GRAND SLAM ACQUISITION CORP, S-1, 1996-07-16

GRAND SLAM ACQUISITION CORP
S-1, 1996-07-16

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1996

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
GRAND SLAM ACQUISITION CORP.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2752 75-2406170
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Numbers) Identification No.)
organization)
</TABLE>

924 AVENUE J EAST
GRAND PRAIRIE, TEXAS 75050
(214) 601-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-------------------

JERRY M. MEYER
CHIEF EXECUTIVE OFFICER
GRAND SLAM ACQUISITION CORP.
924 AVENUE J EAST
GRAND PRAIRIE, TEXAS 75050
(214) 601-7000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
-------------------

COPIES TO:

NANCY E. FUCHS ROHAN S. WEERASINGHE
JOEL I. GREENBERG SHEARMAN & STERLING
KAYE, SCHOLER, FIERMAN, 599 LEXINGTON AVENUE
HAYS & HANDLER, LLP NEW YORK, NEW YORK 10022
425 PARK AVENUE (212) 848-4000
NEW YORK, NEW YORK 10022
(212) 836-8000

-------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value $69,000,000 $23,793.10
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).

----------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE

Prior to distribution of a preliminary prospectus, the registrant, Grand
Slam Acquisition Corp. intends to change its name to Pinnacle Brands, Inc. and
Pinnacle Brands, Inc., a wholly-owned subsidiary of Grand Slam Acquisition
Corp., intends to change its name to Pinnacle Trading Card Company. The
prospectus has been prepared to reflect these name changes.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY , 1996
PROSPECTUS
4,000,000 SHARES

PINNACLE BRANDS, INC.

COMMON STOCK
-------------------

The 4,000,000 shares of Common Stock of Pinnacle Brands, Inc. (the
"Company") offered hereby are being offered by the Company. Prior to this
offering there has been no public market for any securities of the Company. It
is currently estimated that the initial offering price per share will be between
$14 and $16. For a discussion of the factors to be considered in determining the
initial public offering price, see "Underwriting."

The Company intends to apply for listing of the Common Stock on the New York
Stock Exchange ("NYSE") under the symbol .

SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON STOCK
OFFERED HEREBY.
-------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share......................... $ $ $
Total (3)......................... $ $ $
</TABLE>

(1) The Company and the Company's principal stockholder (the "Selling
Stockholder") have agreed to indemnify the several Underwriters against
certain liabilities under the Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Selling Stockholder has granted the several Underwriters a 30-day option
to purchase up to 600,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public and Underwriting Discount, and the proceeds to the Selling
Stockholder will be $ , $ , and $ , respectively. See
"Underwriting."

-------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York, on or
about , 1996.
-------------------
MERRILL LYNCH & CO.
-------------------

The date of this Prospectus is , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
ARTWORK
[TO COME]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) included elsewhere in this Prospectus. Unless the
context otherwise requires, as used in this Prospectus, the term "Pinnacle"
means Pinnacle Brands, Inc., and the term "Company" means Pinnacle and its
direct and indirect wholly-owned subsidiaries. "SCMA" means the Sports Card
Manufacturers Association, Inc., which is a trade organization comprising the
Company and its three principal competitors: Fleer/Skybox, Topps and Upper Deck.
As used in this Prospectus, references to SCMA data or net sales mean net sales,
defined as the aggregate wholesale gross sales of the four SCMA members less the
dollar value of product returns the four members actually received during the
reporting period. SCMA net sales are reported for baseball, football, hockey and
basketball trading cards. The Company believes that SCMA data represent
approximately 90% of wholesale net sales of the sports trading card industry.

THE COMPANY

The Company is one of the nation's leading designers, producers and
distributors of sports trading cards. The Company offers premium value products
under numerous brands and sub-brands--differentiated by product feature, price
point, sport and distribution channel--including such well-established brands as
Score, Select, Pinnacle, Donruss, Leaf, Action Packed, Racer's Choice and
Sportflix. Based on SCMA data, for 1995 the Company had an aggregate 37% market
share in the three major team sports categories in which it competes (including
a 11% market share related to products sold under licenses acquired by the
Company in May 1996). The Company believes that it has the leading market share
in each of those three team sports--baseball, football and hockey. The Company
is also a NASCAR licensee and a leading producer of auto racing cards. As a
result of the marketing strategy implemented by the Company beginning in 1993,
the Company's net sales more than doubled from $62.5 million in 1993 to $130.2
million in 1995, despite a decline in overall sports trading card industry sales
during that period. The Company's net sales have increased 19% from $41.9
million for the first six months of 1995 to $49.9 million for the comparable
1996 period. Market indicators suggest that sports trading card industry sales
have begun to improve. In addition to its sports trading card business, the
Company sells collectible and similar picture products to consumer and food
product companies for their promotional purposes.

According to SCMA data, the 1995 sports trading card market was
approximately $560 million, which equates to approximately $900 million in
retail sales. Sales of sports trading cards are significantly influenced by the
popularity of the related sport. The Company and other producers of sports
trading cards operate pursuant to licenses with the owners' and players'
association in each relevant team sport or, in the case of auto racing, with
NASCAR and the relevant drivers, team owners and sponsors. The major sports
organizations have generally limited the number of licensed sports trading card
competitors. Sports trading cards are sold to consumers through a variety of
distribution channels, including approximately 5,000 specialty hobby stores and
over 80,000 retail outlets such as mass merchandisers, convenience stores,
grocery and drug stores and toy stores. Sport trading cards are a highly
attractive category for retailers because of their relatively high profit
margins per square foot of shelf space.

1
<PAGE>
Company including "Best Manufacturer" as awarded by Sports Collectibles
Association International, the trade association for sports collectibles and
memorabilia retailers, and "The 1995 Sports Trading Card of the Year" for the
Company's Zenith Football product as awarded by Tuff Stuff magazine. The
Company's sports trading card products consistently have among the industry's
highest aftermarket trading values, based on aftermarket prices published in
Beckett Monthly (the most widely circulated sports trading card publication).

Historically, the Company relied on multiple-product brokers to sell its
products. In 1996, however, the Company established an in-house, field sales
force to market its trading card products more effectively by providing a higher
level of customer service to retail and hobby dealers. The field sales force
educates the customer about the Company's products, helps to tailor the
customer's product selection, and shares product placement and merchandising
techniques with the customer, all with the goal of enhancing the customer's
sell-through of the Company's products.

The Company utilizes what it believes to be an aggressive, cost-effective
marketing strategy concentrating on public relations events and targeted
advertising to maximize brand awareness. To increase its visibility in the
sports market, the Company has entered into multi-year commitments to be the
exclusive title sponsor of the premiere fan events for hockey and baseball,
which include the Pinnacle NHL FANtasy held in conjunction with the National
Hockey League All-Star game and the Pinnacle All-Star FanFest held in
conjunction with the Major League Baseball All-Star game. The Company is also
the exclusive sports trading card sponsor of the NFL Quarterback Club's
Quarterback Challenge. These events serve both to increase fan interest in the
relevant sport and to provide an opportunity to introduce the Company's sports
trading cards to a large number of fans who may not be familiar with the
Company's products. In addition, these events provide significant brand
exposure, including national television and print media coverage, to a
sports-conscious target audience at a substantially lower cost than conventional
media advertising.

The Company continually seeks to improve its profitability and the quality
and predictability of its earnings and cash flows by managing the return of
unsold product and controlling costs. The Company believes that it has been an
industry leader in the effort to minimize returns, which has historically been a
concern for the industry. The Company has increased the percentage of its sales
to the hobby distribution channel, which traditionally does not have return
privileges, and has also negotiated with some major mass market retailers to
eliminate return privileges. As a result, since 1992 the Company has tripled the
percentage of its sales made on a non-returnable basis, to more than 50%. In
addition, the Company continually evaluates cost control opportunities. The
Company has successfully identified and reduced certain significant costs
through investments in design technology and identification of more
cost-efficient vendors and sources of raw materials. In addition, since 1993 the
Company has shifted its focus from being a manufacturer of sports trading cards
to being a flexible designer, marketer and distributor of collectible products.
The Company now outsources substantially all of its production processes other
than design and artwork.

STRATEGY

The Company's strategy is to position its sports trading card products
principally as collectibles which are likely to have superior value in the
secondary market. This strategy has led the Company to increase its sales to
specialty retail outlets, consisting mainly of trading card hobby stores, the
retailer of choice for the serious collector/consumer. The Company believes that
success within this hobby channel, in turn, drives demand within the broader,
general retail channel. Since 1993, by consistently executing this strategy, the
Company has experienced a significant increase in net sales, as well as the

2
<PAGE>
proportion of its sales attributable to the key hobby channel. The Company's
strategy encompasses the following elements:

. Continual product innovation, both technological and artistic, to
stimulate collector interest;

. Managed production quantity and quality, making less than the market
demands, to promote collectibility; and

. Tailored product distribution, packaging and sales support, customized
to each individual channel of distribution to maximize sell-through.

In order to implement its strategy, the Company intends to: (i) continue to
enhance highly recognizable brands; (ii) further enhance hobby channel
distribution; (iii) selectively expand general retail distribution; (iv)
continually evaluate and reposition products to meet both customers' and
consumers' demands and preferences; (v) maximize profitability of recent
acquisitions; (vi) pursue opportunities in promotional and related markets;
(vii) position the Company as a strong contender for additional licensing
opportunities; and (viii) evaluate opportunities for strategic acquisitions. The
Company believes that the continued implementation of its strategy will enable
it to maintain its leadership position in the sports trading card market and
achieve future growth.

RECENT ACQUISITION

In May 1996, the Company acquired from Donruss Trading Cards, Inc.
("Donruss/Leaf"), a subsidiary of Leaf, Inc., its baseball and hockey trading
card licenses, as well as certain inventory and intangibles, for approximately
$41.0 million (the "Donruss License Acquisition"). In 1995, based on data
reported to its licensors, Donruss' gross shipments of products sold pursuant to
the purchased licenses (without deduction for returns) exceeded $50 million. The
Company believes that the Donruss License Acquisition significantly enhances the
Company's strategic position in the sports trading card industry. Management
believes that the Donruss products have distinctive features and brand
recognition that appeal to certain collectors/consumers and therefore intends to
maintain the distinctiveness of these products. The Company's strategy to
maximize net sales and profitability of the Donruss licensed products includes:
(i) leveraging the Company's existing infrastructure to maximize the
contribution of the Donruss products; (ii) repositioning Donruss products for
targeted market segments; (iii) marketing Donruss products using the Company's
more effective field sales force and aggressive marketing techniques; (iv)
extending Donruss brands into football trading cards; and (v) applying the
Company's return policies to sales of Donruss products.

Except as otherwise indicated, all information in this Prospectus (i) has
been adjusted to reflect a -for-1 stock split of the outstanding Common
Stock to be effected immediately prior to the consummation of this Offering,
(ii) gives effect to the conversion of certain subordinated indebtedness and all
outstanding shares of Redeemable Preferred Stock, par value $.01 per share
("Redeemable Preferred Stock"), into shares of Common Stock and (iii) assumes no
exercise of the Underwriters' over-allotment option.

Score, Select, Pinnacle, Donruss, Action Packed, Racer's Choice, Sportflix
and Optigraphics are among the Company's trademarks. Leaf is a trademark of
Leaf, Inc.

3
<PAGE>
THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Common Stock offered(a)...................... 4,000,000 shares

Common Stock to be outstanding after the
Offering(b).................................. shares

Use of Proceeds.............................. Of the estimated net proceeds to the Company
of $55.0 million, approximately $22.0 million
will be used to reduce indebtedness under the
Credit Agreement (as defined herein) and
$33.0 million will be used to retire a
portion of the Subordinated Notes (as defined
herein). The Company will not receive any of
the proceeds from the sale of shares subject
to the over-allotment option.

Proposed New York Stock Exchange Symbol......
</TABLE>

- ------------

(a) Excludes shares subject to the over-allotment option which are being offered
by the Selling Stockholder.

(b) Excludes shares of Common Stock subject to options granted under the
Company's 1992 Option Plan and shares of Common Stock subject to other
options. Excludes shares reserved for issuance under the 1996 Incentive
Stock Option Plan.

-------------------

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
FOR THE SIX
FOR THE THREE MONTHS
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ----------------------------------------- -----------------
1991(A) 1992 1993 1994 1995 1995 1996
------------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Net sales(b).................... $35,511 $108,881 $ 62,501 $117,965 $130,183 $41,879 $49,905
Cost of sales................... 25,810 73,264 41,000 78,013 90,388 29,548 34,503
------------- -------- -------- -------- -------- ------- -------
Gross profit.................... 9,701 35,617 21,501 39,952 39,795 12,331 15,402
Selling, general and
administrative expenses........ 5,119 20,222 20,972 23,506 26,310 11,480 15,659
Unusual charges(c)(d)........... -- -- 41,435 47,366 -- -- --
------------- -------- -------- -------- -------- ------- -------
Operating income (loss)......... 4,582 15,395 (40,906) (30,920) 13,485 851 (257)
Interest expense--subordinated
notes payable.................. (777) (4,298) (7,198) (9,307) (11,526) (5,524) (6,034)
Interest expense--other......... (839) (5,792) (4,180) (4,509) (5,068) (2,581) (3,521)
Other income (expense), net..... (795) 252 72 730 657 42 195
------------- -------- -------- -------- -------- ------- -------
Income (loss) before income
taxes........................... 2,171 5,557 (52,212) (44,006) (2,452) (7,212) (9,617)
Income tax provision............ 1,074 2,431 -- -- -- -- --
------------- -------- -------- -------- -------- ------- -------
Net income (loss)(e)............ $ 1,097 $ 3,126 $(52,212) $(44,006) $ (2,452) $(7,212) $(9,617)
------------- -------- -------- -------- -------- ------- -------
------------- -------- -------- -------- -------- ------- -------
</TABLE>

PRO FORMA, AS ADJUSTED, STATEMENT OF OPERATIONS DATA(F):

<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEAR MONTHS
ENDED ENDED JUNE 30,
DECEMBER 31, -----------------
1995(G) 1995(H) 1996(I)
------------ ------- -------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER
SHARE DATA)

Net sales...................................................................... $130,183 $41,879 $49,905
Cost of sales.................................................................. 90,388 29,548 34,503
------------ ------- -------
Gross profit................................................................... 39,795 12,331 15,402
Selling, general and administrative expenses................................... 24,325 10,930 15,509
------------ ------- -------
Operating income (loss)........................................................ 15,470 1,401 (107)
Interest expense............................................................... (2,888) (1,490) (2,431)
Other income (expense), net.................................................... 657 42 195
------------ ------- -------
Income (loss) before income taxes.............................................. 13,239 (47) (2,343)
Income tax provision (benefit)................................................. 5,031 (18) (890)
------------ ------- -------
Net income (loss).............................................................. $ 8,208 $ (29) $(1,453)
------------ ------- -------
------------ ------- -------
Net income (loss) per share(j)................................................. $ $ $
Weighted average number of shares of common stock and equivalents(j)...........
</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-------------------------
PRO FORMA, AS
ACTUAL ADJUSTED(F)(K)
--------- -------------
<S> <C> <C>
(IN THOUSANDS)
Net working capital...................................................... $ 11,471 $ 11,471
Total assets............................................................. 129,296
Long-term debt, including current maturities............................. 197,666 74,318
Stockholders' equity (deficit)........................................... (102,492)
</TABLE>

(Notes on following page)

5
<PAGE>
NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<C> <S>
(a) The Company was formed by a group of investors to effect the September 28, 1991
acquisition of Optigraphics, Inc. Therefore, the 1991 period includes results of
operations for the three months ended December 31, 1991.
(b) Net sales for 1992 includes sales related to "collector's sets" that were discontinued
after 1992. The Company's reported SCMA net sales for these "collector's sets" for 1992
were $17.0 million. Unlike the data contained in the table above, which reports sales of
products shipped less a provision for estimated returns of such products, reported SCMA
net sales are based on sales of products shipped less the dollar value of returns
actually received during the period.
(c) Included in operating loss for 1993 is an unusual charge of $41.4 million resulting from
events that led to the MLM Acquisition related to (i) the write-off of a $30.2 million
pre-acquisition receivable from MLM and (ii) incremental sales returns, write-offs of
unsalable inventory and other operating expenses aggregating $11.2 million.
(d) Included in operating loss for 1994 are unusual charges of $47.4 million related to (i)
a $40.0 million writedown of goodwill and (ii) incremental sales returns and write-offs
of unsalable inventory related to the Major League Baseball and National Hockey League
work stoppages.
(e) For the year ended December 31, 1993, net income (loss) as reported herein is prior to
the effect of the adoption of a new accounting principle.
(f) Presented on a pro forma basis (as if the following transactions had occurred on the
first day of the period presented, and in the case of the Balance Sheet Data, as if such
transactions had occurred on June 30, 1996) to give effect to the conversion of a
portion of the Acadia subordinated notes and all of the Redeemable Preferred Stock; plus
options to purchase Common Stock issued in connection with the Offering at $ per share
and Common Stock to be contributed to the Company's 401(k) Plan (assuming all such
Common Stock was outstanding for all periods presented); and as adjusted for the
Offering assuming the issuance and sale of 4,000,000 shares of Common Stock and
application of the assumed net proceeds. Of the net proceeds from the sale of shares of
Common Stock offered by the Company in the Offering, approximately $22.0 million will be
used to repay senior bank indebtedness and $33.0 million will be used to repay Acadia
subordinated notes.
(g) Pro forma, as adjusted, results for the year ended December 31, 1995 give effect to (i)
decreased interest expense of $13.7 million (which consists of $2.0 million related to
senior bank borrowings, $11.5 million related to subordinated notes to Acadia, and $0.2
million related to amortization of deferred loan costs with respect to senior bank
borrowings), (ii) decreased selling, general and administrative expenses of $2.0 million
(which consists of $2.3 million of management and consulting fees that will no longer be
incurred offset by an increase of $0.3 million in compensation expense for new
employment agreements with members of senior management), and (iii) a tax provision of
$5.0 million.
(h) Pro forma, as adjusted, results for the six months ended June 30, 1995 give effect to
(i) decreased interest expense of $6.6 million (which consists of $1.0 million related
to senior bank borrowings, $5.5 million related to subordinated notes to Acadia, and
$0.1 million related to amortization of deferred loan costs with respect to senior bank
borrowings), (ii) decreased selling, general and administrative expenses of $0.6 million
(which consists of $0.8 million of management and consulting fees that will no longer be
incurred offset by an increase of $0.2 million in compensation expense for new
employment agreements with members of senior management), and (iii) a tax benefit of
$18,000.
(i) Pro forma, as adjusted, results for the six months ended June 30, 1996 give effect to
(i) decreased interest expense of $7.1 million (which consists of $1.0 million related
to senior bank borrowings, $6.0 million related to subordinated notes to Acadia, and
$0.1 million related to amortization of deferred loan costs with respect to senior bank
borrowings), (ii) decreased selling, general and administrative expenses of $0.2 million
(which consists of $0.3 million of management and consulting fees that will no longer be
incurred offset by an increase of $0.1 million in compensation expense for new
employment agreements with members of senior management), and (iii) a tax benefit of
$0.9 million.
(j) For purposes of pro forma, as adjusted, net income (loss) per share, weighted average
shares outstanding is , which is comprised of shares currently outstanding,
5,499,800 shares to be issued to give effect to the conversion of a portion of the
Acadia subordinated notes and all of the Redeemable Preferred Stock, options (net of
options granted by Acadia from its existing holdings) granted in August 1996 to
purchase Common Stock at $ per share and shares to be contributed to the
Company's 401(k) Plan, and 4,000,000 million shares to be issued in the Offering.
(k) Gives effect to the Offering and includes (i) a charge of $0.4 million (net of taxes of
$0.2 million) related to a write-off of a portion of deferred financing costs with
respect to the early payment of a portion of senior bank indebtedness, (ii) a non-cash
operating expense of $ million (net of taxes of $ million) in connection with the
grant of options to purchase Common Stock issued in connection with the Offering at $
per share and shares of Common Stock to be contributed to the Company's 401(k) Plan, and
(iii) a credit of $ million related to the reversal of a portion of the deferred tax
asset valuation allowance. See "Management's Discussion and Analysis of Results of
Operation and Financial Condition--General." These nonrecurring charges are not
considered in the pro forma, as adjusted, statement of operations data.
</TABLE>

6
<PAGE>
RISK FACTORS

Prospective investors should carefully consider the risk factors set forth
below, as well as other information set forth in this Prospectus, before
purchasing the shares of Common Stock offered hereby.

DEPENDENCE UPON NON-EXCLUSIVE LICENSE AGREEMENTS

The Company's ability to market its sports trading cards, from which the
Company derived approximately 89% of its gross sales in 1995, is dependent upon
its non-exclusive licenses from professional sports leagues, players
associations and other licensors. The Company currently has four baseball
licenses (two each with the professional sports league and the players'
association), three football licenses (one with the professional sports league
and two with the players' association), four hockey licenses (two each with the
professional sports league and the players' association), a license with NASCAR
and over 100 licenses with NASCAR drivers, owners and sponsors. The team sport
licenses typically have durations of two to five years. One of the Company's
professional sports league baseball licenses expired on December 31, 1994, one
of its professional sports league football licenses expired on March 31, 1995
and one of its professional sports league hockey licenses expired on June 30,
1996. The Company has entered into letters of intent with Major League Baseball
Properties and National Football League Properties with respect to the material
terms of replacement three-year licenses and is in the process of negotiating
definitive license agreements. The Company is also in the process of negotiating
a new license agreement with National Hockey League Enterprises. The Company
continues to operate under the terms of its expired licenses. The remainder of
the Company's material licenses expire between December 31, 1997 and June 30,
1999. Although each of these licenses is subject to termination for cause by the
respective licensors and to non-renewal at the expiration of its term, the
Company believes its relationships with its sports licensors to be strong, and
anticipates that it will be able to renew its sports trading card licenses on
acceptable terms. However, there can be no assurance that these licenses will
not be terminated for cause, that these licenses will be renewed upon their
expiration or that the terms of future sports trading card licenses will not be
materially less favorable to the Company than those currently in effect. The
loss of any baseball, football or hockey license could have a material adverse
effect on the Company's results of operations and financial condition. See
"Business--License Agreements and Trademarks."

COMPETITION

The sports trading card industry is competitive. The Company competes with
three major competitors and numerous smaller competitors. The sports trading
card industry experienced significant growth between the early 1980s and 1991.
Between 1991 and 1993, however, a substantial industry contraction occurred
resulting in an increasingly competitive environment in the sports trading card
industry. Moreover, 1994 labor disputes in baseball and hockey caused even
further contraction and greater competition. If contractions in the sports
trading card market continue to occur, the resulting increased competition could
materially affect the Company's results of operations and financial condition.
In addition, the licensors retain the ability to grant additional sports trading
card licenses which, if granted, could increase competition in the sports
trading card industry. The Company also competes with sports memorabilia and
collectibles producers, as well as companies that market small toys, comic books
and other similar products. Certain of the Company's competitors are
significantly larger and have greater resources than the Company. See
"Business--Competition."

7
<PAGE>
DEPENDENCE ON POPULARITY OF RELATED SPORTS

Sales of sports trading cards are influenced by the popularity of the sports
to which the cards relate. During 1994, Major League Baseball experienced a
strike and the National Hockey League experienced a work stoppage. These labor
disputes resulted in a loss of interest in these sports by many fans, which in
turn triggered a significant and immediate reduction in the Company's baseball
and hockey card sales as well as substantial product returns. Although the
National Hockey League resolved its dispute and commenced its season in January
1995, and Major League Baseball resumed operations in April 1995 (but without a
written contract between the owners and the players union), industry sales have
been slow to rebound and remain well below pre-strike levels. Market indicators
suggest that sports trading card industry sales have begun to improve. However,
there can be no assurance that the industry's gross sales will return to
pre-strike levels. In addition, there can be no assurance that similar labor
disputes will not occur again or that the popularity of the sports for which the
Company holds sports trading card licenses will not decline for other reasons.
Further labor disputes or any such decline in popularity could have a material
adverse effect on the Company's results of operations and financial condition.
See "Business--Sports Trading Card Industry."

RETURNS

Historically, retailers' returns of unsold sports trading cards have been a
significant factor affecting profitability of companies in the sports trading
card industry. During each of the contractions in the sports trading card
industry since 1991, the industry experienced very high product returns
resulting in the need to increase financial provisions for returns as well as
write off excess inventory. For example, in 1994 the Company wrote off $2.3
million of unsalable inventory and took a charge of $5.1 million relating to
excess returns. Although less than 50% of the Company's sports trading card net
sales currently are subject to return privileges and the Company has implemented
business practices to reduce return occurrences, product returns that
significantly exceed the Company's estimates could have a material adverse
effect on the Company's results of operations and financial condition. In
addition, actions taken by the Company to eliminate or reduce a retailer's
return privileges may accelerate returns of products previously sold to that
retailer. See "Business--Returns."

DEPENDENCE ON KEY PERSONNEL

The operations of the Company currently depend, to a great extent, on the
abilities and continued services of its senior executives, particularly Jerry M.
Meyer, chief executive officer of the Company. The Company has entered into
employment agreements with Mr. Meyer and other key executives. There can be no
assurance that the Company will be able to retain the services of such
executives. The extended loss of the services of Mr. Meyer or the other key
executives could have a material adverse effect on the Company's results of
operations and financial condition. See "Management--Employment Agreements."

CONTROL OF THE COMPANY

Upon completion of the Offering and the recapitalization, Acadia Partners,
L.P. and its affiliates (collectively, "Acadia") will own approximately % of
the outstanding Common Stock (or % on a fully diluted basis) or % if the
over-allotment option is exercised in full (or % on a fully diluted basis). As
a result, Acadia will effectively control the affairs of the Company and will
have the ability to determine the outcome of most corporate actions requiring
stockholder approval, including, among other things, the election of the board
of directors of the Company, the adoption of amendments to the Company's
certificate of incorporation and the approval of mergers and sales of all or
substantially all of the Company's assets. Approximately $33.0 million of the
proceeds of the Offering will be used to retire subordinated indebtedness
payable to Acadia. See "The Company--Acadia Partners, L.P." and "The
Company--Recapitalization."

8
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, shares of the Company's Common Stock
will be outstanding. The Common Stock offered hereby will be freely tradeable
(other than by an "affiliate" of the Company as such term is defined in the
Securities Act of 1933, as amended (the "Securities Act")) without restriction
or registration under the Securities Act. All remaining shares may be sold under
Rule 144 under the Securities Act, subject to the volume limitations and manner
of sale and other restrictions of Rule 144. In addition, Acadia and certain of
the Company's other stockholders have the right to require registration of their
shares for public sale. However, the Company and its directors, officers,
affiliates and the current stockholders have, subject to certain exceptions,
agreed not to, directly or indirectly, sell, offer to sell, grant any option for
sale of, or otherwise dispose of, any capital stock of the Company, or any
security convertible or exchangeable into, or exercisable for, such capital
stock, or, in the case of the Company, file any registration statement with
respect to any of the foregoing, for a period of 180 days after the date of this
Prospectus, without the prior written consent of Merrill Lynch & Co. ("Merrill
Lynch"). Sales of substantial amounts of the Common Stock or the perception that
such sales may occur in the public market after the Offering could adversely
affect the market price of the Common Stock.

ABSENCE OF PRIOR TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or be
sustained or that shares of Common Stock will be able to be resold at or above
the initial public offering price following the Offering. The initial public
offering price of the Common Stock will be determined by negotiations between
the Company and the Representatives of the Underwriters and may not be
indicative of the trading prices of the Common Stock after the Offering. See
"Underwriting" for a description of certain factors to be considered in
determining the initial public offering price for the Common Stock. Trading
prices for the Common Stock following the Offering may be influenced by many
factors, including the depth of the market for the Common Stock, investor
perception of the Company, fluctuations in the Company's operating results and
changes in conditions or trends in the Company's industry, changes in any
securities analysts' estimates of the Company's future performance or that of
its competitors or general market conditions. In addition, future sales of
substantial amounts of Common Stock by existing stockholders could also
adversely affect the prevailing market price of the Common Stock. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."

DILUTION

The initial public offering price will be substantially higher than the net
tangible book value per share of Common Stock. Investors purchasing shares of
Common Stock in the Offering will, therefore, incur immediate and substantial
dilution of $ in the net tangible book value per share of Common Stock from
the midpoint of the initial public offering price range set forth on the cover
page of this Prospectus. See "Dilution."

9
<PAGE>
THE COMPANY

GENERAL

The Company was incorporated in Texas in 1991 and was reincorporated in
Delaware the same year. The Company's principal executive offices are located at
924 Avenue J East, Grand Prairie, Texas 75050, and its telephone number is (214)
601-7000.

BACKGROUND

The Company was formed in September 1991 by a group of investors led by
Acadia Partners, L.P. to effect the acquisition of Optigraphics, Inc., a
manufacturer of baseball, football and hockey sports trading cards under the
Score brand name. At the time of the acquisition, all creative processes, sales
and marketing of the Company's products were managed under an exclusive,
perpetual contract with Major League Marketing, Inc. ("MLM"). The Company's
cutting, collating and packaging functions were performed under an exclusive
contract with Wrap-It-Corporation, an affiliate of the sellers. Finally, the
Company's distribution and customer service functions were performed by a Wm.
Wrigley Jr. Company subsidiary. Following the 1991 acquisition, MLM and
Wrap-It-Corporation continued to be responsible for the functions performed by
them prior to the acquisition and MLM assumed responsibility for the
distribution and customer service functions. The Company determined that the
division of functions among the various entities provided disparate objectives
and that coordination of such activities through consolidation of the MLM
operations was essential to the efficient design, sales, marketing and
distribution of its sports trading cards. Accordingly, in 1993 the Company
acquired MLM and gained control over the creative processes, sales, marketing
and distribution of its sports trading cards. In September 1994, the Company and
a printing company formed Performance Packaging, LLC, in which the Company holds
a 49% interest, to perform, at cost, the packaging functions previously provided
by Wrap-It Corporation. In addition, over time, the Company has outsourced all
of its production functions other than the design and artwork of its products.
As a result of these actions, the Company has been able to (i) complete
consolidation of the design, production, sales, marketing and distribution
functions for its sports trading card products under a single management team,
(ii) reduce operating expenses connected to such activities, (iii) formulate and
implement its marketing strategy and (iv) shift its focus from being a
manufacturer of sports trading cards to being a flexible designer, marketer and
distributor of collectible products. The Company believes that these actions,
together with the acquisitions described below have enabled it to gain an
increased share of the sports trading card market. See "Business--Strategy."

In April 1995, the Company acquired licenses and certain intangibles of LBC
Sports, Inc., a company which produced and distributed football and NASCAR auto
racing trading cards principally under the name Action Packed (the "Action
Packed License Acquisition"). Through this acquisition, the Company entered the
growing motor sports card market, increased its already strong presence in the
football trading card market and acquired innovative technologies.

In May 1996, the Company acquired the Donruss/Leaf baseball and hockey
trading card licenses together with certain trademarks and work-in-process
inventory needed to continue uninterrupted

10
<PAGE>
production of Donruss products under the Donruss and Leaf names. The Company
believes that the Donruss License Acquisition significantly enhances the
Company's competitive position in the trading card industry.

ACADIA PARTNERS, L.P.

Acadia Partners, L.P. is a $1.8 billion investment partnership established
in 1987 by Robert M. Bass to invest in leveraged acquisitions as well as
selected public and private securities. Since its inception, Acadia Partners,
L.P. has sponsored or co-sponsored over 20 leveraged acquisitions with a
combined value in excess of $7 billion. These investments include American
Savings Bank, Bell & Howell Company, CapStar Hotels Inc., Holophane Corporation,
Ivex Packaging Corporation, Multi-Local Media Corporation, Musicland, National
Reinsurance Corporation and Specialty Foods Corporation. Oak Hill Partners, Inc.
serves as Acadia's exclusive investment advisor.

RECAPITALIZATION

Immediately prior to the consummation of this Offering, the Company will
consummate a - for-1 stock split of the outstanding Common Stock. Except as
otherwise stated, all information in this Prospectus has been adjusted to
reflect this stock split. In addition, simultaneously with the closing of this
Offering (i) the Company will repay approximately $33.0 million of subordinated
indebtedness held by Acadia and (ii) the remaining subordinated indebtedness and
all of the 4,025 shares of Redeemable Preferred Stock held by Acadia will be
converted into 5,499,800 shares of Common Stock, using an assumed initial public
offering price of $15, the midpoint of the initial public offering price range.
See "Use of Proceeds."

11
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the four
million shares of Common Stock offered hereby, after deducting underwriting
discounts and estimated offering expenses payable by the Company, are estimated
to be approximately $55.0 million, based on an assumed initial public offering
price of $15 per share, the midpoint of the initial public offering price range.

Approximately $22.0 million of the estimated net proceeds of this Offering
will be used to pay principal and interest outstanding under the Credit
Agreement dated as of May 29, 1996 among Pinnacle Trading Card Company, as
Borrower, Pinnacle Brands, Inc. and GSAC Holdings, Inc., as Parent Guarantors,
the Subsidiary Guarantors, the lenders named therein, Merrill Lynch & Co., as
Arranger and Syndication Agent, and Wells Fargo Bank, N.A., as Administrative
and Collateral Agent (the "Credit Agreement"), an estimated $4.0 million of
which will be used to pay down the revolving credit facility portion of the
Credit Agreement. Amounts repaid under the revolving credit facility may be
reborrowed in the future subject to the terms of such facility. Merrill Lynch &
Co. is the managing underwriter for this Offering. See "Underwriting." The
proceeds of the Credit Agreement were used to refinance existing indebtedness of
the Company and to consummate the Donruss License Acquisition. See "The
Company--Background." The remainder of the estimated net proceeds of this
Offering, approximately $33.0 million, will be used to retire a portion of the
principal and interest outstanding under subordinated indebtedness of the
Company held by Acadia (the "Subordinated Notes").

Amounts outstanding under the Credit Agreement bear interest at various
floating rates. The effective rate was 8.5% per annum as of June 30, 1996. The
term loan portions of the Credit Agreement are payable in installments, with the
final installment due on May 28, 2001 with respect to $40.0 million of
indebtedness and on May 28, 2002 with respect to $48.0 million of indebtedness.
The final maturity date for the revolving credit facility portion of the Credit
Agreement is May 27, 2001, subject to a one-year extension under certain
circumstances. As of June 30, 1996, the Company had outstanding approximately
$88.0 million under the term loan facility of under the Credit Agreement and
approximately $7.5 million under the revolving loan facility thereunder. See
"Description of Indebtedness."

The Subordinated Notes bear interest at 12% per annum, which interest is
payable through the issuance of additional Subordinated Notes. All amounts
outstanding under the Subordinated Notes mature on December 31, 2001. As of June
30, 1996, approximately $101.3 million was outstanding under the Subordinated
Notes. See "Capitalization." Simultaneously with the closing of this Offering,
the subordinated indebtedness not repaid with the proceeds of the Offering will
be converted into 5,107,467 shares of Common Stock, at an assumed initial public
offering price of $15 per share, the midpoint of the initial public offering
price range. See "The Company--Recapitalization."

DIVIDEND POLICY

The Company has not paid any dividends on its Common Stock. The Company
presently intends to retain future earnings to finance its growth and
development and therefore does not anticipate the payment of any cash dividends
in the foreseeable future. In addition, the Credit Agreement restricts the
payment of cash dividends by the Company. See "Description of Indebtedness."
Payment of future dividends, if any, will depend upon future earnings and
capital requirements of the Company and other factors which the Company's Board
of Directors considers appropriate.

12
<PAGE>
DILUTION

The actual net tangible book value (deficit) of the Common Stock at June 30,
1996 was approximately $(173.5) million, or $ per share. Pro forma net
tangible book value (deficit) of the Common Stock reflecting the conversion of
the Subordinated Notes not repaid with the proceeds of this Offering and the
Redeemable Preferred Stock (the "Conversion"), was approximately $(105.2)
million, or $ per share. After giving effect to the sale of the 4,000,000
shares of Common Stock offered hereby by the Company at an assumed initial
public offering price of $15 per share, the midpoint of the initial public
offering price range, and the application of the net proceeds therefrom, and
after deducting the underwriting discount and estimated offering expenses
payable by the Company, the adjusted pro forma net tangible book value of the
Company at June 30, 1996, would have been $ million, or $ per share. This
represents an immediate increase in pro forma net tangible book value per share
of $ to existing stockholders and an immediate dilution per share of $ to
new investors purchasing Common Stock in the Offering.

The following table illustrates the per share dilution described above:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....... $15.00
Actual net tangible book value (deficit) per share at
June 30, 1996(a)....................................
Increase per share attributable the Conversion........
Pro forma net tangible book value (deficit) per share
at June 30, 1996....................................
Increase in net tangible book value per share
attributable to the Offering(b)(c)..................
-------
Adjusted pro forma net tangible book value per share
after the Offering(c).................................
------
Net tangible book value per share dilution to new
investors(c).......................................... $
------
------
</TABLE>

----------------

<TABLE>
<C> <S>
(a) Includes $3.0 million, or $ per share, of Common Stock and common stock equivalents
subject to a put right. See "Management--Employment Agreements."
(b) Includes effect of a $ million non-cash operating expense (net of a tax benefit of
$ million), or $ per share, in connection with (i) the grant of options issued
in connection with the Offering (including options issued by Acadia), (ii) shares
contributed to the Company's 401(k) Plan and (iii) the write-off of deferred loan
costs in connection with the repayment of senior bank indebtedness; and the effect
of $ million, or $ per share, related to the estimated amount of the reversal of
a portion of the Company's deferred tax asset valuation allowance.
(c) Excludes shares subject to issuance under the 1992 Stock Option Plan and other
arrangements. See "Management--1992 Stock Option Plan."
</TABLE>

The following table sets forth, after giving effect to the recapitalization
of the Company, the number of shares of Common Stock purchased from the Company
within the last five years, the total cash consideration paid for such shares
and the average consideration paid per share by the officers, directors and
affiliates of the Company and by new investors. The following computations are
based on an assumed initial public offering price of $15 per share, the midpoint
of the initial public offering price range, before deduction of the underwriting
discount and estimated offering expenses payable by the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------

<CAPTION>
<S> <C> <C> <C> <C> <C>
Officers, directors
and affiliates...... % $ 72,239,000 54.6% $
New investors(a).... 4,000,000 -- 60,000,000 45.4 15.00
---------- ------- ------------ -------
Total(b)...... 100% $132,239,000 100%
------------ -------
------------ -------
</TABLE>

----------------

<TABLE>
<C> <S>
(a) If the over-allotment option is exercised in full, sales by the Selling Stockholder
will reduce the number of shares held by officers, directors and affiliates to
, or %, and will increase the number of shares held by new investors to , or
%, of the total number of shares of Common Stock outstanding after the Offering.
See "Principal and Selling Stockholders."
(b) Excludes shares of Common Stock purchased by existing stockholders who are not
officers, directors or affiliates of the Company.
</TABLE>

13
<PAGE>
CAPITALIZATION

The following table sets forth the actual capitalization of the Company, on
an unaudited basis, as of June 30, 1996 and as adjusted to give effect to (i)
the issuance of 4,000,000 shares of Common Stock offered hereby and the
application of the estimated net proceeds to the Company therefrom ($22.0
million to repay secured bank borrowings and $33.0 million to repay subordinated
notes to Acadia) and (ii) the conversion of the outstanding Subordinated Notes
not repaid with the net proceeds of this Offering and all of the outstanding
Redeemable Preferred Stock to Common Stock. See "The Company--Recapitalization."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
------------------------
PRO FORMA,
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>

Long-term debt (including current portion):
Subordinated notes payable to Acadia............................ $ 101,348 $ --
Long-term debt--all other....................................... 96,318 74,318
--------- -----------
Total long-term debt........................................ 197,666 74,318
--------- -----------

Common stock and common stock equivalents subject to put
agreement........................................................... 3,000 3,000

Stockholders' equity:
Preferred Stock; $.01 par value; $1,000 per share liquidation
preference; 4,025 shares authorized, issued and outstanding (0
pro forma, as adjusted)....................................... -- --
Common Stock; $.01 par value; 80,000 shares authorized (
adjusted for Charter Amendment); issued and outstanding
( pro forma, as adjusted)..................................... --
Paid-in capital................................................. 5,498 (a)
Accumulated deficit............................................. (107,990) (a)(b)
--------- -----------
Total stockholders' equity (deficit)........................ (102,492)
--------- -----------
Total capitalization.................................... $ 98,174 $
--------- -----------
--------- -----------
</TABLE>

- ------------

<TABLE>
<C> <S>
(a) Adjusted for $ million of compensation expense related to options granted in August
1996 to purchase shares (of which were granted by Acadia) of Common Stock
at an exercise price of $ per share and for shares of Common Stock to be contributed
to the Company's 401(k) Plan.

(b) Adjusted for $ million related to the tax effect of the $ million compensation charge
and $ million write-off of deferred loan costs and for $ million related to the
estimated amount of the reversal of a portion of the Company's deferred tax asset
valuation allowance.
</TABLE>

14
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA

The historical selected financial data presented below as of and for the
years ended December 31, 1992, 1993, 1994 and 1995, and as of and for the three
months ended December 31, 1991 are derived from, and are qualified by reference
to, the financial statements that have been audited by Arthur Andersen LLP,
independent public accountants. The historical selected financial data presented
below for the six months ended June 30, 1995 and 1996 are derived from unaudited
interim financial statements of the Company and, in the opinion of management,
reflect a fair presentation of the Company's financial information. Results for
the six months ended June 30, 1996 are not necessarily indicative of the results
which may be expected for any other interim period or for the fiscal year ending
December 31, 1996. The data presented below should be read in conjunction with
the Company's financial statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX MONTHS
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ----------------------------------------- -------------------
1991(A) 1992 1993 1994 1995 1995 1996
------------- -------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales (b)....................... $35,511 $108,881 $ 62,501 $117,965 $130,183 $ 41,879 $49,905
Cost of sales....................... 25,810 73,264 41,000 78,013 90,388 29,548 34,503
------ -------- -------- -------- -------- --------- -------
Gross profit........................ 9,701 35,617 21,501 39,952 39,795 12,331 15,402
Selling, general and administrative
expenses............................ 5,119 20,222 20,972 23,506 26,310 11,480 15,659
Unusual charges (c)(d).............. -- -- 41,435 47,366 -- -- --
------ -------- -------- -------- -------- --------- -------
Operating income (loss)............. 4,582 15,395 (40,906) (30,920) 13,485 851 (257)
Interest expense--subordinated notes
payable............................. (777) (4,298) (7,198) (9,307) (11,526) (5,524) (6,034)
Interest expense--other............. (839) (5,792) (4,180) (4,509) (5,068) (2,581) (3,521)
Other income (expense), net......... (795) 252 72 730 657 42 195
------ -------- -------- -------- -------- --------- -------
Income (loss) before income taxes... 2,171 5,557 (52,212) (44,006) (2,452) (7,212) (9,617)
Income tax provision................ 1,074 2,431 -- -- -- -- --
------ -------- -------- -------- -------- --------- -------
Net income (loss) (e)............... $ 1,097 $ 3,126 $(52,212) $(44,006) $ (2,452) $ (7,212) $(9,617)
------ -------- -------- -------- -------- --------- -------
------ -------- -------- -------- -------- --------- -------
Pro forma, as adjusted, net income
(loss) (f)(g)(h)(i)................. $ 8,208 $ (29) $(1,453)
-------- --------- -------
-------- --------- -------
Pro forma, as adjusted, net income
(loss) per share (j)............... $ -- $ -- $ --
Pro forma, as adjusted, weighted
average shares outstanding.........
</TABLE>

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED AS OF DECEMBER 31,
DECEMBER 31, ----------------------------------------- AS OF JUNE 30,
1991 1992 1993 1994 1995 1996
------------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Net working capital (deficit)....... $(9,737) $ 3,651 $(18,173) $ 4,967 $ 7,350 $ 11,471
Total assets........................ 104,130 134,814 111,736 70,320 88,121 129,296
Long-term debt, including current
maturities.......................... 55,942 100,115 122,327 135,714 150,672 197,666
Stockholders' equity (deficit)...... 3,821 8,114 (46,417) (90,423) (92,875) (102,492)
</TABLE>

(Notes on following page)

15
<PAGE>
NOTES TO SELECTED FINANCIAL AND OPERATING DATA

<TABLE>
<C> <S>
(a) The Company was formed by a group of investors to effect the September 28, 1991
acquisition of Optigraphics, Inc. Therefore, the 1991 period includes results of
operations for the three months ended December 31, 1991.
(b) Net sales for 1992 includes sales related to "collector's sets" that were discontinued
after 1992. The Company's reported SCMA net sales for these "collector's sets" for 1992
were $17.0 million. Unlike the data contained in the table above, which reports sales of
products shipped less a provision for estimated returns of such products, reported SCMA
net sales are based on sales of products shipped less the dollar value of returns
actually received during the period.
(c) Included in operating loss for 1993 is an unusual charge of $41.4 million resulting from
events that led to the MLM Acquisition related to (i) the write-off of a $30.2 million
pre-acquisition receivable from MLM and (ii) incremental sales returns, write-offs of
unsalable inventory and other operating expenses aggregating $11.2 million.
(d) Included in operating loss for 1994 are unusual charges of $47.4 million related to (i)
a $40.0 million writedown of goodwill and (ii) incremental sales returns and write-offs
of unsalable inventory related to the Major League Baseball and National Hockey League
work stoppages.
(e) For the year ended December 31, 1993, net income (loss) as reported herein is prior to
the effect of the adoption of a new accounting principle.
(f) Presented on a pro forma basis (as if the following transactions had occurred on the
first day of the period presented, and in the case of the Balance Sheet Data, as if such
transactions had occurred on June 30, 1996) to give effect to the conversion of a
portion of the Acadia subordinated notes and all of the Redeemable Preferred Stock; plus
options granted in August 1996 to purchase Common Stock at $ per share and Common
Stock to be contributed to the Company's 401(k) Plan (assuming all such Common Stock was
outstanding for all periods presented); and as adjusted for the Offering assuming the
issuance and sale of 4,000,000 shares of Common Stock and application of the assumed net
proceeds. Of the net proceeds from the sale of shares of Common Stock offered by the
Company in the Offering, approximately $22.0 million will be used to repay senior bank
indebtedness and $33.0 million will be used to repay Acadia subordinated notes.
(g) Pro forma, as adjusted, results for the year ended December 31, 1995 give effect to (i)
decreased interest expense of $13.7 million (which consists of $2.0 million related to
senior bank borrowings, $11.5 million related to subordinated notes to Acadia, and $0.2
million related to amortization of deferred loan costs with respect to senior bank
borrowings), (ii) decreased selling, general and administrative expenses of $2.0 million
(which consists of $2.3 million of management and consulting fees that will no longer be
incurred offset by an increase of $0.3 million in compensation expense for new
employment agreements with members of senior management), and (iii) a tax provision of
$5.0 million.
(h) Pro forma, as adjusted, results for the six months ended June 30, 1995 give effect to
(i) decreased interest expense of $6.6 million (which consists of $1.0 million related
to senior bank borrowings, $5.5 million related to subordinated notes to Acadia, and
$0.1 million related to amortization of deferred loan costs with respect to senior bank
borrowings), (ii) decreased selling, general and administrative expenses of $0.6 million
(which consists of $0.8 million of management and consulting fees that will no longer be
incurred offset by an increase of $0.2 million in compensation expense for new
employment agreements with members of senior management), and (iii) a tax benefit of
$18,000.
(i) Pro forma, as adjusted, results for the six months ended June 30, 1996 give effect to
(i) decreased interest expense of $7.1 million (which consists of $1.0 million related
to senior bank borrowings, $6.0 million related to subordinated notes to Acadia, and
$0.1 million related to amortization of deferred loan costs with respect to senior bank
borrowings), (ii) decreased selling, general and administrative expenses of $0.2 million
(which consists of $0.3 million of management and consulting fees that will no longer be
incurred offset by an increase of $0.1 million in compensation expense for new
employment agreements with members of senior management), and (iii) a tax benefit of
$0.9 million.
(j) For purposes of pro forma, as adjusted, net income (loss) per share, weighted average
shares outstanding is , which is comprised of shares currently outstanding,
5,499,800 shares to be issued to give effect to the conversion of a portion of the
Acadia subordinated notes and all of the Redeemable Preferred Stock, options (net of
options granted by Acadia from its existing holdings) granted in August 1996 to
purchase Common Stock at $ per share and shares to be contributed to the Company's
401(k) Plan, and 4,000,000 shares to be issued in the Offering.
</TABLE>

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of
operations of the Company for the years ended December 31, 1993, 1994 and 1995
and for the six month periods ended June 30, 1995 and 1996. This discussion
should be read in conjunction with the audited consolidated financial statements
of the Company and the related notes thereto and other financial information
included elsewhere in this Prospectus.

GENERAL

The Company's revenues are derived from the sale of sports trading cards and
similar picture products. Sports trading cards are sold principally to specialty
and mass market retailers for resale to individual consumers; other picture
products are sold generally to corporations who use the products for premium or
promotional purposes.

Sales are reported when the products are shipped. For those customers for
which return privileges exist, a provision for estimated returns of sports
trading cards (net of refundable royalties) is made in the period in which the
related sale is recorded. Because the actual amount of sports trading card
returns may differ from management's estimates, the Company's recorded liability
for estimated returns may be revised periodically to reflect actual return
experience.

Cost of sales includes both the costs to produce the products and also, in
the case of sports trading cards, royalties paid to the organizations which
represent the professional sports teams and players depicted on the Company's
sports trading cards. Costs to produce the products include materials, printing,
subcontract services, slitting, packaging and variable freight charges.

As noted elsewhere in this Prospectus, the level of sports trading card net
sales achieved by the Company is dependent, among other things, upon the
popularity of the sports for which the Company holds licenses. During 1994,
Major League Baseball canceled the last portion of its season as a consequence
of a disagreement between the league's owners and players' union. Also in 1994
the National Hockey League delayed, for approximately three months, the start of
its 1994-1995 season in order to resolve differences between the league's
players' union and team ownership. After considering the market contraction
caused by these work stoppages, as well as the 1991-1993 market correction
described elsewhere in this Prospectus, the Company determined that the carrying
value of goodwill, as reported in the Company's balance sheet, had been impaired
and recorded a $40.0 million write-down of goodwill in 1994 results of
operations. The Company also recorded other charges to 1994 results of
operations aggregating $7.4 million as a consequence of these work stoppages.

Upon consummation of the Offering, the Company will incur three significant
items of expense/income. This includes a non-cash compensation expense of
$ million (net of taxes of $ million) related to the grant of options
to purchase shares of Common Stock in August 1996 under the Company's 1992
Option Plan and other arrangements (including options granted by Acadia) and
shares of Common Stock contributed to the Company's 401(k) Plan. The
compensation charge of $ per share represents 90% of the initial public
offering price less the exercise price of $ per share. Furthermore, in
connection with the early repayment of a portion of the Company's debt
outstanding under the Credit Agreement with a portion of the proceeds of this
Offering, the Company expects to record a charge of approximately $0.4 million
(net of taxes of $0.2 million) for the write-off of a portion of unamortized
deferred loan costs related to senior bank indebtedness. In addition, the
Company will recognize a previously unrecorded benefit of $ million for tax
operating loss carryforwards as the Company expects to utilize these
carryforwards to offset income resulting from the deleveraging of the Company.

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<PAGE>
The Company expects to record a $1.0 million non-recurring charge in the
fourth quarter of 1996 related to relocation of the Company's corporate offices
from its current facilities in Grand Prairie, Texas to new offices in Dallas,
Texas.

MAJOR DEVELOPMENTS

Growth in Company Sales. The sports trading card market experienced a
correction between 1991 and 1993, followed in late 1994 and 1995 by the negative
effects of work stoppages in baseball and hockey. Notwithstanding this
contraction in overall market size, the Company's sports trading card sales and
its market share of SCMA net sales to the sports trading card market (i.e.,
baseball, football, basketball and hockey) have each increased each year since
1993. Management believes that the Company's sales growth and market share gains
during 1994 and 1995 are consequences of the Company's execution of its business
strategy. See "Business--Strategy."

In recent years the Company's sales and gross profits have, in large part,
improved because sales made on a non-returnable basis, principally to hobby
stores, have increased both in amount and as a percentage of total revenues.

MLM Merger and Other Asset Acquisitions. During 1993, the Company acquired
the operating assets and obligations of Major League Marketing, Inc. ("MLM") in
a stock transaction. Thereafter, the Company became solely responsible for all
creative, marketing, sales and distribution functions, all of which had
previously been conducted on the Company's behalf by MLM. In connection with the
MLM stock transaction, the Company wrote off as uncollectible a $30.2 million
receivable from MLM and recorded $11.2 million in provisions for excess product
return levels and unsalable inventory for a total charge to 1993 results of
operations of approximately $41.4 million.

During the third quarter of 1995, the Company and the former MLM
stockholders reformed the original MLM acquisition in order to resolve a dispute
between the parties related to the treatment of $30.2 million of pre-acquisition
liabilities MLM owed to the Company. See Note 3 to the Consolidated Financial
Statements.

During the second quarter of 1995, the Company acquired certain licenses and
related intangible assets (the "Action Packed Licenses") for $3.0 million plus
certain contingent consideration through which the Company expanded its football
trading card product line and entered into the market for NASCAR motor sports
trading cards. During the second quarter of 1996, the Company acquired certain
licenses and related inventory and intangible assets (the "Donruss Licenses")
for $32.5 million in cash plus the assumption of approximately $8.5 million of
contractual and other liabilities through which the Company expanded its product
lines for baseball and hockey.

Refinancings. As a consequence of the 1994 baseball and hockey work
stoppages, in December 1994 and January 1995 the Company received an aggregate
of $8.0 million from Acadia, financed through the issuance of additional
subordinated debt to Acadia, to fund cash deficits triggered by the work
stoppages. In May 1995, Acadia extended the maturity of the Company's
subordinated debt obligations to Acadia, thereby enabling the Company to
refinance its secured bank obligations and to finance the purchase of the Action
Packed Licenses.

In the second quarter of 1996, the Company refinanced its secured bank
obligations, repaid $8.5 million of its outstanding subordinated debt to Acadia
and financed the purchase of the Donruss Licenses.

18
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth the percentage of net sales represented by
the components of income and expense for the three years ended December 31,
1993, 1994 and 1995 and for the six month periods ended June 30, 1995 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------------- -------------------------
1993 1994 1995 1995 1995 1996 1995 1996
---- ---- ---- ----------- ---- ---- ---- ----

ACTUAL (PRO FORMA) ACTUAL (PRO FORMA)
------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Net sales.............................. 100 % 100 % 100 % 100% 100 % 100 % 100 % 100 %

Cost of sales.......................... 67 % 66 % 69 % 69% 71 % 69 % 71 % 69 %
---- ---- ---- --- ---- ---- ---- ----

Gross profit........................... 33 % 34 % 31 % 31% 29 % 31 % 29 % 31 %

SG&A expenses.......................... 33 % 20 % 21 % 19% 27 % 31 % 26 % 31 %

Unusual charges........................ 66 % 40 % 0 % 0% 0 % 0 % 0 % 0 %
---- ---- ---- --- ---- ---- ---- ----

Operating income (loss)................ (66 %) (26 %) 10 % 12% 2 % 0 % 3 % 0 %

Interest expense, net.................. (18 %) (12 %) (13 %) (2%) (19 %) (19 %) (3 %) (5 %)

Other income, net...................... 0 % 1 % 1 % 1% 0 % 0 % 0 % 0 %
---- ---- ---- --- ---- ---- ---- ----

Income/(loss) before income taxes...... (84 %) (37 %) (2 %) 11% (17 %) (19 %) 0 % (5 %)

Income tax provision................... 0 % 0 % 0 % 4% 0 % 0 % 0 % (2 %)
---- ---- ---- --- ---- ---- ---- ----

Net income/(loss)(a)................... (84 %) (37 %) (2 %) 7% (17 %) (19 %) 0 % (3 %)
---- ---- ---- --- ---- ---- ---- ----
---- ---- ---- --- ---- ---- ---- ----
</TABLE>

----------------

(a) For the year ended December 31, 1993, net income/(loss) as reported
herein is prior to the effects of the adoption of a new accounting
principle. See Note 12 to the Consolidated Financial Statements.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1995

Net Sales. The Company's net sales for the six month periods ended June 30,
1996 and 1995 were $49.9 million and $41.9 million, respectively, reflecting an
increase of $8.0 million, or 19%. This increase resulted from increased
shipments of sports trading cards. This increase in sales was a direct
consequence of renewed consumer interest in baseball and hockey. Approximately
$5.9 million of this increase is attributable to product lines associated with
the Action Packed License Acquisition and the Donruss License Acquisition.

Cost of Sales. Cost of sales in the six month periods ended June 30, 1996
and 1995 was $34.5 million and $29.5 million, respectively. As a percentage of
net sales, cost of sales decreased to 69% in the 1996 period as compared with
71% in the 1995 period. This improvement resulted primarily from a lower
estimated provision for returns and a modest improvement in unit production
costs.

The provision for estimated returns of sports trading card products in the
1995 period was higher, relative to the 1996 period, because of management's
assessment that 1995 retail sales would suffer as a consequence of relatively
low consumer interest in sports trading card products in the aftermath of the
1994 work stoppages. The 1996 improvement in unit production costs, relative to
1995 levels, resulted from increased production volumes.

Selling, general and administrative expenses. Selling, general and
administrative ("SG&A") expenses were $15.7 million and $11.5 million in the
1996 and 1995 periods, respectively. As a percentage of net revenues, SG&A
expenses were 31% in the 1996 period and 27% in the 1995 period. The $4.2
million increase in 1996 spending levels primarily reflects selling, marketing
and similar costs associated with new product lines offered pursuant to the
Action Packed and Donruss/Leaf Licenses

19
<PAGE>
and increased spending for sponsorships of certain sporting events. Also, the
1996 period SG&A includes significant costs relating to recruiting, relocation
and similar expenditures arising from expansion of the Company's field sales
force, although the economic benefit of that expansion, in the form of reduced
broker commissions, will not be realized until the latter part of 1996.

Operating income (loss). The Company experienced an operating loss of $0.3
million for the six month period ended June 30, 1996, compared with operating
income of $0.9 million for the six months ended June 30, 1995, principally as a
result of the higher levels of SG&A incurred in the 1996 period in order to
produce economic benefits in subsequent periods.

Interest expense. Interest expense for the six month period ended June 30,
1996 increased by $1.5 million, or 19%, over the same period in 1995 as the
result of a $0.9 million charge to write off deferred loan costs attributable to
the 1995 secured bank facilities (refinanced in May 1996), higher levels of
secured bank debt arising from the Action Packed License Acquisition and the
Donruss License Acquisition, and higher levels of subordinated debt owed to
Acadia.

Income tax provision. No provision for income taxes was made during the six
month periods ended June 30, 1996 and 1995, as the Company reported a net loss
before income taxes and was in a net operating loss carryforward position at the
end of each such period.

Pro forma results. Pro forma results for the six month period ended June 30,
1996 include the effects of (i) decreased interest expense of $7.1 million
(which consists of $1.0 million related to senior bank indebtedness, $6.0
million related to senior subordinated debt, and $0.1 million with respect to
amortization of deferred loan costs related to senior bank indebtedness), (ii)
decreased selling, general and administrative expenses of $0.2 million (which
consists of $0.3 million of management and consulting fees that will no longer
be incurred, offset by an increase in compensation expense of $0.1 million for
the new employment agreements with members of senior management), and (iii) a
tax benefit of $0.9 million. The comparable 1995 period pro forma results
include the effects of (i) decreased interest expense of $6.6 million (which
consists of $1.0 million related to senior bank indebtedness, $5.5 million
related senior subordinated debt, and $0.1 million related to amortization of
deferred loan costs with respect to senior bank indebtedness), (ii) decreased
selling, general and administrative expenses of $0.6 million (which consists of
$0.8 million of management and consulting fees that will no longer be incurred
offset by an increase in compensation expense of $0.2 million for the new
employment agreements with members of senior management), and (iii) a tax
benefit of $0.2 million. The six month pro forma results for the 1995 and 1996
periods assume that the conversion of certain subordinated debt (the
"Conversion") and the Offering had occurred on the first day of each period
presented.

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994

Net sales. The Company's net sales were $130.2 million in 1995 compared with
$118.0 million in 1994, a 10% increase. This increase in net sales was due to
increased shipments of sport trading cards which, in turn, resulted from sales
of football and NASCAR trading cards offered pursuant to the Action Packed
Licenses, and gains in net sales applicable to the Company's existing football,
baseball and hockey trading card products which resulted from continued
execution of the Company's business strategy.

Cost of sales. Costs of sales in 1995 totaled $90.4 million compared with
$78.0 million for 1994. The increase in cost of sales was principally
attributable to the growth in sales. In addition, during 1995 the Company
increased the provision for estimated returns of sports trading cards in
recognition of the potential that consumer demand for products would be soft
during the first half of 1995. As a consequence of this increase in 1995 return
provisions, 1995 costs of sales was 69% of net sales, whereas 1994 cost of sales
was 66% of net sales (excluding the $7.4 million in unusual charges described
below).

20
<PAGE>
Selling, general and administrative expenses. 1995 SG&A expenses were $26.3
million compared with $23.5 million in 1994, a $2.8 million increase. As a
percentage of net sales, SG&A expenses were 21% in 1995 and 20% in 1994. The
1995 increase relates principally to the Company's sponsorships of the Pinnacle
All-Star FanFest held in conjunction with Major League Baseball's 1995 All Star
Game and the 1995 NFL Quarterback Club's Quarterback Challenge, whereas no
similar sponsorships were undertaken by the Company during 1994. 1995 also
includes approximately seven months of increased operating expense incurred in
support of the new Action Packed motor sports and football product lines.

Unusual Charges. Results of operations for 1994 reflected a $7.4 million
charge, including a $5.1 million charge for excessively high return levels of
1994 product sales and a $2.3 million write-off of unsalable inventory, in each
case directly attributable to 1994's baseball and hockey work stoppages.

Results of operations for 1994 also included a $40.0 million non-cash
write-down of goodwill. Goodwill of $77.4 million was initially recorded in 1991
at the time the Company acquired Optigraphics, Inc. in a transaction
substantially financed through borrowings of long term debt. The goodwill
represented the excess of the purchase price over the valuation of the net
assets acquired in the Optigraphics acquisition. The purchase price was based on
management's expectations of future performance at the time of the Optigraphics
acquisition, considering historical experience and industry trends. These
expectations assumed moderate growth rates in revenue, planned operating and
product improvements to be implemented by new management, and sufficient cash
flow from operations to repay acquisition indebtedness.

The Company was acquired in September 1991, at the peak of the overextended
market for sports trading cards. That market experienced a correction between
1991 and 1993. In the second half of 1994, additional events occurred that led
management to reevaluate its expectations of future performance. In August, the
Major League Baseball players went on strike and one month later, Major League
Baseball canceled the remainder of its 1994 season, including the 1994 World
Series. Then, in October 1994, the National Hockey League delayed until January
1995 the start of league play in order to resolve economic differences between
team ownership and the players union. These events manifested themselves in a
significant decrease in sports trading card sales and a significant increase in
the rate of sports trading card returns. To fund the short-term cash flow
deficits triggered by these work stoppages the Company borrowed an additional $8
million in subordinated debt from Acadia. Concurrently, management of the
Company concluded that these sports' management/labor disputes would have a
material adverse effect on the future revenues of businesses (such as the
Company's) which were dependent upon the popularity of these sports. For
additional information regarding management's assessment and related
assumptions, see Note 5 to the Consolidated Financial Statements.

Operating income (loss). As a consequence of the above, 1995 operating
income was $13.5 million compared with an operating loss of $30.9 million in
1994 (including $47.4 million in unusual charges).

Interest expense. 1995 interest expense was $16.6 million compared with
$13.8 million in 1994, a $2.8 million increase. This increase arose due to
increased borrowings under the Company's subordinated debt instruments owing to
Acadia as well as moderately higher levels of borrowings under the Company's
secured bank facilities in the second half of 1995 arising from generally
increased operating activity and the Action Packed License Acquisition.

Income tax provision. As the Company incurred a loss before income taxes in
1995 and 1994 and was in a net operating loss carryforward position at the end
of each such period, no provision or benefit was made for income taxes.

Pro forma results. Pro forma results for the year ended December 31, 1995,
includes the effects of (i) decreased interest expense of $13.7 million (which
consists of $2.0 million related to secured bank indebtedness, $11.5 million
related to subordinated debt, and $0.2 million related to amortization of

21
<PAGE>
deferred loan costs with respect to secured bank indebtedness), (ii) decreased
selling, general administrative expenses of $2.0 million (which consists of $2.3
million of management and consulting fees that will no longer be incurred,
offset by an increase in compensation expenses of $0.3 million for the new
employment agreements with members of senior management), and (iii) a tax
provision of $4.3 million and assumes that the conversion of a portion of the
subordinated debt and all of the Redeemable Preferred Stock and the Offering had
both occurred on January 1, 1995.

YEAR ENDED DECEMBER 31, 1994 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1993

Net sales. The Company's net sales were $118.0 million in 1994, a $55.5
million or 89% increase over the $62.5 million of net sales reported in 1993.
The 1994 increase reflects several significant events. First, 1994 sales derived
from the sale of sports trading cards increased $42.5 million over 1993 levels
as a direct consequence of management's focus on the sports trading card hobby
store market sector, plus the Company's introduction of new products, brands and
price points focused on the Company's principal target consumer group, the
sports trading card collector/consumer. Also, 1994 promotional sales increased
$13.0 million over 1993 sales as a result of focused marketing efforts which led
to significant sales to certain international consumer products companies.
Overall, 1994 sales reflected the benefits of a full year of Company managerial
control over product development, marketing and sales activities, whereas those
business functions were accomplished by MLM during the first seven months of
1993.

Cost of sales. 1994's cost of sales totaled $78.0 million (66% of net sales)
compared with 1993's cost of sales of $41.0 million (67% of net sales). The 1%
improvement in cost of sales for 1994 responds directly to the beneficial effect
of higher operating levels over fixed production costs, plus changes in product
mix which yielded increased profit margins on a per product basis.

Selling, general and administrative expenses. 1994 SG&A expenses totaled
$23.5 million compared with $21.0 million for 1993, a $2.5 million increase in
1994 over 1993. As a percentage of net sales, SG&A expenses were 20% in 1994 and
33% in 1993. This increase reflects a full year's responsibility for the sales
and marketing functions assumed from MLM in 1993, plus generally higher levels
of operating expenses required to support the 87% increase in net sales noted
above.

Unusual charges. As a result of the 1994 work stoppages discussed earlier,
the Company recorded an aggregate $7.4 million charge to 1994 results of
operations to provide for excessively high returns of 1994 products sales and to
write off unsalable sports trading card inventories. In addition, the Company
recorded a $40.0 million charge to write-down goodwill, as previously described.

1993 operating results included a charge of $41.4 million which arose as a
consequence of events which culminated in the MLM acquisition. At the date of
acquisition, MLM owed the Company approximately $30.2 million, which represented
MLM's share of expenses related to the two companies' operations during 1992 and
1993 that had been funded by the Company. Pursuant to the MLM Acquisition
agreement, the Company charged off this receivable as uncollectible.
Additionally, the Company provided $11.2 million in charges for expected
excessive levels of product returns and obsolete inventory, all arising from the
MLM transaction.

Operating loss. As a consequence of the above, the 1994 financial statements
reported a $30.9 million operating loss, compared to a $40.9 million operating
loss for 1993. Before considering unusual charges, 1994 operations yielded $16.4
million in operating income versus $0.5 million in operating income for 1993.

Interest expense. Interest expense aggregated $13.8 million in 1994,
compared to $11.4 million in 1993, a $2.4 million increase. This 21% increase in
interest expense is entirely attributable to higher levels of subordinated debt
to Acadia and secured bank debt outstanding in 1994 over 1993.

22
<PAGE>
Income tax provision. As the Company incurred a loss before income taxes in
1994 and 1993 and was in a net operating loss carryforward position at the end
of each such period, no provision or benefit was made for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow deficits from operating activities of $2.6 million, $2.6 million
and $9.0 million in 1995, 1994 and 1993, respectively, as set forth in the
Company's Consolidated Statements of Cash Flows for those years, are a direct
consequence of the Company's investment in working capital to support strong
revenue growth and also, for 1994 and 1993, the cash requirements arising from
special charges to operations during those two years. Although the Company has
generated $3.4 million of cash flow from operations for the six months ended
June 30, 1996, management believes that high revenue levels in the last half of
1996 dictate further cash resources will be needed during interim periods of the
year. Cash deficits were funded with borrowings under the Company's bank
facility and with borrowings from Acadia.

During the three years ended December 31, 1995, 1994 and 1993, the Company
invested $0.4 million, $1.5 million and $0.4 million, respectively, in purchases
of property and equipment. Through the first six months of 1996, the Company has
expended an additional $0.9 million for property and equipment, principally new
information systems hardware and software. The Company is currently committed to
spend an additional $2.0 million to $3.0 million during 1996 and 1997 for
information systems and capital expenditures to facilitate relocation of the
Company's corporate headquarters from Grand Prairie, Texas to Dallas, Texas.
Other cash expenditures arising from this relocation, which are likely to be
charged to expense in the fourth quarter of 1996, are expected to approximate $1
million. Except for the information systems and relocation capital expenditures,
management does not currently expect the Company to make significant annual
capital expenditures because the Company relies upon third party vendors,
suppliers and subcontractors for virtually all of its sport trading card
production requirements.

In May 1996, the Company refinanced its secured bank obligations. The
proceeds from this refinancing were used to retire its prior bank obligations,
repay $8.5 million of subordinated notes payable to Acadia, and fund the Donruss
License Acquisition. The refinanced credit facilities include a $15.0 million
revolving credit commitment and $88.0 million term loan. Total availability
under the revolving credit commitment is limited to 80% of eligible accounts
receivable and 50% of eligible inventory, both as defined in the credit
agreement. Outstanding borrowings under the credit facilities bear interest at
optional rates based on the prime rate or LIBOR. A specified commitment fee is
payable on unused amounts under the revolving credit facility. All outstanding
borrowings under the revolving credit commitment are payable on May 27, 2001
(extendable to May 27, 2002 under certain conditions), and the term loans are
payable in 16 quarterly payments of $500,000 and then 4 quarterly payments of
$8.0 million through May 28, 2001, on $40.0 million of term loans and in 20
quarterly payments of $500,000 and then 4 quarterly payments of $9.5 million
through May 28, 2002, on the other $48.0 million of term loans, plus additional
annual payments, beginning in 1997, based upon 50% of any excess cash flows (as
defined) generated during each preceding calendar year. The credit agreement
contains covenants requiring the maintenance of certain minimum financial ratios
and limitations on dividend payments and the issuance of equity securities. The
credit facilities are collateralized by substantially all assets of the Company.

At June 30, 1996, the Company's outstanding senior bank indebtedness was
$95.5 million and the Company had undrawn availability under its revolving
credit facility of $7.5 million.

The Company will use approximately $22.0 million of the estimated net
proceeds from this Offering to repay its secured bank indebtedness. An
additional approximately $33.0 million in estimated net proceeds will be used to
repay subordinated debt owing to Acadia. The balance of the

23
<PAGE>
subordinated debt will, immediately thereafter, be converted to shares of the
common equity of the Company. See "The Company-Recapitalization" and
"Description of Indebtedness" for further details.

As a result of the Conversion and this Offering, the Company will be
significantly deleveraged and will begin to generate taxable income. Although
the Company's statements of operations may reflect income before taxes and tax
expense in future periods, the Company will not be required to make income tax
payments (except for any alternative minimum taxes) until it has utilized its
existing tax net operating loss carryforwards, which were approximately $40.0
million at December 31, 1995. For financial reporting purposes, the Company will
recognize the benefit of its net operating loss carryforwards following
completion of the Offering.

The Company believes that cash from operations and borrowings under its
credit facility should provide sufficient funds to meet its currently
foreseeable debt repayment obligations and other cash needs. The Company may
seek additional debt, equity or equity-linked financing in connection with any
strategic acquisition, depending on its financial condition and market
conditions at the time of any such acquisition.

SEASONALITY

Although the Company's sports trading card products are sold throughout the
year, third and fourth quarter sales, gross profit and operating income are
generally higher than first and second quarter amounts. The Company expects that
these seasonal variations will continue, although in differing degrees from year
to year. For example, in 1995 the Company recognized 68% of its annual sales,
69% of its annual gross profit and 91% of its operating income during its third
and fourth fiscal quarters. See "Business--Competition."

INFLATION

In general, printing costs are affected by inflation, and the effects of
such inflation may be experienced by the Company in future periods. However,
management believes that such effects have not been material during the past
three years.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board recently issued two standards which
will be applicable to the Company which the Company is required to adopt in
1996: "No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of " and "No. 123, Accounting for Stock-Based
Compensation". The impairment standard is not expected to have a significant
impact on the Company. The Company has not yet determined which of the
acceptable approaches it will use under the stock compensation standard.
Adoption of certain approaches under the stock compensation standard could
result in non-cash charges which, if made, are not expected to be material. At a
minimum, the standard will require disclosures about the fair value of employee
stock options.

24
<PAGE>
BUSINESS

GENERAL

The Company is one of the nation's leading designers, producers and
distributors of sports trading cards. The Company offers premium value products
under numerous brands and sub-brands--differentiated by product feature, price
point, sport and distribution channel --including such well-established brands
as Score, Select, Pinnacle, Donruss, Leaf, Action Packed, Racer's Choice and
Sportflix. Based on SCMA data, for 1995 the Company had an aggregate 37% market
share in the three major team sports categories in which it competes (including
a 11% market share related to products sold under licenses acquired by the
Company in May 1996). The Company believes that it has the leading market share
in each of those three team sports--baseball, football and hockey. The Company
is also a NASCAR licensee and a leading producer of auto racing cards. As a
result of the marketing strategy implemented by the Company beginning in 1993,
the Company's net sales more than doubled from $62.5 million in 1993 to $130.2
million in 1995, despite a decline in overall sports trading card industry sales
during that period. The Company's net sales have increased 19% from $41.9
million for the first six months of 1995 to $49.9 million for the comparable
1996 period. Market indicators suggest that sports trading card industry sales
have begun to improve. In addition to its sports trading card business, the
Company sells collectible and similar picture products to consumer and food
product companies for their promotional purposes.

The Company has positioned itself as a leader in the industry through an
emphasis on collectibility and continual product innovation, with a reputation
for high quality products and service. Each of the Company's sports trading card
brands has its own positioning in the marketplace and is designed to appeal to a
targeted group of consumers. The Company produces different products utilizing a
variety of production technologies and distinctive features for sales through
multiple distribution channels at a wide range of price points. The Company
believes that it is an industry leader in innovative card design and production
technologies, as evidenced by recent awards received by the Company including
"Best Manufacturer" as awarded by Sports Collectibles Association International,
the trade association for sports collectibles and memorabilia retailers, and
"The 1995 Sports Trading Card of the Year" for the Company's Zenith Football
products by Tuff Stuff magazine. The Company's sports trading card products
consistently have among the industry's highest aftermarket trading values, based
on information provided by Beckett Monthly (the most widely circulated sports
trading card publication).

The Company utilizes what it believes to be an aggressive, cost-effective
marketing strategy concentrating on public relations events and targeted
advertising to maximize brand awareness. To increase its visibility in the
sports market, the Company has entered into multi-year commitments to be the
exclusive title sponsor of the premiere fan events for hockey and baseball,
which include the Pinnacle NHL FANtasy held in conjunction with the National
Hockey League All-Star game, and the Pinnacle All-Star FanFest held in
conjunction with the Major League Baseball All-Star game. The Company is also
the exclusive sports trading card sponsor of the NFL Quarterback Club's
Quarterback Challenge. These events serve both to increase fan interest in the
relevant sport and to provide an opportunity to introduce the Company's sports
trading cards to a large number of fans who may not be familiar with the
Company's products. In addition, these events provide significant brand
exposure, including national television and print media coverage, to a
sports-conscious target audience at a substantially lower cost than conventional
media advertising.

25
<PAGE>
The Company continually seeks to improve its profitability and the quality
and predictability of its earnings and cash flows by managing the return of
unsold product and controlling costs. The Company believes that it has been an
industry leader in the effort to minimize returns, which has historically been a
concern for the industry. The Company has increased the percentage of its sales
to the hobby distribution channel, which traditionally does not have return
privileges, and has also negotiated with some major mass market retailers to
eliminate return privileges. As a result, since 1992 the Company has tripled the
percentage of its sales made on a non-returnable basis, to more than 50%. In
addition, the Company continually evaluates cost control opportunities. The
Company has successfully identified and reduced certain significant costs
through investments in design technology and identification of more
cost-efficient vendors and sources of raw materials. In addition, since 1993 the
Company has shifted its focus from being a manufacturer of sports trading cards
to being a flexible designer, marketer and distributor of collectible products.
The Company now outsources substantially all of its production processes other
than design and artwork.

STRATEGY

. Continual product innovation, both technological and artistic, to
stimulate collector interest;

. Managed production quantity and quality, making less than the market
demands, to promote collectibility; and

. Tailored product distribution, packaging and sales support, customized to
each individual channel of distribution to maximize sell-through.

Continue to Enhance Highly Recognizable Brands. The Company intends to
continue to enhance its highly recognizable brands among both
collectors/consumers and retailers. The Company has positioned itself as a
leader in the industry through an emphasis on collectibility and continued
product innovation, with a reputation for high quality products and service. The
Company has also utilized numerous media tools to maximize brand awareness,
including the recent publication of Pinnacle magazine and advertising in trade
publications. In addition, the Company has multi-year commitments to be the
title sponsor of the premiere fan events for hockey and baseball, which include
the Pinnacle NHL FANtasy held in concert with the National Hockey League
All-Star game and the Pinnacle All-Star FanFest held in conjunction with the
Major League Baseball All-Star game. The Company is also the exclusive sports
trading card sponsor of the NFL Quarterback Club's Quarterback Challenge. The
Company intends to continue using these cost-effective marketing techniques to
reinforce its brand

26
<PAGE>
image. The Company also intends to strengthen the brand image of its Donruss
products through marketing efforts separate and distinct from those used to
market Pinnacle products.

Further Enhance Hobby Channel Distribution. Since 1993, the Company has
significantly increased its penetration of the hobby channel and currently
distributes its products to over 4,000 hobby stores. The Company plans to add as
many as 300 new hobby retailers to its distribution network in 1996 and will
continue to seek additional hobby stores that have the capabilities to
effectively market the Company's products. The Company is also focused on
expanding the range and volume of the Company's products offered by hobby
stores. The Company believes that its newsletters, magazines, field sales force,
hobby-specific merchandising programs and customer service department support
the Company's attainment of these goals by assisting hobby dealers with the
marketing and merchandising of sports trading cards.

Selectively Expand General Retail Distribution. The Company intends to (i)
recruit, as new customers, general retailers whose sales goals and merchandising
practices are consistent with the Company's marketing strategy and (ii)
selectively expand its sales to its existing general retail outlets by
emphasizing "program selling" of its broad product line and retailer partnership
programs (including the use of custom packaging and special price points). See
"--Marketing and Distribution." The Company's field sales force engages in
program selling in the general retail sector, whereby the sales person assigned
to each customer works with the customer to develop a program through which the
customer commits in advance to purchase the Company's products scheduled for
release during the following six months. To date, these efforts have
successfully increased penetration of the general retail channel while still
enabling the Company to manage product return exposure associated with the
general retail channel.

Maximize Profitability of Recent Acquisitions. In May 1996, the Company
acquired from Donruss/Leaf its baseball and hockey trading card licenses as well
as certain inventory and intangibles for approximately $41.0 million. The
Company's strategy to maximize net sales and profitability of the Donruss
licensed products includes: (i) leveraging the Company's infrastructure to
maximize the contribution of the Donruss products; (ii) repositioning Donruss
products for targeted market segments; (iii) marketing Donruss products using
the Company's more effective field sales force and aggressive marketing
techniques; (iv) extending Donruss brands into football trading cards; and (v)
applying the Company's return policies to sales of Donruss products.

Continually Evaluate and Reposition Products to Meet Both Customers' and
Consumers Demands and Preferences. The Company continually evaluates customer
and consumer demand and preferences, and identifies opportunities to target
products to meet these preferences. The Company then repositions its products
through the addition of innovative trading card features, different price
points, brand concepts and sub-brands and modified product packaging, display
and similar features to support customers' merchandising practices. A recent
example is the Company's 1995 introduction of Pinnacle Zenith which is
distributed principally through the hobby market. This product, which like the
Company's Pinnacle product offers a full bleed design with an emphasis on action
photography, is enhanced to include an all-foil metallized printing technology,
heavy card stock and scarce insert sets. The 1995 premiere issue of the
Company's Pinnacle Zenith football trading card was named "The Sports Trading
Card of the Year" (among all sports and all brands) by Tuff Stuff magazine.

Pursue Opportunities in Promotional and Related Markets. The Company has
identified developing promotional products for commercial enterprises as a
market that it is qualified to service with its marketing expertise, creative
design capabilities and innovative production technologies, as well as its
existing relationships with licensors in major professional sports. For example,
the Company recently worked with McDonald's Corporation to create an innovative
and profitable hockey card promotion for all McDonald's Canadian restaurants.
The Company believes there is opportunity for future growth in this market.

27
<PAGE>
Position the Company as a Strong Contender for Additional Licensing
Opportunities. The Company intends to evaluate and pursue other licensing
opportunities where appropriate. The Company believes that it is well-positioned
to develop any such licenses, if obtained, because of its competitive strengths.
As the only member of the SCMA which does not currently have a basketball
license, the Company is seeking to position itself as the most desirable
candidate for such a license with the National Basketball Association.

Evaluate Opportunities for Strategic Acquisitions. The Company regularly
evaluates opportunities for strategic acquisitions which could take advantage of
the Company's product development, marketing and distribution strengths. The
Company is not currently in discussions with regard to any such acquisition
opportunities.

SPORTS TRADING CARD INDUSTRY

According to SCMA data, the 1995 sports trading card market was
approximately $560 million, which equates to approximately $900 million in
retail sales. Sales of sports trading cards are significantly influenced by the
popularity of the related sport. The Company and other producers of sports
trading cards operate pursuant to licenses with the owners' and players'
association in each relevant team sport or, in the case of auto racing, with
NASCAR and with the relevant drivers, team owners and sponsors. See "--License
Agreements and Trademarks." The major sports organizations have generally
limited the number of licensed sports trading card competitors. Sports trading
cards are sold to consumers through a variety of distribution channels,
including approximately 5,000 specialty hobby stores and over 80,000 retail
outlets such as mass merchandisers, convenience stores, grocery and drug stores
and toy stores. Sport trading cards are a highly attractive category for
retailers because of their relatively high profit margins per square foot of
shelf space.

Consumers. Studies commissioned by the Company to better understand its
ultimate consumer indicate that males over 18 years old account for
approximately half of the number of purchases and over three-quarters of the
dollars spent annually on sports trading cards. The average collector is
approximately 31 years old and owns a collection valued at over $4,000. These
studies also indicate that key product attributes valued by this
collector/consumer base include scarcity, creative design and innovative
printing and technologies. The industry utilizes insert cards (known as "chase
cards") which incorporate these attributes and which are randomly inserted into
card packs to generate further demand for sports trading cards.
Collectors/consumers seek out these cards due to their relative scarcity and
higher aftermarket values. Collector interest in sports trading cards is
evidenced by the large circulation of the various trade magazines and the
significant attendance figures at the industry's various trade shows. Beckett
Monthly, which publishes secondary market values for sports trading cards and
related information, is the largest publisher of sports trading card price
guides covering baseball, football, basketball, hockey, motor sports and future
stars. The Beckett Monthly price guides have a total circulation of 1.2 million,
which ranks them (in the aggregate) second in circulation to Sports Illustrated
among sports periodicals.

The inherent collectibility of sports trading cards is demonstrated by the
existence of an active, sophisticated secondary market for sports trading cards.
The secondary market infrastructure includes Sportsnet, a "members only"
electronic bulletin board for hobby dealers which functions as a clearing house
for advance sales of sports trading cards, plus a number of collector magazines
which publish aftermarket values. Beckett Monthly provides secondary market
values for virtually every baseball card produced since 1948.

History. The sports trading card industry experienced significant growth
between the early 1980s and 1991. The Company believes that this growth was
primarily fueled by the combined effects of new sports franchises, expanding
sports media coverage, growing levels of disposable income and an increased
number of trading card producers as a result of granting of additional licenses.
Reported

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<PAGE>
SCMA net sales of sports trading cards grew from less than $250 million in 1988
to a peak of almost $1.1 billion in 1991. Product innovation and competition
increased significantly. Concurrently with this trend, the trading card market
experienced an influx of speculative investors who acquired cards solely in
expectation of a rapid and significant appreciation in value. Industry
publications with broad circulation, such as Beckett Monthly, were validating
these speculators' interest in the collectibility of sports trading cards by
regularly publishing updated secondary values for trading cards.

However, by 1991 the sports trading card market was overextended, with
supply levels outpacing demand. Retailers, however, continued to purchase large
quantities of trading cards from manufacturers but, not constrained by any time
limitation on sales returns, returned increasing quantities of accumulated
inventory to manufacturers. At the same time, the United States entered into a
recession. The speculative investors ceased viewing sports trading cards as an
attractive investment, and the sports trading card market contracted to its core
collector/consumer. According to SCMA data, 1992 net sales contracted slightly
to $982 million from 1991 and in 1993 net industry sales declined by 22% to
approximately $767 million.

Although SCMA net sales increased by 3% in the first half of 1994 compared
to the first half of 1993, during the second half of 1994 the industry was
negatively impacted by the Major League Baseball strike and the National Hockey
League work stoppage. These events led to a decline in SCMA net sales to
approximately $560 million in 1995. While the National Hockey League resolved
its dispute and commenced its season in January 1995, and Major League Baseball
resumed operations in April 1995 (without a written contract between the owners'
and the players' union), baseball and hockey sales remained well below
pre-strike levels throughout 1995.

Set forth below is SCMA data for the sports trading card industry and the
Company (excluding sales of Donruss products under licenses purchased by the
Company in May 1996) for the three years in the period ended December 31, 1995.

<TABLE>
<CAPTION>
COMPANY NET SALES
SCMA REPORTED DATA REPORTED TO SCMA
-------------------------- --------------------------------------------
% % SHARE OF SCMA
YEAR NET SALES CHANGE NET SALES CHANGE NET SALES
- ---- --------------- ------ --------------- ------ -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS) (IN MILLIONS)
1993.. $ 766.7 (22%) $48.0 (51%)(a) 6%
1994.. 744.0 (3%) 79.3 65% 11%
1995.. 559.7 (25%) 102.5 29% 18%
</TABLE>

-----------------

(a) The Company's reported SCMA net sales for 1992 include $17.0 million
for "collector's sets" which were discontinued in 1993.

There are indications that sports trading card sales for the six months
ended June 15, 1996 have begun to improve. A.C. Nielsen data (which data
excludes the hobby and certain other retail distribution channels) for the 1996
year to date period indicate that consumer purchases of baseball trading cards
have increased 18%, sales of football trading cards have increased 57%, sales of
hockey trading cards have increased 18%, and sales of motor sports trading cards
have increased 70%, in each case over the comparable 1995 period.

PRODUCTS

Sports Trading Cards. The Company is engaged in the design, production and
distribution of premium value sports trading cards featuring major league
baseball players, professional football and hockey players and NASCAR auto
racing drivers, team owners and/or sponsors. The Company markets numerous sports
trading card products under a variety of brand names including Score, Select,
Pinnacle, Donruss, Leaf, Action Packed, Sportflix and Racer's Choice. The
Company's sales are derived from a broad portfolio of products. The cards
feature photographs of the athletes and generally include

29
<PAGE>
summary statistics and biographical material. The Company may issue several new
series of baseball, football, hockey and NASCAR trading cards each year. Each
season's, products contain new players, different designs and photographs and
updated statistics.

