Atari 2010 Annual Report Download - page 41

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
41
During the fiscal year 2009/2010, the BlueBay Value Recovery (Master) fund and Gina Germano (who resigned in May
2010) were members of the Company's Board of Directors. As of June 30, 2010 BlueBay Value Recovery (Master) Fund
Limited and BlueBay High Yield Investment (Luxembourg) SARL were members of the Company’s Board of Directors.
The fact that companies belonging to the same group are, at the same time, principal shareholders, directors and a
major creditor of the Company may give rise to conflicts of interest.
It should also be noted that Frank E. Dangeard is Chairman of the Board of Directors and BlueBay’s special advisor.
Risks related to the enforcement of guarantees provided by the Group
See Note 13.4 to the consolidated financial statements.
In connection with short- and medium-term financing provided to the Company and its European and Asian subsidiaries
within the framework of the refinancing of its bank debt, in April 2006 the Group had to renew and provide guarantees
and senior pledges to Bluebay , involving essential assets of the Group (securities accounts, shares, industrial property
rights, intragroup receivables).
Should the Group default on the debt, Bluebay could enforce guarantees securing it, which would very significantly
reduce the Group's assets and jeopardize its ability to continue as a going concern.
Under the seventh and eighth amendments to the April 21, 2006 credit agreement with Banc of America, dated
February 27, 2009 and March 31, 2009, respectively, the Company provided additional security interests and confirmed
the security interests given earlier and extended their application to new outstanding amounts for a maximum amount of
€61.8 million. The ninth amendment signed on December 10, 2009 extended the maturity date of the loan until
December 31 2010. As per amendment 10, signed in April 2010, the total amount of the credit facility to be drawn as
been reduced from €61.2 million to €49.3 million.
The extension of the guarantees given significantly increases the risk of a reduction in the Company’s assets, as referred
to above.
RISKS RELATED TO THE GROUP’S ABILITY TO DISTRIBUTE DIVIDENDS
The Company did not pay out dividends for fiscal year 2009-2010 and does not envisage paying any in the near future.
Its ability to distribute dividends depends on the distributable earnings generated (which depend in turn on its operating
income, cash balances and financial position). In addition, certain financing agreements to which the Company is a party
prohibit or limit the payment of dividends under certain circumstances.
CONTRACTUAL RISKS
Risks related to licenses
The Group does not hold title to all of the assets it needs to conduct its business. It depends to a large extent on
licensing agreements for themes (characters, stories, trademarks, etc.). The success of its publishing business is largely
dependent on its ability to acquire intellectual property and to develop it in full compliance with applicable agreements.
Accordingly, apart from financial considerations, the term and renewal of licenses for themes obtained by the Group
depend on the conditions applicable to the reproduction and exploitation of the theme features concerned. In particular,
the Group is bound by confidentiality rules concerning the technology of patent holders and the financial terms of
contracts signed with them.
Given the fact that no single license used by the Group accounted for more than 20% of consolidated revenue in fiscal
year 2009/2010, the Group considers that the loss of a license (non-renewal or cancellation) would not by itself have a
material impact on the Group's business or income. Nevertheless, the simultaneous loss of several licenses would be
likely to have a material adverse impact on the Group's financial position, business and income if such loss was not
offset by new licenses with an equivalent economic impact on its business.
The Group relies for much of its business on licenses granted by hardware (console) manufacturers. These agreements
are for average terms of three years and enable the Group to develop products for use on a proprietary medium (Game
Boy Advance, Nintendo DS, PS2, PSP, Xbox 360, PS3, Wii, IPhone, etc.). Licensing agreements require that the Group
provide a guarantee against claims that may be lodged against the manufacturers in connection with these products. The
guarantees cover the content, marketing and distribution of its products, including infringements of intellectual property
rights held by third parties. On the other hand, no licenses are required for products in PC-compatible format.