Section 1. Definitions.

1.1 Senior Credit Agreement Definitions. Unless otherwise defined herein, terms defined in the Senior Credit Agreement and used herein shall have the meanings given to them in the Senior Credit Agreement.

1.2 Defined Terms. The following terms shall have the following respective meanings when used in this Agreement:

"Agreement" shall mean this Inter creditor and Subordination Agreement.

"Availability" shall mean Borrowing Availability plus any available amounts in the Overnight Investment Account.

"Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York.

"Credit Parties" shall mean Borrower, Guarantors and each of their respective subsidiaries and their respective successors and assigns.

"Current Assets" means, with respect to any Person, all current assets of such Person as of any date of determination calculated in accordance with GAAP, but excluding cash, cash equivalents and debts (excluding royalties) due from Affiliates.

"Current Liabilities" means, with respect to any Person, all liabilities that should, in accordance with GAAP, be classified as current liabilities, and in any event shall include all Indebtedness payable on demand or within one year from any date of determination without any option on the part of the obligor to extend or renew beyond such year, all accruals for federal or other taxes based on or measured by income and payable within such year, but excluding the current portion of long-term debt required to be paid within one year and the aggregate outstanding principal balances of the Revolving Loan and the Swing Line Loan and the Subordinated Notes.

"CUSH" has the meaning assigned to it in the preamble hereto.

"Distribution Agreement" shall mean the Distribution Agreement dated as of October 2, 2000 between Borrower (as successor in interest to GT Interactive Software Corp.) and the Parent and Infogrames Europe SA, as supplemented by that certain side letter among Parent, Borrower and Interactive dated as of November__, 2002.

"Exercise of remedies" shall mean any of the following with respect to the Subordinated Obligations: (i) the taking of actions to collect or enforce all or any part of the Subordinated Obligations or any claims in respect thereof against any Credit Party or any of its property or assets, including any Shared Collateral, (ii) the application of any property or assets of any Credit Party, including any Shared Collateral, to the Subordinated Obligations (except payments specifically permitted under Section 3 hereof) or the repossession of, foreclosure on, or the exercise of any other remedy (judicially or non judicially) with respect to any Credit Party or any of its property or assets, including any Shared Collateral; (iii) the taking of control or possession of, or the exercise of any right of set off with respect to, any property or assets of any Credit Party, including any Shared Collateral, or the sale or other disposition of any interest in such property or assets; (iv) theta king of any action to interfere with any rights in respect of such property or assets of Senior Creditors or their ability to realize upon or otherwise deal with such property or assets; or (v) the commencement or maintenance of any action, suit or other proceeding at law, in equity or otherwise in furtherance of any of the foregoing or to otherwise enforce rights against any Credit Party or any of its property or assets, including any Shared Collateral, or to direct the owner of such property or assets to sell or otherwise dispose of any interest therein. To "exercise remedies" shall mean to take or institute theta king of any exercise of remedies.

"Excess Cash Flow" means, without duplication, with respect to any four Fiscal Quarter period of Borrower and the Guarantors, combined net income plus (a) depreciation, amortization and Interest Expense to the extent deducted in determining combined net income, plus decreases or minus increases (as the case may be) (b) in Working Capital, minus (c) Capital Expenditures (excluding the financed portion thereof), minus (d) Interest Expense paid or accrued (excluding any original issue discount, interest paid in kind or amortized debt discount, to the extent included in determining Interest Expense) and principal payments paid or payable in respect of Funded Debt (excluding principal payments in respect of the Subordinated Obligations pursuant to clauses (iii), (iv) and (v) of Section 3.1 hereof), plus or minus (as the case may be) (e) extraordinary gains or losses which are cash items not included in the calculation of net income, plus (g) taxes deducted in determining combined net income to the extent not paid for in cash. For purposes of this definition, "Working Capital" means Current Assets minus Current Liabilities.

"Insolvency Event" shall mean (A) any Credit Party commencing any case, proceeding or other action (1) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservators hip or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (2) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Credit Party making a general assignment for the benefit of its creditors; or (B) there being commenced against any Credit Party any case, proceeding or other action of a nature referred to in clause (A) above which (1) results in the entry of an order for relief or any such adjudication or appointment or (2) remains undismissed, undischarged or unbonded for a period of 30 days; or (C) there being commenced against any Credit Party any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 30 days from the entry thereof; or (D) any Credit Party generally not paying, or being unable to pay, or admitting in writing its inability to pay, its debts as they become due.

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