The Company has positioned itself as a leader in the industry through an
emphasis on collectibility and continued product innovation, with a reputation
for high quality products and service. Each of the Company's sports trading card
brands has its own positioning in the marketplace and is designed to appeal to
targeted groups of consumers. All of the Company's sports trading cards brands
are of high quality and most feature laminated paperboard and state-of-the-art
reproduction techniques. Certain brands contain cards which use wood, leather or
plastic or are produced using the Company's lenticular printing process, which
creates 3D or magic motion effects on the sports trading cards; other brands use
holograms. Certain brands also contain foil stamping; others are packaged with
other items such as coins. The Company produces different products utilizing a
variety of production technologies and distinctive features and sells those
products through multiple distribution channels at a wide range of price points.
The Company uses a variety of chase card sets differentiated by technology,
distribution channel and price point to provide the collector/consumer with
greater value. The Company continually changes and repositions its brands to
respond to its customers needs. As of June 30, 1996, the Company's principal
brands were as follows:

<TABLE>
<CAPTION>
SUGGESTED
BRAND RETAIL PRICE BRAND DESCRIPTION AND POSITIONING
--------------- ------------ ------------------------------------------------------------
<S> <C> <C>

Score $ .99 A classic border card for the traditional collector

Racer's Choice .99 A value priced classic border card for the racing enthusiast

Donruss 1.89 A traditional full bleed product with numbered random insert
cards

Select 1.99 A premium, full bleed hobby-only card for the serious
collector

Sportflix 1.99 A retail only magic motion (lenticular) card targeted to
younger consumers

Pinnacle 2.49 A premium full bleed card with random insert cards designed
to maximize collector value

Leaf 2.99 A premium brand that uses unique materials (such as wood) in
its sequentially numbered random insert cards

Action Packed 2.99 An embossed card featuring unique materials (such as gold
leaf and diamond chips) and non-traditional photography
</TABLE>

To capitalize on the strength of these brands, the Company also issues
sub-brands--technologically advanced versions of regular cards produced in more
limited quantities--to reach niche markets. Examples of this include (i)
Pinnacle Zenith which, like Pinnacle, offers a full bleed design with an
emphasis on photography but also includes all-foil metallized printing
technology, heavier card stock and scarce insert sets (suggested retail price of
$3.99 per pack) and (ii) Select Certified, which, like Select, is a hobby-only
brand, but also includes a mirror-like finish protected by a removable plastic
film and a heavier card stock (suggested retail price of $4.99 per pack).

The Company uses a variety of chase card sets differentiated by technology,
distribution channel and price point to provide the collector/consumer with
greater value. The Company produces substantially fewer chase cards than regular
sports trading cards. Chase cards are differentiated by their innovative
technology, non-traditional photography and limited availability. Chase cards
may be die-cut and use holographic foil, or produced with DufexTM or GoldrushTM
technologies. See "--Technology." Examples of recent chase cards include (i) the
Christie Brinkley Collection, which contains photos taken by supermodel Christie
Brinkley, included in the Pinnacle Baseball II product, (ii) FanScanTM, an
insert in Action Packed Credentials Racing, which allows collectors to access
live radio communications

30
<PAGE>
between popular NASCAR drivers and their pit crews through a special toll-free
telephone number printed on the back of each card and (iii) Studs, an Action
Packed embossed card which shows famous athletes wearing their earrings--but in
this case the diamond studs are real. The Company believes that its innovative
chase card designs, random insertion and limited production reward the collector
with high aftermarket trading values. For example, according to the June 1996
issue of Beckett Monthly, the 1995 Select Artist Proofs subset is valued at
$5,000.

The dollar value of shipments of sports trading card products (excluding
sports trading cards sold by the Company to commercial customers for use as
promotional products) accounted for approximately 93%, 87% and 89% of the
Company's gross sales for the years ended December 31, 1993, 1994 and 1995,
respectively, and approximately 87% for the six months ended June 30, 1996.

Promotional Products. The Company also produces products for use by consumer
and food product companies in their promotional activities. The products include
sports trading cards and other products. The Company works with its customers to
develop promotional strategies and to produce products which employ the
Company's lenticular or other innovative technologies. For example, the Company
recently created a hockey card promotion for all McDonald's Corporation Canadian
restaurants, and has received contracts from other companies to perform similar
promotions in the United States.

The Company markets its promotional projects to several hundred customers,
who typically use these products in conjunction with one-time marketing events
or, occasionally, recurring promotional campaigns. While none of the promotional
projects conducted by the Company's commercial customers is individually
significant to the Company's revenues today, the Company believes that continued
development of products for the commercial consumer provides opportunity for
future revenue growth and creates further awareness of the Company's brands and
products.

Technology. The Company has been an innovator of trading card features
utilizing creative design and advanced production technologies. The Company
develops some technology itself and also works with various vendors to develop
technology and applications for the Company's products. See "--Product
Development and Production." The Company currently employs the following
innovative technologies:

. DufexTM, which superimposes a player's image against a laminated foil
background with UV formulated transparent inks that allow the foil
reflections to shine through.

. Action Packed embossing, which gives the look and feel of raised
typography, and 24KT gold which includes actual gold leafing.

. GoldrushTM, a process where cards are printed in gold on silver metallized
foil.

. Sportflix, a process which allows two or more images to exist on the same
piece of printed stock because of special lenticular plastic lenses that
allow the eye to see only one image at a time. The image changes if the
card is tilted.

. LaserViewTM, a new holographic product which incorporates 3 to 4 seconds
of actual National Football LeagueTM game footage into full motion cards.

. Spectrotech, an etching technique which highlights foil with a texturizing
process that gives it tactile features which complement the mirror-like
look of the foil.

31
<PAGE>
MARKETING AND DISTRIBUTION

The Company has commissioned studies of its customer base and the sports
trading card market. As a result of these studies, the Company shifted its focus
to the hobby channel and the serious collectors who purchase through that
channel, and began to develop innovative products that both attract the
collector/consumer's attention at the point of purchase and also maintain
superior value in the secondary market.

The Company's marketing strategy is based on the following premises: (i) the
collectibility of a product is determined by the market's perception of the
product's scarcity and its design features; (ii) success in the hobby channel
leads to increased demand in the broader general retail channel; (iii) strong
brand positioning is key to developing strong market position; and (iv) the
market demands continual product innovation.

To improve the collectibility of its cards, the Company manages both
production quality and quantity. While the number of the Company's brands or
sub-brands has increased, the Company has reduced the production volume per
product. This increase in products has reduced the Company's dependency on any
single product and reduced the Company's exposure to returns.

As an early demonstration of the Company's commitment to scarcity, the
Company was the first major industry player to eliminate the distribution of
"collector's sets." These sets made available, in a single purchase at the end
of the sports season, almost every card produced for the season. Although
elimination of such sets in 1993 and loss of revenues ($17.0 million in net
sales reported to SCMA in 1992) from their sales initially reduced the Company's
earnings, the Company believes that such action enhanced future sales because
sales of "collector's sets" reduced consumers' need to purchase cards throughout
the season in order to obtain an entire set. In addition, "collector's sets"
were typically priced lower than cards sold earlier in the season.

The Company meets at various times during the year with advisory boards of
hobby dealers, other retailers and consumers. These boards provide the Company
with insight into which of its products and product features are popular, and
keys to the success of its marketing techniques and sales practices within the
respective distribution channels. In addition, the Company solicits from the
advisory boards strategies that the Company, alone or together with its
customers, can employ to enhance sell-through of the Company's products.

Hobby and Retail Distribution. The Company's products are sold in hobby
stores, sports memorabilia shops, wholesale clubs, mass merchandisers,
convenience stores, variety stores, grocery and drug stores and toy stores. The
Company has aggressively pursued sales to the hobby sector, and over the last
three years has tripled its percentage of sales of sports trading cards made to
the hobby sector. The Company has focused on the hobby sector because it
believes that the effects of the market correction and work stoppages on this
sector of the market were less severe than on the general retail sector and that
demand in the hobby channel ultimately drives the more general retail sector.
See "--Sports Trading Card Industry." In addition, the terms of sale to this
sector have made such sales more attractive to the Company. Unlike most general
retail and mass merchandise customers, hobby stores are required to pay in
advance for shipments and do not have the right to return unsold products. See
"--Returns." The Company distributes its products to over 4,000 hobby stores
nationwide.

While the Company has focused on developing the hobby market, the Company
has also taken a number of steps to further develop sales in the general retail
sector. For example, the Company is the only trading card competitor to provide
its customers with tools to manage sports trading card category profitability.
One such tool, "The Team Pinnacle Category Management System Newsletter," which
is distributed to approximately 500 key buyers and merchandise managers, has
been recognized by leading retail trade publications for its valuable insights.
In addition, the Company works with its

32
<PAGE>
general retail customers to implement various trade marketing programs, such as
display merchandising and cooperative promotional advertising, to increase
sell-through of products at the retail outlets and to limit customers' product
purchases based on historical net sales, in each case with a view toward
maximizing future sales while minimizing returns. While the general retail
sector generally has had greater rights with respect to returns of the Company's
products than has the hobby sector, the Company has negotiated the elimination
of return privileges with some larger retailers and continues to pursue similar
arrangements with other retailers. See "--Returns."

Development of In-House Field Sales Force. Historically, the Company relied
on multiple-product brokers to sell its products. In 1996, however, the Company
established an in-house field sales force to market its trading card products
more effectively by providing a higher level of customer service to retail and
hobby dealers. This field sales force markets the Company's products to all of
its customers, including hobby dealers and certain large retailers, as well as
to certain distributors dedicated to particular mass merchandise retailers and,
to a lesser extent, independent distributors. In addition, the Company works
with "Authorized Pinnacle Distributors" to coordinate sales to the hobby channel
and to serve as a source of replenishment for shops in this channel.

Each customer is assigned an individual salesperson whose responsibility is
to educate the customer about the Company products, help to tailor the
retailers' product selection, and share product placement and merchandising
techniques with the customer, all with the goal of increasing the customer's
sell-through of the Company's products. The Company believes its field sales
force will gain important insights into the customer's needs, thereby enabling
the Company to be more responsive and to allocate its products on a basis that
takes into account the customer's past sales history and nature of its consumer
base. In addition, the Company has developed systems to integrate the Company's
scheduling, marketing and sales functions so as to facilitate maximum
information flow of research and sales data to and from the field sales force.
The Company's field sales force engages in program selling, particularly in the
general retail sector, in which it works with a customer to develop a program by
which the customer commits in advance to purchase the Company's products
scheduled for release during the following six months.

The Company's compensation structure for its field sales force is designed
to provide incentives to implement its marketing strategy. While the Company,
like others in the industry, had compensated its multiple-product brokers based
on gross sales with little regard to level of returns, a major component of the
Company's compensation of its field sales force is based on net sales, which
specifically takes into account sell-through and return of products.

Extension of Brand Awareness. To optimize the use of advertising and
promotional expenditures, the Company has chosen to focus its promotional
efforts on recognition of its brands rather than individual products. The
Company has done so through what it believes to be an aggressive, cost-effective
marketing strategy concentrating on public relations and targeted advertising to
maximize brand awareness. For example, the Company markets various brands
through advertising in card collectors' publications, and through the recently
published Pinnacle magazine which is currently being sold at magazine stands
throughout the United States.

To increase its visibility in the sports market, the Company has entered
into multi-year commitments to be the title sponsor of the premiere fan events
for hockey and baseball, which include the Pinnacle All-Star FANtasy, an
interactive fan event held in conjunction with the National Hockey League
All-Star Game, and the Pinnacle All-Star FanFest held in conjunction with the
Major League Baseball All-Star Game. The Company is also the exclusive sports
trading card sponsor of the NFL Quarterback Club's Quarterback Challenge. These
events serve both to increase fan interest in the relevant sport and also to
provide an opportunity to introduce the Company's sports trading cards to a
large number of fans who may not be familiar with the Company's products. In
addition, these events provide significant brand exposure, including national
television and print media coverage, to a sports-

33
<PAGE>
conscious target audience at a substantially lower cost than conventional media
advertising. The Company also obtains significant cost-effective exposure
through its production of products for use by corporate consumers in connection
with promotional activities.

RETURNS

Returns have historically been a concern for the sports trading card
industry. Traditionally, customers were allowed to return products in unlimited
amount and without regard to any time period. The Company has taken a number of
actions to limit product returns, thereby increasing its profitability and the
quality of its earnings and cash flows.

The Company has substantially increased the proportion of its sales to the
hobby channel, which does not have return privileges. The Company has also
negotiated with some large retailers to eliminate return privileges, saving the
retailer, as well as the Company, the time and expense of collecting inventory
for returns. The Company continues to pursue similar arrangements with other
significant retailers. The increase in sales to the hobby channel coupled with
the elimination of return privileges of some retailers has significantly reduced
the risks associated with return levels. In addition, beginning in late 1993 the
Company implemented six initiatives geared toward limiting returns and their
associated costs within the remainder of the retail distribution channel. These
initiatives consist of (i) limiting returns to the period from four months to
twelve months after shipment, (ii) lowering administrative costs by limiting the
number of occasions on which returns may be accepted, (iii) not providing cash
reimbursements, but instead providing a credit that can be used against future
purchases, (iv) allocating its products to the Company's customers on the basis
of the customers' historical net sales, (v) sharing with customers innovative
packaging and merchandising techniques to increase sell-through of the Company's
products and (vi) structuring compensation policies to take into account return
of products. Actions taken by the Company to eliminate or limit a retailer's
return privileges may accelerate returns of products previously sold to that
retailer. As a result of these actions, since 1992 the Company has reduced its
exposure to returns and has tripled the percentage of its sales made on a
non-returnable basis, to more than 50%.

The Company did not assume any product return liability for sports trading
card products previously sold by Donruss/Leaf in connection with the Donruss
License Acquisition. Instead the Company is indemnified by Donruss/Leaf for any
such liability. The Company's return policies have been applied to all sales of
Donruss products made by the Company.

PRODUCT DEVELOPMENT AND PRODUCTION

The Company currently outsources substantially all of its production
processes, other than the design and artwork for its sports trading cards. It
works with a limited number of vendors selected on the basis of their ability to
produce consistent quality products at an efficient price. The Company evaluates
its vendors based on their product quality, their capacity to employ existing
technology developed by the Company or others, and also their willingness to
work with the Company to develop new technologies and/or applications. The
Company's vendors generally perform research and development as part of their
overall relationship with the Company without separate charge.

The elapsed time between initial product design and shipment is typically
six months. During the initial phase of the process, which generally takes
between three and four months, the Company focuses on photography, design,
artwork and technology. Photographs are generally taken by independent
photographers. The Company next converts the photographs into a digital data
base and does both high and low resolution cleanup of the photographs (i.e., to
enhance colors, eliminate blood, stains and shadows). The Company's in-house
staff of artists designs and coordinates the artwork for the sports trading
cards. The Company works with its vendors to produce sample runs to confirm that
the processes employed will produce consistent product quality. Prior to
production, the Company must

34
<PAGE>
obtain licensor approvals of virtually all aspects of the card (i.e., design
features and other elements of presentation). See "--License Agreements and
Trademarks."

Production begins after the product has been designed and has received
necessary licensor approval. The first shipment of product typically occurs six
to eight weeks after production commences. The printing processes, which include
printing, foil stamping and UV coating, are currently performed by third party
vendors. After printing, the trading cards are then packaged, which involves
cutting, collating and wrapping the cards. The finished cards are collated in a
manner designed to avoid duplication of the same card in packages and to
implement the Company's strategy of limiting availability of certain insert and
other cards. Most of the Company's packaging requirements are performed by
Performance Packaging LLC, in which the Company holds a 49% equity interest.

In order to ensure the quality of its sports trading cards, the Company
employs quality assurance personnel who meet with the Company's vendors
regularly and who sample test products at each stage of the production process,
in some cases several times a day. The Company is not dependent on any single
vendor in the production process and in many cases uses multiple vendors to
perform particular tasks.

LICENSE AGREEMENTS AND TRADEMARKS

The Company considers its trademarks, trade names and license agreements to
be of material importance to its business. The Company's principal trademarks
have been registered in the United States, as well as in certain of the foreign
countries where its products are sold. The Company owns the following principal
trademarks: Score, Select, Pinnacle, Donruss, Action Packed, Sportflix, Racer's
Choice and Optigraphics. In addition, the Company has the right to sell sports
trading card products under the name Leaf in the United States and Canada for a
period of five years.

The Company's ability to market its sports trading cards is based on rights
under non-exclusive license agreements with the baseball, hockey and football
players' associations, and with the organizations which represent the respective
leagues and their member teams, and, in the case of NASCAR auto racing, with
NASCAR and with the relevant drivers, owners and sponsors. Each of the players'
association agreements grants the Company the right to produce and sell sports
trading cards depicting virtually every member of such association. Licenses
with individual drivers, owners and sponsors are required to produce and sell
NASCAR auto racing trading cards.

The Company's agreements with the various players' associations enable the
Company to use a player's name, picture, facsimile signature and biographical
description. The Company's agreements with the organizations representing the
various leagues and their member teams enable the Company to use the logos and
trademarks of the various sports, the leagues and the member teams. These
licenses permit the Company to produce and sell trading cards in the United
States and Canada and, for specific licenses, other countries. All of these
licenses are non-exclusive and, accordingly, the various players' associations,
leagues and team representatives are free to grant similar licenses to other
companies. See "--Competition." Generally, these licenses are granted for a two-
to five-year period. Each of the Company's licenses is subject to termination
for cause by the respective licensors and to non-renewal at the expiration of
its term. Each such agreement provides for percentage royalties based on sales
with minimum guaranteed royalty payments. The Company believes that the
royalties received by the various players' associations under their license
agreements with the Company account for a significant portion of their revenues.

35
<PAGE>
The Company holds the following material licenses for team sports:

<TABLE>
<CAPTION>
FIRST ISSUED EXPIRATION DATE
------------ ---------------
<S> <C> <C>
LICENSE
MAJOR LEAGUE BASEBALL
Pinnacle/Major League Baseball Players' Association 1987 12/31/97
Major League Baseball Properties 1987 12/31/94(a)
Donruss/Major League Baseball Players' Association 1981 12/31/97
Major League Baseball Properties 1981 12/31/98

NATIONAL FOOTBALL LEAGUE
Pinnacle/National Football League Players' Association 1988 2/28/99
National Football League Properties 1988 3/31/95(a)
Action Packed/National Football League Players' Association 1990 2/28/99

NATIONAL HOCKEY LEAGUE
Pinnacle/National Hockey League Players' Association 1989 6/30/98
National Hockey League Enterprises 1989 6/30/98
Donruss/National Hockey League Players' Association 6/30/99
National Hockey League Enterprises 6/30/96(b)
</TABLE>

----------------

(a) The Company is operating under a letter of intent with this licensor and
is currently negotiating a definitive three-year licensing agreement.

(b) The Company is in the process of negotiating a new license agreement
with this licensor.

In addition, the Company holds over 100 licenses with National Association
for Stock Car Auto Racing, Inc. ("NASCAR") and with the NASCAR drivers, owners
and sponsors (each, a "NASCAR License"). No single NASCAR License is material to
the Company's business.

Since their expiration, the Company has entered into letters of intent with
respect to the material terms of a new three-year license with each of Major
League Baseball Properties and National Football League Properties, and is in
the process of negotiating definitive license agreements. The Company is
currently negotiating a definitive license agreement with National Hockey League
Enterprises. The Company is continuing to operate under the terms of its expired
licenses and believes that it will be able to enter into new license agreements
in the near future. Since its formation, the Company has never failed to obtain
renewal of any of its team sports licenses and it anticipates that it will be
able to renew its sports trading card licenses on acceptable terms. However,
there can be no assurance that these licenses will not be terminated for cause,
that these licenses will be renewed upon their expiration or that the terms of
future sports trading card licenses will not be materially less favorable to the
Company than those currently in effect. The loss of any baseball, football or
hockey license could have a material adverse effect on the Company's results of
operations and financial condition.

The Company currently does not hold a license with the National Basketball
Association. Although the Company is seeking to obtain such a license, there can
be no assurance that such license will be granted.

Total royalty expense under the Company's sports trading card licenses for
1995 was $26.5 million. See Note 15 to the Consolidated Financial Statements for
a description of minimum guarantee payments required under the Company's
existing sports licenses.

In addition, the Company is party to an equipment sales and technical
assistance agreement with Toppan Printing (America), Inc. and Toppan Printing
Company, Ltd., pursuant to which the Company has the exclusive right to receive
technical assistance involved in producing lenticular products.

36
<PAGE>
COMPETITION

The sports trading card industry is competitive and the Company competes
with several producers of sports trading card products. The principal brands
with which the Company's products compete include Fleer/Sky Box, Topps and Upper
Deck. The Company believes its products compete primarily based upon
collectibility and brand recognition, as well as product features and pricing,
customer service, quality and creativity.

The Company's brands and those of its key competitors account for a
substantial portion of total sports trading card sales. The remaining sales are
made by numerous additional companies that produce and distribute sports trading
cards only in regional or niche markets. Presently, there are four major
licensees for sports trading cards in baseball and hockey, a total of eight
licensees for football and three for basketball. The Company is currently
unaware of any pending new licensees. However, the licensors retain the right to
grant additional licenses.

In addition to the major sports trading card competitors named above, the
Company also competes with numerous smaller distributors of sports trading
cards, with sports memorabilia and collectibles producers and with companies
that market small toys, comic books and other similar products. Certain of the
Company's competitors are significantly larger and have greater resources than
the Company. See "Risk Factors--Competition."

SEASONALITY

The Company's sports trading card products are sold throughout the year,
although sales of baseball and football cards occur during a 10-month period and
sales of hockey and NASCAR auto racing cards occur during an eight-month period,
in each case beginning one to two months prior to the start of the respective
sports season. Given its current licenses, the Company expects that
approximately 20% of the Company's sales will occur in each of the first and
second quarters and 30% will occur in each of the third and fourth quarters. A
substantial portion of the Company's selling, general and administrative
expenses do not vary based on sales. As a result, substantially all of the
Company's operating income has been generated in the second half of the year.
For example, in 1995 the Company recognized 68% of its annual sales, 69% of its
annual gross profit and 91% of its operating income during its third and fourth
fiscal quarters. The Company expects that these seasonal variations will
continue, although in differing degrees from year to year.

EMPLOYEES

The Company employs approximately 200 full-time personnel, including six in
Norwalk, Connecticut, three in Charlotte, North Carolina, and the remainder,
other than the in-house field sales force, are located in Grand Prairie, Texas.
The members of the field sales force are based in the territories they cover.
None of the Company's employees are covered by collective bargaining agreements.
The Company considers its employee relations to be good.

PROPERTIES

The Company currently leases its 50,000 square foot headquarters facility
and a 90,000 square foot warehouse and manufacturing facility, both located in
Grand Prairie, Texas. At the expiration of the term of the headquarters' lease
in October 1996, the Company intends to move its corporate headquarters to an
approximately 50,000 square foot facility located in Dallas, Texas. The new
lease will be for a seven-year term.

The Company also leases the office facilities located in Norwalk,
Connecticut and Charlotte, North Carolina. These leases are for approximately
4,500 and 1,000 square feet, respectively, and expire in April 1998 and August
1996, respectively.

37
<PAGE>
The Company believes that its facilities are in good repair and adequate for
its needs for the foreseeable future.

ENVIRONMENT

The Company believes that it is in compliance in all material respects with
existing federal, state and local regulations relating to the protection of the
environment. Such environmental regulations have not had a material impact on
the Company's capital expenditures, earnings or competitive position.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation incidental to its
business, including an action by Dream Team Collectibles, Inc., a St.
Louis-based retailer, with respect to the Company's use of the "Dream Team"
name. This action is in the discovery phase. In the opinion of the Company, no
such litigation has had or is likely to have a material adverse effect on the
Company's results of operations, financial condition or liquidity.

38
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Jerry M. Meyer............................ 55 Chief Executive Officer and Director
Executive Vice President, Chief Operating
Michael J. Cleary......................... 37 Officer and Director
Chief Financial Officer, Senior Vice
John S. Worth ............................ 47 President and Secretary
James Brochhausen......................... 37 Senior Vice President--Sales
Bradford E. Bernstein..................... 29 Director
Daniel L. Doctoroff....................... 38 Director
Douglas D. Wheat.......................... 45 Director
</TABLE>

Jerry M. Meyer has served as Chief Executive Officer of the Company and a
director of the Company since its formation in 1991. Prior to that, he was a
partner in Grauer & Wheat Investments, a merchant banking firm associated with
Acadia Partners, L.P. that participated in the 1991 acquisition of Optigraphics,
Inc. Prior to that, Mr. Meyer held management positions with Coleman Company,
Inc., Pullman, Inc., Garlock, Inc. and Colt Industries. Mr. Meyer is also
director of City National Bank and Specialty Food Corporation; he also serves as
President of Century Capital, a real estate and financial holding company.

Michael J. Cleary has served as Executive Vice President and Chief Operating
Officer of the Company since October 1995, and has served in various management
positions with the Company since November 1991. Prior to that, he served as
Chief Financial Officer of Coleman Company's Water Sports Holding Company from
May 1990. Mr. Cleary has served as a director of the Company since December
1995.

John S. Worth has served as Chief Financial Officer, Senior Vice President,
and Secretary of the Company since 1994. Prior to that, he was a senior partner
in the Arthur Andersen Worldwide Organization from 1986 to 1994. During that
period, Mr. Worth served, in 1989, as Chief Financial Officer of Arthur
Andersen's newly formed International Accounting, Audit and Tax Business Unit
and, after relocation to the firm's Dallas office, as a Regional Director of
Arthur Andersen's Litigation, Bankruptcy and Corporate Finance Practice from
1990 to 1994.

James Brochhausen has served as Senior Vice President-Sales of the Company
since July 1996; from 1993 to June 1996 he served as Vice President Sales of
Pinnacle Trading Card Company; prior to that he served as Vice President of
Sales for Major League Marketing, Inc. from 1992 to 1993, as North Central
Business Director at Nestle Food Company from 1991 to 1992, as Northeast
Confection Zone Manager from 1990 to 1991 and several other management positions
within Nestle since 1992.

Bradford E. Bernstein has served as a Vice President and an Associate of Oak
Hill Partners, Inc. (Acadia's investment advisor) since 1992. From 1991 until
1992, Mr. Bernstein worked at Patricof & Co. Ventures. Prior to that, from 1989
to 1991, he worked at Merrill Lynch & Co. Mr. Bernstein has served as a director
of the Company since December 1995. Mr. Bernstein serves as a director of
CapStar Hotels Inc. and Payroll Transfers, Inc.

Daniel L. Doctoroff has served as Managing Director of Oak Hill Partners,
Inc. and its predecessor since August 1987; Vice President and Director of
Acadia Partners MGP, Inc. since March 1992; Vice President of Keystone, Inc.
since March 1992; and a Managing Partner of Insurance Partners Advisors, L.P.
since February 1994. All of such entities are affiliates of Acadia Partners,
L.P. Mr Doctoroff has served as a director of the Company since 1995. Mr.
Doctoroff is also a director of Bell &

39
<PAGE>
Howell Holdings Company, CapStar Hotels Inc., National Re Corp., Payroll
Transfers, Inc., Transport Holdings, Inc., Kemper Corporation and Specialty
Foods Corporation.

Douglas D. Wheat has served as President of Haas Wheat & Partners,
Incorporated, a private investment firm, since January 1995. Prior to that, Mr.
Wheat was President of Haas Wheat & Partners from November 1992, Co-Chairman of
Grauer & Wheat, Inc., a private investment firm from April 1989 to October 1992
and Senior Vice President of Donaldson, Lufkin & Jenrette Securities Corporation
from January 1985 to March 1989. Mr. Wheat has served as a director of the
Company since 1991. Mr. Wheat is also a director of Specialty Foods Corporation
and Playtex Products, Inc.

BOARD OF DIRECTORS; COMMITTEES

The Board of Directors currently consists of five directors. Prior to the
consummation of the Offering, the Company intends to appoint three additional
directors, none of whom are officers or employees of the Company. All directors
are elected by the stockholders of the Company for a one-year term and hold
office until the next annual meeting of stockholders or until their successors
are elected and qualify.

The Board of Directors has established an Audit Committee comprising Messrs.
, and . The Audit Committee is responsible for recommending to
the Board of Directors the engagement of independent auditors of the Company and
reviewing with the independent auditors the scope and results of the audits, the
internal accounting controls of the Company, audit practices and the
professional services furnished by the independent auditors.

The Board of Directors has also established a Compensation Committee
comprising Messrs. , and . The Compensation Committee is
responsible for reviewing and approving all compensation arrangements for
officers of the Company and will be responsible for administering the 1992
Option Plan, the 1996 Option Plan and the Bonus Plan (each as defined below).
Prior to the Offering, the Company did not have a Compensation Committee.

DIRECTOR COMPENSATION

Any director who is not an employee of the Company will be paid an annual
fee of $ per annum. In addition, each such director will be paid
$ for attendance at each meeting of the Board and $ for attendance at
each meeting of a committee of the Board of which such director is a member.
Directors who are employees of the Company will not receive any fees for their
service on the Board or a committee thereof. In addition, the Company will
reimburse directors for their out-of-pocket expenses in connection with their
service on the Board.

EXECUTIVE COMPENSATION

The following table sets forth certain compensation awarded to, earned by or
paid to the Chief Executive Officer and the three most highly paid executive
officers other than the Chief Executive Officer, who served as executive
officers of the Company as of December 31, 1995 for services rendered in all
capacities to the Company during 1995.

40
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
1995 ANNUAL COMPENSATION
----------------------------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Jerry M. Meyer............................. $430,106 $108,654(a) $127,422(b) $3,150(c)
Chief Executive Officer
Michael J. Cleary.......................... 250,288 104,808(a) -- 2,704(c)
Executive Vice President and Chief
Operating Officer(d)
John S. Worth.............................. 244,231 104,808(a) -- 2,906(c)
Chief Financial Officer, Senior Vice
President and Secretary(d)
James Brochhausen.......................... 175,000 78,365(a) -- 1,925(c)
Senior Vice President--Sales(d)
</TABLE>

- ------------
(a) Bonus represents amount paid in fiscal year for services rendered in the
prior fiscal year.

(b) Includes amounts paid for housing and auto allowances. Does not include
$1,300,000 paid to Mr. Meyer in 1996 in respect of a relocation loss.

(d) While this individual received perquisites or other personal benefits in the
year shown, in accordance with applicable regulations, the value of these
benefits is not indicated since they did not exceed in the aggregate the
lesser of $50,000 or 10% of the individual's salary and bonus of such year.

EMPLOYMENT AGREEMENTS

The Company has entered into a three-year Employment Agreement (the
"Agreement") with Jerry M. Meyer, its Chairman of the Board and Chief Executive
Officer, which will become effective upon consummation of the Offering. The
Agreement provides for an annual base salary of $600,000, which may be increased
by the Board in its sole discretion. Under the terms of the Agreement, Mr. Meyer
participates in the bonus plan described below under which he may receive awards
of up to 130% of his base salary. If Mr. Meyer's employment is terminated by the
Company without cause, he will be entitled to receive an amount equal to three
times the sum of his then base salary plus $100,000. The Agreement also provides
that Mr. Meyer may not compete with the Company during the term of the Agreement
and for one year thereafter and is entitled to customary executive benefits,
including health insurance, participation in the Company's employee benefit
plans and an automobile allowance. Acadia has granted Mr. Meyer an option (the
"Acadia Option") to purchase shares of Common Stock at an exercise price
of $ per share, on substantially the same terms as the options granted under
the Company's 1992 Option Plan. See "--1992 Stock Option Plan." In addition, Mr.
Meyer has the right (the "Put Right") to require the Company to purchase, on
November 30, 1998, all of the shares of Common Stock and options to purchase
shares of Common Stock owned by Mr. Meyer or members of his immediate family at
the time of consummation of the Offering for a purchase price of $3.0 million,
less any amounts previously realized with respect to those shares and options.
In the event the Company fails to purchase Mr. Meyer's securities upon exercise
of the Put Right, Acadia Partners, L.P. is obligated to purchase, or cause the
Company to purchase, those securities at the same price.

The Company has entered into two-year Employment Agreements with each of
Michael Cleary, John Worth and James Brochhausen, which will become effective
upon consummation of the Offering. Mr. Cleary's annual base compensation will be
$300,000, Mr. Worth's will be $275,000 and Mr. Brochhausen's will be $225,000,
in each case subject to increase by the Board in its sole discretion. Each of
these individuals participates in the bonus plan described below and may receive
the bonus awards described below. The Employment Agreements contain other
provisions similar to Mr. Meyer's (other than the Acadia Option and the Put
Right) and other provisions customary in executive employment agreements.

41
<PAGE>
BONUS PLAN

The Company has established a bonus plan in which its executive officers and
certain other employees may participate. Receipt of compensation under it will
be performance-based and will be weighted based on a combination of net income,
net cash flow, EBITDA (earnings before interest, taxes, depreciation and
amortization) and qualitative targets. Achievement of targets will be weighted
35% to the net income test, 30% to the net cash flow test, 15% to the EBITDA
test and 20% to the qualitative test. If the Company achieves 100% of these
targets, the participants in the bonus plan will receive a bonus ranging from
20% to 40% of his base compensation (depending on position), except that Mr.
Meyer's bonus will be 65% of base compensation, Mr. Cleary's bonus will be 55%
of base compensation, and Mr. Brochhausen's and Mr. Worth's bonuses will be 50%
of base compensation. If the Company meets 110% of its goals the foregoing
awards will be increased by 50% (i.e., if a participant was entitled to receive
40% of his base compensation, he would receive 60%). If the Company meets 120%
of its goals participants will be entitled to receive twice the base bonus
described above (i.e., 80% of base compensation, adjusted in the case of the
specified individuals).

1992 STOCK OPTION PLAN

In 1992, the Company's Board of Directors adopted, and the Company's
stockholders approved, the 1992 Stock Option Plan (the "1992 Option Plan"). The
1992 Option Plan was designed to provide employees with a more direct stake in
the Company's future welfare and an incentive to remain with the Company and to
encourage qualified persons to seek employment with the Company. Options to
purchase shares of Common Stock at an exercise price of $ per share
will be granted in August 1996 under the 1992 Plan. Upon consummation of the
Offering, all of these options will be fully vested. No additional options will
be granted under the 1992 Plan.

The 1992 Option Plan provides for grants of "incentive stock options"
("ISOs") meeting the requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and "non-qualified stock options" ("NQSOs"). All
options granted under the 1992 Plan are NQSOs.

The 1992 Option Plan is administered by a stock option committee of the
Board of Directors (the "Committee") comprised of three members, each of whom
will be a "disinterested director" within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), at any time
when Section 16 of the Exchange Act is applicable to the Company. The 1992
Option Plan permits the Committee to determine which employees shall receive
options and the times when options are to be granted. The Committee will also
determine the purchase price of Common Stock covered by each option, the term of
each option and the number of shares of Common Stock to be covered by each
option. The Committee will also designate whether the options shall be ISOs or
NQSOs.

Options granted to employees under the 1992 Option Plan have a maximum term
of ten years from the date of grant. Options are not transferable except by will
or pursuant to the applicable laws of descent and distribution.

The Company has agreed to register under the Securities Act of 1933 the
shares of Common Stock issuable upon exercise of stock options granted under the
1992 Option Plan (and, in the case of Mr. Meyer, the Acadia Option). 25% of the
shares issuable under the stock options granted to each holder will be
registered on the first anniversary of the consummation of the Offering, with an
additional 25% registered on each of the three succeeding anniversaries of the
Offering. However, if an option holder's employment is terminated by the Company
without cause, all of the shares of Common Stock issuable upon exercise of the
stock options granted to that employee will be registered.

In the event that an employee is terminated for any reason, the employee's
options will be exercisable until the expiration date of the option. Upon a Sale
of the Company (as defined in the 1992 Option Plan) the Committee may accelerate
the expiration date of such options.

The Board is permitted to suspend, terminate, modify or amend the 1992
Option Plan, provided that any amendment that would (i) increase the maximum
number of shares for which options may be granted, (ii) reduce the option price
below par value, (iii) extend the period during which options may

42
<PAGE>
be granted or exercised or (iv) amend the requirements as to the class of
employees eligible to receive options shall be subject to stockholder approval.

1996 INCENTIVE STOCK OPTION PLAN

The Company's Board of Directors and stockholders have approved the 1996
Incentive Stock Option Plan (the "1996 Option Plan"). The description in this
Prospectus of the principal terms of the 1996 Option Plan is a summary, does not
purport to be complete, and is qualified in its entirety by the full text of the
1996 Option Plan, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

Pursuant to the 1996 Option Plan, executive officers and key employees of
the Company are eligible to receive awards of stock options. Options granted
under the 1996 Option Plan may be ISOs or NQSOs.

Under the 1996 Option Plan, the Company has reserved shares of Common
Stock for issuance of awards under the 1996 Option Plan (subject to antidilution
and similar adjustments).

The 1996 Option Plan will be administered by the Compensation Committee (the
"Committee"). Subject to the provisions of the 1996 Option Plan, the Committee
will determine the type of award, when and to whom awards will be granted, the
number of shares covered by each award and the terms, provisions and kind of
consideration payable (if any), with respect to awards. The Committee may
interpret the 1996 Option Plan and may at any time adopt such rules and
regulations for the 1996 Option Plan as it deems advisable. The Committee may,
additionally, cancel or suspend awards.

In determining the persons to whom awards shall be granted and the number of
shares covered by each award the Committee shall take into account the duties of
the respective persons, their present and potential contribution to the success
of the Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the 1996 Option Plan.

An option may be granted on such terms and conditions as the Committee may
approve, and generally may be exercised for a period of up to 10 years from the
date of grant. Generally, ISOs will be granted with an exercise price equal to
the "Fair Market Value" (as defined in the 1996 Option Plan) on the date of
grant. In the case of ISOs, certain limitations will apply with respect to the
aggregate value of option shares which can become exercisable for the first time
during any one calendar year, and certain additional limitations will apply to
ISOs granted to "Ten Percent Stockholders" (as defined in the 1996 Option Plan).
The Committee may provide for the payment of the option price in cash, by
delivery of other Common Stock having a Fair Market Value equal to such option
price, by a combination thereof or by such other manner as the Committee shall
determine, including a cashless exercise procedure through a broker-dealer. The
Committee may, in its discretion, make a loan to a grantee in an amount
sufficient to pay the option price payable by such grantee. Options granted
under the 1996 Option Plan will become exercisable at such times and under such
conditions as the Committee shall determine, subject to acceleration of the
exercisability of options in the event of, among other things, a "Change in
Control" (as defined in the 1996 Option Plan). Generally, stock options may not
be exercised unless the grantee is employed by the Company.

The Board may at any time and from time to time suspend, amend, modify or
terminate the 1996 Option Plan; provided, however, that, to the extent required
by Rule 16b-3 promulgated under the Exchange Act or any other law, regulation or
stock exchange rule, no such change shall be effective without the requisite
approval of the Company's stockholders. In addition, no such change may
adversely affect any award previously granted, except with the written consent
of the grantee.

No awards may be granted under the 1996 Option Plan after the tenth
anniversary of the approval of the 1996 Option Plan.

401(K) PLAN

The Company has a 401(k) defined contribution plan under which employees may
contribute up to 15% of eligible gross wages subject to certain IRS limitations.
The Company, at its option, may match a portion of each eligible employee's
contribution. Contributions are made at the discretion of the Board

43
<PAGE>
of Directors. Employer contributions vest 20% after the first year, 60% after
the second year and 100% after the third year. The Company incurred expenses of
$68,000 and $80,000 related to this plan for the years ended December 31, 1995
and 1994, respectively. Following consummation of the Offering, the Company
intends to contribute shares of Common Stock to this plan.

The Company does not provide any post-retirement or post-employment health
or welfare benefits to any of its employees, except as required by law.

44
<PAGE>
CERTAIN TRANSACTIONS

SUBORDINATED NOTES AND REDEEMABLE PREFERRED STOCK

Since 1991, the Company has borrowed funds for its operation from Acadia
pursuant to the Subordinated Notes. On June 30, 1996, $101.3 million was
outstanding. The Subordinated Notes bear interest at a rate of 12% per annum,
payable through the issuance of additional Subordinated Notes, and mature on
December 31, 2001. A portion of the proceeds of this Offering will be used to
pay down principal and accrued interest on the Subordinated Notes. See "Use of
Proceeds." In addition, in 1993 Acadia was issued 4,025 shares of Redeemable
Preferred Stock in partial consideration for funding and consent to the
acquisition of MLM. The Subordinated Notes not repaid with the proceeds of this
Offering, together with the shares of Redeemable Preferred Stock owned by
Acadia, will be converted into shares of Common Stock. See "The
Company--Recapitalization."

CONSULTING AGREEMENTS

Pursuant to a Consulting Agreement dated as of October 1, 1991 between the
Company and Penobscot-MB Partners, a New York general partnership ("Penobscot")
(as amended on November 1, 1992 the "Penobscot Consulting Agreement"), the
Company paid fees to Penobscot equal to $250,000 per year in 1994, 1995 and 1996
for management services performed for the Company by Penobscot. Penobscot, a
Delaware limited partnership, is an affiliate of Acadia. The Penobscot
Consulting Agreement is to terminate on July 30, 1996 and the Company has no
further obligations thereunder.

Pursuant to a Consulting Agreement dated as of November 1, 1992 between the
Company and Haas, Wheat & Partners Incorporated, a Delaware corporation ("Haas
Wheat") (as amended on July 30, 1993, the "Haas Wheat Consulting Agreement"),
the Company paid fees to Haas Wheat equal to $250,000 per year in 1994, 1995 and
1996 for management services performed for the Company by Haas Wheat. Douglas D.
Wheat, a director of the Company, is a managing partner of Haas Wheat. The Haas
Wheat Consulting Agreement is to terminate on July 30, 1996 and the Company has
no further obligations thereunder.

MLM SETTLEMENT

On July 30, 1993, the Company acquired, in exchange for issuance of shares
of its Class B Common Stock and Senior Preferred Stock, all the issued and
outstanding capital stock of MLM (the "1993 MLM Acquisition"). Simultaneously
with the issuance of shares to the former MLM stockholders, 4,025 shares of
Redeemable Preferred Stock was issued to Acadia in partial consideration for
additional funding and consent to the 1993 MLM Acquisition. Assets acquired
(including cash of $68,000) and liabilities assumed were $13,164,000 and
$8,557,000, respectively, which resulted in an assigned value of $4,607,000 for
the Class B common stock and Senior Preferred Stock issued to the former MLM
stockholders. Pursuant to consulting agreements entered into in connection with
the 1993 MLM Acquisition, the Company paid the former MLM stockholders an
aggregate of $3.0 million.

After the 1993 MLM Acquisition was consummated, the Company and the former
MLM stockholders disagreed as to the proper interpretation of a provision in the
agreement to effect the 1993 MLM Acquisition (the "1993 Agreement") concerning
the treatment of certain pre-acquisition liabilities owed to MLM to the Company.
To resolve the parties' differing understandings as to the effects of the 1993
Agreement, in September 1995, all of the parties agreed to a settlement (the
"1995 MLM Settlement") through which the 1993 MLM Acquisition was reformed.
Under the 1995 MLM Settlement, the former MLM stockholders returned to Pinnacle
for cancellation all of the preferred and common shares of Pinnacle stock
originally issued to them as consideration in the 1993 MLM Acquisition and the
parties exchanged releases.

45
<PAGE>
REGISTRATION RIGHTS

Following this Offering, Acadia will be entitled to require the Company to
register all or part of Acadia's shares of Common Stock (the "Acadia Shares")
under the Securities Act in accordance with an agreement with the Company
providing for demand, shelf and piggyback registration rights. Certain
stockholders have been granted "piggyback" registration rights.

46
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth the beneficial ownership of the Common Stock
to be sold pursuant to the Offering with respect to (i) each person known by the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii) the
Selling Stockholder, (iii) each director of the Company, (iv) each of the
executive officers named in the Summary Compensation Table, and (v) all
directors and executive officers of the Company as a group. The table assumes
that the Underwriters' over-allotment option is not exercised and is based on an
assumed initial offering price of $15 per share, the midpoint of the initial
public offering price range.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING OWNED AFTER OFFERING
NAME AND ADDRESSES --------------------- SHARES BEING ---------------------
OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Acadia Partners, L.P.
201 Main Street
Fort Worth, Texas 76102...... -- (a) -- % -- (a) -- %
Bradford E. Bernstein.......... -- -- -- --
Daniel L. Doctoroff............ -- (b) -- -- (b) --
Douglas D. Wheat............... -- (c) * -- (c) *
Jerry M. Meyer................. -- (d) -- -- (d) --
Michael J. Cleary.............. -- (d) -- -- (d) --
John S. Worth.................. -- (d) -- -- (d) --
James Brochhausen.............. -- (d) -- -- (d) --
All directors and executives as
a group (7 persons)..........
</TABLE>

--------------------

<TABLE>
<C> <S>
* Less than 1%.

(a) The general partner of Acadia Partners, L.P. is Acadia FW Partners, L.P. ("Acadia
FW"), the managing general partner of which is Acadia MGP, Inc. ("Acadia MGP"), a
corporation controlled by J. Taylor Crandall. As such, Acadia FW, Acadia MGP and Mr.
Crandall may be deemed to beneficially own the shares of the Common Stock held by
Acadia. Excludes shares of Common Stock held by Rosecliff-Score 1991 Partners,
L.P. ("Rosecliff-Score") and shares of Common Stock held by FWHY-Coinvestments IV
Partners, L.P. ("FWHY-IV"). The general partner of Rosecliff-Score is Steven B.
Gruber, who is also an officer and director of Acadia MGP. The general partner of
FWHY-IV is Bondo FTW, Inc. ("Bondo FTW"), a corporation controlled by David
Bonderman. Bondo FTW is the general partner of FW-HY Partners, L.P., one of two
non-managing general partners of Acadia FW. Acadia disclaims beneficial ownership of
the shares of Common Stock held by Rosecliff-Score and FWHY-IV. The address of
Acadia FW, Acadia MGP, FWHY-IV and Mr. Crandall is 201 Main Street, Suite 3100, Fort
Worth, Texas 76102, The address of Bondo FTW, FW-HY Partners, L.P. and Mr. Bonderman
is 201 Main Street, Suite 2420, Fort Worth, Texas 76102. The address of
Rosecliff-Score and Mr. Gruber is 65 East 55th Street, New York, New York
10022-3219.

(b) Mr. Doctoroff is a director of Acadia MGP (see footnote (a) above). Mr. Doctoroff
disclaims beneficial ownership of the shares of Common Stock held by Acadia.

(d) Represents options to purchase shares of Common Stock at $ per share.
</TABLE>

47
<PAGE>
DESCRIPTION OF CAPITAL STOCK

At June 30, 1996, the outstanding capital stock of the Company consisted of
(i) 20,739.10589 shares of Class A Common Stock and (ii) 4,025 shares of
Redeemable Preferred Stock, par value $.01 per share, without giving effect to
the recapitalization. See "Capitalization." Simultaneously with the closing of
this Offering, all of the outstanding shares of Redeemable Preferred Stock will
be converted into shares of Common Stock. Upon completion of the Offering and
after giving effect to the recapitalization, the authorized capital stock will
consist of (i) 20,000,000 shares of Common Stock (of which will be
outstanding) and (ii) 2,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock") (none of which will be outstanding). See "The
Company-- Recapitalization."

The following summary description relating to the capital stock does not
purport to be complete. Reference is made to the Certificate of Incorporation
that will be in effect upon the completion of the Offering which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part for a
detailed description of the provisions thereof summarized below.

COMMON STOCK

Holders of Common Stock are entitled to receive such dividends as may from
time to time be declared by the Board of Directors of the Company out of funds
legally available therefor. Holders of Common Stock are entitled to one vote per
share on all matters on which the holders of Common Stock are entitled to vote
and do not have any cumulative voting rights. Holders of Common Stock have no
preemptive, conversion, redemption or sinking fund rights. In the event of a
liquidation, dissolution or winding-up of the Company, holders of Common Stock
are entitled to share equally and ratably in the assets of the Company, if any,
remaining after the payment of all debts and liabilities of the Company and the
liquidation preference of any outstanding Preferred Stock. The outstanding
shares of Common Stock are, and the shares of Common Stock offered hereby when
issued will be, fully paid and nonassessable. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of the Preferred Stock or any class or
series of preferred stock which the Company may issue in the future.

At present, there is no established trading market for the Common Stock. The
Company intends to apply for listing of its Common Stock on the New York Stock
Exchange under the symbol .

PREFERRED STOCK

The Company is authorized to issue up to 2,000,000 shares of Preferred
Stock. There is no Preferred Stock outstanding as of the date of this
Prospectus. The Board of Directors of the Company may, without further
stockholder action, issue the authorized and unissued shares of Preferred Stock
in any number of series and may establish as to each series the designation and
number of shares to be issued and the relative rights and preferences of the
shares of each series, including provisions regarding voting powers, redemption,
dividend rights, rights upon liquidation and conversion rights. The issuance of
Preferred Stock by the Board of Directors could adversely affect the rights of
holders of shares of Common Stock by, among other matters, establishing
preferential dividends, liquidation rights and voting power. Although the
Company has no present intention to do so, Preferred Stock could be issued to
discourage or defeat efforts to acquire control of the Company through the
acquisition of shares of Common Stock.

DELAWARE LAW

Section 203 of the Delaware General Corporation Law (the "DGCL") prohibits
certain business combinations with certain stockholders for a period of three
years after they acquire 15% of the outstanding voting stock of a corporation.
The Company has expressly elected not to be governed by Section 203 of the DGCL.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is .

48
<PAGE>
DESCRIPTION OF INDEBTEDNESS

CREDIT AGREEMENT

Set forth below is a summary description of the terms of the Credit
Agreement. The following summary does not purport to be complete and is
qualified in its entirety by reference to the Credit Agreement, including the
definitions of certain terms therein, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Whenever particular provisions of the Credit Agreement are referred to herein,
such provisions are incorporated herein by reference, and the statements are
qualified in their entirety by such reference.

A syndicate of banks and other financial institutions have provided Pinnacle
Trading Card Company, Pinnacle's principal operating subsidiary ("Pinnacle
Trading"), with loans under the Credit Agreement in an aggregate principal
amount not to exceed $103.0 million of which (i) $88.0 million is in the form of
term loans and (ii) up to $15.0 million (including a sub-limit of $3.0 million
for letters of credit), depending upon the available Borrowing Base (as defined
therein), will be available on a revolving credit basis for general corporate
purposes of Pinnacle Trading, including certain acquisitions (up to $10.0
million).

The loans consist of (a) senior secured term loan facilities consisting of
(i) a senior secured five-year term loan facility providing for term loans in
the amount of $40.0 million (the "Term Loan A") and (ii) a senior secured
six-year term loan facility providing for term loans in the amount of $48.0
million (the "Term Loan B" and together with the Term Loan A, the "Term Loans")
and (b) a senior secured five-year revolving credit facility (which may, subject
to certain terms and conditions, be extended to a six-year revolving credit
facility) providing for revolving loans and the issuance of letters of credit in
the aggregate principal amount of $15.0 million (the "Revolving Credit
Facility"). Subject to the terms of the Revolving Credit Facility, Pinnacle
Trading may, from time to time, borrow, repay and reborrow under such facility.
Amounts borrowed under the Revolving Credit Facility are not subject to
scheduled repayment prior to the Revolving Credit Commitment Termination Date
(as defined in the Credit Agreement); however, Pinnacle Trading is required to
reduce the outstanding payment balance of the Revolving Credit Facility to $4.0
million if Pinnacle Trading has not consummated any Related Business Acquisition
(as defined in the Credit Agreement) or to $4.0 million plus the aggregate
principal amount of revolving loans outstanding (but not to exceed $6.0 million)
the proceeds of which were used to fund such acquisition if Pinnacle Trading has
consummated any such acquisition for a consecutive 30-day period during the
150-day period beginning April 1, 1997 and during the second quarter of each
fiscal year beginning in 1998.

The Term Loans will have quarterly amortization payments commencing
September 30, 1996 and continuing over their respective terms. See Note 17 to
the Consolidated Financial Statements. Under the Credit Agreement, Pinnacle will
under certain circumstances be required to make mandatory prepayments (including
in connection with this Offering) and be subject to corresponding commitment
reductions and may make optional prepayments and commitment reductions.

Obligations of Pinnacle under the Credit Agreement are jointly and severally
guaranteed by Pinnacle and its other subsidiaries. In addition, the Credit
Agreement is secured by (i) first priority security interests in virtually all
tangible and intangible assets of Pinnacle Trading, Pinnacle and its other
subsidiaries, and (ii) pledges of all capital stock of Pinnacle Trading and
Pinnacle's other subsidiaries, and all capital stock and all notes owned by
Pinnacle Trading, Pinnacle and its other subsidiaries.

Each of the Term Loans and advances under the Revolving Credit Facility bear
interest at specified margins over the applicable eurodollar rate or base rate.

49
<PAGE>
The Credit Agreement contains a number of covenants that, among other
things, restrict the ability of the Company to dispose of assets, incur
additional indebtedness, incur guarantee obligations, repay other indebtedness
or amend other debt instruments, pay dividends, create liens on assets, enter
into leases, form or acquire subsidiaries, make investments, make acquisitions,
engage in mergers or consolidations, make capital expenditures, modify certain
documents or engage in certain transactions with subsidiaries and affiliates and
otherwise restrict corporate activities. In addition, the Credit Agreement
requires compliance with certain financial tests based on consolidated results
for Pinnacle and its subsidiaries.

Under the terms of the Credit Agreement, the Company was required to seek,
and has obtained, a waiver from the banks party thereto regarding the repayment
of certain subordinated indebtedness concurrently with this Offering. See "Use
of Proceeds."

50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering, the Company will have outstanding
shares of Common Stock. Of these shares, the 4,000,000 shares of Common
Stock sold in the Offering (or a maximum of 4,600,000 shares if the
over-allotment option is exercised in full) will be freely tradeable without
restriction under the Securities Act, unless purchased by "affiliates" of the
Company (as that term is defined in Rule 144). The remaining shares of Common
Stock outstanding upon completion of the Offering will be "restricted
securities" as that term is defined in Rule 144 ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144 under the Securities
Act, which is summarized below.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares of
Common Stock that constitute restricted securities and have been outstanding and
not held by any "affiliate" of the Company for a period of two years may sell,
within any three-month period, a number of shares that does not exceed the
greater of one percent of the then outstanding shares of Common Stock or the
average weekly reported trading volume of the Common Stock during the four
calendar weeks preceding the date on which notice of such sale is given,
provided certain requirements as to the manner of sale, notice of sale and the
availability of current public information are satisfied (which requirements as
to the availability of current public information are expected to be satisfied
commencing 90 days after the date of this Prospectus). Affiliates of the Company
must comply with the foregoing restrictions and requirements of Rule 144 as to
both restricted and non-restricted securities, except that the two-year holding
period requirement does not apply to shares of Common Stock that are not
"restricted securities" (such as shares acquired by affiliates in the Offering).
Under Rule 144(k), a person who is not deemed an "affiliate" of the Company at
any time during the three months preceding a sale by such person, and who has
beneficially owned shares of Common Stock that were not acquired from the
Company or an "affiliate" of the Company within the previous three years, would
be entitled to sell such shares without regard to volume limitation, manner of
sale provisions, notification requirements or the availability of current public
information concerning the Company. As defined in Rule 144, an "affiliate" of an
issuer is a person that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such issuer.

The Company, the directors, officers, affiliates and current stockholders of
the Company have entered into contractual "lock-up" agreements providing that
they will not offer, sell, contract to sell or otherwise dispose of the shares
of Common Stock, except for the shares offered hereby and subject to certain
exceptions in the case of the Company relating to employee stock options and the
recapitalization of the Company, or securities convertible into or exchangeable
or exercisable for Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Merrill Lynch. In addition,
certain individuals purchasing reserved shares may be required to agree not to
sell, offer or otherwise dispose of any shares of Common Stock for a period of
three months after the date of this Prospectus. Acadia and certain of the
Company's stockholders have the right to require registration of their shares
for public sale. See "Certain Transactions --Registration Rights." The remainder
of the shares held by existing stockholders will become eligible for sale at
various times thereafter, subject to the provisions of Rule 144.

Prior to the Offering, there has been no public market for the Common Stock.
No predictions can be made as to the effect, if any, that future sales of shares
of Common Stock, and options to acquire shares of Common Stock, or the
availability of shares for future sale, will have on the market price prevailing
from time to time. Sales of substantial amounts of Common Stock in the public
market, or the perception that such sales may occur, could have a material
adverse effect on the market price of the Common Stock.

51
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company and the Selling Stockholder have agreed to
sell to each of the Underwriters named below, and each of the Underwriters, for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and are acting
as representatives (the "Representatives"), has severally agreed to purchase,
the respective number of shares of Common Stock set forth opposite its name
below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................................

---------
Total................................................................. 4,000,000
---------
---------
</TABLE>

In the Purchase Agreement, the several Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the shares of Common
Stock hereby if any of such shares are purchased. In the event of a default by
an Underwriter, the Purchase Agreement provides that, in certain circumstances,
such commitments of the non-defaulting Underwriters may be increased or the
Purchase Agreement may be terminated.

The Representatives of the Underwriters have advised the Company and the
Selling Stockholder that they propose initially to offer the shares of Common
Stock offered hereby to the public at the public offering price per share set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a discount not in excess of $ per share on
sales to certain other dealers. After the initial public offering, the offering
price, discount and reallowance may be changed.

The Selling Stockholder has granted the Underwriters an option, which may be
exercised within 30 days of the date of this Prospectus, to purchase up to an
additional 600,000 shares of Common Stock to cover over-allotments, if any, at
the initial public offering price, less the underwriting discount. To the extent
that the Underwriters exercise the option, each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage of such shares that the number of shares of Common Stock to be
purchased by it shown on the foregoing table bears to the total number of shares
initially offered hereby.

At the request of the Company, the Underwriters have reserved up to
approximately 3.5% of the shares of the Common Stock offered hereby for sale at
the public offering price to certain directors, officers and employees of the
Company, business affiliates and related persons who have expressed an interest
in purchasing shares. The number of shares available to the general public will
be reduced to the extent persons purchase such reserved shares. Any reserved
shares not so purchased will be offered by the Underwriters to the general
public on the same terms as other shares offered by this Prospectus. Certain
individuals purchasing reserved shares may be required to agree not to sell,
offer or otherwise dispose of any shares of Common Stock for a period of three
months after the date of this Prospectus.

52
<PAGE>
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.

The Representatives have informed the Company that the Underwriters do not
intend to make sales to discretionary accounts.

The Company, its officers and directors, and the Company's current
stockholders have agreed not to sell, contract to sell or otherwise transfer or
dispose of any shares of Common Stock of the Company for a period of 180 days
after the date of this Prospectus without the prior written consent of Merrill
Lynch. See "Shares Eligible for Future Sale."

The Company intends to apply for listing of the Common Stock on the NYSE
under the symbol . To meet the requirements of listing the Common Stock on
the exchange, the Underwriters will undertake to sell lots of or more shares
to a minimum of beneficial holders.

Prior to this Offering, there has been no market for the Common Stock of the
Company. Accordingly, the initial public offering price will be determined by
negotiation between the Company, Acadia Partners, L.P. and the Representatives.
Among the factors to be considered in determining the initial public offering
price are the Company's record of operations, the Company's current financial
condition, its future prospects, the present state of the Company's industry in
general, the experience of its management, the general condition of the equity
securities market and the demand for similar securities of companies considered
comparable to the Company and other relevant factors. The initial public
offering price set forth on the cover page of this Prospectus should not,
however, be considered an indication of the actual value of the Common Stock.
Such price is subject to change as a result of market conditions and other
factors. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offering at or above the initial public offering price.

Merrill Lynch is one of the Company's lenders under the Credit Agreement and
will receive a portion of the proceeds of this Offering in connection therewith.
See "Use of Proceeds."

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby and certain legal
matters will be passed upon for the Company by Kaye, Scholer, Fierman, Hays &
Handler, LLP, New York, New York and for the Underwriters by Shearman &
Sterling, New York, New York.

EXPERTS

The consolidated financial statements and schedules included in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included in reliance upon said firm as experts in giving said
reports.

53
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement, which may be inspected,
without charge, at the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048
and its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of all or any portion of the Registration Statement
may be obtained from the Public Reference Section of the Commission, upon
payment of prescribed fees.

The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent
accounting firm and quarterly reports containing unaudited consolidated
financial information for each of the first three fiscal quarters of each fiscal
year of the Company.

Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

54
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PINNACLE BRANDS, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Condensed Consolidated Balance Sheets as of June 30, 1996, and December
31, 1995.......................................................................... F-2

For the Six Months Ended June 30, 1996 and 1995:

Unaudited Condensed Consolidated Statement of Operations......................... F-3

Unaudited Condensed Consolidated Statement of Cash Flows......................... F-4

Notes to Unaudited Condensed Consolidated Financial Statements..................... F-5

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Public Accountants........................................... F-7

Consolidated Balance Sheets as of December 31, 1995 and 1994....................... F-8

For the Years Ended December 31, 1995, 1994, and 1993:

Consolidated Statement of Operations............................................. F-9

Consolidated Statement of Stockholders' Investment .............................. F-10

Consolidated Statement of Cash Flows............................................. F-11

Notes to Consolidated Financial Statements......................................... F-12
</TABLE>

F-1
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents................................... $ 222,000 $ 240,000
Accounts receivable, net.................................... 22,236,000 35,862,000
Inventories................................................. 16,893,000 10,503,000
Other current assets........................................ 7,815,000 1,312,000
------------- ------------
Total current assets.................................... 47,166,000 47,917,000

PROPERTY AND EQUIPMENT, net................................... 4,145,000 3,727,000

INTANGIBLE AND OTHER ASSETS, net.............................. 77,985,000 36,477,000
------------- ------------
$ 129,296,000 $ 88,121,000
------------- ------------
------------- ------------

LIABILITIES AND STOCKHOLDERS' INVESTMENT

CURRENT LIABILITIES:
Accounts payable............................................ $ 11,449,000 $ 12,224,000
Accrued liabilities......................................... 19,673,000 15,100,000
Current maturities of long-term debt........................ 4,573,000 13,243,000
------------- ------------
Total current liabilities............................... 35,695,000 40,567,000
------------- ------------
LONG-TERM DEBT, net of current maturities..................... 91,745,000 33,615,000

SUBORDINATED NOTES PAYABLE TO MAJORITY STOCKHOLDER............ 101,348,000 103,814,000

COMMITMENTS AND CONTINGENCIES

COMMON STOCK AND COMMON STOCK EQUIVALENTS SUBJECT TO PUT
AGREEMENT..................................................... 3,000,000 3,000,000

STOCKHOLDERS' INVESTMENT:
Senior preferred stock; $.01 par value; $100,000 per share
liquidation preference; 50 shares authorized; 0 shares
issued and outstanding.................................... -- --
Preferred stock; $.01 par value; $1,000 per share
liquidation preference; 4,025 shares authorized, issued
and outstanding............................................... 40 40
Class A common stock; $.01 par value; 80,000 shares
authorized; 20,739 shares issued and outstanding.............. 207 207
Class B common stock; $.01 par value; 30,000 shares
authorized; 759 shares issued and outstanding................. -- --
Paid-in capital............................................. 5,497,753 5,497,753
Accumulated deficit......................................... (107,990,000) (98,373,000)
------------- ------------
Total stockholders' investment.......................... (102,492,000) (92,875,000)
------------- ------------
$ 129,296,000 $ 88,121,000
------------- ------------
------------- ------------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-2
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------
<S> <C> <C>
1996 1995
----------- -----------

NET SALES........................................................ $49,905,000 $41,879,000

COST OF SALES.................................................... 34,503,000 29,548,000
----------- -----------
Gross profit............................................... 15,402,000 12,331,000

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..................... 15,659,000 11,480,000
----------- -----------
Operating income (loss).................................... (257,000) 851,000

NONOPERATING INCOME (EXPENSE):
Interest expense--subordinated notes payable................... (6,034,000) (5,524,000)
Interest expense--other........................................ (3,521,000) (2,581,000)
Other income, net.............................................. 195,000 42,000
----------- -----------
Nonoperating expense, net.................................. (9,360,000) (8,063,000)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES................................ (9,617,000) (7,212,000)

INCOME TAX PROVISION............................................. -- --
----------- -----------
NET LOSS......................................................... $(9,617,000) $(7,212,000)
----------- -----------
----------- -----------
PRO FORMA NET LOSS PER SHARE..................................... $ $
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-3
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------------

1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................... $ (9,617,000) $ (7,212,000)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities-
Depreciation and amortization.............................. 2,722,000 2,128,000
Interest added to long-term debt........................... 6,034,000 5,524,000
Change in assets and liabilities-
Accounts receivable, net................................. 13,627,000 4,368,000
Inventories.............................................. (6,390,000) (3,754,000)
Other current assets..................................... (6,505,000) (1,293,000)
Accounts payable......................................... (1,619,000) (4,552,000)
Accrued liabilities...................................... 5,418,000 338,000
Intangible and other assets.............................. (293,000) (1,312,000)
------------ ------------
Net cash provided by (used in) operating activities.... 3,377,000 (5,765,000)
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.......................... (940,000) (241,000)
Purchases of sports trading card licenses and tradenames..... (40,950,000) (3,025,000)
------------ ------------
Net cash used in investing activities.................. (41,890,000) (3,266,000)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subordinated notes payable to majority
stockholder.................................................... -- 2,000,000
Payments on subordinated notes payable to majority
stockholder.................................................... (8,500,000) --
Proceeds from long-term debt................................. 101,300,000 50,973,000
Payments on long-term debt................................... (54,305,000) (46,218,000)
------------ ------------
Net cash provided by financing activities.............. 38,495,000 6,755,000
------------ ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS...................... (18,000) (2,276,000)

CASH AND CASH EQUIVALENTS, beginning of period................. 240,000 2,847,000
------------ ------------

CASH AND CASH EQUIVALENTS, end of period....................... $ 222,000 $ 571,000
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-4
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

The accompanying interim condensed consolidated financial statements of
Pinnacle Brands, Inc. and its subsidiaries (collectively, the Company or
Pinnacle) as of June 30, 1996, and for the six months ended June 30, 1996 and
1995, are unaudited. Certain information and footnote disclosures normally
prepared in accordance with generally accepted accounting principles have been
either condensed or omitted pursuant to the rules of the Securities and Exchange
Commission. Although the Company believes these interim statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position, results of operations and cash
flows, interim period results are not necessarily indicative of the results of
operations for a full year. As such, these financial statements should be read
in conjunction with the consolidated financial statements and the related notes
thereto for the year ended December 31, 1995, included elsewhere in this
Prospectus.

2. LONG-TERM DEBT:

In May 1996, the Company refinanced substantially all of its long-term debt.
The proceeds from this refinancing were used to retire existing senior bank
obligations, repay $8.5 million of subordinated notes payable to Acadia, and to
acquire licenses and tradenames from Donruss Trading Cards, Inc. (see Note 3
below). The refinanced credit facilities include a $15.0 million revolving
credit commitment and $88.0 million of term loans. Total availability under the
revolving credit commitment is limited to 80% of eligible accounts receivable
and 50% of eligible inventory, both as defined in the credit agreement.
Outstanding borrowings under the credit facilities bear interest at optional
rates based on the prime rate or LIBOR. A commitment fee is payable on unused
amounts under the revolving credit facility. All outstanding borrowings under
the revolving credit commitment are payable on May 27, 2001 (extendable to May
27, 2002 under certain conditions), and the term loans are payable in 16
quarterly payments of $0.5 million and then 4 quarterly payments of $8.0 million
through May 28, 2001, on $40.0 million of term loans and in 20 quarterly
payments of $0.5 million and then 4 quarterly payments of $9.5 million through
May 28, 2002, on the other $48.0 million of term loans, plus additional annual
payments, beginning in 1997, based upon 50% of any excess cash flows (as
defined) generated during each preceding calendar year. The credit agreement
contains covenants requiring the maintenance of certain minimum financial ratios
and limitations on dividend payments and the issuance of equity securities. The
credit facilities are collateralized by substantially all assets of the Company.

In connection with the senior bank debt refinancing described above, during
May 1996, the maturity dates of all principal and interest payable under the
subordinated notes and the convertible subordinated notes were extended, by
agreement of the noteholders, to December 31, 2001.

3. ACQUISITION OF DONRUSS SPORTS TRADING CARD LICENSES AND TRADENAMES:

In May 1996, the Company acquired from Donruss Trading Cards, Inc. (Donruss)
the right to use the tradenames "Donruss" and "Leaf" and Donruss' licenses
through which it produces certain baseball and hockey trading card products.
Consideration given to Donruss included $32.5 million in cash plus the
assumption of various contracts with certain professional athletes and other
obligations. In connection with this transaction, the Company recorded $41.0
million attributable to the licenses and tradenames which will be amortized over
35 years. The Company concurrently purchased certain prepaid expenses and
work-in-process inventory, and assumed certain related trade payables.

F-5
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. OPERATING LEASES:

At the expiration in October 1996 of the term of its current lease, the
Company intends to move its corporate headquarters to Dallas, Texas. The new
lease has a seven year term with annual lease payments of approximately $0.8
million which approximate the annual leasehold costs on the current corporate
headquarters lease.

5. SUBSEQUENT EVENTS:

Recapitalization and Initial Public Offering

The Company has filed a registration statement with the Securities and
Exchange Commission pursuant to an initial public offering (the Offering)
whereby 4,000,000 shares are to be sold at an assumed initial public offering
price of $15 per share, the midpoint of the initial public offering price range.
Immediately prior to the completion of the Offering, (1) the Company will change
its authorized capital to include shares of Common Stock, (2) the
Company will declare a -for-1 stock split, (3) the majority stockholder
will convert all but $33.0 million of its subordinated notes payable and all
4,025 shares of its preferred stock into shares of Common Stock, and (4)
the Company will grant options to purchase shares of Common Stock at
$ per share and will contribute shares of Common Stock to the Company's
401(k) plan. In connection with these transactions, the Company expects to
record noncash expenses at the time of the Offering of approximately $ million.

Pro Forma Per Share Information

Of the assumed net proceeds from the sale of shares of Common Stock offered
by the Company in the Offering, approximately $22.0 million will be used to
repay senior bank borrowings and $33.0 million will be used to repay
subordinated notes payable to majority stockholder. Pro forma net income per
common share is calculated using the weighted average number of shares of Common
Stock outstanding during the period (after giving effect to (i) the conversion
of subordinated notes payable and preferred stock referred to above, (ii)
assuming the issuance and sale of 4,000,000 shares of Common Stock and
application of the proceeds, as described, as if these transactions had occurred
on January 1, 1995, (iii) decreased selling, general and administrative expenses
related to management and consulting fees offset by increased salaries to senior
management under new employment agreements, and (iv) tax benefits on the
resulting pro forma net losses before taxes), plus options granted in August
1996 to purchase Common Stock at $ per share and Common Stock contributed to
the Company's 401(k) plan, assuming all such Common Stock was outstanding for
all periods presented. For purposes of this computation, the weighted average
number of shares of Common Stock outstanding during each of the periods ended
June 30, 1996 and 1995, is .

F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Pinnacle Brands, Inc.:

We have audited the accompanying consolidated balance sheets of Pinnacle
Brands, Inc. (formerly Grand Slam Acquisition Corp., a Delaware corporation) and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' investment, and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pinnacle Brands, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

As discussed in Note 12, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," on January 1, 1993.

ARTHUR ANDERSEN LLP

Dallas, Texas,
March 7, 1996 (except with respect
to the matters discussed in Note 17,
as to which the date is July 15, 1996)

F-7
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents.................................... $ 240,000 $ 2,847,000
Accounts receivable, net of allowance for uncollectible
accounts of $260,000 and $209,000, respectively............ 35,862,000 20,024,000
Inventories.................................................. 10,503,000 6,681,000
Other current assets......................................... 1,312,000 1,274,000
------------ ------------
Total current assets..................................... 47,917,000 30,826,000
------------ ------------
PROPERTY AND EQUIPMENT, net.................................... 3,727,000 5,131,000

INTANGIBLE AND OTHER ASSETS, net............................... 36,477,000 34,363,000
------------ ------------
$ 88,121,000 $ 70,320,000
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' INVESTMENT

CURRENT LIABILITIES:
Accounts payable............................................. $ 12,224,000 $ 8,613,000
Accrued liabilities.......................................... 15,100,000 13,416,000
Current maturities of long-term debt......................... 13,243,000 3,810,000
------------ ------------
Total current liabilities................................ 40,567,000 25,839,000
------------ ------------
LONG-TERM DEBT, net of current maturities...................... 33,615,000 41,616,000

SUBORDINATED NOTES PAYABLE TO MAJORITY STOCKHOLDER............. 103,814,000 90,288,000

COMMITMENTS AND CONTINGENCIES

COMMON STOCK AND COMMON STOCK EQUIVALENTS SUBJECT TO PUT
AGREEMENT...................................................... 3,000,000 3,000,000

STOCKHOLDERS' INVESTMENT:
Senior preferred stock; $.01 par value; $100,000 per share
liquidation preference; 50 shares authorized; 0 and 24
shares issued and outstanding, respectively................ -- 1
Preferred stock; $.01 par value; $1,000 per share liquidation
preference; 4,025 shares authorized, issued and outstanding.... 40 40
Class A common stock; $.01 par value; 80,000 shares
authorized; 20,739 and 18,505 shares issued and
outstanding, respectively...................................... 207 185
Class B common stock; $.01 par value; 30,000 shares
authorized; 0 and 14,118 shares issued and outstanding,
respectively................................................... -- 141
Paid-in capital.............................................. 5,497,753 5,497,633
Accumulated deficit.......................................... (98,373,000) (95,921,000)
------------ ------------
Total stockholders' investment........................... (92,875,000) (90,423,000)
------------ ------------
$ 88,121,000 $ 70,320,000
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-8
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES........................................ $130,183,000 $117,965,000 $ 62,501,000

COST OF SALES.................................... 90,388,000 78,013,000 41,000,000
------------ ------------ ------------
Gross profit............................... 39,795,000 39,952,000 21,501,000

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..... 26,310,000 23,506,000 20,972,000

UNUSUAL CHARGES:
Sports League work stoppages................... -- 7,366,000 --
Write-down of goodwill......................... -- 40,000,000 --
Related to MLM................................. -- -- 41,435,000
------------ ------------ ------------
Operating income (loss).................... 13,485,000 (30,920,000) (40,906,000)

NONOPERATING INCOME (EXPENSE):
Interest expense--subordinated notes payable... (11,526,000) (9,307,000) (7,198,000)
Interest expense--all other.................... (5,068,000) (4,509,000) (4,180,000)
Other income, net.............................. 657,000 730,000 72,000
------------ ------------ ------------
Nonoperating expense, net.................. (15,937,000) (13,086,000) (11,306,000)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
THE ADOPTION OF A NEW ACCOUNTING PRINCIPLE..... (2,452,000) (44,006,000) (52,212,000)

INCOME TAX PROVISION............................. -- -- --
------------ ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT OF THE ADOPTION OF
A NEW ACCOUNTING PRINCIPLE..................... (2,452,000) (44,006,000) (52,212,000)

CUMULATIVE EFFECT OF THE ADOPTION OF A NEW
ACCOUNTING PRINCIPLE............................. -- -- 3,926,000
------------ ------------ ------------
NET LOSS......................................... $ (2,452,000) $(44,006,000) $(56,138,000)
------------ ------------ ------------
------------ ------------ ------------
PRO FORMA NET INCOME PER SHARE................... $
------------
------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-9
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
SENIOR
PREFERRED PREFERRED CLASS A CLASS B
STOCK STOCK COMMON STOCK COMMON STOCK
------------- ------------- ------------- -------------- RETAINED
NUMBER NUMBER NUMBER NUMBER EARNINGS TOTAL
OF PAR OF PAR OF PAR OF PAR PAID-IN (ACCUMULATED STOCKHOLDERS'
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE CAPITAL DEFICIT) INVESTMENT
------ ----- ------ ----- ------ ----- ------- ----- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1992.................... -- $-- -- $-- 15,018 $ 150 -- $-- $ 3,890,850 $ 4,223,000 $ 8,114,000
Issuance of stock in
connection with the
1993 MLM
Acquisition............. 24 1 -- -- -- -- 14,118 141 4,606,858 -- 4,607,000
Issuance of preferred
stock to majority
stockholder at time
of the 1993 MLM
Acquisition............. -- -- 4,025 40 -- -- -- -- (40) -- --
Issuance of put rights
on common stock and
common stock
equivalents............. -- -- -- -- -- -- -- -- (3,000,000) -- (3,000,000)
Net loss............... -- -- -- -- -- -- -- -- -- (56,138,000) (56,138,000)
-- ----- ------ ----- ------ ----- ------- ----- ----------- ------------ -------------
BALANCE, December 31,
1993.................... 24 1 4,025 40 15,018 150 14,118 141 5,497,668 (51,915,000) (46,417,000)
Issuance of stock in
connection with
conversion of
subordinated notes
payable and preferred
stock................... -- -- -- -- 3,487 35 -- -- (35) -- --
Net loss............... -- -- -- -- -- -- -- -- -- (44,006,000) (44,006,000)
-- ----- ------ ----- ------ ----- ------- ----- ----------- ------------ -------------
BALANCE, December 31,
1994.................... 24 1 4,025 40 18,505 185 14,118 141 5,497,633 (95,921,000) (90,423,000)
Issuance of stock in
connection with
conversion of
subordinated notes
payable and preferred
stock................... -- -- -- -- 2,234 22 -- -- (22) -- --
Cancellation of stock
in connection with
the 1995 MLM
Settlement.............. (24) (1) -- -- -- -- (14,118) (141) 142 -- --
Net loss............... -- -- -- -- -- -- -- -- -- (2,452,000) (2,452,000)
-- ----- ------ ----- ------ ----- ------- ----- ----------- ------------ -------------
BALANCE, December 31,
1995.................... -- $-- 4,025 $ 40 20,739 $ 207 -- $-- $ 5,497,753 $(98,373,000) $ (92,875,000)
-- ----- ------ ----- ------ ----- ------- ----- ----------- ------------ -------------
-- ----- ------ ----- ------ ----- ------- ----- ----------- ------------ -------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-10
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................... $ (2,452,000) $(44,006,000) $(56,138,000)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization................ 4,222,000 6,657,000 7,649,000
Write-down of goodwill....................... -- 40,000,000 --
Interest added to subordinated notes payable
to majority stockholder.................... 11,526,000 9,307,000 7,198,000
Cumulative effect of the adoption of a new
accounting principle............................. -- -- 3,926,000
Change in assets and liabilities, net of
acquired balances-
Accounts receivable, net................... (15,838,000) (2,186,000) 26,016,000
Inventories................................ (3,822,000) (2,534,000) 2,487,000
Other current assets....................... (38,000) 1,116,000 2,011,000
Accounts payable........................... 3,611,000 1,822,000 727,000
Accrued liabilities........................ 1,684,000 (12,619,000) (2,049,000)
Income taxes receivable.................... -- -- 703,000
Intangible and other assets................ (1,460,000) (179,000) (1,493,000)
------------ ------------ ------------
Net cash used in operating activities.... (2,567,000) (2,622,000) (8,963,000)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net....... (447,000) (1,509,000) (418,000)
Purchases of sports trading card licenses and
tradenames....................................... (3,025,000) -- --
Net cash balance of MLM at acquisition date.... -- -- 68,000
------------ ------------ ------------
Net cash used in investing activities.... (3,472,000) (1,509,000) (350,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subordinated notes payable to
majority stockholder............................. 2,000,000 6,000,000 20,400,000
Proceeds from long-term debt................... 54,973,000 12,880,000 19,473,000
Payments on long-term debt..................... (53,541,000) (14,801,000) (29,025,000)
------------ ------------ ------------
Net cash provided by financing
activities....................................... 3,432,000 4,079,000 10,848,000
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS...................................... (2,607,000) (52,000) 1,535,000
CASH AND CASH EQUIVALENTS, beginning of year..... 2,847,000 2,899,000 1,364,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year........... $ 240,000 $ 2,847,000 $ 2,899,000
------------ ------------ ------------
------------ ------------ ------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for-
Interest..................................... $ 4,490,000 $ 3,924,000 $ 3,672,000
SUPPLEMENTAL NONCASH INVESTING ACTIVITIES:
Assets acquired under capital lease
arrangements..................................... $ -- $ 478,000 $ --
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-11
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION:

In 1991, an investor group, through newly formed Pinnacle Brands, Inc.
(Pinnacle) (formerly Grand Slam Acquisition Corp.), acquired all of the issued
and outstanding capital stock of Score Group, Inc. (Score). Two years later in
1993, Pinnacle acquired all of the issued and outstanding capital stock of Major
League Marketing, Inc. (MLM) (see Note 3), concurrently merged MLM into Score,
and changed Score's name to Pinnacle Trading Card Company (formerly Pinnacle
Brands, Inc.).

Pinnacle and its operating subsidiaries are primarily engaged (under license
agreements) in the printing, marketing, and distribution of sports trading
cards, three-dimensional specialty products, and other collectibles to hobby and
retail customers primarily in North America.

The consolidated financial statements include the operations of Pinnacle and
its majority-owned subsidiaries (collectively referred to as the Company). All
significant intercompany balances and transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.

Cash Equivalents

Cash equivalents are highly liquid investments having original maturities of
three months or less.

Accounts Receivable

In the normal course of business, the Company may extend unsecured credit to
certain classes of its customers. Because of the credit risk involved,
management has provided an allowance for doubtful accounts which reflects its
estimate of amounts which will eventually become uncollectible. Accounts
receivable from customers are stated net of allowances for doubtful accounts of
$260,000 and $209,000 as of December 31, 1995 and 1994, respectively.

Inventories

Inventories are stated at the lower of cost (principally weighted average
cost) or market. Inventory costs include material, labor, and manufacturing
overhead.

Property and Equipment

Property and equipment, including capitalized leases, are recorded at cost
and are depreciated over their estimated useful lives which range from five to
ten years for machinery and equipment, five to seven years for furniture and
office equipment, three years for vehicles, and over the life of the related
lease for leasehold improvements. Major additions and betterments are
capitalized and depreciated over the remaining estimated useful lives of the
related assets. Maintenance, repairs, and minor improvements are charged to
expense as incurred. Depreciation and amortization, which include amortization

F-12
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
of assets under capital leases, are computed using the straight-line method for
financial reporting purposes and accelerated methods for income tax reporting
purposes.

Intangible and Other Assets

Intangible and other assets consist primarily of goodwill, acquired licenses
and tradenames, organization costs, and deferred loan costs. Goodwill is being
amortized under the straight-line method over a period of 40 years. Acquired
licenses and tradenames are being amortized over periods ranging from 15 to 35
years. Organization costs and deferred loan costs are amortized over a period of
five years and the life of the related indebtedness, respectively.

Subsequent to its initial recording, the Company periodically evaluates
whether later events and circumstances have occurred that indicate the remaining
estimated useful life of intangible assets may warrant revision or that the
remaining balance of the asset may not be recoverable. When factors indicate
that the recorded amount of the intangible asset should be evaluated for
possible impairment, the Company uses an estimate of the fair value of the
related asset (of the operating unit in the case of goodwill) in measuring
whether the asset is recoverable.

Net Sales

Revenue is recognized when the product is shipped. For those customers for
which return privileges exist, a provision for estimated returns of sports cards
(net of refundable royalties) is made in the period in which the related sale is
recorded. The actual amount of sports cards returns may differ from management's
estimates, however, and is dependent upon, among other things, consumer
perception of the products' desirability and scarcity, retailers' merchandising
practices, and owner-player relations in the respective professional sports
leagues. As such, the Company's recorded liability for estimated returns may be
revised periodically to reflect actual return experience. Sales of certain
sports card products and certain custom products require partial or full
deposits from customers.

Cost of Sales

Cost of sales includes materials, printing, production, slitting, packaging,
royalties, and freight. Royalties are paid primarily to organizations
representing the professional sports teams and players.

Income Taxes

Deferred income taxes are provided for temporary differences between the tax
basis of assets and liabilities and their financial reporting amounts. Deferred
taxes are recorded based upon enacted tax rates anticipated to be in effect when
these temporary differences are expected to reverse. Management provides a
valuation allowance when it is more likely than not that the deferred tax assets
will not be realized.

3. 1993 MLM ACQUISITION AND 1995 MLM SETTLEMENT:

On July 30, 1993, Pinnacle acquired all the issued and outstanding capital
stock of MLM (the 1993 MLM Acquisition) in a tax-free transaction. MLM had the
exclusive, contractual responsibility for all design, creative, marketing,
advertising, and sales/distribution activities for all of the Company's

F-13
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. 1993 MLM ACQUISITION AND 1995 MLM SETTLEMENT:--(CONTINUED)
sports trading card products. Simultaneously with the issuance of shares to the
former MLM stockholders, the Company's majority stockholder was issued 4,025
shares of preferred stock in partial consideration for additional funding and
consent to the 1993 MLM Acquisition. The acquisition was accounted for under the
purchase method of accounting. Assets acquired (including cash of $68,000) and
liabilities assumed were $13,164,000 and $8,557,000, respectively, which
resulted in an assigned value of $4,607,000 for the Class B common stock and
senior preferred stock issued to the former MLM stockholders. See additional
matters related to MLM in Note 5.

After the merger was consummated, the Company and the former MLM
shareholders disagreed as to the proper interpretation of a provision in the
1993 MLM Acquisition agreement (the 1993 Agreement) which regarded the treatment
and the tax attributes of certain pre-acquisition liabilities owed by MLM to the
Company. To resolve the parties' differing understandings as to the effects of
the 1993 Agreement, in September 1995, all of the parties agreed to a settlement
(the 1995 MLM Settlement) through which the 1993 MLM Acquisition was reformed.
Under the 1995 MLM Settlement, the former MLM shareholders returned to Pinnacle
for cancellation all of the preferred and common shares of Pinnacle stock
originally issued to them as consideration in the 1993 MLM Acquisition in
exchange for Pinnacle agreeing to amend its 1993 tax return in respect of the
treatment of the aforementioned pre-acquisition liabilities. For financial
reporting purposes, the 1995 MLM Settlement resulted in a credit to paid-in
capital and corresponding charges to Class B common stock and to senior
preferred stock to reflect the cancellation of those shares. The 1995 MLM
Settlement also resulted in a reduction of the deferred tax asset related to the
net operating loss carryforward and a corresponding reduction of the valuation
reserve (see Note 12).

4. ACQUISITION OF LICENSES AND TRADENAMES OF LBC:

During April 1995, the Company acquired from LBC Sports, Inc. and related
entities (LBC), the rights to use the trade name "Action Packed" and LBC's
licenses to produce certain motor sports and football trading card products.
Consideration given to LBC by the Company included cash and the assumption of
certain liabilities of LBC, plus performance payments, generally for a
three-year term, based on future net sales (as defined) of specified Action
Packed branded products and other criteria agreed to by the Company and LBC. In
connection with this transaction, the Company recorded $3,025,000 attributable
to the licenses and tradenames (see Note 8). Performance payments will be
expensed when they are earned. In accordance with the terms of the purchase
agreement, no performance payments were earned or payable for the period ending
December 31, 1995.

5. UNUSUAL CHARGES:

Related to Work Stoppages

During 1994, the Company incurred a substantial economic loss as a
consequence of the Major League Baseball strike and the National Hockey League
work stoppage. The 1994 financial statement

F-14
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. UNUSUAL CHARGES:--(CONTINUED)
impact of these events has been reflected as an unusual charge in the
accompanying consolidated statement of operations and is comprised of the
following:

Write-off of unsalable inventory............................... $2,300,000
Accrual for excess sales returns............................... 5,066,000
----------
$7,366,000
----------
----------

The National Hockey League resolved its dispute and commenced its season in
January 1995, and in April 1995, Major League Baseball resumed operations
(without a written contract between the owners and players union).

Related to Goodwill Write-down

In the fourth quarter of 1994, the Company recorded a $40,000,000 noncash
write-down of goodwill. Goodwill of $77.4 million was initially recorded in 1991
at the time the Company acquired Score (the Score Acquisition) in a transaction
substantially financed via borrowings of long-term debt. The goodwill
represented the excess of the purchase price over the valuation of the net
assets acquired in the Score Acquisition. The purchase price was based on
management's expectations of future performance at the time of the Score
Acquisition, considering historical experience and industry trends. These
expectations assumed moderate growth rates in revenue, planned operating and
product improvements to be implemented by new management, and sufficient cash
flow from operations to repay acquisition indebtedness.

