as Rights Agent, one one-thousandth of a fully paid non-assessable
share of Series A Junior Participating Preferred Stock (the "Preferred Shares")
of the Company, at a purchase price of $94.23 per one one-thousandth of a
Preferred Share (the "Purchase Price"), upon presentation and surrender of this
Rights

-----------------------------
(1)The portion of the legend in brackets shall be inserted only if applicable.

                                     -A-2-

<PAGE>

Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one one-thousandths of a Preferred Share which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of June 27, 2001, based on the Preferred Shares
as constituted at such date.

         Upon the occurrence of a Triggering Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or any Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of any such Triggering Event.

         As provided in the Rights Agreement, the Purchase Price and the number
and kind of Preferred Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.

         This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.

         This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purposes,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of one one-thousandths of a share of the Preferred Shares as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may, but are not required to, be redeemed by the Company at
a redemption price of $.001 per Right.

         No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

                                     -A-3-
<PAGE>

         No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

         This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.

         WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ____________, ____.

[CORPORATE SEAL]

                                        DYAX CORP.

ATTEST:

_________________________________       By: ____________________________________
    Clerk                                    Name:
                                             Title:

Countersigned:

AMERICAN STOCK TRANSFER & TRUST COMPANY

By:_____________________________
    Authorized Signature

                                     -A-4-

<PAGE>

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate.)

         FOR VALUE RECEIVED ________________________  hereby sells, assigns and

transfers unto ____________________________________________________________
                 (Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.

Dated:________________________, ____

                                                 ______________________________
                                                 Signature

Signature Guaranteed:

         Signatures must be guaranteed by a participant in a recognized
signature guaranty medallion program.

________________________________________________________________________________

                                   CERTIFICATE

         The undersigned hereby certifies by checking the appropriate boxes
that:

         (1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.

Dated:___________________, ____                    ____________________________
                                                   Signature

                                     NOTICE

         The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.

________________________________________________________________________________

                                     -A-5-

<PAGE>

                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Rights Certificate.)

To: DYAX CORP.

         The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:

            ________________________________________________________

            ________________________________________________________

            ________________________________________________________
                         (Please print name and address)

Please insert social security or other identifying number: ____________________

If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

            ________________________________________________________

            ________________________________________________________

            ________________________________________________________
                         (Please print name and address)

Please insert social security or other identifying number: ____________________

Dated:_____________________, ____

                                          _____________________________________
                                          Signature

                                          (Signature must conform in all
                                          respects to name of holder as
                                          specified on the face of this Rights
                                          Certificate in every particular,
                                          without alteration or enlargement or
                                          any change whatsoever)

Signature Guaranteed:

         Signatures must be guaranteed by a participant in a recognized
signature guaranty medallion program.

________________________________________________________________________________

                                     -A-6-

<PAGE>

                                   CERTIFICATE

         The undersigned hereby certifies by checking the appropriate boxes
that:

         (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.

Dated:_____________________, ____              _________________________________
                                               Signature

________________________________________________________________________________

                                     NOTICE

         The signatures in the foregoing Forms of Assignment and Election must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.

     In the event the Certificates set forth above in the Forms of Assignment
     and Election are not completed, the Company will deem the beneficial owner
     of the Rights evidenced by this Rights Certificate to be an Acquiring
     Person or an Affiliate or Associate thereof (as defined in the Rights
     Agreement) and in the case of an Assignment, will affix a legend to that
     effect on any Rights Certificates issued in exchange for this Rights
     Certificate.

                                     -A-7-

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