Beginning in 1992, the sports trading cards industry began to contract
primarily as a result of prior industry overproduction which led to a reduced
perception of scarcity and collectibility. Further, in the second half of 1994,
two events occurred that led management to reevaluate its expectations of future
performance. In August, the Major League Baseball players went on strike and in
October, the National Hockey League players became involved in a work stoppage.
These events manifested themselves in a significant decrease in sports cards
sales and a significant increase in the rate of sports cards returns. Moreover,
management of the Company believed that these sports' management/labor disputes
would have a material adverse effect on future sports trading cards revenues.

As a result of the foregoing, in the fourth quarter of 1994, the Company
revised its projections of earnings before interest, taxes, depreciation and
amortization (EBITDA). The most critical assumptions used in these projections
were (i) decreases of baseball and hockey cards sales in 1995 of at least 20%
each and annual growth rates thereafter of 3-6%, (ii) no change in the Company's
market share, and (iii) annual expense inflation rate of 3%. Based on these
EBITDA projections, the Company utilized a fair value approach by discounting
(i) projected 1996--1999 EBITDA and (ii) a multiple of 1999 EBITDA, less
applicable Company long-term debt to unrelated parties. The EBITDA discount rate
and multiple used by the Company was based on transactions involving other
sports trading cards companies. In applying this methodology, the Company
concluded that the fair value of the Company indicated that the value of the
goodwill was approximately $30 million.

Consequently, and as a result of the foregoing, the Company recorded a
$40,000,000 write-down of goodwill in 1994 that has been classified as an
unusual charge in the accompanying consolidated statement of operations.

F-15
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. UNUSUAL CHARGES:--(CONTINUED)
Related to MLM

Prior to the 1993 MLM Acquisition, the Company had a receivable from MLM.
This receivable resulted from certain production costs billed to MLM for
reimbursement and from MLM's portion of certain operating costs such as sales
returns, bad debts, inventory write-offs, and unrecoverable minimum royalties.
Because of MLM's inability to pay, this receivable was written off immediately
prior to the acquisition. The Company also incurred its portion of certain of
these operating charges, all of which were in excess of normal operating levels
because of MLM operating decisions made prior to the acquisition. These charges
(which have been reflected as an unusual charge in the accompanying consolidated
statement of operations) are as follows:

Receivable due from MLM at July 30, 1993...................... $30,225,000
Incremental operating expenses absorbed by Pinnacle related to
MLM........................................................... 11,210,000
-----------
Unusual charges related to MLM.......................... $41,435,000
-----------
-----------
6. INVENTORIES:

Inventories at December 31, 1995 and 1994, comprised the following:

1995 1994
----------- ----------
Raw materials and supplies....................... $ 877,000 $1,762,000
Work-in-process.................................. 6,299,000 2,532,000
Finished goods................................... 3,327,000 2,387,000
----------- ----------
$10,503,000 $6,681,000
----------- ----------
----------- ----------

7. PROPERTY AND EQUIPMENT:

1995 1994
----------- -----------
Vehicles, machinery, and equipment............... $ 5,352,000 $ 5,132,000
Furniture and office equipment................... 3,557,000 3,338,000
Leasehold improvements........................... 1,360,000 1,342,000
----------- -----------
10,269,000 9,812,000
Less- Accumulated depreciation................... (6,542,000) (4,681,000)
----------- -----------
$ 3,727,000 $ 5,131,000
----------- -----------
----------- -----------

The Company recorded depreciation expense of $1,861,000, $1,777,000, and
$1,589,000 in 1995, 1994, and 1993, respectively.

F-16
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. INTANGIBLE AND OTHER ASSETS:

Intangible and other assets at December 31, 1995 and 1994, consisted of the
following:

1995 1994
----------- -----------
Goodwill, net of accumulated amortization of
$46,571,000 and $45,702,000, respectively....... $30,808,000 $31,671,000
Acquired sports trading card licenses and
tradenames, net of accumulated amortization of
$134,000 in 1995................................ 2,891,000 --
Organization costs, net of accumulated
amortization of $3,695,000 and $2,715,000,
respectively.................................... 1,261,000 2,112,000
Deferred loan costs, net of accumulated
amortization of $199,000 and $2,236,000,
respectively.................................... 1,041,000 186,000
Deposits and other.............................. 476,000 394,000
----------- -----------
$36,477,000 $34,363,000
----------- -----------
----------- -----------

9. ACCRUED LIABILITIES:

Accrued liabilities at December 31, 1995 and 1994, comprised the following:

1995 1994
----------- -----------
Accrued operating expenses and other............ $ 4,112,000 $ 3,728,000
Accrued sales returns........................... 5,026,000 7,153,000
Accrued royalties payable....................... 5,962,000 2,535,000
----------- -----------
$15,100,000 $13,416,000
----------- -----------
----------- -----------

F-17
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. LONG-TERM DEBT:

Long-term debt (including accrued but unpaid interest where applicable) at
December 31, 1995 and 1994, comprised the following:

1995 1994
------------- ------------
SENIOR BANK OBLIGATIONS

Revolving bank loans, due December 31,
1998, with variable interest (rates
ranging from 6.79% to 11%) payable
quarterly.................................... $ 4,700,000 $ 16,500,000

Bank term loans, due December 31, 1998,
with scheduled principal and variable
interest (rates ranging from 6.36% to
11%) payable quarterly................... 41,000,000 26,950,000
------------- ------------
Subtotal--Senior Bank Obligations...... 45,700,000 43,450,000
------------- ------------
SUBORDINATED NOTES PAYABLE TO MAJORITY
STOCKHOLDER

Subordinated notes payable, due December
31, 1999, plus interest (at 12%) added to
the principal semiannually each January
15 and July 15........................... 103,814,000 90,288,000
------------- ------------
OTHER

Other long-term debt....................... 906,000 1,498,000
Obligations under capital leases (see Note
11).......................................... 252,000 478,000
------------- ------------
Subtotal--Other........................ 1,158,000 1,976,000
------------- ------------
Total Long-Term Debt....................... 150,672,000 135,714,000
Less-
Subordinated notes payable to majority
stockholder.................................. (103,814,000) (90,288,000)
Current portion of all other long-term
debt......................................... (13,243,000) (3,810,000)
------------- ------------
Long-term debt, net of current
maturities................................... $ 33,615,000 $ 41,616,000
------------- ------------
------------- ------------

During May 1995, the Company's senior bank obligations were refinanced with
a group of lenders. As refinanced, these credit facilities include a $15.0
million revolving credit commitment and a $44.0 million term loan. Total
availability under the revolving credit commitment ($10.7 million at December
31, 1995) is limited to 80% of eligible accounts receivable and 50% of eligible
inventory, both as defined in the credit agreement. Outstanding borrowings under
the credit facilities bear interest, at the Company's option, at (1) the agent
bank's prime rate plus 2% or (2) LIBOR plus 3%. A commitment fee of 1/2 of 1% is
payable quarterly on unused amounts under the revolving credit facility. All
outstanding borrowings under the revolving credit commitment are payable on
December 31, 1998, and the term loan is payable in specified quarterly
installments through December 31, 1998, plus additional annual payments,
beginning in 1997, based upon 75% of any excess cash flows (as defined)
generated during each preceding calendar year. The credit agreement contains
covenants requiring the maintenance of certain minimum financial ratios and
limitations on dividend payments and the issuance of equity securities. The
credit facilities are collateralized by substantially all assets of the Company.

F-18
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. LONG-TERM DEBT:--(CONTINUED)
In connection with the senior bank debt refinancing described above, during
May 1995, the maturity dates of all principal and interest payable under the
subordinated notes payable to majority stockholder were extended, by agreement
of the noteholder, to December 31, 1999.

Scheduled principal maturities of capital lease obligations and long-term
debt (including subordinated notes payable to majority stockholder and excluding
any payments arising from excess cash flows) are as follows:

YEAR ENDING
DECEMBER 31,
- -----------
1996........................................................ $ 13,243,000
1997........................................................ 14,703,000
1998........................................................ 18,906,000
1999........................................................ 103,820,000
2000........................................................ --
Thereafter.................................................. --
------------
$150,672,000
------------
------------

11. LEASES:

Property and equipment includes assets under capital lease having
capitalized costs of $478,000, less accumulated depreciation of $226,000 and
$66,000 at December 31, 1995 and 1994, respectively.

At December 31, 1995, future minimum payments under capital lease
obligations and noncancelable operating leases are as follows:

YEAR ENDING CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
- ----------- -------- ----------
1996................................................ $245,000 $1,080,000
1997................................................ 61,000 200,000
1998................................................ -- 103,000
1999................................................ -- 65,000
2000................................................ -- 62,000
Thereafter.......................................... -- --
-------- ----------
Total minimum lease payments........................ 306,000 $1,510,000
----------
Less- Amounts representing interest................. 54,000
--------
Present value of future minimum lease payments...... $252,000
--------
--------

Rental expense for all operating leases for the years ended December 31,
1995, 1994, and 1993, was $1,311,000, $1,173,000, and $1,141,000, respectively.

12. INCOME TAXES:

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires a change from the deferred to the liability method of computing
deferred income taxes. The cumulative effect of adopting

F-19
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. INCOME TAXES:--(CONTINUED)
SFAS 109 at the beginning of 1993 was $3.9 million, which was principally a
result of providing a valuation reserve for deferred tax assets previously
recorded net-of-tax in connection with the Score Acquisition. Had the Company
elected to restate prior periods' financial statements, $3.2 million of the
cumulative effect would have been recorded as additional goodwill.

Due to the Company's losses incurred in 1995, 1994, and 1993, and due to
lack of any loss carryback opportunities, the Company had no taxes currently
payable or refundable during any of the periods presented. The effective income
tax rate differs from the statutory federal income tax rate for the following
reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Statutory rate................................... (34.0)% (34.0)% (34.0)%
Nondeductible goodwill amortization.............. 12.0 32.4 1.3
Valuation allowance.............................. 22.6 1.6 32.8
Other............................................ (0.6) 0.0 (0.1)
----- ----- -----
Effective tax rate............................... 0.0% 0.0% 0.0%
----- ----- -----
----- ----- -----
</TABLE>

The following table summarizes the changes in the deferred income tax assets
and (liabilities):

<TABLE>
<CAPTION>
DEFERRED
DECEMBER 31, (PROVISION) DECEMBER 31,
1994 BENEFIT 1995
------------ ----------- ------------
<S> <C> <C> <C>
Excess tax depreciation and
amortization...................... $ (370,000) $ 91,000 $ (279,000)
Nondeductible accruals............ 2,001,000 (937,000) 1,064,000
Other items....................... 90,000 258,000 348,000
Operating loss carryforward....... 21,848,000 (8,143,000) 13,705,000
------------ ----------- ------------
23,569,000 (8,731,000) 14,838,000
Valuation allowance............... (23,569,000) 8,731,000 (14,838,000)
------------ ----------- ------------
Deferred income tax asset
(liability), net.................. $ -- $ -- $ --
------------ ----------- ------------
------------ ----------- ------------
</TABLE>

The Company's tax net operating loss carryforwards of approximately $40.0
million will begin to expire in 2007, if not utilized earlier. The 1995 decrease
in the net operating loss carryforward and valuation allowance is related to the
1995 MLM Settlement (see Note 3).

Management has concluded that, based on the Company's history of losses, it
is currently more likely than not that the Company will not realize its deferred
tax asset. Therefore, the Company has provided a 100% valuation allowance on its
deferred tax asset.

13. EMPLOYEE BENEFIT PLANS:

The Company has a 401(k) defined contribution plan under which employees may
contribute up to 10% of eligible gross wages subject to certain IRS limitations.
The Company, at its option, may match a portion of each eligible employee's
contribution. Contributions are made at the discretion of the Board

F-20
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
of Directors. The Company incurred expenses of $68,000, $80,000, and $85,000
related to this plan for the years ended December 31, 1995, 1994, and 1993,
respectively.

The Company does not provide any postretirement or postemployment health or
welfare benefits to any of its employees.

14. STOCK OPTION PLAN:

During 1992, the stockholders approved a stock option plan (the "Plan") for
key employees covering 2,145 shares of Class A common stock. The Plan authorized
the issuance of both nonqualified and incentive stock options and is
administered by a committee of the Board of Directors (the "Committee"). Under
the terms of this Plan, the purchase price of shares subject to each
nonqualified stock option granted will not be less than the par value of the
common stock. The purchase price of shares subject to each incentive stock
option granted will not be less than 100% of their fair market value at the date
of grant. Unless extended by the Committee, options granted are exercisable for
a period not to exceed 10 years. As of December 31, 1995, there were 536 options
outstanding at an option price of $259 each, all of which were exercisable.
There were no options granted, exercised, canceled, or forfeited during 1995.

Further, the Board of Directors of the Company has reserved 7,558 shares of
Class A common stock for issuance to management. None of these shares has been
issued.

15. COMMITMENTS AND CONTINGENCIES:

Licensing Agreements

Sales of sports trading cards are permitted under licensing agreements with
owners' associations representing Major League Baseball, the National Football
League, the National Hockey League, and their related players' associations. The
agreements with these organizations typically require royalty payments based on
a percentage of net sports card sales (based on the regular wholesale price of
the sports cards) with guaranteed minimum annual payments that may vary by
license year. Historically, the Company has successfully renewed these license
agreements upon the expiration of the previous licenses; however, the impact on
net sales, operating income, and cash flows due to a loss of any of these
contracts would be significant. In addition to sports licensing agreements, the
Company has licensing agreements with certain manufacturers and individuals to
produce lenticular (three-dimensional) and other collectible products. The
Company pays royalty fees to these manufacturers based on net sales of these
products.

The Company's current licensing agreements (including renewal of licenses
which management believes will be executed during 1996 and one expired license
currently being negotiated for which the Company is currently operating under a
letter of intent) expire at various dates through June 30, 1998, requiring
future minimum payments aggregating $34,753,000 through 1998.

Related Parties

In addition to the financing described in Note 10, the Company also has
consulting agreements with certain stockholders and their affiliates under which
management services are provided to the Company. Total fees under these
agreements are $500,000 annually, payable through July 30, 1996.

F-21
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

15. COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
The Company paid $2,000,000 and $1,000,000 in consulting payments to the
former MLM shareholders during 1995 and 1994, respectively. No further amounts
are owed to the former MLM shareholders.

Legal Matters

The Company and its subsidiaries are parties to various legal proceedings
arising in the ordinary course of business. Management believes, based upon the
advice of legal counsel responsible for the review of such matters, that there
is no proceeding, either threatened or pending, against the Company or its
subsidiaries that could result in a materially adverse effect on the business or
the financial condition of the Company.

16. STOCKHOLDERS' INVESTMENT:

During 1992, the Board of Directors authorized the issuance of 464 shares of
Class A common stock to the chief executive officer of the Company for a total
consideration of $120,300. As of December 31, 1995, these shares had not been
issued.

The Company's current authorized capital consists of an aggregate of 114,075
shares of stock, consisting of 80,000 shares designated as Class A common stock
(having 10 votes per share) (the Common Stock), 30,000 shares designated as
Class B common stock (having one vote per share), 4,025 shares designated as
redeemable preferred stock, and 50 shares designated as senior preferred stock.

In connection with the 1993 MLM Acquisition (see Note 3), the former MLM
stockholders received 14,118 shares of Class B common stock and 24 shares of
senior preferred stock in exchange for the issued and outstanding capital stock
of MLM. Simultaneously, 4,025 shares of redeemable preferred stock were issued
to the Company's majority stockholder in partial consideration for additional
funding and consent to the 1993 MLM Acquisition. In connection with the 1995 MLM
Settlement (see Note 3), in September 1995 all of the issued and outstanding
Class B common stock and senior preferred stock were returned to the Company and
canceled.

Dividends on the preferred shares accrue at the rate of $120 per year per
share (payable quarterly) and are cumulative. The preferred stock has a
liquidation preference of $1,000 per share together with all accrued but unpaid
dividends, and may be redeemed at any time, in whole or in part, by the Company
for the liquidation preference amount together with all accrued but unpaid
dividends. No dividends have been declared by the Company for the preferred
stock. Accumulated but undeclared and unpaid dividends on the preferred stock as
of December 31, 1995 and 1994, were $1,207,500 and $724,500, respectively.

Under an arrangement with the majority stockholder, the chief executive
officer of the Company has the right (the Put Right) to require the Company to
purchase on November 30, 1998, all shares of Common Stock and options owned by
such officer for a purchase price of $3,000,000, less any amounts previously
realized by such officer with respect to those shares and options. In the event
the Company fails to purchase these securities upon the exercise of the Put
Right, the majority stockholder is obligated to fulfill the commitment.

F-22
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

17. SUBSEQUENT EVENTS:

Refinancing of Long-Term Debt

In May 1996, the Company refinanced substantially all of its long-term debt.
The proceeds from this refinancing were used to refinance existing senior bank
obligations, repay $8.5 million of subordinated notes payable to majority
stockholder, and to acquire licenses and tradenames from Donruss Trading Cards,
Inc. (see below). The refinanced credit facilities include a $15.0 million
revolving credit commitment and $88.0 million of term loans. Total availability
under the revolving credit commitment is limited to 80% of eligible accounts
receivable and 50% of eligible inventory, both as defined in the credit
agreement. Outstanding borrowings under the credit facilities bear interest at
optional rates based on the prime rate or LIBOR. A commitment fee is payable on
unused amounts under the revolving credit facility. All outstanding borrowings
under the revolving credit commitment are payable on May 27, 2001 (extendable to
May 27, 2002 under certain conditions), and the term loans are payable in 16
quarterly payments of $0.5 million and then 4 quarterly payments of $8.0 million
through May 28, 2001, on $40 million of term loans and in 20 quarterly payments
of $0.5 million and then 4 quarterly payments of $9.5 million through May 28,
2002, on the other $48.0 million of term loans, plus additional annual payments,
beginning in 1997, based upon 50% of any excess cash flows (as defined)
generated during each preceding calendar year. The credit agreement contains
covenants requiring the maintenance of certain minimum financial ratios and
limitations on dividend payments and the issuance of equity securities. The
credit facilities are collateralized by substantially all assets of the Company.

In connection with the senior bank debt refinancing described above, during
May 1996, the maturity dates of all principal and interest payable under the
subordinated notes payable to majority stockholder were extended, by agreement
of the noteholder, to December 31, 2001.

Acquisition of Donruss Sports Trading Card Licenses and Tradenames

Recapitalization and Initial Public Offering

The Company has filed a registration statement with the Securities and
Exchange Commission pursuant to an initial public offering (the Offering)
whereby 4,000,000 million shares of Common Stock are to be sold at an estimated
per share amount of $15. Immediately prior to the completion of the Offering,
(1) the Company will change its authorized capital to include 20,000,000 shares
of Common Stock, (2) the Company will declare a -for-1 stock split, (3) the
majority stockholder will convert all but $33.0 million of its subordinated
notes payable and all 4,025 shares of its preferred stock into 5,499,800 shares
of Common Stock, and (4) the Company will grant options in August 1996 to
purchase shares of Common Stock at $ per share and will contribute
shares of Common Stock to the Company's 401(k) plan. In connection with
these transactions, the Company expects to record non-cash expenses at the time
of the Offering of approximately $ million.

F-23
<PAGE>
PINNACLE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

18. UNAUDITED PRO FORMA INFORMATION:

Of the net proceeds from the sale of shares of Common Stock offered by the
Company in the Offering, approximately $22.0 million will be used to repay
senior bank borrowings and $33.0 million will be used to repay subordinated
notes payable to majority stockholder. Pro forma net income per common share is
calculated using the weighted average number of shares of Common Stock
outstanding during the period (after giving effect to (i) the conversion of
subordinated notes payable and preferred stock referred to in Note 17, (ii)
assuming the issuance and sale of 4,000,000 shares of Common Stock and
application of the proceeds, as described, as if these transactions had occurred
on January 1, 1995, (iii) decreased selling, general and administrative expenses
related to management and consulting fees offset by increased salaries to senior
management under new employment agreements, and (iv) a tax provision on the
resulting pro forma net income before taxes), plus options granted in August
1996 to purchase Common Stock at per share and Common Stock contributed to the
Company's 401(k) plan, assuming all such Common Stock was outstanding for all
periods presented. For purposes of this computation, the weighted average number
of shares of Common Stock outstanding during the period ended December 31, 1995,
is .

F-24
<PAGE>
- ------------------------------------------- ----------------------------------
- ------------------------------------------- ----------------------------------
NO DEALER, SALESPERSON OR OTHER
INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT 4,000,000 SHARES
CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING COVERED BY THIS PROSPECTUS.
IF GIVEN OR MADE, SUCH INFORMATION OR PINNACLE BRANDS, INC.
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS COMMON STOCK
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY
PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT
BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.

-------------------

TABLE OF CONTENTS

PAGE
---- -------------------
Prospectus Summary.................... 1
Risk Factors.......................... 7 PROSPECTUS
The Company........................... 10
Use of Proceeds....................... 12 -------------------
Dividend Policy....................... 12
Dilution.............................. 13
Capitalization........................ 14
Selected Financial and Operating
Data.................................. 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 25
Management............................ 39 MERRILL LYNCH & CO.
Certain Transactions.................. 45
Principal and Selling Stockholders.... 47
Description of Capital Stock.......... 48
Description of Indebtedness........... 49
Shares Eligible for Future Sale....... 51
Underwriting.......................... 52
Legal Matters......................... 53
Experts............................... 53
Additional Information................ 54
Index to Financial Statements......... F-1 , 1996

-------------------

UNTIL , 1996 (25 DAYS FROM THE
DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- ------------------------------------------- ----------------------------------
- ------------------------------------------- ----------------------------------

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated (except for the Securities and
Exchange Commission registration fee and the National Association of Securities
Dealers, Inc. filing fee) fees and expenses (other than underwriting discounts
and commissions) in connection with the offering described in this registration
statement:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.................... $23,793.10
National Association of Securities Dealers, Inc. filing fee............
The New York Stock Exchange filing fee.................................
Transfer Agent and Registrar fees......................................
Blue Sky filing and counsel fees and expenses..........................
Printing and engraving costs...........................................
Legal fees and expenses................................................
Accounting fees and expenses...........................................
Miscellaneous..........................................................
Total............................................................
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Eleventh of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation"), as provided by Section
102(b)(7) of the Delaware General Corporation Law ("Delaware Law"), enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director to a corporation or
its stockholders for violations of the director's fiduciary duty, except (i) for
any breach of a director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the Delaware Law (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which a director derived an improper personal benefit.

Section 145 of the Delaware Law provides, in summary, that directors and
officers of Delaware corporations are entitled, under certain circumstances, to
be indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, if they had no
reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made in respect of any claim, issue or matter as to which
they shall have been adjudged to be liable to the Company, unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, they are fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper. Any
such indemnification may be made by the Company only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Article Tenth of the Company's Certificate of
Incorporation entitles officers and directors of the Company to indemnification
to the fullest extent permitted by Section 145 of the Delaware Law, as the same
may be supplemented from time to time.

Reference is also made to the Company's Certificate of Incorporation, filed
as Exhibit 3.1 hereto.

II-1
<PAGE>
Reference is also made to Section of the Underwriting Agreement contained
in Exhibit 1.1 hereto, which provides certain indemnification rights to the
directors and officers of the Company in connection with this Offering.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On July 30, 1993, the Company issued an aggregate of 14,117.7 shares of its
Class B Common Stock and an aggregate of 27.6675 shares of its Senior Preferred
Stock to Daniel C. Shedrick, Harris A. Cahn, Barry A. Halper, Bruno Tomasi and
Franco Harris (collectively, the "MLM Stockholders") in connection with its
acquisition of MLM Marketing, Inc. On March 17, 1994 the Company issued an
aggregate of 6,352.96 shares of Class B Common Stock and an aggregate of 8.055
shares of Senior Preferred Stock to the MLM Stockholders. In September 1995, the
acquisition of MLM Marketing, Inc. was reformed and the MLM Stockholders
returned to the Company all of the shares of Class B Common Stock and Senior
Preferred Stock issued to them in the acquisition. In connection with the
acquisition, Acadia received 4,025 shares of Redeemable Preferred Stock. On
March 31, 1994 and May 31, 1995, Acadia received 3,486.90652 and 2,234.48529
shares of Class A Common Stock. During the past three years, $73.7 million of
subordinated indebtedness was issued to Acadia, of which $28.4 million was
issued for cash, $28.0 million was issued as pay-in-kind interest and $17.3
million was issued in exchange for maturing subordinated indebtedness.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- --------------------------------------------------------------------------------
<C> <S>
10.13 License Agreement dated as of May 28, 1996 by and between Pinnacle Brands, Inc.
and Donruss Trading Cards, Inc.
10.14 Settlement Agreement dated September 15, 1995 among Grand Slam Acquisition
Corp., Pinnacle Brands, Inc., MLM Acquisition Corp., the MLM Stockholders and
Larry Lambrecht
10.15 Settlement Agreement dated September 15, 1995 among Grand Slam Acquisition
Corp., Pinnacle Brands, Inc., MLM Acquisition Corp., the MLM Stockholders and
Larry Lambrecht
10.16 Release dated September 15, 1995, by and among Grand Slam Acquisition Corp.,
Pinnacle Brands, Inc. and MLM Acquisition Corp.
10.17 Release dated September 15, 1995, by and among Daniel C. Shedrick, Harris A.
Cohn, Barry A. Halper, Bruno Tomasi, Franco Harris, Larry Lambrecht, Grand
Slam Acquisition Corp., Pinnacle Brands, Inc., MLM Acquisition Corp. and the
other Releasees as listed therein.
10.18 Release dated as of September 15, 1995, by and among Grand Slam Acquisition
Corp., Pinnacle Brands, Inc., MLM Acquisition Corp., Daniel C. Shedrick,
Harris A. Cohn, Barry A. Halper, Bruno Tomasi, Franco Harris, Larry Lambrecht
and the other Releasees as listed therein.
10.19 Retail License Agreement dated September 21, 1993 between NHL Enterprises, Inc.
and Pinnacle Brands, Inc. (1)
10.20 License Agreement dated June 3, 1996 between Donruss Trading Card Company and
the National Hockey League Players Association (1)
10.21 License Agreement dated March 9, 1993 between Score Group, Inc. and the National
Hockey League Players Association (1)
10.22 License Agreement dated December 31, 1994 between the Major League Baseball
Players Association and Donruss Trading Cards, Inc. (1)
10.23 (Standard) Major League Baseball Properties, Inc. License Agreement re: Donruss
Trading Cards, Inc., dated May 23, 1996 (1)
10.24 License Agreement dated December 27, 1994 between the Major League Baseball
Players Association and Pinnacle Brands, Inc. (1)
10.25 Agreement dated March 14, 1995 between Pinnacle Brands, Inc. and the National
Football League Players, Inc. (1)
21.1 Subsidiaries of the Company (1)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP (included in Exhibit
5.1)(1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>

- ------------

(1) To be filed by amendment.

(b) Consolidated Financial Statements Schedules

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or notes
thereto.

ITEM 17. UNDERTAKINGS

(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other

II-3
<PAGE>
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(2) The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Grand Prairie, State of Texas on July 15, 1996.

GRAND SLAM ACQUISITION CORP.

By: /s/ JERRY M. MEYER
..................................

Jerry M. Meyer
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes each of Jerry M. Meyer, Michael J. Cleary and John S.
Worth, as attorney-in-fact, to sign and file on his or her behalf, individually
and in each capacity stated below, any pre-effective or post-effective amendment
hereto or any registration statement relating to this offering.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------- ------------------
<S> <C> <C>

/s/ JERRY M. MEYER Chief Executive Officer and Director July 15, 1996
..................................... (principal executive officer)
Jerry M. Meyer

/s/ MICHAEL J. CLEARY Executive Vice President, Chief July 15, 1996
..................................... Operating Officer and Director
Michael J. Cleary

/s/ JOHN S. WORTH Chief Financial Officer, Senior Vice July 15, 1996
..................................... President and Secretary (principal
John S. Worth financial and accounting officer)

/s/ BRADFORD E. BERNSTEIN Director July 15, 1996
.....................................
Bradford E. Bernstein

/s/ DANIEL L. DOCTOROFF Director July 15, 1996
.....................................
Daniel L. Doctoroff

/s/ DOUGLAS D. WHEAT Director July 15, 1996
.....................................
Douglas D. Wheat
</TABLE>

II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Pinnacle Brands Inc.:

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Pinnacle Brands Inc. (formerly Grand
Slam Acquisition Corp., a Delaware Corporation) and subsidiaries included in
this registration statement and have issued our report thereon dated March 7,
1996. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II, Valuation and Qualifying
Accounts, is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

ARTHUR ANDERSEN LLP

March 7, 1996
Dallas, Texas

S-1

<PAGE>
PINNACLE BRANDS, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------------- DEDUCTIONS
BALANCE AT CHARGED TO CHARGED TO ------------ NET
BEGINNING COSTS AND OTHER PRODUCT INCREASE
OF PERIOD EXPENSES ACCOUNTS RETURNS (DECREASE)
----------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Description

YEAR ENDED DECEMBER 31, 1995
Included in Accrued Liabilities:
Accrued Sales Returns....................... $ 7,153,000 $14,925,000 $ -- $(17,052,000) $(2,127,000)
----------- ----------- ---------- ------------ -----------
Total..................................... $ 7,153,000 $14,925,000 $ -- $(17,052,000) $(2,127,000)
----------- ----------- ---------- ------------ -----------
----------- ----------- ---------- ------------ -----------

YEAR ENDED DECEMBER 31, 1994
Included in Accrued Liabilities:
Accrued Sales Returns....................... $11,765,000 $17,037,000 $ -- $(21,649,000) $ 4,612,000
----------- ----------- ---------- ------------ -----------
Total..................................... $11,765,000 $17,037,000 $ -- $(21,649,000) $ 4,612,000
----------- ----------- ---------- ------------ -----------
----------- ----------- ---------- ------------ -----------

YEAR ENDED DECEMBER 31, 1993
Included in Accrued Liabilities:
Accrued Sales Returns....................... $ 3,276,000 $19,010,000 $ -- $(10,521,000) $ 8,489,000
----------- ----------- ---------- ------------ -----------
Total..................................... $ 3,276,000 $19,010,000 $ -- $(10,521,000) $ 8,489,000
----------- ----------- ---------- ------------ -----------
----------- ----------- ---------- ------------ -----------

BALANCE AT
END
OF PERIOD
-----------
<S> <C>
Description
YEAR ENDED DECEMBER 31, 1995
Included in Accrued Liabilities:
Accrued Sales Returns....................... $ 5,026,000
-----------
Total..................................... $ 5,026,000
-----------
-----------
YEAR ENDED DECEMBER 31, 1994
Included in Accrued Liabilities:
Accrued Sales Returns....................... $ 7,153,000
-----------
Total..................................... $ 7,153,000
-----------
-----------
YEAR ENDED DECEMBER 31, 1993
Included in Accrued Liabilities:
Accrued Sales Returns....................... $11,765,000
-----------
Total..................................... $11,765,000
-----------
-----------
</TABLE>

S-2

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- --------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Company and Merrill Lynch & Co. (1)
3.1 Form of Amended and Restated Certificate of Incorporation of the Company (1)
3.2 Amended and Restated By-Laws of the Company (1)
4.1 Form of Certificate for Common Stock (1)
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP (1)
10.1 Credit Agreement dated as of May 29, 1996 among Pinnacle Brands, Inc., Grand
Slam Acquisition Corp. and GSAC Holdings, Inc., as Parent Guarantors, the
Subsidiary Guarantors, the lenders named therein, Merrill Lynch & Co., as
Arranger and Syndication Agent, and Wells Fargo Bank, N.A., as Administrative
and Collateral Agent
10.2 Grand Slam Acquisition Corp. 1992 Stock Option Plan (1)
10.3 Lease Agreement between E. Ann Flavin and John P. Flavin and Optigraphics
Corporation
10.4 Amended and Restated Employment Agreement dated as of , 1996, between the
Company and Jerry M. Meyer (1)
10.5 Amended and Restated Employment Agreement dated as of , 1996 between the
Company and Michael J. Cleary (1)
10.6 Employment Agreement dated as of , 1996 between the Company and John S.
Worth (1)
10.7 Employment Agreement dated as of , 1996 between the Company and James
Brochhausen (1)
10.8 Pinnacle Brands Inc. 1996 Incentive Stock Option Plan (1)
10.9 Pinnacle Brands, Inc. 401(k) Plan (1)
10.10 Asset Purchase Agreement dated as of April 16, 1996 by and among Donruss Trading
Cards, Inc., Leaf, Inc. and Pinnacle Brands, Inc.
10.11 Trademark License Agreement dated as of May 28, 1996, by and between Leaf, Inc.
and Pinnacle Brands, Inc.
10.12 License Agreement dated as of May 28, 1996 by and between Pinnacle Brands, Inc.
and Donruss Trading Cards, Inc.
10.13 License Agreement dated as of May 28, 1996 by and between Pinnacle Brands, Inc.
and Donruss Trading Cards, Inc.
10.14 Settlement Agreement dated September 15, 1995 among Grand Slam Acquisition
Corp., Pinnacle Brands, Inc., MLM Acquisition Corp., the MLM Stockholders and
Larry Lambrecht
10.15 Settlement Agreement dated September 15, 1995 among Grand Slam Acquisition
Corp., Pinnacle Brands, Inc., MLM Acquisition Corp., the MLM Stockholders and
Larry Lambrecht
10.16 Release dated September 15, 1995, by and among Grand Slam Acquisition Corp.,
Pinnacle Brands, Inc. and MLM Acquisition Corp.
10.17 Release dated September 15, 1995, by and among Daniel C. Shedrick, Harris A.
Cohn, Barry A. Halper, Bruno Tomasi, Franco Harris, Larry Lambrecht, Grand
Slam Acquisition Corp., Pinnacle Brands, Inc., MLM Acquisition Corp. and the
other Releasees as listed therein.
10.18 Release dated as of September 15, 1995, by and among Grand Slam Acquisition
Corp., Pinnacle Brands, Inc., MLM Acquisition Corp., Daniel c. Shedrick,
Harris A. Cohn, Barry A. Halper, Bruno Tomasi, Franco Harris, Larry Lambrecht
and the other Releasees as listed therein.
10.19 Retail License Agreement dated September 21, 1993 between NHL Enterprises, Inc.
and Pinnacle Brands, Inc. (1)
10.20 License Agreement dated June 3, 1996 between Donruss Trading Card Company and
the National Hockey League Players Association (1)
10.21 License Agreement dated March 9, 1993 between Score Group, Inc. and the National
Hockey League Players Association (1)
10.22 License Agreement dated December 31, 1994 between the Major League Baseball
Players Association and Donruss Trading Cards, Inc. (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- --------------------------------------------------------------------------------
<C> <S>
10.23 (Standard) Major League Baseball Properties, Inc. License Agreement re: Donruss
Trading Cards, Inc., dated May 23, 1996(1)
10.24 License Agreement dated December 27, 1994 between the Major League Baseball
Players Association and Pinnacle Brands, Inc.(1)
10.25 Agreement dated March 14, 1995 between Pinnacle Brands, Inc. and the National
Football League Players, Inc. (1)
21.1 Subsidiaries of the Company(1)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP (included in Exhibit
5.1)(1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>

- ------------

(1) To be filed by amendment.

Exhibit 10.1

************************************************************

PINNACLE BRANDS, INC.,
as Borrower

and

GRAND SLAM ACQUISITION CORP.

and

GSAC HOLDINGS, INC.,
as Parent Guarantors

and

SUBSIDIARY GUARANTORS

_____________________________

CREDIT AGREEMENT

Dated as of May 29, 1996

______________________________

MERRILL LYNCH & CO.,
as Arranger and Syndication Agent

and

WELLS FARGO BANK, N.A.,
as Administrative and Collateral Agent

and

THE BANK OF NEW YORK,
as Documentation Agent

************************************************************

<PAGE>

TABLE OF CONTENTS

This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.

Page
----

Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . 1

1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . 37
1.03 Classes and Types of Loans . . . . . . . . . . . . . . . . . . 38
1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . 38

Section 2. Commitments, Loans, Notes, Fees
and Prepayments . . . . . . . . . . . . . . . . . . . . . 39

2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.02 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.03 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 42
2.04 Termination and Reductions of Commitments . . . . . . . . . . 47
2.05 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.06 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . 48
2.07 Several Obligations; Remedies Independent . . . . . . . . . . 48
2.08 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2.09 Optional Prepayments and Conversions or
Continuations of Loans . . . . . . . . . . . . . . . . . . . 50
2.10 Mandatory Prepayments and Reductions of
Commitments . . . . . . . . . . . . . . . . . . . . . . . . 50
2.11 Annual Cleandown . . . . . . . . . . . . . . . . . . . . . . . 53

Section 3. Payments of Principal and Interest . . . . . . . . . . . . . 54

3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . 54
3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Section 4. Payments; Pro Rata Treatment; Computations;
Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 55

4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . 56
4.03 Computations . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . 57
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . 58
4.06 Non-Receipt of Funds by the Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.07 Right of Setoff; Sharing of Payments, Etc. . . . . . . . . . . 60

Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . 62

5.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . 62

-i-
<PAGE>

Page
----

5.02 Limitation on Types of Loans . . . . . . . . . . . . . . . . . 64
5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . . 66
5.05 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 66
5.06 Additional Costs in Respect of Letters of
Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.07 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.08 Replacement of Lender . . . . . . . . . . . . . . . . . . . . 71

Section 6. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . 72

6.01 The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 72
6.02 Obligations Unconditional . . . . . . . . . . . . . . . . . . 72
6.03 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 74
6.04 Subrogation; Subordination . . . . . . . . . . . . . . . . . . 74
6.05 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.06 Instrument for the Payment of Money . . . . . . . . . . . . . 75
6.07 Continuing Guarantee . . . . . . . . . . . . . . . . . . . . . 75
6.08 General Limitation on Guarantee Obligations . . . . . . . . . 76

Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . 76

7.01 Initial Extension of Credit . . . . . . . . . . . . . . . . . 76
7.02 Initial and Subsequent Extensions of Credit . . . . . . . . . 83

Section 8. Representations and Warranties . . . . . . . . . . . . . . . 84

8.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 84
8.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . 84
8.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.05 Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.08 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.09 Investment Company Act . . . . . . . . . . . . . . . . . . . . 88
8.10 Public Utility Holding Company Act . . . . . . . . . . . . . . 88
8.11 Debt Agreements . . . . . . . . . . . . . . . . . . . . . . . 88
8.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . 88
8.13 Use of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.14 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 91
8.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.16 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 93
8.17 True and Complete Disclosure . . . . . . . . . . . . . . . . . 94
8.18 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.19 Ancillary Documents . . . . . . . . . . . . . . . . . . . . . 95
8.20 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 95

-ii-
<PAGE>

Page
----

Section 9. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 95

9.01 Financial Statements, Etc. . . . . . . . . . . . . . . . . . . 96
9.02 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . 100
9.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . 100
9.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.05 Fundamental Changes . . . . . . . . . . . . . . . . . . . . . 103
9.06 Liens and Related Matters . . . . . . . . . . . . . . . . . . 104
9.07 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.08 Investments . . . . . . . . . . . . . . . . . . . . . . . . . 108
9.09 Dividend Payments . . . . . . . . . . . . . . . . . . . . . . 108
9.10 Financial Covenants . . . . . . . . . . . . . . . . . . . . . 111
9.11 Pledge of Additional Collateral . . . . . . . . . . . . . . . 113
9.12 Security Interests . . . . . . . . . . . . . . . . . . . . . . 113
9.13 Subordinated Indebtedness . . . . . . . . . . . . . . . . . . 114
9.14 Lines of Business . . . . . . . . . . . . . . . . . . . . . . 114
9.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . 115
9.16 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 115
9.17 Modifications of Certain Documents . . . . . . . . . . . . . . 116
9.18 Issuance of Equity . . . . . . . . . . . . . . . . . . . . . . 116
9.19 Issuance or Disposal of Subsidiary Stock . . . . . . . . . . . 116
9.20 Limitation on Certain Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 117
9.21 Preservation of Status as Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 117
9.22 Additional Obligors . . . . . . . . . . . . . . . . . . . . . 117
9.23 Restriction on Leases . . . . . . . . . . . . . . . . . . . . 118
9.24 Restriction on Tax Consolidation . . . . . . . . . . . . . . . 118
9.25 Sale and Lease-Backs . . . . . . . . . . . . . . . . . . . . . 118
9.26 Limitation on Other Restrictions on Amendment
of Basic Documents . . . . . . . . . . . . . . . . . . . . . 118
9.27 Sale or Discount of Receivables . . . . . . . . . . . . . . . 119
9.28 Contingent Obligations . . . . . . . . . . . . . . . . . . . . 119
9.29 Interest Rate Protection Agreements . . . . . . . . . . . . . 119

Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . . 120

Section 11. The Administrative Agent . . . . . . . . . . . . . . . . . . 125

11.01 Appointment, Powers and Immunities . . . . . . . . . . . . . 125
11.02 Reliance by Administrative Agent . . . . . . . . . . . . . . 127
11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . 127
11.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 128
11.06 Non-Reliance on Administrative Agent,
Arranger and Other Lenders . . . . . . . . . . . . . . . . 129
11.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . 130
11.08 Resignation or Removal of Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 130
11.09 Consents Under Other Basic Documents . . . . . . . . . . . . 131

-iii-
<PAGE>

Page
----

11.10 Collateral Sub-Agents . . . . . . . . . . . . . . . . . . . . 131
11.11 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . 132

Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 133

12.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
12.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . 134
12.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . 136
12.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . 139
12.06 Assignments and Participations . . . . . . . . . . . . . . . 139
12.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 141
12.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 142
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 142
12.10 Governing Law; Submission to Jurisdiction;
Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
12.11 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
12.12 Treatment of Certain Information;
Confidentiality . . . . . . . . . . . . . . . . . . . . . . 143
12.13 Independence of Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . 145
12.14 Severability; Modification to Conform to
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
12.15 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . 145
12.16 Prior Understandings . . . . . . . . . . . . . . . . . . . . 145

-iv-
<PAGE>

ANNEX A - Commitments

SCHEDULE 1.01(a) - Indebtedness of the Company and GSAC to be Refinanced with
Initial Loans
SCHEDULE 1.01(b) - Subordinated Notes
SCHEDULE 8.03 - Litigation
SCHEDULE 8.11 - Material Agreements and Liens
SCHEDULE 8.12 - Environmental Matters
SCHEDULE 8.14 - Equity Rights
SCHEDULE 8.20 - Real Property
SCHEDULE 9.08 - Investments

EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Tranche A Term Loan Note
EXHIBIT A-3 - Form of Tranche B Term Loan Note
EXHIBIT A-4 - Form of Swing Loans Note
EXHIBIT B - Form of Borrowing Base Certificate
EXHIBIT C - Form of Interest Rate Certificate
EXHIBIT D - Form of Security Agreement
EXHIBIT E - Form of Opinion of Counsel to the Obligors
EXHIBIT F - Form of Confidentiality Agreement
EXHIBIT G - Form of Notice of Assignment
EXHIBIT H - Form of Intercompany Note

-v-
<PAGE>

CREDIT AGREEMENT dated as of May 29, 1996 among: PINNACLE BRANDS,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "Company" or the "Borrower"); GRAND SLAM ACQUISITION
------- --------
CORP., a corporation duly organized and validly existing under the laws of the
State of Delaware ("GSAC," which term shall include its successors and assigns);
----
GSAC HOLDINGS, INC., a corporation duly organized and validly existing under the
laws of the State of Delaware ("GSAC Holdings", which term shall include its
-------------
successors and assigns and, together with GSAC, the "Parent Guarantors");
-----------------
MLM ACQUISITION CORP., a corporation duly organized and validly existing under
the laws of the State of Delaware ("MLM", which term shall include its
---
successors and assigns); DONRUSS TRADING CARD COMPANY, a corporation duly
organized and validly existing under the laws of the State of Delaware ("Donruss
-------
Trading," which term shall include its successors and assigns); each of the
- -------
lenders that is a signatory hereto identified under the caption "LENDERS" on the
signature pages hereto or that, pursuant to Section 12.06(b), shall become a
"Lender" hereunder (individually, a "Lender" and, collectively, the "Lenders");
------ -------
MERRILL LYNCH & CO., as arranger and syndication agent (in such capacity,
together with its successors in such capacity, the "Arranger"); and WELLS FARGO
--------
BANK, N.A., as administrative and collateral agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Administrative
--------------
Agent").
- -----

The parties hereto agree as follows:

Section 1. Definitions and Accounting Matters.
----------------------------------

1.01 Certain Defined Terms. As used herein, the following terms
---------------------
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
---- -----

"Acadia Affiliate" shall mean Keystone, Inc., a Texas corporation and
----------------
its successors and assigns.

"Acadia Electra" shall mean Acadia Electra Partners, L.P., a Delaware
--------------
limited partnership and its successors and assigns.

"Acadia Partners" shall mean Acadia Partners, L.P., a Delaware limited
---------------
partnership and its successors and assigns.

"Acquired Business" shall mean the business acquired pursuant to the
-----------------
Acquisition Documents.

<PAGE>

-2-

"Acquisition" shall mean the purchase by the Company of certain assets
-----------
of Donruss Trading Cards, Inc., a Delaware corporation, pursuant to the
Acquisition Documents for total consideration not to exceed $37,500,000, of
which not more than $32,500,000 shall be in cash.

"Acquisition Documents" shall mean the Purchase and Sale Agreement
---------------------
dated as of April 16, 1996 among the Company, Donruss Trading Cards, Inc., a
Delaware corporation, and Leaf, Inc., a Delaware corporation, and each of the
related documents and instruments, in each case, including all attachments
thereto.

"Additional Costs" shall have the meaning set forth in Section 5.01.
----------------

"Adjusted Net Income" shall mean, for any period, the net income
-------------------
(loss) of the Company and its Consolidated Subsidiaries calculated on a
consolidated basis in accordance with GAAP, adjusted by (I) adding back any
amounts deducted in the calculation of such net income (loss) for such period
associated with (a) the relocation of the Company to new leased premises as
disclosed to the Administrative Agent (to the extent such amounts in the
aggregate for all periods do not exceed $1,500,000), (b) management fees
incurred during fiscal 1995 or fiscal quarters ended March 31, 1996 and June 30,
1996 pursuant to the Company's management agreements as in effect on the date
hereof and (c) premiums incurred in such period for the Key Man Life Insurance
and (II) excluding the effect of (a) gains for such period from sales or
dispositions of assets other than in the ordinary course of business and the tax
consequences thereof, (b) any proceeds of life insurance and (c) any non-
recurring or extraordinary items of income and the non-cash portion of any
extraordinary item of expense for such period.

"Administrative Agent" shall have the meaning set forth in the
--------------------
introduction to this Agreement.

"Administrative Agent's Fee Letter" shall mean the Fee Letter dated
---------------------------------
May 23, 1996, by and among Wells Fargo and the Company.

"Affiliate" shall mean any Person which directly or indirectly
---------
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse and children) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such

<PAGE>

-3-

member or trust. As used in this definition, "control" (including, with its
-------
correlative meanings, "controlled by" and "under common control with") shall
------------- -------------------------
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise); provided,
--------
however, that, in any event, any Person which owns directly or indirectly 10% or
- -------
more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person. Notwithstanding the foregoing, (i) no individual shall be
deemed to be an Affiliate solely by reason of his or her being a director,
officer or employee of the Company or any of its Subsidiaries and (ii) the
Company and its Subsidiaries shall not be deemed to be Affiliates of each other
so long as, with respect to whether a Subsidiary is an Affiliate of the Company
(but not vice-versa) the Company owns 100% of the capital stock of such
Subsidiary.

"Agreement" shall mean this Credit Agreement, as amended from time to
---------
time.

"Amortization Payment" shall have the meaning set forth in Section
--------------------
3.01(b).

"Ancillary Documents" shall mean the Sports Contracts, the
-------------------
Subordinated Debt Documents, the Packaging Agreement and the Acquisition
Documents.

"Applicable Lending Office" shall mean, for each Lender and for each
-------------------------
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other office of such Lender (or of an affiliate of such Lender) as such Lender
may from time to time specify to the Administrative Agent and the Company as the
office by which its Loans of such Type are to be made and maintained.

"Applicable Margin" shall be determined by reference to the following
-----------------
table:

<PAGE>

-4-

Base Rate Loans Eurodollar Loans

Revolving Credit Loans 1.75% 2.75%
Tranche A Term Loans 1.75% 2.75%
Tranche B Term Loans 2.25% 3.25%

; provided, however, that from and after the first anniversary of the Closing
-------- -------
Date, the Applicable Margin for Revolving Credit Loans shall be, when the
Leverage Ratio at the end of the most recent fiscal quarter ended on or after
the first anniversary of the Closing Date is as set forth below, the percentage
per annum set forth opposite such Leverage Ratio below:
- --- -----

Leverage Ratio Base Rate Loans Eurodollar Loans

greater than or 1.75% 2.75%
equal to 3.00

greater than or 1.50% 2.50%
equal to 2.25 and
less than 3.00
greater than or 1.25% 2.25%
equal to 1.50 and
less than 2.25

less than 1.50 1.00% 2.00%

Any change in the Leverage Ratio shall be effective to adjust the Applicable
Margin as of the date of receipt by the Administrative Agent of the Interest
Rate Certificate most recently delivered pursuant to Section 9.01(f).
Notwithstanding anything herein or elsewhere to the contrary, the Applicable
Margin for Swing Loans shall not be changed or otherwise affected by a change in
the Leverage Ratio and the Applicable Margin for Swing Loans shall at all times
be 1.75%.

"Arranger" shall have the meaning set forth in the introduction to
--------
this Agreement.

"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978.
---------------

"Baseball Contracts" shall mean the following agreements:
------------------

<PAGE>

-5-

(i) the License Agreement dated December 27, 1994 between the Company
and the Major League Baseball Players Association;

(ii) the Letter Agreement dated August 25, 1995 between Major League
Baseball Properties, Inc. and the Company;

(iii) the License Agreement dated June 7, 1995 between Major League
Baseball Properties, Inc. and the Company (acquired in connection with the
acquisition of the Acquired Business);

(iv) the License Agreement dated December 31, 1994 between the Major
League Baseball Players Association and the Company (acquired in connection
with the acquisition of the Acquired Business);

(v) the Letter Agreement dated December 18, 1995 between the Major
League Baseball Players Association and the Company (acquired in connection
with the acquisition of the Acquired Business); and

(vi) Player Highlight Agreement dated February 6, 1996 between the
Major League Baseball Players Association (on behalf of Frank Thomas) and
the Company (acquired in connection with the acquisition of the Acquired
Business).

"Base Rate" shall mean, for any day, a rate per annum that is the
---------
higher of (i) the Prime Rate or (ii) the Federal Funds Rate plus 0.5%.

"Base Rate Loans" shall mean Loans that bear interest at rates based
---------------
upon the Base Rate.

"Basic Documents" shall mean this Agreement, the Notes, the Letter of
---------------
Credit Documents and the Security Documents.

"Borrower" shall have the meaning set forth in the introduction to
--------
this Agreement.

"Borrowing Base" shall mean, as at any date, the sum of (i) 80% of the
--------------
aggregate amount of Eligible Receivables at said date plus (ii) 50% of the
----
aggregate value of Eligible Inventory at said date; provided, however, that (x)
-------- -------
at no time may the amount determined under clause (ii) represent more than 50%
of the Borrowing Base and (y) the amount of the Borrowing Base attributable to
Inventory located in Canada may not exceed $1,500,000. The "value" of Eligible
Inventory shall be

<PAGE>

-6-

determined at the lower of cost or market in accordance with generally accepted
accounting principles, except that cost shall be determined on a weighted
average basis.

"Borrowing Base Certificate" shall mean a certificate of a senior
--------------------------
financial officer of the Company, substantially in the form of Exhibit B and
---------
appropriately completed.

"Business Day" shall mean any day (a) on which commercial banks are
------------
not authorized or required to close in New York City or San Francisco,
California and (b) if such day relates to a borrowing of, a payment or
prepayment of principal of or interest on, a Continuation or Conversion of or
into, or an Interest Period for, a Eurodollar Loan or a notice by the Company
with respect to any such borrowing, payment, prepayment, Continuation,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.

"Capital Expenditures" shall mean, for any period, expenditures
--------------------
(including the aggregate amount of Capital Lease Obligations incurred during
such period) made by the Company or any of its Consolidated Subsidiaries to
acquire or construct fixed assets, plant and equipment (including renewals,
improvements and replacements, but excluding repairs) during such period
computed in accordance with GAAP.

"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

"Cash Interest Expense" shall mean, for any period, the sum, for the
---------------------
Company and its Consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following: (a) all
interest payable in cash in respect of Indebtedness during such period (whether
or not actually paid during such period), excluding the amortization of any fees
paid in connection with the Loans made hereunder plus (b) the net amounts paid
----
(or minus the net amounts received) under Interest Rate Protection Agreements
-----
during such period.

<PAGE>

-7-

"Casualty Event" shall mean, with respect to any Property of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.

"Class" shall have the meaning set forth in Section 1.03.
-----

"Closing Date" shall mean the date upon which the initial extension of
------------
credit hereunder is made.

"Code" shall mean the Internal Revenue Code of 1986, as amended.
----

"Collateral Account" shall have the meaning set forth in Section 4.01
------------------
of the Security Agreement.

"Commitment Letter" shall mean that certain commitment letter among
-----------------
Merrill Lynch and the Company and the Parent Guarantors dated April 15, 1996
together with Exhibit A thereto and incorporated therein.

"Commitments" shall mean the Revolving Credit Commitments and the Term
-----------
Loan Commitments.

"Company" shall have the meaning set forth in the introduction of this
-------
Agreement.

"Consolidated Rental Payments" shall mean, for any period, the
----------------------------
aggregate amount of all rents paid or to be incurred under all capital leases
and operating leases of the Company and its Subsidiaries as lessees (net of
sublease income).

"Consolidated Subsidiary" shall mean, for any Person, each Subsidiary
-----------------------
of such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with generally accepted
accounting principles.

"Contingent Obligations" shall mean, as to any Person, without
----------------------
duplication, any obligation of such Person guaranteeing or expressly intended to
guarantee by its terms any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary obligor") in any
------------------- ---------------
manner, whether directly or indirectly, including any "keep-well" or "make-well"
agreement, guarantee of return on equity or other obligation of

<PAGE>

-8-

such Person and including any obligation of such Person, whether or not
contingent, to (a) purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) advance or supply funds
(i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise assure or hold harmless the
owner of such primary obligation against loss in respect thereof; provided,
--------
however, that the term Contingent Obligation shall not include endorsements of
- -------
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person reasonably and in
good faith.

"Continue", "Continuation" and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 2.09 of a Eurodollar Loan from one Interest
Period to the next Interest Period.

"Convert", "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 2.09 of one Type of Loans into another Type of Loans, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.

"Creditors" shall mean the Arranger, the Administrative Agent and the
---------
Lenders; and "Creditor" shall mean any of them.
--------

"Debt Issuance" shall mean the incurrence by the Company of any
-------------
Indebtedness after the Closing Date (other than under clauses (a), (c), (d),
(f), (g) and (h) of Section 9.07) or the incurrence by GSAC or GSAC Holdings of
any Permitted Subordinated Indebtedness.

"Default" shall mean an Event of Default or an event that with notice
-------
or lapse of time or both would become an Event of Default.

"Disposition" shall mean any conveyance, sale, lease assignment,
-----------
transfer or other disposition (including any sale-

<PAGE>

-9-

leaseback transaction) of any Property (including shares of capital stock of any
Subsidiary of any Person) (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any Person (other than the Company) to the
extent exceeding $250,000 in any fiscal year other than (a) an Excluded
Disposition and (b) an exchange of equipment for like equipment provided that
the Company or such Subsidiary receives fair market value in such exchange for
the Property disposed of.

"Disposition Event" shall mean (i) a Disposition or (ii) the receipt
-----------------
by GSAC or any of its Subsidiaries of cash proceeds or cash distributions of any
kind from Property received in consideration for a Disposition.

"Distribution" shall have the meaning set forth in Section 9.09(f).
------------

"Dividend Payment" shall mean dividends (in cash, Property or
----------------
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of GSAC or any of its Subsidiaries, or of any rights, warrants or
options to acquire the same (or to make payments to any Person, such as "phantom
stock", where the amount thereof is calculated with reference to the fair market
or equity value of GSAC, or any of its Subsidiaries), but excluding (i) in the
case of GSAC, (w) dividends payable in respect of shares of the common stock of
GSAC through the issuance of additional shares of common stock of GSAC,
(x) dividends payable in respect of any class of preferred stock of GSAC, to the
extent the issuance thereof is permitted hereunder, through the issuance of
additional shares of such class of preferred stock, (y) the conversion of shares
of Senior Preferred Stock of GSAC in accordance with Article SEVENTH, Section 6
of GSAC's Restated Certificate of Incorporation as in effect on the date hereof
and (z) any conversion of shares of Class B Common Stock of GSAC in accordance
with Article FIFTH, Section 3 of GSAC's Restated Certificate of Incorporation as
in effect on the date hereof, (ii) in the case of the Company, dividends payable
in respect of shares of the common stock of the Company through the issuance of
additional shares of common stock of the Company and (iii) in the case of GSAC
Holdings, dividends payable in respect of shares of the common stock of GSAC
Holdings through the issuance of additional shares of common stock of GSAC
Holdings.

"Documentation Agent" shall mean The Bank of New York.
-------------------

<PAGE>

-10-

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

"Donruss Trading" shall have the meaning set forth in the introduction
---------------
to this Agreement.

"EBITDA" shall mean, for any period, the remainder of (a) the sum
------
(without duplication) of the amounts for such period of (i) Adjusted Net Income,
(ii) income tax expense (including reserves for deferred taxes not payable
currently) to the extent deducted in determining Adjusted Net Income for such
period, (iii) interest expense to the extent deducted in determining Adjusted
Net Income for such period and (iv) depreciation and amortization allowances to
the extent deducted in determining Adjusted Net Income for such period minus (b)
-----
the amount for such period of interest income, all as determined on a
consolidated basis for the Company and its Consolidated Subsidiaries.

"Eligible Inventory" shall mean, as at any date, all Inventory
------------------
consisting of raw materials (other than inks), work-in-process and finished
goods owned by the Company as at such date and located in a jurisdiction in the
United States of America as to which appropriate Uniform Commercial Code
financing statements have been filed naming the Company as "debtor" and the
Administrative Agent for the benefit of the Lenders as "secured party" or
located in Canada and (whether located in the United States or in Canada)

(x) if such Inventory is being processed or stored by a third Person,
the Company has filed appropriate Uniform Commercial Code financing
statements with respect to such Inventory located in the United States
naming such third Person as Debtor (and such financing statements have been
properly assigned to the Administrative Agent for the benefit of the
Lenders), or

(y) with respect to up to three other Persons, if such Inventory is
being stored or processed by a third Person, such third Person has executed
and delivered to the Administrative Agent a supplier's subordination
agreement satisfactory to the Majority Revolving Credit Lenders in form and
substance; provided, however, that "Eligible Inventory" shall not include
-------- -------
the value of such Inventory stored or processed by any one such third
Person in excess of $500,000, or

(z) if such Inventory is being shipped to the Company from outside
the United States, appropriate documents of

<PAGE>

-11-

title with respect to such Inventory have been delivered to the
Administrative Agent as additional collateral under the Security Agreement,

(excluding, however, any such Inventory which has been shipped to a customer of
the Company, even if on a consignment or "sale or return" basis, it being
understood that such Inventory gives rise to an Eligible Receivable to the
extent otherwise satisfying the requirements thereof) and which is in good
condition and is either currently useable or currently saleable in the normal
course of the Company's business; provided, however, that (i) in no event shall
-------- -------
Eligible Inventory include finished goods which have been held by the Company
for more than 12 months and (ii) the Administrative Agent may at any time
exclude from Eligible Inventory any type of Inventory which the Administrative
Agent (in its sole discretion) determines to be unmarketable based on the
results of a collateral audit conducted pursuant to Section 9.01(g).

"Eligible Person" shall mean a financial institution or investment
---------------
company or fund that makes commercial loans in the ordinary course of its
business.

"Eligible Receivables" shall mean, as at any date, the aggregate of
--------------------
all Receivables at such date owing to the Company other than the following
(determined without duplication):

(a) any Receivable not payable in Dollars or Canadian dollars,

(b) any Receivable which, at the date of issuance of the respective
invoice therefor, was payable more than forty-five days after shipment of
the related Inventory (or in the case of any such Receivable owing from
Anco, Toys-R-Us or Sams Wholesale Club or, if expressly approved by the
Majority Revolving Credit Lenders, any other substantial account debtor,
more than 60 days after shipment of the related Inventory),

(d) any Receivable owing from an account debtor whose principal place
of business is located outside of the United States of America or Canada
unless either the Majority Revolving Credit Lenders have agreed in writing
that such Receivable shall be treated as "Eligible" or such Receivable is
backed by U.S. Government insurance or a letter of

<PAGE>

-12-

credit, in form and substance reasonably satisfactory to the Administrative
Agent, issued or confirmed by a bank organized under the laws of the United
States of America or a state thereof and having capital and surplus in
excess of $500,000,000 (so long as such letter of credit has been delivered
to the Administrative Agent as additional collateral under the Security
Agreement),

(e) any Receivable owing from an account debtor that is the subject
of a voluntary or involuntary bankruptcy or similar proceeding or that the
Administrative Agent has notified the Company does not have a satisfactory
credit standing (based on the determination of the Administrative Agent
that there is a reasonable basis for exclusion),

(f) any Receivable which remains unpaid for more than sixty days
(measured from the due date of the invoice),

(g) all Receivables of any account debtor if any Receivable owed by
such account debtor is more than sixty days past due, unless a Receivable
of such account debtor is more than sixty days past due solely (x) as a
result of an unresolved dispute with the respective account debtor or
(y) because it relates to goods that the Company has been advised by such
account debtor are to be returned,

(h) any Receivable as to which there is any unresolved dispute with
the respective account debtor (but only to the extent of the amount thereof
in dispute),

(i) any Receivable evidenced by an Instrument (as defined in the
Security Agreement) not in the possession of the Administrative Agent (but
only to the extent of the amount of the Receivable evidenced by such
Instrument), and

(j) any Receivable arising in connection with goods sold on
consignment or approval or on a sale-or return basis to the extent that the
related goods either have been returned to the Company or the Company has
been advised that the related goods are to be returned.

"Environmental Claim" shall mean, with respect to any Person, any
-------------------
written notice, claim, demand or other communication (collectively, a "claim")
-----
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the

<PAGE>

-13-

presence, or Release into the environment, of any Hazardous Material at any
location, whether or not owned by such Person, or (ii) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law. The
term "Environmental Claim" shall include any claim by any governmental authority
-------------------
for enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law, and any claim by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence of Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.

"Environmental Laws" shall mean any and all present and future
------------------
applicable Federal, state, local and foreign laws, rules or regulations, any
orders or decrees, and the common law in each case as now or hereafter in
effect, relating to the regulation or protection of human health, safety or the
environment or to emissions, discharges, Releases or threatened Releases of
Hazardous Materials into the indoor or outdoor environment, including ambient
air, soil, surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.

"Equity Issuance" shall mean, any of (a) any issuance or sale by GSAC
---------------
or any of its Subsidiaries after the Closing Date of (x) any capital stock
(including any capital stock issued upon exercise of any warrant or option)
or any warrants or options to purchase capital stock or (y) any other security
or instrument representing an equity interest (or the right to obtain any equity
interest) in the issuing or selling Person or (b) the receipt by GSAC or any of
its Subsidiaries after the Closing Date of any capital contribution (whether or
not evidenced by any equity security issued by the recipient of such
contribution); provided, however, that Equity Issuance shall not include (i) any
-------- -------
capital contribution to any Subsidiary of GSAC from GSAC or any of its
Subsidiaries or any such issuance or sale (including as a result of capital
contributions) by the Company to GSAC Holdings or by GSAC Holdings to GSAC, (ii)
any such sale or issuance by GSAC of its capital stock (including capital stock
issued upon exercise of any warrant or option) or warrants or options to
purchase its capital stock, in each case, to directors, officers or employees of
GSAC or any of its Subsidiaries, (iii) any conversion or exchange of any
Indebtedness of either Parent Guarantor outstanding as of the Closing Date for
or into equity securities of GSAC and (iv) any such issuance or sale by GSAC or
any capital contribution to GSAC, GSAC Holdings or the Company,

<PAGE>

-14-

all of the proceeds of which are used by the Company substantially
contemporaneously with such issuance, sale or capital contribution to finance
Related Business Acquisitions.

"Equity Rights" shall mean, with respect to any Person, any
-------------
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or outstanding securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.

"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.

"ERISA Affiliate" shall mean any corporation or trade or business that
---------------
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.

"Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan
--------------------
for any Interest Period therefor, the rate per annum at which the Lender which
is the Administrative Agent is offered deposits in Dollars at approximately
11:00 a.m. London time (or as soon thereafter as practicable) on the date two
Business Days prior to the first day of such Interest Period in the London
interbank market for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount comparable to the amount of
its portion of the Eurodollar Loans to be outstanding during such Interest
Period.

"Eurodollar Loans" shall mean Loans that bear interest at rates based
----------------
on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.

"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest
---------------
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Administrative Agent to be equal to the
Eurodollar Base Rate for such Loan for such Interest Period divided by 1 minus
the Reserve Requirement (if any) for such Loan for such Interest Period.

<PAGE>

-15-

"Event of Default" shall have the meaning set forth in Section 10.
----------------

"Excess Cash Flow" shall mean, for any period, the difference, if any,
----------------
of (a) the sum of the following items for the Company and its Subsidiaries on a
consolidated basis for such period: (i) net income (calculated by (x) excluding
any gains on the sale or other disposition of assets to the extent applied
pursuant to Section 2.10(b)(iii) (other than to the extent not required to be
applied by virtue of the definition of "Disposition") and any life insurance
proceeds, (y) adding back the non-cash component of all extraordinary or non-
recurring items of expense and (z) deducting the non-cash component of all
extraordinary or non-recurring items of income, in each case to the extent taken
into account in the calculation of such net income), (ii) the non-cash component
of interest expense to the extent deducted in determining net income for such
period and (iii) depreciation and amortization allowances to the extent deducted
in determining net income for such period, minus (b) the sum of the following
-----
items for the Company and its Consolidated Subsidiaries on a consolidated basis
for such period: (i) Cash Interest Expense for such period, (ii) Capital
Expenditures for such period that are paid other than from (1) the proceeds of
any Indebtedness other than from Loans in such period, (2) capital contributions
to the Company in such period to the extent not applied to the prepayment of the
Loans or (3) the proceeds of Disposition Events not applied to the prepayment of
the Loans, (iii) principal payments in respect of Indebtedness together with any
administrative fees paid pursuant to this Agreement (excluding (1) any
refinanced Indebtedness, (2) any voluntary prepayments of Revolving Credit Loans
which do not reduce the aggregate amount of Revolving Credit Commitments and (3)
any prepayment of Indebtedness (including the Loans) made with Excess Cash Flow
from any prior period, the proceeds of capital contributions, asset sale
proceeds or proceeds of other Indebtedness) and (iv) net increases in Working
Capital, all determined based on the audited financial statements required to be
provided hereunder (or in the case of the period from the Closing Date to the
fiscal quarter ending March 31, 1997, the unaudited financial statements
required to be provided hereunder).

"Excluded Dispositions" shall mean any conveyance, sale, lease,
---------------------
assignment, transfer or other disposition by the Company or any of its
Subsidiaries of (i) inventory or other Property sold or disposed of in the
ordinary course of business and on customary business terms, (ii) printing
presses or (iii)

<PAGE>

-16-

up to an aggregate fair value of $250,000 of obsolete or worn-out property on
customary business terms.

"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided, however, that (a) if the day for which such
-------- -------
rate is to be determined is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Business Day and (b) if such rate is not
so published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate quoted to the Administrative Agent on such Business
Day on such transactions by three federal funds brokers of recognized standing,
as determined by the Administrative Agent.

"Fee Letter" shall mean the Fee Letter dated April 15, 1996 by and
----------
among Merrill Lynch and the Company and the Parent Guarantors.

"Fixed Charges" shall mean, for any period, (i) scheduled principal
-------------
payments on Indebtedness of the Company or any of its Subsidiaries required to
be made during such period and amortization of discount or premium relating to
any such Indebtedness for such period, whether expensed or capitalized, (ii)
Cash Interest Expense for such period, (iii) capital lease expense for such
period, determined without duplication of items included in Cash Interest
Expense, (iv) the aggregate amount of Capital Expenditures made during such
period excluding those made for Related Business Acquisitions and (v) income
taxes paid or payable in respect of such period (other than, to the extent
otherwise included therein, current income tax expense attributable to gains
from sales of assets out of the ordinary course of business), all as determined
on a consolidated basis for the Company and its Subsidiaries.

"Flapco" shall mean Flapco, Inc., a Delaware corporation and its
------
successors and assigns.

"Football Contracts" shall mean the following agreements:
------------------

(i) the Agreement dated March 14, 1995 between the Company and National
Football League Players Incorporated; and

<PAGE>

-17-

(ii) the License Agreement between the Company and National Football League
Properties, Inc. dated a date as soon as commercially practicable
after the Closing Date (the terms of which are outlined in a letter
previously delivered to the Administrative Agent).

"GAAP" shall mean generally accepted accounting principles in the
----
United States applied on a basis consistent with the principles used in
preparing the financial statements of the Company as of December 31, 1995 and
for the fiscal year then ended.

"generally accepted accounting principles" shall mean generally
----------------------------------------
accepted accounting principles in the United States as in effect from time to
time.

"Governmental Authority" shall mean any government or political
----------------------
subdivision or any agency, authority, board, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

"GSAC" shall have the meaning set forth in the introduction to this
----
Agreement.

"GSAC Holdings" shall have the meaning set forth in the introduction
-------------
to this Agreement.

"Guarantee" shall mean a guarantee, an endorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including causing a bank or other financial institution to issue a letter of
credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a
--------- ----------
correlative meaning.

<PAGE>

-18-

"Guarantors" shall mean the Parent Guarantors and the Subsidiary
----------
Guarantors.

"Hazardous Material" shall mean, collectively, (a) any petroleum or
------------------
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.

"Hockey Contracts" shall mean the following agreements:
----------------

(i) the License Agreements dated March 19, 1993 and April 15, 1993
between the National Hockey League Players Association and the Company
(with respect to the April 15, 1993 agreement, acquired in connection with
the acquisition of the Acquired Business);

(ii) the Retail License Agreement dated August 2, 1993, between NHL
Enterprises, Inc. and the Company (acquired in connection with the
acquisition of the Acquired Business);

(iii) the NHL Export License Agreement dated August 2, 1993 between NHL
Enterprises, Inc. and the Company (acquired in connection with the
acquisition of the Acquired Business);

(iv) the Agreement dated October 1995 between Eric Lindros and the
Company (acquired in connection with the acquisition of the Acquired
Business); and

(v) the License Agreement dated September 21, 1993 between National
Hockey Enterprises, Inc. and the Company.

"Indebtedness" shall mean, for any Person: (a) indebtedness created,
------------
issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to

<PAGE>

-19-

repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than (i) trade accounts payable (other than for borrowed money) arising in the
ordinary course of business, (ii) accrued expenses incurred in the ordinary
course of business and (iii) any earn-out or other deferred payment arrangement
of a similar nature in connection with a Related Business Acquisition made in
accordance with the terms hereof; (c) Indebtedness of others secured by a Lien
on the Property of such Person, whether or not the respective indebtedness so
secured has been assumed by such Person; (d) obligations of such Person
(contingent or otherwise) in respect of letters of credit or similar instruments
issued or accepted by banks and other financial institutions for account of such
Person; (e) Capital Lease Obligations of such Person; and (f) Indebtedness
described in the foregoing clauses (a) through (e) of others Guaranteed by such
Person; provided, however, that in no event shall (A) obligations under Interest
-------- -------
Rate Protection Agreements and (B) Contingent Obligations be treated as
Indebtedness.

"Indemnitee" shall have the meaning set forth in Section 12.03.
----------

"Intercompany Note" shall mean a promissory note substantially in the
-----------------
form of Exhibit H.
---------

"Interest Coverage Ratio" shall mean, for any period, the ratio of (x)
-----------------------
EBITDA for such period minus the aggregate amount of Capital Expenditures made
-----
by the Company and its Consolidated Subsidiaries in cash during such period
excluding those made for Related Business Acquisitions to (y) Cash Interest
Expense for such period.

"Interest Period" shall mean, with respect to any Eurodollar Loan,
---------------
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or the last day of the next preceding Interest Period for
such Eurodollar Loan and (subject to the requirements of Sections 2.01(a),
2.01(b) and 2.09) ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as the Company may select as
provided in Section 4.05, except that each Interest Period that commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period for any Revolving
Credit Loan would otherwise end after the Revolving

<PAGE>

-20-

Credit Commitment Termination Date, such Interest Period shall end on the
Revolving Credit Commitment Termination Date; (ii) no Interest Period for any
Term Loan may commence before and end after any Principal Payment Date unless,
after giving effect thereto, the aggregate principal amount of the Term Loans
having Interest Periods that end after such Principal Payment Date shall be
equal to or less than the aggregate principal amount of the Term Loans scheduled
to be outstanding after giving effect to the payments of principal required to
be made on such Principal Payment Date; (iii) each Interest Period that would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and
(iv) notwithstanding clauses (i) and (ii) above, no Interest Period shall have a
duration of less than one month and, if the Interest Period for any Eurodollar
Loan would otherwise be a shorter period, such Loan shall not be available
hereunder as a Eurodollar Loan for such period.

"Interest Rate Certificate" shall mean an Officers' Certificate
-------------------------
substantially in the form of Exhibit C, delivered pursuant to Section 9.01(f),
---------
demonstrating in reasonable detail the calculation of the Leverage Ratio as of
the last day of the subject period.

"Interest Rate Protection Agreement" shall mean, for any Person, an
----------------------------------
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.

"Inventory" shall mean all Inventory (as defined in the Uniform
---------
Commercial Code in the State of New York, as amended) of the Company, of a type
manufactured or consumed by the Company in the ordinary course of business.

"Investment" shall mean, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person; (b) the making of any deposit with, or advance,
loan or other extension of credit to, any other Person (including the purchase
of Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person), but excluding
any such advance, loan or extension of credit having a term not exceeding 90
days arising in connection with the sale of inventory or supplies by such Person
in the ordinary course of business; (c) the entering

<PAGE>

-21-

into of any Guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person; (d) the entering into of
any Interest Rate Protection Agreement; or (e) any agreement to make any
Investment (including any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale).

"Issuing Lender" shall mean Wells Fargo Bank, N.A., as the issuer of
--------------
Letters of Credit under Section 2.03, together with its successors and assigns
in such capacity. The Company may from time to time, by not less than five
Business Days' prior notice to the Administrative Agent and the Lender then
acting as the Issuing Lender, appoint another Lender that is an Original Lender
as the successor to such first Lender to act as the Issuing Lender. Upon the
acceptance of any appointment as Issuing Lender hereunder by a successor Issuing
Lender, such successor Issuing Lender shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the former Issuing
Lender hereunder, and the former Issuing Lender shall be discharged from its
duties, obligations and liabilities hereunder (other than its obligations under
the last sentence of Section 2.03(g) to pay to the Administrative Agent for
account of the Revolving Credit Lenders their pro rata portions of any letter of
credit commission received by such former Issuing Lender). After any Issuing
Lender's replacement hereunder, the provisions of Sections 2.03 and 5.06 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Issuing Lender. Notwithstanding
anything contained herein to the contrary, no successor Issuing Lender may be
appointed by the Company at any time that any Letter of Credit or Reimbursement
Obligation or other amount payable by the Company relating to any Letter of
Credit is outstanding.

"Key Man Life Insurance" shall have the meaning set forth in Section
----------------------
9.04.

"Lender" shall have the meaning set forth in the introduction to this
------
Agreement.

"Letter of Credit" shall have the meaning set forth in Section 2.03.
----------------

"Letter of Credit Documents" shall mean, with respect to any Letter of
--------------------------
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights

<PAGE>

-22-

and obligations of the parties concerned or at risk with respect to such Letter
of Credit or (b) any collateral security for any of such obligations, each as
the same may be modified and supplemented and in effect from time to time.

"Letter of Credit Interest" shall mean, for each Revolving Credit
-------------------------
Lender, such Lender's participation interest (or, in the case of the Issuing
Lender, the Issuing Lender's retained interest) in the Issuing Lender's
liability under Letters of Credit and such Lender's rights and interests in
Reimbursement Obligations and fees, interest and other amounts payable in
connection with Letters of Credit and Reimbursement Obligations.

"Letter of Credit Liability" shall mean, without duplication, at any
--------------------------
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit plus (b) the aggregate unpaid principal amount
----
of all Reimbursement Obligations of the Company at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Revolving Credit Lender (other than the Issuing Lender) shall be
deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.03, and
the Issuing Lender shall be deemed to hold a Letter of Credit Liability in an
amount equal to its retained interest in the related Letter of Credit after
giving effect to the acquisition by the Revolving Credit Lenders other than the
Issuing Lender of their participation interests under Section 2.03.

"Leverage Ratio" shall mean, at any date, the ratio of Total Debt at
--------------
such date to EBITDA for the trailing four-quarter period ending on such date;
provided, however, that in order to give pro forma effect to the acquisition of
- -------- -------
the Acquired Business, (i) for the four fiscal quarter period ending September
30, 1996, there shall be added $3,133,000 to actual EBITDA, (ii) for the four
fiscal quarter period ending December 31, 1996, there shall be added $1,958,000
to actual EBITDA and (iii) for the four fiscal quarter period ending March 31,
1997, there shall be added $783,000 to actual EBITDA.

"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Basic Documents, a
Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any

<PAGE>

-23-

conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.

"Loans" shall mean the Revolving Credit Loans, the Swing Loans and the
-----
Term Loans.

"Losses" of any Person shall mean the losses, liabilities, claims
------
(including those based upon negligence, strict or absolute liability and
liability in tort), damages, reasonable expenses, obligations, penalties,
actions, judgments, encumbrances, liens, penalties, fines, suits, reasonable
costs or disbursements of any kind or nature whatsoever (including reasonable
fees and expenses of counsel in connection with any Proceeding commenced or
threatened in writing, whether or not such Person shall be designated a party
thereto) at any time (including following the payment of the Obligations)
incurred by, imposed on or asserted against such Person.

"Majority Lenders" shall mean, subject to the last paragraph of
----------------
Section 12.04, (i) at any time prior to the Closing Date, Lenders holding a
majority of the aggregate amount of the Commitments and (ii) at any time after
the Closing Date, Lenders holding a majority of the sum of (a) the aggregate
principal amount of outstanding Loans plus (b) the aggregate amount of all
----
Letter of Credit Liabilities plus (c) the aggregate unused amount of Revolving
----
Credit Commitments.

"Majority Revolving Credit Lenders" shall mean, subject to the last
---------------------------------
paragraph of Section 12.04, (i) at any time prior to the Closing Date, Lenders
holding a majority of the aggregate amount of the Revolving Credit Commitments
and (ii) at any time after the Closing Date, Lenders holding a majority of the
sum of (a) the aggregate principal amount of outstanding Revolving Credit Loans
plus (b) the aggregate amount of all Letter of Credit Liabilities plus (c) the
----
aggregate unused amount of Revolving Credit Commitments.

"Majority Tranche A Term Lenders" shall mean, subject to the last
-------------------------------
paragraph of Section 12.04, (i) at any time prior to the Closing Date, Lenders
holding a majority of the Tranche A Term Loan Commitments and (ii) at any time
after the Closing Date, Lenders holding a majority of the aggregate principal
amount of outstanding Tranche A Term Loans.

"Majority Tranche B Term Lenders" shall mean, subject to the last
-------------------------------
paragraph of Section 12.04, (i) at any time prior to the Closing Date, Lenders
holding a majority of the Tranche B

<PAGE>

-24-

Term Loan Commitments and (ii) at any time after the Closing Date, Lenders
holding a majority of the aggregate principal amount of outstanding Tranche B
Term Loans.

"Margin Stock" shall mean margin stock within the meaning of
------------
Regulations U and X.

"Material Adverse Effect" shall mean any of (a) a material adverse
-----------------------
effect on the business, assets, liabilities, results of operations, condition
(financial or otherwise), prospects or solvency of GSAC and its Subsidiaries
(before and after giving effect to the Transaction) taken as a whole or (prior
to consummation of the Acquisition) of the Acquired Business, (b) a material
adverse effect on the ability of the Obligors to consummate in a timely manner
the Transaction or perform their obligations under any material provisions of
any of the Basic Documents or (c) an adverse effect on the legality, binding
effect or enforceability of any material provision of any Basic Document or the
rights and remedies of the Lenders thereunder. In determining whether the
occurrence of any individual event or the existence of any individual condition
would, or the failure of any individual event to occur or any individual
condition to exist would, have a Material Adverse Effect, notwithstanding that
the occurrence of such individual event or the existence of such individual
condition does not, or the failure to occur of such individual event or such
individual condition to exist does not, of itself have such effect, a Material
Adverse Effect shall be deemed to have occurred if the cumulative effect of such
event or condition or failure of event or condition and all other then existing
events or conditions and failures or events or conditions would have a Material
Adverse Effect.

"MLM" shall have the meaning set forth in the introduction to this
---
Agreement.

"Multiemployer Plan" shall mean a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions are or have been made by the
Company or any ERISA Affiliate or as to which the Company or any ERISA Affiliate
may have liability and that is covered by Title IV of ERISA.

"Net Available Proceeds" shall mean:
----------------------

(i) in the case of any Disposition Event, the amount of Net Cash
Payments received by GSAC or any of its Subsidiaries in connection with
such Disposition Event;

<PAGE>

-25-

(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Company and its Subsidiaries in respect of such Casualty Event net
of (A) reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith and (B) repayments of Indebtedness (other than
Indebtedness hereunder) to the extent secured by a Lien on such Property
and any income and transfer taxes payable by the Company or any of its
Subsidiaries in respect of such Casualty Event; and

(iii) in the case of any Equity Issuance or any Debt Issuance, the
aggregate amount of all cash received by GSAC and its Subsidiaries in
respect thereof net of reasonable expenses incurred by GSAC and its
Subsidiaries in connection therewith (including all brokers' commissions,
lawyers', accountants' and consultants' fees and expenses, all investment
advisory and placement fees and any other nonrecurring expenses).

"Net Cash Payments" shall mean, with respect to any Disposition Event,
-----------------
the aggregate amount of all cash payments received by GSAC and its Subsidiaries
directly or indirectly in connection with such Disposition Event; provided,
--------
however, that Net Cash Payments shall be net (without duplication) of (i) the
- -------
amount of any title and recording tax expenses, commissions and other fees and
expenses paid by GSAC and its Subsidiaries in connection with the Disposition
(the "Relevant Disposition") constituting (or relating to) such Disposition
--------------------
Event (including all brokers' commissions, all lawyers', accountants' and
consultants' fees and expenses, all investment advisory and placement fees and
any other nonrecurring expenses), (ii) any Federal, state and local income or
other taxes estimated to be payable by GSAC and its Subsidiaries as a result of
the Relevant Disposition (but only to the extent that such estimated taxes are
in fact paid to the relevant Federal, state or local governmental authority
within three months of the date of the Relevant Disposition), (iii) any
repayments by the Company or any of its Subsidiaries of Indebtedness to the
extent that (a) such Indebtedness is secured by a Lien on the Property that is
the subject of the Relevant Disposition and (b) the transferee of (or holder of
a Lien on) such Property requires that such Indebtedness be repaid as a
condition to the purchase of such Property and (iv) the amount of such cash
payments intended to be reinvested by any Obligor in its business (but only to
the extent that such payments are in fact so reinvested within six months of the
date of the Relevant Disposition in capital assets or Property of the same type
sold or otherwise disposed of).

<PAGE>

-26-

"Notes" shall mean the Revolving Credit Notes, the Swing Loans Note
-----
and the Term Loan Notes.

"Obligations" shall mean all amounts, direct or indirect, contingent
-----------
or absolute, of every type or description, and at any time existing, owing to
any of the Administrative Agent, the Arranger or Lenders pursuant to the terms
of any Basic Document or secured by any of the Security Documents.

"Obligors" shall mean the Company and the Guarantors.
--------

"Officers' Certificate" shall mean, as applied to any corporation, a
---------------------
certificate executed on behalf of such corporation by its Chairman of the Board
(if an officer) or its Chief Executive Officer or one of its Vice Presidents and
by its Chief Financial Officer, Vice President-Finance or its Treasurer or any
Assistant Treasurer in their official (and not individual) capacities; provided,
--------
however, that every Officers' Certificate with respect to the compliance with a
- -------
condition precedent to the making of any Loan or the taking of any other action
hereunder shall include (i) a statement that the officers making or giving such
Officers' Certificate have read such condition and any definitions or other
provisions contained in this Agreement relating thereto and (ii) a statement as
to whether, in the opinion of the signers, such condition has been complied
with.

"Original Lenders" shall mean the Lenders named on the signature pages
----------------
hereof.

"Other Taxes" shall have the meaning set forth in Section 5.07(b).
-----------

"Packaging Agreement" shall mean the Packaging Services Agreement
-------------------
dated as of June 13, 1994 between the Company, Performance Printing Corporation,
a Texas corporation, and Performance Packaging.

"Parent Guarantors" shall have the meaning set forth in the
-----------------
introduction to this Agreement.

"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
successor thereto.

"Performance Packaging" shall mean Performance Packaging L.L.C., a
---------------------
Texas limited liability company.

"Permitted Investments" shall mean, for any Person: (a) direct
---------------------
obligations of the United States of America, or of any

<PAGE>

-27-

agency thereof, or obligations guaranteed as to principal and interest by the
United States of America, or of any agency thereof, in either case maturing not
more than 180 days from the date of acquisition thereof by such Person; (b) time
deposits (including eurodollar deposits) issued by any bank or trust company
organized under the laws of the United States of America or any state thereof
and having capital, surplus and undivided profits of at least $500,000,000 and a
deposit rating of investment grade; and (c) commercial paper rated A-1 or better
by Standard & Poor's Corporation or P-1 or better by Moody's Investors Service,
Inc., respectively, maturing not more than 180 days from the date of acquisition
thereof by such Person.

"Permitted Person" shall mean any Person of whom Keystone, Inc., a
----------------
Texas corporation ("Keystone", which term includes its successors), Oak Hill
--------
Partners, Inc., a Delaware corporation ("Oak Hill", which term includes its
--------
successors), and/or Arbor Investors LLC, a Delaware limited liability company
("Arbor", which term includes its successors) (collectively or individually),
-----
have the power, directly or indirectly, to appoint or elect not less than a
majority of the members of the board of directors, in the case of a corporation,
or other equivalent governing body, in any other case, and of whom Keystone, Oak
Hill and/or Arbor (collectively or individually), have the power to direct the
management and policies thereof; provided, however, that (i) Robert M. Bass, a
-------- -------
natural person resident in Fort Worth, Texas as of May 14, 1996, owns not less
than a majority of the outstanding voting capital stock of Keystone and has the
power to direct the management and policies of Keystone, (ii) Daniel L.
Doctoroff, a natural person resident in New York, New York as of May 20, 1996,
Glenn R. August, a natural person resident in New York, New York as of May 20,
1996 and/or Steven B. Gruber, a natural person resident in New York, New York as
of May 20, 1996, own (collectively or individually) not less than a majority of
the outstanding voting capital stock of Oak Hill and have the power
(collectively or individually) to direct the management and policies of Oak Hill
and (iii) J. Taylor Crandall, a natural person resident in Woodside, California
as of May 20, 1996, David Brown, a natural person resident in Woodside,
California as of May 20, 1996 and/or Mark Wolfson, a natural person resident in
Sanford, California as of May 20, 1996, own (collectively or individually) not
less than a majority of the outstanding voting capital stock of Arbor and have
the power (collectively or individually) to direct the management and policies
of Arbor.

"Permitted Subordinated Indebtedness" shall have the meaning set forth
-----------------------------------
in Section 9.07(e).

<PAGE>

-28-

"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).

"Plan" shall mean an employee benefit or other plan which is or has
----
been established or maintained by or to which contributions are or have been
made by the Company or any ERISA Affiliate or as to which the Company or any
ERISA Affiliate may have liability and that is covered by Title IV of ERISA,
other than a Multiemployer Plan.

"Post-Default Rate" shall mean, in respect of any principal of any
-----------------
Loan, any Reimbursement Obligation or any other amount payable under this
Agreement, any Note or any other Basic Document that is not paid when due
(whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 2% plus the Base Rate as in effect from time to time plus the
---- ----
Applicable Margin for Base Rate Loans; provided, however, that, if the amount so
-------- -------
in default is principal of a Eurodollar Loan and the due date thereof is a day
other than the last day of the Interest Period therefor, the "Post-Default Rate"
for such principal shall be, for the period from and including such due date to
but excluding the last day of such Interest Period, 2% plus the interest rate
----
for such Loan as provided in Section 3.02(b) and, thereafter, the rate provided
for above in this definition.

"Prime Rate" shall be the rate most recently announced by the
----------
Administrative Agent at its principal office in San Francisco as its "Prime
Rate." Prime Rate is one of the Administrative Agent's base rates and serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the reporting thereof after its
announcement in such internal publication or publications as the Administrative
Agent may designate. Any change in the interest rate resulting from a change in
such Prime Rate shall become effective as of 12:01 a.m., San Francisco time, of
the Business Day on which each change in Prime Rate is announced by the
Administrative Agent.

"Principal Payment Date" shall mean (i) the Quarterly Dates commencing
----------------------
with September 30, 1996 through and including March 31, 2002 and (ii) each of
the fifth and sixth anniversary of the Closing Date.

<PAGE>

-29-

"Principal Office" shall mean the principal office of the
----------------
Administrative Agent, located on the date hereof at 420 Montgomery Street, San
Francisco, California 94163.

"Proceeding" shall mean any claim, action, judgment, suit, hearing,
----------
governmental investigation, arbitration or proceeding, including by or before
any Governmental Authority.

"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.

"Quarterly Dates" shall mean the last Business Day of March, June,
---------------
September and December in each year, commencing with September 30, 1996.

"Racing Contracts" shall mean the following agreements:
----------------

(i) License Agreement by and among National Association for Stock Car
Auto Racing, Inc. and the Company dated as of February 29, 1996;

(ii) Sublicense Agreement by and among National Association for Stock
Car Auto Racing, Inc. and the Company dated as of February 29, 1996; and

(iii) Licensing Agreement and Promotional Agreement each dated as of
May 1, 1996 between the Company and Dale Earnhardt.

"Receivable" shall mean, as at any date, the unpaid portion of the
----------
obligation, as stated on the respective invoice, of a customer of the Company
which is payable (directly or through a lockbox arrangement) to the Company in
respect of Inventory purchased and shipped, net of any credits, rebates or
offsets owed to the respective customer (and for purposes hereof, a credit or
rebate paid by check or draft of the Company shall be deemed to be outstanding
until such check or draft shall have been debited to the account of the Company
on which such check or draft was drawn).

"Refinancing" shall mean the repayment in full of approximately
-----------
$48,000,000 of senior indebtedness of the Company in existence prior to the
consummation of the Acquisition and listed on Schedule 1.01(a) and approximately
----------------
$8,500,000 of indebtedness of GSAC and/or GSAC Holdings in existence prior to
the consummation of the Acquisition and listed on Schedule 1.01(a).
----------------

<PAGE>

-30-

"Regulations A, D, U and X" shall mean, respectively, Regulations A,
-------------------------
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.

"Regulatory Change" shall mean, with respect to any Lender, any change
-----------------
after the date hereof in Federal, state or foreign law or regulations (including
Regulation D) or the adoption or making after such date of any interpretation,
directive or request applying to a class of banks or other financial
institutions including such Lender of or under any Federal, state or foreign law
or regulations (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) by any court or governmental or
monetary authority or any other regulatory agency with proper authority,
including non-governmental agencies or bodies, charged with the interpretation
or administration thereof.

"Reimbursement Obligations" shall mean, at any time, the obligations
-------------------------
of the Company then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.

"Related Business Acquisition" shall mean any acquisition of all or
----------------------------
substantially all the assets of, or shares or other equity interests in, a
Person or division or business segment or line of business of a Person if
immediately after giving effect thereto: (a) no Default shall have occurred and
be continuing, (b) all transactions related thereto shall be consummated in
accordance in all material respects with applicable laws, (c) the Administrative
Agent shall have received evidence that the board of directors (or Persons
performing similar functions, such as general partners) of such Person shall
have approved such acquisition, such evidence of approval to be in form and
substance reasonably satisfactory to the Administrative Agent in all respects,
(d) the payment of the total consideration for such acquisition, separately and
when considered with all Related Business Acquisitions since the Closing Date,
shall be in compliance with clauses (a) and (b) of the definition of Related
Business Acquisition Consideration Limitation, (e) one hundred percent (100%) of
the capital stock or other equity interests of any acquired or newly formed
corporation, partnership, association or other business entity is owned directly
by the Company or a Subsidiary of the Company and all actions required to be
taken, if any, with respect to such acquired or newly formed subsidiary under
Sections 9.11 and 9.22 shall have been taken and (f) the Obligors and their
Subsidiaries

<PAGE>

-31-

shall be in compliance, on a pro forma basis after giving effect to such
acquisition or formation, with the covenants contained in Section 9.10
recomputed as at the last day of the most recently ended fiscal quarter, and the
Company shall have delivered to the Administrative Agent an Officers'
Certificate to such effect, together with such financial information for such
subsidiary or assets as are reasonably requested by the Administrative Agent or
the Majority Lenders, which Officers' Certificate and information shall be
forwarded by the Administrative Agent to the Lenders.

"Related Business Acquisition Consideration Limitation" shall mean (a)
-----------------------------------------------------
for each Related Business Acquisition, $5,000,000 in aggregate consideration,
calculated by (A) excluding (1) earn-out or other deferred payment arrangements
(not to exceed $3,500,000 for all such acquisitions consummated since the
Closing Date) and (2) any amount funded through (x) Excess Cash Flow for all
prior fiscal years as to which at the time of determination it has been
established that such Excess Cash Flow is not required to be applied pursuant to
Section 2.10(b)(iv) and (y) capital contributions to the Borrower not required
to be applied pursuant to Section 2.10(b)(ii) and (B) including (1) any
Indebtedness and other liabilities assumed (including contingent liabilities but
excluding working capital liabilities) or any Indebtedness incurred in
connection therewith, (2) covenants not to compete and (3) working capital
deficits and (b) in the aggregate of total consideration for all Related
Business Acquisitions since the Closing Date, $10,000,000, such amount to be
calculated in accordance with the provisions of clause (a) of this definition;
provided, however, that the aggregate of earn-out or other deferred payment
- -------- -------
arrangements in respect of all such acquisitions consummated since the Closing
Date shall not exceed $3,500,000.

"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including the movement of Hazardous Materials
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.

"Relevant Parties" and "Relevant Party" shall have the meanings set
---------------- --------------
forth in Section 10(b).

"Reserve Requirement" shall mean, for any Interest Period for any
-------------------
Eurodollar Loan, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve

<PAGE>

-32-

System in New York City with deposits exceeding one billion Dollars against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall include any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change with respect to (i) any category of liabilities that includes
deposits by reference to which the Eurodollar Base Rate is to be determined as
provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or
(ii) any category of extensions of credit or other assets that includes
Eurodollar Loans.

"Revolving Credit Commitment" shall mean, for each Revolving Credit
---------------------------
Lender, the obligation of such Lender to make Revolving Credit Loans in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount set opposite the name of such Lender on Annex A under the caption
-------
"Revolving Credit Commitment" (as the same may be reduced from time to time
pursuant to Section 2.04 or changed pursuant to Section 12.06(b)), minus, in the
-----
case of Wells Fargo only, as of any date determination, the aggregate
outstanding principal balance of all Swing Loans on such date. The initial
aggregate principal amount of the Revolving Credit Commitments is $15,000,000.

"Revolving Credit Commitment Percentage" shall mean, with respect to
--------------------------------------
any Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Lender to (b) the aggregate amount of the Revolving Credit
Commitments of all of the Lenders.

"Revolving Credit Commitment Termination Date" shall have the meaning
--------------------------------------------
set forth in Section 2.01(a).

"Revolving Credit Commitments" shall mean the aggregate sum of the
----------------------------
Revolving Credit Commitment of all of the Revolving Credit Lenders.

"Revolving Credit Lenders" shall mean (a) on the date hereof, the
------------------------
Lenders having Revolving Credit Commitments on the signature pages hereof and
(b) thereafter, the Lenders from time to time holding Revolving Credit Loans and
Revolving Credit Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).

"Revolving Credit Loans" shall have the meaning set forth in Section
----------------------
2.01(a).

<PAGE>

-33-

"Revolving Credit Notes" shall mean the promissory notes provided for
----------------------
by Section 2.08(a) and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.

"Security Agreement" shall mean a Security Agreement substantially in
------------------
the form of Exhibit D between the Company, the Subsidiary Guarantors and the
---------
Administrative Agent, as amended.

"Security Documents" shall mean the Security Agreement and all Uniform
------------------
Commercial Code financing statements required by this Agreement or the Security
Agreement to be filed with respect to the security interests in personal
Property and fixtures created pursuant to the Security Agreement.

"Sports Contracts" shall mean the Baseball Contracts, the Football
----------------
Contracts, the Hockey Contracts and the Racing Contracts.

"Subordinated Debt Documents" shall mean, collectively, (i) the
---------------------------
Subordinated Notes and all documents and agreements executed and delivered in
connection with the issuance of the Subordinated Notes and (ii) all documents
and agreements executed and delivered in connection with the issuance of any
other Subordinated Indebtedness.

"Subordinated Indebtedness" shall mean (i) Indebtedness of GSAC or
-------------------------
GSAC Holdings in respect of the Subordinated Notes and (ii) Permitted
Subordinated Indebtedness.

"Subordinated Notes" shall mean the notes of GSAC and GSAC Holdings,
------------------
as the case may be, listed on Schedule 1.01(b) and any other 12% subordinated
----------------
note of GSAC or GSAC Holdings issued as interest on any other Subordinated Note
as contemplated by Section 9.14(ii) containing terms identical to such other
Subordinated Note.

"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at

<PAGE>

-34-

the time directly or indirectly owned or controlled by such Person or one or
more Subsidiaries of such Person or by such Person and one or more Subsidiaries
of such Person. It is understood and agreed that Performance Packaging is not,
on the date hereof, a Subsidiary of GSAC, GSAC Holdings or the Company.

"Subsidiary Guarantors" shall mean MLM, Donruss Trading and each other
---------------------
Subsidiary of the Company that guarantees the payment of the obligations of the
Company hereunder.

"Supermajority Lenders" shall mean, subject to the last paragraph of
---------------------
Section 12.04, (i) at any time prior to the Closing Date, Lenders holding two-
thirds of the aggregate amount of the Commitments and (ii) at any time after the
Closing Date, Lenders holding two-thirds of the sum of (a) the aggregate
principal amount of outstanding Loans, plus (b) the aggregate amount of all
----
Letter of Credit Liabilities, plus (c) the aggregate unused amount of Revolving
----
Credit Commitments.

"Supermajority Lenders of the Affected Class" shall mean, subject to
-------------------------------------------
the last paragraph of Section 12.04, (i) at any time prior to the Closing Date,
Lenders holding two-thirds of the aggregate amount of the Commitments of the
applicable tranche of Term Loan Commitments which would be affected by any
modification, supplement or waiver contemplated by clause (b) to the proviso to
the first paragraph of Section 12.04 and (ii) at any time after the Closing
Date, Lenders holding two-thirds of the aggregate amount of the outstanding
Loans of the applicable tranche of Term Loans which would be affected by any
modification, supplement or waiver contemplated by clause (b) to the proviso to
the first paragraph of Section 12.04.

"Swing Loans" shall have the meaning set forth in Section 2.01(e).
-----------

"Swing Loan Commitment" shall mean the obligation of Wells Fargo to
---------------------
make or continue Swing Loans hereunder in an aggregate principal amount up to
but not exceeding the amount set forth opposite Wells Fargo's name on Annex A
-------
under the heading "Swing Loan Commitment," as the same may be reduced or
terminated pursuant to Section 2.04 or Section 10. As of the Closing Date, the
Swing Loan Commitment is $1,000,000.

"Swing Loans Maturity Date" shall mean the earlier of (a) the
-------------------------
Revolving Credit Commitment Termination Date or (b) the date designated by Wells
Fargo, in its sole discretion, as the Swing Loans Maturity Date upon notice
hereafter given by Wells Fargo to the Borrower.

<PAGE>

-35-

"Swing Loans Note" shall mean the promissory note made by the Borrower
----------------
evidencing the Swing Loans, in the form of Exhibit A-4 hereto.
-----------

"Term Loan Commitments" shall mean the Tranche A Term Loan Commitments
---------------------
and the Tranche B Term Loan Commitments, collectively.

"Term Loan Lenders" shall mean the Tranche A Term Loan Lenders and the
-----------------
Tranche B Term Loan Lenders, collectively.

"Term Loan Notes" shall mean the Tranche A Term Loan Notes and the
---------------
Tranche B Term Loan Notes, collectively.

"Term Loans" shall mean the Tranche A Term Loans and the Tranche B
----------
Term Loans, collectively.

"Total Debt" shall mean at any date, the aggregate amount of
----------
Indebtedness of the Company and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.

"Tranche A Term Loan Commitment" shall mean, for each Tranche A Term
------------------------------
Loan Lender, the obligation of such Lender to make a Tranche A Term Loan in an
amount up to but not exceeding the amount set opposite the name of such Lender
on Annex A under the caption "Tranche A Term Loan Commitment" (as the same may
-------
be changed pursuant to Section 12.06(b)). The aggregate principal amount of the
Tranche A Term Loan Commitments is $40,000,000.

"Tranche A Term Loan Commitments" shall mean the aggregate sum of the
-------------------------------
Tranche A Term Loan Commitment of all the Lenders.

"Tranche A Term Loan Lenders" shall mean (a) on the date hereof, the
---------------------------
Lenders having Tranche A Term Loan Commitments on the signature pages hereof and
(b) thereafter, the Lenders from time to time holding Tranche A Term Loans and
Tranche A Term Loan Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).

"Tranche A Term Loan Notes" shall mean the promissory notes provided
-------------------------
for by Section 2.08(b)(i) and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.

<PAGE>

-36-

"Tranche A Term Loans" shall mean the loans provided for by
--------------------
Section 2.01(b), which may be Base Rate Loans and/or Eurodollar Loans.

"Tranche B Term Loan Commitment" shall mean, for each Tranche B Term
------------------------------
Loan Lender, the obligation of such Lender to make a Tranche B Term Loan in an
amount up to but not exceeding the amount set opposite the name of such Lender
on Annex A under the caption "Tranche B Term Loan Commitment" (as the same may
-------
be changed pursuant to Section 12.06(b)). The aggregate principal amount of the
Tranche B Term Loan Commitments is $48,000,000.

"Tranche B Term Loan Commitments" shall mean the aggregate sum of the
-------------------------------
Tranche B Term Loan Commitment of all the Lenders.

"Tranche B Term Loan Lenders" shall mean (a) on the date hereof, the
---------------------------
Lenders having Tranche B Term Loan Commitments on the signature pages hereof and
(b) thereafter, the Lenders from time to time holding Tranche B Term Loans and
Tranche B Term Loan Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).

"Tranche B Term Loan Notes" shall mean the promissory notes provided
-------------------------
for by Section 2.08(b)(ii) and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.

"Tranche B Term Loans" shall mean the loans provided for by
--------------------
Section 2.01(c), which may be Base Rate Loans and/or Eurodollar Loans.

"Transaction" shall mean the Acquisition, the Refinancing and the
-----------
transactions in connection therewith (including the closing hereunder).

"Transaction Documents" shall mean the Basic Documents, the Ancillary
---------------------
Documents and the Acquisition Documents.

"Type" shall have the meaning set forth in Section 1.03.
----

"Wells Fargo" shall mean Wells Fargo Bank, N.A.
-----------

"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other

<PAGE>

-37-

than, in the case of a corporation, directors' qualifying shares) are directly
or indirectly owned or controlled 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.

"Working Capital" shall mean an amount determined for the Company and
---------------
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) equal to the sum of all current assets (other than cash)
less the sum of all current liabilities (other than the current portion of long-
term indebtedness).

1.02 Accounting Terms and Determinations.
-----------------------------------

(a) Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters shall be made in
accordance with GAAP, and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP. All financial statements to be
delivered pursuant to this Agreement shall be prepared in accordance with
generally accepted accounting principles (including principles of consolidation
where appropriate).

(b) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9, the Company will not change the last
day of its fiscal year from December 31 of each year, or the last days of the
first three fiscal quarters in each of its fiscal years from March 31, June 30
and September 30 of each year, respectively.

(c) Whenever making determinations under this Agreement of the amount
of taxes payable during any period by the Company and its Subsidiaries, the
amount of such taxes payable shall be deemed to be equal to the Dividend
Payments that are permitted to be made during such period by the Company to GSAC
Holdings under Section 9.09(a)(i) (without taking into account
Section 9.09(a)(ii)).

1.03 Classes and Types of Loans. Loans hereunder are distinguished
--------------------------
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a
-----
Loan) refers to whether such Loan is a Revolving Credit Loan, Swing Loan or a
Term Loan, each of which constitutes a Class. The "Type" of a Loan refers to
----
whether such Loan is a Base Rate Loan or a Eurodollar Loan, each of which
constitutes a Type. Loans may be identified by both Class and Type.

<PAGE>

-38-

1.04 Rules of Construction. (a) In this Agreement and each other
---------------------
Basic Document, unless the context clearly requires otherwise (or such other
Basic Document clearly provides otherwise), references to (i) the plural include
the singular, the singular the plural and the part the whole; (ii) Persons
include their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; (iii) agreements (including this Agreement), promissory notes and other
contractual instruments include subsequent amendments, assignments, and other
modifications thereto, but only to the extent such amendments, assignments or
other modifications thereto are not prohibited by their terms or the terms of
any Basic Document; (iv) statutes and related regulations include any amendments
of same and any successor statutes and regulations; and (v) time shall be to New
York City time. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

(1) In this Agreement and each other Basic Document, unless the
context clearly requires otherwise (or such other Basic Document clearly
provides otherwise), (i) "amend" shall mean "amend, amend and restate,
-----
supplement or modify"; and "amended" and "amendment" shall have meanings
------- ---------
correlative to the foregoing; (ii) in the computation of periods of time from a
specified date to a later specified date, "from" shall mean "from and
----
including"; "to" and "until" shall mean "to but excluding"; and "through" shall
-- ----- -------
mean "to and including"; (iii) "hereof," "herein" and "hereunder" (and similar
------ ------ ---------
terms) in this Agreement or any other Basic Document refer to this Agreement or
such other Basic Document, as the case may be, as a whole and not to any
particular provision of this Agreement or such other Basic Document;
(iv) "including" (and similar terms) shall mean "including without limitation"
---------
(and similarly for similar terms); (v) with respect to the Obligors "knowledge"
---------
or "aware" shall mean and include (A) the actual knowledge or awareness of a
-----
senior officer or director of any of the Obligors; (vi) "or" has the inclusive
--
meaning represented by the phrase "and/or"; (vii) "property" and "assets" each
-------- ------
shall include all properties and assets of any kind or nature, tangible or
intangible, real, personal or mixed, now existing or hereafter acquired;
(viii) "satisfactory to" any of the Administrative Agent, the Arranger or
---------------
Lenders shall mean in form, scope and substance and on terms and conditions
satisfactory to such Person; and (ix) references to "the date hereof" shall mean
---------------
the date first set forth above.

<PAGE>

-39-

(2) In this Agreement unless the context clearly requires otherwise,
any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or
Schedule, as the case may be, attached to this Agreement and constituting a part
hereof, and (ii) a Section or other subdivision is to a Section or such other
subdivision of this Agreement.

(3) No doctrine of construction of ambiguities in agreements or
instruments against the interests of the party controlling the drafting thereof
shall apply to any Basic Document.

Section 2. Commitments, Loans, Notes and Prepayments.
-----------------------------------------

2.01 Loans.
-----

(a) Revolving Credit Loans. Each Revolving Credit Lender severally
----------------------
agrees, on the terms and conditions of this Agreement, to make revolving credit
loans (the "Revolving Credit Loans") to the Company in Dollars during the period
----------------------
from and including the date hereof to but not including the Revolving Credit
Commitment Termination Date in an aggregate principal amount at any one time
outstanding not exceeding the amount of the Revolving Credit Commitment of such
Lender as in effect from time to time; provided, however, that (x) in no event
-------- -------
shall the aggregate principal amount of all Revolving Credit Loans, together
with the aggregate amount of all Letter of Credit Liabilities, at any time
exceed the lesser of (i) the aggregate amount of the Revolving Credit
Commitments as in effect at such time and (ii) the Borrowing Base as in effect
at such time and (y) in no event shall Revolving Credit Loans be made to fund
Related Business Acquisitions to the extent that after giving effect thereto the
aggregate amount of Revolving Credit Loans made to fund Related Business
Acquisitions would exceed $10,000,000. Subject to the terms and conditions of
this Agreement, during such period the Company may borrow, repay and reborrow
the amount of the Revolving Credit Commitments by means of Base Rate Loans and
Eurodollar Loans and may Convert Revolving Credit Loans of one Type into
Revolving Credit Loans of another Type (as provided in Section 2.09) or Continue
Revolving Credit Loans of one Type as Revolving Credit Loans of the same Type
(as provided in Section 2.09). The "Revolving Credit Commitment Termination
---------------------------------------
Date" shall be the Business Day immediately prior to the fifth anniversary of
- ----
the Closing Date or, if the Borrower gives written notice to the Administrative
Agent not earlier than the 120th day and not later than the 90th day prior to
such fifth anniversary, the Business Day immediately prior to the sixth
anniversary of the Closing Date; provided, however, that such
-------- -------

<PAGE>

-40-

extension shall be effected only if (A) no Default shall have occurred and be
continuing as of the date of such notice or the date that is the fifth
anniversary of the Closing Date and (B) the Arranger, the Administrative Agent
and the Documentation Agent (in each case such consent being needed only for so
long as such entity holds Loans and/or Commitments, of if none so holds Loans
and/or Commitments, then only the Administrative Agent) shall have given their
consent to such extension. The Administrative Agent shall give written notice
to the Lenders of such notice from the Borrower and whether such extension has
been effected.

(b) Tranche A Term Loans. Each Tranche A Term Loan Lender severally
--------------------
agrees, on the terms and conditions of this Agreement, to make a single term
loan to the Company in Dollars during the period from the date hereof through
the Closing Date in a principal amount equal to the Tranche A Term Loan
Commitment of such Lender, such loan to be used to fund the Acquisition, the
Refinancing and the Distribution. Thereafter the Company may Convert Tranche A
Term Loans of one Type into Tranche A Term Loans of another Type (as provided in
Section 2.09) or Continue Tranche A Term Loans of one Type as Tranche A Term
Loans of the same Type (as provided in Section 2.09).

(c) Tranche B Term Loans. Each Tranche B Term Loan Lender severally
--------------------
agrees, on the terms and conditions of this Agreement, to make a single term
loan to the Company in Dollars during the period from the date hereof through
the Closing Date in a principal amount equal to the Tranche B Term Loan
Commitment of such Lender, such loan to be used to fund the Acquisition, the
Refinancing and the Distribution. Thereafter the Company may Convert Tranche B
Term Loans of one Type into Tranche B Term Loans of another Type (as provided in
Section 2.09) or Continue Tranche B Term Loans of one Type as Tranche B Term
Loans of the same Type (as provided in Section 2.09).

(d) Limit on Eurodollar Loans. No more than eight separate Interest
-------------------------
Periods in respect of Eurodollar Loans of either Class from each Lender may be
outstanding at any one time. No Eurodollar Loans shall be made on the Closing
Date.

(e) Swing Loans. Subject to the terms and conditions of this
-----------
Agreement, upon request of the Borrower and subject to the discretionary consent
of Wells Fargo as provided herein, Wells Fargo agrees to make one or more swing
loans to the Borrower from time to time from and including the Closing Date, to
but excluding the Swing Loans Maturity Date, up to but not exceeding the amount
of Wells Fargo's Swing Loans Commitment as

<PAGE>

-41-

then in effect. (Such swing loans referred to in this Section 2.01(e) now or
hereafter made by Wells Fargo to the Borrower from and including and after the
Closing Date are hereinafter collectively called the "Swing Loans".)
Notwithstanding anything to the contrary contained in this Section 2.01(e), or
elsewhere in this Agreement, Wells Fargo shall not be obligated, pursuant to
this Section 2.01(e) or otherwise, to make any Swing Loan to or for the account
of the Borrower, and the Borrower shall not be entitled to borrow, pursuant to
this Section 2.01(e), unless and until Wells Fargo shall have consented to each
such Swing Loan, which consent may or may not be given by Wells Fargo in its
sole discretion. Prior to the Swing Loans Maturity Date, the Borrower may,
subject to the discretionary consent of Wells Fargo as provided herein, borrow,
repay, and reborrow Swing Loans up to the Swing Loans Commitment in accordance
with the terms of this Agreement. Wells Fargo shall not make any Swing Loans on
or after the Swing Loans Maturity Date. Notwithstanding anything to the
contrary contained in this Section 2.01(e) or elsewhere in this Agreement, Wells
Fargo shall not be obligated, pursuant to this Section 2.01(e) or otherwise, to
make any Swing Loan to or for the account of the Borrower, and the Borrower
shall not be entitled to borrow, pursuant to this Section 2.01(e), if, after
giving full effect to the requested Swing Loan, the aggregate outstanding amount
of Revolving Credit Loans, together with the aggregate outstanding Letter of
Credit Liabilities would exceed the lesser of (x) the Revolving Credit
Commitments and (y) the Borrowing Base. Notwithstanding anything herein or
elsewhere to the contrary, the Swing Loans will be made and maintained only as
Base Rate Loans.

2.02 Borrowings. The Company shall give the Administrative Agent
----------
notice of each borrowing hereunder as provided in Section 4.05. Not later than
1:00 p.m. New York time on the date specified for each borrowing hereunder, each
Lender shall make available the amount of the Loan or Loans to be made by it on
such date to the Administrative Agent, at an account specified by the
Administrative Agent maintained at the Principal Office, in immediately
available funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with the
Administrative Agent at the Principal Office designated by the Company.

2.03 Letters of Credit. Subject to the terms and conditions hereof,
-----------------
the Revolving Credit Commitments may be

<PAGE>

-42-

utilized, upon the request of the Company, in addition to the Revolving Credit
Loans provided for by Section 2.01(a), by the issuance by the Issuing Lender of
standby and commercial letters of credit (herein collectively called "Letters of
----------
Credit") for the account of the Company; provided, however, that in no event
- ------ -------- -------
shall (i) the aggregate amount of all Letter of Credit Liabilities, together
with the aggregate principal amount of the Revolving Credit Loans and Swing
Loans outstanding, exceed at any time the lesser of (x) the Revolving Credit
Commitments as in effect at such time and (y) the Borrowing Base as in effect at
such time, (ii) the outstanding aggregate amount of all Letter of Credit
Liabilities exceed $3,000,000, (iii) the face amount of any Letter of Credit be
less than $100,000 and (iv) the expiration date of any Letter of Credit extend
beyond the earlier of (x) the fifth Business Day preceding the Revolving Credit
Termination Date and (y) the date twelve months following the issuance of such
Letter of Credit. The following additional provisions shall apply to Letters of
Credit:

(a) The Company shall give the Administrative Agent at least three
Business Days' irrevocable prior notice (effective upon receipt) specifying
the date (which shall be no later than thirty days preceding the Revolving
Credit Termination Date) each Letter of Credit is to be issued and
describing in reasonable detail the proposed terms of such Letter of Credit
(including the beneficiary thereof) and the nature of the transactions or
obligations proposed to be supported thereby (including whether such Letter
of Credit is to be a commercial letter of credit or a standby letter of
credit). Upon receipt of any such notice, the Administrative Agent shall
advise the Issuing Lender of the contents thereof.

(b) On each day during the period commencing with the issuance by the
Issuing Lender of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Revolving Credit Commitment of
each Revolving Credit Lender shall be deemed to be utilized for all
purposes hereof in an amount equal to such Lender's Revolving Credit
Commitment Percentage of the then undrawn face amount of such Letter of
Credit. Each Revolving Credit Lender (other than the Issuing Lender)
agrees that, upon the issuance of any Letter of Credit hereunder, it shall
automatically acquire a participation in the Issuing Lender's liability
under such Letter of Credit in an amount equal to such Lender's Revolving
Credit Commitment Percentage of such liability, and each Revolving Credit
Lender (other than the Issuing Lender) thereby shall

<PAGE>

-43-

absolutely, unconditionally and irrevocably assume, as primary obligor and
not as surety, and shall be unconditionally obligated to the Issuing Lender
to pay and discharge when due, its Revolving Credit Commitment Percentage
of the Issuing Lender's liability under such Letter of Credit.

(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Company (through the Administrative Agent) of the
amount to be paid by the Issuing Lender as a result of such demand and the
date on which payment is to be made by the Issuing Lender to such
beneficiary in respect of such demand. The Company hereby unconditionally
agrees to pay and reimburse the Issuing Lender for the amount of each
demand for payment under such Letter of Credit at or prior to the date on
which payment is to be made by the Issuing Lender to the beneficiary
thereunder, without presentment, demand, protest, other formalities or
notice of any kind.

(d) Forthwith upon its receipt of a notice referred to in
clause (c) of this Section 2.03, the Company shall advise the Issuing
Lender whether or not the Company intends to borrow hereunder to finance
its obligation to reimburse the Issuing Lender for the amount of the
related demand for payment and, if it does, submit a notice of such
borrowing as provided in Section 4.05. In the event that the Company fails
to so advise the Administrative Agent, or if the Company fails to reimburse
the Issuing Lender for a demand for payment under a Letter of Credit by the
date of such payment, the Administrative Agent shall give each Revolving
Credit Lender prompt notice of the amount of the demand for payment,
specifying such Lender's Revolving Credit Commitment Percentage of the
amount of the related demand for payment.

(e) Each Revolving Credit Lender (other than the Issuing Lender)
shall pay to the Administrative Agent for account of the Issuing Lender at
the Principal Office in Dollars and in immediately available funds, the
amount of such Lender's Revolving Credit Commitment Percentage of any
payment under a Letter of Credit upon notice by the Issuing Lender (through
the Administrative Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make such payments to the Administrative Agent for account of
the Issuing Lender under this clause (e), and the Issuing

<PAGE>

-44-

Lender's right to receive the same, shall be absolute and unconditional and
shall not be affected by any circumstance whatsoever, including, without
limiting the effect of the foregoing, (i) the failure of any other
Revolving Credit Lender to make its payment under this clause (e), the
financial condition of the Company or the existence of any Default or (ii)
the termination of the Commitments. Each such payment to the Issuing
Lender shall be made without any offset, abatement, withholding or
reduction whatsoever.

(f) Upon the making of each payment by a Revolving Credit Lender to
the Issuing Lender pursuant to clause (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of the Administrative Agent, the Issuing Lender or such Lender,
acquire (i) a participation in an amount equal to such payment in the
Reimbursement Obligation owing to the Issuing Lender by the Company
hereunder and under the Letter of Credit Documents relating to such Letter
of Credit and (ii) a participation in a percentage equal to such Lender's
Revolving Credit Commitment Percentage in any interest or other amounts
payable by the Company hereunder and under such Letter of Credit Documents
in respect of such Reimbursement Obligation. Upon receipt by the Issuing
Lender from or for account of the Company of any payment in respect of any
Reimbursement Obligation or any such interest or other amounts (including
by way of setoff or application of proceeds of any collateral security) the
Issuing Lender shall promptly pay to the Administrative Agent for account
of each Revolving Credit Lender entitled thereto, such Revolving Credit
Lender's Revolving Credit Commitment Percentage of such payment, each such
payment by the Issuing Lender to be made in the same money and funds in
which received by the Issuing Lender. In the event any payment received by
the Issuing Lender and so paid to the Revolving Credit Lenders hereunder is
rescinded or must otherwise be returned by the Issuing Lender, each
Revolving Credit Lender shall, upon the request of the Issuing Lender
(through the Administrative Agent), repay to the Issuing Lender (through
the Administrative Agent) the amount of such payment paid to such Lender,
with interest at the rate specified in clause (j) of this Section 2.03.

(g) The Company shall pay to the Administrative Agent for account of
the Issuing Lender in respect of each Letter of Credit a letter of credit
commission in an amount equal to (x) the rate per annum equal to, in the
case of commercial letters of credit having a duration of 90 days or

<PAGE>

-45-

less, the Applicable Margin for Revolving Credit Loans that are Eurodollar
Loans in effect at the time of issuance thereof minus one half percent
(1/2%) and, in the case of all other Letters of Credit, the Applicable
Margin for Revolving Credit Loans that are Eurodollar Loans in effect at
the time of issuance thereof, multiplied by (y) the daily average undrawn
face amount of such Letter of Credit (but in no event less than $500 per
Letter of Credit) for the period from and including the date of issuance of
such Letter of Credit (i) in the case of a Letter of Credit which expires
in accordance with its terms, to and including such expiration date and
(ii) in the case of a Letter of Credit which is drawn in full or is
otherwise terminated other than on the stated expiration date of such
Letter of Credit, to but excluding the date such Letter of Credit is drawn
in full or is terminated, such fee to be non-refundable and to be paid in
arrears quarterly, on each Quarterly Date, and on the earlier of the
Revolving Credit Commitment Termination Date or the date of the termination
of the Revolving Credit Commitments. The Issuing Lender shall pay to the
Administrative Agent for account of each Revolving Credit Lender (other
than the Issuing Lender), from time to time at reasonable intervals (but in
any event at least quarterly), but only to the extent actually received
from the Company, an amount equal to such Lender's Revolving Credit
Commitment Percentage of all letter of credit commissions referred to in
the first sentence of this clause (g). In addition, the Company shall pay
to the Administrative Agent for account of the Issuing Lender only in
respect of each Letter of Credit a letter of credit issuance fee in an
amount equal to 1/2% per annum multiplied by the original face amount from
the issue date through the expiry date of such Letter of Credit (but in no
event less than $500 per Letter of Credit), such amount to be payable on
the date of issuance of such Letter of Credit, plus all charges, costs and
expenses in the amounts customarily charged by the Issuing Lender from time
to time in like circumstances with respect to the issuance of each Letter
of Credit and drawings and other transactions relating thereto.

(h) Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through the Administrative Agent) to each Revolving
Credit Lender and the Company a notice describing the aggregate amount of
all Letters of Credit outstanding at the end of such month. Upon the
request of any Revolving Credit Lender from time to time, the Issuing
Lender shall deliver any other information

<PAGE>

-46-

reasonably requested by such Lender with respect to each Letter of Credit
then outstanding.

(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 7, be
subject to the conditions precedent that (i) such Letter of Credit shall be
in such form, contain such terms and support such transactions as shall be
satisfactory to the Issuing Lender consistent with its then current
practices and procedures with respect to letters of credit of the same type
and (ii) the Company shall have executed and delivered such other
instruments and agreements relating to such Letter of Credit as the Issuing
Lender shall have reasonably requested consistent with its then current
practices and procedures with respect to letters of credit of the same
type; provided, however, that to the extent such other instruments or
-------- -------
agreements contain terms contrary to those provided herein or in the other
Basic Documents, the provisions of the Basic Documents shall govern.

(j) To the extent that any Revolving Credit Lender fails to pay an
amount required to be paid pursuant to clause (e) or (f) of this Section
2.03 on the due date therefor, such Lender shall pay interest to the
Issuing Lender (through the Administrative Agent) on such amount from and
including such due date to but excluding the date such payment is made (i)
during the period from and including such due date to but excluding the
date three Business Days thereafter, at a rate per annum equal to the
Federal Funds Rate (as in effect from time to time) and (ii) thereafter, at
a rate per annum equal to the Post-Default Rate (as in effect form time to
time).

(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (x) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (y) each
Revolving Credit Lender shall have consented thereto.

The Company hereby indemnifies and holds harmless each Revolving Credit Lender
and the Administrative Agent from and against any and all claims and damages,
losses, liabilities, costs or

<PAGE>

-47-

expenses which such Lender or the Administrative Agent may incur (or which may
be claimed against such Lender or the Administrative Agent by any Person
whatsoever) by reason of or in connection with the execution and delivery or
transfer of or payment or refusal to pay by the Issuing Lender under any Letter
of Credit; provided, however, that the Company shall not be required to
-------- -------
indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the Issuing Lender
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (y) in the case of the Issuing Lender
such Lender's failure to pay under any Letter of Credit after the presentation
to it of a request strictly complying with the terms and conditions of such
Letter of Credit, unless such failure constituted compliance with a court
injunction, decree or other order. Nothing in this Section 2.03 is intended to
limit the other obligations of the Company, any Lender or the Administrative
Agent under this Agreement.

2.04 Termination and Reductions of Commitments.
-----------------------------------------

(a) The aggregate amount of the Revolving Credit Commitments shall be
automatically and permanently reduced to zero on the Revolving Credit Commitment
Termination Date.

(b) The Company shall have the right at any time or from time to time
(i) so long as no Revolving Credit Loans or Letter of Credit Liabilities are
outstanding, to terminate the Revolving Credit Commitments and (ii) to reduce
the aggregate unused amount of the Revolving Credit Commitments (for which
purpose use of the Revolving Credit Commitments shall be deemed to include the
aggregate amount of Letter of Credit Liabilities); provided, however, that
-------- -------
(x) the Company shall give notice of each such termination or reduction as
provided in Section 4.05, (y) each partial reduction shall be in an aggregate
amount at least equal to $500,000 (or a larger multiple of $250,000) and (z) if
the Company gives notice to reduce the Revolving Credit Commitments to an amount
less than $5,000,000, the Revolving Credit Commitments shall be reduced to zero.

2.05 Fees. (a) The Company shall pay to the Administrative Agent
----
for account of each Lender a commitment fee on the daily average unused amount
of such Lender's Revolving

<PAGE>

-48-

Credit Commitment (for which purpose the aggregate amount of any Letter of
Credit Liabilities shall be deemed to be a pro rata (based on the Revolving
Credit Commitments) use of each Lender's Revolving Credit Commitment), for the
period from and including the Closing Date to but not including the earlier of
the date such Revolving Credit Commitment is terminated and the Revolving Credit
Commitment Termination Date, at a rate per annum equal to 0.50%. Accrued
commitment fee shall be payable on each Quarterly Date and on the earlier of the
date the relevant Commitments are terminated and the Revolving Credit Commitment
Termination Date.

(b) The Company shall pay to the Administrative Agent a nonrefundable
administrative fee pursuant to the terms of the Administrative Agent's Fee
Letter.

2.06 Lending Offices. The Loans of each Type made by each Lender
---------------
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.

2.07 Several Obligations; Remedies Independent. The failure of any
-----------------------------------------
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender, and
(except as otherwise provided in Section 4.06) no Lender shall have any
obligation to the Administrative Agent or any other Lender for the failure by
such Lender to make any Loan required to be made by such Lender. The amounts
payable by the Company at any time hereunder and under the Notes to each Lender
shall be a separate and independent debt and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and the Notes, and
it shall not be necessary for any other Lender or the Administrative Agent to
consent to, or be joined as an additional party in, any proceedings for such
purposes.

<PAGE>

-49-

2.08 Notes.
-----

(a) The Revolving Credit Loans made by each Lender shall be evidenced
by a single promissory note of the Company substantially in the form of
Exhibit A-1, dated the date hereof, payable to such Lender and otherwise duly
- -----------
completed. The Swing Loans made by Wells Fargo shall be evidenced by a single
promissory note of the Company substantially in the form of Exhibit A-4, dated
the date hereof, payable to Wells Fargo and otherwise duly completed.

(b) (i) The Tranche A Term Loan made by each Tranche A Term Loan
Lender shall be evidenced by a single promissory note of the Company
substantially in the form of Exhibit A-2, dated the date hereof, payable to such
-----------
Lender and otherwise duly completed.

(ii) The Tranche B Term Loan made by each Tranche B Term Loan Lender
shall be evidenced by a single promissory note of the Company substantially in
the form of Exhibit A-3, dated the date hereof, payable to such Lender and
-----------
otherwise duly completed.

(c) The Swing Loans shall be evidenced by a single promissory note of
the Company substantially in the form of Exhibit A-4, dated the date hereof,
-----------
payable to the Administrative Agent and otherwise duly completed.

(d) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan of each Class made by each Lender to the
Company, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of any Note
evidencing the Loans of such Class held by it, endorsed by such Lender on the
schedule attached to such Note or any continuation thereof; provided, however,
-------- -------
that the failure of such Lender to make any such recordation or endorsement
shall not affect the obligations of the Company to make a payment when due of
any amount owing hereunder or under such Note.

(e) No Lender shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Commitments, Loans and Notes pursuant to
Section 12.06 (and, if requested by any Lender, the Company agrees to so
exchange any Note).

<PAGE>

-50-

2.09 Optional Prepayments and Conversions or Continuations of Loans.
--------------------------------------------------------------
Subject to Section 4.04, the Company shall have the right to prepay Loans, or to
Convert Loans of one Type into Loans of another Type or Continue Loans of one
Type as Loans of the same Type, at any time or from time to time; provided,
--------
however, that: (a) the Company shall give the Administrative Agent notice of
- -------
each such prepayment, Conversion or Continuation as provided in Section 4.05
(and, upon the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable hereunder); (b) Eurodollar Loans may be
prepaid or Converted only on the last day of an Interest Period for such Loans;
and (c) prepayments of the Term Loans shall be applied to the installments of
the Term Loans pro rata in accordance with their respective maturities.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 10, in the event that any Event of Default shall have
occurred and be continuing, the Administrative Agent may (and at the request of
the Majority Lenders shall) suspend the right of the Company to Convert any Loan
into a Eurodollar Loan, or to Continue any Loan as a Eurodollar Loan, in which
event all Loans shall be Converted (on the last day(s) of the respective
Interest Periods therefor) or Continued, as the case may be, as Base Rate Loans.

2.10 Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------

(a) Borrowing Base. Until the Revolving Credit Commitment
--------------
Termination Date, the Company shall from time to time immediately prepay the
Revolving Credit Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (d) below of this Section 2.10) in such amounts as shall
be necessary so that at all times the aggregate outstanding amount of the
Revolving Credit Loans together with the aggregate outstanding Letter of Credit
Liabilities shall not exceed the lesser of (x) the Revolving Credit Commitments
or (y) the Borrowing Base, such amount to be applied, first, to Revolving Credit
Loans outstanding and, second, as cover for Letter of Credit Liabilities
outstanding as specified in paragraph (d) below of this Section 2.10.

(b) The Company shall prepay the Loans (and/or provide cover for the
Letter of Credit Liabilities as specified in paragraph (d) below of this Section
2.10) and the Revolving Credit Commitments shall be automatically reduced as
follows (each such prepayment and reduction to be effected in each case in the
manner, order and to the extent specified in clause (c) below of this Section
2.10):

<PAGE>

-51-

(i) Casualty Events. Upon any Casualty Event, and without limiting
---------------
the obligation of the Company to deposit Insurance Proceeds (as defined
below) in the Collateral Account as set forth in the Security Agreement,

(x) on the date not more than 90 days following the receipt by
the Company or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty
Event (referred in this Section 2.10(b) as "Insurance Proceeds")
------------------
unless the Company has decided to repair or replace the Property
affected by such Casualty Event (the "affected Property"), in an
-----------------
aggregate principal amount equal to 100% of the Net Available Proceeds
of such Casualty Event;

(y) on the date 120 days following the receipt of such Insurance
Proceeds, in an aggregate principal amount equal to the excess of (A)
100% of the Net Available Proceeds of such Casualty Event not
theretofore applied to the repair or replacement of such affected
Property over (B) the amount, if any, held in the Collateral Account
----
with respect to such Casualty Event; provided, however, that the
-------- -------
amount so held may not exceed the aggregate purchase price of
replacement Property for which orders have been placed by the Company
and copies of such orders delivered to the Administrative Agent; and

(z) on the date 180 days following receipt of such Insurance
Proceeds, in an aggregate amount equal to 100% of the Net Available
Proceeds not theretofore applied to the repair or replacement of such
affected Property.

(ii) Equity Issuance; Debt Issuance. Upon any Equity Issuance or any
------------------------------
Debt Issuance, in an aggregate principal amount equal to 50% of the Net
Available Proceeds of such Equity Issuance or 100% of the Net Available
Proceeds of such Debt Issuance, as the case may be.

(iii) Sale of Assets. Upon the date of any Disposition Event, in an
--------------
aggregate principal amount equal to 100% of the Net Available Proceeds from
such Disposition Event, provided, however, that no later than five Business
-------- -------
Days prior to the occurrence of such Disposition Event, the Company shall
deliver to the Lenders a statement, certified by a senior financial officer
of the Company, in form and

<PAGE>

-52-

detail satisfactory to the Administrative Agent, of the amount of the Net
Available Proceeds from such Disposition Event if such amount exceeds
$250,000 (it being understood that the foregoing shall in no way affect the
obligation of the Company to obtain the consent of the Majority Lenders
pursuant to Section 9.05 to any Disposition not otherwise permitted
hereunder).

(iv) Excess Cash Flow. Not later than 90 days after the end of
----------------
(x) the period from the Closing Date through March 31, 1997, (y) the 9-
month period ending December 31, 1997 and (z) each fiscal year of the
Company thereafter, in an aggregate principal amount equal to 50% of the
Excess Cash Flow for such period.

(v) Purchase Price Adjustments. Upon receipt of any refund payment
--------------------------
or purchase price adjustment payment under or in respect of the
transactions contemplated by the Acquisition Documents in an aggregate
principal amount equal to the amount of such payment.

(vi) Life Insurance Proceeds. Upon receipt by the Company of any life
-----------------------
insurance proceeds from any life insurance policy required by Section 9.04
in an aggregate principal amount equal to the amount of any such proceeds.

(c) Application. Prepayments and reductions of Commitments described
-----------
in Section 2.10(b) shall be effected as follows:

(i) first, the amount of the required prepayment shall be applied to
the reduction of Amortization Payments on the Term Loans required by
Section 3.01(b) pro rata between the Tranche A Term Loans and the Tranche B
Term Loans, with all of such reduction to be applied to such Amortization
Payments (1) with respect to all required prepayments other than pursuant
to Section 2.10(b)(vi), in the inverse order of maturity and (2) with
respect to any required prepayment pursuant to Section 2.10(b)(vi), to the
next four succeeding Amortization Payments with any remaining amount of
such prepayment thereafter in the inverse order of maturity.

(ii) second, the Revolving Credit Commitments shall be automatically
reduced to the extent that the amount of the required prepayment exceeds
the aggregate principal amount of Term Loans outstanding, and to the extent
that, after giving effect to such reduction, the aggregate principal amount
of Revolving Credit Loans, together with the

<PAGE>

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aggregate amount of all Letter of Credit Liabilities, would exceed the
Revolving Credit Commitments, the Company shall, first, prepay outstanding
Revolving Credit Loans and, second, provide cover for Letter of Credit
Liabilities as specified in Section 2.10(d), in an aggregate amount equal
to such excess.

Notwithstanding the foregoing, if the amount of any prepayment of Loans required
under this Section 2.10 shall be in excess of the amount of the Base Rate Loans
at the time outstanding, only the portion of the amount of such prepayment as is
equal to the amount of such Base Rate Loans shall be immediately prepaid and, at
the election of the Company, the balance of such required prepayment shall be
either (i) deposited in the Collateral Account and applied to the prepayment of
Eurodollar Loans on the last day of the then next-expiring Interest Period for
Eurodollar Loans or (ii) prepaid immediately, together with any amounts owing to
the Lenders under Section 5.05. Notwithstanding any such deposit in the
Collateral Account, interest shall continue to accrue on such Loans until
prepayment.

(d) Cover for Letter of Credit Liabilities. In the event that the
--------------------------------------
Company shall be required pursuant to this Section 2.10 to provide cover for
Letter of Credit Liabilities, the Company shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as provided in the Security Agreement as collateral
security in the first instance for the Letter of Credit Liabilities) until such
time as all Letters of Credit shall have been terminated and all of the Letter
of Credit Liabilities paid in full.

2.11 Annual Cleandown. For a consecutive thirty-day period (x)
----------------
during the 150-day period beginning on April 1, 1997 and (y) during the second
quarter of each fiscal year beginning in 1998, the sum of the aggregate
principal amount of Revolving Credit Loans outstanding plus the aggregate amount
of all Letter of Credit Liabilities shall not exceed the following:

(i) if the Company has not theretofore consummated any Related
Business Acquisition, $4,000,000; or

(ii) if the Company has theretofore consummated any Related
Business Acquisition(s) in accordance with the terms hereof,
$4,000,000 plus the aggregate principal amount of Revolving Credit
Loans outstanding (but not to exceed $6,000,000) the proceeds of which

<PAGE>

-54-

were used solely to fund such Related Business Acquisition(s) and to pay
fees and expenses directly related thereto.

Section 3. Payments of Principal and Interest.
----------------------------------

3.01 Repayment of Loans.
------------------

(a) The Company hereby promises to pay to the Administrative Agent
for the account of each Lender the entire outstanding principal amount of such
Lender's Revolving Credit Loans, and each Revolving Credit Loan shall mature, on
the Business Day after the Revolving Credit Commitment Termination Date.

(b) The Company hereby promises to pay to the Administrative Agent
(i) for the account of the Tranche A Term Loan Lenders, in repayment of the
principal of the Tranche A Term Loans, (x) $500,000 on each of the first sixteen
Quarterly Dates, (y) $8,000,000 on each of the then immediately succeeding three
Quarterly Dates and (z) $8,000,000 on the fifth anniversary of the Closing Date
(or if such date is not a Business Day, the Business Day immediately preceding
such date) and (ii) for the account of the Tranche B Term Loan Lenders, in
repayment of the principal of the Tranche B Term Loans, (x) $500,000 on each of
the first twenty Quarterly Dates, (y) $9,500,000 on each of the then immediately
succeeding three Quarterly Dates and (z) $9,500,000 on the sixth anniversary of
the Closing Date (or if such date is not a Business Day, on the Business Day
immediately preceding such date) (each such scheduled payment described in the
foregoing clauses (i) and (ii) an "Amortization Payment").
--------------------

3.02 Interest. The Company hereby promises to pay to the
--------
Administrative Agent for the account of each Lender interest on the unpaid
principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:

(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin and
----

(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period plus the Applicable Margin.
----

<PAGE>

-55-

Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable Post-
Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Company hereunder or under the Notes held by such Lender to or for account
of such Lender, that shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full. Accrued interest on each Loan shall be payable (i) in the case of
a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, (iii) in the case of any Base Rate Loan,
upon the payment or prepayment thereof (but only on the principal amount so paid
or prepaid) and, in respect of each portion thereof Converted into a Eurodollar
Loan, on the first date that interest is payable hereunder on such Eurodollar
Loan and (iv) in the case of any Eurodollar Loan, upon the payment or prepayment
thereof or the Conversion of such Loan to a Loan of another Type (but only on
the principal amount so paid, prepaid or Converted), except that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Administrative Agent shall give notice thereof to the
Lenders to which such interest is payable and to the Company.

Section 4. Payments; Pro Rata Treatment; Computations; Etc.
-----------------------------------------------

4.01 Payments.
--------

(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Obligors under any
other Basic Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent at its
account at the Principal Office, not later than 1:00 p.m. New York time on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day).

<PAGE>

-56-

(b) The Company shall, at the time of making each payment under this
Agreement or any Note for the account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans, Reimbursement Obligations or other amounts payable by the Company
hereunder to which such payment is to be applied (and in the event that the
Company fails to so specify, or if an Event of Default has occurred and is
continuing, the Administrative Agent may distribute such payment to the Lenders
for application in such manner as it or the Majority Lenders, subject to Section
4.02, may determine to be appropriate).

(c) Except to the extent otherwise provided in the second sentence of
Section 2.03(g), each payment received by the Administrative Agent under this
Agreement or any Note for the account of any Lender shall be paid by the
Administrative Agent to such Lender, in immediately available funds, (x) if the
payment was actually received by the Administrative Agent prior to 2:00 p.m.
(New York time) on any day, on such day and (y) if the payment was actually
received by the Administrative Agent after 2:00 p.m. (New York time) on any day,
on the following Business Day (it being understood that to the extent that any
such payment is not made in full by the Administrative Agent, the Administrative
Agent shall pay to such Lender, upon demand, interest at the Federal Funds Rate
from the date such amount was required to be paid to such Lender pursuant to the
foregoing clauses until the date the Administrative Agent pays such Lender the
amount).

(d) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.

4.02 Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (a) each borrowing of Loans of a particular Class from the Lenders
under Section 2.01 shall be made from the relevant Lenders, each payment of
commitment fee under Section 2.05 in respect of Commitments of a particular
Class shall be made for account of the relevant Lenders, and each termination or
reduction of the amount of the Commitments of a particular Class under
Section 2.04 shall be applied to the respective Commitments of such Class of the
relevant Lenders, pro rata according to the amounts of their respective
Commitments of such Class; (b) except as otherwise provided in Section 5.04,
Eurodollar Loans of any Class having the same Interest Period shall be allocated
pro rata among the relevant Lenders according

<PAGE>

-57-

to the amounts of their respective Revolving Credit and Term Loan Commitments
(in the case of the making of Loans) or their respective Revolving Credit and
Term Loans (in the case of Conversions and Continuations of Loans); (c) each
payment or prepayment of principal of Revolving Credit Loans or Term Loans by
the Company shall be made for account of the relevant Lenders pro rata in
accordance with the respective unpaid outstanding principal amounts of the Loans
of such Class held by them; and (d) each payment of interest on Revolving Credit
Loans and Term Loans by the Company shall be made for account of the relevant
Lenders pro rata in accordance with the amounts of interest on such Loans then
due and payable to the respective Lenders.

4.03 Computations. Interest on Eurodollar Loans and commitment fee
------------
and letter of credit fees shall be computed on the basis of a year of 360 days
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable and interest on Base Rate Loans and
Reimbursement Obligations shall be computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for each day that the Base Rate is calculated by
reference to the Federal Funds Rate, interest on Base Rate Loans and
Reimbursement Obligations shall be computed on the basis of a year of 360 days
and actual days elapsed (including the first day but excluding the last day).

4.04 Minimum Amounts. Except for mandatory prepayments made pursuant
---------------
to Section 2.10 and Conversions or prepayments made pursuant to Section 5.04,
each borrowing, Conversion and prepayment of principal of Loans shall be in an
amount at least equal to $500,000 with respect to Base Rate Loans and $1,000,000
with respect to Eurodollar Loans and in multiples of $250,000 in excess thereof
(borrowings, Conversions or prepayments of or into Loans of different Types or,
in the case of Eurodollar Loans, having different Interest Periods at the same
time hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Type or Interest Period). Anything in
this Agreement to the contrary notwithstanding, the aggregate principal amount
of Eurodollar Loans having the same Interest Period shall be in an amount at
least equal to $1,000,000 and in multiples of $250,000 in excess thereof and, if
any Eurodollar Loans would otherwise be in a lesser principal amount for any
period, such Loans shall be Base Rate Loans during such period.

<PAGE>

-58-

4.05 Certain Notices. Notices by the Company to the Administrative Agent
---------------
of terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans and of Classes of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by the Administrative Agent not later than
12:00 noon New York time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing, Conversion, Continuation or
prepayment or the first day of such Interest Period specified below:

Number of
Business
Notice Days Prior
------ ----------

Termination or reduction
of Commitments 2

Borrowing or optional prepayment
of, or Conversions into,
Base Rate Loans same day

Borrowing or optional prepayment
of, Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3

Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or prepayment shall specify the Class of
Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to
Section 4.04) and Type of each Loan to be borrowed, Converted, Continued or
prepaid and the date of borrowing, Conversion, Continuation or prepayment (which
shall be a Business Day). Each such notice of the duration of an Interest
Period shall specify the Loans to which such Interest Period is to relate. The
Administrative Agent shall promptly notify the Lenders of the contents of each
such notice. In the event that the Company fails to select the Type of Loan, or
the duration of any Interest Period for any Eurodollar Loan, within the time
period and otherwise as provided in this Section 4.05, such Loan (if outstanding
as a Eurodollar Loan) will be automatically Converted into a Base Rate Loan on
the last day of the then current Interest Period for such Loan or (if
outstanding as a Base Rate Loan) will remain as, or (if not then outstanding)
will be made as, a Base Rate Loan.

<PAGE>

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4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
------------------------------------------------
Administrative Agent shall have received written notice from a Lender or the
Company (the "Payor") prior to the date on which the Payor is to make payment to
-----
the Administrative Agent of (in the case of a Lender) the proceeds of a Loan to
be made by such Lender hereunder or (in the case of the Company) a payment to
the Administrative Agent for the account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
------------
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid; provided, however, that if neither the
-------- -------
recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows:

(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (without duplication of the
obligation of the Company under Section 3.02 to pay interest on the
Required Payment at the Post-Default Rate), it being understood that the
return by the recipient(s) of the Required Payment to the Administrative
Agent shall not limit such obligation of the Company under Section 3.02 to
pay interest at the Post-Default Rate in respect of the Required Payment
and

(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to the Company, the Payor and the Company shall each be
obligated retroactively

<PAGE>

-60-

to the Advance Date to pay interest in respect of the Required Payment
pursuant to Section 3.02, it being understood that the return by the
Company of the Required Payment to the Administrative Agent shall not limit
any claim the Company may have against the Payor in respect of such
Required Payment.

4.07 Right of Setoff; Sharing of Payments, Etc.
-----------------------------------------

(a) Each Obligor agrees that, in addition to (and without limitation
of) any right of setoff, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option (to the fullest extent
permitted by law), to set off and apply any deposit (general or special, time or
demand, provisional or final), or other indebtedness, held by it for the credit
or account of such Obligor at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder
that is not paid when due (regardless of whether such deposit or other
indebtedness is then due to such Obligor), in which case it shall promptly
notify such Obligor and the Administrative Agent thereof; provided, however,
-------- -------
that such Lender's failure to give such notice shall not affect the validity
thereof.

(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Basic Document through the exercise of any right of setoff, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or Letter of Credit Liabilities or such other amounts then due
hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender or such
other Lender, direct interests in) the Loans of such Class or Letter of Credit
Liabilities or such other amounts, respectively, owing to such other Lenders (or
in interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that all
the Lenders shall share the benefit of such excess payment (net of any expenses
that may be incurred by such Lender in obtaining or preserving such excess
payment) pro rata in accordance with the unpaid principal of and/or interest on
the Loans of such Class or Letter

<PAGE>

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of Credit Liabilities or such other amounts, respectively, owing to each of the
Lenders; provided, however, that if at the time of such payment the outstanding
-------- -------
principal amount of the Loans of any Class shall not be held by the Lenders pro
rata in accordance with their respective Commitments of such Class in effect at
the time such Loans were made (by reason of a failure of a Lender to make a Loan
hereunder in the circumstances described in the last paragraph of Section
12.04), then such purchases of participations and/or direct interests shall be
made in such manner as will result, as nearly as is practicable, in the
outstanding principal amount of the Loans being held by the Lenders pro rata
according to the amounts of such Commitments. To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.

(c) The Company agrees that any Lender so purchasing such a
participation may exercise all rights of setoff, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans or other amounts (as the case may be) owing to
such Lender in the amount of such participation.

(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Obligor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.

Section 5. Yield Protection, Etc.
---------------------

5.01 Additional Costs.
----------------

(a) The Company shall pay directly to each Lender from time to time
on written request such amounts as such Lender may determine to be necessary to
compensate it for any costs which such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions

<PAGE>

-62-

in amounts receivable being herein called "Additional Costs"), resulting from
----------------
any Regulatory Change which:

(i) imposes or modifies any tax, levy, charge or withholding of any
nature or any penalty with respect to the maintenance or fulfillment of
such Lender's obligations under this Agreement or its Notes in respect of
any of such Loans (other than changes in the rate of taxes imposed on or
measured by the overall net income of such Lender or of its Applicable
Lending Office for any of such Loans by the jurisdiction in which such
Lender has its principal office or such Applicable Lending Office); or

(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including any of such Loans or any deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01),
or any commitment of such Lender (including the Commitments of such Lender
hereunder); or

(iii) imposes any other condition affecting this Agreement or its Notes
(or any of such extensions of credit or liabilities) or its Commitments.

If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender to make or Continue Eurodollar
Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 shall be applicable). Nothing herein shall limit the
Company's obligations under this Section 5.01(a) for the period prior to such
suspension.

(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Lender which includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if

<PAGE>

-63-

such Lender so elects by notice to the Company (with a copy to the
Administrative Agent), the obligation of such Lender to make or Continue, or to
Convert Base Rate Loans into, Eurodollar Loans hereunder shall be suspended
until such Regulatory Change ceases to be in effect (in which case the
provisions of Section 5.04 shall be applicable).

(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, the bank
holding company of which such Lender is a subsidiary) for any costs which it
determines are attributable to the maintenance by such Lender (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) heretofore or hereafter issued by
any government or governmental or supervisory authority implementing at the
national level the Basle Accord (including the Final Risk-Based Capital
Guidelines of the Board of Governors of the Federal Reserve System (12 CFR
Part 208, Appendix A; 12 CFR Part 225, Appendix A) and the Final Risk-Based
Capital Guidelines of the Office of the Comptroller of the Currency (12 CFR
Part 3, Appendix A)), of capital in respect of its Commitments or Loans (such
compensation to include an amount equal to any reduction of the rate of return
on assets or equity of such Lender (or any Applicable Lending Office or such
bank holding company) to a level below that which such Lender (or any Applicable
Lending Office or such bank holding company) could have achieved but for such
law, regulation, interpretation, directive or request). For purposes of this
Section 5.01(c), "Basle Accord" shall mean the proposals for risk-based capital
------------
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.

(d) Each Lender shall notify the Company of any event occurring after
the date of this Agreement that will entitle such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any
event within 45 days after such Lender obtains actual knowledge thereof;

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provided, however, that (i) if any Lender fails to give such notice within 45
- -------- -------
days after it obtains actual knowledge of such an event, such Lender shall, with
respect to compensation payable pursuant to this Section 5.01 in respect of any
costs resulting from such event, only be entitled to payment under this
Section 5.01 for costs incurred from and after the date 45 days prior to the
date that such Lender does give such notice and (ii) each Lender will designate
a different Applicable Lending Office for the Loans of such Lender affected by
such event if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate an Applicable Lending Office located in the United States of
America. Each Lender will furnish to the Company a certificate setting forth
the basis and amount of each request by such Lender for compensation under
paragraph (a) or (c) of this Section 5.01, which certificate shall, except for
demonstrable error, be final, conclusive and binding for all purposes.
Determinations and allocations by any Lender for purposes of this Section 5.01
of the effect of any Regulatory Change pursuant to paragraph (a) or (b) of this
Section 5.01, or of the effect of capital maintained pursuant to paragraph (c)
of this Section 5.01, on its costs or rate of return of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Lender under this Section 5.01,
shall be conclusive; provided, however, that such determinations and allocations
-------- -------
are made on a reasonable basis.

5.02 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:

(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01 are
not being provided in the relevant amounts or for the relevant maturities
for purposes of determining rates of interest for Eurodollar Loans as
provided herein; or

(b) if the Administrative Agent determines, which determination shall
be conclusive, that the relevant rates of interest referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 upon the basis of
which the rate of interest for Eurodollar Loans for such Interest Period is
to be determined are not likely adequately to cover the cost

<PAGE>

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to the applicable Lenders of making or maintaining Eurodollar Loans for
such Interest Period;

then the Administrative Agent shall give the Company and each Lender prompt
notice thereof, and so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans and the
Company shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09.

5.03 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Administrative Agent) and such Lender's obligation to make
or Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall
be suspended until such time as such Lender may again make and maintain
Eurodollar Loans (in which case the provisions of Section 5.04 shall be
applicable). Before giving any such notice to the Company pursuant to this
Section 5.03, however, such Lender shall either designate a different Applicable
Lending Office or use its best efforts to transfer its Eurodollar Loans
hereunder to any other Lender if such designation or transfer will avoid the
need for giving such notice and will not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender.

5.04 Treatment of Affected Loans. If the obligation of any Lender to
---------------------------
make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03, such
Lender's Eurodollar Loans shall be automatically Converted into Base Rate Loans
on the last day(s) of the then current Interest Period(s) for such Eurodollar
Loans (or, in the case of a Conversion as a result of Section 5.03, on such
earlier date as such Lender may specify to the Company with a copy to the
Administrative Agent as is required by law) and, unless and until such Lender
gives notice as provided below that the circumstances specified in Section 5.01
or 5.03 which gave rise to such Conversion no longer exist:

(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal which would otherwise
be applied to such Lender's

<PAGE>

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Eurodollar Loans shall be applied instead to its Base Rate Loans; and

(b) all Loans which would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans and all Base Rate Loans of such Lender which would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.

If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 which gave rise
to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans are outstanding,
such Lender's Base Rate Loans shall be automatically Converted, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar
Loans, to the extent necessary so that, after giving effect thereto, all Loans
held by the Lenders holding Eurodollar Loans and by such Lender are held pro
rata (as to principal amounts, Types and Interest Periods) in accordance with
their respective Commitments.

5.05 Compensation. The Company shall pay to the Administrative Agent
------------
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense which such Lender determines is attributable to:

(a) any payment, prepayment or Conversion of a Eurodollar Loan held
by such Lender for any reason (including the acceleration of the Loans
pursuant to Section 10) on a date other than the last day of the Interest
Period for such Loan; or

(b) any failure by the Company for any reason (including the failure
of any of the conditions precedent specified in Section 7 to be satisfied)
to borrow a Eurodollar Loan from or Continue or Convert a Eurodollar Loan
of such Lender on the date for such borrowing or Continuation or Conversion
specified in the relevant notice of borrowing or Continuation or Conversion
given pursuant to Section 2.02 or 2.09.

Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any,

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of (i) the amount of interest which otherwise would have accrued on the
principal amount so paid, prepaid or Converted or not borrowed, Continued or
Converted for the period from the date of such payment, prepayment, Conversion
or failure to borrow, Continue or Convert to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, Continue
or Convert, the Interest Period for such Loan which would have commenced on the
date specified for such borrowing, Continuation or Conversion) at the applicable
rate of interest for such Loan provided for herein over (ii) the amount of
interest which otherwise would have accrued on such principal amount at a rate
per annum equal to the interest component of the amount such Lender would have
bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender). Any Lender requesting
compensation pursuant to this Section 5.05 will furnish to the Administrative
Agent and the Company a certificate setting forth the basis and amount of such
request and such certificate, absent manifest error, shall be conclusive.

5.06 Additional Costs in Respect of Letters of Credit. Without
------------------------------------------------
limiting the obligations of the Company under Section 5.01 (but without
duplication), if as a result of any Regulatory Change there shall be imposed,
modified or deemed applicable any tax, levy, charge, reserve or withholding of
any nature, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reduction in amount
receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders, the Company shall pay
immediately to such Lender or Lenders, from time to time as specified by such
Lender or Lenders, such additional amounts as shall be sufficient to compensate
such Lender or Lenders for such increased costs or reductions in amount. A
statement as to such increased costs or reductions in amount incurred by such
Lender or Lenders, submitted by such Lender or Lenders to the Company shall be
conclusive in the absence of manifest error as to the amount thereof.

<PAGE>

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5.07 Net Payments.
------------

(a) The Company agrees to pay to each Lender (which term, for
purposes of this Section 5.07, shall include a separately incorporated
Applicable Lending Office) such additional amounts as are necessary in order
that the net payment of any amount due hereunder after deduction for or
withholding in respect of any Taxes imposed with respect to such payment (or in
lieu thereof, payment of such Taxes by such Lender), will not be less than the
amount stated herein to be then due and payable; provided, however, that the
-------- -------
foregoing obligation to pay additional amounts with respect to U.S. federal
withholding taxes shall not apply:

(i) to any payment to a Lender that is not a U.S. Person if such
Lender (1) is not, on the date hereof (or on the date it becomes a Lender
as provided in Section 12.06(b)) and on the date of any change in the
Applicable Lending Office of such Lender, either entitled to submit a Form
1001 (relating to such Lender and entitling it to a complete exemption from
withholding on all interest or fees to be received by it hereunder in
respect of the Loans) or Form 4224 (relating to all interest or fees to be
received by such Lender hereunder in respect of the Loans), or (2) as of
the date of such payment, has not submitted such Form 1001 or Form 4224
(including renewals thereof) effective for the period for which such
payment is made and entitling it to a complete exemption from withholding
unless such failure to submit such Form 1001 or Form 4224 has arisen solely
by reason of there having occurred a change in law, rule, regulation,
treaty or directive, or in the interpretation or application thereof after
the later of the date hereof (or the date on which it becomes a Lender) and
the date of any change in the Applicable Lending Office of such Lender, or

(ii) to any U.S. federal withholding taxes that would not have been
imposed but for the failure by a Lender that is not a U.S. Person to comply
with applicable certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or
connections with the United States of America of such Lender if such
compliance is required by statute, rule, regulation, treaty or directive of
the United States of America or the interpretation or application thereof
as a precondition to relief or exemption from such U.S. federal withholding
taxes.

<PAGE>

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For the purposes of this Section 5.07(a), (w) "Form 1001" shall mean Form 1001
---------
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
---------
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or
-----------
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of
America, or any estate or trust that is subject to United States Federal income
taxation regardless of the source of its income and (z) "Taxes" shall mean any
-----
present or future tax, levy, deduction, assessment or other charge or
withholding, and all liabilities with respect thereto (including penalties,
interest and expenses other than penalties, interest and expenses incurred as a
result of the negligence of such Lender) imposed by or on behalf of any
government or any political subdivision or any taxing authority (excluding taxes
imposed on or measured by the overall net income of such Lender or of its
Applicable Lending Office) pursuant to the laws of the United States or any
political subdivision thereof or of the jurisdiction in which it is incorporated
or the jurisdiction where such Bank's lending office is located.

(b) Documentary and Similar Taxes. Except as otherwise provided in
-----------------------------
this clause (b), the Company agrees to pay any current or future stamp,
intangible or documentary taxes or any other excise or property taxes, charges
or similar levies (including mortgage recording taxes and similar fees) that
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, or any other
document in connection with this Agreement or any Loan (all such taxes, charges
and levies are hereinafter referred to as, collectively, "Other Taxes").
-----------

(c) Within 30 days after paying any Other Taxes under clause (b) or
any amount to any Lender from which it is required by law to make any deduction
or withholding, and within 30 days after it is required by law to remit such
deduction or withholding or payment of Other Taxes to any relevant taxing or
other authority, the Company shall deliver to the Administrative Agent for
delivery to such Lender evidence reasonably satisfactory to such Lender of such
deduction, withholding or payment (as the case may be).

<PAGE>

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(d) In the event the Company shall fail to pay, deduct or withhold
Taxes with respect to payments made by the Company to the Administrative Agent
for account of any Lender hereunder (other than any such failure which results
from the Company relying upon a Form 1001 or Form 4224, or successor form,
delivered pursuant to Section 5.07(f)) or shall fail to pay Other Taxes, whether
or not such Taxes or Other Taxes were correctly or legally asserted by the
relevant taxing authority, the Company will indemnify such Lender for any
penalties, interest and expenses (including reasonable attorney's fees and
expenses) paid by such Lender in connection with such failure and, as to any
payment of interest and fees with respect to which the Company is required to
pay additional amounts under Section 5.07(a), for the amount of any U.S. Taxes
which it is obligated to deduct or withhold from such interest or fees. Such
indemnification shall be made within 30 days after the date any Lender makes
written demand therefor. In the event that the Company makes payment of any
additional amount pursuant to Section 5.07(a), (b) or (d) with respect to any
Lender, such Lender shall refund, to the extent of any refund or credit or other
reduction in Taxes received by such Lender in respect of such additional amount,
any amounts paid by the Company under said Section 5.07(a), (b) or (d) in
respect of such Taxes.

(e) Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its Applicable Lending Office) to avoid or minimize
any amounts which might otherwise be payable pursuant to Section 5.07(a);
provided, however, that such efforts will not, in the judgment of such Lender,
- -------- -------
be otherwise disadvantageous to such Lender.

(f) Each Lender that is not a U.S. Person agrees that it shall
deliver to the Company and the Administrative Agent on the date of execution of
this Agreement (or on the date it becomes a Lender as provided in Section
12.06(b)), either a duly completed Form 1001 or Form 4224, as appropriate, or
any successor applicable form (and shall deliver a further copy of the
applicable form on or before the date that such form expires or becomes obsolete
or after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Company) indicating in each case that such
Lender is entitled to receive payments hereunder without any deduction or
withholding of any U.S. federal withholding tax, unless in any such case any
change in law, rule, regulation, treaty or directive, or in the interpretation
or application thereof has occurred after the later of the date hereof (or the
date it becomes a Lender) and the date of any change in the Applicable Lending
Office of such Lender prior to the date on which any such

<PAGE>

-71-

delivery would otherwise be required which renders any such form inapplicable or
which would prevent such Lender from duly completing and delivering any such
form with respect to it. The Company shall be entitled to rely on such forms in
its possession until receipt of any revised or successor form pursuant to the
preceding sentence.

5.08 Replacement of Lender. If any Lender requests compensation
---------------------
pursuant to Section 5.01 or 5.07, or such Lender's obligation to make or
Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall be
suspended pursuant to Section 5.01 or 5.03, then, unless a Default shall have
occurred and be continuing, the Company, upon three Business Days notice, may
require that such Lender (a "Replaced Lender") transfer all of its right, title
---------------
and interest under this Agreement and such Replaced Lender's Notes to any bank
(a "Proposed Lender") identified by the Company if: (i) such Proposed Lender
---------------
agrees to assume all of the obligations of such Replaced Lender for
consideration equal to the outstanding principal amount of such Replaced
Lender's Loans, together with interest thereon at the rates applicable thereto
hereunder to the date of such transfer, and satisfactory arrangements are made
for payment to such Replaced Lender of all other amounts payable hereunder to
such Replaced Lender on or prior to the date of such transfer (including any
fees accrued hereunder and any amounts which would be payable under Section 5.05
as if all of such Replaced Lender's Loans were being prepaid in full on such
date), (ii) the conditions to an assignment of such Replaced Lender's Loans set
forth in Section 12.06(b) have been met and (iii) if such Replaced Lender has
requested compensation pursuant to Section 5.01 or 5.07, such Proposed Lender's
aggregate requested compensation, if any, pursuant to said Section 5.01 or 5.07
with respect to such Replaced Lender's Loans is lower than that of the Replaced
Lender. Any Proposed Lender which has met the conditions of the foregoing
sentence shall be a "Lender" for all purposes hereunder. Without prejudice to
the survival of any other agreement of the Company hereunder, the agreements of
the Company contained in Sections 5.01, 5.05, 5.06, 5.07 and 12.03 (without
duplication of any payments made to such Replaced Lender by the Company or the
Proposed Lender) shall survive for the benefit of any Lender replaced under this
Section 5.08 with respect to the time prior to such replacement.

Section 6. Guarantee.
---------

6.01 The Guarantee. The Guarantors hereby jointly and severally
-------------
guarantee to each Lender and the Administrative Agent and their respective
successors and assigns the prompt payment in

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full when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on the Loans made by the Lenders to, and the Notes
held by each Lender of, the Company and all other amounts from time to time
owing to the Lenders or the Administrative Agent by the Company under this
Agreement and under the Notes and by any Obligor under any of the other Basic
Documents, and all obligations of the Company or any of its Subsidiaries to any
Lender in respect of any Interest Rate Protection Agreement, in each case
strictly in accordance with the terms thereof (such obligations being herein
collectively called the "Guaranteed Obligations"). The Guarantors hereby
----------------------
further jointly and severally agree that if the Company shall fail to pay in
full when due (whether at stated maturity, by acceleration or otherwise) any of
the Guaranteed Obligations, the Guarantors will promptly pay the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.

6.02 Obligations Unconditional. The obligations of the Guarantors
-------------------------
under Section 6.01 are absolute, irrevocable and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Company under this Agreement, the Notes
or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 6.02 that the obligations of the
Guarantors hereunder shall be absolute, irrevocable and unconditional, joint and
several, under any and all circumstances. Without limiting the generality of
the foregoing, it is agreed that the occurrence of any one or more of the
following shall not alter or impair the liability of the Guarantors hereunder
which shall remain absolute, irrevocable and unconditional as described above:

(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;

(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or

<PAGE>

-73-

instrument referred to herein or therein shall be done or omitted;

(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement,
the Notes or any other Basic Document or any other agreement or instrument
referred to herein or therein shall be amended, modified or waived in any
respect or any other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;

(iv) any lien or security interest granted to, or in favor of, the
Administrative Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations shall fail to be perfected; or

(v) the release of any other Guarantor.

The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent or any Lender exhaust any right, power or remedy or proceed against the
Company under this Agreement or the Notes or any other agreement or instrument
referred to herein or therein, or against any other Person under any other
guarantee of, or security for, any of the Guaranteed Obligations. The
Guarantors waive any and all notice of the creation, renewal, extension or
accrual of any of the Guaranteed Obligations and notice of or proof of reliance
by any Lender upon this guarantee or acceptance of this guarantee, and the
Guaranteed Obligations, and any of them, shall conclusively be deemed to have
been created, contracted or incurred in reliance upon this guarantee, and all
dealings between the Company and the Lenders shall likewise be conclusively
presumed to have been had or consummated in reliance upon this guarantee. This
guarantee shall be construed as a continuing, absolute, irrevocable and
unconditional guarantee of payment without regard to any right of offset with
respect to the Guaranteed Obligations at any time or from time to time held by
the Lenders, and the obligations and liabilities of the Guarantors hereunder
shall not be conditioned or contingent upon the pursuit by the Lenders or any
other Person at any time of any right or remedy against the Company or against
any other Person which may be or become liable in respect of all or any part of
the Guaranteed Obligations or against any collateral security or guarantee
therefor or right of offset with respect thereto. This guarantee shall remain
in full force and effect and be binding in accordance with and to the extent of
its

<PAGE>

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terms upon the Guarantors and the successors and assigns thereof, and shall
inure to the benefit of the Lenders, and their respective successors and
assigns, notwithstanding that from time to time during the term of this
Agreement there may be no Guaranteed Obligations outstanding.

6.03 Reinstatement. The obligations of the Guarantors under this
-------------
Section 6 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise and the Guarantors jointly and severally agree
that they will indemnify the Administrative Agent and each Lender on demand for
all reasonable costs and expenses (including reasonable fees of counsel)
incurred by the Administrative Agent or such Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.

6.04 Subrogation; Subordination. Each Guarantor hereby agrees that
--------------------------
until the payment and satisfaction in full in cash of all Guaranteed Obligations
and the expiration and termination of the Commitments of the Lenders under this
Agreement it shall not exercise any right or remedy arising by reason of any
performance by it of its guarantee in Section 6.01, whether by subrogation or
otherwise, against the Company or any other guarantor of any of the Guaranteed
Obligations or any security for any of the Guaranteed Obligations. The payment
of any amounts due with respect to any indebtedness of the Company now or
hereafter owing to any Guarantor by reason of any payment by such Guarantor
under the Guarantee in this Section 6 is hereby subordinated to the prior
payment in full in cash of the Obligations. Each Guarantor agrees that it will
not demand, sue for or otherwise attempt to collect any such indebtedness of the
Company to such Guarantor until the Obligations shall have been paid in full in
cash. If, notwithstanding the foregoing sentence, any Guarantor shall prior to
the payment in full in cash of the Obligations collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by such Guarantor as trustee for the Administrative Agent
and the Lenders and be paid over to the Administrative Agent on account of the
Obligations without affecting in any manner the liability of such Guarantor
under the other provisions of the guaranty contained herein.

<PAGE>

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6.05 Remedies. The Guarantors jointly and severally agree that, as
--------
between the Guarantors and the Lenders, the obligations of the Company under
this Agreement and the Notes may be declared to be forthwith due and payable as
provided in Section 10 (and shall be deemed to have become automatically due and
payable in the circumstances provided in said Section 10) for purposes of
Section 6.01 notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against the Company and that, in the event of such declaration
(or such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by the Company) shall forthwith
become due and payable by the Guarantors for purposes of Section 6.01.

6.06 Instrument for the Payment of Money. Each Guarantor hereby
-----------------------------------
acknowledges that the guarantee in this Section 6 constitutes an instrument for
the payment of money, and consents and agrees that any Lender or the
Administrative Agent, at its sole option, in the event of a dispute by such
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring motion-action under New York CPLR Section 3213.

6.07 Continuing Guarantee. The guarantee in this Section 6 is a
--------------------
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.

6.08 General Limitation on Guarantee Obligations. In any action or
-------------------------------------------
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 would otherwise, be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under Section 6.01, then, notwithstanding any
other provision to the contrary, the amount of such liability shall, without any
further action by such Subsidiary Guarantor, any Lender, the Administrative
Agent or any other Person, be automatically limited and reduced to the highest
amount that is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.

Section 7. Conditions Precedent.
--------------------

7.01 Initial Extension of Credit. The obligation of any Lender to
---------------------------
make its initial extension of credit hereunder (whether by making a Loan or
issuing a Letter of Credit) is

<PAGE>

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subject to the conditions precedent that (i) such extension of credit shall be
made on or before May 31, 1996 and (ii) the Administrative Agent shall have
received the following documents (with, in the case of clauses (a), (b), (c),
(d), (e), (f), (g), (j), (p) and (u) below, sufficient copies for each Lender),
each of which shall be satisfactory to the Administrative Agent (and to the
extent specified below, to each Lender) in form and substance:

(a) Corporate Documents. Certified copies of the charter and by-laws
-------------------
(or equivalent documents) of each Obligor and of all corporate authority
for each Obligor (including board of director resolutions and evidence of
the incumbency, including specimen signatures, of officers) with respect to
the execution, delivery and performance of such of the Basic Documents to
which such Obligor is intended to be a party and each other document to be
delivered by such Obligor from time to time in connection herewith and the
extensions of credit hereunder (and the Administrative Agent and each
Lender may conclusively rely on such certificate until it receives notice
in writing from such Obligor to the contrary).

(b) Officers' Certificate. An officers' certificate of the Company,
---------------------
dated the Closing Date, to the effect set forth in the first sentence of
Section 7.02.

(c) Borrowing Base Certificate. A Borrowing Base Certificate as at
--------------------------
the last day of the monthly accounting period most recently ended prior to
the Closing Date.

(d) Opinion of Counsel to the Obligors. (i) Opinion of Kaye,
----------------------------------
Scholer, Fierman, Hays & Handler, special New York counsel to the Obligors,
substantially in the form of Exhibit E and (ii) opinion of local counsel to
---------
the Obligors in each state in which Collateral is located as requested by
the Arranger and the Administrative Agent, substantially in a form
acceptable to the Arranger and the Administrative Agent (and each Obligor
hereby instructs such counsel to deliver such opinion to the Lenders, the
Arranger and the Administrative Agent).

(e) Opinion of Special New York Counsel to Merrill Lynch. An
----------------------------------------------------
opinion, dated the Closing Date, of Cahill Gordon & Reindel, special New
York counsel to the Arranger, in form and substance reasonably satisfactory
to the Arranger.

<PAGE>

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(f) Notes. The Notes, duly completed and executed for each Lender.
-----

(g) Security Agreement. The Security Agreement, duly executed and
------------------
delivered by the Obligors and the Administrative Agent and the certificates
identified under the name of such Obligors in Annex 1 thereto, accompanied
by undated stock powers executed in blank. In addition, the Obligors shall
have taken such other action (including delivering to the Administrative
Agent, for filing, appropriately completed and duly executed copies of
Uniform Commercial Code financing statements) as the Administrative Agent
shall have requested in order to perfect the security interests created
pursuant to the Security Agreement.

(h) [Intentionally Omitted]

(i) Insurance. Certificates of insurance evidencing the existence of
---------
all insurance required to be maintained by the Company pursuant to
Section 9.04 and the designation of the Administrative Agent as the loss
payee or additional named insured, as the case may be, thereunder to the
extent required by Section 9.04, such certificates to be in such form and
contain such information as is specified in Section 9.04. In addition, the
Company shall have delivered (i) a certificate of the chief financial
officer of the Company setting forth the insurance obtained by it in
accordance with the requirements of Section 9.04 and stating that such
insurance is in full force and effect and that all premiums then due and
payable thereon have been paid and (ii) a written report, dated reasonably
near the date the Loans are being made, of Sedgwick, James of Texas, Inc.
or any other firm of independent insurance brokers of nationally recognized
standing, as to such insurance and stating that, in their opinion, such
insurance adequately protects the interests of the Administrative Agent and
the Lenders and is in compliance with the provisions of Section 9.04.

(j) Solvency Analysis. A certificate from the chief financial
-----------------
officer of the Company to the effect that, as of the Closing Date and after
giving effect to the initial extension of credit hereunder and to the other
transactions contemplated hereby, (i) the aggregate value of all Properties
of the Company and its Subsidiaries at their present fair saleable value
(i.e., the amount that may be realized within a reasonable time, considered
----
to be six months to one year, either through collection or sale at the

<PAGE>

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regular market value, conceiving the latter as the amount that could be
obtained for the Property in question within such period by a capable and
diligent businessman from an interested buyer who is willing to purchase
under ordinary selling conditions), exceed the amount of all the debts and
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) of the Company and its Subsidiaries, (ii) the Company and its
Subsidiaries will not, on a consolidated basis, have an unreasonably small
capital with which to conduct their business operations as heretofore
conducted and (iii) the Company and its Subsidiaries will have, on a
consolidated basis, sufficient cash flow to enable them to pay their debts
as they mature and that the financial projections and underlying
assumptions contained in such analyses were at the time made, and on the
Closing Date are, fair and reasonable and accurately computed.

(k) Repayment of Existing Indebtedness. Evidence that the principal
----------------------------------
of and interest on, and all other amounts owing in respect of, the
Indebtedness (including any contingent or other amounts payable in respect
of letters of credit) indicated on Schedule 8.11 that is to be repaid on
-------------
the Closing Date have been (or shall be simultaneously) paid in full, that
any commitments to extend credit under the agreements or instruments
relating to such Indebtedness have been canceled or terminated and that all
Guarantees in respect of, and all Liens securing, any such Indebtedness
have been released (or arrangements for such release satisfactory to the
Majority Lenders have been made); in addition, the Administrative Agent
shall have received from any Person holding any Lien securing any such
Indebtedness, such Uniform Commercial Code termination statements, mortgage
releases and other instruments, in each case in proper form for recording,
as the Administrative Agent shall have requested to release and terminate
of record the Liens securing such Indebtedness (or arrangements for such
release and termination satisfactory to the Majority Lenders have been
made).

(l) Subordinated Debt Documents. Evidence that the Subordinated Debt
---------------------------
Documents shall have been amended in a manner satisfactory to the Lenders
to extend the first date on which the principal of the Subordinated Notes
may be paid in cash to a date not earlier than December 31, 2002 and to
cause the rights of the Lenders hereunder to be entitled to the benefits of
the terms of subordination thereof.

<PAGE>

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(m) Other Documents. Such other documents as the Administrative
---------------
Agent, special counsel to the Administrative Agent or any Lender or special
New York counsel to the Arranger may reasonably request.

(n) No Material Adverse Change. Since December 31, 1995, there shall
--------------------------
not have been any material adverse change in the business, assets,
liabilities, results of operations, condition (financial or otherwise),
prospects or solvency of GSAC and its Consolidated Subsidiaries taken as a
whole or of the Acquired Business.

(o) Consummation of the Acquisition. (i) The Administrative Agent
-------------------------------
and the Arranger shall have received true and complete copies of all of the
Acquisition Documents. Any amendment or waiver of any provision of any
Acquisition Document shall be satisfactory to the Arranger and the
Administrative Agent.

(ii) The Acquisition shall be consummated simultaneously with the
initial extensions of credit under this Agreement in accordance with
applicable law and all related documentation on terms reasonably
satisfactory to the Lenders. All of the representations and warranties in
the Acquisition Documents shall be true and correct in all material
respects, and the Administrative Agent shall have received an Officers'
Certificate from the Borrower that the Lenders shall be entitled to rely on
such representations and warranties.

(p) Receipt of Financials.
---------------------

(i) The Lenders shall have received unaudited interim financial
statements of GSAC and unaudited interim royalty reports and income
statements (with respect to the income statements of the Acquired
Business, to the extent available from the seller under the
Acquisition Documents) of the Acquired Business for (x) the fiscal
quarter ended March 31, 1996 and (y) each month ended more than 30
days before the Closing Date and subsequent to the latest financial
statements provided pursuant to the preceding clause (x), and such
financial statements shall not reflect any material adverse change in
the consolidated financial condition, results of operations or cash
flows of the Company or either of the Parent Guarantors or the
Acquired Business from that reflected in the

<PAGE>

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financial statements or projections previously delivered to the Lenders.

(ii) The Lenders shall have received audited consolidated
financial statements of GSAC and unaudited income statements for the
Acquired Business, in each case, at and for each of the three fiscal
years ending immediately prior to the Closing Date.

(iii) The Lenders shall have received satisfactory pro forma
consolidated balance sheets and income statements of the Company, as
of, and for the 12-month period ending on, the Closing Date (after
giving effect to the Acquisition and the Refinancing) and for each 12-
month period ended through the sixth anniversary of the Closing Date
together with a certificate of the Company to the effect that such
financial statements fairly and completely present the pro forma and
projected financial condition and results of operations of the Company
and its Subsidiaries in accordance with generally accepted accounting
principles. The Lenders shall be satisfied that such financial
statements are not materially inconsistent with the information or
projections and the financial model delivered to the Lenders prior to
the date hereof. The Company shall have delivered such other
financial information as the Lenders may reasonably request in
connection with the Transaction.

(iv) The Lenders shall have received a detailed budget for fiscal
year 1996 and a written analysis of the business and prospects of the
Company and its Subsidiaries, which report shall be in form and
substance satisfactory to the Lenders.

(q) Evidence of Status of Certain Conditions. The Lenders shall have
----------------------------------------
received evidence satisfactory to them that (i) the aggregate principal
amount of indebtedness for money borrowed of the Company and its
Subsidiaries outstanding on the Closing Date (after giving effect to the
Acquisition and the Refinancing) shall not exceed $95 million, (ii) the
consolidated EBITDA of the Company for the twelve months ended March 31,
1996 was not less than $19.150 million and (iii) the pro forma ratio of
Total Debt as of the last day of the month for which financial statements
have been provided to the Lenders (not more than 45 days prior to the
Closing Date), after giving pro forma effect to the Acquisition and the
Refinancing, to consolidated EBITDA

<PAGE>

-81-

of the Company and its Subsidiaries for the twelve month period ended as of
such date (calculated on a pro forma basis as if the Acquisition had been
consummated on the first day of such period) shall not be greater than 3.90
to 1.0.

(r) Absence of Certain Proceedings. No litigation, inquiry,
------------------------------
injunction or restraining order shall be pending, entered or threatened and
no statute, rule or regulation shall be enacted or proposed which could
reasonably be expected to have a Material Adverse Effect.

(s) Certain Approvals. All governmental and other third-party
-----------------
approvals (including landlords' and other consents) necessary in connection
with the Acquisition and the Refinancing, the financing contemplated hereby
and the continuing operations of GSAC and its Subsidiaries (after giving
effect to the Acquisition and the Refinancing) shall have been obtained and
shall be in full force and effect, and all applicable waiting periods shall
have expired without any action being taken, threatened or noticed by any
competent authority which would restrain, prevent or otherwise impose
materially adverse or burdensome conditions on the Acquisition and the
Refinancing or any of the other transactions contemplated hereby or by the
other Basic Documents or the rights or remedies of the Lenders hereunder or
thereunder. All material governmental and other third-party licenses and
permits necessary in connection with the Company's and its Subsidiaries'
respective businesses as presently conducted and after giving effect to the
Acquisition shall be satisfactory to the Lenders and shall be in full force
and effect on the Closing Date.

(t) Absence of Certain Events. There shall not have occurred or
-------------------------
become known any change, event or circumstance, or any development
involving a prospective change, event or circumstance, which in any case in
the opinion of the Lenders could reasonably be expected to have a Material
Adverse Effect.

(u) Report on Inventory and Receivables. The Lenders shall have
-----------------------------------
received the report of an independent field examination, satisfactory in
form and substance to the Lenders, with respect to the accounts receivable
and inventory of the Company and its Subsidiaries and shall be satisfied
with the results thereof.

<PAGE>

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(v) Other Matters.
-------------

(i) The Lenders shall be satisfied with the status of all labor,
tax, employee benefit, environmental and health and safety matters
involving the Obligors and their plans with respect thereto.

(ii) The corporate and capital structure, and documents and
instruments related thereto, of the Obligors, after giving effect to
the Acquisition and the Refinancing, shall be satisfactory to the
Lenders in all respects.

(iii) The terms and conditions of any Indebtedness (including
maturities, interest rates, prepayment and redemption requirements,
covenants, defaults, remedies, security provisions and subordination
provisions) of any Obligor to remain outstanding after the Closing
Date shall be satisfactory to the Lenders in all respects, and the
Lenders shall be satisfied that no Obligor is subject to contractual
or other restrictions that would be violated by the contemplated
transactions, including the granting of security interests and
guarantees and payment of dividends by subsidiaries.

(iv) All other documentation, including any tax sharing
agreement, employment agreement, management compensation arrangement
(including any agreements entered into with any of the senior
management of the Company) or other financing arrangement of the
Obligors shall be satisfactory in form and substance to the Lenders.

The obligation of any Lender to make its initial extension of credit hereunder
is also subject to the payment by the Company and the Parent Guarantors of such
fees and expenses as the Company and the Parent Guarantors shall have agreed to
pay or deliver to any Lender or the Administrative Agent in connection herewith,
including the reasonable fees and expenses of Cahill Gordon & Reindel, special
New York counsel to the Arranger in connection with the negotiation,
preparation, execution and delivery of this Agreement and the Notes and the
other Basic Documents and the extensions of credit hereunder (to the extent that
statements for such fees and expenses have been delivered to the Company).

<PAGE>

-83-

7.02 Initial and Subsequent Extensions of Credit. The obligation of
-------------------------------------------
the Lenders to make any Loan or otherwise extend any credit to the Company upon
the occasion of each borrowing or other extension of credit hereunder (including
the initial borrowing) is subject to the further conditions precedent that, both
immediately prior to the making of such Loan or other extension of credit and
also after giving effect thereto and to the intended use thereof:

(a) no Default shall have occurred and be continuing;

(b) the representations and warranties made by the Company and the
Guarantors in Section 8, and by each Obligor in each of the other Basic
Documents to which it is a party, shall be true and complete on and as of
the date of the making of such Loan or other extension of credit with the
same force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date); and

(c) the aggregate principal amount of the Revolving Credit Loans
together with the aggregate amount of all Letter of Credit Liabilities
shall not exceed the Borrowing Base reflected on the most recent Borrowing
Base Certificate delivered pursuant to Section 9.01(e).

Each notice of borrowing or request for the issuance of a Letter of Credit by
the Company hereunder shall constitute a certification by the Company to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Company otherwise notifies the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).

Section 8. Representations and Warranties. Each Obligor represents
------------------------------
and warrants to the Creditors that (in each case before and after giving effect
to the Transaction):

8.01 Corporate Existence. Each of GSAC and its Subsidiaries: (a) is
-------------------
a corporation, partnership or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization; (b) has
all requisite corporate or other power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being or as proposed to be conducted; and (c) is
qualified to do business and is in good standing in all jurisdictions in which

<PAGE>

-84-

the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify could (either individually or in the aggregate)
have a Material Adverse Effect.

8.02 Financial Condition. GSAC and the Company have heretofore
-------------------
furnished to each of the Lenders consolidated balance sheets of GSAC and its
Consolidated Subsidiaries as at December 31, 1993, 1994 and 1995 and the related
consolidated statements of income, retained earnings and cash flows of GSAC and
its Consolidated Subsidiaries for each of the fiscal years ended on said dates,
with the opinion thereon of Arthur Andersen & Co. or Arthur Andersen LLP (as
applicable), and the consolidated statements of income of the Acquired Business
for each of the three fiscal years ended on December 31, 1995. All such
financial statements are complete and correct and fairly present the
consolidated financial condition of GSAC, the Company and their respective
Consolidated Subsidiaries, as at said dates and the consolidated results of
operations of the Company for the respective fiscal years ended on said dates,
all in accordance with generally accepted accounting principles and practices
applied on a consistent basis. None of GSAC, the Company nor any of their
respective Subsidiaries has on the date hereof any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in said balance sheets as at said
dates. Since December 31, 1995, there has been no material adverse change in
the business, assets, liabilities, results of operations, condition (financial
or otherwise), prospects or solvency of GSAC and its Consolidated Subsidiaries
or the Acquired Business from that set forth in said financial statements as at
said date. On the basis of royalty and other information provided by the seller
under the Acquisition Documents and the licensors of the Acquired Business, the
data with respect to the gross revenues with respect to the Acquired Business
for 1995 provided by the Company to the Lenders with respect to the Acquired
Business are true and complete in all material respects and such information is
all information reasonably necessary to verify such gross revenues. All pro
forma financial information provided by or on behalf of the Company to the
Lenders after giving effect to the Transactions is true and complete in all
material respects and all pro forma adjustments given effect therein are based
upon assumptions which the Company believes to be fair and reasonable.

8.03 Litigation. Except as disclosed in Schedule 8.03, there are no
---------- -------------
legal or arbitral proceedings, or any

<PAGE>

-85-

proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the best knowledge of the Obligors) threatened against GSAC or
any of its Subsidiaries that, if adversely determined could (either individually
or in the aggregate) have a Material Adverse Effect.

8.04 No Breach. None of the execution and delivery of this
---------
Agreement, the other Basic Documents and the Acquisition Documents, the
consummation of the transactions herein and therein contemplated or compliance
with the terms and provisions hereof and thereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of any
Obligor, or any applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency, or any agreement or
instrument to which GSAC or any of its Subsidiaries is a party or by which any
of them or any of their Property is bound or to which any of them is subject, or
constitute a default under any such agreement or instrument, or (except for the
Liens created pursuant to the Security Documents) result in the creation or
imposition of any Lien upon any Property of GSAC or any of its Subsidiaries
pursuant to the terms of any such agreement or instrument.

8.05 Action. Each Obligor has all necessary corporate power,
------
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents and Acquisition Documents to which it is a party and
to consummate the transactions herein and therein contemplated; the execution,
delivery and performance by each Obligor of each of the Basic Documents and
Acquisition Documents to which it is a party and the consummation of the
transactions herein and therein contemplated have been duly authorized by all
necessary corporate action on its part (including, any required shareholder
approvals); and this Agreement and the Acquisition Documents have been duly and
validly executed and delivered by each Obligor (to the extent each is a party
hereto or thereto) and constitute, and each of the Notes and the other Basic
Documents to which it is a party when executed and delivered by such Obligor (in
the case of the Notes, for value) will constitute, its legal, valid and binding
obligation, enforceable against each Obligor in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

<PAGE>

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8.06 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Obligor of the Basic Documents or the Acquisition Documents
to which it is a party or for the legality, validity or enforceability hereof or
thereof or for the consummation of the transactions herein and therein
contemplated, except for filings and recordings in respect of the Liens created
pursuant to the Security Documents.

8.07 ERISA. (a) The Company and each of its ERISA Affiliates is in
-----
compliance in all material respects with all applicable provisions of ERISA, the
Code and the regulations and published interpretations thereunder with respect
to all employee benefit plans, Plans and Multiemployer Plans.

(b) No event or condition specified in Section 9.01(d) has occurred
or is reasonably expected to occur with respect to any Plan or Multiemployer
Plan which resulted or would result in a liability to the Company or any of its
ERISA Affiliates that did or would have a Material Adverse Effect.

(c) No unfunded benefit liabilities (within the meaning of Section
4001(a)(18) of ERISA) exist with respect to any of the Plans in an amount that,
if any of such Plans were terminated, would have a material adverse effect on
the Company and its ERISA Affiliates taken as a whole.

(d) Neither the Company nor any of its ERISA Affiliates has any
obligation to contribute to or any liability or potential liability (including
actual or potential withdrawal liability) with respect to any Multiemployer Plan
or any employee benefit plan of the type described in Sections 4063 and 4064 of
ERISA or in Section 413(c) of the Code.

(e) Neither the Company nor any of its ERISA Affiliates has incurred
any accumulated funding deficiency (whether or not waived) with respect to any
Plan or sought a waiver of the minimum funding standard under Section 412 of the
Code in respect of any Plan.

(f) Neither the Company nor any of its ERISA Affiliates has or
reasonably expects to become subject to a Lien in favor of, or requirement to
provide security to, any Plan under Section 302(f) or 307 of ERISA or Section
401(a)(29) or 412(n) of the Code.

<PAGE>

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As used in this Section 8.07, the term "accumulated funding
deficiency" has the meaning specified in Section 302 of ERISA and Section 412 of
the Code, and the term "employee benefit plan" has the meaning specified in
Section 3(3) of ERISA.

8.08 Taxes. GSAC and its Subsidiaries are members of an affiliated
-----
group of corporations filing consolidated returns for Federal income tax
purposes, of which GSAC is the "common parent" (within the meaning of
Section 1504 of the Code) of such group. GSAC and each of its Subsidiaries
(including the Company) have filed all Federal income tax returns and reports
and all other material tax returns and reports, domestic and foreign, that are
required to be filed by them and have paid all taxes shown as due pursuant to
such returns and reports or pursuant to any assessment received by GSAC or any
of its Subsidiaries. GSAC and each of its Subsidiaries have paid, or GSAC has
provided adequate reserves (in accordance with generally accepted accounting
principles) for the payment of, all federal, state, local and foreign income
taxes (including franchise taxes based upon income) applicable for all prior
fiscal years and for the current fiscal year to the date hereof. GSAC knows of
no proposed tax assessment against it or any of its Subsidiaries that could
reasonably be expected to have a Materially Adverse Effect which is not being
actively contested in good faith by such Person to the extent affected thereby
in good faith and by appropriate proceedings; provided, however, that such
-------- -------
reserves or other appropriate provisions, if any, as shall be required in
conformity with generally accepted accounting principles shall have been made or
provided therefor. The charges, accruals and reserves on the books of GSAC and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of GSAC, adequate. GSAC has not given or been requested to give a
waiver of the statute of limitations relating to the payment of any Federal,
state, local and foreign taxes or other impositions.

8.09 Investment Company Act. Neither GSAC nor any of its
----------------------
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.

8.10 Public Utility Holding Company Act. Neither GSAC nor any of its
----------------------------------
Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

8.11 Debt Agreements. Schedule 8.11 is a complete and correct list,
--------------- -------------
as of the date hereof, of each credit agreement,

<PAGE>

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loan agreement, indenture, purchase agreement, guarantee or other arrangement
(including the Subordinated Notes) providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, GSAC or any of its Subsidiaries the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$100,000 and the aggregate principal or face amount outstanding or which may
become outstanding under each such arrangement is correctly described in
Schedule 8.11. The aggregate principal or face amount of Indebtedness of GSAC
- -------------
and its Subsidiaries under any agreement or other arrangement not set forth on
Schedule 8.11 does not exceed $100,000.
- -------------

8.12 Environmental Matters. Each of GSAC and its Subsidiaries has
---------------------
obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization (individually or in the aggregate)
would not have a Material Adverse Effect. Each of such permits, licenses and
authorizations is in full force and effect and each of GSAC and its Subsidiaries
is in compliance with the terms and conditions thereof, and is also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith (individually or in the aggregate) would not have a Material Adverse
Effect.

In addition, except as set forth in Schedule 8.12:
-------------

(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened in writing by any governmental or other Person with respect to
any alleged failure by GSAC or any of its Subsidiaries to have any
environmental, health or safety permit, license or other authorization
required under any Environmental Law in connection with the conduct of the
business of GSAC or any of its Subsidiaries or with respect to any
generation, treatment, storage, recycling, transportation, discharge or
disposal, or any Release or threatened Release of any Hazardous Materials
generated by GSAC or any of its Subsidiaries.

<PAGE>

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(b) Neither GSAC nor any of its Subsidiaries owns, operates or leases
a treatment, storage or disposal facility requiring a permit under the
Resource Conservation and Recovery Act of 1976, as amended, or under any
comparable state or local statute; and

(i) no polychlorinated biphenyls are or have been present at any
site or facility now or previously owned, operated or leased by GSAC
or any of its Subsidiaries;

(ii) no asbestos or asbestos-containing materials are or have
been present at any site or facility now or previously owned, operated
or leased by GSAC or any of its Subsidiaries;

(iii) there are no underground storage tanks or surface
impoundments for Hazardous Materials, active or abandoned, at any site
or facility now or previously owned, operated or leased by GSAC or any
of its Subsidiaries;

(iv) no Hazardous Materials have been Released at, on or under
any site or facility now or (to the best knowledge of the Obligors)
previously owned, operated or leased by GSAC or any of its
Subsidiaries in a reportable quantity established by statute,
ordinance, rule, regulation or order; and

(v) no Hazardous Materials have been otherwise Released at, on
or under any site or facility now or previously owned, operated or
leased by GSAC or any of its Subsidiaries that would have a Material
Adverse Effect.

(c) Neither GSAC nor any of its Subsidiaries has transported or
arranged for the transportation of any Hazardous Material to any location
that is listed on the National Priorities List ("NPL") under the
---
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by
------
the Environmental Protection Agency in the Comprehensive Environmental
Response, Compensation, and Liability Information System, as provided for
by 40 C.F.R. Sec. 300.5 ("CERCLIS"), or on any similar state or local list
-------
or that is the subject of Federal, state or local enforcement actions or
other investigations that may lead to

<PAGE>

-90-

Environmental Claims against GSAC or any of its Subsidiaries.

(d) No Hazardous Material generated by GSAC or any of its
Subsidiaries has been recycled, treated, stored, disposed of or Released by
GSAC or any of its Subsidiaries at any location other than those listed in
Schedule 8.12.
-------------

(e) No written notification of a Release of a Hazardous Material has
been filed by or on behalf of GSAC or any of its Subsidiaries and no site
or facility now or (to the best knowledge of the Obligors) previously
owned, operated or leased by GSAC or any of its Subsidiaries is listed or
proposed for listing on the NPL, CERCLIS or any similar state list of sites
requiring investigation or clean-up.

(f) No Liens have arisen under or pursuant to any Environmental Laws
on any site or facility owned, operated or leased by GSAC or any of its
Subsidiaries, and no government action has been taken or is in process that
could subject any such site or facility to such Liens and neither GSAC nor
any of its Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any site or
facility owned by it in any deed to the real property on which such site or
facility is located.

(g) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or that are in the possession
of GSAC or any of its Subsidiaries in relation to any site or facility now
or previously owned, operated or leased by GSAC or any of its Subsidiaries
which have not been made available to the Arranger and the Administrative
Agent.

(h) Since the preparation of the Phase I Environmental Site
Assessment dated September 1991 by Espy, Huston & Associates with respect
to the Company's facility located in the City of Grand Prairie, Tarrant
County, Texas, there has been no material adverse development in the
matters referred to in such Assessment.

8.13 Use of Loans. Neither GSAC nor any of its Subsidiaries is
------------
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying

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Margin Stock and no part of the proceeds of any extension of credit hereunder
will be used to buy or carry any Margin Stock.

8.14 Capitalization.
--------------

(a) The authorized capital stock of GSAC consists, on the date
hereof, of an aggregate of 114,075 shares consisting of (i) 80,000 shares of
Class A Common Stock, par value $.01 per share, of which 20,739.10589 shares are
duly and validly issued and outstanding (and none of which are held in
treasury), (ii) 30,000 shares of Class B Common Stock, par value $.01 per share,
none of which shares are duly and validly issued and outstanding (and none of
which are held in treasury), (iii) 4,025 shares of Redeemable Preferred Stock,
par value $.01 per share, of which 4,025 shares are duly and validly issued and
outstanding (and none of which are held in treasury) and (iv) 50 shares of
Senior Preferred Stock, par value $.01 per share, none of which shares are duly
and validly issued and outstanding (and none of which are held in treasury). On
the date hereof, a majority of the issued and outstanding shares of common stock
of GSAC is owned beneficially and of record by Acadia Partners. As of the date
hereof, (x) except for Equity Rights listed in Schedule 8.14, there are no
-------------
outstanding Equity Rights with respect to GSAC and (y) there are no outstanding
obligations of GSAC or any of its Subsidiaries to repurchase, redeem, or
otherwise acquire any shares of capital stock of GSAC nor are there any
outstanding obligations of GSAC or any of its Subsidiaries to make payments to
any Person, such as "phantom stock" payments, where the amount thereof is
calculated with reference to the fair market value or equity value of GSAC or
any of its Subsidiaries.

(b) The authorized capital stock of GSAC Holdings consists, on the
date hereof, of an aggregate of 1,000 shares of common stock, par value $.01 per
share, of which 100 shares are duly and validly issued and outstanding (with no
shares held in treasury), each of which shares is fully paid and nonassessable.
On the date hereof, all of such issued and outstanding shares of common stock
are owned beneficially and of record by GSAC. As of the date hereof, there are
no outstanding Equity Rights with respect to GSAC Holdings and there are no
outstanding obligations of GSAC or any of its Subsidiaries to repurchase,
redeem, or otherwise acquire any shares of capital stock of GSAC Holdings nor
are there any outstanding obligations of GSAC or any of its Subsidiaries to make
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
GSAC Holdings or any of its Subsidiaries.

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(c) The authorized capital stock of the Company consists, on the date
hereof, of an aggregate of 2,000 shares of common stock, par value $.01 per
share, of which 1,000 shares are duly and validly issued and outstanding (with
no shares held in treasury), each of which shares is fully paid and
nonassessable. As of the date hereof, all of such issued and outstanding shares
of common stock are owned beneficially and of record by GSAC Holdings. As of
the date hereof, there are no outstanding Equity Rights with respect to the
Company and there are no outstanding obligations of GSAC or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital
stock of the Company nor are there any outstanding obligations of GSAC or any of
its Subsidiaries to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of the Company or any of its Subsidiaries.

(d) The authorized capital stock of MLM consists, on the date hereof,
of an aggregate of 1,000 shares of common stock, par value $.01 per share, of
which 100 shares are duly and validly issued and outstanding (with no shares
held in treasury), each of which shares is fully paid and nonassessable. As of
the date hereof, all of such issued and outstanding shares of common stock are
owned beneficially and of record by the Company. As of the date hereof, there
are no outstanding Equity Rights with respect to MLM and there are no
outstanding obligations of GSAC or any of its Subsidiaries to repurchase,
redeem, or otherwise acquire any shares of capital stock of MLM nor are there
any outstanding obligations of GSAC or any of its Subsidiaries to make payments
to any Person, such as "phantom stock" payments, where the amount thereof is
calculated with reference to the fair market value or equity value of MLM or any
of its Subsidiaries. The authorized capital stock of Donruss Trading consists,
on the date hereof, of an aggregate of 1,000 shares of common stock, par value
$.01 per share, of which 100 shares are duly and validly issued and outstanding
(with no shares held in treasury), each of which shares is fully paid and
nonassessable. As of the date hereof, all of such issued and outstanding shares
of common stock are owned beneficially and of record by the Company. As of the
date hereof, there are no outstanding Equity Rights with respect to Donruss
Trading and there are no outstanding obligations of GSAC or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital
stock of Donruss Trading nor are there any outstanding obligations of GSAC or
any of its Subsidiaries to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of Donruss Trading or any of its Subsidiaries.

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8.15 Subsidiaries. On the date hereof, the Company has no
------------
Subsidiaries other than MLM and Donruss Trading; GSAC Holdings has no
Subsidiaries other than the Company, MLM and Donruss Trading; and GSAC has no
Subsidiaries other than GSAC Holdings, the Company, MLM, Flapco and Donruss
Trading.

8.16 Title to Assets. Each of GSAC and its Subsidiaries owns and has
---------------
on the date hereof, and will own and have on the Closing Date, good and
marketable title or, with respect to capital leases, good leasehold title
(subject only to Liens permitted by Section 9.06 and to any consent which may be
required from a licensor pursuant to any licensing agreement to which the
Company is a party (including the Sports Contracts)) to the Properties shown to
be owned in the financial statements referred to in Section 8.02 (other than
Properties disposed of in the ordinary course of business or otherwise permitted
to be disposed of pursuant to Section 9.05). Each of GSAC and its Subsidiaries
owns and has on the date hereof, and will own and have on the Closing Date, good
and marketable title (or good leasehold title) to, and enjoys on the date
hereof, and will enjoy on the Closing Date, peaceful and undisturbed possession
of, all Properties (subject only to Liens permitted by Section 9.06) that are
necessary for the operation and conduct of its businesses.

8.17 True and Complete Disclosure. The information, reports,
----------------------------
Transaction Documents, financial statements, exhibits and schedules furnished in
writing by or on behalf of any of the Obligors to any Creditor in connection
with the negotiation, preparation or delivery of this Agreement and the other
Basic Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole, do not contain any untrue statement of material
fact or omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. No written information furnished after the date hereof by or on
behalf of GSAC or any of its Subsidiaries to any Creditor in connection with
this Agreement and the other Basic Documents will contain any material
misstatement of facts or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any projections furnished by GSAC or any of its Subsidiaries to
any Creditor pursuant to this Agreement are reasonable estimates based on the
best information available to GSAC and its Subsidiaries at the time so
furnished. Neither GSAC nor any of its Subsidiaries, however, makes any
representation as to the ability of GSAC or any of its Subsidiaries to achieve
the results set forth in any such projections. There is no fact known to any

<PAGE>

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Obligor that could reasonably be expected to have a Material Adverse Effect that
has not been disclosed herein, in the other Basic Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.

8.18 Solvency. As of the Closing Date:
--------

(a) the fair salable value of the Properties of the Company (assuming
that all approvals necessary to such sale shall be acquired) exceeds and
will, immediately following the making of each Loan or other extension of
credit hereunder, exceed the amount of all debt and liabilities (including
all contingent, subordinated, unmatured and unliquidated liabilities) of
the Company;

(b) the Company does not, nor will, immediately following the making
of each Loan or other extension of credit hereunder, have unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted; and

(c) the Company does not intend to, nor believes that it will, incur
debts beyond its ability to pay such debts as they mature.

8.19 Ancillary Documents. The Company has heretofore delivered to
-------------------
the Arranger true and complete copies of each of the Ancillary Documents, as
each Ancillary Document is in effect on the date hereof. As of the Closing
Date, no default will have occurred and be continuing under or in respect of any
of such Ancillary Documents (except, other than in the case of the Subordinated
Debt Documents, any default of a purely administrative or ministerial nature)
and no dispute or other claim will have been made by any party thereunder based
upon a breach of the provisions thereof. No approval or consent to the
consummation of the transactions hereunder or under any of the Ancillary
Documents is required under any of the provisions of the Ancillary Documents
except for such approvals and consents which have been heretofore received and
are in full force and effect.

8.20 Real Property. Except with respect to leased space which does
-------------
not cost in excess of $5,000 per month in rental expense, set forth in
Schedule 8.20 is a list, as of the date of this Agreement, of all the real
- -------------
property interests held by GSAC and its Subsidiaries indicating in each case
whether the

<PAGE>

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respective Property is owned or leased, the identity of the owner or lessee and
the location of the respective Property.

Section 9. Covenants. Each of Company and each Parent Guarantor
---------
covenants and agrees with the Creditors that, so long as any Commitment, Loan or
Letter of Credit Liability is outstanding and until payment in full of all
amounts payable by the Company hereunder:

9.01 Financial Statements, Etc. The Company (for itself and on
-------------------------
behalf of each Parent Guarantor) shall deliver to each of the Lenders:

(a) as soon as available and in any event within 45 days after the
end of each of the first three quarterly fiscal periods of each fiscal year
of the Company, consolidated statements of income, retained earnings and
cash flow of GSAC and its Consolidated Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated balance sheet of GSAC and its
Consolidated Subsidiaries as at the end of such period, setting forth in
each case in comparative form the corresponding consolidated figures as of
the end of and for the corresponding period in the preceding fiscal year,
accompanied by a certificate of a senior financial officer of GSAC, which
certificate shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of
GSAC and its Consolidated Subsidiaries in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);

(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, consolidated statements of income,
retained earnings and cash flow of GSAC and its Consolidated Subsidiaries
for such year and the related consolidated balance sheet of GSAC and its
Consolidated Subsidiaries as at the end of such year, setting forth in each
case in comparative form the corresponding consolidated figures as of the
end of and for the preceding fiscal year, and accompanied by an opinion
thereon of independent certified public accountants of recognized national
standing, which opinion shall state that said consolidated financial
statements fairly present the consolidated financial condition and results
of operations of GSAC and its Consolidated Subsidiaries as at the end of,

<PAGE>

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and for, such fiscal year in accordance with generally accepted accounting
principles, and a certificate of such accountants stating that, in making
the examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default;

(c) promptly upon delivery thereof to the shareholders of GSAC
generally, or to the holders of Subordinated Notes or Permitted
Subordinated Indebtedness in respect of such Subordinated Notes or
Permitted Subordinated Indebtedness generally, copies of all notices,
financial statements, reports and proxy statements so delivered;

(d) as soon as possible, and in any event within ten days after the
Company or either Parent Guarantor knows or has reason to believe that any
of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Company setting forth details respecting such
event or condition and the action, if any, that the Company or any ERISA
Affiliate proposes to take with respect thereto (and a copy of any report
or notice required to be filed with or given to PBGC by the Company or any
ERISA Affiliate with respect to such event or condition):

(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided, however, that a failure to meet
-------- -------
the minimum funding standard of Section 412 of the Code or Section 302
of ERISA, including the failure to make on or before its due date a
required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;

(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or any
ERISA Affiliate to terminate any Plan;

<PAGE>

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(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;

(iv) the complete or partial withdrawal from a Multiemployer Plan
by the Company or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt
by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;

(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days;

(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Company or an ERISA Affiliate fails to timely provide
security to such Plan in accordance with the provisions of said
Sections;

(vii) the imposition of any liability to the PBGC or any other
party under Section 4062, 4063, 4064 or 4069 upon the Company or any
ERISA Affiliate with respect to any Plan; and

(viii) the occurrence of any transaction in connection with which
the Company could reasonably be subject to either a tax imposed by
Section 4975 of the Code or the corresponding civil penalty assessed
pursuant to Section 502(i) of ERISA, in connection with any Plan or
any trust created thereunder;

(e) as soon as available and in any event within 15 Business Days of
each monthly accounting period (ending on the last day of each calendar
month), a Borrowing Base Certificate as at the last day of such accounting
period;

<PAGE>

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(f) after the first anniversary of the Closing Date, together
with the financial statements delivered pursuant to clause (a) or (b)
of this Section 9.01, an Interest Rate Certificate;

(g) periodically at the request of the Administrative Agent or the
Majority Lenders, but in no event more frequently than once each calendar
year so long as no Event of Default has occurred and is continuing, a
report (the cost and expense of which, up to $10,000 shall be for the sole
account of the Borrower, provided that there has been a use of the
Revolving Credit Commitments in the immediately preceding trailing twelve
month period), of an independent collateral auditor (which may be, or be
affiliated with, one of the Lenders) with respect to the Receivables and
Inventory components included in the Borrowing Base as at the end of a
monthly accounting period, which report shall indicate that, based upon a
review by such auditors of the Receivables (including verification with
respect to the amount, aging, identity and credit of the respective account
debtors and the billing practices of the Company and its Subsidiaries) and
Inventory (including verification as to the value, location and respective
types), the information set forth in the Borrowing Base Certificate
delivered by the Company as at the end of such accounting period is
accurate and complete in all material respects;

(h) promptly after the Company or either Parent Guarantor knows or
has reason to believe that any Default has occurred, a notice of such
Default describing the same in reasonable detail and, together with such
notice or as soon thereafter as possible, a description of the action that
the Company has taken and proposes to take with respect thereto;

(i) as soon as possible, and in any event within ten days after the
Company or either Parent Guarantor knows or has reason to believe that any
of the following events or conditions has occurred or exists, a statement
signed by a senior financial officer of the Company setting forth details
respecting such event or condition and the action, if any, that the Company
proposes to take with respect thereto (and a copy of any notice or other
notification or information given to the Company with respect to such event
or condition): any notice, notification, demand, request for information,
citation, summons or order has been issued, any complaint has been filed,
any penalty has been assessed or any investigation or review is pending or
threatened by

<PAGE>

-99-

any governmental or other entity with respect to any alleged failure by
GSAC or any of its Subsidiaries to have any permit, license or
authorization required in connection with the conduct of the business of
GSAC or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, discharge or disposal, or
any Release, of any Hazardous Materials generated by GSAC or any of its
Subsidiaries; and

(j) from time to time such other information regarding the condition
(financial or other), operations, prospects or business of GSAC or any of
its Subsidiaries (including any Plan or Multiemployer Plan and any reports
or other information required to be filed under ERISA) as any Creditor may
reasonably request.

The Company will furnish to the Administrative Agent, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the Company (i) to the effect that
no Default has occurred and is continuing (or, if any Default has occurred and
is continuing, describing the same in reasonable detail and describing the
action that the Company has taken and proposes to take with respect thereto) and
(ii) setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Sections 9.07, 9.08(f), 9.09, 9.10,
9.11, 9.12 and 9.13 as of the end of the respective quarterly fiscal period or
fiscal year. The Administrative Agent shall forward such certificate and
information to the Lenders.

9.02 Litigation, Etc. The Company (for itself and on behalf of each
---------------
Parent Guarantor) will promptly give to the Administrative Agent (which shall
promptly provide a copy thereof to each Lender) notice of (i) all legal or
arbitral proceedings, and of all proceedings by or before any governmental or
regulatory authority or agency, and any material development in respect of such
legal or other proceedings, affecting GSAC or any of its Subsidiaries, except
proceedings which, if adversely determined, would not (individually or in the
aggregate) have a Material Adverse Effect and (ii) all disputes or other claims
of which any senior officer of the Company or either Parent Guarantor has become
aware under any Ancillary Document which remain unresolved for 15 or more days,
provided that if any such dispute or claim has been set forth or made in
writing, such notice shall be delivered to the Administrative Agent within
2 Business Days of receipt thereof, except any disputes or claims which, if
adversely determined, would not (individually or in the aggregate) have a
Material Adverse Effect.

<PAGE>

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9.03 Existence, Etc. GSAC will, and will cause each of its
--------------
Subsidiaries to, preserve and maintain its legal existence and all of its
material rights, privileges and franchises (provided, however, that nothing in
-------- -------
this Section 9.03 shall prohibit any transaction expressly permitted under
Section 9.05); comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure to
comply with such requirements would (individually or in the aggregate) have a
Material Adverse Effect; pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach thereto (except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained) if failure to pay and discharge such taxes would
(individually or in the aggregate) have a Material Adverse Effect; maintain all
of its Properties used or useful in its business in good working order and
condition, ordinary wear and tear excepted; permit representatives of any
Creditor, during normal business hours, to examine, copy and make extracts from
its books and records, to inspect its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by such
Creditor and perform in all material respects all of its obligations under the
terms of each mortgage, indenture, security agreement, other debt instrument and
material contract by which it is bound or to which it is a party, except where
such failure to so perform, singly or in the aggregate with all other such
failures, would not have a Material Adverse Effect.

9.04 Insurance. (a) GSAC will, and will cause each of its
---------
Subsidiaries to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by corporations engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations; provided, however,
-------- -------
that in any event the Company shall maintain (i) business interruption insurance
against loss of net income plus continuing expenses of the Company (up to an
----
aggregate amount equal to $10,000,000), (ii) "key man" life insurance for Jerry
M. Meyer, the Chief Executive Officer of the Company in an amount not less than
$10,000,000 (the "Key Man Life Insurance") and (iii) insurance against loss or
----------------------
damage covering all of the tangible real and personal property and improvements
of the Company and its Subsidiaries in such amounts (subject to such deductibles
as shall be in effect on the Closing Date) as shall

<PAGE>

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be reasonable and customary and sufficient to avoid the insured named therein
from becoming a co-insurer of any loss under such policy but in any event in an
aggregate amount at least equal to that in effect on the Closing Date. The
insurance described in clauses (i), (ii) and (iii) of the preceding sentence
(the "Required Insurance") shall be written by financially responsible companies
------------------
selected by the Company and having an A.M. Best rating of "A-" or better and
being in a financial size category of XI or larger, or by other companies
acceptable to the Majority Lenders, and shall name the Administrative Agent as
additional insured, or loss payee, as its interests may appear. Each policy
with respect to Required Insurance shall provide that it will not be canceled or
reduced, or allowed to lapse without renewal, except after not less than 30
days' notice to the Administrative Agent and shall also provide that the
interests of the Creditors shall not be invalidated by any act or negligence of
the Company or any Person having an interest in the Company's principal
manufacturing facility in Grand Prairie, Tarrant County, Texas nor by occupancy
or use of such facility for purposes more hazardous than permitted by such
policy nor by any foreclosure or other proceedings relating to such facility.
The Company will advise the Administrative Agent promptly of any policy
cancellation, reduction or amendment relating to the Required Insurance.

(b) On or before the Closing Date (or with respect to the Key Man
Life Insurance, on or before the date which is 120 days after the Closing
Date), the Company will deliver to the Administrative Agent certificates of
insurance satisfactory to the Administrative Agent evidencing the existence of
all insurance maintained by the Company setting forth the respective coverages,
limits of liability, carrier, policy number and period of coverage and showing
that all Required Insurance will remain in effect through December 31, 1996,
subject only to the payment of premiums as they become due (and attaching
original copies of any policies with respect to casualty insurance).
Thereafter, on each December 15 in each year (commencing with December 15, 1996)
the Company will deliver to the Administrative Agent certificates of insurance
evidencing that all Required Insurance to be maintained by the Company hereunder
will be in effect through the December 31 of the calendar year following the
calendar year of the current December 15, subject only to the payment of
premiums as they become due; provided, however, that in no event shall the
-------- -------
Company be required to maintain the Key Man Life Insurance for more than two
years after it is obtained and delivered to the Administrative Agent. The
Company will not obtain or carry separate insurance concurrent in form or
contributing in the event of loss with any Required Insurance unless the

<PAGE>

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Administrative Agent is the named insured thereunder, with loss payable as
provided herein. The Company will immediately notify the Administrative Agent
whenever any such separate insurance is obtained and shall deliver to the
Administrative Agent the certificates evidencing the same.

Without limiting the obligations of the Company under the foregoing
provisions of this Section 9.04, in the event the Company shall fail to maintain
in full force and effect the Required Insurance, the Administrative Agent may,
but shall have no obligation to, procure insurance covering the interests of the
Creditors in such amounts and against such risks as the Administrative Agent (or
the Majority Lenders) shall reasonably deem appropriate and the Company shall
reimburse the Administrative Agent in respect of any premiums paid by the
Administrative Agent in respect thereof.

9.05 Fundamental Changes. GSAC will not, nor will it permit any of
-------------------
its Subsidiaries to, directly or indirectly, enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution). GSAC will not, and will not
permit any of its Subsidiaries to, acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person, except (a)
purchases of inventory and other Property to be sold or used in the ordinary
course of business (including Capital Expenditures permitted by Section 9.10(e))
and Investments permitted under Section 9.08 and (b) Related Business
Acquisitions. GSAC will not, and will not permit any of its Subsidiaries to,
directly or indirectly, convey, sell, lease, assign, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or a substantial
part of its business or Property, whether now owned or hereafter acquired,
including receivables and leasehold interests. Nothing in the foregoing shall
prohibit any Excluded Disposition. Notwithstanding the foregoing provisions of
this Section 9.05:

(a) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or
surviving corporation or (ii) any other such Subsidiary; provided, however,
-------- -------
that if any such transaction shall be between a Subsidiary and a Wholly
Owned Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation; and

(b) any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any or all of its Property

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(upon voluntary liquidation or otherwise) to the Company or a Wholly Owned
Subsidiary of the Company.

To the extent a proposed acquisition does not meet the requirements
described in the definition of Related Business Acquisition and so long as no
Default has occurred and is continuing, the Lenders will in their reasonable
discretion consider permitting such proposed acquisition based upon factors such
as the gross purchase price, complementary nature of the proposed business,
projected cash flows and budgets, and overall business plan of the Company's
management with respect to the business or entity to be acquired.

9.06 Liens and Related Matters. GSAC will not, nor will it permit
-------------------------
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien upon any of its Property, whether now owned or
hereafter acquired, or sell any such Property subject to an understanding or
agreement, contingent or otherwise, to repurchase such Property or assign any
right to receive income or profits therefrom, or file or permit the filing of
any financing statement under the UCC or any other notice of Lien under any
similar recording or notice statute, except:

(a) Liens created pursuant to the Security Documents;

(b) Liens in existence on the date hereof and identified in
Schedule 8.11 (excluding, however, following the making of the initial
-------------
Loans hereunder, Liens securing Indebtedness to be repaid with the proceeds
of such Loans, as indicated on Schedule 8.11);
-------------

(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of GSAC or the affected Subsidiaries,
as the case may be, in accordance with generally accepted accounting
principles;

(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings and Liens securing judgments
but only to the extent for an amount and for a period not resulting in an
Event of Default under Section 10(h);

<PAGE>

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(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;

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

(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case
materially detract from the value of the real Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;

(h) Liens upon tangible personal Property acquired after the date
hereof by the Company or any of its Subsidiaries, each of which Liens
either (A) existed on such Property before the time of its acquisition and
was not created in anticipation thereof, or (B) was created solely for the
purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, the cost of such Property; provided, however, that
-------- -------
(x) no such Lien shall extend to or cover any Property of the Company or
such Subsidiary other than the Property so acquired and improvements
thereon and (y) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed 100% of the fair market value (as determined
in good faith by a senior financial officer of the Company) of such
Property at the time it was acquired; and

(i) any extension, renewal or replacement of the foregoing; provided,
--------
however, that the Liens permitted hereunder shall not cover any additional
-------
Indebtedness or Property (other than like Property substituted for Property
covered by such Lien).

If GSAC or any of its Subsidiaries shall create or assume any Lien
upon any of its properties or assets, or on any income or profits therefrom,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of this Section 9.06, it shall make or cause to be made effective

<PAGE>

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provision (if and to the extent effective provision therefor has not theretofore
been made pursuant to the Basic Documents) whereby the Obligations will be
secured by such Lien equally and ratably with any and all other Indebtedness or
other obligation thereby secured as long as any such Indebtedness or other
obligation shall be secured; provided, however, that the foregoing shall not be
-------- -------
construed as a consent by the Majority Lenders or any Lender to any creation or
assumption of any such Lien not permitted by the provisions of this
Section 9.06.

Except with respect to (I) specific property encumbered pursuant to a
Lien permitted to be incurred pursuant to clause (h) of the second preceding
paragraph of this Section 9.06, (II) specific property to be sold pursuant to an
executed agreement with respect to a Disposition consummated in accordance with
this Agreement or (III) the Sports Contracts and other license, franchise,
distribution and similar agreements entered into in the ordinary course of
business, neither GSAC nor any of its Subsidiaries shall enter into any
agreement after the date hereof (other than the Basic Documents) prohibiting or
restricting in any manner (directly or indirectly and including by way of
covenant, representation or warranty or event of default) (i) the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired, (ii) any incurrence of any Indebtedness or contingent
obligation, (iii) the sale, disposition or pledge of any of their respective
assets, except restrictions in a Capital Lease or other purchase money financing
agreement permitted hereunder relating to the asset financed thereunder or
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest, (iv) any Investments by any of them, (v) any Capital
Expenditures by any of them, (vi) any acquisition, merger or consolidation
involving any of them or (vii) any change in control of any of them.

9.07 Indebtedness. GSAC will not, and will not permit any of its
------------
Subsidiaries to, directly or indirectly, create, incur or suffer to exist or be
or become liable for any Indebtedness, except:

(a) Indebtedness under the Basic Documents;

(b) Indebtedness outstanding on the date hereof and listed in
Schedule 8.11 (excluding, however, Indebtedness in respect of Subordinated
-------------
Notes permitted under clause (c) below and, following the making of the
initial Loans hereunder, the Indebtedness to be repaid with the proceeds of
such Loans, as indicated on said Schedule 8.11);
-------------

<PAGE>

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(c) Indebtedness in respect of the Subordinated Notes in an original
aggregate principal amount (without giving effect to any capitalized
interest thereon or to Subordinated Notes issued in payment of interest on
any Subordinated Notes, as contemplated in Section 9.14(ii)) not exceeding
$71,809,178.80 at any time;

(d) Indebtedness of the Company or any of its Subsidiaries owing to
the Company or any of its Subsidiaries; provided, however, that (i) such
-------- -------
Indebtedness shall be evidenced by an Intercompany Note which shall be
pledged to the Administrative Agent on behalf of the Lenders pursuant to
arrangements in form and substance satisfactory to the Administrative Agent
and (ii) such Indebtedness shall not be held by any Person other than the
Company or a Wholly Owned Subsidiary which is a Guarantor and shall not be
subordinate to any other Indebtedness or other obligation of the obligor
other than the Loans;

(e) unsecured Indebtedness for which GSAC or GSAC Holdings is
directly and primarily liable, in respect of which none of their respective
Subsidiaries (excluding GSAC Holdings but including the Company) is
directly or indirectly or contingently or otherwise obligated, and which is
subordinated to the obligations of GSAC and GSAC Holdings hereunder
(including in respect of their Guarantees under Section 6) on terms, and
which contains other terms (including interest, amortization, covenants
(including financial covenants), events of default, defeasance provisions
and amendment and waiver provisions), in form and substance satisfactory to
the Supermajority Lenders (such Indebtedness "Permitted Subordinated
----------------------
Indebtedness");
------------

(f) Indebtedness of the Company and its Subsidiaries secured by Liens
permitted under Section 9.06(h) not exceeding $5,000,000 at any one time
outstanding;

(g) Indebtedness of the Company representing the obligation under
each of the Sports Contracts and other license distribution and similar
agreements entered into in the ordinary course of business of the Company
to pay the minimum guaranteed royalty or compensation to the
counterparty(ies) thereunder in accordance with the terms thereof; and

(h) in addition to the foregoing, unsecured Indebtedness in an
aggregate principal amount not to exceed,

<PAGE>

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together with Contingent Obligations (without duplication) under Section
9.28(iv), $2,500,000 at any time outstanding.

9.08 Investments. GSAC will not, and will not permit any of its
-----------
Subsidiaries to, directly or indirectly, make or permit to remain outstanding
any Investments, except:

(a) operating deposit accounts with banks;

(b) Permitted Investments;

(c) Investments by (i) GSAC in GSAC Holdings and Flapco (with respect
to Flapco, to the extent and in the manner in existence as of the Closing
Date), (ii) GSAC Holdings in the Company in the form of capital
contributions or equity, (iii) the Company in MLM, Donruss Trading and
other Wholly Owned Subsidiaries of the Company that are Guarantors and have
complied with Section 9.11 and (iv) the Company in Performance Packaging on
the date hereof and accumulated undistributed earnings thereon;

(d) Investments outstanding on the date hereof and identified in
Schedule 9.08;
-------------

(e) Investments that constitute Indebtedness permitted under Section
9.07 or Contingent Obligations permitted under Section 9.28;

(f) Investments by the Company in Interest Rate Protection Agreements
entered into as bona fide hedges and not for speculative purposes; and
---- ----

(g) in addition to the foregoing, other Investments not exceeding
$2,000,000 (increasing by $1,000,000 on each anniversary of the Closing
Date to a maximum of $5,000,000) in the aggregate at any time outstanding,
net of any returns of capital, cash dividends and distributions received in
respect thereof and net cash proceeds of sales thereof but not net of
write-downs or write-offs.

9.09 Dividend Payments. GSAC will not, and will not permit any of
-----------------
its Subsidiaries to, directly or indirectly, declare or make any Dividend
Payment at any time, except that:

(a) the Company may, in each fiscal quarter, declare and make
Dividend Payments in cash to GSAC Holdings, and GSAC Holdings may, in each
such fiscal quarter, declare and make Dividend Payments in cash to GSAC to
enable GSAC to pay

<PAGE>

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taxes owed by GSAC and its Subsidiaries, subject to the satisfaction of
each of the following conditions:

(i) the aggregate amount of such Dividend Payments shall not
exceed the lesser of (x) the amount of taxes which GSAC has paid (or
will pay) during such fiscal quarter and (y) the amount of taxes which
would have been owed by the Company during such fiscal quarter if the
Company were not a member of an affiliated group with GSAC or GSAC
Holdings for income tax purposes; and

(ii) at least three Business Days prior to making any such
Dividend Payment, the Company shall have delivered to the
Administrative Agent (x) notification of the amount of the proposed
payment and the date therefor, (y) a statement from a senior financial
officer of the Company setting forth a detailed calculation of the
amounts set forth in clauses (x) and (y) of subsection (i) above and
(z) a certificate of a senior officer of the Company certifying that
GSAC has paid all such taxes for which a Dividend Payment was made for
the immediately preceding fiscal quarter and that the Company has not
paid any income taxes to the same taxing authority directly during the
fiscal quarter for which the proposed Dividend Payment is to be made;

(b) any Subsidiary of the Company may declare and make Dividend
Payments to the Company or any Subsidiary that is a Guarantor;

(c) so long as no Default has occurred and is continuing or would
result therefrom, the Company may declare and make Dividend Payments in
cash to GSAC Holdings, and GSAC Holdings may declare and make Dividend
Payments in cash to GSAC, sufficient to enable GSAC Holdings and/or GSAC
(as applicable) to (i) pay reasonable legal fees and expenses of counsel to
GSAC and/or GSAC Holdings in defending any legal proceeding in which GSAC
or GSAC Holdings and the Company or any of its Subsidiaries is a defendant,
(ii) pay franchise taxes and other reasonable fees and expenses necessary
to maintain its corporate existence and (iii) perform accounting, legal,
corporate reporting and administrative functions in the ordinary course of
its business;

<PAGE>

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(d) if no acceleration of the Obligations shall have been declared or
otherwise occurred, GSAC may repurchase common stock from management of the
Company upon such person's death or termination of employment with the
Company (and the Company may make a Dividend Payment in respect of the
Company's common stock to GSAC Holdings, which in turn may make a Dividend
Payment to GSAC, to enable such repurchases to be made); provided, however,
-------- -------
that the aggregate amount so paid by GSAC in respect of such repurchases
(or by the Company or GSAC Holdings as Dividend Payments) in any fiscal
year shall not exceed $500,000;

(e) if no Default shall have occurred and be continuing, (A) the
Company may make cash Dividend Payments to GSAC Holdings and GSAC Holdings
may make cash Dividends Payments to GSAC therefrom (i) in an amount not to
exceed the difference of 25% of the Excess Cash Flow for the period from
the Closing Date through March 31, 1997 (each such Dividend Payment to be
paid, if at all, on or after the date prepayment is made pursuant to
Section 2.10(b)(iv) with respect to the same period), less any amount
applied by GSAC Holdings from such 25% of such Excess Cash Flow to fund
Subordinated Indebtedness Payments during such period as permitted under
Section 9.13(iii)(A); provided, however, that the Leverage Ratio does not
-------- -------
exceed 3.0 to 1.0 (after giving effect to the repayment of the Loans
required pursuant to Section 2.10(b)(iv) with respect to Excess Cash Flow
for such period), (ii) in an amount not to exceed the difference of 25% of
the Excess Cash Flow for the nine-month period ending December 31, 1997,
less any amount applied by GSAC Holdings from such 25% of such Excess Cash
Flow to fund Subordinated Indebtedness Payments during such period as
permitted under Section 9.13(iii)(A) (each such Dividend Payment to be
paid, if at all, on or after the date prepayment is made pursuant to
Section 2.10(b)(iv) with respect to the same period) and (iii) in an amount
not to exceed the difference of 25% of the Excess Cash Flow for each fiscal
year thereafter, less any amount applied by GSAC Holdings from such 25% of
such Excess Cash Flow to fund Subordinated Indebtedness Payments during
such period as permitted under Section 9.13(iii)(A) (each such Dividend
Payment to be paid, if at all, on or after the date prepayment is made
pursuant to Section 2.10(b)(iv) with respect to the same period); provided,
--------
however, that in no event shall any dividend permitted to be paid by the
-------
foregoing be paid (I) prior to (x) the prepayment of the Loans as required
pursuant to Section 2.10(b)(iv) and (y) the delivery of an Officers'
Certificate calculating Excess

<PAGE>

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Cash Flow for the relevant period as based upon the audited consolidated
financial statements (or, in the case of clause (i) above, unaudited
financial statements) of the Company delivered pursuant to this Agreement
or (II) after the end of the period in which such dividend is permitted to
be made and (B) any dividends paid to GSAC during any period pursuant to
this clause (e) may be used by GSAC to make Dividend Payments to the extent
that the amount thereof would not exceed the amount of such Dividend
Payments paid to GSAC less the amount of any Excess Cash Flow applied by
GSAC to fund Subordinated Indebtedness Payments during such period as
permitted under Section 9.13(iii)(B); and

(f) the Company may make a cash Dividend Payment to GSAC Holdings on
the Closing Date from the proceeds of the Loans made on such date not to
exceed $8,500,000 (the "Distribution") and GSAC Holdings may make a cash
------------
Dividend Payment to GSAC on the Closing Date therefrom; provided, however,
-------- -------
that the proceeds of the Distribution are immediately used on the Closing
Date to repay $8,500,000 aggregate principal amount of Indebtedness of GSAC
and/or GSAC Holdings outstanding on the Closing Date and listed on Schedule
--------
1.01(a) and acceptable to the Arranger.
-------

If GSAC receives any tax refund payment the payment of which was
funded from dividends from any of its Subsidiaries it shall promptly contribute
the amount thereof to GSAC Holdings, which shall contribute such amount to the
Company.

9.10 Financial Covenants. (a) Leverage Ratio. The Company will not
------------------- --------------
permit the Leverage Ratio at the end of any four fiscal quarter period ending
during any period set forth in the table below to exceed the ratio set forth
opposite such period in the table below:

Period Ratio
Closing Date - 6/29/97 4.10x
6/30/97 - 12/30/97 3.60
12/31/97 - 12/30/98 3.10
12/31/98 - 12/30/99 2.60
12/31/99 and thereafter 2.30

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(b) Fixed Charge Coverage Ratio. The Company will not permit the
---------------------------
ratio of EBITDA to Fixed Charges (i) for any trailing four fiscal quarter period
ending before December 31, 1999 to be less than 1.50x or (ii) for any trailing
four fiscal quarter period ending on or after December 31, 1999 to be less than
1.10x.

(c) Interest Coverage Ratio. The Company will not permit the
-----------------------
Interest Coverage Ratio for any trailing four fiscal quarter period ending
during any period set forth in the table below to be less than the ratio set
forth opposite such period in the table below:

Period Ratio
Closing Date - 12/30/96 2.40x
12/31/96 - 12/30/97 2.75
12/31/97 - 12/30/98 3.00
12/31/98 - 12/30/99 3.25
12/31/99 and thereafter 3.50

(d) EBITDA. The Company will not permit EBITDA for any trailing four
------
fiscal quarter period ending during any period set forth in the table below to
be less than the amount set forth opposite such period in the table below
(provided, however, that in order to give pro forma effect to the Acquired
-------- -------
Business, (i) for the four fiscal quarter period ending September 30, 1996,
there shall be added $3,133,000 to actual EBITDA, (ii) for the four fiscal
quarter period ending December 31, 1996, there shall be added $1,958,000 to
actual EBITDA and (iii) for the four fiscal quarter period ending March 31,
1997, there shall be added $783,000 to actual EBITDA):

Period EBITDA
Closing Date - 6/29/97 $21,000,000
6/30/97 - 12/30/97 24,000,000
12/31/97 - 12/30/98 26,500,000
12/31/98 - 12/30/99 29,000,000
12/31/99 and thereafter 31,500,000

<PAGE>

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(e) Capital Expenditures. The Company will not permit the aggregate
--------------------
amount of Capital Expenditures (excluding Capital Expenditures for equipment to
the extent acquired in exchange for like equipment) made by the Company and its
Consolidated Subsidiaries to exceed $2,000,000 during any fiscal year of the
Company (or $2,750,000 for fiscal 1996); provided, however, that, if the
-------- -------
aggregate amount of Capital Expenditures for any fiscal year shall be less than
$2,000,000, then the shortfall may be added to the amount of Capital
Expenditures permitted for the immediately succeeding (but not any other) fiscal
year.

(f) The covenants in clauses (a), (b), (c) and (d) of this Section
9.10 shall be measured as of the end of each fiscal quarter, beginning with
September 30, 1996.

9.11 Pledge of Additional Collateral. Promptly, and in any event
-------------------------------
within 30 days, after the acquisition of any Property of the type that would
have constituted Collateral at the Closing Date (the "Additional Collateral"),
---------------------
GSAC will, and will cause each of its Subsidiaries to, take all action necessary
or desirable, including the filing of appropriate financing statements under the
provisions of the UCC or applicable governmental requirements in each of the
offices where such filing is necessary or appropriate, to grant the
Administrative Agent for the benefit of the Lenders a perfected first priority
Lien on such Property (or comparable interest under foreign law in the case of
any foreign Property) pursuant to and to the full extent required by the
Security Documents and this Agreement. In the event that GSAC or any of its
Subsidiaries acquires an interest in additional real property, GSAC will, and
will cause each of its Subsidiaries to, take such actions and execute such
documents as the Administrative Agent shall require to confirm the Lien of a
mortgage, if applicable, or to create a new mortgage. The costs of all actions
taken by the parties in connection with the pledge of Additional Collateral,
including reasonable costs of counsel for the Administrative Agent, shall be for
the account of the Company, which shall pay all sums due on demand.

9.12 Security Interests. (a) GSAC will, and will cause each of its
------------------
Subsidiaries to, perform any and all acts and execute any and all documents
(including the execution, amendment or supplementation of any financing
statement, continuation statement or other statement) for filing under the
provisions of the UCC and the rules and regulations thereunder, or any other
statute, rule or regulation of any applicable Federal, state or local
jurisdiction, including any filings in local real estate land record offices and
the United States Patent and Trademark

<PAGE>

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Office, or the United States Copyright Office, which are necessary, from time to
time, in order to grant, continue and maintain in favor of the Administrative
Agent for the benefit of the Lenders valid and perfected Liens on the
Collateral.

(b) GSAC will, and will cause each of its Subsidiaries to, deliver or
cause to be delivered to the Administrative Agent from time to time such other
documentation, consents, authorizations, approvals and orders in form and
substance reasonably satisfactory to the Administrative Agent as the
Administrative Agent shall reasonably deem necessary to perfect or maintain the
Liens on the Collateral.

9.13 Subordinated Indebtedness. Neither GSAC nor any of its
-------------------------
Subsidiaries shall, directly or indirectly, purchase, redeem, retire or
otherwise acquire for value, or set apart any money for a sinking, defeasance or
other analogous fund for, the purchase, redemption, retirement or other
acquisition of, or make any voluntary payment or prepayment of the principal of
or interest on, or any other amount owing in respect of, any Subordinated
Indebtedness, except for:

(i) regularly scheduled payments of interest on the Subordinated
Notes effected through the issuance of Subordinated Notes in a principal
amount not greater than the amount of interest to be paid on the respective
interest payment date (or effected through the capitalization of such
interest without the issuance of additional Subordinated Notes);

(ii) regularly scheduled payments of interest on Permitted
Subordinated Indebtedness effected through the issuance of subordinated
notes of GSAC or GSAC Holdings having the same terms as such Permitted
Subordinated Indebtedness and in a principal amount not greater than the
amount of interest to be paid on the respective interest payment date (or
effected through the capitalization of such interest without the issuance
of additional subordinated notes); and

(iii) if no Default shall have occurred and be continuing, any such
redemption, retirement, acquisition, setting apart, purchase or payment
(collectively, a "Subordinated Indebtedness Payment") (A) by GSAC Holdings
---------------------------------
with any amount of Excess Cash Flow with which GSAC Holdings could have
made (but has not already made) a Dividend Payment pursuant to Section
9.09(e)(A); provided, however, that such Subordinated Indebtedness Payment
-------- -------
is made no

<PAGE>

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earlier than or later than the date that a Dividend Payment in such amount
could have been made by the Company under Section 9.09(e)(A) and (B) by
GSAC with the amount of any Excess Cash Flow with which GSAC could have
made (but has not already made) a Dividend Payment pursuant to
Section 9.09(e)(B); provided, however, that such Subordinated Indebtedness
-------- -------
Payment is made no earlier than or later than the date that a Dividend
Payment in such amount could have been made by the Company under
Section 9.09(e)(A).

9.14 Lines of Business.
-----------------

(a) Neither the Company nor any of its Subsidiaries shall engage to
any substantial extent in any line or lines of business activity other than the
business of manufacturing, distributing and selling licensed products, other
collectible products that have broad based distribution and consumer packaged
goods that are related to or extensions of those products manufactured,
distributed or sold by the Company on the date hereof, including trading cards,
sports-related products and lenticular and three-dimensional image specialty
products.

(b) GSAC shall engage in no activities other than continuing to own
all of the capital stock of GSAC Holdings and such activities as are reasonably
incidental thereto, and GSAC Holdings shall engage in no activities other than
continuing to own all of the capital stock of the Company and Flapco and such
activities as are reasonably incidental thereto.

9.15 Transactions with Affiliates. Except as expressly permitted by
----------------------------
this Agreement, GSAC will not, nor will it permit any of its Subsidiaries to,
directly or indirectly: (a) make any Investment in an Affiliate; (b) transfer,
sell, lease, assign or otherwise dispose of any Property to an Affiliate; (c)
merge into or consolidate with or purchase or acquire Property from an
Affiliate; or (d) enter into any other transaction directly or indirectly with
or for the benefit of an Affiliate (including guarantees and assumptions of
obligations of an Affiliate); provided, however, that (i) GSAC and GSAC Holdings
-------- -------
may enter into the transactions contemplated by the Subordinated Notes,
(ii) GSAC may engage or employ any Affiliate who is an individual as a director,
officer or employee of GSAC or any of its Subsidiaries and GSAC may pay such
individual reasonable compensation for his or her services in such capacity,
(iii) the Company may perform the Packaging Agreement and (iv) the Company and
its Subsidiaries may enter into transactions (other than extensions of credit by
the Company or any of its Subsidiaries to

<PAGE>

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an Affiliate) providing for the leasing of Property, the rendering or receipt of
services or the purchase or sale of inventory and other Property in the ordinary
course of business if the monetary or business consideration arising therefrom
would be at least substantially as advantageous to the Company and its
Subsidiaries as the monetary or business consideration which would obtain in a
comparable transaction with a Person not an Affiliate. Without limiting the
generality of the foregoing, the Company will not, and will not permit any of
its Subsidiaries to, make any payment to GSAC to enable GSAC to pay taxes of
GSAC and its Subsidiaries, except for payments constituting Dividend Payments
permitted under Section 9.09(a).

9.16 Use of Proceeds. On the Closing Date, the Company will use the
---------------
proceeds of all of the Term Loans and a borrowing of Revolving Credit Loans
solely (i) to repay in full approximately $48,000,000 of its existing senior
indebtedness, (ii) to fund the Distribution, which will be used by GSAC and/or
GSAC Holdings on the Closing Date solely to repay $8,500,000 of existing
indebtedness of GSAC and/or GSAC Holdings listed on Schedule 1.01(a), (iii) to
----------------
pay the cash portion of the purchase price for the Acquisition (which shall not
exceed $32,500,000) and (iv) to pay fees and expenses directly related to the
Transaction. After the Closing Date, the Company will use the proceeds of
Revolving Credit Loans for general corporate purposes, including, in an
aggregate principal amount outstanding at any time not to exceed $10,000,000,
for Related Business Acquisitions.

9.17 Modifications of Certain Documents. GSAC will not, and will not
----------------------------------
permit any of its Subsidiaries to, consent to any modification, supplement or
waiver of any of the provisions of any Ancillary Document without the prior
approval of the Majority Lenders unless, in the case of any Sports Contract, any
such modification, supplement or waiver, singly or in the aggregate with all
other such modifications, supplements and waivers, could not reasonably be
expected to have a Material Adverse Effect; provided, however, that GSAC shall
-------- -------
promptly after entering into such modification, supplement or waiver of a Sports
Contract, supply the Administrative Agent with a copy thereof.

9.18 Issuance of Equity. The Company will not issue any shares of
------------------
capital stock to GSAC Holdings other than shares of common stock of the Company.
GSAC Holdings will not issue any shares of capital stock to GSAC other than
shares of common stock of GSAC Holdings. The Company will not permit MLM or
Donruss Trading to issue any shares of capital stock to the Company other than
shares of common stock of MLM or Donruss Trading, as the

<PAGE>

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case may be. GSAC will not, and will not cause or permit any of its
Subsidiaries to, permit any Person (other than GSAC and its Subsidiaries) to own
or hold any of the capital stock of any of the Subsidiaries of GSAC.

9.19 Issuance or Disposal of Subsidiary Stock. The Company will not:
----------------------------------------
(a) issue, sell, assign, pledge or otherwise encumber or dispose of any shares
of capital stock, partnership interests, or other equity securities of (or
warrants, rights or options to acquire shares or other equity securities of) any
Subsidiary of the Company; or (b) permit any Subsidiary of the Borrower to
issue, sell, assign, pledge or otherwise encumber or dispose of any of their
respective or any of their respective Subsidiaries' shares of capital stock,
partnership interests, or other securities (or warrants, rights or options to
acquire any such shares or other securities), except, in each case under clause
(a) or (b), (i) to the Company or any of its Wholly Owned Subsidiaries, (ii) to
qualify directors if required by applicable law and (iii) the pledge thereof
pursuant to the Security Documents.

9.20 Limitation on Certain Restrictions Affecting Subsidiaries. GSAC
---------------------------------------------------------
shall not, and shall not cause or permit any of 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 (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Company or any of its
Subsidiaries, or pay any Indebtedness or any other obligation owed to the
Company or any of its Subsidiaries, (b) make loans or advances to the Company or
any of its Subsidiaries or guarantee any Indebtedness of the Company or any of
its Subsidiaries or (c) transfer any of its properties or assets to the Company
or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) this Agreement and the
other Basic Documents, (iii) such restrictions with respect to the transfer of
those assets subject to a Lien permitted under clause (h) of Section 9.06 as are
contained in the respective documentation with respect thereto, (iv) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of the Company or any of its Subsidiaries and (v) with
respect to restrictions described in clause (c) only, (x) the Sports Contracts
and other license, franchise, distribution and similar agreements entered into
in the ordinary course of business and (y) restrictions in any agreement
relating to the disposition of assets to the extent that such disposition is
permitted under this Agreement.

<PAGE>

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9.21 Preservation of Status as Senior Indebtedness. GSAC and its
---------------------------------------------
Subsidiaries shall promptly take all action reasonably requested by the
Administrative Agent at any time to protect, preserve and give effect to the
status of the Creditors as the holders of senior indebtedness within the meaning
of any agreement or instrument relating to Indebtedness of GSAC or any of its
Subsidiaries that is subordinated to the Obligations.

9.22 Additional Obligors. In the event that the Company creates or
-------------------
acquires a Subsidiary after the date hereof (each such Subsidiary referred to
herein as an "Additional Obligor" and collectively as the "Additional
------------------ ----------
Obligors"), then, upon such Person becoming a Subsidiary of the Company, the
- --------
Company shall cause such Subsidiary to execute and deliver all such agreements,
guarantees, security agreements, assignments, documents and certificates
(including any amendments to the Basic Documents) as the Administrative Agent
may reasonably request and do such other acts and things as the Administrative
Agent may reasonably request in order to have such Subsidiary guarantee the
Obligations, grant to the Administrative Agent, ratably on behalf of the
Lenders, a duly perfected first priority Lien on all real, personal and mixed
property of such Subsidiary to effect fully the purposes of the Basic Documents
and to provide for payment of the Obligations in accordance with the terms of
the Basic Documents.

9.23 Restriction on Leases. Neither GSAC nor any of its Subsidiaries
---------------------
shall become liable in any way, whether, directly or by assignment or as a
guarantor or other surety, for the obligations of the lessee under any lease,
whether an operating lease or a capital lease, unless, immediately after giving
effect to the incurrence of liability with respect to such lease, the
Consolidated Rental Payments of the Company at the time in effect shall not
exceed $2,750,000 for the then current fiscal year, increased at the start of
each fiscal year after the Closing Date by an amount equal to the amount
permitted hereby immediately prior to such increase multiplied by the percentage
increase in the Consumer Price Index for the immediately preceding year as
reported by the United States Department of Commerce expressed as a decimal.

9.24 Restriction on Tax Consolidation. None of GSAC or any of its
--------------------------------
Subsidiaries shall file or consent to the filing of any consolidated income tax
return with any Person other than GSAC and its Subsidiaries.

9.25 Sale and Lease-Backs. None of GSAC or any of its Subsidiaries
--------------------
shall, directly or indirectly, become or thereafter

<PAGE>

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remain liable as lessee or as guarantor or other surety with respect to the
lessee's obligations under any lease, whether an operating lease or a capital
lease, of any property (whether real or personal or mixed) whether now owned or
hereafter acquired, (i) which such Person has sold or transferred or is to sell
or transfer to any other Person or (ii) which GSAC or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by GSAC or any of its Subsidiaries to
any Person in connection with such lease, if in the case of clause (i) or (ii)
above, such sale and such lease are part of the same transaction or a series of
related transactions or such sale and such lease occur within one year of each
other or are with the same other Person.

9.26 Limitation on Other Restrictions on Amendment of Basic
------------------------------------------------------
Documents. None of GSAC or any of its Subsidiaries shall enter into, suffer to
- ---------
exist or become or remain subject to any agreement or instrument to which GSAC
or any of its Subsidiaries is a party or by which GSAC or any of its
Subsidiaries or any property of GSAC or any of its Subsidiaries (now owned or
hereafter acquired) may be subject or bound, except for the Basic Documents,
that would expressly prohibit or restrict (including by way of an express
covenant, representation or warranty or event of default), or expressly require
the consent of any Person to, any amendment to, or waiver or consent to
departure from the terms of, any of the Basic Documents.

9.27 Sale or Discount of Receivables. None of GSAC or any of its
-------------------------------
Subsidiaries shall sell, with or without recourse, or discount, or otherwise
sell for less than the face value thereof, notes or accounts receivables, other
than in connection with trade discounts in the ordinary course of business or
consistent with past practice.

9.28 Contingent Obligations. None of GSAC or any of its Subsidiaries
----------------------
shall, directly or indirectly, create or become or be liable with respect to any
Contingent Obligation, except:

(i) pursuant to Section 6;

(ii) Contingent Obligations in respect of operating leases to the
extent permitted under Section 9.23;

(iii) Contingent Obligations of the Company or any of its
Subsidiaries in respect of Indebtedness or other liabilities of the
Company or any of its Subsidiaries to the extent that the existence of
such Indebtedness

<PAGE>

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or other liabilities is not prohibited under this Agreement; and

(iv) other Contingent Obligations which, together with the amount
of Indebtedness incurred under Section 9.07(h) (but without
duplication), does not exceed $2,500,000 in the aggregate at any time
outstanding.

9.29 Interest Rate Protection Agreements. Not later than 90 days
-----------------------------------
from the Closing Date, the Company shall enter into or obtain Interest Rate
Protection Agreements with parties reasonably acceptable to the Majority Lenders
as shall result in effectively limiting the interest cost to the Company of 40%
of the aggregate principal amount of Term Loans then outstanding for a period of
at least three years from the date the initial Interest Rate Protection
Agreements are entered into at a rate satisfactory to the Majority Lenders.

Section 10. Events of Default. If one or more of the following
-----------------
events (herein called "Events of Default") shall occur and be continuing:
-----------------

(a) (i) The Company shall default in the payment when due of any
principal of any Loan or (ii) the Company shall default in the payment when
due of interest on any Loan or any Reimbursement Obligation or any fee or
any other amount payable by it hereunder or under any other Basic Document
when due and such default under this clause (ii) shall have continued
unremedied for three or more Business Days; or

(b) GSAC or any of its Subsidiaries (GSAC and such Subsidiaries
herein collectively called the "Relevant Parties" and each, a "Relevant
---------------- --------
Party") shall default in the payment when due of any principal of or
-----
interest on any of its other Indebtedness aggregating $250,000 or more, or
in the payment when due of any amount under any Interest Rate Protection
Agreement; or any event specified in any note, agreement, indenture or
other document evidencing or relating to any such Indebtedness or any event
specified in any Interest Rate Protection Agreement shall occur if the
effect of such event is to cause, or (with the giving of any notice or the
lapse of time or both) to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity or to have the interest rate thereon reset to a level so that
securities

<PAGE>

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evidencing such Indebtedness trade at a level specified in relation to the
par value thereof or, in the case of an Interest Rate Protection Agreement,
to permit the payments owing under such Interest Rate Protection Agreement
to be liquidated; or

(c) Any representation, warranty or certification made or deemed made
in any Basic Document (or in any modification or supplement thereto) by any
Relevant Party, or any certificate furnished to any Creditor pursuant to
the provisions thereof, shall prove to have been false or misleading as of
the time made, deemed made or furnished in any material respect; or

(d) The Company or either Parent Guarantor (as applicable) shall
default in the performance of any of its obligations under any of Sections
9.01(h), 9.05 through 9.13 or 9.15 through 9.28 or the Company, MLM or
Donruss Trading shall default in the performance of any of its obligations
under Section 5.02 or 6.02 of the Security Agreement; or either Parent
Guarantor shall default in the performance of its obligations under Section
4.02 of the Pledge Agreement; or the Company shall default in the
performance of its obligations under Section 9.01(e) and such default shall
continue unremedied for 5 Business Days; or any Obligor shall default in
the performance of any of its other obligations in this Agreement, the
Security Documents or the Letter of Credit Documents and such default shall
continue unremedied for a period of thirty days after written notice
thereof to such Obligor, the Company or the Parent Guarantors by the
Administrative Agent; or

(e) Any Relevant Party shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or

(f) Any Relevant Party shall (i) apply for 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, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case

<PAGE>

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under the Bankruptcy Code, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or

(g) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
such Relevant Party or of all or any substantial part of its assets, or
(iii) similar relief in respect of such Relevant Party under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 or more days; or an order for relief against any
Relevant Party shall be entered in an involuntary case under the Bankruptcy
Code; or

(h) A final judgment or judgments for the payment of money in excess
of $500,000 in the aggregate (exclusive of judgment amounts to the extent
covered by insurance, other than a deductible or retained liability amount
not exceeding $500,000, where the insurer has admitted liability in respect
of such judgment or is precluded by the express terms of the relevant
insurance policy from asserting any contest or defense to such liability by
reason of the due submission of a claim and the passage of time) shall be
rendered by one or more courts, administrative tribunals or other bodies
having jurisdiction against any Relevant Party and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay
of execution thereof shall not be procured, within 30 days from the date of
entry thereof and such Relevant Party shall not, within said period of
30 days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or

(i) An event or condition specified in Section 9.01(d) shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
the Company or any ERISA Affiliate shall incur, or in the opinion of the
Majority Lenders shall be reasonably likely to incur, a liability to a
Plan, a

<PAGE>

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Multiemployer Plan, the PBGC or the Internal Revenue Service (or any
combination of the foregoing) in an amount in excess of $1,000,000; or

(j) A reasonable basis shall exist for the assertion against any
Relevant Party of, or there shall have been asserted against any Relevant
Party, claims or liabilities, whether accrued, absolute or contingent,
based on or arising from the generation, storage, transport, handling or
disposal of Hazardous Materials by any Relevant Party or any Affiliate, or
any predecessor in interest of any Relevant Party or any Affiliate, or
relating to any site or facility owned, operated or leased by any Relevant
Party or any Affiliate, which claims or liabilities (insofar as they are
payable by any Relevant Party but after deducting any portion thereof which
is reasonably expected to be paid by other creditworthy Persons jointly and
severally liable therefor), in the judgment of the Majority Lenders are
reasonably likely to be determined adversely to any Relevant Party, and the
amount thereof is, singly or in the aggregate, reasonably likely to have a
Material Adverse Effect; or

(k) (i) Any Ancillary Document shall be terminated by any party
thereto or shall expire by its terms and not be renewed or shall be renewed
on terms that could reasonably be expected to have a Material Adverse
Effect or (ii) any party to any Ancillary Document shall default in the
performance or observance of any of their agreements contained therein, or
any Sports Contract shall be sold, assigned or otherwise conveyed, if such
default, sale, assignment or other conveyance, in the judgment of the
Majority Lenders, would reasonably be likely to result in a Material
Adverse Effect; or

(l) Acadia Electra and Acadia Partners shall cease to own or control
(in the aggregate), whether directly or indirectly, outstanding shares of
capital stock of GSAC that in effect have voting power to elect a majority
of the members of the board of directors of GSAC or shall cease to hold
such voting power or shall fail to have the power to appoint or elect a
majority of the members of the board of directors of GSAC, unless and for
so long thereafter as any Permitted Person(s) (collectively or
individually) shall have the power to vote not less than a majority of the
voting power of the outstanding voting capital stock of GSAC and the power
to appoint or elect not less than a majority of the members of the board of
directors of GSAC pursuant to

<PAGE>

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a stockholders' agreement in form and substance satisfactory to the
Majority Lenders; or any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), other
than Acadia Electra, Acadia Partners and/or any Permitted Person(s)
(collectively or individually), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of 50% or more of the outstanding capital stock of GSAC; or
GSAC shall fail to own, directly or indirectly, 100% of the outstanding
capital stock of GSAC Holdings; or GSAC Holdings fail to own, directly or
indirectly, 100% of the outstanding capital stock of the Company;

(m) Acadia Partners or Acadia Electra Partners, L.P. shall, without
the prior consent of the Majority Lenders, transfer any of the Subordinated
Notes prior to the conversion of such notes in accordance with Section 3
thereof to any Person other than to the Acadia Affiliate;

(n) The Acquisition shall not be consummated simultaneously with or
immediately after the Closing pursuant to the terms of the Acquisition
Documents; or

(o) Any Security Document after delivery thereof at any time shall
cease to be in full force and effect or shall for any reason fail to create
or cease to maintain a valid and duly perfected first priority security
interest in and Lien upon a material portion of the Collateral;

THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 10, the Administrative Agent may, and upon
written direction of the Majority Lenders shall, by notice to the Company,
terminate the Commitments and/or declare the principal amount then outstanding
of, and the accrued interest on, the Loans, the Reimbursement Obligations and
all other amounts payable by the Company hereunder and under the Notes
(including any amounts payable under Section 5.05 or 5.06) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Company, reduce any claim to judgment, take any
other action permitted by law and/or take any action permitted to be taken by
the Security Agreement during the existence of an Event of Default; and (2) in
the case of the occurrence of an Event of Default referred to in clause (f)
or (g) of this Section 10, the Commitments shall automatically be terminated and
the principal amount then

<PAGE>

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outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Company hereunder and under the
Notes (including any amounts payable under Section 5.05 or 5.06) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company.

In addition, the Company agrees, upon the occurrence and during the
continuance of any Event of Default if the Administrative Agent has declared the
principal amount then outstanding of, and accrued interest on, the Revolving
Credit Loans, and all other amounts payable to the Revolving Credit Lenders
hereunder and under the Notes evidencing such Loans to be due and payable, it
may and shall, if requested by the Majority Revolving Credit Lenders through the
Administrative Agent (and, in the case of any Event of Default referred to in
clause (f) or (g) of this Section 10 with respect to any Relevant Party, forth-
with, without any demand or the taking of any other action by the Administrative
Agent or such Lenders) provide cover for the Letter of Credit Liabilities by
paying to the Administrative Agent immediately available funds in an amount
equal to the then aggregate undrawn face amount of all Letters of Credit, which
funds shall be held by the Administrative Agent in the Collateral Account as
collateral security in the first instance for the Letter of Credit Liabilities
and be subject to withdrawal only as provided in the Security Agreement.

Section 11. The Administrative Agent.
------------------------

11.01 Appointment, Powers and Immunities. Each Lender hereby
----------------------------------
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Basic Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and the
other Basic Documents, together with such other powers as are reasonably
incidental thereto. Neither the Administrative Agent nor the Arranger (which
term as used in this sentence and in Section 11.05 and the first sentence of
Section 11.06 shall include reference to their respective affiliates and their
own and their respective affiliates' officers, directors, employees, attorneys
and agents):

(a) shall have any duties or responsibilities except those expressly
set forth in this Agreement and in the other Basic Documents, or shall by
reason of this Agreement or any other Basic Document be a trustee or
fiduciary for any Lender;

<PAGE>

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(b) shall be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other
Basic Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any
other Basic Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or
any other Basic Document or any other document referred to or provided for
herein or therein or for any failure by the Company or any other Person to
perform any of its obligations hereunder or thereunder;

(c) shall, except to the extent expressly instructed pursuant to the
provisions of this Agreement by the Majority Lenders with respect to
collateral security under the Security Documents, be required to initiate
or conduct any litigation or collection proceedings hereunder or under any
other Basic Document;

(d) shall be responsible or liable to any Lender or any other party
including the Borrower and the Guarantors for any action taken or omitted
to be taken by it hereunder or under any other Basic Document or under any
other document or instrument referred to or provided for herein or therein
or in connection herewith or therewith, except for its own gross negligence
or willful misconduct;

(e) in performing its functions and duties under the Credit
Documents, shall assume or shall be deemed to have assumed any obligation
towards or relationship of agency or trust with or for any Obligor (it
being understood that the provisions of this Section 11 are solely for the
benefit of the Creditors, and no Obligor shall have any rights as a third-
party beneficiary of any of the provisions hereof); or

(f) shall be under any obligation to take any action hereunder or
under any other Basic Document if the Administrative Agent determines that
taking such action may conflict with any law or any provision of any Basic
Document, or may require the Administrative Agent to qualify to do business
in any jurisdiction where it is not then so qualified.

The Administrative Agent may employ and consult with agents, attorneys-in-fact,
independent public accountants and other experts selected by it, and shall not
be responsible or liable for the negligence or misconduct of any such agents,
attorneys-

<PAGE>

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in-fact, independent public accountants and other experts and shall not be
responsible or liable for any action taken or omitted to be taken in good faith
by it in accordance with the advice of such counsel, accountants or experts.
The Administrative Agent may deem and treat the payee of a Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment or
transfer thereof shall have been filed with the Administrative Agent, together
with any necessary consents required by Section 12.06. Except as expressly set
forth in the third sentence of Section 2.01(a), neither the Arranger nor the
Documentation Agent, as such, shall have any independent duties or obligations
under any Basic Document.

11.02 Reliance by Administrative Agent. The Administrative Agent
--------------------------------
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telecopy, telegram or cable) believed by it
to be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or any other
Basic Document, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder or thereunder in accordance
with instructions given by the Majority Lenders or, if provided herein, in
accordance with the instructions given by the Majority Revolving Credit Lenders,
the Majority Tranche A Term Lenders, the Majority Tranche B Term Lenders or all
of the Lenders as is required in such circumstance, and such instructions of
such Lenders and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders; provided, however, that the Administrative Agent
-------- -------
shall not be required to take any action which exposes the Administrative Agent
to any responsibility or liability or which is contrary to this Agreement, any
other Basic Document or applicable law.

11.03 Defaults. The Administrative Agent shall not be deemed to have
--------
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Company specifying such Default
and stating that such notice is a "Notice of Default" under this Agreement or
another Basic Document. In the event that the Administrative Agent receives
such a notice of the occurrence of a Default, the Administrative Agent shall
give prompt notice thereof to the Lenders. The Administrative Agent shall
(subject to Sections 11.07 and 12.04) take such action with respect to such
Default as shall be directed by the Majority Lenders or, if

<PAGE>

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provided herein, the Majority Revolving Credit Lenders, the Majority Tranche A
Term Lenders or the Majority Tranche B Term Lenders; provided, however, that,
-------- -------
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interest of the Lenders.

11.04 Rights as a Lender. With respect to its Commitments and the
------------------
Loans made by it, Wells Fargo Bank, N.A. (and any successor acting as
Administrative Agent) in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as the Administrative Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include Wells Fargo in
its individual capacity. Wells Fargo Bank, N.A. (and any successor acting as
Administrative Agent) and its affiliates may (without having to account therefor
to any Lender) accept deposits from, lend money to, act as trustee under
indentures of, provide merchant banking services to, own securities of, make
investments in and generally engage in any kind of banking, trust or other
business with the Obligors (and any of their Subsidiaries or Affiliates) as if
it were not acting as the Administrative Agent, and Wells Fargo Bank, N.A. (and
any such successor) and its affiliates may accept fees and other consideration
from the Obligors for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders. Each Lender acknowledges
the potential conflict of interest between Wells Fargo (i) as a Lender holding
disproportionate interests in the various Commitments and/or Loans and (ii) as
the Administrative Agent under this Agreement and each Lender expressly consents
to, and waives any claim based upon, such potential conflicts of interest.

11.05 Indemnification. Each Lender agrees to indemnify and hold
---------------
harmless the Administrative Agent and the Arranger (to the extent not reimbursed
under Section 12.03, but without limiting the obligations of the Company under
Section 12.03, and including in any event any payments under any indemnity that
the Administrative Agent is required to issue to any Lender referred to in
Section 4.01(c) of the Security Agreement, or to any bank referred to in
Section 4.02 of the Security Agreement to which remittances in respect of
Accounts, as defined therein, are to be made), ratably in accordance with the
aggregate principal amount of the Loans and Reimbursement Obligations held by
the Lenders (or, if no Loans or Reimbursement Obligations are at the time
outstanding, ratably in accordance

<PAGE>

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with their respective Commitments), for any and all liabilities (including,
without limitation, any Environmental Liabilities), obligations, losses,
damages, penalties, actions, judgments, deficiencies, suits, costs, expenses
(including reasonable attorney's fees) or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Administrative Agent or the Arranger (including by any Lender) arising out of or
by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Basic Document or any other documents contemplated
by or referred to herein or therein for any action taken or omitted to be taken
by the Administrative Agent or the Arranger under or in respect of the Agreement
or any of the Basic Documents or other such documents or the transactions
contemplated hereby or thereby (including the costs and expenses that the
Company is obligated to pay under Section 12.03, and including also any payments
under any indemnity that the Administrative Agent is required to issue to any
Lender referred to in Section 4.01(c) of the Security Agreement, or to any bank
referred to in Section 4.02 of the Security Agreement to which remittances in
respect of Accounts, as defined therein, are to be made, but excluding, unless a
Default has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents; provided,
--------
however, that no Lender shall be liable for any of the foregoing to the extent
- -------
they are determined by a court of competent jurisdiction in a final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of the party to be indemnified. WITHOUT LIMITATION OF THE FOREGOING,
IT IS THE EXPRESS INTENTION OF THE LENDERS THAT THE ADMINISTRATIVE AGENT SHALL
BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES
(INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES
(INCLUDING REASONABLE ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND OR NATURE
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE ADMINISTRATIVE AGENT (EXCEPT TO THE EXTENT THE SAME ARE CAUSED
BY THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILFUL MISCONDUCT). WITHOUT
LIMITING ANY OTHER PROVISION OF THIS SECTION 11.05, EACH LENDER AGREES TO
REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE
OF ANY AND ALL EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) REASONABLY
INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION,
EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT
(WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS OR OTHERWISE) OF, OR LEGAL
ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER THE

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LOAN DOCUMENTS, TO THE EXTENT THAT THE ADMINISTRATIVE AGENT IS NOT PROMPTLY
REIMBURSED FOR SUCH EXPENSES BY THE BORROWER; PROVIDED, HOWEVER, THAT THE
ADMINISTRATIVE AGENT SHALL NOT BE REIMBURSED FOR ANY SUCH EXPENSES ARISING OUT
OF OR RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILFUL
MISCONDUCT. The agreements set forth in this Section 11.05 shall survive the
payment of all Loans and other obligations hereunder and shall be in addition to
and not in lieu of any other indemnification agreements contained in any other
Basic Document.

11.06 Non-Reliance on Administrative Agent, Arranger and Other
--------------------------------------------------------
Lenders. Each Lender agrees that it has, independently and without reliance on
- -------
any other Creditor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Parent Guarantors and their
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon any other Creditor, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or under any other Basic Document. Neither the Administrative Agent
nor the Arranger shall be required to keep itself informed as to the performance
or observance by any Obligor of this Agreement or any of the other Basic
Documents or any other document referred to or provided for herein or therein or
to inspect the Properties or books of the Parent Guarantors or any of their
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or under the Security Documents, neither the Administrative Agent nor
the Arranger shall have any duty or responsibility to provide any Lender with
any credit or other information concerning the affairs, financial condition or
business of the Parent Guarantors or any of their Subsidiaries (or any of their
affiliates) that may come into the possession of the Administrative Agent or the
Arranger or any of their respective affiliates.

11.07 Failure to Act. The Administrative Agent shall in all cases be
--------------
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from the Lenders of their
indemnification obligations under Section 11.05 against any and all liability
and expense that may be incurred by it by reason of taking or continuing to take
any such action.

11.08 Resignation or Removal of Administrative Agent. Subject to the
----------------------------------------------
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent

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may resign at any time by giving notice thereof to the Lenders and the Company
and the Parent Guarantors, and the Administrative Agent may be removed at any
time with or without cause by the Majority Lenders (the determination of
Majority Lenders for purposes of this Section 11.08 to be made without reference
to any Commitments, Loans or Letter of Credit Liabilities held by the
Administrative Agent). Upon any such resignation or removal, the Majority
Lenders shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, that shall be a bank that has an office in New York, New
York with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from all of its duties, liabilities and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 11 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.

11.09 Consents Under Other Basic Documents. Except as otherwise
------------------------------------
provided in Section 12.04 with respect to this Agreement, the Administrative
Agent may, with the prior consent of the Majority Lenders (but not otherwise),
consent to any modification, supplement or waiver under any of the Basic
Documents; provided, however, that, without the prior consent of each Lender,
-------- -------
the Administrative Agent shall not (except as provided herein or in the Security
Documents) release any collateral or otherwise terminate any Lien under any
Basic Document providing for collateral security, or agree to additional
obligations being secured by such collateral security, except that no such
consent shall be required, and the Administrative Agent is hereby authorized, to
release any Lien covering Property that is the subject of a disposition of
Property (i) which is permitted hereunder or (ii) to which the Majority Lenders
have consented; provided, further, however, that notwithstanding the foregoing,
-------- ------- -------
the Administrative Agent shall not, without the prior consent of all of the
Lenders, release all or substantially all of the collateral subject to the
security

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agreements and Liens of the Security Documents or terminate the Lien under any
Basic Document in respect of all or substantially all the collateral subject to
the security agreements and Liens of the Security Documents.

11.10 Collateral Sub-Agents. Each Lender by its execution and
---------------------
delivery of this Agreement agrees, as contemplated by Section 4.03 of the
Security Agreement, that, in the event it shall hold any Permitted Investments
referred to therein, such Permitted Investments shall be held in the name and
under the control of such Lender, and such Lender shall hold such Permitted
Investments as a collateral sub-agent for the Administrative Agent thereunder.
The Company by its execution and delivery of this Agreement hereby consents to
the foregoing.

11.11 Exculpatory Provisions. None of the Administrative Agent, the
----------------------
Arranger or any of their respective officers, directors, employees,
representatives, agents, attorneys-in-fact or affiliates shall be (i) liable for
any waiver, consent or approval given or any action taken or omitted to be taken
by such Person under or in connection with any Basic Document or be responsible
for the consequences of any oversight or error in judgment by such Person
whatsoever, except to the extent that such action, omission, oversight or error
in judgment is determined by a court of competent jurisdiction in a final non-
appealable judgment to have resulted solely from such Person's own gross
negligence or bad faith, (ii) responsible in any manner to any Lender for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any other Basic Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Administrative Agent or the Arranger to
the Lenders or by or on behalf of any Obligor or any of their respective
officers to any Creditor or (iii) required to inspect the properties, books or
records of any Obligor or otherwise to ascertain, inquire or give any notice as
to (A) the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any Basic Document, (B) the
business, operations, condition (financial or otherwise) or prospects or any
Obligor or any other Person, (C) the use of the proceeds of the Loans or (D)
except to the extent set forth in Section 11.03, the existence or possible
existence of any Default. Neither the Arranger, the Administrative Agent, any
Lender nor any affiliate, officer, director, employee, attorney or agent thereof
shall have any liability with respect to, and the Borrower hereby waives,

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releases and agrees not to sue any of them upon, any claim for any special,
indirect, incidental or consequential damages suffered or incurred by the
Borrower or any other Obligor in connection with, arising out of or in any way
related to this Agreement or any of the other Basic Documents, or any of the
transactions contemplated by this Agreement or any of the other Basic Documents.
The Borrower hereby waives, releases and agrees not to sue the Arranger, the
Administrative Agent or any Lender or any of their respective affiliates,
officers, directors, employees, attorneys or agents for exemplary or punitive
damages in respect of any claim in connection with, arising out of or in any way
related to this Agreement or any of the other Basic Documents, or any of the
transactions contemplated by this Agreement or any of the other Basic Documents.

Section 12. Miscellaneous.
-------------

12.01 Waiver. No failure on the part of any Creditor to exercise and
------
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement or any other Basic Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any other Basic Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

Each Obligor irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by any
Creditor relating in any way to this Agreement should be dismissed or stayed by
reason, or pending the resolution, of any action or proceeding commenced by any
Obligor relating, in any way, to this Agreement, whether or not such action or
proceeding by such Obligor was commenced prior to the commencement of the action
or proceeding by such Creditor. To the fullest extent permitted by applicable
law, the Obligors shall take all measures necessary for any such action or
proceeding commenced by any Creditor to proceed to judgment prior to the entry
of judgment in any such action or proceeding commenced by any Obligor.

12.02 Notices. All notices, requests and other communications
-------
provided for herein and under the Security Documents (including any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including by telecopy) delivered to the intended
recipient at the "Address for Notices" specified below its name

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on the signature pages hereof; or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.

12.03 Expenses, Etc. The Company agrees: (a) to pay or reimburse
-------------
the Arranger and the Administrative Agent for all of their reasonable out-of-
pocket costs and expenses (including the reasonable fees and expenses of Cahill
Gordon & Reindel) in connection with (i) the negotiation, preparation, execution
and delivery of this Agreement and the other Basic Documents and the extension
of credit hereunder and (ii) the negotiation or preparation of any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Basic Documents (whether or not consummated or effective); (b) to pay or
reimburse each of the Lenders and the Administrative Agent for all reasonable
out-of-pocket costs and expenses of the Lenders and the Administrative Agent
(including the reasonable fees and expenses of legal counsel) in connection with
(i) any Default and any enforcement or collection proceedings resulting
therefrom, including all manner of participation in or other involvement with
(x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 12.03; and (c) to pay or reimburse each of the
Lenders and the Administrative Agent for all transfer or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Basic Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Basic Document or any other document referred to therein.

The Obligors, jointly and severally, hereby agree to indemnify each
Creditor and their respective directors, trustees, officers, employees,
attorneys and agents (each, an "Indemnitee") from, and hold each of them
----------
harmless against, any and all Losses incurred by any of them (including any and
all Losses incurred by the Administrative Agent or the Arranger to any Lender,
whether or not the Administrative Agent, the Arranger or any Lender is a party
thereto) directly or indirectly arising out of or by reason

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of or relating to the negotiation, execution, delivery, performance,
administration or enforcement of this Agreement or any of the other Basic
Documents, any of the transactions contemplated by the Basic Documents, any
breach by any Obligor of any representation, warranty, covenant or other
agreement contained in any of the Basic Documents, the use or proposed use of
any of the Loans or Letters of Credit, any and all (subject to the terms hereof)
deductions and charges imposed on the Administrative Agent, the Issuing Lender
or any Lender in respect of any Letter of Credit or any actual or proposed use
by the Company or any of its Subsidiaries of the proceeds of any of the
extensions of credit hereunder or the use of any collateral security for the
Loans (including the exercise by the Administrative Agent or any Lender of the
rights and remedies or any power of attorney with respect thereto and any action
or inaction in respect thereof) (but excluding any such Losses to the extent
determined by a court of competent jurisdiction in a final and nonappealable
judgment to have resulted from the gross negligence or bad faith of the
Indemnitee). Without limiting the generality of the foregoing, the Obligors,
jointly and severally, will (x) indemnify the Administrative Agent for any
payments that the Administrative Agent is required to make under any indemnity
issued to any Lender referred to in Section 4.01(c) of the Security Agreement,
or to any bank referred to in Section 4.02 of the Security Agreement to which
remittances in respect of Accounts, as defined therein, are to be made and (y)
indemnify each Creditor and each other Indemnitee from, and hold each Creditor
harmless against, any Losses described in the preceding sentence (but excluding,
as provided in the preceding sentence, any Loss to the extent determined by a
court of competent jurisdiction in a final and nonappealable judgment to have
resulted from the gross negligence or bad faith of such Indemnitee) arising
under any Environmental Law as a result of (A) the past, present or future
operations of the Company or any of its Subsidiaries (or any predecessor in
interest to the Company or any of its Subsidiaries), (B) the past, present or
future condition of any site or facility owned, operated or leased at any time
by the Company or any of its Subsidiaries (or any such predecessor in interest),
or (C) any Release or threatened Release of any Hazardous Materials at or from
any such site or facility, including any such Release or threatened Release that
shall occur during any period when any Creditor shall be in possession of any
such site or facility following the exercise by such Creditor of any of its
rights and remedies hereunder or under any of the Security Documents.
Notwithstanding anything to the contrary contained herein or elsewhere, no
Obligor shall have any obligation hereunder with respect to indemnified
liabilities of any Creditor arising from

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legal proceedings commenced against any Creditor by any other Creditor.

To the extent that the undertaking to indemnify and hold harmless set
forth in this Section 12.03 is unenforceable because it is violative of any law
or public policy or otherwise, the Obligors, jointly and severally, shall
contribute the maximum portion that each of them is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all indemnified
liabilities incurred by any of the Persons indemnified hereunder.

The Obligors also agree that no Indemnitee shall have any liability
(whether direct or indirect, in contract or tort or otherwise) for any Losses to
any Obligor or any Obligor's security holders or creditors resulting from,
arising out of, in any way related to or by reason of any matter referred to in
the second preceding paragraph of this Section 12.03, except to the extent that
any Loss is determined by a court of competent jurisdiction in a final
nonappealable judgment to have resulted from the gross negligence or bad faith
of such Indemnitee.

In the event that any Indemnitee is requested or required to appear as
a witness in any Proceeding brought by or on behalf of or against any Obligor or
any affiliate of any Obligor in which such Indemnitee is not named as a
defendant, the Obligors, jointly and severally, agree to reimburse each
Indemnitee for all reasonable out-of-pocket expenses and all reasonable
allocable costs of in-house legal counsel incurred by each Indemnitee in
connection with such Indemnitee's appearing and preparing to appear as such a
witness, including the reasonable fees and disbursements of each Indemnitee's
legal counsel.

The Obligors agree that, without the prior written consent of the
Administrative Agent, the Arranger and the Majority Lenders, no Obligor will
settle, compromise or consent to the entry of any judgment in any pending or
threatened Proceeding in respect of which indemnification could be sought under
the indemnification provisions of this Section 12.03 (whether or not any
Indemnitee is an actual or potential party to such Proceeding), unless such
settlement, compromise or consent includes an unconditional written release
reasonably satisfactory to the Administrative Agent, the Arranger and the
Majority Lenders of each Indemnitee from all liability arising out of such
Proceeding and does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Indemnitee and does not
involve any payment of money or other

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value by any Indemnitee or any injunctive relief or factual findings or
stipulations binding on any Indemnitee.

12.04 Amendments, Etc. Except as otherwise expressly provided in
---------------
this Agreement, any provision of this Agreement may be modified or supplemented
by an instrument in writing signed by the Obligors and the Majority Lenders, or
by the Obligors and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Administrative Agent acting with the consent of the
Majority Lenders; provided, however, that: (a) no modification, supplement or
-------- -------
waiver shall, unless by an instrument signed by all of the Lenders or by the
Administrative Agent acting with the consent of all of the Lenders:
(i) increase (it being understood that assignments of Commitments effected in
accordance with this Agreement are not within the ambit of this clause) or
extend the final maturity of any of the Commitments (it being understood that
the extension of the Revolving Credit Commitment Termination Date pursuant to
Section 2.01(a) is not within the ambit of this clause and that any waiver or
modification of any condition precedent, covenant, Event of Default or Default
shall not constitute a change in the terms of any Commitment of any Lender) or
extend the time or waive any requirement for the reduction or termination of any
of the Commitments, (ii) extend the date fixed for any Amortization Payment or
the scheduled payment of interest on any Loan, the Reimbursement Obligations or
any fee hereunder, (iii) reduce the amount of any such Amortization Payment or
any interest payment or fee, (iv) reduce the rate at which interest is payable
thereon (other than as a result of waiving the applicability of any post-default
increase in interest rates) or any fee is payable hereunder, (v) alter the terms
of this Section 12.04 or Section 4.07, 5 or 11.09, (vi) modify the definition of
the term "Majority Lenders", "Supermajority Lenders," "Supermajority Lenders of
the Affected Class", "Majority Revolving Credit Lenders", "Majority Tranche A
Term Lenders" or "Majority Tranche B Term Lenders", or modify in any other
manner the number or percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
(vii) release any Guarantor from its obligations under Section 6, (viii) alter
any provision of this Agreement or any other Basic Document requiring the
consent of all Lenders or (ix) consent to the assignment or transfer by any
Obligor of any of its rights and obligations under any Basic Document; (b) no
modification, supplement or waiver shall, unless by an instrument signed by the
Supermajority Lenders of the Affected Class or by the Administrative Agent
acting with the consent of the Supermajority Lenders of the Affected Class
change the application of mandatory

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prepayments hereunder as between the Tranche A Term Loans and the Tranche B Term
Loans or the order in which any such prepayment is applied to the Tranche A Term
Loans or Tranche B Term Loans (although any required prepayment pursuant to
Section 2.10(b)(iv) may be waived or amended by the Supermajority Lenders and
each other required prepayment may be amended or waived by the Majority
Lenders); and (c) any amendment, modification or supplement of Section 11 which
affects the Administrative Agent or the Arranger in their respective capacities
as such shall require the consent of the Administrative Agent and the Arranger
and any amendment, modification or supplement of Section 2.01(e) or the
definitions of "Swing Loans", "Swing Loans Commitment", "Swing Loans Maturity
Date" or "Swing Loans Note" shall require the consent of Wells Fargo. In the
case of any waiver effected in accordance with this Section 12.04, the Obligors
and the Creditors shall be restored to their former position and rights under
each Basic Document, and any Event of Default or Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Event of Default or Default, or impair any right consequent
thereon. Any amendment, termination, waiver or consent effected in accordance
with this Section 12.04 shall be binding upon each holder of the Notes at the
time outstanding, each future holder of the Notes and, if signed by the
Obligors, on the Obligors.

Anything in this Agreement to the contrary notwithstanding, if:

(i) at a time when the conditions precedent set forth in Section 7 to
any Loan hereunder are, in the opinion of (a) with respect to the initial
Loans, the Majority Lenders, or (b) with respect to any Revolving Credit
Loan occurring after the Closing Date, the Majority Revolving Credit
Lenders, satisfied, any Lender shall fail to fulfill its obligations to
make such Loan, or

(ii) any Revolving Credit Lender shall fail to pay to the
Administrative Agent for the account of the Issuing Lender the amount of
such Lender's Revolving Credit Commitment Percentage of any payment under a
Letter of Credit pursuant to Section 2.03(e),

then, for so long as such failure shall continue, such Lender shall (unless the
Majority Lenders, determined as if such Lender were not a "Lender" hereunder,
shall otherwise consent in writing) be deemed for all purposes relating to
amendments, modifications, waivers or consents under this Agreement or any of
the other Basic Documents (including under this Section 12.04 and

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under Section 11.09) to have no Loans, Letter of Credit Liabilities or
Commitments, shall not be treated as a "Lender" hereunder when performing the
computation of Majority Lenders, Supermajority Lenders, Supermajority Lenders of
the Affected Class, Majority Revolving Credit Lenders, Majority Tranche A Term
Lenders or Majority Tranche B Term Lenders and shall have no rights under the
preceding paragraph of this Section 12.04; provided, however, that any action
-------- -------
taken by the other Lenders with respect to the matters referred to in clause (a)
of the preceding paragraph shall not be effective as against such Lender.

12.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.

12.06 Assignments and Participations.
------------------------------

(a) No Obligor may assign its respective rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent.

(b) Each Lender may assign to any Eligible Person any of its Loans,
its Notes, its Letter of Credit Interests and its Commitments (but only with the
consent of the Administrative Agent, which consent shall not be unreasonably
withheld or delayed, and in the case of the Revolving Credit Commitments, the
Issuing Lender); provided, however, that (i) no such consent by the
-------- -------
Administrative Agent shall be required in the case of any assignment to another
Lender or to any parent of a Lender or any Lender's Affiliate (in which case,
the assignee and assignor Lenders shall give notice of the assignment to the
Administrative Agent); (ii) except with respect to any assignment pursuant to
Section 5.08, any such partial assignment shall be in an aggregate amount at
least equal to $5,000,000; (iii) each such assignment by a Lender of its
Revolving Credit Loans, Revolving Credit Note, Letter of Credit Interests or
Revolving Credit Commitment shall be made in such manner so that the same
portion of its Revolving Credit Loans, Revolving Credit Note, Letter of Credit
Interests and Revolving Credit Commitment is assigned to the respective
assignee; (iv) in no event may any such assignment be made to the Company or any
of its Affiliates. Upon execution and delivery by the assignee to the Company
and the Administrative Agent of an instrument in writing substantially in the
form of Exhibit G, and upon consent thereto by the Administrative Agent and the
---------
Issuing Lender to the extent required above, the assignee shall have, to the
extent of such assignment (unless otherwise provided in such assignment with the

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consent of the Administrative Agent), the obligations, rights and benefits of a
Lender hereunder holding the Commitment(s), Loans (or portions thereof) and
Letter of Credit Interests assigned to it (in addition to the Commitment(s),
Letter of Credit Interests and Loans, if any, theretofore held by such assignee)
and the assigning Lender shall, to the extent of such assignment, be released
from the Commitment(s) (or portion(s) thereof) so assigned.

(c) A Lender may sell or agree to sell to one or more other Eligible
Persons a participation in all or any part of any Loans and Letter of Credit
Interests held by it, or in its Commitments, in which event each purchaser of a
participation (a "Participant") shall be entitled to the rights and benefits of
-----------
the provisions of Section 5 (provided, however, that no Participant shall be
-------- -------
entitled to receive any greater amount pursuant to Section 5 than the transferor
Lender would have been entitled to receive in respect of the participation
effected by such transferor Lender had no participation occurred) with respect
to its participation in such Loans, Letter of Credit Interests and Commitments
as if (and the Company shall be directly obligated to such Participant under
such provisions as if) such Participant were a "Lender" for purposes of said
Section, but, except as otherwise provided in Section 4.07(c), shall not have
any other rights or benefits under this Agreement or any Note or any other Loan
Document (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by such Lender in
favor of the Participant). All amounts payable by the Company to any Lender
under Section 5 in respect of Loans, Letter of Credit Interests and its
Commitments, shall be determined as if such Lender had not sold or agreed to
sell any participation in such Loans, Letter of Credit Interests and
Commitments, and as if such Lender were funding each of such Loan, Letter of
Credit Interests and Commitments in the same way that it is funding the portion
of such Loan, Letter of Credit Interests and Commitments in which no
participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document, except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the final maturity, or extend the
time or waive any requirement for the reduction or termination, of such Lender's
related Commitment (it being understood that no Lender shall agree that an
extension pursuant to Section 2.01(a) of the Revolving Credit Commitment
Termination Date or that a waiver of any condition precedent, covenant or Event
of Default or Default requires such consent), (ii) extend the date fixed for

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any Amortization Payment or interest on the related Loan or Loans or
Reimbursement Obligations or any portion of any fee hereunder payable to the
Participant (through the subject Lender), (iii) reduce the amount of any such
payment of principal, (iv) reduce the rate at which interest is payable thereon
(other than as a result of waiving applicability of any post-default increase in
interest rates), or any fee hereunder payable to the Participant (through the
subject Lender), to a level below the rate at which the Participant is entitled
to receive such interest or fee, or (v) release all or substantially all of the
collateral securing the Obligations.

(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.06, any Lender may assign and pledge
all or any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall release the assigning
Lender from its obligations hereunder.

(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants)
subject, however, to the provisions of Section 12.12(b). In addition, each of
the Administrative Agent and the Arranger may furnish any information concerning
any Obligor in the Administrative Agent's or the Arranger's possession to any
Affiliate of the Administrative Agent or the Arranger. The Obligors shall
assist any Lender in effectuating any assignment or participation pursuant to
this Section 12.06 (including during syndication) in whatever manner such Lender
reasonably deems necessary, including the participation in meetings with
prospective transferees.

(f) Anything in this Section 12.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Company or any of its Affiliates or
Subsidiaries without the prior written consent of each Lender.

12.07 Survival. The obligations of the Company under Sections 5.01,
--------
5.05, 5.06, 5.07 and 12.03, the obligations of each Guarantor under
Section 6.03, and the obligations of the Lenders under Section 11.05, shall
survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments and, in the case of any Lender that may assign
any interest in its Commitments, Loans or Letter of Credit Interest hereunder,
shall survive the making of such assignment,

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notwithstanding that such assigning Lender may cease to be a "Lender" hereunder.
In addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit (whether by means of a Loan or a Letter of
Credit), herein or pursuant hereto shall survive the making of such
representation and warranty, and no Lender shall be deemed to have waived, by
reason of making any extension of credit hereunder (whether by means of a Loan
or a Letter of Credit), any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Lender or the Administrative Agent may have had notice
or knowledge or reason to believe that such representation or warranty was false
or misleading at the time such extension of credit was made.

12.08 Captions. The table of contents and captions and section
--------
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.

12.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

12.10 Governing Law; Submission to Jurisdiction; Etc. Each Basic
----------------------------------------------
Document shall be governed by, and construed in accordance with, the law of the
State of New York, without regard to the principles of conflicts of laws thereof
(except in the case of the other Basic Documents, to the extent otherwise
expressly stated therein). Each Obligor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby and agrees
to be bound by any judgment rendered thereby in connection with any Proceeding
relating to any Basic Document. Each Obligor hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. Each Obligor further irrevocably consents to
the service of process out of any of the aforementioned courts in any such
Proceeding by the mailing of copies thereof by

<PAGE>

-142-

registered or certified mail, postage prepaid, to such Obligor at its address
for notices pursuant to Section 12.02, such service to become effective 30 days
after such mailing. Each Obligor designates and appoints Prentice Hall and such
other persons as may hereafter be selected by the Obligors irrevocably agreeing
in writing to serve, as its and such Obligor's agent to receive on such
Obligor's behalf, service of all process in any Proceedings in any such court,
such service being hereby acknowledged by each Obligor to be effective and
binding service in every respect. A copy of such process so served shall be
mailed by registered mail to the Obligor so served at its address provided in
Section 12.02, except that unless otherwise provided by applicable law, any
failure to mail such copy shall not affect the validity of service of process.
If any agent appointed by any Obligor refuses to receive and forward such
service, such Obligor hereby agrees that service upon it by mail shall
constitute sufficient notice. Nothing herein shall affect the right of any
Creditor to serve process in any other manner permitted by law or to commence
proceedings or otherwise proceed against any Obligor in any other jurisdiction.

12.11 Waivers. (a) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
-------
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER BASIC
DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. The scope
of this waiver is intended to be all-encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Each party hereto acknowledges that
this waiver is a material inducement to enter into a business relationship, that
each has already relied on the waiver in entering into this Agreement, and that
each will continue to rely on the waiver in their related future dealings. Each
party hereto further warrants and represents that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS OR
REPLACEMENTS TO THIS AGREEMENT, THE OTHER BASIC DOCUMENTS, OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR LETTERS OF CREDIT. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.

(b) Each Obligor waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover any

<PAGE>

-143-

special, exemplary, punitive or consequential damages from any Creditor in any
Proceeding in connection with, arising out of, or in any way related to the
transactions contemplated herein or in any other Basic Document.

12.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------

(a) Each of the Company and each Parent Guarantor acknowledges that
from time to time financial advisory, investment banking and other services may
be offered or provided to the Company, either Parent Guarantor or one or more of
their Subsidiaries (in connection with this Agreement or otherwise) by any
Creditor or by one or more subsidiaries or affiliates of such Creditor and each
of the Company and each Parent Guarantor hereby authorizes each Creditor to
share any information delivered to such Lender by the Company, either Parent
Guarantor and their Subsidiaries pursuant to this Agreement, or in connection
with the decision of such Creditor to enter into this Agreement, to any such
subsidiary or affiliate, it being understood that any such subsidiary or
affiliate receiving such information shall be bound by the provisions of
paragraph (b) below as if it were a Lender hereunder. Such authorization shall
survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments.

(b) Each Creditor agrees (on behalf of itself and each of its
affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with its customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by either Parent Guarantor or the Company pursuant to this
Agreement that is identified by such Person as being confidential at the time
the same is delivered to the Creditors; provided, however, that nothing herein
-------- -------
shall limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any of the
Creditors, (iii) to bank examiners, auditors or accountants or to any other
regulatory agency or body with proper authority (including non-governmental
regulatory agencies or bodies), (iv) to any Creditor, (v) in connection with any
litigation to which any one or more of the Creditors is a party, (vi) to a
subsidiary or affiliate of any Creditor as provided in paragraph (a) above or
(vii) to any assignee or participant (or prospective assignee or participant) so
long as such assignee or participant (or prospective assignee or participant)
first executes and delivers to the respective Lender a Confidentiality

<PAGE>

-144-

Agreement substantially in the form of Exhibit F (or executes and delivers to
---------
such Lender an acknowledgement to the effect that it is bound by the provisions
of this Section 12.12(b)); provided, further, that in no event shall any
-------- -------
Creditor be obligated or required to return any materials furnished by either
Parent Guarantor or the Company. The obligations of any assignee that has
executed a Confidentiality Agreement in the form of Exhibit F shall be
---------
superseded by this Section 12.12 upon the date upon which such assignee becomes
a Lender hereunder pursuant to Section 12.06(b).

12.13 Independence of Representations, Warranties and Covenants. The
---------------------------------------------------------
representations, warranties and covenants contained herein shall be independent
of each other and no exception to any representation, warranty or covenant shall
be deemed to be an exception to any other representation, warranty or covenant
contained herein unless expressly provided, nor shall any such exception be
deemed to permit any action or omission that would be in contravention of
applicable law.

12.14 Severability; Modification to Conform to Law. It is the
--------------------------------------------
intention of the parties that this Agreement be enforceable to the fullest
extent permissible under applicable law, but that the unenforceability (or
modification to conform to such law) of any provision or provisions hereof shall
not render unenforceable, or impair, the remainder hereof. If any provision of
this Agreement shall be held invalid or unenforceable in whole or in part in any
jurisdiction, this Agreement shall, as to such jurisdiction, be deemed amended
to modify or delete, as necessary, the offending provision or provisions and to
alter the bounds thereof in order to render it or them valid and enforceable to
the maximum extent permitted by applicable law, without in any manner affecting
the validity or enforceability of such provision or provisions in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.

12.15 [Intentionally Omitted]

12.16 Prior Understandings. This Agreement and the other Basic
--------------------
Documents supersede all prior and contemporaneous understandings and agreements,
whether written or oral, among the parties hereto relating to the transactions
provided for herein and therein, except that the following shall continue to
remain in effect: (a) the Commitment Letter (other than (A) the Term Sheet (as
defined in the Commitment Letter) and (B) the commitments of Merrill Lynch
thereunder), (b) the Fee Letter and (c) the Administrative Agent's Fee Letter.

<PAGE>

-145-

[Signature Pages Follow]

<PAGE>

-146-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.

PINNACLE BRANDS, INC.
GRAND SLAM ACQUISITION CORP.
GSAC HOLDINGS, INC.
MLM ACQUISITION CORP.
DONRUSS TRADING CARD COMPANY

By:
------------------------------
Name: John S. Worth, Sr.
Title: Sr. Vice President
and Secretary

Address for Notices:

924 Avenue J East
Grand Prairie, Texas 75050

Attention: Chief Executive Officer

Telecopier No.: (214) 601-7095

Telephone No.: (214) 601-7000

With a copy to:

Joel I. Greenberg, Esq.
Kaye, Scholer, Fierman,
Hayes & Handler
425 Park Avenue
New York, New York 10023

<PAGE>

-147-

LENDERS
-------

MERRILL LYNCH CAPITAL CORPORATION

By:
----------------------------
Name:
Title:

Lending Office for all Loans:
World Financial Center
c/o Merrill Lynch & Co.
North Tower - 7th Floor
250 Vesey Street
New York, New York 10281-1307

Address for Notices:
World Financial Center
c/o Merrill Lynch & Co.
North Tower - 7th Floor
250 Vesey Street
New York, New York 10281-1307

Attention:

Telecopier No.:

Telephone No.:

<PAGE>

-148-

WELLS FARGO BANK, N.A.,
as Administrative Agent

By:
------------------------------
Name:
Title: Managing Director

Address for Notices to
as Agent:

Attention:

Telecopier No.:

Telephone No.:

<PAGE>

Exhibit A-1
-----------

[Form of Revolving Credit Note]

PROMISSORY NOTE

$_______________ ____________
New York, New York

FOR VALUE RECEIVED, PINNACLE BRANDS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to the order of __________________ (the
-------
"Lender"), for the account of its Applicable Lending Office provided for by the
------
Credit Agreement referred to below, at the Principal Office of the
Administrative Agent, the principal sum of _______________ Dollars (or such
lesser amount as shall equal the aggregate unpaid principal amount of the
Revolving Credit Loans made by the Lender to the Company under the Credit
Agreement), in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the
Credit Agreement, and to pay interest on the unpaid principal amount of each
such Revolving Credit Loan, at such office, in like money and funds, for the
period commencing on the date of such Revolving Credit Loan until such Revolving
Credit Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.

The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Revolving Credit Loan made by the Lender to the Company,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof; provided,
--------
however, that the failure of the Lender to make any such recordation or
- -------
endorsement shall not affect the obligations of the Company to make a payment
when due of any amount owing under the Credit Agreement or hereunder.

This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of May , 1996 (as modified and supplemented and in
effect from time to time, the "Credit Agreement") between the Company, Grand
----------------
Slam Acquisition Corp., GSAC Holdings, Inc., MLM Acquisition Corp., the lenders
named therein, Merrill Lynch & Co., as arranger and documentation agent, and
Wells Fargo Bank, N.A., as administrative and collateral agent, and evidences
Revolving Credit Loans made by the Lender thereunder. Terms used but not
defined in this Note have the respective meanings assigned to them in the Credit
Agreement.

<PAGE>

-2-

The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.

Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.

This Note shall be governed by, and construed in accordance with, the
law of the State of New York.

PINNACLE BRANDS, INC.

By: _________________________
Name:
Title:

<PAGE>

-3-

SCHEDULE OF REVOLVING CREDIT LOANS

This Note evidences Revolving Credit Loans made, Continued or
Converted under the within-described Credit Agreement to the Company, on the
dates, in the principal amounts, of the Types, bearing interest at the rates and
having Interest Periods (if applicable) of the durations set forth below,
subject to the payments, Continuations, Conversions and prepayments of principal
set forth below:

Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
--------- ------ ---- -------- -------- --------- ------ --------

<PAGE>

Exhibit A-2
-----------

[Form of Tranche A Term Loan Note]

PROMISSORY NOTE

$_______________ ____________
New York, New York

FOR VALUE RECEIVED, PINNACLE BRANDS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to the order of __________________ (the
-------
"Lender"), for the account of its Applicable Lending Office provided for by the
------
Credit Agreement referred to below, at the Principal Office of the
Administrative Agent, the principal sum of _______________ Dollars (or such
lesser amount as shall equal the unpaid principal amount of the Tranche A Term
Loan made by the Lender to the Company under the Credit Agreement), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of such Tranche A Term Loan, at such
office, in like money and funds, for the period commencing on the date of such
Tranche A Term Loan until such Tranche A Term Loan shall be paid in full, at the
rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Tranche A Term Loan made by the Lender to the Company,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof; provided,
--------
however, that the failure of the Lender to make any such recordation or
- -------
endorsement shall not affect the obligations of the Company to make a payment
when due of any amount owing under the Credit Agreement or hereunder.

This Note is one of the Tranche A Term Loan Notes referred to in the
Credit Agreement dated as of May , 1996 (as modified and supplemented and in
effect from time to time, the "Credit Agreement") between the Company, Grand
----------------
Slam Acquisition Corp., GSAC Holdings, Inc., MLM Acquisition Corp., the lenders
named therein, Merrill Lynch & Co., as arranger and documentation agent, and
Wells Fargo Bank, N.A., as administrative and collateral agent, and evidences
the Tranche A Term Loan made by the Lender thereunder. Terms used but not
defined in this Note have the respective meanings assigned to them in the Credit
Agreement.

<PAGE>

-2-

The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Tranche A
Term Loans upon the terms and conditions specified therein.

Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.

This Note shall be governed by, and construed in accordance with, the
law of the State of New York.

PINNACLE BRANDS, INC.

By: _________________________
Name:
Title:

<PAGE>

-3-

SCHEDULE OF TRANCHE A TERM LOANS

This Note evidences Tranche A Term Loans made, Continued or Converted
under the within-described Credit Agreement to the Company, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:

<PAGE>

Exhibit A-3
-----------

[Form of Tranche B Term Loan Note]

PROMISSORY NOTE

$_______________ ____________
New York, New York

FOR VALUE RECEIVED, PINNACLE BRANDS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to the order of __________________ (the
-------
"Lender"), for the account of its Applicable Lending Office provided for by the
------
Credit Agreement referred to below, at the Principal Office of the
Administrative Agent, the principal sum of _______________ Dollars (or such
lesser amount as shall equal the unpaid principal amount of the Tranche B Term
Loan made by the Lender to the Company under the Credit Agreement), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of such Tranche B Term Loan, at such
office, in like money and funds, for the period commencing on the date of such
Tranche B Term Loan until such Tranche B Term Loan shall be paid in full, at the
rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Tranche B Term Loan made by the Lender to the Company,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof; provided,
--------
however, that the failure of the Lender to make any such recordation or
- -------
endorsement shall not affect the obligations of the Company to make a payment
when due of any amount owing under the Credit Agreement or hereunder.

This Note is one of the Tranche B Term Loan Notes referred to in the
Credit Agreement dated as of May , 1996 (as modified and supplemented and in
effect from time to time, the "Credit Agreement") between the Company, Grand
----------------
Slam Acquisition Corp., GSAC Holdings, Inc., MLM Acquisition Corp., the lenders
named therein, Merrill Lynch & Co., as arranger and documentation agent, and
Wells Fargo Bank, N.A., as administrative and collateral agent, and evidences
Tranche B Term Loans made by the Lender thereunder. Terms used but not defined
in this Note have the respective meanings assigned to them in the Credit
Agreement.

The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events

<PAGE>

-2-

and for prepayments of Tranche B Term Loans upon the terms and conditions
specified therein.

Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.

This Note shall be governed by, and construed in accordance with, the
law of the State of New York.

PINNACLE BRANDS, INC.

By: _________________________
Name:
Title:

<PAGE>

-3-

SCHEDULE OF TRANCHE B TERM LOANS

This Note evidences Tranche B Term Loans made, Continued or Converted
under the within-described Credit Agreement to the Company, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:

<PAGE>

Exhibit F
---------

[Form of Confidentiality Agreement]

CONFIDENTIALITY AGREEMENT

[Date]

[Insert Name and
Address of Prospective
Participant or Assignee]

Re: Credit Agreement dated as of May 29, 1996 (the "Credit
------
Agreement"), between Pinnacle Brands, Inc. (the
---------
"Company"), Grand Slam Acquisition Corp., GSAC
-------
Holdings, Inc., MLM Acquisition Corp., Donruss Trading
Card Company, the lenders named therein, Merrill Lynch
& Co., as arranger and syndication agent, Wells Fargo
Bank, N.A., as administrative and collateral agent, and
The Bank of New York, as documentation agent.

Dear Ladies and Gentlemen:

As a Lender party to the Credit Agreement, we have agreed with the
Company pursuant to Section 12.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all
non-public information identified by the Company as being confidential at the
time the same is delivered to us pursuant to the Credit Agreement.

As provided in said Section 12.12, we are permitted to provide you, as
a prospective [holder of a participation in the Loans and Letter of Credit
Interests (as defined in the Credit Agreement)] [assignee Lender], with certain
of such non-public information subject to the execution and delivery by you,
prior to receiving such non-public information, of a Confidentiality Agreement
in this form. Such information will not be made available to you until your
execution and return to us of this Confidentiality Agreement.

Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates, directors, officers, employees and
representatives and for the benefit of us and each Obligor) that (A) such
information will not be used by you except in connection with the proposed
[participation] [assignment] mentioned above and (B) you shall

<PAGE>

-2-

use reasonable precautions, in accordance with your customary procedures for
handling confidential information and in accordance with safe and sound banking
practices, to keep such information confidential; provided, however, that
-------- -------
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to your
counsel or to counsel for any Creditors, (iii) to bank examiners, auditors or
accountants, (iv) to any Creditor, (v) in connection with any litigation to
which you or any one or more of the Creditors is a party or (vi) to a subsidiary
or affiliate of yours as provided in Section 12.12(a) of the Credit Agreement.

Your obligations under this Confidentiality Agreement shall be
superseded by Section 12.12 of the Credit Agreement on the date upon which you
become a Lender under the Credit Agreement pursuant to Section 12.06(b) thereof.

Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.

Very truly yours,

[INSERT NAME OF LENDER]

By:
--------------------------
Name:
Title:

The foregoing is agreed to
as of the date of this letter.

[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]

By:
--------------------------------
Name:
Title:

<PAGE>

Exhibit G
---------

[Form of Notice of Assignment]

NOTICE OF ASSIGNMENT

[Date]

Pinnacle Brands, Inc.
924 Avenue J East
Grand Prairie, Texas 75050

Attention: CEO

Wells Fargo Bank, N.A.
3535 Lincoln Plaza
500 North Akard
Dallas, TX 75201

Attention: [Mary Jo Hoch]

Re: Credit Agreement dated as of May 29, 1996 (the "Credit
------
Agreement"), between Pinnacle Brands, Inc. (the "Company"),
--------- -------
Grand Slam Acquisition Corp., GSAC Holdings, Inc., MLM
Acquisition Corp., Donruss Trading Card Company, the lenders
named therein, Merrill Lynch & Co., as arranger and
syndication agent, Wells Fargo Bank, N.A., as administrative
and collateral agent, and The Bank of New York, as
documentation agent.

Dear Ladies and Gentlemen:

We hereby give notice that, effective as of the date hereof, [Name of
Assignor] (the "Assignor") has assigned its rights and obligations with respect
--------
to % (representing $_____________) of the Assignor's outstanding [[Revolving
----
Credit] [Tranche A Term Loan] [Tranche B Term Loan] Commitment and] [[Revolving
Credit] [Tranche A Term] [Tranche B Term] Loans] (such interest in such rights
and obligations being hereinafter referred to as the "Assigned Interest") under
-----------------
the Credit Agreement to [Name of Assignee] (the "Assignee"). The Assignee
--------
hereby agrees (i) to become a "Lender" pursuant to Section 12.06(b) of the
Credit Agreement (if not already a Lender under the Credit Agreement) and (ii)
agrees to assume all the obligations of the Assignor thereunder with respect to
the Assigned Interest.

The address for notices, lending office(s) and payment instructions
for the Assignee are as follows:

<PAGE>

-2-

Address for Notices:

----------------------

Attention:
Telephone:
Telecopier:

Lending Office for Base Rate Loans:

----------------------

Lending Office for Loans other than Base Rate Loans:

----------------------

Payment Instructions:

----------------------

Please sign and return the enclosed copy of this letter to the
undersigned to indicate your receipt hereof, and your consent to or notice of
(as applicable) the above-mentioned assignment and assumption, and your
agreement to the release of the Assignor from its obligations under the Credit
Agreement with respect to the Assigned Interest. As a condition to the
effectiveness of the above-mentioned assignment and assumption, the Assignee
hereby agrees to pay to the Administrative Agent on the date hereof an
assignment fee of $3,000.

Very truly yours,

[NAME OF ASSIGNOR]

By
----------------------------
Title:

<PAGE>

-3-

[NAME OF ASSIGNEE]

By
----------------------------
Title:

ACKNOWLEDGED OR CONSENTED TO
(AS APPLICABLE):

WELLS FARGO BANK, N.A.,
as Administrative Agent

By
--------------------------
Title:

WELLS FARGO BANK, N.A.,
as Issuing Lender

By
--------------------------
Title:

PINNACLE BRANDS, INC.

By
--------------------------
Title:

<PAGE>

Exhibit A-4
-----------

[Form of Swing Loans Note]

PROMISSORY NOTE

$1,000,000 ____________
New York, New York

FOR VALUE RECEIVED, PINNACLE BRANDS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to Wells Fargo Bank, N.A. (the "Lender"), for
------- ------
the account of its Applicable Lending Office provided for by the Credit
Agreement referred to below, at the Principal Office of the Administrative
Agent, the principal sum of One Million Dollars (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Swing Loans made by the
Lender to the Company under the Credit Agreement), in lawful money of the United
States of America and in immediately available funds, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Swing Loan, at such office, in like money
and funds, for the period commencing on the date of such Swing Loan until such
Swing Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.

The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Swing Loan made by the Lender to the Company, and each
payment made on account of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof; provided,
--------
however, that the failure of the Lender to make any such recordation or
- -------
endorsement shall not affect the obligations of the Company to make a payment
when due of any amount owing under the Credit Agreement or hereunder in respect
of the Swing Loans made by the Lender.

This Note is the Swing Loans Note referred to in the Credit Agreement
dated as of May , 1996 (as modified and supplemented and in effect from time
to time, the "Credit Agreement") between the Company, Grand Slam Acquisition
----------------
Corp., GSAC Holdings, Inc., MLM Acquisition Corp., the lenders named therein,
Merrill Lynch & Co., as arranger and documentation agent, and Wells Fargo Bank,
N.A., as administrative and collateral agent, and evidences Swing Loans made by
the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.

<PAGE>

-2-

The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.

Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.

This Note shall be governed by, and construed in accordance with, the
law of the State of New York.

PINNACLE BRANDS, INC.

By: _________________________
Name:
Title:

<PAGE>

-3-

SCHEDULE OF SWING LOANS

This Note evidences Swing Loans made under the within-described Credit
Agreement to the Company, on the dates, in the principal amounts, and bearing
interest at the Base Rate, subject to the payments and prepayments of principal
set forth below:

Principal Type Interest Unpaid
Date Amount of Rate (Base Amount Principal Notation
Made of Loan Loan Rate Only) Paid Amount Made by
- ---- --------- ---- ---------- ------ --------- --------

<PAGE>

Exhibit B
---------

[Form of Borrowing Base Certificate]

BORROWING BASE CERTIFICATE

Monthly accounting period ended __________, 199_

Reference is made to the Credit Agreement dated as of May 29, 1996 (as
modified and supplemented and in effect from time to time, the "Credit
------
Agreement"), between Pinnacle Brands, Inc. (the "Company"), Grand Slam
- --------- -------
Acquisition Corp., GSAC Holdings, Inc., MLM Acquisition Corp., Donruss Trading
Card Company, the lenders named therein, Merrill Lynch & Co., as arranger and
syndication agent, Wells Fargo Bank, N.A., as administrative and collateral
agent for the Lenders, and The Bank of New York, as documentation agent. Terms
defined in the Credit Agreement are used herein as defined therein.

Pursuant to Section [7.01(c)] [9.01(e)] of the Credit Agreement, the
undersigned, a senior financial officer of the Company, hereby certifies that,
to the best of [his/her] knowledge, attached hereto as Annex 1 is a true and
accurate calculation of the Borrowing Base as at the end of the monthly
accounting period ended ___________, 199_ determined in accordance with the
requirements of the Credit Agreement.

All Inventory covered by this certificate has been produced in
compliance with the minimum wage and overtime requirements of the Fair Labor
Standards Act of 1938, as amended.

IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed as of the __________ day of _________, 199_.

PINNACLE BRANDS, INC.

By:
-----------------------------------------
Name:
Title:

<PAGE>

Annex 1

PINNACLE BRANDS, INC.
BORROWING BASE CERTIFICATE
(OOO'S omitted)

ELIGIBLE RECEIVABLES

Total Beginning Receivables, as of
______________ __, 199_

Add: Sales, __________ __, 199_ $
----------
Less: Cash Receipts, as of _________, __, 199_
Credits
Rebates
Offsets
----------

Total Ending Receivables, as of
______________ __, 199_
----------

Ineligible Receivables:
Receivables not payable in Dollars or
Canadian Dollars
----------
Receivables with more than 45 days
terms (unless owing from Anco,
Toys-R-Us or Sams Wholesale Club
or other substantial account debtor
approved by the Majority Revolving
Credit Lenders)
----------
Receivables over 60 days from due date on
the invoice
----------
Receivables due from subsidiaries & affiliates
----------
Receivables owing from account debtors
located outside the U.S. or Canada without
agreement of the Majority Revolving Credit
Lenders, Letters of Credit or U.S.
Government Insurance
----------
Receivables due from creditors in bankruptcy
proceedings
----------
Receivables from creditors with unsatisfactory
credit standing (as determined by the
Majority Revolving Credit Lenders)
----------
Receivables subject to dispute
----------
Receivables from creditor with any balances
60 days past due unless because of an
unresolved dispute or the goods to be returned
----------
Receivables evidenced by instrument not in
the possession of the Administrative Agent
----------

<PAGE>

-2-

Receivables arising from consignment or
sale or return transactions to the extent
the related Inventory has been returned or
the Company has been notified the goods
are to be returned
----------

Total Eligible Receivables
----------
(Total Ending Receivables less
Total Ineligible Receivables)

80% of Eligible Receivables
----------

ELIGIBLE INVENTORY

Add:
Total Inventory located in U.S. for which
UCC financing statement filed at lower
of cost (weighted average)
or market, as of __________, __, 199_
----------
Total Inventory located in Canada at
lower of cost (weighted average)
or market, __________, __, 199_
----------
(includable amount cannot exceed
$2,500,000)

Less:

Ineligible Inventory
----------

Total Eligible Inventory
----------

50% of Eligible Inventory
----------

<PAGE>

-3-

BORROWING BASE

Add:
80% of Eligible Receivable
----------
50% of Eligible Inventory 1
----------

Total Borrowing Base
----------

*******************************************

Revolving Credit Loan Balance Period Beginning
__________, 199_
----------
advances for period
----------
reductions for period
----------
other adjustments (+/-)
----------
Revolving Credit Loan Balance Period
ending__________, 199_
----------

Total Revolving Credit Loans outstanding
----------

Total Letter of Credit Liabilities outstanding
----------

Total outstanding
----------

*******************************************

Total Borrowing Base

- -----------------

Minus total outstanding
- ----- ----------

Availability (overadvance)
-----------

- --------------------

1 May not represent more than 50% of the Borrowing Base.

<PAGE>

Exhibit C
---------

[Form of Interest Rate Certificate]

INTEREST RATE CERTIFICATE

Fiscal quarter ended _____________, 199_

Reference is made to the Credit Agreement dated as of May 29, 1996 (as
modified and supplemented and in effect from time to time, the "Credit
------
Agreement"), between Pinnacle Brands, Inc. (the "Company"), Grand Slam
- --------- -------
Acquisition Corp., GSAC Holdings, Inc., MLM Acquisition Corp., Donruss Trading
Card Company, the lenders named therein, Merrill Lynch & Co., as arranger and
syndication agent, Wells Fargo Bank, N.A., as administrative and collateral
agent, and The Bank of New York, as documentation agent. Terms defined in the
Credit Agreement are used herein as defined therein.

Pursuant to Section 9.01(f) of the Credit Agreement, each of the
undersigned, hereby certifies that, to the best of [his/her] knowledge, attached
hereto as Annex 1 is a true and accurate calculation of the Leverage Ratio as at
the end of the fiscal quarter ended ___________________, 199_ determined in
accordance with the requirements of the Credit Agreement.

IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed as of the _____________ day of _________, 199_.

PINNACLE BRANDS, INC.

By:
------------------------------------
Name:
Title:

<PAGE>

Exhibit D
---------

[Form of Security Agreement]

SECURITY AGREEMENT

SECURITY AGREEMENT dated as of May __, 1996 between PINNACLE BRANDS,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "Company"); GRAND SLAM ACQUISITION CORP., a corporation
-------
duly organized and validly existing under the laws of the State of Delaware
("GSAC"); GSAC HOLDINGS, INC., a corporation duly organized and validly existing
----
under the laws of the State of Delaware ("GSAC Holdings" and together with GSAC,
-------------
the "Parent Guarantors"); MLM ACQUISITION CORP., a corporation duly organized
-----------------
and validly existing under the laws of the State of Delaware ("MLM"); and WELLS
---
FARGO BANK, N.A., as administrative and collateral agent for the lenders or
other financial institutions or entities party, as lenders, to the Credit
Agreement referred to below (in such capacity, together with its successors in
such capacity, the "Administrative Agent").
--------------------

The Company, GSAC, GSAC Holdings, MLM, certain lenders, Merrill Lynch
Capital Corporation, as Arranger and Syndication Agent, and the Administrative
Agent are parties to a Credit Agreement dated as of the date hereof (as modified
and supplemented and in effect from time to time, the "Credit Agreement"),
----------------
providing, subject to the terms and conditions thereof, for extensions of credit
(by the making of loans and the issuance of letters of credit) to be made by
said lenders to the Company.

To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Debtor (as
hereinafter defined) has agreed to pledge and grant a security interest in the
Collateral (as hereinafter defined) as security for the Secured Obligations (as
so defined). Accordingly, the parties hereto agree as follows:

Section 1. Definitions. Terms defined in the Credit Agreement are
-----------
used herein as defined therein. In addition, as used herein:

"Accounts" shall have the meaning ascribed thereto in Section 3(d)
--------
hereof.

<PAGE>

-2-

"Collateral" shall have the meaning ascribed thereto in Section 3
----------
hereof.

"Collateral Account" shall have the meaning ascribed thereto in
------------------
Section 4.01(a) hereof.

"Copyright Collateral" shall mean all Copyrights, whether now owned or
--------------------
hereafter acquired by any Debtor, including each Copyright identified in Annex 2
-------
hereto.

"Copyrights" shall mean all copyrights, copyright registrations and
----------
applications for copyright registrations, including, without limitation, all
renewals and extensions thereof, the right to recover for all past, present and
future infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.

"Debtor" shall mean each of the Company and the Guarantors.
------

"Documents" shall have the meaning ascribed thereto in Section 3(j)
---------
hereof.

"Equipment" shall have the meaning ascribed thereto in Section 3(h)
---------
hereof.

"Instruments" shall have the meaning ascribed thereto in Section 3(e)
-----------
hereof.

"Intellectual Property" shall mean, collectively, all Copyright
---------------------
Collateral, all Patent Collateral and all Trademark Collateral, together with
(a) all inventions, processes, production methods, proprietary information,
know-how and trade secrets; (b) all licenses or user or other agreements granted
to any Debtor with respect to any of the foregoing, in each case whether now or
hereafter owned or used including, without limitation, the licenses or other
agreements with respect to the Copyright Collateral, the Patent Collateral or
the Trademark Collateral, listed in Annex 5 hereto; (c) all information,
-------
customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, materials standards, processing standards,
performance standards, catalogs, computer and automatic machinery software and
programs; (d) all field repair data, sales data and other information relating
to sales or service of products now or hereafter manufactured; (e) all
accounting information and all media in which or on which any information or
knowledge or data

<PAGE>

-3-

or records may be recorded or stored and all computer programs used for the
compilation or printout of such information, knowledge, records or data; and (f)
all licenses, consents, permits, variances, certifications and approvals of
governmental agencies now or hereafter held by any Debtor; and (g) all causes of
action, claims and warranties now or hereafter owned or acquired by the Debtors
in respect of any of the items listed above.

"Inventory" shall have the meaning ascribed thereto in Section 3(f)
---------
hereof.

"Issuers" shall mean, collectively, the respective corporations
-------
identified beneath the names of the Debtors on Annex 1 hereto under the caption
-------
"Issuer".
------

"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
--------------
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.

"Patent Collateral" shall mean all Patents, whether now owned or
-----------------
hereafter acquired by any Debtor, including each Patent identified in Annex 3
-------
hereto, excluding, however, the Patents identified as "Excluded Patents" on said
Annex 3.
- -------

"Patents" shall mean all patents and patent applications, including,
-------
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect thereto,
including, without limitation, damages and payments for past or future
infringements thereof, the right to sue for past, present and future
infringements thereof, and all rights corresponding thereto throughout the
world.

"Pledged Stock" shall have the meaning ascribed thereto in
-------------
Section 3(a) hereof.

"Secured Obligations" shall mean, collectively, (a) the principal of
-------------------
and interest on the Loans made by the Lenders to, and the Notes held by each
Lender of, the Company and all other amounts from time to time owing to the
Creditors by the Company under the Basic Documents including, without
limitation, all Reimbursement Obligations and interest thereon, (b) all
obligations of the Company arising under any Interest Rate Protection Agreement
between the Company and any Lender, (c) all obligations of the Guarantors under
the Credit Agreement and the

<PAGE>

-4-

other Basic Documents (including, without limitation, in respect of their
Guarantees under Section 6 of the Credit Agreement) and (d) all obligations of
the Debtors to the Creditors hereunder.

"Special Event of Default" shall mean any Event of Default that arises
------------------------
pursuant to Section 10(a), (e), (f) or (g) of the Credit Agreement.

"Stock Collateral" shall mean, collectively, the Collateral described
----------------
in clauses (a) through (c) of Section 3 hereof and the proceeds of and to any
such property and, to the extent related to any such property or such proceeds,
all books, correspondence, credit files, records, invoices and other papers.

"Trademark Collateral" shall mean all Trademarks, whether now owned or
--------------------
hereafter acquired by any Debtor, including each Trademark identified in Annex 4
-------
hereto. Notwithstanding the foregoing, the Trademark Collateral does not and
shall not include any Trademark that would be rendered invalid, abandoned, void
or unenforceable by reason of its being included as part of the Trademark
Collateral.

"Trademarks" shall mean all trade names, trademarks and service marks,
----------
logos, trademark and service mark registrations, and applications for trademark
and service mark registrations, including, without limitation, all renewals of
trademark and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark.

"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.

Section 2. Representations and Warranties. Each Debtor represents
------------------------------
and warrants to the Creditors that:

(a) Such Debtor is the sole beneficial owner of the Collateral in
which it purports to grant a security interest pursuant to Section 3 hereof
and no Lien exists or will exist upon such Collateral at any time (and no
right or option to acquire the same exists in favor of any other Person),
subject to any consent to the disposition of

<PAGE>

-5-

certain Collateral which may be required from a licensor to any licensing
agreement to which any Debtor is a party (including, without limitation,
the Sports Contracts) and except for Liens permitted under Section 9.06 of
the Credit Agreement and except for the pledge and security interest in
favor of the Administrative Agent for the benefit of the Lenders created or
provided for herein, which pledge and security interest shall (upon the
filing of the financing statements delivered by the Company pursuant to
Section 7.01(g) of the Credit Agreement in locations specified by the
Obligors to the Administrative Agent in writing) constitute a first
priority perfected pledge and security interest in and to all of such
Collateral (other than Intellectual Property registered or otherwise
located outside of the United States of America).

(b) The Pledged Stock represented by the certificates identified
under the name of such Debtor in Annex 1 hereto is, and all other Pledged
-------
Stock in which such Debtor shall hereafter grant a security interest
pursuant to Section 3 hereof will be, duly authorized, validly existing,
fully paid and non-assessable and none of such Pledged Stock is or will be
subject to any contractual restriction, or any restriction under the
charter or by-laws of the respective Issuer of such Pledged Stock, upon the
transfer of such Pledged Stock (except for any such restriction contained
herein or in the Credit Agreement).

(c) The Pledged Stock represented by the certificates identified
under the name of such Debtor in Annex 1 hereto constitutes all of the
-------
issued and outstanding shares of capital stock of any class of the Issuers
beneficially owned by such Debtor on the date hereof (whether or not
registered in the name of such Debtor) and said Annex 1 correctly
-------
identifies, as at the date hereof, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such
Pledged Stock and the respective number of shares (and registered owners
thereof) represented by each such certificate.

(d) Annexes 2, 3 and 4 hereto, respectively, set forth under the name
------------------
of such Debtor a complete and correct list of all Copyrights, Patents and
Trademarks owned by such Debtor on the date hereof, which have been
registered or for which an application for registration has been made;
except pursuant to licenses and other user agreements entered into by such
Debtor in the ordinary course of business, that are listed in Annex 5
-------
hereto, on and as of the date hereof (i)

<PAGE>

-6-

such Debtor owns and possesses the right to use, and has done nothing to
authorize or enable any other Person to use, any Copyright, Patent or
Trademark listed in said Annexes 2, 3 and 4, and (ii) all registrations
--------- -------
listed in said Annexes 2, 3 and 4 are valid and in full force and effect;
------------------
except as may be set forth in said Annex 5, such Debtor owns and possesses
-------
the right to use all Copyrights, Patents end Trademarks on and as of the
date hereof.

(e) Annex 5 hereto sets forth a complete and correct list of all
-------
licenses and other user agreements included in the Intellectual Property on
the date hereof.

(f) To such Debtor's knowledge, on and as of the date hereof: (i)
except as set forth in Annex 5 hereto, there is no violation by others of
-------
any right of such Debtor with respect to any Copyright, Patent or Trademark
listed in Annexes 2, 3 and 4 hereto, respectively, under the name of such
------------------
Debtor and (ii) such Debtor is not infringing in any respect upon any
Copyright, Patent or Trademark of any other Person; and no proceedings have
been instituted or are pending against such Debtor or, to such Debtor's
knowledge, threatened, and no claim against such Debtor has been received
by such Debtor, alleging any such violation, except as may be set forth in
said Annex 5.
-------

(g) Any goods now or hereafter produced by such Debtor or any of its
Subsidiaries included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act of 1938,
as amended.

Section 3. Collateral. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations owing by such Debtor, each Debtor hereby pledges and
grants to the Administrative Agent, for the benefit of the Creditors as
hereinafter provided, a security interest in all of such Debtor's right, title
and interest in the following property, whether now owned by such Debtor or
hereafter acquired and whether now existing or hereafter coming into existence
(all being collectively referred to herein as "Collateral"):
----------

(a) the shares of common and/or preferred stock of the Issuers
represented by the certificates identified in Annex 1 hereto under the name
-------
of such Debtor and all other shares of capital stock of whatever class of
the Issuers, now or hereafter owned by such Debtor, in each case together

<PAGE>

-7-

with the certificates evidencing the same (collectively, the "Pledged
-------
Stock");
-----

(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;

(c) without affecting the obligations of such Debtor under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which an Issuer is not the
surviving corporation, all shares of each class of the capital stock of the
successor corporation (unless such successor corporation is such Debtor
itself) formed by or resulting from such consolidation or merger;

(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Debtor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to such Debtor in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to such Debtor under any
guarantee (including a letter of credit) of the purchase price of Inventory
or Equipment sold by such Debtor and all tax refunds (such accounts,
general intangibles and moneys due and to become due being herein called
collectively "Accounts");
--------

(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of such Debtor evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "Instruments");
-----------

(f) all inventory (as defined in the Uniform Commercial Code) of such
Debtor, all goods obtained by such Debtor in exchange for such inventory,
and any products made or processed from such inventory including all
substances,

<PAGE>

-8-

if any, commingled therewith or added thereto (herein collectively called
"Inventory");
---------

(g) all Intellectual Property and all other accounts or general
intangibles (each as defined in the Uniform Commercial Code) not
constituting Intellectual Property or Accounts;

(h) all equipment (as defined in the Uniform Commercial Code) of such
Debtor, including all Motor Vehicles (herein collectively called
"Equipment");
---------

(i) each contract and other agreement of such Debtor relating to the
sale or other disposition of Inventory or Equipment;

(j) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of such Debtor covering, evidencing or representing
Inventory or Equipment (herein collectively called "Documents");
---------

(k) all rights, claims and benefits of such Debtor against any Person
arising out of, relating to or in connection with Inventory or Equipment
purchased by such Debtor, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory or Equipment;

(l) the balance from time to time in the Collateral Account; and

(m) all other tangible and intangible personal property and fixtures
of such Debtor, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of such Debtor described in the
preceding clauses of this Section 3 (including, without limitation, any
proceeds of insurance thereon and all causes of action, claims and
warranties now or hereafter held by any Debtor in respect of any of the
items listed above) and, to the extent related to any property described in
said clauses or such proceeds, products and accessions, all books,
correspondence, credit files, records, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Debtor or any
computer bureau or service company from time to time acting for such
Debtor.

<PAGE>

-9-

Notwithstanding the foregoing, the Collateral does not and shall not include (i)
any contract to which any Debtor is a party which would be rendered void or
unenforceable by reason of its being included as part of the Collateral or which
is not assignable by its terms, unless a consent to the assignment has been
received by such Debtor and/or the Administrative Agent or (ii) any equipment,
proceeds or other related items covered by the security interests granted in
connection with the agreements listed as items [ ] on Schedule 8.11 to
-------------
the Credit Agreement, but only for as long as the inclusion of such equipment,
proceeds or related items in the Collateral is prohibited by such agreements.

Section 4. Cash Proceeds of Collateral.
---------------------------

4.01 Collateral Account.
------------------

(a) There is hereby established with the Administrative Agent a cash
collateral account (the "Collateral Account") in the name and under the control
------------------
of the Administrative Agent into which there shall be deposited from time to
time the cash proceeds of any of the Collateral (including proceeds of
insurance covering the Collateral unless the amount of such Net Available
Proceeds with respect to any single Casualty Event is less than $250,000 in the
aggregate) required to be delivered to the Administrative Agent pursuant hereto
and into which the Debtors may from time to time deposit any additional amounts
that any of them wishes to pledge to the Administrative Agent for the benefit of
the Lenders as additional collateral security hereunder and which, as provided
in Section 2.10(d) or Section 10 of the Credit Agreement, it is required to
pledge as additional collateral security hereunder.

(b) The balance from time to time in the Collateral Account shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied as hereinafter provided. So long as no
Special Event of Default has occurred and is continuing, the Administrative
Agent shall remit the collected balance outstanding to the credit of the
Collateral Account to or upon the order of the respective Debtor as such Debtor
shall from time to time instruct; provided, however, that (i) any amounts
-------- -------
deposited in the Collateral Account in respect of Casualty Events shall be
advanced to the Company in periodic installments with such reasonable conditions
as may be imposed by the Administrative Agent including, but not limited to,
reasonable retentions and lien releases and (ii) any amounts deposited in the
Collateral Account in respect of prepayments or reductions of Loans or
Commitments under Section 2.10 of the

<PAGE>

-10-

Credit Agreement which are to be applied to Eurodollar Loans as provided in the
last sentence of Section 2.10(c) shall be held by the Administrative Agent until
the end of the respective Interest Periods of such Eurodollar Loans at which
time, whether or not a Special Event of Default has occurred, the Administrative
Agent shall cause such monies to be applied to such Eurodollar Loans. However,
at any time following the occurrence and during the continuance of a Special
Event of Default, the Administrative Agent may (and, if instructed by the
Lenders as specified in Section 11.03 of the Credit Agreement, shall) in its (or
their) discretion apply or cause to be applied (subject to collection) the
balance from time to time outstanding to the credit of the Collateral Account to
the payment of the Secured Obligations in the manner specified in Section 5.09
hereof. The balance from time to time in the Collateral Account shall be
subject to withdrawal only as provided herein.

(c) If requested by the Company and agreed to by any Lender that is
an Original Lender, and subject to documentation reasonably satisfactory to the
Administrative Agent and such Lender, the Administrative Agent shall designate
such Lender as a collateral sub-agent for the Administrative Agent in respect of
all or any portion of the Collateral Account.

4.02 Proceeds of Accounts. At any time after the occurrence and
--------------------
during the continuance of an Event of Default, each Debtor shall, upon the
request of the Administrative Agent, instruct all account debtors and other
Persons obligated in respect of all Accounts to make all payments in respect of
the Accounts either (a) directly to the Administrative Agent (by instructing
that such payments be remitted to a post office box which shall be in the name
and under the control of the Administrative Agent) or (b) to one or more other
banks in the United States of America (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Administrative Agent) under arrangements, in form and substance
satisfactory to the Administrative Agent pursuant to which such Debtor shall
have irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to the Administrative
Agent for deposit into the Collateral Account. All payments made to the
Administrative Agent, as provided in the preceding sentence, shall be
immediately deposited in the Collateral Account. In addition to the foregoing,
each Debtor agrees that, if the proceeds of any Collateral hereunder (including
the payments made in respect of Accounts) shall be received by it, such Debtor
shall as promptly as possible deposit such proceeds into the Collateral Account.
Until so deposited,

<PAGE>

-11-

all such proceeds shall be held in trust by such Debtor for and as the property
of the Administrative Agent and shall not be commingled with any other funds or
property of such Debtor.

4.03 Investment of Balance in Collateral Account. Amounts on deposit
-------------------------------------------
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the respective Debtor (or, after the occurrence and during the
continuance of a Default, the Administrative Agent) shall determine, which
Permitted Investments shall be held in the name and be under the control of the
Administrative Agent; provided, however, that (i) at any time after the
-------- -------
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Lenders as specified in Section 11.03 of
the Credit Agreement, shall) in its (or their) discretion at any time and from
time to time elect to liquidate any such Permitted Investments and to apply or
cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 5.09 hereof and (ii) if requested
by the respective Debtor, such Permitted Investments may be held in the name and
under the control of one or more of the Lenders (and in that connection each
Lender, pursuant to Section 11.10 of the Credit Agreement) has agreed that such
Permitted Investments shall be held by such Lender as a collateral sub-agent for
the Administrative Agent hereunder).

4.04 Cover for Letter of Credit Liabilities. Amounts deposited into
--------------------------------------
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 2.10(d) or Section 10 thereof shall be held
by the Administrative Agent in a separate sub-account (designated "Letter of
Credit Liabilities Sub-Account") and all amounts held in such sub-account shall
constitute collateral security first for the Letter of Credit Liabilities
-----
outstanding from time to time and second as collateral security for the other
------
Secured Obligations hereunder.

Section 5. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, the Debtors
hereby jointly and severally agree with each Lender and the Administrative Agent
as follows:

5.01 Delivery and Other Perfection. Each Debtor shall:
-----------------------------

(a) if any of the above-described shares, securities, moneys or
property required to be pledged by such Debtor

<PAGE>

-12-

under clauses (a), (b) and (c) of Section 3 hereof are received by such
Debtor, forthwith either (x) transfer and deliver to the Administrative
Agent such shares or securities so received by such Debtor (together with
the certificates for any such shares and securities duly endorsed in blank
or accompanied by undated stock powers duly executed in blank), all of
which thereafter shall be held by the Administrative Agent, pursuant to the
terms of this Agreement, as part of the Collateral or (y) take such other
action as the Administrative Agent shall deem necessary or appropriate to
duly record the Lien created hereunder in such shares, securities, moneys
or property in said clauses (a), (b) and (c);

(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; provided, however, that so long as no Default shall have occurred
-------- -------
and be continuing, such Debtor may retain for collection in the ordinary
course any Instruments received by such Debtor in the ordinary course of
business and the Administrative Agent shall, promptly upon request of such
Debtor, make appropriate arrangements for making any other Instrument
pledged by such Debtor available to such Debtor for purposes of
presentation, collection or renewal (any such arrangement to be effected,
to the extent deemed appropriate by the Administrative Agent, against trust
receipt or like document);

(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Administrative Agent) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Administrative Agent to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, after the occurrence and during
the continuance of an Event of Default, causing any or all of the Stock
Collateral to be transferred of record into the name of the Administrative
Agent or its nominee (and the Administrative Agent agrees that if any Stock
Collateral is transferred into its name or the name of its nominee, the
Administrative Agent will thereafter promptly give to the respective Debtor
copies of any notices and communications received by it with respect to the
Stock Collateral); provided, however, that notices to account debtors in
-------- -------
respect of any Accounts or Instruments

<PAGE>

-13-

shall be subject to the provisions of clause (i) below;

(d) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark all such material books and records
in such manner as the Administrative Agent may reasonably require in order
to reflect the security interests granted by this Agreement;

(e) furnish to the Administrative Agent from time to time (but,
unless an Event of Default shall have occurred and be continuing, no more
frequently than quarterly) statements and schedules further identifying and
describing the Copyright Collateral, the Patent Collateral and the
Trademark Collateral, respectively, and such other reports in connection
with the Copyright Collateral, the Patent Collateral and the Trademark
Collateral, as the Administrative Agent may reasonably request, all in
reasonable detail;

(f) promptly upon request of the Administrative Agent, following
receipt by the Administrative Agent of any statements, schedules or reports
pursuant to clause (e) above, modify this Agreement by amending Annexes 2,
----------
3 and/or 4 hereto, as the case may be, to include any Copyright, Patent or
----------
Trademark that becomes part of the Collateral under this Agreement;

(g) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral;

(h) upon the occurrence and during the continuance of any Event of
Default, permit representatives of the Administrative Agent to be present
at such Debtor's place of business to receive copies of all communications
and remittances relating to the Collateral, and forward copies of any
notices or communications received by such Debtor with respect to the
Collateral, all in such manner as the Administrative Agent may require; and

(i) upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, except as otherwise
expressly provided herein, promptly notify (and such Debtor hereby
authorizes the Administrative Agent so to notify) each account debtor in
respect of any Accounts or Instruments that such Collateral has been
assigned to the Administrative Agent hereunder, and

<PAGE>

-14-

that any payments due or to become due in respect of such Collateral are to
be made directly to the Administrative Agent.

5.02 Other Financing Statements and Liens. Except as otherwise
------------------------------------
permitted under Section 9.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 11.09 of the Credit Agreement), no Debtor shall
file or suffer to be on file, or authorize or permit to be filed or to be on
file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative Agent is not named as the
sole secured party for the benefit of the Lenders.

5.03 Preservation of Rights. The Administrative Agent shall not be
----------------------
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.

5.04 Special Provisions Relating to Certain Collateral.
-------------------------------------------------

(a) Stock Collateral.
----------------

(1) The Debtors will cause the Pledged Stock to constitute at all
times 100% of the total number of shares of each class of capital stock of each
Issuer then outstanding.

(2) So long as no Event of Default shall have occurred and be
continuing, the Debtors shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein; provided, however, that the Debtors jointly and severally agree that
-------- -------
they will not vote the Stock Collateral in any manner that is inconsistent with
the terms of this Agreement, the Credit Agreement, the Notes or any such other
instrument or agreement; and the Administrative Agent shall execute and deliver
to the Debtors or cause to be executed and delivered to the Debtors all such
proxies, powers of attorney, dividend and other orders, and all such
instruments, without recourse, as the Debtors may reasonably request for the
purpose of enabling the Debtors to exercise the rights and powers that they are
entitled to exercise pursuant to this Section 5.04(a).

(3) Unless and until an Event of Default has occurred and is
continuing, the Debtors shall be entitled to receive and

<PAGE>

-15-

retain any dividends on the Collateral paid in cash to the extent permitted by
the Credit Agreement.

(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Administrative Agent or
any Lender exercises any available right to declare any Secured Obligation due
and payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Collateral shall be paid directly to the Administrative
Agent and retained by it as part of the Collateral, subject to the terms of this
Agreement, and, if the Administrative Agent shall so request in writing, the
Debtors jointly and severally agree to execute and deliver to the Administrative
Agent appropriate additional dividend, distribution and other orders and
documents to that end; provided, however, that (a) if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to the Administrative
Agent shall, upon request of the Debtors (except to the extent theretofore
applied to the Secured Obligations), be returned by the Administrative Agent to
the Debtors and (b) nothing contained in this paragraph (4) shall prohibit any
Dividend Payment permitted by Section 9.09 of the Credit Agreement.

(b) Intellectual Property.
---------------------

(1) For the purpose of enabling the Administrative Agent, during the
continuance of an Event of Default, to exercise rights and remedies under
Section 5.05 hereof at such time as the Administrative Agent shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, each
Debtor hereby grants to the Administrative Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to such Debtor) to use, assign, license or sublicense any of
the Intellectual Property now owned or hereafter acquired by such Debtor,
wherever the same may be located, including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.

(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 9.05 of the Credit Agreement that limit the
right of the Debtors to dispose of their respective property, so long as no
Event of Default shall have occurred and be continuing, the Debtors will be

<PAGE>

-16-

permitted to exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property in
the ordinary course of the business of the Debtors. In furtherance of the
foregoing, unless an Event of Default shall have occurred and be continuing the
Administrative Agent shall from time to time, upon the request of the respective
Debtor, execute and deliver any instruments, certificates or other documents, in
the form so requested, that such Debtor shall have certified are appropriate (in
their respective judgment) to allow them to take any action permitted above
(including relinquishment of the license provided pursuant to clause (1)
immediately above as to any specific Intellectual Property). Further, upon the
payment in full of all of the Secured Obligations and cancellation or
termination of the Commitments and Letter of Credit Liabilities or earlier
expiration of this Agreement or release of the Collateral, the Administrative
Agent shall grant back to the Debtors the license granted pursuant to clause (1)
immediately above. The exercise of rights and remedies under Section 5.05
hereof by the Administrative Agent shall not terminate the rights of the holders
of any licenses or sublicenses theretofore granted by the Debtors in accordance
with the first sentence of this clause (2).
(3) The Administrative Agent agrees that it will not exercise any of
its rights and remedies pursuant to Section 5.05 hereof prior to having received
the required consents, if any, under any licensing agreements to which any
Debtor is a party, including, without limitation, the Sports Contracts, to the
exercise of such rights and remedies.

(c) Motor Vehicles. At any time after the occurrence and during the
--------------
continuance of an Event of Default, each Debtor shall, upon the request of the
Administrative Agent, deliver to the Administrative Agent originals of the
certificates of title or ownership for the Motor Vehicles, and any other
Equipment covered by certificates of title or ownership, owned by it with the
Administrative Agent listed as lienholder.

5.05 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:

(a) each Debtor shall, at the request of the Administrative Agent,
assemble the Collateral owned by it at such place or places, reasonably
convenient to both the Administrative Agent and such Debtor, designated in
its request;

(b) the Administrative Agent may make any reasonable

<PAGE>

-17-

compromise or settlement deemed desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, any of the Collateral;

(c) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to the
maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if the
Administrative Agent were the sole and absolute owner thereof (and each
Debtor agrees to take all such action as may be appropriate to give effect
to such right);

(d) the Administrative Agent in its discretion may, in its name or in
the name of the Debtors or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do
so; and

(e) the Administrative Agent may, upon ten business days' prior
written notice to the Debtors of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter come
into the possession, custody or control of the Administrative Agent, the
Lenders or any of their respective agents, sell, lease, assign or otherwise
dispose of all or any part of such Collateral, at such place or places as
the Administrative Agent deems best, and for cash or for credit or for
future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be waived),
and the Administrative Agent or any Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim
or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Debtors, any

<PAGE>

-18-

such demand, notice and right or equity being hereby expressly waived and
released. In the event of any sale, assignment, or other disposition of
any of the Trademark Collateral, the goodwill connected with and symbolized
by the Trademark Collateral subject to such disposition shall be included,
and the Debtors shall supply to the Administrative Agent or its designee,
for inclusion in such sale, assignment or other disposition, all
Intellectual Property relating to such Trademark Collateral. The
Administrative Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.

The proceeds of each collection, sale or other disposition under this
Section 5.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance
with Section 5.09 hereof.

The Debtors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Debtors acknowledge that any such private sales may be at prices and on terms
less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agree that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer or
issuer thereof to register it for public sale.

The Administrative Agent agrees that any public or private sale of the
Collateral will be held in a commercially reasonable manner.

5.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Debtors shall remain liable for any

<PAGE>

-19-

deficiency.

5.07 Removals, Etc. Without at least 30 days' prior written notice
-------------
to the Administrative Agent, no Debtor shall (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than at the address indicated beneath the signature of
the Company to the Credit Agreement or at one of the locations identified in
Annex 6 hereto or at the premises of a Person processing or storing such
- -------
Inventory, if such Person has executed Uniform Commercial Code Financing
Statements naming such Debtor as secured party, which financing statements have
been assigned to the Administrative Agent or such Person has executed a supplier
subordination agreement satisfactory to the Majority Lenders in form and
substance or in transit from one of such locations to another, provided that
such Debtor may permit Inventory to be located at such other premises if the
aggregate value of all such Inventory at all such other premises is not in
excess of [$1,500,000] or (ii) change its corporate name, or the name under
which it does business, from the name shown on the signature pages hereto.

5.08 Private Sale. No Creditors shall incur liability as a result of
------------
the sale of the Collateral, or any part thereof, at any private sale pursuant to
Section 5.05 hereof conducted in a commercially reasonable manner. Each Debtor
hereby waives any claims against any Creditor arising by reason of the fact that
the price at which the Collateral may have been sold at any such private sale
held in a commercially reasonable manner was less than the price that might have
been obtained at a public sale or was less than the aggregate amount of the
Secured Obligations, even if the Administrative Agent accepts the first offer
received and does not offer the Collateral to more than one offeree.

5.09 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Administrative Agent
under Section 4 hereof or this Section 5, shall be applied by the Administrative
Agent:

First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the fees and expenses of its
agents and counsel, and all expenses incurred and advances made by the
Administrative

<PAGE>

-20-

Agent in connection therewith;

Next, to the payment in full of the Secured Obligations, in each case
----
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Lenders holding the same may otherwise agree; and

Finally, to the payment to the respective Debtor, or their respective
-------
successors or assigns, or as a court of competent jurisdiction may direct,
of any surplus then remaining.

As used in this Section 5, "proceeds" of Collateral shall mean cash, securities
--------
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Debtors or any issuer of or obligor on any of the
Collateral. Notwithstanding the foregoing, the proceeds of any cash or other
amounts held in the "Letter of Credit Liabilities Sub-Account" of the Collateral
Account pursuant to Section 4.04 hereof shall be applied first to the Letter of
-----
Credit Liabilities outstanding from time to time and second to the other Secured
------
Obligations in the manner provided above in this Section 5.09.

5.10 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the attorney-
in-fact of each Debtor for the purpose of carrying out the provisions of this
Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, upon and during the
continuance of any Event of Default, so long as the Administrative Agent shall
be entitled under this Section 5 to make collections in respect of the
Collateral, the Administrative Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of any Debtor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.

5.11 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, each Debtor shall (i) file such financing statements
and other documents in such offices as the Administrative Agent may request to
perfect the

<PAGE>

-21-

security interests granted by Section 3 of this Agreement and (ii) deliver to
the Administrative Agent all certificates identified in Annex 1 hereto,
-------
accompanied by undated stock powers duly executed in blank.

5.12 Termination. When all Secured Obligations shall have been paid
-----------
in full and the Commitments of the Lenders under the Credit Agreement and all
Letter of Credit Liabilities shall have expired or been terminated, this
Agreement shall terminate, and the Administrative Agent shall forthwith cause to
be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the respective Debtor
and to be released and canceled all licenses and rights referred to in
Section 5.04(b) hereof. The Administrative Agent shall also execute and deliver
to the respective Debtor upon such termination such Uniform Commercial Code
termination statements, certificates for terminating the Liens on the Motor
Vehicles and such other documentation as shall be reasonably requested by the
respective Debtor to effect the termination and release of the Liens on the
Collateral.

5.13 Expenses. The Debtors jointly and severally agree to pay to the
--------
Administrative Agent all out-of-pocket expenses (including reasonable expenses
for legal services of every kind) of, or incident to, the enforcement of any of
the provisions of this Section 5, or performance by the Administrative Agent of
any obligations of the Debtors in respect of the Collateral which the Debtors
have failed or refused to perform, or any actual or attempted sale, or any
exchange, enforcement, collection, compromise or settlement in respect of any of
the Collateral, and for the care of the Collateral and defending or asserting
rights and claims of the Administrative Agent in respect thereof, by litigation
or otherwise, including expenses of insurance, and all such expenses shall be
Secured Obligations to the Administrative Agent secured under Section 3 hereof.

5.14 Further Assurances. Each Debtor agrees that, from time to time
------------------
upon the written request of the Administrative Agent, such Debtor will execute
and deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.

Section 6. Miscellaneous.
-------------

<PAGE>

-22-

6.01 No Waiver. No failure on the part of the Administrative Agent
---------
or any of its agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any of its agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.

6.02 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of New York.

6.03 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 12.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 12.02.

6.04 Waivers, Etc. The terms of this Agreement may be waived,
------------
altered or amended only by an instrument in writing duly executed by each Debtor
and the Administrative Agent (with the consent of the Lenders as specified in
Section 11.09 of the Credit Agreement). Any such amendment or waiver shall be
binding upon each Creditors, each holder of any of the Secured Obligations and
each Debtor.

6.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective successors and assigns of each
Debtor, the Creditors and each holder of any of the Secured Obligations
(provided, however, that no Debtor shall assign or transfer its rights hereunder
-------- -------
without the prior written consent of the Administrative Agent).

6.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.

6.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

<PAGE>

-23-

6.08 Agents. The Administrative Agent may employ agents and
------
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.

6.09 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Creditors in order
to carry out the intentions of the parties hereto as nearly as may be possible
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.

<PAGE>

-24-

IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.

GRAND SLAM ACQUISITION CORP.
GSAC HOLDINGS, INC.
PINNACLE BRANDS, INC.
MLM ACQUISITION CORP.

By:
----------------------------------------------
Name:
Title: Sr. Vice President
and Secretary

WELLS FARGO BANK, N.A.,
as Administrative and
Collateral Agent

By:
----------------------------------------------
Name:
Title:

<PAGE>

ANNEX 1

PLEDGED STOCK
- -------------

[See Section 2(b)]

GRAND SLAM ACQUISITION CORP.
- ---------------------------

Certificate Registered
Issuer No. Owner Number of Shares
- ------ ---------- ---------- ----------------

GSAC 1 Grand Slam 100 shares of
Holdings, Acquisition common stock, par
Inc. Corp value $.01

GSAC HOLDINGS, INC.
- ------------------

Certificate Registered
Issuer No. Owner Number of Shares
- ------ ---------- ---------- ----------------

Pinnacle 21 GSAC Holdings, 1,000 shares of
Brands, Inc. common stock, par
Inc. value $.01

PINNACLE BRANDS, INC.
- --------------------

Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------

MLM 1 Pinnacle 100 shares of
Acquisition Brands common stock, par
Corp. Inc. value $.01

MLM ACQUISITION CORP.
- --------------------

None

<PAGE>

<PAGE>
Exhibit E-2
-----------

[Form of Opinion of Local Counsel to the Obligors]

May , 1996

To the Lenders party to the Credit
Agreement referred to below,
Merrill Lynch & Co.,
as Arranger and Syndication Agent, and
Wells Fargo Bank, N.A.,
as Administrative and Collateral Agent

Ladies and Gentlemen:

We have acted as special counsel in the state of _____________ (the
"State") to Pinnacle Brands, Inc. (the "Company"), Grand Slam Acquisition Corp.
("GSAC"), GSAC Holdings, Inc. ("GSAC Holdings") and MLM Acquisition Corp. ("MLM"
and, together with the Company, GSAC and GSAC Holdings, the "Obligors") in
connection with (i) the Credit Agreement dated as of May __, 1996 (the "Credit
Agreement") among the Obligors, the lenders named therein, Merrill Lynch Capital
Corporation, as Arranger and Syndication Agent (the "Arranger"), and
, as Administrative and Collateral Agent (the "Administrative
Agent"), providing for extensions of credit to be made by said lenders to the
Company in an aggregate amount not exceeding $103,000,000 and (ii) the various
other agreements, instruments and other documents referred to in the following
paragraph. Capitalized terms not otherwise defined herein shall have the
meanings assigned to them in the Credit Agreement.

There has been furnished to us for review the final forms of (i) the
Credit Agreement, (ii) the Security Agreement and (iii) the UCC-1 financing
statements (collectively, the "Financing Statements") relating to the Security
Agreement. We have reviewed such instruments, documents and agreements as we
have deemed necessary or appropriate to enable us to render the opinions
hereinafter set forth.

In rendering the opinions hereinafter set forth, we have assumed that
(a) the Basic Documents and all documentation in connection therewith have been
duly executed and delivered and (b) the Credit Parties own the Collateral (as
defined in the Security Agreement).

In addition, the opinions contained in paragraph 2 below are qualified
to the extent that enforceability of any of the Basic Documents may be limited
by (i) bankruptcy, insolvency,

<PAGE>
-2-

moratorium, reorganization or other laws relating to creditors' rights
generally, and (ii) general principles of equity, whether considered in an
action at law or in equity.

Subject to the foregoing assumptions and qualifications, we are of the
opinion that:

1. Neither the Administrative Agent nor any of the other Creditors
is required (a) to be qualified to transact business, file any designation for
service of process, file any reports or pay any taxes in the State or (b) to
comply with any statutory or regulatory requirement applicable only to financial
institutions chartered or qualified to do business in the State, in each case,
solely by reason of the execution and delivery of any of the Basic Documents or
by reason of the participation in any of the transactions under or contemplated
by the Basic Documents, including, without limitation, the extension of any
credit contemplated thereby, the making and receipt of payments pursuant thereto
and the exercise of any remedy thereunder. If it were determined that any such
qualification and filing were required, the validity of the Basic Documents
would not be affected thereby, but if the Administrative Agent or any of the
other Creditors were not qualified, the Administrative Agent, or the other
Creditors in the event they institute remedies without the Administrative Agent,
as the case may be, would be precluded from enforcing their respective rights in
the courts of the State until such time as they are qualified to transact
business in the State. However, the lack of qualification would not result in
any waiver of rights or remedies pending such qualification.

2. Assuming that the Basic Documents are governed by the laws of the
State for the purpose of rendering the opinion set forth in this paragraph, the
Security Agreement is in proper form under the applicable laws of the State (i)
to create and constitute a valid security interest in, lien on or pledge of the
Collateral described therein and (ii) to be enforceable against the Credit
Parties in accordance with its terms.

3. The Financing Statements have been properly filed with the Office
of the Secretary of State of the State. The Financing Statements adequately
identify the Collateral described therein to provide sufficient notice to third
parties of the security interest referenced therein. The security interest,
lien or pledge created by the Security Agreement is duly perfected.

4. The filing of the Financing Statements in the office described
above is the only action, recording or filing

<PAGE>
-3-

necessary to publish notice and protect the validity of and to establish of
record the rights of the Creditors under the Basic Documents, except (i) that
continuation statements under the UCC are required to be filed within ______
months prior to the expiration of ____ years from the date of filing of the
Financing Statements, and (ii) that a security interest in or pledge of [specify
collateral] cannot be perfected by filing Financing Statements, but must be
perfected by taking physical possession thereof.

5. Subject to appropriate continuation of perfection under the UCC
as set forth in paragraph 4 above, the priority of the security interest in,
lien on or pledge of the Collateral created by the Security Agreement with
respect to any extension of credit under the Credit Agreement secured thereby
made or deemed to have been made after the date of execution and delivery of the
Security Agreement will be the same as the priority of the Security Agreement
applicable on the date of execution and delivery thereof and such priority will
not be affected by the rights in and to the Collateral of any third party whose
interest in the Collateral attached thereto after the date of such execution and
delivery but prior to the date of such extension of credit under the Credit
Agreement.

6. The execution, delivery and performance by each of the Creditors
and Credit Parties of the Basic Documents to which each is a party (i) will not
violate any existing law, governmental rule or regulation of the State and
(ii) do not require any license, permit, authorization, consent or other
approval of, any exemption by, or any registration, recording or filing with,
any court, administrative agency or other governmental authority of the State,
except for the filing of the Financing Statements as set forth in paragraph 3
above.

7. The Administrative Agent is permitted under the laws of the State
without naming all of other Creditors in any applicable legal proceeding to
exercise remedies under the Security Agreement for the realization of any of the
Collateral in its own name, as collateral agent.

8. No taxes or other charges, including, without limitation,
intangible or documentary stamp taxes, transfer taxes or similar charges, are
payable to the State or to any jurisdiction therein on account of the execution
and delivery of the Basic Documents or the creation of the indebtedness
evidenced or secured by any of the Basic Documents or the filing of the Security
Agreement, except for nominal filing fees.

<PAGE>
-4-

9. A state or federal court in the State applying the State's choice
of law principles will give effect to the provisions in the Basic Documents
which select the laws of the State of New York as the governing law thereof and
will apply such laws, rather than the laws of the State, to the enforceability,
construction and application thereof.

10. Assuming that the Basic Documents are governed by the laws of the
State for the purpose of rendering the opinion set forth in this paragraph, (i)
none of the provisions of the Basic Documents will violate any law, statute or
regulation of the State relating to usury and (ii) the use of counterpart copies
of any of the Basic Documents does not affect the enforceability of any of the
Basic Documents.

We are admitted to practice in the State. We express no opinion as to
matters under or involving the laws of any jurisdiction other than the laws of
the United States and the State and its political subdivisions.

The foregoing opinions may be relied on by each of you, by any
successors and assigns of the Arranger or the Administrative Agent and by any
participant, assignee or successor to interests of the Lenders under the Basic
Documents.

Very truly yours,

<PAGE>
Exhibit H
---------

[Form of Intercompany Note]

May , 1996 New York, New York

FOR VALUE RECEIVED, [Name of Payor], a Delaware corporation ("Payor"),
hereby promises to pay on demand to the order of [Name of Payee] ("Payee"), in
lawful money of the United States of America in immediately available funds, at
such location in the United States of America as Payee shall from time to time
designate, the unpaid principal amount of all loans and advances made by Payee
to Payor. Payor promises also to pay interest on the unpaid principal amount of
all such loans and advances in like money at said location from the date of such
loans and advances until paid at such rate per annum as shall be agreed upon
from time to time by Payor and Payee.

This note ("Note") is one of the Intercompany Notes referred to in the
Credit Agreement, dated as of May 29, 1996, among Pinnacle Brands, Inc. (the
"Company"), Grand Slam Acquisition Corp., GSAC Holdings Inc., MLM Acquisition
Corp., Donruss Trading Card Company, Merrill Lynch & Co., as Arranger and
Syndication Agent, Wells Fargo Bank, N.A., as Administrative and Collateral
Agent, The Bank of New York, as Documentation Agent, and the lenders party
thereto (as amended, supplemented or amended and restated from time to time, the
"Credit Agreement") and is subject to the terms thereof, and shall be pledged by
Payee pursuant to the Security Agreement (as defined in the Credit Agreement).
Capitalized terms used without definition shall have the meanings given to such
terms in the Credit Agreement. Payee hereby acknowledges and agrees that the
Administrative Agent may exercise all rights provided in the Credit Agreement
and the Security Agreement with respect to this Note.

Anything in this Note to the contrary notwithstanding, the
indebtedness evidenced by this Note shall be subordinate and junior in right of
payment, to the extent and in the manner hereinafter set forth, to all
Obligations of Payor under the Credit Agreement, [including, without limitation,
under Payor's guarantee of the Obligations under the Credit Agreement]1 (such
Obligations and other indebtedness and obligations in connection with any
renewal, refunding, restructuring or refinancing thereof, including interest
thereon accruing after the

- --------------------

1 To be inserted if Payor is not the Company.

<PAGE>
commencement of any proceedings referred to in clause (ii) below, whether or not
such interest is an allowed claim in such proceeding, being hereinafter
collectively referred to as "Senior Indebtedness"):

(i) In the event of any insolvency or bankruptcy proceedings,
and any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, relative to Payor or to its
creditors, as such, or to its property, and in the event of any
proceedings for voluntary liquidation, dissolution or other winding up
of Payor, whether or not involving insolvency or bankruptcy, then (x)
the holders of Senior Indebtedness shall be paid in full in cash in
respect of all amounts constituting Senior Indebtedness before Payee
is entitled to receive (whether directly or indirectly), or make any
demands for, any payment on account of this Note and (y) until the
holders of Senior Indebtedness are paid in full in cash in respect of
all amounts constituting Senior Indebtedness, any payment or
distribution to which the Payee would otherwise by entitled (other
than debt securities of Payor that are subordinated, to at least the
same extent as this Note, to the payment of all Senior Indebtedness
then outstanding (such securities being hereinafter referred to as
"Restructured Debt Securities") shall be made to the holders of Senior
Indebtedness.

(ii) If any payment or distribution of any character, whether in
cash, securities or other property (other than Restructured Debt
Securities), in respect of this Note shall (despite these
subordination provisions) be received by Payee before all Senior
Indebtedness shall have been paid in full in cash, such payment or
distribution shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Indebtedness (or
their representatives), ratably according to the respective aggregate
amounts remaining unpaid thereon, to the extent necessary to pay all
Senior Indebtedness in full in cash.

No present or future holder of Senior Indebtedness shall be prejudiced
in its right to enforce the subordination of this Note by any act or failure to
act on the part of Payor or by any act or failure to act on the part of such
holder or any trustee or agent for such holder. Payee and Payor hereby agree
that the subordination of this Note is for the benefit of the Creditors (as
defined in the Credit Agreement), the Creditors are

<PAGE>
obligees under this Note to the same extent as if their names were written
herein as such and they may, singly or collectively, proceed to enforce the
subordination provisions herein.

Payee is hereby authorized to record all loans and advances made by it
to Payor (all of which shall be evidenced by this Note), and all repayments or
prepayments thereof, in its books and records, such books and records
constituting prima facie evidence of the accuracy of the information contained
therein.

Payor hereby waives presentment, demand, protest or notice of any kind
in connection with this Note. All payments under this Note shall be made
without offset, counterclaim or deduction of any kind.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

[NAME OF PAYOR]

By: _______________________
Name:
Title:

[NAME OF PAYEE]

By:
-------------------------
Name:
Title:

EXHIBIT 10.3

LEASE AGREEMENT

STATE OF TEXAS SECTION
SECTION
COUNTY OF TARRANT SECTION

THIS LEASE AGREEMENT made and entered into by and between E. Ann Flavin
and John P. Flavin, individually, hereinafter referred to as "Landlord," and
Optigraphics Corporation, a Texas corporation hereinafter referred to as
"Tenant";

WITNESSETH:

Landlord hereby leases to Tenant, and Tenant hereby takes from Landlord the
following described premises, (hereinafter referred to as the "demised
premises") situated within the County of Tarrant, State of Texas:

Site 3, Block 4, Industrial Community No. 1, Great
Southwest Industrial District, an Addition to the City of
Grand Prairie, Tarrant County, Texas, according to Plat
recorded in Volume 388-17, Page 465, Plat Records, Tarrant
County, Texas and as described by metes and bounds in
attached Exhibit "A".

together with all rights, privileges, easements and appurtenances belonging to
or in any way pertaining to the demised premises and together with the building
and other improvements now situated or to be erected upon the demised premises.

TO HAVE AND TO HOLD the same for a term of ten (10) years beginning on
October 15, 1986, upon the following terms, conditions and covenants:

1. RENT: Tenant agrees to pay Landlord without offset or deduction,
rent for the demised premises at the rate of Thirty-Three Thousand Dollars
($33,000.00) per month in advance. One such monthly installment shall be due
and payable on or before the beginning date of this lease, and a like monthly
installment shall be due and payable on or before the first day of each
succeeding calendar month during the term hereof; provided that in the event the
term hereof shall commence or end during a calendar month, the rent for any
fractional calendar month following the commencement or preceding the end of the
term of this lease shall be pro rated by days.

Tenant has deposited with Landlord, upon delivery of this lease, Sixty-Six
Thousand Dollars ($66,000.00) to be applied as follows:

(a) $33,000.00 for rent for October 1986.
(b) $33,000.00 as a security deposit.

Such security shall be held by Landlord without interest as security for the
performance by Tenant of Tenant's covenants and obligations under this lease.
The security deposit is not an advanced payment of rental or the full measure of
liquidated damages in case of default by Tenant. Upon the occurrence of any
event of default, Landlord may, from time to time, without prejudice to any
other remedy provided herein or provided by law, use the security deposit to the
extent necessary to make good any arrears of rent and any other damage, injury,
expense or liability caused to Landlord by such event of default. Following any
such application of the security deposit, Tenant shall pay to Landlord, on
demand, the

LEASE AGREEMENT - Page 1

<PAGE>

amount so applied in order to restore the security deposit to its original
amount. If Tenant is not in default, hereunder, any remaining balance of such
deposit shall be returned by Landlord to Tenant upon expiration or termination
of this lease.

2. ACCEPTANCE OF PREMISES: Tenant acknowledges that it has fully
inspected the demised premises and accepts the demised premises, and any
buildings and improvements situated thereon, as suitable for the purposes for
which the same are leased in their present condition.

3. USE OF PREMISES: The demised premises shall be used and occupied
only for the purpose of Tenant's specialty printing business, including, but
not limited to, any related packaging activities as may be necessary or useful
in the operation of such business. Tenant shall at its own expense obtain any
and all governmental licenses and permits necessary for such use.

4. COMPLIANCE WITH LAW: Tenant shall comply with all governmental
laws, ordinances and regulations applicable to the use of the demised premises,
and shall promptly comply with all governmental orders and directives for the
correction, prevention and abatement of nuisances in or upon, or connected with
the demised premises, all at Tenant's sole expense.

5. REAL ESTATE TAXES:

A. Tenant shall pay as additional rental upon receipt of statement
of all real estate taxes on the property of which the demised premises form a
part. The base year shall be 1986.

B. In the event the real estate taxes levied against the demised
premises for the real estate tax year in which the lease term commences are
increased as a result of any alterations, additions or improvements made by
Tenant or by Landlord at the request of Tenant, Tenant shall pay to Landlord
upon demand the amount of such increase. Landlord shall obtain from the tax
assessor or assessors a written statement of the total amount of such increase.

6. MAINTENANCE BY LANDLORD:

A. Landlord shall at its expense maintain the roof, foundation and
the structural soundness of the exterior walls (excluding all windows, window
glass, plate glass and all doors) of the building in good repair and condition,
reasonable wear and tear excepted. Landlord shall not be required to make
repairs occasioned by the act or negligence of Tenant, its employees,
subtenants, licensees or concessionaires (unless such act or negligence results
in damage covered by valid and collectible fire and extended coverage insurance
policies and is collectible thereunder). Tenant shall give immediate written
notice to Landlord of the need for repairs or corrections, and Landlord shall
proceed promptly to make such repairs or corrections. In the event any repairs
are required to be made by Landlord, Tenant shall, at Tenant's sole cost and
expense, promptly remove Tenant's fixtures, inventory and other property and
equipment maintained by Tenant to the extent required to enable Landlord to make
such repairs. Landlord's liability hereunder shall be limited to the cost of
such repairs or corrections.

B. Landlord represents that at the commencement of the lease term,
the plumbing, electrical system and exterior doors, and any fire protection
sprinkler system, heating system, air conditioning equipment and elevators
existing on the date of this lease or to be provided by Landlord, are or will be
in good operating condition.

LEASE AGREEMENT - page 2

<PAGE>

7. MAINTENANCE BY TENANT:

A. Tenant shall maintain in good repair and condition at its expense
and risk all other parts of the building and other improvements and equipment on
the demised premises not required to be maintained by Landlord including but not
limited to repairs (including all necessary replacements) of the windows, window
glass, plate glass, doors, heating system, air conditioning equipment, fire
protection sprinkler system, elevators, interior and exterior plumbing, and the
interior of the building in general, and including care of landscaping and
regular mowing of grass, and maintenance of any paving and railroad siding.

B. Tenant shall, throughout the lease term, take good care of the
building and other improvements and keep them free from waste or nuisance and,
at the expiration or termination of this lease, deliver up the demised premises
clean and free of trash and in good repair and condition, with all equipment
situated in the demised premises on the beginning date of this lease or
replacements thereof, in working order (reasonable wear and tear and damage by
fire, tornado or other casualty excepted).

C. In the event Tenant shall fail to maintain the demised premises
and any paving, landscaping or railroad siding in accordance with this
paragraph 7, Landlord shall have the right (but not the obligation) to cause all
repairs or other maintenance to be made and the reasonable costs therefor
expended by Landlord shall be reimbursed by Tenant on demand.

8. ALTERATIONS, ADDITIONS AND IMPROVEMENTS: Tenant shall not create any
openings in the roof or exterior walls, or make any alterations, additions or
improvements to the demised premises without prior written consent of Landlord.
Consent for non-structural alterations, additions or improvements shall not be
unreasonably withheld by Landlord. Tenant shall have the right to erect or
install shelves, bins, machinery, air conditioning or heating equipment and
trade fixtures, provided that Tenant complies with all applicable governmental
laws, ordinances and regulations. At the expiration or termination of this
lease, Tenant shall have the right to remove such items so installed, provided
Tenant is not in default at the time of such removal and provided further that
Tenant shall, at the time of removal of such items, repair in a good and
workmanlike manner any damage caused by installation or removal thereof.

Tenant shall pay for all costs incurred or arising out of alterations,
additions or improvements in or to the demised premises and shall not permit a
mechanic's or materialman's lien to be asserted against the demised premises.
Upon request by Landlord, Tenant shall deliver to Landlord proof of payment
reasonably satisfactory to Landlord of all costs incurred or arising out of any
such alterations, additions or improvements.

All alterations, additions or improvements in or to the demised
premises shall become the property of Landlord at the expiration or termination
of this lease; however, Landlord may direct the removal of alterations,
additions or improvements by giving written notice to Tenant prior to the
expiration or termination of this lease. At the direction of Landlord, Tenant
shall promptly remove all alterations, additions and improvements and any other
property placed in the demised premises by Tenant and Tenant shall repair in a
good and workmanlike manner any damage and close any holes caused or revealed by
such removal.

9. SIGNS: Tenant shall not place or affix any signs or other objects
upon or to the roof or exterior walls of the demised premises or paint or
otherwise deface the exterior walls of the demised premises without the prior
written consent of Landlord. Any signs installed by Tenant shall conform with
applicable laws and

LEASE AGREEMENT - page 3

<PAGE>

deed and other restrictions. Tenant shall remove all signs at the termination
of this lease and shall repair any damage and close any hole caused or revealed
by such removal.

10. INSURANCE: Lessee shall, at all times during the Lease term and at
its cost and expense, maintain insurance of the following character:

A. Hazard insurance against loss by fire and lightning and insurance
against risks customarily covered by extended coverage endorsement, in an amount
equal to the maximum insurable value of the improvements located on the demised
premises. All policies shall insure the interests of Lessor and shall contain a
replacement cost endorsement and a mortgagee's benefit clause in favor of
Lessor's First Mortgagee, or its successors or assigns. Copies of the original
policies shall be deposited with Lessor's First Mortgagee.

B. Comprehensive general public liability insurance covering the
legal liability of Lessor and Lessee against claims for bodily injury, death, or
property damage occurring on, in, or about the demised premises and the
adjoining land in such amounts as are being carried by owners or lessees of
property comparable to the demised premises in the locale where the demised
premises are located.

C. Such other insurance, in such amounts and against such risks, as
is customarily maintained by an enterprise of the type conducted by Lessee with
respect to its business and the properties owned by it.

All of the above-described insurance policies shall be written by such
reputable insurance companies, licensed to do business in Texas, as Lessee shall
from time to time select. Such policies shall contain a provision or
endorsement whereby the insurer agrees not to cancel the insurance without at
least ten (10) days' prior written notice to Lessor and Lessor's First
Mortgagee. The amount of such insurance coverage shall be subject to the
reasonable approval of Lessor and Lessor's First Mortgagee, and the policies
shall show Lessor and Lessor's First Mortgagee as additional insureds, or, with
respect to Lessor's First Mortgagee, may contain the standard mortgagee benefit
clause.

On or before commencement of the first lease year, Lessee shall furnish
Lessor with copies of the original policies evidencing the aforesaid insurance
coverage.

11. WAIVER OF SUBROGATION: Each party hereto waives any and every claim
which arises or may arise in its favor against the other party hereto during
the term of this lease or any renewal or extension thereof for any and all loss
of, or damage to any of its property located within or upon, or constituting a
part of, the demised premises, which loss or damage is covered by valid and
collectible fire and extended coverage insurance policies, to the extent that
such loss or damage is recoverable under such insurance policies. Such mutual
waivers shall be in addition to and not in limitation or derogation of, any
other waiver or release contained in this lease with respect to any loss of, or
damage to, property of the parties hereto. Inasmuch as such mutual waivers will
preclude the assignment of any aforesaid claim by way of subrogation or
otherwise to an insurance company (or any other person), each party hereby
agrees immediately to give to each insurance company which has issued to it
policies of fire and extended coverage insurance, written notice of the terms of
such mutual waivers, and to cause such insurance policies to be properly
endorsed, if necessary, to prevent the invalidation of such insurance coverages
by reason of such waivers.

LEASE AGREEMENT - page 4

<PAGE>

12. LANDLORD'S RIGHT OF ENTRY: Landlord and its authorized agents shall
have the right, during normal business hours, to enter the demised premises (a)
to inspect the general condition and state of repair thereof, (b) to make
repairs required or permitted under this lease, (c) to show the premises to any
prospective tenant or purchaser or (d) for any other reasonable purpose.

During the final 150 days of the lease term, Landlord and its
authorized agents shall have the right to erect and maintain on or about the
demised premises customary signs advertising the property for lease or for sale.

12. UTILITY SERVICES: Tenant shall pay the cost of all utility services,
including but not limited to initial connection charges, all charges for gas,
water and electricty used on the demised premises, and ofr all electric lights,
lamps and tubes.

14. ASSIGNMENT AND SUBLEASING: Tenant shall not, without the prior
written consent of Landlord, assign this lease or sublet the demised premises or
any portion thereof. Assignment or subletting shall be expressly subject to all
terms and provisions of this lease, including the provisions of paragraph 3
pertaining to the use of the demised premises. In the event of any assignment
or subletting, Tenant shall remain fully liable for the full performance of all
Tenant's obligations under this lease. Tenant shall not assign his rights
hereunder or sublet the premises without first obtaining a written agreement
from assignee or sublessee whereby assignee or sublessee agrees to be bound by
the terms of this lease. No such asssignment or subletting shall constitute a
novation. In the event of the occurrence of an event of default while the
demised premises are assigned or sublet, Landlord, in addition to any other
remedies provided herein or by law, may at Landlord's option, collect directly
from such assignee or subtenant all rents becoming due under such assignment or
subletting and apply such rent against any sums due to Landlord hereunder. No
direct collection by Landlord from any such assignee or subtenant shall release
Tenant from the performance of its obligations hereunder.

15. FIRE AND CASUALTY DAMAGE:

A. If the building or other improvements on the demised premises
should be damaged or destroyed by fire, tornado or other casualty, Tenant shall
give immediate written notice thereof to Landlord.

B. If the building situated on the demised premises should be
substantially or totally destroyed by fire, tornado or other casualty, or so
damaged that rebuilding or repairs cannot reasonably be completed within 120
days from the date of written notification by Tenant to Landlord of the
happening of the damage, this lease shall terminate at the option of Landlord
and rent shall be abated for the unexpired portion of this lease, effective from
the date of actual receipt by Landlord of such written notification. If this
lease is not terminated, the building and other improvements shall be rebuild or
repaired and rent abated to the extent provided under Section C.

C. If the building or other improvements situated on the demised
premises should be damaged by fire, tornado or other casualty but not to such an
extent that rebuilding or repairs cannot reasonably be completed within 120 days
from the date of written notification by Tenant to Landlord of the happening of
the damage, this lease shall not terminate, but Landlord shall, at its sole cost
and risk, proceed forthwith and use reasonable diligence to rebuild or repair
such building and other improvements on the demised premises (other than
leasehold improvements made by Tenant or any assignee, subtenant or other
occupanct of the demised premises) to substantially the condition in which they
existed prior to such

LEASE AGREEMENT - page 5

<PAGE>

damage; provided, however, if the casualty occurs during the final 18 months of
the lease term, Landlord shall not be required to rebuild or repair such damage
unless Tenant shall exercise its renewal option (if any is contained herein)
within 15 days after the date of receipt by Landlord of the notification of the
occurrence of the damage. If Tenant does not elect to exercise its renewal
option or if there is no renewal option contained herein or previously
unexercised at such time, this lease shall terminate at the option of Landlord
and rent shall be abated for the unexpired portion of this lease, effective from
the date of actual receipt by Landlord of the written notification of the
damage. If the building and other improvements are to be rebuilt or repaired
and are untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be adjusted
equitably.

16. INDEMNITY AND PUBLIC LIABILITY INSURANCE:

A. Landlord shall not be liable to Tenant or to Tenant's employees,
agents or visitors, or to any other person whomsoever, for any injury to persons
or damage to property on or about the demised premises or any adjacent area
owned by Landlord caused by the negligence or misconduct of Tenant, its
employees, subtenants, licensees or concessionaires or any other person entering
the demised premises under the express or implied invitation of Tenant, or
arising out of the use of the demised premises by Tenant and the conduct of its
business therein, or arising out of any breach or default by Tenant in the
performance of its obligations hereunder; and Tenant hereby agrees to indemnify
Landlord and hold it harmless from any loss, expense or claim arising out of
such damage or injury. Tenant shall not be liable for any injury or damage
caused by the negligence or misconduct of Landlord, or its employees or agents,
and Landlord agrees to indemnify Tenant and hold it harmless from any loss,
expense or damage arising out of such damage or injury.

B. Landlord and Landlord's agents and employees shall not be liable
to Tenant for any injury to persons or damage to property resulting from the
demised premises or other premises owned by Landlord becoming out of repair or
by defect in or failure of equipment, pipes, or wiring, or broken glass, or by
the backing up of drains, or by gas, water, steam, electricity or oil leaking,
escaping or flowing into the demised premises, regardless of the source, or by
dampness (except where due to Landlord's willful failure to make repairs
required to be made hereunder, after the expiration of a reasonable time after
written notice to Landlord of the need for such repairs) or by fire, explosion,
falling plaster or ceiling. Landlord shall not be liable to Tenant for any loss
or damage that may be occasioned by or through the acts or omissions of other
tenants of the Landlord or caused by operations in construction of any private,
public or quasi-public work, or of any other persons whomsoever, excepting only
duly authorized employees and agents of Landlord.

17. CONDEMNATION:

A. If, during the term of this lease or any extension or renewal
thereof, all or a substantial part of the demised premises should be taken for
any public or quasi-public use under any governmental law, ordinance or
regulation or by right of eminent domain, or should be sold to the condemning
authority under threat of condemnation, this lease shall terminate and the rent
shall be abated during the unexpired portion of this lease, effective from the
date of taking of the demised premises by the condemning authority.

B. If less than a substantial part of the demised premises is taken
for public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or is sold to the condemning
authority under threat of

LEASE AGREEMENT - page 6

<PAGE>

condemnation, Landlord, at its option, may by written notice terminate this
lease or shall forthwith at its sole expense restore and reconstruct the
buildings and improvements (other than leasehold improvements made by Tenant or
any assignee, subtenant or other occupant of the demised premises) situated on
the demised premises in order to make the same reasonably tenantable and
suitable for the uses for which the demised premises are leased as defined in
paragraph 3. The rent payable hereunder during the unexpired portion of this
lease shall be adjusted equitably.

C. Landlord and Tenant shall each be entitled to receive and retain
such separate award and portions of lump sum awards as may be allocated to their
respective interest in any condemnation proceedings. The termination of this
lease shall not affect the rights of the respective parties to such awards.

18. HOLDING OVER: Should Tenant or any of its successors in interest fail
to surrender the demised premises, or any part thereof, on the expiration of the
term of this lease, such holding over shall constitute a tenancy from month to
month, at a monthly rental equal to 100% of the rent paid for the last month of
the term of this lease unless otherwise agreed in writing.

19. DEFAULT BY TENANT: The following events shall be deemed to be events
of default under this lease:

A. Failure of Tenant to pay any installment of the rent or other sum
payable to Landlord hereunder on the date that same is due and such failure
shall continue for a period of 10 days.

B. Failure of Tenant to comply with any term, condition or covenant
of this lease, other than the payment of rent or the sum of money, and such
failure shall not be cured within 30 days after written notice thereof to
Tenant.

C. Insolvency, the making of a transfer in fraud of creditors, or
the making of an assignment for the benefit of creditors by Tenant or any
guarantor of Tenant's obligation.

D. Filing of a petition under any section or chapter of the National
Bankruptcy Act, as amended, or under any similar law or statute of the United
States or any State thereof by Tenant or any guarantor of Tenant's obligations,
or adjudication as a bankrupt or involvent in proceedings filed against Tenant
or such guarantor.

E. Appointment of a receiver or trustee for all or substantially all
of the assets of Tenant or any guarantor of Tenant's obligations hereunder.

F. Abandonment by Tenant of any substantial portion of the demised
premises or cessation of use of the demised premises for the purpose leased.

20. REMEDIES OF LANDLORD: Upon the occurrence of any of the events of
default listed in Section 19, Landlord shall have the option to pursue any one
or more of the following remedies without any notice or demand whatsoever:

A. Terminate this lease, in which event Tenant shall immediately
surrender the demised premises to Landlord. If Tenant fails to surrender such
premises, Landlord may, without prejudice to any other remedy which it may have
for possession of the demised premises or arrearages in rent, enter upon and
take possession of the demised premises and expel or remove Tenant and any other
person who may be occupying such premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim for damages
therefor. Tenant shall pay to Landlord on demand the amount of all loss and
damage which Landlord may suffer by reason of such termination, whether through
inability to relet the demised premises on satisfactory terms or otherwise.

LEASE AGREEMENT - page 7

<PAGE>

B. Enter upon and take possession of the demised premises, by force
if necessary, without terminating this lease and without being liable for
prosecution or for any claim for damages therefor, and expel or remove Tenant
and any other person who may be occupying such premises or any part thereof.
Landlord may relet the demised premises and receive the rent therefor. Tenant
agrees to pay to Landlord monthly or on demand from time to time any deficiency
that may arise by reason of any such reletting. In determining the amount of
such deficiency, the brokerage commission, attorney's fees, remodeling expenses
and other costs of reletting shall be subtracted from the amount of rent
received under such reletting.

C. Enter upon the demised premises, by force, if necessary, without
terminating this lease and without being liable for prosecution or for any claim
for damages therefor, and do whatever Tenant is obligated to do under the terms
of this lease. Tenant agrees to pay Landlord on demand for expenses which
Landlord may incur in thus effecting compliance with Tenant's obligations under
this lease, together with interest thereon at the rate of 10% per annum from the
date caused by negligence of Landlord or otherwise.

Pursuit of any of the foregoing remedies shall not preclude pursuit of any
of the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided, constitute a forfeiture or waiver
of any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, conditions and covenants herein
contained.

21. LANDLORD'S LIEN: In addition to the statutory Landlord's lien,
Tenant hereby grants to Landlord a security interest to secure payment of all
rent and other sums of money becoming due hereunder from Tenant, upon all goods,
wares, equipment, fixtures, furniture and other personal property of Tenant
situated in or upon the demised premises, together with the proceeds from the
sale or lease thereof. Such property shall not be removed without the consent
of Landlord until all arrearages in rent and other sums of money then due to
Landlord hereunder shall first have been paid and discharged. Upon the
occurrence of an event of default, Landlord may, in addition to any other
remedies provided herein or by law, enter upon the demised premises and take
possession of any and all goods, wares, equipment, fixtures, furniture and other
personal property of Tenant situated on the premises without liability for
trespass or conversion, and sell the same at public or private sale, with or
without having such property at the sale, after giving Tenant reasonable notice
of the time and place of any such sale. Unless otherwise required by law,
notice to Tenant of such sale shall be deemed sufficient if given in the manner
prescribed in this lease at least 10 days before the time of the sale. Any
public sale made under this paragraph shall be deemed to have been conducted in
a commercially reasonable manner if held in the demised premises or where the
property is located, after the time, place and method of sale and a general
description of the types of property to be sold have been advertised in a daily
newspaper published in Tarrant County, Texas, for five consecutive days before
the date of the sale. The proceeds from any disposition dealt with in this
paragraph, less any and all expenses connected with the taking of possession,
holding and selling of the property (including reasonable attorneys' fees and
legal expenses), shall be paid to Tenant or as otherwise required by law; Tenant
shall pay any deficiencies forthwith. Upon request by Landlord, Tenant agrees
to execute and deliver to Landlord a financing statement in form sufficient to
perfect the security interest of Landlord in the

LEASE AGREEMENT - page 8

<PAGE>

aforementioned property and proceeds thereof under the provisions of the Uniform
Commercial Code in force in the State of Texas. The statutory lien for rent is
expressly reserved; the security interest herein granted is in addition and
supplementary thereto.

22. ATTORNEYS' FEES: If, on account of any breach or default by
Landlord or Tenant of their respective obligations under this lease, it shall
become necessary for the other to employ an attorney to enforce or defend any of
its rights or remedies hereunder, and should such party prevail, it shall be
entitled to any reasonable attorneys' fees incurred in such connection.

23. QUIET ENJOYMENT: Landlord warrants that it has full right and power
to execute and perform this lease and to grant the estate demised herein and
that Tenant, on payment of the rent and performing the covenants herein
contained, shall peaceably and quietly have, hold and enjoy the demised premises
during the full term of this lease and any extension or renewal hereof;
provided, however, that Tenant accepts this lease subject and subordinate to
any recorded mortgage, deed of trust or other lien presently existing upon the
demised premises. Landlord is hereby irrevocably vested with full power and
authority to subordinate Tenant's interest hereunder to any mortgage, deed of
trust or other lien hereafter placed on the demised premises, and Tenant agrees
upon demand to execute such further instruments subordinating this lease as
Landlord may request, provided such further subordination shall be upon the
express condition that this lease shall be recognized by the mortgage and that
the rights of Tenant shall remain in full force and effect during the term of
this lease so long as Tenant shall continue to perform all of the covenants of
this lease.

24. WAIVER OF DEFAULT: No waiver by the parties hereto of any default or
breach of any term, condition or covenant of this lease shall be deemed to be
waiver of any subsequent default or breach of the same or any other term,
condition or covenant contained herein.

25. CERTIFICATE OF OCCUPANCY: Tenant may, prior to the commencement of
the term of this lease, apply for a Certificate of Occupancy to be issued by the
municipality in which the demised premises are located, but this lease shall not
be contingent upon issuance thereof. Nothing herein contained shall obligate
Landlord to install any additional electrical wiring, plumbing or plumbing
fixtures which are not presently existing in the demised premises, or which have
not been expressly agreed upon by Landlord in writing.

26. FORCE MAJEURE: In the event performance by Landlord of any term,
condition or covenant in this lease is delayed or prevented by any Act of God,
strike, lockout, shortage of material or labor, restriction by any governmental
authority, civil riot, flood, and any other cause not within the control of
Landlord, the period for performance of such terms, conditions or covenant shall
be extended for a period equal to the period Landlord is so delayed or hindered.

27. EXHIBITS: All exhibits, attachments, annexed instruments and addenda
referred to herein shall be considered a part hereof for all purposes with the
same force and effect as if copied at full length herein.

28. USE OF LANGUAGE: Words of any gender used in this lease shall be
held and construed to include any other gender, and words in the singular shall
be held to include the plural, unless the context otherwise requires.

29. CAPTIONS: The captions or headings of paragraphs in this lease are
inserted for convenience only, and shall not be considered in construing the
provisions hereof if any question of intent should arise.

LEASE AGREEMENT - page 9

<PAGE>

30. SUCCESSORS: The terms, conditions and covenants, contained in this
lease shall apply to, inure to the benefit of, and be binding upon the parties
hereto and their respective successors in interest and legal representatives
except as otherwise herein expressly provided. All rights, powers, privileges,
immunities and duties of Landlord under this lease including, but not limited
to, any notices required or permitted to be delivered by Landlord to Tenant
hereunder, may, at Landlord's option, be exercised or performed by Landlord's
agent or attorney.

31. SEVERABILITY: If any provision in this lease should be held to be
invalid or unenforceable, the validity and enforceability of the remaining
provisions of this lease shall not be affected thereby.

32. NOTICES: Any notice or document required or permitted to be
delivered hereunder may be delivered in person or shall be deemed to be
delivered, whether actually received or not, when deposited in the United States
mail, postage prepaid, registered or certified mail, return receipt requested,
addressed to the parties at the addresses indicated below, or at such other
addresses as may have theretofore been specified by written notice delivered in
accordance herewith.

LANDLORD TENANT
-------- ------
E. Ann and John P. Flavin Optigraphics Corporation

924 Avenue J East 924 Avenue J East
Grand Prairie, Texas 75050 Grand Prairie, Texas 75050

35. SPECIAL CONDITIONS: Tenant shall be subject to all restrictive
covenants regarding the demised premises and hereby covenants that it will do no
act or thing which would constitute a violation under such restrictive
covenants.

EXECUTED this day of , 1987.
-------- --------

LANDLORD

/s/ E. Ann Flavin
---------------------------------
E. Ann Flavin

/s/ John P. Flavin
---------------------------------
John P. Flavin

TENANT

Optigraphics Corporation

By: /s/ E. Ann Flavin
----------------------------
E. Ann Flavin, President

LEASE AGREEMENT - page 10

Exhibit 10.10

================================================================================

ASSET PURCHASE AGREEMENT

Dated as of April 16, 1996

by and among

DONRUSS TRADING CARDS, INC.,

LEAF, INC.

and

PINNACLE BRANDS, INC.

================================================================================

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II

PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . 7
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Inventory Count . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . 9
2.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE III

REPRESENTATIONS OF SELLER AND LEAF . . . . . . . . . . . . . . . . . . . 10
3.1 Organization of Seller and Leaf . . . . . . . . . . . . . . . . . . 10
3.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Compliance with Law; Permits . . . . . . . . . . . . . . . . . . . 12
3.8 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . 12
3.9 1996 Shipment Schedule . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 Return Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 License Royalties . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 Title; Sufficiency of Assets . . . . . . . . . . . . . . . . . . . 13
3.14 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . 13
3.15 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16 Sales Documents and Invoices . . . . . . . . . . . . . . . . . . . 14
3.17 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . 14
3.18 Disclaimer of Other Representations and Warranties . . . . . . . . 14
3.19 Tax Representations and Warranties . . . . . . . . . . . . . . . . 14

<PAGE>

Page
----

ARTICLE IV

REPRESENTATIONS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Existence and Good Standing of Purchaser . . . . . . . . . . . . . 15
4.2 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE V

COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Review of Seller . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Books and Records; Confidentiality . . . . . . . . . . . . . . . . 18
5.6 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Seller's Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 Non-Competition with the Business . . . . . . . . . . . . . . . . . 19
5.9 Remittance of Deposits . . . . . . . . . . . . . . . . . . . . . . 19
5.10 Manner of Sale of Excluded Inventory . . . . . . . . . . . . . . . 19
5.11 Release of Certain Obligations . . . . . . . . . . . . . . . . . . 19
5.12 Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.13 Customer Communication . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.15 Return Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.16 New Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.17 Packaging Services . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE VI

CONDITIONS TO PURCHASER'S OBLIGATIONS . . . . . . . . . . . . . . . . . 21
6.1 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . 21
6.2 Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . . . 21
6.3 Representations and Warranties . . . . . . . . . . . . . . . . . . 21
6.4 Performance of Agreements . . . . . . . . . . . . . . . . . . . . . 21
6.5 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Ancillary Documents . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . 22

<PAGE>

Page
----

ARTICLE VII

CONDITIONS TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . 22
7.1 Opinion of Purchaser's Counsel . . . . . . . . . . . . . . . . . . 22
7.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 22
7.3 Performance of Agreements . . . . . . . . . . . . . . . . . . . . . 22
7.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . 23
7.6 Ancillary Documents . . . . . . . . . . . . . . . . . . . . . . . . 23
7.7 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 Tennessee Sales Tax Exemption . . . . . . . . . . . . . . . . . . . 23

ARTICLE VIII

EVENTS OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE IX

SURVIVAL OF REPRESENTATIONS: INDEMNITY . . . . . . . . . . . . . . . . . 24
9.1 Survival of Representations . . . . . . . . . . . . . . . . . . . . 24
9.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.3 Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . 25
9.4 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.5 Exclusive Remedies . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE X

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.7 Headings: References . . . . . . . . . . . . . . . . . . . . . . . 29
10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.9 Parties in Interest; Assignment . . . . . . . . . . . . . . . . . . 29
10.10 Severability; Enforcement . . . . . . . . . . . . . . . . . . 29
10.11 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.12 HSR Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.13 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . 30

iii

<PAGE>

EXHIBITS

EXHIBIT 1 Leaf Trademark License Agreement
EXHIBIT 2 Bill of Sale
EXHIBIT 3 Donruss Trademark License Agreement
EXHIBIT 4 Assumption Agreement

<PAGE>

ASSET PURCHASE AGREEMENT
------------------------

ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of April 16,
1996, by and among DONRUSS TRADING CARDS, INC., a corporation organized under
the laws of the State of Delaware ("Seller"), LEAF, INC., a corporation
organized under the laws of the State of Delaware ("Leaf"), and PINNACLE BRANDS,
INC., a corporation organized under the laws of the State of Delaware
("Purchaser").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, Seller owns all of the Assets (as hereinafter defined);

WHEREAS, Leaf owns 95% of the outstanding capital stock of Seller; and

WHEREAS, on the terms and subject to the conditions set forth herein,
Seller desires to sell to Purchaser and Purchaser desires to purchase from
Seller the Assets;

NOW THEREFORE, in consideration of the mutual covenants and conditions
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

ARTICLE I

DEFINITIONS
-----------

The following capitalized terms when used in this Agreement shall have
the following meanings:

"Affiliate" of a Person shall mean a Person that directly or
---------
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under Common Control with the first Person; provided that the term
"Affiliate" shall not include any of NLS, Mark November, Gene Scher or Craig
Lazar.

"Agreement" shall have the meaning set forth in the introductory
---------
paragraph hereof.

"Assets" shall mean all of the right, title and interest of Seller in
------
and to:

(a) only those (x) raw materials listed on Schedule A to the extent
existing on the Closing Date or acquired by Seller for use in the
Business after March 31, 1996

<PAGE>

on a basis consistent with Seller's normal practices and (y) work-in-
process and finished goods relating to the Business for products of
those series listed on Schedule A that have not begun to be shipped by
Seller prior to the Closing Date ("Inventory");

(b) all contracts and commitments to purchase materials and supplies
which were entered into for use in the Business on a basis consistent
with Seller's normal practices, with any of the vendors listed on
Schedule B;

(d) all trademarks, tradenames, trademark and tradename registrations,
service marks, brand marks and brand names used in or relating to the
Business, including, without limitation, the name "Donruss" and all
registrations and pending applications relating thereto, but excluding
the name and mark "Leaf" and all registrations and pending
applications relating thereto;

(e) Seller's collection of sports trading cards used for card
replacement services, but excluding any such cards produced prior to
January 1, 1992;

(f) Product Concepts;

(g) customer purchase orders for Inventory;

(h) Customer Deposits;

(i) copies of all customer lists relating to the Business;

(j) copies of all current vendor and subcontractor lists relating to
the Business; and

(k) all documents, files, market research and records (or copies
thereof) relating primarily to the Business.

"Assumed Liabilities" shall mean, and shall be expressly limited to,
-------------------
(i) trade payables incurred for the purchase of Inventory acquired by Purchaser
to the extent set forth on the Payables Certificate delivered pursuant to
Section 2.4; (ii) all liabilities and obligations for performance following the
Closing arising under the contracts and commitments listed on Schedule C,
including, without limitation, the NHL Export License Agreement and the Sports
License Agreements and the highlighting agreements with Frank Thomas and Eric
Lindros; (iii) liabilities and obligations under purchase orders for materials
and supplies for use in the Business after the Closing Date in connection with
series of sports trading cards scheduled for the current year incurred on a
basis consistent with Seller's normal practices, with any of the vendors listed
on Schedule B; (iv) all liabilities and obligations to fulfill sales orders for
which

<PAGE>

Seller has remitted to Purchaser Customer Deposits; (v) all liabilities for
Taxes for all periods after the Closing Date arising from or related to
Purchaser's ownership of the Assets or operation of the Business; and (vi) those
Commitments listed on Schedule D. The Assumed Liabilities shall not include any
liabilities or obligations not expressly included in Assumed Liabilities;
accordingly, among other things, the Purchaser is not assuming any of Seller's
liabilities pertaining to (a) obligations under any contracts or arrangements
with or relating to NLS, (b) obligations of Seller to Leaf or any Affiliate of
Leaf, excluding any amount payable with respect to packaging and finishing
services provided by Leaf pursuant to the first sentence of Section 5.17,
(c) any liabilities for Taxes arising from or related to the Assets or the
Business for all periods prior to or including the Closing Date, other than as
set forth in Section 10.13, (d) any liabilities arising from or relating to
Seller's interactive card games and entertainment trading card businesses,
(e) any credits against accounts receivable attributable to (i) the conduct of
the Business prior to the Closing or (ii) the conduct of any other business by
Seller or Leaf at any time or (f) shutdown, severance and similar costs of
Seller.

"Balance Sheet" shall have the meaning set forth in Section 3.3.
-------------

"Baseball Minimum Royalties" shall mean the minimum royalties paid by
--------------------------
Seller pursuant to the license agreements between Seller or Leaf and each of
Major League Baseball Players Association and Major League Baseball Properties,
Inc. with respect to the period commencing on January 1, 1996 and ending on the
Closing Date.

"Baseball Sports Trading Cards" shall mean sports trading cards
-----------------------------
bearing the LEAF or DONRUSS name and sold pursuant to the license agreements
between Seller or Leaf and each of Major League Baseball Players Association and
Major League Baseball Properties, Inc.

"Business" shall mean the creation, production, advertisement,
--------
marketing promotion, sale and distribution of sports trading cards.

"Business Combination" shall have the meaning set forth in
--------------------
Section 5.2.

"Business Day" shall mean any day except Saturday, Sunday and any day
------------
which shall be in the City of New York, New York, a legal holiday or a day on
which banking institutions are authorized or required by law or other government
action to close.

"Claim" shall have the meaning set forth in Section 9.3.
-----

"Closing" shall have the meaning set forth in Section 2.6.
-------

"Closing Date" shall have the meaning set forth in Section 2.6.
------------

"Closing Payment" shall have the meaning set forth in Section 2.3.
---------------

<PAGE>

"Code" shall mean the Internal Revenue Code of 1986, as amended.
----

"Commitments" shall have the meaning set forth in Section 3.14(a).
-----------

"Confidentiality Agreement" shall have the meaning set forth in
-------------------------
Section 5.3.

"Control" (including the terms "Controlled by" and "under Common
------- ------------- ------------
Control with") shall mean the direct or indirect possession of ordinary voting
- ------------
power to elect a majority of the Board of Directors (or comparable body) of a
Person.

"Customer Deposits" shall have the meanings set forth in Section 5.9.
-----------------

"Damages" shall have the meaning set forth in Section 9.2(a).
-------

"Donruss Trademark License Agreements" shall have the meaning set
------------------------------------
forth in Section 6.7.

"Excluded Assets" shall mean (i) all cash, cash equivalents,
---------------
certificates of deposit, notes, drafts, checks and similar instruments other
than Customer Deposits; (ii) general books of account and books of original
entry that comprise Seller's permanent or tax records and books and records that
Seller is required to retain pursuant to any statute, rule or regulation or that
do not relate primarily to the Business; (iii) intercompany account balances
owed to Seller from any Affiliate of Seller; (iv) all insurance policies of
Seller and all rights of Seller of every nature and description under or arising
out of such insurance policies; (v) all license and other contracts not part of
the definition of Assets; (vi) inventory which is not covered by the definition
of Inventory or paragraph (e) of the definition of Assets; (vii) any and all
assets and rights of Seller relating to interactive cards, interactive card
games and entertainment cards except those relating to the Donruss name;
(viii) claims for refunds of Taxes (including, without limitation, Income
Taxes); (ix) all past, present and future claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind to the extent
relating to the operation of the Business prior to the Closing Date and except
to the extent representing a defense or set-off with respect to claims that may
be asserted against Purchaser; (x) prepaid insurance; (xi) all machinery and
equipment; and (xii) all bank accounts maintained by Seller.

"Excluded Inventory" shall mean the inventory not included in the
------------------
definition of Inventory or in paragraph (e) of the definition of Assets and any
returns of inventory shipped by Seller prior to the Closing Date.

"GAAP" shall have the meaning set forth in Section 3.3.
----

"Governmental Authority" shall have the meaning set forth in Section
----------------------
3.5.

<PAGE>

"Gross Sales" shall mean "Gross Sales" (or an equivalent term used to
-----------
denote the measure of sales by which royalties are computed) as used in the
applicable Sports License Agreement, as the context requires.

"Hockey Credit Returns" shall have the meaning set forth in Section
---------------------
5.12.

"Hockey Sports Trading Cards" shall mean sports trading cards bearing
---------------------------
the LEAF or DONRUSS name and sold pursuant to the license agreements between
Seller or Leaf and each of the National Hockey League Players Association and
National Hockey League Enterprises, Inc.

"HSR Act" shall have the meaning set forth in Section 3.4.
-------

"Income Taxes" shall mean (a) foreign, federal, state or local income
------------
or franchise taxes or other taxes imposed on or with respect to net income or
capital, together with any interest or penalties or additions to tax imposed
with respect thereto, and (b) any obligations under any agreements or
arrangements with respect to any Income Taxes described in clause (a) above.

"Income Tax Returns" shall mean foreign, federal, state or local Tax
------------------
Returns required to be filed with any Taxing Authority that include Seller and
pertain to Income Taxes.

"Indemnified Party" shall have the meaning set forth in Section 9.3.
-----------------

"Indemnifying Party" shall have the meaning set forth in Section 9.3.
------------------

"Intellectual Property" shall have the meaning set forth in Section
---------------------
3.6(a).

"Inventory" shall have the meaning set forth in the definition of
---------
Assets.

"Inventory Payment" shall have the meaning set forth in Section 2.3.
-----------------

"License Agreements" shall have the meaning set forth in Section 3.12.
------------------

"Leaf Trademark License Agreement" shall have the meaning set forth in
--------------------------------
Section 6.7.

"Liens" shall mean any lien, claim, charge, security interest,
-----
mortgage, deed of trust, pledge, option, easement, limitation or other
encumbrance, or any agreement to give any of the foregoing.

"Material Adverse Effect" shall mean any effect on the Business that
-----------------------
is either individually or in the aggregate, materially adverse to the business,
operations, Assets or financial condition of Seller or the Business.

<PAGE>

"Net Sales" shall mean "Net Sales" (or an equivalent term used to
---------
denote the measure of sales by which royalties are computed) as used in the
applicable Sports License Agreement, as the context requires.

"NLS" shall mean November Lazar Scher, Inc.
---

"Non-competition Fee" shall mean $5,000,000.
-------------------

"Parent" shall mean Huhtamaki Oy, a company organized under the laws
------
of Finland.

"Payables Certificate" shall have the meaning set forth in Section
--------------------
2.4.

"Person" shall mean an individual, partnership, joint venture,
------
corporation, trust, unincorporated organization, limited liability company or
other entity.

"Product Concepts" shall mean concepts, ideas, artwork or other works
----------------
in process which are reduced to writing or other tangible form (including
photographs, negatives, computer files or other electronic storage) or
incorporated in prototypes created or prepared by or on behalf of Seller
relating to the Business.

"Purchase Price" shall have the meaning set forth in Section 2.3.
--------------

"Purchaser" shall have the meaning set forth in the introductory
---------
paragraph hereof.

"Representatives" shall have the meaning set forth in Section 5.2.
---------------

"Return Policy" shall have the meaning set forth in Section 3.11.
-------------

"Seller" shall have the meaning set forth in the introductory
------
paragraph hereof.

"Shipment Schedule" shall have the meaning set forth in Section 3.9.
-----------------

"Sports License Agreements" shall mean the license agreements between
-------------------------
Seller or Leaf and each of Major League Baseball Players Association, Major
League Baseball Properties, Inc., the National Hockey League Players Association
and National Hockey League Enterprises, Inc. listed on Schedule 3.12 attached
hereto.

"Tax" or "Taxes" shall mean (a) any and all taxes (whether federal,
--- -----
state, local or foreign), including, without limitation, gross receipts,
profits, sales, use, occupation, value added, ad valorem, transfer, franchise,
withholding, payroll, employment, excise, or property taxes, together with any
interest, penalties or additions to tax imposed with respect thereto and (b) any
obligations under any agreements or arrangements with respect to any Tax or
Taxes described in clause (a) above.

<PAGE>

"Tax Returns" shall mean returns, reports and forms required to be
-----------
filed with any Taxing Authority.

"Taxing Authority" shall mean any governmental authority, domestic or
----------------
foreign, having jurisdiction over the assessment, determination, collection, or
other imposition of any Tax.

"Third Party Consents" shall have the meaning set forth in
--------------------
Section 3.5.

"Transfer Taxes" shall have the meaning set forth in Section 10.13.
--------------

"WARN Act" shall have the meaning set forth in Section 5.14.
--------

ARTICLE II

PURCHASE AND SALE OF ASSETS
---------------------------

Section 2.1 Purchase and Sale of Assets. (a) On the terms and
---------------------------
subject to the conditions of this Agreement, at the Closing, Seller and Leaf
will sell, assign, transfer, convey and deliver to Purchaser, and Purchaser will
accept and purchase from Seller, the Assets.

(b) On or prior to July 31, 1996, Purchaser shall (x) prepare and
deliver to Seller copies of the royalty reports (certified by the Chief
Financial Officer of Purchaser as true and correct) required to be delivered
pursuant to the license agreements with each of the National Hockey League
Players Association and National Hockey League Enterprises, Inc. listed on
Schedule 3.12 attached hereto with respect to the DONRUSS ELITE Hockey Sports
Trading Cards and (y) pay to Seller by wire transfer of immediately available
funds to an account designated by Seller an amount equal to 21.7% of the Net
Sales from DONRUSS ELITE Hockey Sports Trading Cards by Purchaser prior to July
1, 1996 as reflected in such royalty reports less the aggregate amount, if any,
of royalties paid or payable by the Purchaser with respect to such Net Sales.

(c) On the Closing Date Purchaser shall also pay to Seller by wire
transfer of immediately available funds to an account designated by Seller an
amount (the "Minimum Royalty Payment") equal to the excess, if any, of (x) the
Baseball Minimum Royalties over (y) 22% of Gross Sales from Baseball Sports
Trading Cards during the period commencing on January 1, 1996 and ending on the
Closing Date (the "Baseball Royalty Period"). At the Closing, Seller will
provide a certificate to Purchaser, dated the Closing Date, certifying the
amount of the Baseball Minimum Royalties and the Gross Sales of Baseball Sports
Trading Cards recorded by Seller with respect to the Baseball Royalty Period.
If the aggregate minimum royalties paid by both Purchaser and Seller from
January 1, 1996 to December 31, 1996 pursuant to the license agreements with
each of Major League Baseball Players Association and Major League Baseball
Properties, Inc. exceeds 22% of the aggregate of (i) Purchaser's Gross Sales of
Baseball Sports Trading Cards and (ii) Seller's Gross Sales of Baseball Sports
Trading Cards between such dates,

<PAGE>

then Seller shall pay to Purchaser an amount equal to the excess, if any, of (x)
the aggregate of (i) minimum royalties paid by Purchaser from the Closing Date
to December 31, 1996 and (ii) the Minimum Royalty Payment over (y) the Purchaser
Percentage of Minimum Royalties (as defined below). As used in this section,
"Purchaser Percentage of Minimum Royalties" shall equal the product of (A) the
quotient of Purchaser's Gross Sales of Baseball Sports Trading Cards from the
Closing Date to December 31, 1996 divided by the aggregate of Purchaser's and
Seller's Gross Sales of Baseball Sports Trading Cards from January 1, 1996 to
December 31, 1996 and (B) the minimum royalties paid by both Purchaser and
Seller from January 1, 1996 to December 31, 1996 pursuant to the license
agreements with each of Major League Baseball Players Association and Major
League Baseball Properties, Inc. Purchaser agrees to provide Seller with
reasonable documentation to enable Seller to verify any amounts payable under
this Section 2.1(c) and Section 5.12, including without limitation copies of
royalty reports submitted pursuant to the Sports License Agreements.

Section 2.2 Excluded Assets. Seller and Purchaser agree that
---------------
Purchaser is only purchasing the Assets. Accordingly, at the Closing, Seller
shall retain all of its right, title and interest in and to, there shall be
excluded from sale, assignment or transfer to Purchaser hereunder, and the
Assets shall not include any assets not included in the definition of Assets,
including but not limited to the Excluded Assets.

Section 2.3 Purchase Price. In consideration of the transfer and
--------------
conveyance of the Assets to Purchaser, Purchaser shall (a) pay to Seller
$27,500,000 (the "Closing Payment"), (b) assume the Assumed Liabilities and
(c) pay to Seller the amount, if any, by which the book value of the Inventory
on the Closing Date, as determined in accordance with Section 2.4, exceeds
$1,750,000 (the "Inventory Payment"); provided, however, that the Inventory
-------- -------
Payment shall be reduced by the amount of any trade payables or other
obligations for the purchase of such Inventory which are assumed by Purchaser on
the Closing Date. The Closing Payment and the Non-competition Fee shall be paid
at the Closing by bank wire transfer of immediately available funds to an
account designated by Seller in writing to Purchaser at least two Business Days
prior to the Closing. The Inventory Payment, if any, shall be paid on the
second Business Day following delivery of the certificate of Seller's
accountants to Purchaser as contemplated by Section 2.4, by wire transfer of
immediately available funds to an account designated by Seller. The amount of
the Closing Payment plus the amount of the Inventory Payment shall be referred
to herein as the "Purchase Price."

Section 2.4 Inventory Count. (a) On the Closing Date, Seller shall
---------------
cause its accountants, KPMG Peat Marwick LLP, to perform a physical count of the
Inventory and determine the book value thereof on a basis consistent with
Seller's past practices, as set forth on Schedule 2.4. Purchaser shall be
entitled to have one or more of its Representatives present when such Inventory
is counted. Seller shall deliver to Purchaser (x) a certificate of its
accountants (the "Certificate") which certificate shall set forth the book value
of the Inventory determined in accordance with the foregoing procedures and
(y) a certificate which shall set forth the estimated amount and description of
any trade payables or other obligations for the purchase

<PAGE>

of such Inventory. Within 10 Business Days after the Closing Date, Seller shall
deliver to Purchaser a certificate (the "Payables Certificate") which shall set
forth the actual amount and description of any trade payables or other
obligations for the purchase of such Inventory which are assumed by Purchaser on
the Closing Date.

(b) Unless Purchaser, within 10 Business Days of receipt of the
Certificate, gives Seller a notice objecting to the book value of the Inventory
set forth therein and specifying in reasonable detail the basis for such
objection, the book value as set forth in the Certificate shall be considered
accepted and binding upon Purchaser and Seller. If within 10 Business Days
after receipt of the Certificate Purchaser gives a notice of objection to
Seller, the dispute shall be submitted to the New York City office of one of the
six largest firms of certified public accountants in the United States as agreed
by Purchaser and Seller or, if they do not agree on the selection thereof, as
designated by the American Arbitration Association in New York City, in either
case from those of such six firms as are not then engaged by Purchaser, Seller
or Leaf or any of their respective parents, for resolution. If issues in
dispute are submitted to such accountants for resolution, (i) each party will
furnish to the accountants such workpapers and other documents related to the
dispute as the accountants may request and will be afforded the opportunity to
present to the accountants and to discuss the determination with the
accountants, (ii) the determination of the accountants shall be binding and
conclusive on the parties, and (iii) Purchaser and Seller shall each bear one-
half of the fees of the accountants for such determination.

Section 2.5 Allocation of Purchase Price. The Purchase Price shall
----------------------------
be allocated in accordance with Section 1060 of the Code as Purchaser and Seller
may agree prior to the Closing Date. In addition, Seller and Purchaser hereby
undertake and agree to file timely any information that may be required to be
filed pursuant to Treasury Regulations promulgated under Section 1060(b) of the
Code. Neither Seller nor Purchaser shall file any tax return or other document
or otherwise take any position which is inconsistent with the allocation
determined pursuant to this Section 2.5.

Section 2.6 Closing. (a) The closing of the transactions
-------
contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m. on
the latest to occur of (i) the second Business Day following the expiration of
the waiting period under the HSR Act and (ii) the second Business Day after
Purchaser gives Seller notice that it expects that the condition in Section 6.8
hereof shall be satisfied; provided, however, that the Closing shall not occur
-------- -------
later than May 31, 1996. The Closing shall occur at the offices of Kaye,
Scholer, Fierman, Hays & Handler, LLP, 425 Park Avenue, New York, New York
10022, or at such other date and time as the parties may mutually agree. The
date on which the Closing occurs is herein called the "Closing Date."

(b) All of the actions taken and documents executed or delivered at
the Closing shall be deemed to be taken, executed or delivered simultaneously,
and no such action, execution or delivery shall be effective until all such
actions to be taken and executions and deliveries to be accomplished are
complete.

<PAGE>

Section 2.7 Further Assurances. (a) At any time and from time to
------------------
time at and after the Closing, at the request and expense of Purchaser, Seller
and Leaf shall execute and deliver or cause to be executed and delivered all
such deeds, assignments, consents, and other documents, and take or cause to be
taken all such other actions, as Purchaser reasonably deems necessary or
desirable in order to (i) put Purchaser in actual possession or operating
control of the Assets, (ii) more fully and effectively vest in Purchaser, or
confirm its title to and possession of, the Assets or (iii) otherwise carry out
the terms of this Agreement, but not including the payment of money, the
incurrence of liabilities, or the modification of any right or obligation.

(b) At any time and from time to time at and after the Closing, at
the request and expense of Seller, Purchaser shall execute and deliver or cause
to be executed and delivered, all such documents, and take or cause to be taken
all such other actions, as Seller reasonably deems necessary or desirable in
order to more fully and effectively divest Seller of the Assumed Liabilities and
incidents of ownership of the Assets or otherwise carry out the terms of this
Agreement.

ARTICLE III

REPRESENTATIONS OF SELLER AND LEAF
----------------------------------

Seller and Leaf jointly and severally represent and warrant as
follows:

Section 3.1 Organization of Seller and Leaf. Each of Seller and
-------------------------------
Leaf is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware with the corporate power and authority
to make, execute, deliver and perform this Agreement and, with respect to Leaf,
the Leaf Trademark License Agreement, and the other documents to be executed and
delivered by them pursuant to this Agreement, and to perform their respective
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of each of Seller
and Leaf. This Agreement has been, and upon execution thereof the Leaf
Trademark License Agreement and the Donruss Trademark License Agreements will
have been, duly executed and delivered by each of Seller and Leaf and
constitutes or will constitute the valid, binding and enforceable obligation of
each of Seller and Leaf, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other similar laws affecting creditors' rights
generally from time to time in effect and to general equitable principles.

Section 3.2 Corporate Power. Seller has all requisite corporate
---------------
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Seller is duly qualified or licensed as a
foreign corporation to do business and is in good standing in each jurisdiction
in which the character or location of the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary,

<PAGE>

except where the failure to be so duly qualified or licensed could not
reasonably be expected to have a Material Adverse Effect.

Section 3.3 Financial Statements. Seller has heretofore furnished
--------------------
Purchaser with an unaudited statement of net operating assets (the "Balance
Sheet") of the Business as at December 31, 1995. The Balance Sheet was prepared
in accordance with United States generally accepted accounting principles
("GAAP") and fairly presents in all material respects the financial condition of
Seller at such date; provided, however, that there are no notes to such
-------- -------
statement.

Section 3.4 No Violations. Except as set forth in Schedule 3.4 or
-------------
Schedule 3.5(a) attached hereto and assuming all filings required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
are duly made and the waiting period thereunder has been terminated or has ex-
pired, the execution and delivery of this Agreement by Seller and Leaf and the
consummation of the transactions contemplated hereby (a) will not violate any
provision of the Certificate of Incorporation or By-Laws or any other
organizational documents of Seller and Leaf, (b) will not violate any statute,
rule, regulation, order or decree of any public body or authority by which it is
bound and (c) will not result in a violation or breach of, or constitute a
default under, any license, franchise, permit, indenture, agreement or other
instrument to which Seller or Leaf is bound, except in the case of (c) for such
violations, breaches or defaults that do not relate to the Sports License
Agreements and could not reasonably be expected to otherwise result in a
Material Adverse Effect.

Section 3.5 Consents. (a) Except as described in Schedule 3.5(a)
--------
attached hereto, no consent, authorization, order or approval of, filing or
registration with, or notice to, any United States federal, state and foreign
governmental commission, board or other regulatory body or agency (each a
"Governmental Authority"), and (b) except as described in Schedule 3.5(b)
attached hereto, no consent, authorization, approval, waiver, order, license,
certificate or permit or act of or from, or notice to, any party to any
mortgage, indenture, lease, franchise license, permit, agreement or instrument
(collectively, "Third Party Consents") to which Seller is a party or by which
any of its assets or properties are bound, is required for the execution and
delivery of this Agreement by Seller and Leaf and the consummation by Seller and
Leaf of the transactions contemplated hereby.

Section 3.6 Intellectual Property. (a) Set forth in Schedule
---------------------
3.6(a) attached hereto is a list of the material domestic and foreign patents,
patent applications, trade names, trademarks, service marks, trademark
registrations and applications, service mark registrations and applications,
copyright registrations and applications owned by Seller or Leaf, which are used
in the Business (collectively, the "Intellectual Property"). Unless otherwise
noted in Schedule 3.6(a), Seller or Leaf owns the entire right, title and
interest in and to the Intellectual Property (including, without limitation, the
exclusive right to use and license the same) and each item constituting part of
the Intellectual Property has been, to the extent indicated in Schedule 3.6(a),
duly registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office or such other government entity, domestic or
foreign, as is indicated in Schedule 3.6(a) and such registrations, filings and
issuances remain in full force and

<PAGE>

effect. To the knowledge of Seller and Leaf, except as stated in
Schedule 3.6(a), there are no pending proceedings or litigation or other adverse
claims made in writing affecting or with respect to the Intellectual Property.

(b) Schedule 3.6(b) hereto is a complete and accurate list of all
Persons (other than NLS or salaried employees of Leaf or Seller) that Seller and
Leaf have since July 1, 1995 employed or contracted with in connection with the
research, development and creation of new products relating to the Business,
regardless of whether such new products were or will be placed into production
or distribution. Except as set forth on Schedule 3.6(b) hereto, Seller and, to
the extent relating to the Business, Leaf have not entered into any agreement,
written or otherwise, granting any rights of ownership or use to any of the
Intellectual Property, including but not limited to Product Concepts now or
previously existing, to any Person. Neither Seller or Leaf has any knowledge of
any claim that any product, activity or operation of Seller or Leaf, to the
extent relating to the Business, infringes upon or has resulted in the
infringement of any patent, trademark, copyright or other similar right of any
other Person; and no proceedings have been instituted, are pending or are
threatened which challenge the rights of Seller with respect thereto. Neither
Seller nor Leaf has given nor is bound by any agreement of indemnification for
any patent, trademark, copyright or other similar right as to any property
manufactured, used or sold by Seller in connection with the Business.

Section 3.7 Compliance with Law; Permits. Except as set forth in
----------------------------
Schedule 3.7 attached hereto, the Business is being conducted in compliance with
all laws, ordinances and regulations of any Governmental Authorities applicable
to it, except to the extent the failure to comply could not reasonably be
expected to result in a Material Adverse Effect. All governmental approvals,
permits and licenses required by it in connection with the conduct of its
business have been obtained and are in full force and effect and are being
complied with in all material respects.

Section 3.8 Broker's or Finder's Fees. No agent, broker, person or
-------------------------
firm retained by the Seller, Leaf or Parent is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Affiliate of any of the parties hereto, in connection with any of the
transactions contemplated herein.

Section 3.9 1996 Shipment Schedule. Schedule 3.9 sets forth a
----------------------
schedule of the anticipated shipment dates during 1996 for each of Seller's
product lines relating to the Inventory (the "Shipment Schedule"). The Shipment
Schedule is accurate and complete in all material respects and fairly reflects
the dates upon which shipment of Seller's product lines is anticipated by the
market. As of the date of this Agreement, nothing has come to the attention of
Seller or Leaf that would render the Shipment Schedule unrealistic or materially
inaccurate.

Section 3.10 Brokers. Schedule 3.10 sets forth a schedule of all
-------
brokers with which Seller has a relationship as of the date of this Agreement,
contractual or otherwise, to the extent relating to the Business. Set forth on
Schedule 3.10 are the material terms and conditions

<PAGE>

of such relationship and any changes to the terms or conditions that would be
triggered by the consummation of the transactions contemplated herein.

Section 3.11 Return Policy. Schedule 3.11 sets forth the Seller's
-------------
policy on customer product returns to the extent relating to the Business as in
effect on the date of this Agreement (the "Return Policy"). Since January 1,
1995, Seller has not in connection with the Business accepted customer product
returns on a basis materially different from the Return Policy.

Section 3.12 License Royalties. All royalties due as of the Closing
-----------------
Date (or to become due after the Closing Date based on sales made prior to the
Closing Date) for sales made by Seller or Leaf, to the extent relating to the
Business, prior to the Closing under the license agreements listed on
Schedule 3.12 (the "License Agreements") have been paid or will be paid by
Seller.

Section 3.13 Title; Sufficiency of Assets. Except as described in
----------------------------
Schedule 3.13(a), Seller owns the Assets, free and clear of all Liens. Except
as described in Schedule 3.13(b), the Assets constitute all the material assets
used by Seller in the conduct of the Business.

Section 3.14 Contracts and Commitments. (a) Schedule C and
-------------------------
Schedule 3.14 list (i) all written contracts or arrangements of Seller or Leaf
(other than contracts with NLS), to the extent relating to the Business, that
involve either an unperformed commitment in excess of $25,000 or that terminate
more than one year from the date hereof; and (ii) all other agreements or
commitments of or to which Seller or Leaf is a party or to which either may be
bound or subject, to the extent relating to the Business, not made in the
ordinary course of business or that are material to the Business (all of the
foregoing, including such contracts and commitments set forth in other Schedules
to this Agreement, are hereinafter collectively referred to as "Commitments").
True, correct and complete copies of the Commitments have heretofore been
delivered to Purchaser. There are no existing defaults, events of default or
events, occurrences or acts that, with the giving of notice or lapse of time or
both, would constitute defaults, and no penalties have been incurred nor are
amendments pending, with respect to Commitments, except as described in
Schedule 3.12 or any other Schedule hereto, except for defaults that do not
relate to the license agreements listed on Schedule 3.14 and would not otherwise
result in a Material Adverse Effect. The Sports License Agreements and, to the
knowledge of Seller and Leaf, all other Commitments are in full force and effect
and are valid and enforceable obligations of the parties thereto in accordance
with their terms, and no defenses, off-sets or counterclaims have been asserted
or, to the best of the knowledge of Seller and Leaf, may be made by any party
thereto, nor has Seller waived any material rights thereunder, except as
described in Schedule 3.14 or any other Schedules hereto. Since July 1, 1995,
Seller has extended no discounts, promotions or other special terms or
conditions to any current or former customer, other than such discounts,
promotions and terms offered in the ordinary course of business (as described on
Schedule 3.14) or as otherwise set forth in Schedule 3.14.

<PAGE>

(b) Except as contemplated herein, Seller and Leaf have not received
notice of any plan or intention of any other party to any Commitment included in
the Assets to exercise any right to cancel or terminate any Commitment included
in the Assets, and Seller and Leaf do not know of no fact that would justify the
exercise of such right. Seller and Leaf do not currently contemplate, nor have
reason to believe any other Person currently contemplates, any amendment or
change to any Commitment included in the Assets. Except as listed in
Schedule 3.14, to the knowledge of Seller and/or Leaf, none of the licensors, -
customers, vendors or suppliers of Seller as of the date of this Agreement has
refused, or communicated that it will refuse, to license, represent, purchase or
supply goods or services, as the case may be, or has communicated that it will
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, Seller, in each case to the extent related to the
Business.

Section 3.15 Inventory. All Inventory is of good, usable and
---------
saleable quality in the ordinary course of business of Seller. All Inventory is
stated at the lower of cost or net realizable value on a first-in, first-out
basis.

Section 3.16 Sales Documents and Invoices. Seller has previously
----------------------------
provided Purchaser with true and complete copies of all standard order forms,
solicitations to buy, invoices and other forms used by Seller or Leaf, to the
extent relating to the Business, in connection with sales to Seller's customers.

Section 3.17 Customers and Suppliers. (a) Schedule 3.17(a) sets
-----------------------
forth the names and addresses of all retail and hobby customers of Seller to the
extent relating to the Business that ordered goods and services from Seller
during the twelve-month period ended December 31, 1995 and the amount for which
each such customer was invoiced during such period.

(b) Schedule 3.17(b) sets forth the names and addresses of all
suppliers from which Seller or Leaf, to the extent relating to the Business,
ordered raw materials, supplies, merchandise and other goods and services during
the twelve-month period ended December 31, 1995 and the amount for which each
such supplier invoiced the Company during such period.

Section 3.18 Disclaimer of Other Representations and Warranties.
--------------------------------------------------
Seller and Leaf do not make, and have not made, any representations or
warranties relating to Seller or Leaf, their respective businesses, operations
or assets or otherwise in connection with the transactions contemplated hereby
other than those expressly set forth in this Article III.

Section 3.19 Tax Representations and Warranties. All material Tax
----------------------------------
Returns for all periods ending on or before, or including, the Closing Date that
are or were required to be filed by, or with respect to, Seller, either
separately or as a member of an affiliated group of corporations, have been or
will be filed on a timely basis in accordance with the laws, regulations and
administrative requirements of each Taxing Authority. Seller and Leaf have paid
or will pay all material Taxes due for all periods ending on or before, or
including, the Closing Date, including, without limitation, all Taxes reflected
on the Tax Returns referred to in this

<PAGE>

Section 3.19 except Transfer Taxes to be paid as provided in Section 10.13
hereof and such Taxes, if any, that are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP consistently
applied) have been provided. All material Taxes that the Seller is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the appropriate Taxing Authority. No
portion of the Assets is property that Seller or Purchaser is or will be
required to treat as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately before the enactment of the Tax Reform Act of 1986, or is "tax-
exempt use property" within the meaning of Section 168(h)(i) of the Code.

ARTICLE IV

REPRESENTATIONS OF PURCHASER
----------------------------

Purchaser represents and warrants as follows:

Section 4.1 Existence and Good Standing of Purchaser. Purchaser is
----------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Purchaser has the corporate power and authority
to make, execute, deliver and perform this Agreement, the Leaf Trademark License
Agreement and the Donruss Trademark License Agreements, and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized and approved by all requisite corporate action of Purchaser.
This Agreement has been, and upon execution thereof, the Leaf Trademark License
Agreement and the Donruss Trademark License Agreements will have been, duly
executed and delivered by Purchaser and constitutes or will constitute valid,
binding and enforceable obligations of Purchaser, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other similar laws
affecting creditors' rights generally from time to time in effect and to general
equitable principles.

Section 4.2 No Violations. Except as set forth in Schedule 4.2 or
-------------
Schedule 4.3(a) attached hereto, and assuming all filings required by the HSR
Act are duly made and the waiting period thereunder has been terminated or
expired, the execution and delivery of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby (a) will not violate any
provision of the Certificate of Incorporation or By-Laws of Purchaser, (b) will
not violate any statute, rule, regulation, order or decree of any public body or
authority by which Purchaser or any of its properties or assets is bound and
(c) will not result in a violation or breach of, or constitute a default under,
any license, franchise, permit, indenture, agreement or other instrument to
which Purchaser is a party, or by which Purchaser or any of its properties or
assets is bound, except in the case of (c) for such violations, breaches or
defaults that could not reasonably be expected to result in a Material Adverse
Effect.

<PAGE>

Section 4.3 Consents. (a) Except as described in Schedule 4.3(a),
--------
no consent, authorization, order or approval of, filing or registration with, or
notice to, any Governmental Authority and (b) except as described in
Schedule 4.3(b), no Third Party Consent to which Purchaser is a party or by
which any of its property or assets is bound is required for the execution and
delivery of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby.

Section 4.4 Financing. Purchaser has provided to Seller a true and
---------
correct copy of the commitment letter it received from Merrill Lynch to arrange
a loan facility for Purchaser. Assuming the availability to Purchaser of the
facility referred to in such letter, Purchaser will have sufficient funds to pay
the Purchase Price and the Non-competition Fee.

Section 4.5 Broker's or Finder's Fees. No agent, broker, person or
-------------------------
firm retained by Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Affiliate
of any of the parties hereto, in connection with any of the transactions
contemplated herein.

ARTICLE V

COVENANTS
---------

Section 5.1 Conduct of Business. During the period from the date
-------------------
of this Agreement to the Closing Date and except as otherwise contemplated or
expressly required or permitted by this Agreement, Seller agrees to conduct the
Business in the ordinary and usual course. Notwithstanding the immediately
preceding sentence, pending the Closing Date and except as may be first approved
by Purchaser or as is otherwise permitted or required by this Agreement, Seller
agrees to:

(a) refrain from granting any Lien in any of the Assets;

(b) refrain from transferring or granting any right under any
Intellectual Property;

(c) refrain from (i) entering into any contract or commitment except
contracts and commitments in the ordinary course of business, (ii) cancelling or
waiving any claims or rights of substantial value and (iii) taking or failing to
take any action that would cause or permit the representations and warranties
made in Article III hereof to be inaccurate in any material respect at the time
of Closing; and

(d) not agree, whether or not in writing, to do any of the foregoing.

Section 5.2 Exclusive Dealing. During the period from the date of
-----------------
this Agreement through the earlier of termination pursuant to Article VIII and
the Closing, to the

<PAGE>

extent relating to the Business, Leaf and Seller will not, and will not
authorize or permit any of their respective Affiliates, officers, employees,
counsel, accountants, financial advisors, consultants and other representatives
(as to each party, collectively, "Representatives") to, take, directly or
indirectly, any action to initiate, assist, solicit, negotiate, encourage,
accept or otherwise pursue any offer or inquiry from any Person (i) to engage in
any Business Combination other than the transactions contemplated hereby or
(ii) to reach any agreement or understanding (whether or not such agreement or
understanding is absolute, revocable, contingent or conditional) for, or
otherwise attempt to consummate, any Business Combination other than such
transactions. For purposes hereof, "Business Combination" means any (x) merger,
consolidation, business combination or similar transaction to which Seller is a
party to the extent relating to the Business, and (y) any sale, dividend or
other disposition of all or any material portion of the assets and properties of
Seller to the extent relating to the Business, other than as permitted by this
Agreement.

Section 5.3 Review of Seller. Prior to the Closing Date, Seller
----------------
will provide Purchaser and its Representatives with access, upon reasonable
prior written notice, (a) to its employees, (b) to the Assets and its
properties, contracts, books and records relating to the Business and (c) to all
such other information and data concerning the Business as are reasonably
requested by Purchaser. The parties hereto acknowledge that Purchaser and
Parent have entered into a Confidentiality Agreement dated December 20, 1995,
relating to information provided or made available to Purchaser and its
Representatives pursuant to this Section 5.3 (the "Confidentiality Agreement")
and that such information shall be held by Purchaser accordance with the terms
thereof.

Section 5.4 Reasonable Best Efforts. Each of the parties agrees to
-----------------------
use its reasonable best efforts to take, or cause to be taken, all action to do,
or cause to be done, and to assist and cooperate with the other parties hereto
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, but not limited to, (a) compliance
with the HSR Act in all respects (including the filing of a notification and
report form), (b) the obtaining of all necessary waivers, consents and approvals
from Governmental Authorities and the making of all necessary registrations and
filings (including, but not limited to, filings with Governmental Authorities,
if any) and the taking of all reasonable steps as may be necessary to obtain any
approval or waiver from, or to avoid any action or proceeding by, any
Governmental Authority, (c) the obtaining of all necessary Third Party Consents
and (d) the defending of any lawsuits or any other legal proceedings whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby including, without limitation, seeking to
have any temporary restraining order entered by any court or administrative
authority vacated or reversed. Notwithstanding the foregoing, in no event shall
Purchaser be required to effect or agree or consent to any divestiture, hold
separate any of its assets or the Assets to be acquired from Seller or take
similar action to make effective the transactions contemplated by this
Agreement.

<PAGE>

Section 5.5 Books and Records; Confidentiality. (a) Purchaser
----------------------------------
will retain all books, records and other documents, or copies thereof, and all
electronically archived data, pertaining to the Business in existence on the
Closing Date that are delivered to Purchaser by Seller and will make the same
available after the Closing Date for inspection and copying by Seller or any
Affiliate of Seller at Seller's expense during the normal business hours of
Purchaser upon reasonable request and upon reasonable notice. No such books,
records or documents shall be destroyed by Purchaser prior to the seventh
anniversary of the Closing Date and, thereafter, without first advising Seller
in writing and giving Seller a reasonable opportunity to obtain possession
thereof. Without limiting the generality of the foregoing, Purchaser will make
available to Seller, the Affiliates of Seller and their respective
Representatives all information deemed necessary or desirable by Seller or such
Affiliates in preparing their respective financial statements, tax returns and
conducting any audits in connection therewith.

(b) Leaf and Seller agree that they shall, and shall use reasonable
efforts to cause their respective officers and all their other Affiliates,
employees, auditors, attorneys, consultants, advisors and agents to, hold in
strict confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law and after prior written notice to
Seller, all confidential information relating to the Business in its possession
and will not release or disclose such confidential information to any other
Person, except to its auditors, attorneys, financial advisors and other
consultants, agents and advisors; provided that the foregoing obligations shall
--------
not apply to any such information which comes into the public domain otherwise
than through any action in contravention of this paragraph or as may be required
to be disclosed by law or regulation.

(c) Seller will retain all books, records and other documents, or
copies thereof, and all electronically archived data, pertaining to the Business
in existence on the Closing Date that are not delivered to Purchaser by Seller
and will make the same available after the Closing Date for inspection and
copying by Purchaser or any Affiliate of Purchaser at Purchaser's expense during
the normal business hours of Seller upon reasonable request and upon reasonable
notice. No such books, records or documents shall be destroyed by Seller prior
to the seventh anniversary of the Closing Date and, thereafter, without first
advising Purchaser in writing and giving Purchaser a reasonable opportunity to
obtain possession thereof. Without limiting the generality of the foregoing,
Seller will make available to Purchaser, the Affiliates of Purchaser and their
respective Representatives all information deemed necessary or desirable by
Purchaser or such Affiliates in preparing their respective financial statements,
tax returns and conducting any audits in connection therewith.

Section 5.6 Public Announcements. No news release or other public
--------------------
announcement pertaining to the transactions contemplated by this Agreement shall
be made by or on behalf of any party hereto without the prior written consent of
the other parties hereto, except for such public disclosure as may be necessary
for the party proposing to make the disclosure (a) not to be in violation of or
default under any applicable law, regulation or governmental order or (b) to
maintain satisfactory relationships with licensors and other persons currently
having business relationships with it.

<PAGE>

Section 5.7 Seller's Name. Promptly after the Closing, Seller
-------------
agrees to change its corporate name to eliminate "Donruss" from such name.

Section 5.8 Non-Competition with the Business. In consideration of
---------------------------------
the Non-competition Fee, Seller agrees that for a period of three years from the
Closing Date it shall not, and it shall not permit Leaf, Parent or its other
Affiliates to, directly or indirectly, engage in or assist others to engage in
the Business; provided, however, that this provision shall not prohibit Seller,
-------- -------
Leaf, Parent or its other Affiliates from (a) acquiring, solely as an
investment, securities of any Person listed on a national securities exchange or
regularly traded in the over-the-counter market if Seller, Leaf, Parent or its
other Affiliates do not own, collectively, one percent or more of any class of
securities of such Person, (b) engaging in the entertainment card and
interactive card game business, (c) selling or otherwise disposing of Excluded
Inventory or (d) manufacturing, selling or distributing sports trading cards
which feature hockey players who appear in Scandinavian hockey leagues and which
do not identify any persons appearing on such cards as playing in, and do not
use or depict any symbols, marks, uniforms or other intellectual property of,
the National Hockey League, the National Basketball Association, Major League
Baseball, the National Football League or NASCAR or any member thereof.

Section 5.9 Remittance of Deposits. On the Closing Date, Seller
----------------------
shall remit to Purchaser any and all deposits received by Seller relating to
merchandise ordered prior to the Closing Date, but which are of a series that
has not begun to be shipped on the Closing Date (the "Customer Deposits").

Section 5.10 Manner of Sale of Excluded Inventory. Purchaser agrees
------------------------------------
that from and after the Closing Seller and/or Leaf shall have the right to sell
sports trading cards that constitute Excluded Inventory in a reasonable manner.
Notwithstanding the foregoing, no sports trading cards that constitute Excluded
Inventory may be sold (a) except in such manner as Purchaser determines, in its
sole discretion, will not in any way interfere with, disparage or diminish in
any material respect the reputation of Purchaser's business, trademarks or
products, including, but not limited to, the Business and (b) until Seller
receives Purchaser's express written approval to each disposition of Excluded
Inventory, such approval not to be unreasonably withheld or delayed. However,
such prior approval shall not be required for disposition of such Excluded
Inventory in the manner set forth in Schedule 5.10.

Section 5.11 Release of Certain Obligations. Prior to the Closing
------------------------------
Date, Purchaser, Seller and Leaf will endeavor in good faith to persuade each of
Major League Baseball Players Association, Major League Baseball Properties,
Inc., National Hockey League Players Association and National Hockey League
Enterprises, Inc., to release Parent and Leaf, effective upon the Closing Date,
from any continuing obligations under the License Agreements listed on
Schedule 3.12 attached hereto.

Section 5.12 Returns. From time to time following the Closing
-------
Date, Seller and/or Leaf may receive returns of Baseball Sports Trading Cards
products sold by Seller or Leaf prior to the Closing Date ("Baseball Credit
Returns") and/or returns of Hockey Sports Trading

<PAGE>

Cards products sold by Seller or Leaf prior to the Closing Date ("Hockey Credit
Returns"). Within 15 days after the end of each calendar month, commencing with
the first calendar month subsequent to the Closing Date, Seller or Leaf will
deliver to Purchaser a certificate setting forth in reasonable detail the amount
of Baseball Credit Returns and Hockey Credit Returns received by Seller and/or
Leaf during the previous calendar month and the Net Sales represented thereby,
together with a copy of the return authorizations received from customers during
such periods. Within five Business Days following receipt of each such
certificate, Purchaser will pay to Seller, by wire transfer of immediately
available funds to the bank account of Seller or Leaf as designated in such
certificate, an amount equal to 22% of the Net Sales related to Baseball Credit
Returns and 21.7% of the Net Sales related to Hockey Credit Returns, but only to
the extent that such Baseball Credit Returns or Hockey Credit Returns reduce the
percentage royalties currently payable by the Purchaser below the amounts that
would be payable but for such returns (i.e., Purchaser shall only be obligated
to make such payment in the event that its Net Sales are no less than the amount
at which percentage royalties would exceed minimum royalties).

Section 5.13 Customer Communication. From and after the Closing
----------------------
Date, Seller and Purchaser shall notify customers of Seller and/or Leaf who are
also customers of Purchaser in a manner reasonably acceptable to both Seller and
Purchaser.

Section 5.14 Employees. (a) Purchaser shall have no obligation to
---------
offer employment to any of Seller's employees, and shall do so only as and if it
determines to do so in its sole discretion.

(b) Seller shall be liable to, and shall pay and Purchaser shall have
no liability or obligation to pay, Seller's employees whose employment is
terminated in connection with the transactions contemplated by this Agreement
for wages, severance, benefits and other obligations of any kind whatsoever,
except to the extent such liabilities or obligations arise from Purchaser's
employment of any such individuals after the Closing Date.

(c) Seller shall provide any notice to its employees which may be
required pursuant to the Federal Workers Adjustment and Retraining Notification
Act of 1988 ("WARN Act") or any similar applicable law and shall bear any
liability or obligation that may accrue to Seller's employees under the WARN Act
or any similar applicable law.

Section 5.15 Return Policy. Prior to the Closing, Seller shall not
-------------
make any changes in, or accept customer product returns on a basis materially
different from, the Return Policy.

Section 5.16 New Series. Seller shall not, without the prior
----------
written consent of Purchaser, begin the shipment of any series of sports trading
cards after the date hereof, except for 1996 Leaf Baseball Series 1.

Section 5.17 Packaging Services. Leaf shall provide to Purchaser
------------------
packaging and finishing services of the type previously provided to Seller by
Leaf with respect to Leaf

<PAGE>

Hockey products scheduled to begin shipment in May 1996 on terms consistent with
past practice. Within one week of the date of this Agreement, Purchaser shall
notify Leaf if it wishes Leaf to provide packaging and finishing services for
any other products scheduled to be shipped within 30 days after the Closing
Date. If Purchaser so desires, Purchaser and Leaf shall negotiate in good faith
the basis on which such services will be furnished.

ARTICLE VI

CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------

The obligations of Purchaser to consummate the transactions
contemplated by this Agreement is conditioned upon the satisfaction or waiver,
at or prior to the Closing, of the following conditions:

Section 6.1 No Material Adverse Change. From December 31, 1995 to
--------------------------
the Closing Date, there shall not have occurred or become known any event or
circumstance which has had a Material Adverse Effect.

Section 6.2 Opinion of Seller's Counsel. Seller shall furnish
---------------------------
Purchaser with an opinion, dated the Closing Date, of White & Case to the effect
set forth in Section 3.1.

Section 6.3 Representations and Warranties. The representations
------------------------------
and warranties of Seller and Leaf contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and each of Seller and Leaf shall have delivered to Purchaser a
certificate, dated the Closing Date, to such effect.

Section 6.4 Performance of Agreements. All of the agreements of
-------------------------
Seller to be performed at or prior to the Closing pursuant to the terms hereof
shall have been duly performed in all material respects, and Seller shall have
delivered to Purchaser a certificate, dated the Closing Date, to such effect.

Section 6.5 No Injunction. No court or other government body or
-------------
public authority shall have issued an order which shall then be in effect
(a) restraining or prohibiting the completion of the transactions contemplated
hereby, (b) restricting in any material respect Purchaser's ability to deal with
the Assets or operate the Business after the Closing or (c) requiring the
Purchaser to divest or hold separate all or any portion of the Assets.

Section 6.6 Governmental Approvals. All consents and approvals
----------------------
from Governmental Authorities (including the expiration of applicable waiting
periods under the HSR Act) necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been received.

<PAGE>

Section 6.7 Ancillary Documents. Seller and/or Leaf shall have
-------------------
duly executed and delivered to Purchaser the following agreements:

(i) the Leaf Trademark License Agreement substantially in the
form attached hereto as Exhibit 1 (the "Leaf Trademark License Agreement");

(ii) the Bill of Sale in respect of the Assets substantially in
the form attached hereto as Exhibit 2; and

(iii) the Donruss Trademark License Agreements substantially in
the forms attached hereto as Exhibit 3 (the "Donruss Trademark License
Agreements").

Section 6.8 Third Party Consents. The Third Party Consents listed
--------------------
on Schedule 3.5(b) shall have been received in form and substance reasonably
satisfactory to Purchaser.

ARTICLE VII

CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------

The obligations of Seller to consummate the transactions contemplated
by this Agreement is conditioned upon satisfaction or waiver, at or prior to the
Closing, of the following conditions:

Section 7.1 Opinion of Purchaser's Counsel. Purchaser shall have
------------------------------
furnished Seller with an opinion, dated the Closing Date, of Kaye, Scholer,
Fierman, Hays & Handler, LLP, to the effect set forth in Section 4.1.

Section 7.2 Representations and Warranties. The representations
------------------------------
and warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and Purchaser shall have delivered to Seller a certificate, dated the
Closing Date, to such effect.

Section 7.3 Performance of Agreements. All of the agreements of
-------------------------
Purchaser to be performed at or prior to the Closing pursuant to the terms
hereof shall have been duly performed in all material respects, and Purchaser
shall have delivered to Seller a certificate, dated the Closing Date, to such
effect.

Section 7.4 No Injunction. No court or other government body or
-------------
public authority shall have issued an order which shall then be in effect
restraining or prohibiting the completion of the transactions contemplated
hereby.

<PAGE>

Section 7.5 Governmental Approvals. All consents and approvals
----------------------
from Governmental Authorities (including the expiration of applicable waiting
periods under the HSR Act) necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been received.

Section 7.6 Ancillary Documents. Purchaser shall have duly
-------------------
executed and delivered to Seller the following:

(i) the Leaf Trademark License Agreement;

(ii) the Assumption Agreement in respect of the Assumed
Liabilities substantially in the form attached hereto as
Exhibit 5; and

(iii) the Donruss Trademark License Agreements.

Section 7.7 Third Party Consents. The Third Party Consents listed
--------------------
on Schedule 3.5(b) shall have been received.

Section 7.8 Tennessee Sales Tax Exemption. Purchaser shall have
-----------------------------
delivered to Seller a resale certificate regarding the exemption of the
Inventory from Tennessee sales tax.

ARTICLE VIII

EVENTS OF TERMINATION
---------------------

Section 8.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby abandoned at any time prior to the Closing
Date:

(a) by mutual written consent of Seller, Leaf and Purchaser;

(b) by either Seller or Leaf, on the one hand, or Purchaser, on the
other hand, upon written notice given to the other party in the event of a
breach or default in any material respect in the performance by such other party
of any representation, warranty, covenant or agreement contained in this
Agreement which breach or default has not been, or cannot be, cured within
30 days after written notice of such breach or default, describing such breach
or default in reasonable detail, is given by the terminating party to the
breaching or defaulting party, assuming such breach is capable of cure;

(c) by Purchaser or Seller upon written notice to the other party in
the event that any Governmental Authority (including any court of competent
jurisdiction) the consent of which is necessary for the consummation of the
transactions contemplated hereby shall have issued an order, decree or ruling or
taken any other official action enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or denying approval of any

<PAGE>

application or notice for approval to consummate such transactions, and such
order, decree, ruling or other action shall have become final and
non-appealable; or

(d) by Purchaser or Seller upon written notice given to the other
party in the event that the Closing shall not have taken place on or before May
31, 1996, provided that the failure of the Closing to occur on or before such
date is not the result of a breach of any covenant, agreement, representation or
warranty hereunder by the party seeking such termination.

Section 8.2 Effect of Termination. In the event of the termination
---------------------
of this Agreement as provided above, this Agreement (other than this Section)
shall become void and of no further force and effect and, other than in the
event of a termination pursuant to Section 8.1(b) as a result of a willful
breach or default by the non-terminating party, there shall be no duties,
liabilities or obligations of any kind or nature whatsoever on the part of
either party hereto to the other party based either upon this Agreement or the
transactions contemplated hereby, except that the obligations of the parties
referred to in Sections 3.8, 4.5 and 10.1 shall continue to apply following any
such termination of this Agreement. In the event of the termination of this
Agreement pursuant to Section 8.1(b) as a result of a willful breach or default
by the non- terminating party, the terminating party shall be indemnified by the
other party and shall have the right to sue the other party for any and all
Damages sustained or incurred as a result of such termination.

ARTICLE IX

SURVIVAL OF REPRESENTATIONS: INDEMNITY
--------------------------------------

Section 9.1 Survival of Representations. The respective
---------------------------
representations and warranties of Seller and Purchaser contained in this
Agreement shall survive the Closing and any investigation made by any party;
provided, however, that no claim for indemnification may be made with respect to
- -------- -------
any breach of a representation or warranty unless notice of such claim is given
on or before the first anniversary of the Closing Date.

Section 9.2 Indemnification. (a) Leaf and Seller hereby agree,
---------------
jointly and severally, to indemnify and hold Purchaser and its shareholders,
officers, directors, Affiliates and agents, and any successors thereto harmless
from damages, losses or expenses (including, without limitation, reasonable
attorneys' fees and expenses) ("Damages") incurred or suffered as a result of or
arising out of or in connection with (i) the failure of any representation or
warranty made by Seller or Leaf in this Agreement to be true and correct in all
material respects as of the Closing Date, (ii) any claim made against Purchaser
with respect to any liabilities of Seller or Leaf, or which arise from the
operation of the Business prior to Closing, other than the Assumed Liabilities,
(iii) any offset of, deduction from or credit against accounts receivable
whether or not purchased hereunder by customers of Seller and/or Leaf who are
also customers of Purchaser, including, without limitation, those offsets,
deductions and credits resulting from the return of

<PAGE>

any products sold by Seller or Leaf prior to or after the Closing Date and (iv)
any claims for commission or broker's or finder's fees by American Consulting
Corporation or its principal, Mr. James F. Echeandia, excluding any such
commissions or fees that are finally determined by a court of competent
jurisdiction to be payable by Purchaser to either American Consulting
Corporation or Mr. James F. Echeandia by reason of any action of or commitment
made by Purchaser or any Affiliate of Purchaser; provided, however, that
-------- -------
(x) Leaf and Seller shall not be liable under clause (i) of this Section 9.2(a)
unless the aggregate amount of Damages with respect to matters referred to
therein exceeds $250,000 and then only to the extent of such excess and (y) the
aggregate liability of Seller and Leaf under clause (i) of this Section 9.2(a)
shall not exceed $5,000,000; and provided, further, that there shall be no
-------- -------
minimum or maximum with respect to clauses (ii), (iii) and (iv) of this Section
9.2(a) and Leaf and Seller shall be liable under clauses (ii), (iii) and (iv)
for all Damages with respect to matters referred to therein.

(b) Purchaser hereby agrees to indemnify and hold Seller, Leaf and
their respective shareholders, officers, directors, Affiliates and agents, and
any successors thereto, harmless from any and all Damages incurred or suffered
as a result of or arising out of or in connection with (i) the failure of any
representation or warranty made by Purchaser pursuant to this Agreement to be
true and correct in all material respects as of the Closing Date and (ii) any
claim made with respect to Purchaser's failure to perform any Assumed Liability;
provided, however, that (x) Purchaser shall not be liable under clause (i) of
- -------- -------
this Section 9.2(b) unless the aggregate amount of Damages with respect to
matters referred to therein exceeds $250,000 and then only to the extent of such
excess and (y) the aggregate liability of Purchaser under clause (i) of this
Section 9.2(b) shall not exceed $5,000,000; and provided, further, that there
-------- -------
shall be no minimum or maximum with respect to clause (ii) of this
Section 9.2(b) and Purchaser shall be liable under clause (ii) for all Damages
with respect to matters referred to therein.

Section 9.3 Indemnification Procedure. Promptly after discovery by
-------------------------
the party seeking indemnification under this Agreement (the "Indemnified Party")
of facts on which such party intends to assert a claim for indemnification
hereunder or receipt by such Indemnified Party of written notice of any claim by
a third party which the Indemnified Party reasonably believes is likely to give
rise to a claim for indemnification hereunder, the Indemnified Party shall
notify the party from which indemnification is sought (the "Indemnifying Party")
in writing specifying, in reasonable detail, the nature and amount of the claim
or facts which might give rise to indemnification hereunder, to the extent then
known. The failure by an Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification obligation under
this Agreement except to the extent that such Indemnifying Party is materially
damaged as a result of such failure to give notice. The Indemnifying Party
shall be entitled to assume the defense and settlement of such action, suit,
proceeding or claim (which collectively is referred to in this Section 9.3 as a
"Claim"), unless such claim is also asserted against the Indemnifying Party or
an Affiliate and the Indemnified Party concludes in good faith that joint
representation would be inappropriate; provided that:

<PAGE>

(a) the Indemnified Party shall be entitled to participate in the
defense of such Claim and, in connection therewith, to employ counsel at its own
expense; provided, however, that the defense will be controlled by the
-------- -------
Indemnifying Party;

(b) without the prior written consent of the Indemnified Party, the
Indemnifying Party shall not consent to the entry of any judgment or enter into
any settlement that requires any action other than the payment of money paid by
the Indemnifying Party for which the Indemnifying Party agrees that it is
obligated to indemnify the Indemnified Party under this Article IX (the
Indemnified Party shall not unreasonably withhold or delay its consent to any
proposed settlement that (x) does not require the payment of monetary damages
other than amounts paid by the Indemnifying Party, (y) does not provide for any
admission of guilt or violation by, or equitable, declaratory or other non-
monetary relief against, the Indemnified Party and (z) includes an unconditional
release of the Indemnified Party); and

(c) in the event the Indemnifying Party elects to assume the defense
of any such action in accordance with the foregoing provisions, (i) the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
fees, costs and expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof, (ii) the Indemnified Party shall cooperate
with the Indemnifying Party as it may reasonably request in such defense and
(iii) the Indemnifying Party shall conduct such defense in good faith. If the
Indemnifying Party does not assume the defense of such Claim in accordance with
the foregoing provisions, the Indemnified Party shall have the right to defend
such Claim, in which case the Indemnifying Party shall pay all reasonable costs
and expenses of such defense to the extent it is determined that the Indemnified
Party is entitled to be indemnified by the Indemnifying Party under this
Agreement and the Indemnifying Party shall be bound by any judgment reached with
respect to such Claim.

Section 9.4 Disputes. The parties hereto agree that any dispute in
--------
connection with a claim arising under this Article IX shall be resolved pursuant
to Section 10.3 of this Agreement.

Section 9.5 Exclusive Remedies. The parties hereto acknowledge
------------------
that the indemnification obligations set forth in this Article IX shall
constitute the exclusive remedy of each party with respect to the matters being
indemnified against herein.

ARTICLE X

MISCELLANEOUS
-------------

Section 10.1 Expenses. Each of the parties hereto shall pay the
--------
fees and expenses of its respective counsel, accountants and other experts and
shall pay all other expenses incurred by it in connection with the negotiation,
preparation and execution of this Agreement and the consummation of the
transactions contemplated hereby.

<PAGE>

Section 10.2 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO CHOICE OF LAW PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW), INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.

Section 10.3 Dispute Resolution. (a) In the event that a party
------------------
hereto has a claim arising under this Agreement, such party shall provide
written notice of such claim to the other parties hereto. Each of the parties
hereto agrees that any dispute relating to a claim arising under this Agreement
shall be resolved by submitting said dispute to an arbitrator mutually agreed
upon by the parties hereto. It is the parties' intention to select an
arbitrator who has experience, as a former judge or otherwise, in dispute
resolution. In the event that the parties hereto cannot agree upon the
selection of an arbitrator within ten (10) days after a party hereto provides
notice to the other parties hereto of its intent to submit a dispute to
arbitration any party hereto may submit such dispute to JAMS/Endispute (New York
office), which organization shall select a sole arbitrator to arbitrate such
dispute. The arbitrator shall use reasonable efforts to conduct the arbitration
proceedings on consecutive business days as expeditiously as possible. The
place of arbitration shall be New York, New York. The parties hereto agree that
the arbitrator's decision shall be final, conclusive and binding. The costs and
expenses of the arbitration shall be paid as the arbitrator determines to be
appropriate.

(b) Each party hereto agrees that any legal action arising out of or
relating to such arbitration (other than with respect to confirmation or
enforcement of an arbitration award) shall only be instituted in the Federal or
State courts situated within the State of New York, County of New York and any
legal action seeking confirmation or enforcement of any such arbitration award
may be instituted in any Federal or State court in the State of New York or any
other appropriate jurisdiction.

(c) Each party hereto further irrevocably consents to service of
process upon it out of such court situated within the State of New York, County
of New York in any action or proceeding by mailing copies thereof by United
States registered mail, postage prepaid, to its address specified in
Section 10.4.

Section 10.4 Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
signed by the respective person giving such notice or other communication (in
the case of any corporation the signature shall be by an authorized officer
thereof) upon receipt of: hand delivery; certified or registered mail, return
receipt requested; or telecopy transmission with confirmation of receipt:

<PAGE>

If to Seller, to:

Donruss Trading Cards, Inc.
500 North Field Drive
Lake Forest, Illinois 60045
Telephone: 708-735-7847
Telecopy: 708-735-7579

If to Leaf, to:

Leaf Inc.
500 North Field Drive
Lake Forest, Illinois 60045
Telephone: 708-735-7500
Telecopy: 708-735-0098
Attention: General Counsel

with a copy to:

Huhtamaki Oy
Etelaranta 8
00130 Helsinki
Finland
Telephone: 358 0 708 8380
Telecopy: 358 0 660 622
Attention: Chief Financial Officer

and a copy to:

White & Case
1155 Avenue of the Americas
New York, New York 10036
Telephone: 212-819-8259
Telecopy: 212-354-8113
Attention: Timothy B. Goodell, Esq.

If to Purchaser, to:

Pinnacle Brands, Inc.
924 Avenue J East
Grand Prairie, Texas 75050
Telephone: 214-601-7000
Telecopy: 214-601-7096
Attention: Chief Financial Officer

<PAGE>

with a copy to:

Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telephone: 212-836-8201
Telecopy: 212-836-7149
Attention: Joel I. Greenberg, Esq.
Nancy E. Fuchs, Esq.

Such names and addresses may be changed by such notice.

Section 10.5 Entire Agreement. This Agreement (including the
----------------
Schedules and Exhibits attached hereto, all of which are a part hereof) contains
the entire understanding of the parties hereto with respect to the subject
matter contained herein, supersedes and cancels all prior agreements,
negotiations, correspondence, undertakings and communications of the parties,
oral or written, respecting such subject matter. There are no restrictions,
promises, representations, warranties, agreements or undertakings of any party
hereto with respect to the transactions contemplated by this Agreement other
than those set forth herein or made hereunder.

Section 10.6 Amendments. This Agreement may be amended only by a
----------
written instrument executed by the parties or their respective successors or
assigns.

Section 10.7 Headings: References. The article, section and
--------------------
paragraph headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
All references herein to "Articles", "Sections", or "Schedules" shall be deemed
to be references to Articles or Sections hereof or Schedules hereto unless
otherwise indicated.

Section 10.8 Counterparts. This Agreement may be executed in one or
------------
more counterparts, all of which taken together shall constitute one instrument.

Section 10.9 Parties in Interest; Assignment. This Agreement shall
-------------------------------
inure to the benefit of and be binding upon Seller, Leaf and Purchaser and their
respective successors and assigns. As expressly set forth herein, nothing in
this Agreement, express or implied, is intended to confer upon any Person not a
party to this Agreement any rights or remedies under or by reason of this
Agreement. No party to this Agreement may assign or delegate all or any portion
of its rights, obligations or liabilities under this Agreement without the prior
written consent of the other party to this Agreement; provided, however that
-------- -------
Purchaser shall have the right to assign this Agreement to a wholly-owned
subsidiary, but such assignment shall not relieve Purchaser of its obligations
hereunder.

Section 10.10 Severability; Enforcement. The invalidity of any
-------------------------
portion hereof shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that

<PAGE>

any restriction hereunder is too broad to permit enforcement of such restriction
to its fullest extent, each party agrees that a court of competent jurisdiction
may enforce such restriction to the maximum extent permitted by law, and each
party hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.

Section 10.11 Waiver. Any of the conditions to Closing set forth in
------
this Agreement may be waived at any time prior to or at the Closing hereunder by
the party entitled to the benefit thereof. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every such provision. No waiver of any breach of
or non-compliance with this Agreement shall be held to be a waiver of any other
or subsequent breach or non-compliance.

Section 10.12 HSR Fees. The filing fee payable in connection with
--------
any filing under the HSR Act shall be paid by Purchaser.

Section 10.13 Transfer Taxes. All transfer, sales and use,
--------------
registration, documentary, stamp and other such taxes and fees (including
penalties and interest) incurred in connection with this Agreement and the
transactions contemplated hereby (collectively "Transfer Taxes") shall be paid
one-half by Purchaser and one-half by Seller, and Purchaser shall properly file,
with the cooperation of Seller, on a timely basis all necessary tax returns,
reports, forms, and other documentation with respect to any Transfer Taxes and
provide to the Seller evidence of payment of all Transfer Taxes.

EXHIBIT 10.11

TRADEMARK LICENSE AGREEMENT

This License Agreement ("Agreement"), dated as of May 28th, 1996, is
entered into by and between Leaf, Inc., a Delaware corporation with offices
at 500 North Field Drive, Lake Forest, Illinois 60045 ("Licensor"), and
Pinnacle Brands, Inc., a Delaware corporation with offices at 924 Avenue J
East, Grand Prairie, Texas 75050 ("Licensee").

WITNESSETH

WHEREAS, Licensor's licensee, Donruss Trading Cards, Inc. ("Donruss")
has been engaged in the business of creating, producing, advertising,
marketing, promoting, selling and distributing sports trading cards (the
"Business");

WHEREAS, Licensor owns and has licensed Donruss to use various
trademarks in connection with the Business, as shown on Schedule 1 attached
hereto (collectively, the "Marks");

WHEREAS, Licensee has acquired certain assets of Donruss relating to
the Business pursuant to an Asset Purchase Agreement (the "Purchase
Agreement") dated as of April 16, 1996;

WHEREAS, Licensee desires to obtain from Licensor the right to use the
Marks solely in connection with the Business;

NOW, THEREFORE, in consideration of these premises and the mutual
agreements, covenants and promises contained herein, and in consideration
of Licensee's purchase of assets of Donruss relating to the Business, and
for other good and valuable consideration, Licensor and Licensee hereby
agree as follows:

1. GRANT OF LICENSE; LIMITATIONS
-----------------------------

1.1 Licensor hereby grants to Licensee, and Licensee hereby accepts,
upon the terms and conditions set forth in

<PAGE>

this Agreement, the exclusive, royalty-free right to use the Marks on and
in connection with baseball and hockey sports trading cards (the "Licensed
Products") in the following territories: the United States, Canada and
such other territories where Licensor or Donruss was authorized to
distribute Licensed Products prior to the date hereof (the "Territory").

1.2 Licensee shall use the Marks only in the forms set forth on
Schedule 1 hereto.

1.3 Licensee shall not, during or after the term of this Agreement, use
(or purport to authorize any other person to use) the Marks on or in
connection with any goods or services other than the Licensed Products.

1.4 Licensee shall not offer, sell or distribute Licensed Products
bearing the Marks in the same retail package or retail container with any
other item, product or service, without Licensor's express written consent.
Licensee may offer the Licensed Products under the Marks on order sheets
which include other of Licensee's products, and Licensee may ship the
Licensed Products in the same vehicle or container as other of Licensee's
products.

1.5 All rights not expressly granted to Licensee herein are reserved by
Licensor, for its own use and benefit, including without limitation the
right to use and authorize third parties to use the Marks on and in
connection with all goods or services other than the Licensed Products.

2. TERM
----

The term of the license granted herein is five years from the date
first set forth above, unless sooner terminated as provided herein;
provided, however that Licensee may extend the term of the license granted
herein for an additional twelve months by written notice to Licensor at
least sixty days prior to the expiration of the five year term if at the
time of such extension Licensee is not in breach of this Agreement.

3. QUALITY CONTROL
---------------

3.1 Licensee acknowledges and understands that the provisions of this
Section 3 are necessary and desirable to protect and enhance the goodwill
symbolized by the Marks and

-2-

<PAGE>

to facilitate Licensor's control over the nature and quality of goods
produced, marketed, distributed and sold in connection with the Marks.
Licensee agrees to cooperate and assist Licensor in the exercise of such
control.

3.2 All Licensed Products bearing the Marks, and all advertising and
promotional material or other matter bearing the Marks shall comply in all
respects with all applicable federal, state and local rules, regulations
and other laws.

3.3 Licensee shall produce, market, package, display, distribute and
sell Licensed Products bearing the Marks strictly in accordance with
specifications and quality standards supplied or approved in writing from
time to time by Licensor, which shall be no more stringent than the
standards observed by Donruss prior to the date hereof. Licensor
specifically acknowledges that the form and manner of use of the Marks on
the Licensed Products and the quality of the sports trading cards sold by
Licensor and Donruss since January 1, 1991 under the Marks meets such
standards and are approved. Licensee shall not alter or modify the quality
of the Licensed Products or the form and manner of the use of the Marks, in
a manner that does not comply with the foregoing, without Licensor's prior
written consent.

3.4 Licensee shall comply with periodic and reasonable requests by
Licensor for submission (free of charge to Licensor) of representative
samples showing how Licensee is using the Marks on and in connection with
the Licensed Products.

3.5 The Licensed Products offered for sale and the form and manner of
the use of the Marks on and in connection therewith shall conform in all
respects to the samples provided to Licensor.

4. DISTRIBUTION
------------

Unless otherwise agreed in writing by the parties, Licensee shall not
advertise, offer, sell or distribute Licensed Products bearing the Marks
outside the Territory, nor offer, sell or distribute the Licensed Products
in the Territory to persons that Licensee knows intends to distribute the
Licensed Products outside the Territory.

-3-
<PAGE>

5. USE OF MARKS BY LICENSOR
------------------------

During the term of this Agreement, Licensor shall not, and shall not
authorize any other person to, use the Marks in connection with any kind of
sports trading cards.

6. GOODWILL
--------

6.1 Licensee acknowledges that the Marks symbolize valuable goodwill
owned by Licensor, that has been established at substantial cost and effort
and as a result of the high quality of goods in connection with which the
Marks are used.

6.2 Licensee agrees that it will not engage in any act or omission, or
allow anyone under Licensee's control to engage in any act or omission, in
derogation of the goodwill symbolized by the Marks.

6.3 Licensee acknowledges that all goodwill generated by Licensee's use
of the Marks shall inure solely to the benefit of Licensor.

7. VALIDITY AND USE OF THE MARKS
-----------------------------

7.1 Subject to the rights granted to Licensee by this Agreement,
Licensee agrees not to contest at any time during or after the term of this
Agreement, in any manner, the validity of, or Licensor's exclusive
ownership of all right, title and interest in and to the Marks.

7.2 Licensee shall use the Marks in connection with appropriate symbols
and abbreviations and otherwise give such notice of the status thereof as
may be required by Licensor or by applicable laws to preserve and protect
the Marks and to give notice to the public of federal trademark
registrations.

7.3 Licensee agrees that it will not, at any time, represent that it
has any right, title or interest in or to the Marks, or variations or
colorable imitations thereof, or in or to any applications for registration
thereof which may be filed or any registration thereof which has or may be
issued, or in or to any mark or name similar thereto, except as expressly
granted under this Agreement. Licensee agrees that it will not register or
attempt to register the Marks, or any variations, colorable imitations or
components

-4 -

<PAGE>

thereof, either alone or in combination with any other word, mark, name,
symbol, device or character, or aid or abet anyone else in doing so.

7.4 Licensee shall, at Licensor's expense, execute and deliver such
documents as Licensor deems necessary to register, maintain or otherwise
protect Licensor's rights in, the Marks.

8. THIRD PARTY CLAIMS AND INFRINGEMENTS
------------------------------------

8.1 Licensee shall promptly notify Licensor upon becoming aware of any
claim, demand, litigation or proceeding instituted by any third party
involving the Marks.

8.2 Licensor hereby warrants and represents that it owns the trademark
registrations and applications for registration of the Marks as set forth
on Schedule 1. To the knowledge of Licensor, no third party has rights in
the Marks for sports trading cards, and there are no pending proceedings or
litigation or other adverse claims affecting or with respect to the Marks.

8.3 In the event any third party brings suit or an administrative
proceeding against Licensee or Licensor, alleging that use of the Marks by
either party constitutes infringement of any trademark belonging to the
third party, or which otherwise seeks to prevent use or maintenance of the
Marks in connection with the Licensed Products, Licensor shall have the
right, as between the parties, to control any resulting litigation, select
counsel and determine the terms of any settlement, provided, however, that
----------
Licensee shall have the right to participate in any such litigation at
Licensee's sole cost and expense, and provided further, that no settlement
---------
that would affect Licensee's continued use of the Marks may be effected by
Licensor without Licensee's consent, which will not be unreasonably
withheld. Licensee agrees to cooperate fully with Licensor and Licensor's
counsel in the conduct of such litigation, as Licensor may reasonably
request.

8.4 Licensee shall promptly notify Licensor upon becoming aware of
any third party use of the Marks or any mark confusingly similar to the
Marks in connection with sports trading cards. Licensor shall, as
between the parties, have the sole right to decide whether or not
proceedings shall be brought against third parties, and to

- 5 -

<PAGE>

control the prosecution of any administrative proceeding or litigation.
Licensee shall take no action of any kind with respect to such third party
use, unless such use is in connection with sports trading cards, sports
related products or other related paper products, and Licensor, within
ninety (90) days of receiving notice of such third party use from Licensee,
fails to file a civil action against such use or to take other action which
is intended to cause such use to cease.

8.5 In the event that Licensor takes action respecting adverse use of
the Marks by a third party, such action will be at Licensor's sole cost and
expense, and Licensor will be entitled to all monetary awards granted
therein, except that after deduction of all attorneys' fees and litigation
expenses actually incurred by Licensor, Licensee shall be entitled to any
remaining amount of an award of damages based upon lost sales by Licensee.

8.6 In the event that Licensee takes action (in accordance with the
terms hereof) respecting adverse use of the Marks by a third party, such
action will be at Licensee's sole cost and expense, and Licensee will be
entitled to all monetary awards granted therein. In no event shall Licensee
enter into any settlement respecting third party use of the Marks or any
mark confusingly similar thereto which allows such use to continue, without
Licensor's prior written consent.

8.7 Each party, at the request and expense of the other party, shall
provide all reasonable cooperation, including execution of all reasonably
necessary documents, with respect to efforts to protect the Marks.

9. BREACH AND TERMINATION
----------------------

9.1 This Agreement may be terminated by Licensor upon 30 (thirty) days'
written notice to Licensee in the event of breach of its terms by Licensee,
provided that if such breach is curable, Licensee may avoid termination if
such breach is cured within the thirty (30) day period.

9.2 In any action or proceeding brought by either party to enforce any
of the terms of this Agreement, the prevailing party shall be entitled to
recover the reasonable costs and expenses incurred by such party in
connection with such

<PAGE>
action or proceeding, including, but not limited to, reasonable
attorneys' fees.

9.3 This Agreement may be terminated by Licensor upon 30 days' written
notice to Licensee in the event Licensee makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due, or any other judgment, order or decree is
entered adjudicating Licensee bankrupt or insolvent, or Licensee petitions
or applies to any tribunal for the appointment of a trustee, receiver or
liquidator of Licensee or of any substantial part of the assets of
Licensee, or commences any proceedings relating to Licensee, under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation laws of any jurisdiction
whether now or hereafter in effect, or any such petition or application is
filed or any such proceedings are commenced against Licensee and Licensee
by an act indicates its approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered into appointing any
such trustee, receiver or liquidator, or approving the petition in any such
proceeding, and such order, judgment or decree remains unstayed and in
effect for more than thirty (30) consecutive days without the prior written
permission of Licensor.

9.4 This Agreement shall terminate automatically, without requirement
of notice or other action by Licensor, (a) upon dissolution of Licensee;
(b) in the event Licensee purports to transfer, assign, delegate or
sublicense its rights or obligations hereunder, except pursuant to a
statutory merger or consolidation, without the prior written consent of
Licensor; or (c) in the event any competitor of Licensor's confectionery
business directly or indirectly acquires majority ownership or control of
Licensee at any time prior to an initial public offering by Licensee or its
indirect parent, Grand Slam Acquisition Corp., without the prior written
consent of Licensor.

10. EFFECTS OF TERMINATION
----------------------

10.1 Upon the expiration or sooner termination of this Agreement for
any reason, all rights acquired by Licensee hereunder shall automatically,
without the need for further act or deed, revert to and vest in Licensor,
but such expiration or termination shall not terminate any obligation

- 7 -

<PAGE>

of Licensee under this Agreement that arose prior to or which survives the
termination or expiration of this Agreement.

10.2 Upon any such expiration or termination, Licensee shall, subject
to the rights of Licensee to sell off inventory:

(a) immediately and permanently discontinue any and all use of the
Marks, and refrain from using or adopting any mark confusingly similar
thereto;

(b) immediately and permanently discontinue production and sales
of Licensed Products and related promotional and sales materials
bearing the Marks;

(c) notify Licensor in writing, within 30 days, of the amount of
Licensee's stock (including work in process in the possession of
vendors) of Licensed Products bearing the Marks, and the Licensee will
be granted a period of 6 (six) months in which to sell off inventory
of the Licensed Products. At the end of said term, Licensee shall
destroy any remaining inventory bearing the Marks, including, without
limitation, printed material or other matter of any kind and nature
which bears the Marks, all art work, plates, molds, matrices, designs
or other material or apparatus used to produce materials bearing the
Marks, and shall certify in writing to Licensor that all such
inventory has been destroyed.

11. INDEMNITY
---------

11.1 Licensee hereby indemnifies and agrees to defend and hold Licensor
harmless, during the term of this Agreement and at any time thereafter,
from any and all claims, causes of action, costs, expenses, fines,
penalties, liabilities, damages, suits or judgments, including
costs of investigation, court costs and reasonable attorney's fees
(hereinafter collectively, "Claims"), arising directly or indirectly from,
as a result of, or in connection with the manufacture, marketing or sale of
Licensed Products by Licensee, and Licensor will have no obligation or
liability in connection therewith or arising from such Claims, unless such
Claims are subject to the indemnity contained in Section 11.2 hereof.
Licensee will, within 15 days of notice of any such action in which
Licensor is named, notify Licensor in writing thereof.

- 8 -

<PAGE>

11.2 Licensor hereby indemnifies and agrees to defend and hold Licensee
harmless, during the term of this Agreement and at any time thereafter,
from any and all Claims, arising directly or indirectly from, as a result
of, or in connection with (a) the rights of any third party with respect to
the Marks, or (b) a breach of the representations and warranties made by
Licensor in Section 8.2 hereof, provided, however, that Licensee has used
the Marks in accordance with the terms of this Agreement. Licensor will,
within 15 days of notice of any such action in which Licensee is named,
notify Licensee in writing thereof.

12. ASSIGNMENT; SUBLICENSE; CHANGE OF CONTROL

12.1 This Agreement shall be fully transferable and assignable by
Licensor and shall inure to the benefit of any assignee, transferee or
other legal successor to the interests of Licensor herein. Licensor may
authorize or designate representatives to administer Licensor's rights
under this Agreement, including, without limitation, audit and quality
control functions.

12.2 Neither this Agreement, nor any of Licensee's rights or
obligations hereunder may be assigned, sublicensed, delegated or otherwise
transferred, in whole or in part, except pursuant to a statutory merger or
consolidation, without the prior written consent of Licensor.

12.3 Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, and their respective
successors and permitted assigns.

13. NO WAIVER
---------

The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion, and no custom or practice of the parties at
variance with the terms hereof, shall constitute or be construed as a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers
must be in writing.

-9-

<PAGE>

14. SEVERABILITY
------------

If any provision of this Agreement shall be construed or found to be
invalid or unenforceable, such shall not affect the legality or validity of
any of the other provisions hereof, and the illegal or invalid provision
shall be deemed stricken, but all remaining provisions hereof shall
continue in full force and binding effect, and if any provision is
inapplicable to any circumstance, it will nevertheless remain applicable to
all other circumstances.

15. NO AGENCY
---------

The relationship between Licensor and Licensee is that of independent
contractors; no partnership, joint venture, agency or employment is
intended. Neither party will be considered as, or hold itself out to be, an
agent of the other party, and neither party may act for or bind the other
to any obligation.

16. GOVERNING LAW/EQUITABLE RELIEF
------------------------------

16.1 This Agreement will be interpreted under the relevant laws of the
United States and the State of New York, without regard to the conflict of
laws principles thereof. The courts of the State of New York and the United
States district courts which sit in such state will have exclusive
jurisdiction over any action interpreting this Agreement or in which it is
alleged that a party hereto has breached any term of this Agreement.

16.2 Licensee acknowledges that any injury to Licensor's goodwill or
image, or any obstacle to Licensor's control over the nature and quality of
the goods offered in connection with the Marks will cause Licensor
immediate and irreparable harm, and Licensor will have no adequate remedy
at law. Accordingly, Licensee hereby consents to entry of a temporary
restraining order and preliminary injunction, or other equitable relief, to
enjoin and restrain Licensee, pending resolution of any dispute, from
taking or continuing any action which injures the reputation, goodwill or
commercial image of Licensor or the Marks.

- 10 -

<PAGE>

17. CAPTIONS
--------

The captions used herein are for convenience only and shall not in any
way affect the meaning or interpretation of this Agreement.

18. NOTICES
-------

All notices and communications in this Agreement will be in writing and
will be considered given when personally delivered or mailed by prepaid
certified or registered mail, return receipt requested, to the parties at
the respective addresses stated at the beginning of this Agreement or at
such other address as a party may specify by notice given to the other.

- 11 -

<PAGE>
IN WITNESS WHEREOF, the parties hereby execute this Agreement as
of the date first set forth above.

LEAF, INC.

By /s/ Robert A. R.
-----------------------------
Title: President & CEO

PINNACLE BRANDS, INC.

BY
-----------------------------
Title: Senior Vice President
and Chief Financial Officer

-12 -

<PAGE>
LEAF TRADEMARKS

<TABLE>

MARK COUNTRY REG.# GOODS STATUS
---- ------- ----- ----- ------
<S> <C> <C> <C> <C>
LEAF(STYLIZED) U.S. 1,721,896 BASEBALL TRADING CARDS ACTIVE

LEAF(WORD MARK) U.S. 1,713,643 BASEBALL TRADING CARDS ACTIVE

LEAF(WORD) U.S. 1,929,624 TRADING CARDS ACTIVE

LEAF SET(WORDMARK) U.S. TRADING CARDS PENDING

LEAF SET(STYLIZED) U.S. 1,789,339 BASEBALL TRADING CARDS ACTIVE

LEAF SET(WORD MARK) U.S. 1,789,340 BASEBALL TRADING CARDS ACTIVE
</TABLE>

<PAGE>

Int.Cl.: 16
Prior U.S. Cl.: 37

Reg. No. 1,721,896
United States Patent and Trademark Office Registered Oct. 6, 1992
- ------------------------------------------------------------------

TRADEMARK
PRINCIPAL REGISTER

[LEAF LOGO]

LEAF.INC.(DELEWARE CORPORATION) FIRST USE 6-28-1990;IN COMMERCE
2355 WAUKEGAN ROAD 6-28-1990.
BANNOCKBURN, IL 60015

SER. NO. 74-232,713, FILED 12-23-91
FOR: BASEBALL TRADING CARDS, IN
CLASS 16(U.S.CL.37). LINDA F. BLOHM, EXAMINING ATTORNEY

<PAGE>
Int.Cl.: 16

Prior U.S. Cl.: 38

Reg. No. 1,713,643
United States Patent and Trademark Office Registered Sep. 8, 1992
- ------------------------------------------------------------------

TRADEMARK
PRINCIPAL REGISTER

[LEAF]

LEAF.INC.(DELEWARE CORPORATION) FIRST USE 6-28-1990; IN COMMERCE
2355 WAUKEGAN ROAD 6-28-1990.
BANNOCKBURN, IL 60015

SER. NO. 74-232,082, FILED 12-20-1991.

FOR: BASEBALL TRADING CARDS, IN
CLASS 16(U.S.CL.38). JEFFREY SMITH, EXAMINING ATTORNEY

<PAGE>
Int.Cl.: 16

Prior U.S. Cl.: 38

Reg. No. 1,929,624
United States Patent and Trademark Office Registered Oct. 24,1995
- -------------------------------------------------------------------

TRADEMARK
PRINCIPAL REGISTER

[LEAF]

LEAF.INC.(DELEWARE CORPORATION) OWNER OF U.S. REG. NOS. 1,713,643, 1,789,340
500 NORTH FIELD DRIVE AND OTHERS.
LAKE FOREST, IL 60045

FOR: TRADING CARDS, IN CLASS 16 SER. NO. 74-574,46, FILED 9-16-1994.

FIRST USE 6-28-1990; IN COMMERCE
6-28-1990 MICHAEL LEVY, EXAMINING ATTORNEY

<PAGE>

FILING RECEIPT FOR TRADEMARK APPLICATION Page 01 M D1

12/30/94

Receipt on the DATE OF FILING of the application law registration and filing
fees is acknowledged for the mark identified below. The DATE OF FILING is
contingent upon the collection of any payment made by check or draft. Your
application will be considered in the order in which it was received and you
will be notified as to the examination thereof. Correspondence should be
expected from the Patent and Trademark Office in approximately months.
When inquiring about this application, include the SERIAL NUMBER, DATE OF
FILING, OWNER NAME and MARK 06

IMPRE
Georgia L. Vlamis ATTORNEY
Wildman, Harrold, Allen & Dixon REFERENCE NUMBER
225 West Wacker Drive, Suite 2600
Chicago, IL 60606-1229

PLEASE REVIEW THE ACCURACY OF THE FILING RECEIPT DATA.
A request to for correction to the notice of allowance should be submitted
within 30 days to the following address. ASSISTANT COMMISSIONER FOR TRADEMARKS,
2900 CRYSTAL DRIVE, ARLINGTON, VIRGINIA 23203-3513. The correspondence should
be marked to the attention of the Office of Trademark Program Control. The
Patent and Trademark Office will review the request and make corrections when
appropriate.

SERIAL NUMBER: 74/572458 DATE OF FILING: 09/16/1994
MARK: LEAF SET
MARK TYPE(S): TRADEMARK
DRAWING TYPE: WORDS, LETTERS, OR NUMBERS IN TYPED FORM
SECTION 1(A): YES SECTION 1(B): NO SECTION 44: NO

- --------------------------------------------------------------------------------

ATTORNEY: Georgia L. Vlamis
OWNER NAME: Leaf, Inc.
OWNER ADDRESS: 500 North Field Drive
Lake Forest
ILLINOIS 60045
ENTITY: CORPORATION
CITIZENSHIP/DOMICILE: DELAWARE

- --------------------------------------------------------------------------------

INTERNATIONAL CLASS DATE OF FIRST USE DATE OF FIRST USE IN COMMERCE

016 06/28/1990 06/28/1990

ONLY THOSE DATES OF USE AND CLASSES FILED UNDER SECTION 1(A) ARE LISTED

- --------------------------------------------------------------------------------

GOODS/SERVICES BY INTERNATIONAL CLASS

316-trading cards
ALL OF THE GOODS/SERVICES IN EACH CLASS ARE LISTED

- --------------------------------------------------------------------------------

ADDITIONAL INFORMATION MAY BE PRESENT IN THE PTO RECORDS

<PAGE>

INT. CL.: 16

PRIOR U.S. CL.: 38
REG. NO. 1,789,339
UNITED STATES PATENT AND TRADEMARK OFFICE REGISTERED AUG. 24, 1993
- -------------------------------------------------------------------------------

TRADEMARK
PRINCIPAL REGISTER

[LEAF SET LOGO]

LEAF, INC. (DELAWARE CORPORATION) NO CLAIM IS MADE TO THE EXCLUSIVE
2355 WAUKEGAN ROAD RIGHT TO USE "SET", APART FROM THE
BANNOCKBURN, IL 60015 MARK AS SHOWN.

FOR: BASEBALL TRADING CARDS, IN
CLASS 16 (U.S. CL. 38) SER. NO. 74-283,975. FILED 6-12-1992.
FIRST USE 6-28-1990; IN COMMERCE
6-28-1990.
MARY C. MACK, EXAMINING ATTORNEY

<PAGE>

INT. CL.: 16

PRIOR U.S. CL.: 38
REG. NO. 1,789,340
UNITED STATES PATENT AND TRADEMARK OFFICE REGISTERED AUG. 24, 1993
- -------------------------------------------------------------------------------

TRADEMARK
PRINCIPAL REGISTER

LEAF SET

LEAF, INC. (DELAWARE CORPORATION) NO CLAIM IS MADE TO THE EXCLUSIVE
2355 WAUKEGAN ROAD RIGHT TO USE "SET", APART FROM THE
BANNOCKBURN, IL 60015 MARK AS SHOWN.

FOR: BASEBALL TRADING CARDS, IN
CLASS 16 (U.S. CL. 38) SER. NO. 74-283,998. FILED 6-12-1992.
FIRST USE 6-28-1990; IN COMMERCE
6-28-1990.
MARY C. MACK, EXAMINING ATTORNEY

<PAGE>
DONRUSS TRADING CARDS. INC-
---------------------------

TRADEMARKS

MARK REG. NO. ISSUE DATE COUNTRY
---- ------- ---------- --------

LONG BALL LEADERS 1,847,354 7/26/94 U.S.A.
THE SIGNATURE SERIES 1,831,290 4/19/94 U.S.A.
THE ELITE SERIES 1,822,660 2/22/94 U.S.A.
PHENOMS 1,805,274 11/16/93 U.S.A.
STUDIO & DESIGN 1,781,361 7/13/93 U.S.A.
THE LEGEND SERIES 1,741,283 12/22/92 U.S.A.
STUDIO 1,735,693 11/24/92 U.S.A.
DONRUSS 1.526,835 2/28/89 U.S.A.
RATED ROOKIE 1,375,844 12/17/85 U.S.A.
ACTION ALL STARS 1,312,280 1/1/85 U.S.A.
DIAMOND KING 1,255,294 10/25/83 U.S.A.
DONRUSS 422,023 1/7/94 CANADA
DONRUSS DOMINATORS
ELITE DOMINATORS
POWER ALLEY U.S.A. (PENDING
ROUNDTRIPPERS U.S.A. (PENDING)
HIT LIST U.S.A. (PENDING)
PRO POINTERS U.S.A. (PENDING)
FIRE ON ICE 1,924,619 10/3/95 U.S.A.
STICK SIDE U.S.A. (PENDING)
ICE MASTERS

EXHIBIT 10.12

LICENSE AGREEMENT
-----------------

This Agreement is entered into as of this 28th day of May, 1996 by and
between Pinnacle Brands, Inc., a Delaware corporation with offices at 924
Avenue J East, Grand Prairie, Texas 75050 ("Licensor"), and Donruss Trading
Cards, Inc., a Delaware corporation with offices at 500 North Field Drive,
Lake Forest, Illinois 60045 ("Licensee").

WHEREAS Licensor and Licensee have entered into an Asset Purchase
Agreement as of the date hereof, pursuant to which Licensor has acquired
the assets of Licensee relating to the sports trading card business,
including the trademark DONRUSS; and

WHEREAS, Licensor is now the owner by assignment of the trademark
DONRUSS, and United States Trademark Registration No. 1,526,835 and Canada
Trademark Registration No. 422,023 (collectively, the "Mark"); and

WHEREAS, as a condition of entering into the Asset Purchase Agreement,
Licensor and Licensee agreed that Licensee may continue using the Mark in
connection with its interactive card games business;

NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and in the Asset Purchase Agreement, it is mutually agreed
by and between the parties as follows:

1. Grant of License. Licensor hereby grants to Licensee, during the
----------------
Term (as set forth below) and in accordance with the provisions of this
Agreement, an exclusive, royalty-free license to use the Mark on and in
connection with the advertising, promotion, sale and distribution of the
following products:

Interactive Card Games, namely, Red Zone and Top of the Order;

(the "Products").

2. Ownership.
---------

a. Licensee acknowledges Licensor's exclusive ownership of all
right, title and interest in and to the Mark, and Licensee shall not, at
any time, do or cause to

<PAGE>

be done any act or thing contesting or in any way impairing or tending to
impair Licensor's rights, title and interests. Except as provided herein,
Licensee agrees not to adopt or use any word, designation or trademark that
is confusingly similar to the Mark.

b. Licensor expressly disclaims any warranty or representation to
Licensee as to ownership of or rights in or to the Mark.

3. Quality Standards.
-----------------

a. Licensee shall produce, market, package, display, distribute and
sell the Products bearing the Mark strictly in accordance with
specifications and quality standards supplied or approved in writing from
time to time by Licensor, which shall be no more stringent than the
standards observed by Licensee prior to the date hereof. Licensor
specifically acknowledges that the quality of the Interactive Card Games
sold by Licensee since January 1, 1991 under the Mark meets such standards.

b. Licensee shall comply with periodic and reasonable requests by
Licensor for submission (free of charge to Licensor) of representative
samples showing how Licensee is using the Mark on and in connection with
the Products.

c. The Products offered for sale and the form and manner of the use
of the Mark on and in connection therewith shall conform in all respects to
the samples previously provided to and approved by Licensor. Licensee shall
not alter or modify the quality of the Products or the form or manner of
the use of the Mark without Licensor's prior written consent.

4. Term.
-----

a. The Term of this Agreement shall be one year from the date
hereof, provided, however, that Licensee shall have the right to renew this
--------
Agreement for an additional six month period if at the time of such renewal
Licensee is not in breach of this Agreement.

b. Upon expiration of the Term, Licensee and its agents, assignees and
sublicensees shall permanently cease and desist from any and all use of the
Mark and refrain from adopting or using any mark confusingly similar
thereto.

<PAGE>

5. Right to Assign/Sublicense. Licensee shall have the right to
--------------------------
assign this Agreement or sublicense the rights granted under this
Agreement, in whole or in part, without Licensor's prior consent. Licensee
shall notify Licensor of the name and address of any such assignee or
sublicensee no later than the date on which such assignment or sublicense
is made.

6. Notices. All notices, consents or other communications under this
-------
Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or five (5) business days after being mailed in
the United States by first-class postage prepaid mail, to the party's
address set forth above (or to such other address(es) as a party may
designate by notice to the other).

7. Governing Law, Jurisdiction. This Agreement will be interpreted
---------------------------
under the relevant laws of the United States and the State of New York,
without regard to the conflict of laws principles thereof. The courts of
the State of New York and the United States district courts which sit in
such state will have exclusive jurisdiction over any action interpreting
this Agreement or in which it is alleged that a party hereto has breached
any term of this Agreement.

8. Indemnity. Licensee hereby indemnifies and agrees to defend and
---------
hold Licensor harmless, during the term of this Agreement and at any time
thereafter, from any and all claims, causes of action, costs, expenses,
fines, penalties, liabilities, damages, suits or judgments, including costs
of investigation, court costs and reasonable attorney's fees (hereinafter
collectively, "Claims"), arising directly or indirectly from, as a result
of, or in connection with the manufacture, marketing or sale of Licensed
Products by Licensee, and Licensor will have no obligation or liability in
connection therewith or arising from such Claims. Licensee will, within 15
days of notice of any such action in which Licensor is named, notify
Licensor in writing thereof.

9. No Waiver. The failure of a party to insist upon strict adherence
---------
to any term of this Agreement on any occasion, and no custom or practice of
the parties at variance with the terms hereof, shall constitute or be

<PAGE>

construed as a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement. All waivers must be in writing.

10. No Agency. The relationship between Licensor and Licensee is that
---------
of independent contractors. No partnership, agency, joint venture or
employment is intended. Neither party will be considered as, or hold itself
out to be, an agent of the other party, and neither party may act for or
bind the other to any obligation.

11. Miscellaneous.
-------------

a. This Agreement shall be binding on the parties hereto, and their
officers, employees, agents, sublicensees, assignees and successors.

b. If any provision of this Agreement shall be construed or found to
be invalid or unenforceable, such shall not affect the legality or validity
of any of the other provisions hereof, and the illegal or invalid provision
shall be deemed stricken, but all remaining provisions hereof shall
continue in full force and binding effect, and if any provision is
inapplicable to any circumstance, it will nevertheless remain applicable to
all other circumstances.

c. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof, and all prior agreements are
hereby merged into this Agreement. This Agreement may not be amended or
modified except in a writing signed by both parties.

d. The captions used herein are for convenience only and shall not
in any way affect the meaning or interpretation of this Agreement.

<PAGE>

or other equitable relief, to enjoin and restrain Licensee, pending
resolution of any dispute, from taking or continuing any action which
injures the reputation, goodwill or commercial image of Licensor or the
Mark.

<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

LICENSOR
PINNACLE BRANDS, INC.

By: /s/ John S. Worth
----------------------------
Name John S. Worth
---------------------------
Title: Senior Vice President and
Chief Financial Officer
-------------------------

LICENSEE
DONRUSS TRADING CARDS, INC.

By: /s/ Juha Salonen
----------------------------
Name: Juha Salonen
--------------------------
Title: Vice President
-------------------------

EXHIBIT 10.13

LICENSE AGREEMENT
-----------------

WHEREAS, as a condition of entering into the Asset Purchase Agreement,
Licensor and Licensee agreed that Licensee may continue using the Mark in
connection with its entertainment trading cards business;

NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and in the Asset Purchase Agreement, it is mutually agreed
by and between the parties as follows:

1. Grant of License. Licensor hereby grants to Licensee, during the
------------------
Term (as set forth below) and in accordance with the provisions of this
Agreement, an exclusive, royalty-free license to use the Mark on and in
connection with the advertising, promotion, sale and distribution of the
following products:

Entertainment Trading Cards, including, without limitation, Flipper and Ace
Ventura trading cards

(the "Products").

<PAGE>
2. Ownership.
---------

a. Licensee acknowledges Licensor's exclusive ownership of all
right, title and interest in and to the Mark, and Licensee shall not, at
any time, do or cause to be done any act or thing contesting or in any way
impairing or tending to impair Licensor's rights, title and interests.
Except as provided herein, Licensee agrees not to adopt or use any word,
designation or trademark that is confusingly similar to the Mark.

b. Licensor expressly disclaims any warranty or representation to
Licensee as to ownership of or rights in or to the Mark.

3. Quality Standards.
-----------------

a. Licensee shall produce, market, package, display, distribute and
sell the Products bearing the Mark strictly in accordance with
specifications and quality standards supplied or approved in writing from
time to time by Licensor, which shall be no more stringent than the
standards observed by Licensee prior to the date hereof. Licensor
specifically acknowledges that the quality of the Entertainment Trading
Cards sold by Licensee since January 1, 1991 under the Mark meets such
standards.

4. Term.
----

a. The Term of this Agreement shall be one year from the date
hereof.

b. Upon expiration of the Term, Licensee and its agents, assignees
and sublicensees shall permanently cease and desist from any and all use of
the Mark and refrain from adopting or using any mark confusingly similar
thereto.

<PAGE>

8. No Waiver. The failure of a party to insist upon strict adherence
-----------
to any term of this Agreement on any occasion, and no custom or practice of
the parties at variance with the terms hereof, shall constitute or be
construed as a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement. All waivers must be in writing.

9. Indemnity. Licensee hereby indemnifies and agrees to defend and
---------
hold Licensor harmless, during the term of this Agreement and at any time
thereafter, from any and all claims, causes of action, costs, expenses,
fines, penalties, liabilities, damages, suits or judgments, including costs
of investigation, court costs and reasonable attorney's fees (hereinafter
collectively, "Claims"), arising directly or indirectly from, as a result
of, or in connection with the manufacture, marketing or sale of Licensed
Products by Licensee, and Licensor will have no obligation or liability in
connection therewith or arising from such Claims. Licensee will, within 15
days of

<PAGE>
notice of any such action in which Licensor is named, notify Licensor in
writing thereof.

11. Miscellaneous.
-------------

a. This Agreement shall be binding on the parties hereto, and their
officers, employees, agents, sublicensees, assignees and successors.

d. The captions used herein are for convenience only and shall not
in any way affect the meaning or interpretation of this Agreement.

e. Licensee acknowledges that any injury to Licensor's goodwill or
image, or any obstacle to Licensor's control over the nature and quality of
the goods offered in connection with the Mark will cause Licensor immediate
and irreparable harm, and Licensor will have no adequate remedy at law.
Accordingly, Licensee hereby consents to entry of a temporary restraining
order and preliminary injunction, or other equitable relief, to enjoin and
restrain Licensee, pending resolution of any dispute, from taking or
continuing any action which injures the reputation, goodwill or commercial
image of Licensor or the Mark.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

LICENSOR
PINNACLE BRANDS, INC.

By: /s/ John S. Worth
----------------------------
Name: John S. Worth
--------------------------
Title: Senior Vice President and
Chief Financial Officer
-------------------------

LICENSEE
DONRUSS TRADING CARDS, INC.

By: /s/ Juha Salonen
---------------------------
Name: Juha Salonen
-------------------------
Title: Vice President
------------------------

Exhibit 10.14

01134881

SETTLEMENT AGREEMENT

Agreement dated September 15, 1995 among Grand Slam Acquisition Corp., a
Delaware corporation ("GSAC"), Pinnacle Brands, Inc. (formerly Score Group,
Inc.), a Delaware corporation ("PBI"), MLM Acquisition Corp., a Delaware
corporation ("MLM Acquisition" and, collectively with GSAC and PBI, the "GSAC
Parties"), Daniel C. Shedrick ("Shedrick"), Harris A. Cahn ("Cahn"), Barry A.
Halper ("Halper"), Bruno Tomasi ("Tomasi") and Franco Harris ("Harris" and,
collectively with Shedrick, Cahn, Halper and Tomasi, the "MLM Stockholders") and
Larry Lambrecht ("Lambrecht" and, collectively with the MLM Stockholders, the
"MLM Parties").

Background

The GSAC Parties and the MLM Parties, intending to be legally bound hereby,
agree as follows:

1. GSAC Consulting Agreements.

1.1 Payment. Concurrently with the execution and delivery of this
agreement, GSAC is paying $1,000,000 to the MLM Parties (allocated 72 1/2% to
Shedrick, 10% to Cahn, 10% to Halper, 2 1/2% Tomasi, 2 1/2% to Harris and 2 1/2%
to Lambrecht), plus as to each MLM Party the amount set forth under such MLM
Party's name as "Total Adjustments" on Schedule 1.1, in full satisfaction of all
of GSAC's obligations (whether accrued prior to, on or after the date of this
agreement) under the GSAC Consulting Agreements.

1.2 Section 2 of GSAC Consulting Agreements. The words "the third
anniversary of the date hereof" are deleted and the words "September 15, 1995"
are substituted therefor in Section 2 of the GSAC Consulting Agreements.

2. Releases.

2.1 The GSAC Parties. Concurrently with the execution and delivery of this
agreement, the GSAC Parties are executing and delivering to each of the MLM
Parties a release in the form of exhibit 2.1.

<PAGE>

2.2 The MLM Parties. Concurrently with the execution and delivery of this
agreement, each of the MLM Parties is executing and delivering to the GSAC
Parties a release in the form of exhibit 2.2.

3. Representations and Warranties of the GSAC Parties.

Each of the GSAC Parties hereby represents and warrants to the MLM Parties
with respect to itself as follows:

3.1 Organization; Authority; Binding Effect. Each of the GSAC Parties is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to execute and
deliver this agreement and to perform its obligations hereunder. The execution,
delivery and performance of this agreement have been duly authorized by all
necessary corporate action of each of the GSAC Parties and this agreement
constitutes a valid and binding obligation of each of the GSAC Parties,
enforceable against each of them in accordance with its terms.

3.2 No Conflict. Neither the execution, delivery and performance of this
agreement nor the consummation of any or all of the transactions contemplated
hereby will (a) violate any provision of the certificate of incorporation or by-
laws (or other governing instrument) of any of the GSAC Parties or (b) violate,
or be in conflict with, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or excuse performance
by any Person of any of its obligations under, or cause the acceleration of the
maturity of any debt or obligation pursuant to, or result in the creation or
imposition of any Encumbrance upon any property or assets of any of the GSAC
Parties under, any agreement or commitment to which any of the GSAC Parties is a
party or by which any of their respective property or assets is bound, or to
which any of the property or assets of any of the GSAC Parties is subject, or
(c) violate any statute or law or any judgment, decree, order, regulation or
rule of any court or other Governmental Body applicable to any of the GSAC
Parties.

4. Representations and Warranties of the MLM Parties.

Each of the MLM Parties hereby represents and warrants to the GSAC Parties
with respect to himself as follows:

<PAGE>
3

4.1 Capacity; Binding Effect. Each of the MLM Parties is an individual,
with full power and capacity to execute and deliver this agreement and to
perform his obligations hereunder. This agreement has been duly executed and
delivered by each of the MLM Parties and this agreement constitutes a valid and
binding obligation of each of the MLM Parties, enforceable against each of them
in accordance with its terms.

4.2 No Conflict. Neither the execution, delivery and performance of this
agreement nor the consummation of any or all of the transactions contemplated
hereby will (a) violate, or be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or excuse performance by any Person of any of its obligations under, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any Encumbrance upon any property or
assets of any of the MLM Parties under, any agreement or commitment to which any
of the MLM Parties is a party or by which any of their respective property or
assets is bound, or to which any of the property or assets of any of the MLM
Parties is subject, or (b) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other Governmental Body applicable to
any of the MLM Parties. Shedrick has obtained all requisite consents to the
execution and delivery of this agreement and the consummation of the
transactions contemplated hereby from the lenders to which he has granted
Encumbrances in any of the payments to which he may be entitled under the GSAC
Consulting Agreement to which he is a party and releases of all such
Encumbrances; concurrently with the execution and delivery of this agreement,
Shedrick is delivering copies of such consents and releases to the GSAC Parties.

4.3 No Other Representations and Warranties. The MLM Parties have received
no representations and warranties from or on behalf of any of the GSAC Parties
other than as expressly set forth in this agreement in connection with the
execution and delivery of this agreement or the transactions contemplated
hereby. Nothing in this Section 4.3 shall impair the effect of the
representations and warranties of the GSAC Parties in this agreement or form the
basis for a defense to any claim arising under this agreement.

5. Survival; Indemnification.

5.1 Survival. All representations, warranties and agreements contained in
this agreement shall survive the execution, delivery and performance of this
agreement notwithstanding any investigation conducted, or knowledge acquired,
with respect thereto.

5.2 Indemnification by the GSAC Parties. Each of the GSAC Partes shall
indemnify and hold harmless the MLM Parties and shall reimburse the MLM Parties
for, any Damages arising from or in connection with (a) any inaccuracy in any of
the representations or warranties of that GSAC Party in this agreement or
(b) any failure by that GSAC Party to perform or comply with any agreement in
this agreement.

<PAGE>
4

5.3 Indemnification by the MLM Parties. Each of the MLM Partes shall
indemnify and hold harmless the GSAC Parties and shall reimburse the GSAC
Parties for, any Damages arising from or in connection with (a) any inaccuracy
in any of the representations or warranties of that MLM Party in this agreement
or (b) any failure by that MLM Party to perform or comply with any agreement in
this agreement.

5.4 Procedure. Section 8.4 of the BCA shall apply to claims under Section
5.2 and 5.3.

6. Notices. All notices, consents and other communications under this
agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate as to itself by notice to the other
parties):

If to any of the GSAC Parties:

924 Avenue J East
Grand Prairie, Texas 75050
Telecopier No.: (214) 647-8311
Attention: Jerry M. Meyer

with copies to:

Acadia Partners, L.P.
65 East 55th Street
32nd Floor
New York, New York 10022
Telecopier No.: (212) 754-5685
Attention: David G. Offensend

and

Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Telecopier No.: (212) 836-7149
Attention: Joel I. Greenberg, Stuart L. Rosow and Nancy E. Fuchs

<PAGE>
5

If to an MLM Party:

Daniel C. Shedrick
649 Merwins Lane
Fairfield, CT 06430

Harris A. Cahn
701 Gibson Avenue
P.O. Box 4040
Aspen, Colorado 81612
and
621 Smith Manor Blvd.
West Orange, New Jersey 07052

Barry A. Halper
2 Nottingham Road
Livingston, NJ 07039

Franco Harris
200 Chaucer Ct.
Sewickly, PA 15143

Bruno Tomasi
7 Round Pond Road
Westport, CT 06880

Larry Lambrecht
128 Sasco Hill Road
Fairfield, Connecticut 06430

with a copy to:

Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
Telecopier No: (212) 969-2900
Attention: Edward W. Kerson and
S.L. Warhaftig

7. Jurisdiction; Service of Process.

<PAGE>
6

7.1 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this agreement shall be
brought against any of the parties in the courts of the State of New York or the
United States District Court for the Southern District of New York, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein.

7.2 Service of Process. Process in any action or proceeding referred to in
Section 7.1 may be served on any party anywhere in the world, whether within or
without the State of New York.

8. Miscellaneous.

8.1 Expenses. Each party shall bear its own expenses incident to the
preparation, negotiation, execution and delivery of this agreement and the
performance of its obligations hereunder.

8.2 Specific Performance. The parties acknowledge that the subject matter
of this agreement is unique and that no adequate remedy of law would be
available for breach of this agreement. Accordingly, each party agrees that the
other parties will be entitled to an appropriate decree of specific performance
or other equitable remedies to enforce this agreement (without any bond or other
security being required) and each party waives the defense in any action or
proceeding brought to enforce this agreement that there exists an adequate
remedy at law.

8.3 Captions. The captions in this agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this
agreement.

8.4 No Waiver. The failure of a party to insist upon strict adherence to
any term of this agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this agreement. Any waiver must be in writing.

8.5 Exclusive Agreement; Amendment. This agreement supersedes all prior
agreements among the parties with respect to its subject matter, is intended
(with the documents referred to herein) as a complete and exclusive statement of
the terms of the agreement among the parties with respect thereto and cannot be
changed or terminated except by a written instrument signed by the parties.

8.6 Counterparts. This agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.

<PAGE>
7

8.7 Governing Law. This agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of action) shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to any conflicts-of-law rule or principle that might result in the
application of the laws of another jurisdiction.

GRAND SLAM ACQUISITION CORP.

By: /s/ John Worth
-----------------------------

PINNACLE BRANDS, INC.

By: /s/ John Worth
-----------------------------
MLM ACQUISITION CORP.

By: /s/ John Worth
-----------------------------
DANIEL C. SHEDRICK

________________________________

HARRIS A. CAHN

________________________________

BARRY A. HALPER

________________________________

BRUNO TOMASI

<PAGE>
7

GRAND SLAM ACQUISITION CORP.

By:
-----------------------------

PINNACLE BRANDS, INC.

By:
-----------------------------
MLM ACQUISITION CORP.

By: /s/ Daniel C. Shedrick
-----------------------------
DANIEL C. SHEDRICK

________________________________

HARRIS A. CAHN

________________________________

BARRY A. HALPER

________________________________

BRUNO TOMASI

<PAGE>
7

GRAND SLAM ACQUISITION CORP.

By:
-----------------------------

PINNACLE BRANDS, INC.

By:
-----------------------------
MLM ACQUISITION CORP.

By:
-----------------------------
DANIEL C. SHEDRICK

________________________________

HARRIS A. CAHN

/s/ Barry A. Halper
--------------------------------

BARRY A. HALPER

________________________________

BRUNO TOMASI

<PAGE>
7

GRAND SLAM ACQUISITION CORP.

By:
-----------------------------

PINNACLE BRANDS, INC.

By:
-----------------------------
MLM ACQUISITION CORP.

By:
-----------------------------
DANIEL C. SHEDRICK

/s/ Harris A. Cahn
--------------------------------

HARRIS A. CAHN

________________________________

BARRY A. HALPER

/s/ Bruno Tomasi
--------------------------------

BRUNO TOMASI

<PAGE>
8

FRANCO HARRIS

/s/ Franco Harris
--------------------------------

LARRY LAMBRECHT

--------------------------------

<PAGE>
8

FRANCO HARRIS

--------------------------------

LARRY LAMBRECHT

/s/ Larry Lambrecht
--------------------------------

<PAGE>
9

Exhibit 2.1

RELEASE

This Release is being executed by Grand Slam Acquisition Corp. ("GSAC"),
Pinnacle Brands, Inc. ("PBI") and MLM Acquisition Corp. ("MAC" and, collectively
with GSAC and PBI, the "Releasors") in favor of Daniel C. Shedrick, Harris A.
Cahn, Barry A. Halper, Bruno Tomasi, Franco Harris and Larry Lambrecht
(collectively, the "MLM Parties") and the other Releasees (as defined below).

The Releasors and the MLM Parties are entering into a Settlement Agreement
dated September 15, 1995 (the "Settlement Agreement") that calls for the
execution and delivery of this release. Capitalized terms used in this release
without definition shall have the meanings given to them in the Settlement
Agreement.

The Releasors, intending to be legally bound, agree as follows:

1. Release. The Releasors hereby irrevocably release and discharge the
-------
MLM Parties and their respective heirs, executors, administrators, successors
and assigns (collectively, the "Releasees") from any and all claims, agreements,
obligations and causes of action whatsoever, whether known or unknown, suspected
or unsuspected, at law or in equity or otherwise, which the Releasors or any of
them now have, ever had or (to the extent arising from or in connection with any
action taken or omitted or state of facts existing on or prior to the date of
this release) may hereafter have against the Releasees or any of them arising
out of (i) the GSAC Consulting Agreements or any action or failure to take
action thereunder, (ii) the capital stock of GSAC or the status of any of the
MLM Parties as holders of capital stock of GSAC, or (iii) any obligation (for
indemnification or otherwise) in respect of (x) any representation or warranty
in the Amended BCA (other than the representations and warranties in Sections
6.2, 6.15 and 6.16 of the Amended BCA, (y) any claim by Jack Klinge for a bonus
for 1992) or (z) Sections 7 or 8.5 of the Amended BCA. The Releasors shall
refrain from asserting any matter released or purported to be released hereby
against any Releasee in any manner, including, but not limited to, by way of
counterclaim, offset or defense and shall actively resist any effort to assert
any such matter on their behalf.

The Releasors shall indemnify and hold harmless, on an after-tax basis,
each of the Releasees from and against any loss, liability, damage or expense
(including, but not limited to, reasonable counsel fees and expenses) arising
from or in connection with the assertion by or on behalf of the Releasors of any
claim or other matter purported to be released pursuant hereto.

2. Representation. The Releasors hereby represent and warrant that they
--------------
have not assigned any interest in any matter released or purported to be
released hereby to any other person or entity and that the individuals signing
below have full power to execute and deliver this Release.

<PAGE>
10

3. Governing Law. This release and all questions relating to its
-------------
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of action) shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to any conflicts-of-law rule or principle that might result in the
application of the laws of another jurisdiction. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
release may be brought against any of the parties in the courts of the State of
New York or the United States District Court for the Southern District of New
York, and each of the parties hereby consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world, whether within or without the State of New York.

4. Settlement Agreement. Except to the extent expressly provided herein,
--------------------
nothing contained herein shall affect the obligations contained in the
Settlement Agreement or the other settlement agreement of even date among the
same parties or the documents being executed pursuant to such agreements. To
the extent there is any conflict between the express terms provided herein and
any such agreement, the express terms herein shall be controlling.

Dated: September __, 1995

GRAND SLAM ACQUISITION CORP.

By:
----------------------------
PINNACLE BRANDS, INC.

By:
----------------------------
MLM ACQUISITION CORP.

By:
----------------------------

<PAGE>
11

Exhibit 2.2

RELEASE

This Release is being executed by Daniel C. Shedrick, Harris A. Cahn, Barry
A. Halper, Bruno Tomasi, Franco Harris and Larry Lambrecht (collectively, the
"Releasors") in favor of Grand Slam Acquisition Corp. ("GSAC"), Pinnacle Brands,
Inc. ("PBI"), MLM Acquisition Corp. ("MAC" and, collectively with GSAC and PBI,
the "GSAC Parties") and the other Releasees (as defined below).

The Releasors and the GSAC Parties are entering into a Settlement Agreement
dated September 15, 1995 (the "Settlement Agreement") that calls for the
execution and delivery of this release. Capitalized terms used in this release
without definition shall have the meanings given to them in the Settlement
Agreement.

The Releasors, intending to be legally bound, agree as follows:

1. Release. The Releasors hereby irrevocably release and discharge the
-------
GSAC Parties and their respective stockholders, subsidiaries, affiliates,
directors, officers, employees and agents and their respective heirs, executors,
administrators, successors and assigns (collectively, the "Releasees") from any
and all claims, agreements, obligations and causes of action whatsoever, whether
known or unknown, suspected or unsuspected, at law or in equity or otherwise,
which the Releasors or any of them now have, ever had or (to the extent arising
from or in connection with any action taken or omitted or state of facts
existing on or prior to the date of this release) may hereafter have against the
Releasees or any of them arising out of (i) the GSAC Consulting Agreements or
any action or failure to take action thereunder, (ii) the capital stock of GSAC
or the status of any of the Releasors as holders of capital stock of GSAC, or
(iii) any obligation (for indemnification or otherwise) in respect of (x) any
representation or warranty in the Amended BCA (other than the representation and
warranty in Section 5.9 of the Amended BCA) or (y) Sections 7 or 8.5 of the
Amended BCA. The Releasors shall refrain from asserting any matter released or
purported to be released hereby against any Releasee in any manner, including,
but not limited to, by way of counterclaim, offset or defense and shall actively
resist any effort to assert any such matter on their behalf.

2. Representation. The Releasors hereby represent and warrant that they
--------------
have not assigned any interest in any matter released or purported to be
released hereby to any other person or entity and that they have full power to
execute, deliver and perform this Release.

<PAGE>
12

Dated: September __, 1995

___________________________________
Daniel C. Shedrick

___________________________________
Harris A. Cahn

___________________________________
Barry A. Halper

___________________________________
Bruno Tomasi

___________________________________
Franco Harris

___________________________________
Larry Lambrecht

<PAGE>
Schedule 1.1.

PINNACLE BRANDS, INC.
ANALYSIS OF ADJUSTMENTS
As of SEPTEMBER 19, 1995

<TABLE><CAPTION>
FRANCO BRUNO BARRY LARRY HARRIS DAN
HARRIS TOMASI HALPER LAMBRECHT CAHN SHEDRICK TOTAL
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

ADJUSTMENTS 1994:

Offset River Group Deductions (2,303.15) (2,306.15) (9,224.59) (2,306.15) (9,224.59) (20,755.32) (46,122.94)

ADJUSTMENTS May 31, 1995:
Balance of 12/31/93 Consulting Payment(1) (2,500.00) (2,500.00) (10,000.00) (2,500.00) (10,000.00) (22,500.00) (50,000.00)

Offset River Group Deductions(2) (983.67) (983.67) (3,934.68) (983.67) (3,934.58) (8,853.03) (19,673.40)

Unpaid Invoice for Invisible Monster Decoder
Product(3) (131.12) (131.12) (524.48) (131.12) (524.48) (1,180.04) (2,622.32)

Refund River Group Payments Received by
Pinnacle 321.60 321.60 1,286.40 321.60 1,266.40 2,894.40 6,432.00
---------------------------------------------------------------------------------
Total Adjustments made to May 31, 1995
payment (3,293.19) (3,293.19) (13,172.74) (3,293.19) (13,172.74) (29,638.67) (65,853.72)

ADJUSTMENTS June 30, 1995:

Offset River Group Deductions(2) (822.38) (822.38) (3,289.51) (822.38) (3,289.51) (7,401.40) (16,447.56)

---------------------------------------------------------------------------------
TOTAL ADJUSTMENTS: (6,421.72) (6,421.72) (25,686.84) (6,421.72) (25,588.84) (57,795.39) (128,434.22)(4)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------

</TABLE>

(1) Payment contingent on receipt of Italian Tax Refund pursuant to Harris
Cahn's letter dated 2/16/95
(2) Represents customer deductions taken against amounts due to Pinnacle for
River Group product since 9/30/94.
(3) Represents unpaid River Group invoice dated 7/30/94 for Pinnacle services
relating to the Invisible Monster Decoder product
(4) Represents the total deduction reimbursements agreed to per Dan Shedrick's
September 18, 1995 memo to Jerry Meyer

Exhibit 10.15

01166550

SETTLEMENT AGREEMENT

Background

The GSAC Parties and the MLM Stockholders are party to a Business
Combination Agreement and Plan of Reorganization dated as of June 10, 1993 (as
amended by the BCA Amendment referred to below, the "Amended BCA") and an
Amendment to Business Combination Agreement and Plan of Reorganization dated
July 30, 1993 (the "BCA Amendment") pursuant to which, inter alia, Major League
Marketing, Inc., a Delaware corporation ("MLM") was merged with and into MLM
Acquisition and the MLM Stockholders received the shares of capital stock of
GSAC referred to in Section 3.5(b) of the BCA and Section 9 of the BCA Amendment
(the "Shares"). Capitalized terms used in this agreement without definition
shall have the meaning given to them in the BCA.

The GSAC Parties and the MLM Stockholders (collectively, the "Parties")
dispute responsibility for a liability owed by MLM to PBI immediately prior to
the consummation of the Merger in the amount of approximately $30,000,000 (the
"Liability") and the effect of the BCA on responsibility for the Liability. The
Parties recognize that the BCA does not reflect their mutual intent with respect
to the Liability and that there was no agreement among the Parties with respect
thereto. The GSAC Parties believed that the Liability had not been assumed in
the Merger, while the MLM Parties believed that MLM Acquisition had assumed the
liability in the Merger as part of the consideration for MLM's assets.

The Parties believe that the dispute warrants reformation of the BCA since
the responsibility for the Liability was a basic assumption on which the BCA was
made, and the dispute as to the responsibility for the Liability had a material
effect on the agreed exchange of performances. Since the Parties cannot undue
the Merger, the Parties wish to provide for a settlement of the dispute that
would retroactively reform their agreement pursuant to the BCA into an agreement
each of the Parties would have originally entered into had they fully understood
the dispute as to the responsibility for the Liability. The Parties agree that
they would have entered into an agreement whereby the GSAC Parties assumed the
Liability, rather than issuing the Shares to the MLM Stockholders, in exchange
for the acquisition of MLM and its assets through the Merger. The Parties

<PAGE>
2

therefore wish to provide for a settlement under which the Shares would be
canceled and the GSAC Parties would assume the Liability.

The GSAC Parties and the MLM Parties, intending to be legally bound hereby,
agree as follows:

1. Amendment of BCA.

1.1 MLM Assumed Liabilities. The definition of "MLM Assumed Liability" in
Section 1 of the BCA is hereby amended to change clause (a) of such definition
by deleting "(excluding any payables to SGI)", so that such definition reads in
its entirety as follows:

"MLM Assumed Liabilities" -- (a) accounts payable, accrued
expenses, liabilities and other obligations (other than Taxes, and
other than accounts payable, accrued expenses, liabilities and
obligations to shareholders and their affiliates) arising out of the
MLM Sports Trading Card Business; (b) the principal of, and accrued
interest since the last scheduled interest payment date prior to the
Closing on, the following notes, in an aggregate amount (for principal
and interest) not exceeding $1,069,000: (I) the note payable by MLM to
Harris dated March 20, 1991, (ii) the note payable by MLM to Halper
dated March 21, 1991 and (iii) the notes payable by MLM to Tomasi and
Cahn each dated March 22, 1991 (with any amount in excess thereof
canceled and contributed to the capital of MLM immediately prior to
the Closing), to the extent provided in Section 4.4(j); and (c) Taxes
other than Income Taxes incurred in the ordinary course of the MLM
Sports Trading Card Business of a type for which provision has been
made on the balance sheets of MLM referred to in Section 6.6.

1.2 Conversion of Securities. Section 3 of the BCA is hereby amended to
provide that the shares of MLM Common Stock issued and outstanding immediately
prior to the Effective Time shall be canceled and not converted into any
securities (including, but not limited to, the Shares) or other rights or
property. Section 9 of the BCA Amendment is hereby deleted. The GSAC Parties
and the MLM Parties have agreed that it is not necessary to reflect the
foregoing in an amendment of the certificate of merger filed with the Secretary
of State of the State of Delaware to effect the Merger. Instead, each of the
MLM Parties hereby transfers and assigns to GSAC all of his right, title and
interest in and to the Shares and, concurrently with the execution and delivery
of this agreement, is delivering the certificates representing the Shares to
GSAC for cancellation. Each of the MLM Parties hereby agrees and confirms that,
as a result of the foregoing, none of the MLM Parties (nor any person or entity
claiming through any of the MLM Parties) will have any interest of any kind,
direct or indirect, in the Shares or any other securities of any of the GSAC
Parties. Each of the MLM Parties hereby transfers and assigns to GSAC for
cancellation any such interest that may exist. The provisions of this Section
1.2 are irrevocable and shall not be affected by the characterization of the
transaction accomplished pursuant to the Amended BCA and this agreement for tax
purposes.

<PAGE>
3

1.3 River Group Customers. Section 8.3 of the BCA is hereby amended to
delete clause (d) thereof so that Section 8.3 reads in its entirety as follows:

8.3 Indemnification by the MLM Stockholders. Subject to Section
8.5, the MLM Stockholders, jointly and severally, shall indemnify and
hold harmless, and shall reimburse GSAC, SGI, MLM Acquisition Corp.
and their respective stockholders, directors, officers and agents for
Damages arising from or in connection with (a) any inaccuracy in any
of the representations and warranties of the MLM Stockholders in
Section 6.2, 6.15 and 6.16 of this Agreement, (b) any failure by MLM
or any of the MLM Stockholders to perform or comply with any agreement
in this Agreement (other than in Section 7 or 8.5 of this Agreement,
(c) MLM or its business activities prior to the Closing Date, but
excluding the MLM Assumed Liabilities, or (d) any claim by any Person
for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by
such Person with MLM or any of the MLM Stockholders (or any Person
acting on its behalf) in connection with any of the Contemplated
Transactions.

2. Tax Matters.

As a result of the reformation of the BCA pursuant to this agreement, the
Parties recognize that the transaction provided for in the BCA, as amended,
does not qualify as a reorganization under section 368 of the Internal Revenue
Code of 1986, as amended (the "Code). The Parties agree to treat such
transaction as a sale of assets by MLM to MLM Acquisition in exchange for a
purchase price equal to the amount of MLM's liabilities, including the
Liability, followed by the liquidation of MLM. The parties further agree that
such purchase price will be allocated among the MLM assets as follows: that
portion of the purchase price equal to the tax basis of any assets reflected on
the balance sheet of MLM shall be allocated to such assets in an amount equal to
their tax basis and the balance of the purchase price shall be allocated to good
will. The Parties agree to file their income tax returns, including amended
returns, in a manner consistent with this Section 2.

3. Representations and Warranties of the GSAC Parties.

Each of the GSAC Parties hereby represents and warrants to the MLM Parties
with respect to itself as follows:

<PAGE>
4

3.3 No Other Representations and Warranties. The GSAC Parties have
received no representations and warranties from or on behalf of any of the MLM
Parties other than as expressly set forth in this agreement in connection with
the execution and delivery of this agreement or the transactions contemplated
hereby. Without limiting the generality of the foregoing, none of the GSAC
Parties have relied upon any advise or assurance from any of the MLM Parties as
to the tax consequences of this agreement or the transactions contemplated
hereby. Nothing in this Section 3.3 shall impair the effect of the
representations and warranties of the MLM Parties in this agreement or form the
basis for a defense to any claim arising under this agreement.

4. Representations and Warranties of the MLM Parties.

Each of the MLM Parties hereby represents and warrants to the GSAC Parties
with respect to himself as follows:

<PAGE>
5

any statute or law or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to any of the MLM Parties. Shedrick
has obtained all requisite consents to the execution and delivery of this
agreement and the consummation of the transactions contemplated hereby from the
lenders to which he has granted Encumbrances in any of the Shares and releases
of all such Encumbrances; concurrently with the execution and delivery of this
agreement, Shedrick is delivering copies of such consents and releases to the
GSAC Parties.

4.3 No Transfer. With the exception of the transfer of some of the Shares
to Lambrecht and the Encumbrances created by Shedrick described in the last
sentence of Section 4.2, (a) none of the MLM Parties has transferred or created
any Encumbrance in any of the Shares or any interest therein or suffered any
such transfer or Encumbrance to occur or be created and (b) each of the MLM
Parties owns, of record and beneficially, the Shares issued to him pursuant to
the BCA and the BCA Amendment.

4.4 No Other Representations and Warranties. The MLM Parties have received
no representations and warranties from or on behalf of any of the GSAC Parties
other than as expressly set forth in this agreement in connection with the
execution and delivery of this agreement or the transactions contemplated
hereby. Without limiting the generality of the foregoing, none of the MLM
Parties have relied upon any advise or assurance from any of the GSAC Parties as
to the tax consequences of this agreement or the transactions contemplated
hereby. Nothing in this Section 4.4 shall impair the effect of the
representations and warranties of the GSAC Parties in this agreement or form the
basis for a defense to any claim arising under this agreement.

5. Tax Indemnification.

5.1 General. GSAC shall pay, indemnify and hold harmless the MLM
Stockholders from and against any liabilities for Income Taxes resulting from
(1) the transaction accomplished pursuant to the Amended BCA and this agreement,
regardless of whether these liabilities are imposed with or without giving
effect to this agreement, and (2) the receipt by the MLM Stockholders of any
payment pursuant to this Section 5. The foregoing indemnity shall not extend
to (i) the Consulting Agreements or any amounts paid or payable thereunder, (ii)
any amounts paid or payable in respect of indebtedness owed to any of the MLM
Stockholders, or (iii) except as provided in clause (2) of the preceding
sentence, any payment to any of the MLM Stockholders. In addition, any payments
made pursuant to this Section 5.1 shall be reduced, or refunded if previously
made, to the extent that any of the MLM shareholders realize a reduction in
Income Taxes that they would not otherwise have realized but for the
characterization or treatment (other than as provided in Section 2) of the
transactions for which indemnification is paid or payable. The foregoing
indemnity is based upon, and GSAC's obligations under such indemnity are
conditioned upon the accuracy of, the following representation and warranty
(which the MLM Stockholders hereby make to GSAC) (it being understood, however,
that the foregoing indemnity shall be inapplicable to the extent of any
liability for Income Taxes finally determined to be caused by noncompliance by
the MLM Stockholders with Section 2):

<PAGE>
6

(a) For all taxable years since 1990 and through the time of the
merger, MLM has been a S Corporation for federal income tax purposes
and has been a S corporation for the states listed on Schedule 5.1(b)
attached hereto.

5.2 Procedure. GSAC shall have no liability under or with respect to
Section 5.1 except to the extent one or more MLM Stockholders give GSAC notice
of a claim under Section 5.1 (such notice to set forth the basis of the claim in
reasonable detail) on or before the date that is 120 days after the expiration
of the statute of limitations with respect to the Income Taxes for which
indemnification is claimed. Each MLM Stockholder shall inform GSAC of any
notice received by MLM or such MLM Stockholder of any examination, audit or
other proceeding relating to MLM or such MLM Stockholder for any year for which
indemnification may be claimed by such MLM Stockholder. GSAC shall be entitled
to control and conduct those aspects of such audits, examinations or proceedings
("Tax Contest") relating to MLM and the MLM Stockholders that are related to
the liability for any Taxes for which the GSAC would be required to indemnify
the MLM Stockholders pursuant to Section 5.1. Costs of any Tax Contest are to
be borne by the party controlling such Tax Contest. With respect to a Tax
Contest which GSAC is entitled to control, GSAC shall have the right to
determine, in its sole discretion, how such Tax Contest shall be conducted,
including, without limitation, the right to determine such issues as (i) the
forum, administrative or judicial, in which to contest any proposed adjustment,
(ii) the attorney and/or accountant to represent MLM and the MLM Stockholder in
the Tax Contest, (iii) whether or not to appeal any decision of any
administrative or judicial body, and (iv) whether to settle any such Tax
Contest. The MLM Stockholders shall deliver to GSAC any power of attorney
required to allow GSAC and its counsel to represent MLM or the MLM Stockholders
in connection with the Tax Contest and shall use their best efforts to provide
GSAC with such assistance as may be reasonably requested by GSAC in connection
with the Tax Contest. GSAC shall reimburse the MLM Stockholders for all
reasonable expenses incurred at GSAC's request in providing such assistance.

5.3 Definition. "Income Taxes" means federal, state or local income taxes
or other taxes imposed on or with respect to net income, including interest and
penalties, but only to the extent such interest or penalties result from the
item or issue with respect to which indemnification is being provided.

6. Survival; Indemnification.

6.1 Survival. All representations, warranties and agreements contained in
this agreement shall survive the execution, delivery and performance of this
agreement notwithstanding any investigation conducted, or knowledge acquired,
with respect thereto.

6.2 Indemnification by the GSAC Parties. Each of the GSAC Partes shall
indemnify and hold harmless the MLM Parties and shall reimburse the MLM Parties
for, any Damages arising from or in connection with (a) any inaccuracy in any of
the representations or warranties of that GSAC Party in this agreement or
(b) any failure by that GSAC Party to perform or comply with any agreement in
this agreement.

<PAGE>
7

6.3 Indemnification by the MLM Parties. Each of the MLM Partes shall
indemnify and hold harmless the GSAC Parties and shall reimburse the GSAC
Parties for, any Damages arising from or in connection with (a) any inaccuracy
in any of the representations or warranties of that MLM Party in this agreement
or (b) any failure by that MLM Party to perform or comply with any agreement in
this agreement.

6.4 Procedure. Section 8.4 of the BCA shall apply to claims under Section
6.2 and 6.3.

7. Notices. All notices, consents and other communications under this
agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate as to itself by notice to the other
parties):

If to any of the GSAC Parties:

924 Avenue J East
Grand Prairie, Texas 75050
Telecopier No.: (214) 647-8311
Attention: Jerry M. Meyer

with copies to:

Acadia Partners, L.P.
65 East 55th Street
32nd Floor
New York, New York 10022
Telecopier No.: (212) 754-5685
Attention: David G. Offensend

and

Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Telecopier No.: (212) 836-7149
Attention: Joel I. Greenberg, Stuart L. Rosow and Nancy E. Fuchs

If to an MLM Party:

<PAGE>
8

Daniel C. Shedrick
649 Merwins Lane
Fairfield, CT 06430

Harris A. Cahn
701 Gibson Avenue
P.O. Box 4040
Aspen, Colorado 81612
and
621 Smith Manor Blvd.
West Orange, New Jersey 07052

Barry A. Halper
2 Nottingham Road
Livingston, NJ 07039

Franco Harris
200 Chaucer Ct.
Sewickly, PA 15143

Bruno Tomasi
7 Round Pond Road
Westport, CT 06880

Larry Lambrecht
128 Sasco Hill Road
Fairfield, Connecticut 06430

with a copy to:

Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
Telecopier No.: (212) 969-2900
Attention: Edward W. Kerson and
S.L. Warhaftig

8. Jurisdiction; Service of Process.

8.1 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this agreement shall be
brought against any of the parties in the courts of the State of New York or the
United States District Court for the Southern District of New York,

<PAGE>
9

and each of the parties hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein.

8.2 Service of Process. Process in any action or proceeding referred to in
Section 8.1 may be served on any party anywhere in the world, whether within or
without the State of New York.

9. Miscellaneous.

9.1 Expenses. GSAC will reimburse the MLM Parties $20,000 for legal
expenses incurred in connection with the transactions contemplated hereby.
Otherwise, each party shall bear its own expenses incident to the preparation,
negotiation, execution and delivery of this agreement and the performance of its
obligations hereunder.

9.2 Specific Performance. The parties acknowledge that the subject matter
of this agreement is unique and that no adequate remedy of law would be
available for breach of this agreement. Accordingly, each party agrees that the
other parties will be entitled to an appropriate decree of specific performance
or other equitable remedies to enforce this agreement (without any bond or other
security being required) and each party waives the defense in any action or
proceeding brought to enforce this agreement that there exists an adequate
remedy at law.

9.3 Captions. The captions in this agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this
agreement.

9.4 No Waiver. The failure of a party to insist upon strict adherence to
any term of this agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this agreement. Any waiver must be in writing.

9.5 Exclusive Agreement; Amendment. This agreement supersedes all prior
agreements among the parties with respect to its subject matter, is intended
(with the documents referred to herein) as a complete and exclusive statement of
the terms of the agreement among the parties with respect thereto and cannot be
changed or terminated except by a written instrument signed by the parties.

9.6 Counterparts. This agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.

<PAGE>
10

9.7 Governing Law. This agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of action) shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to any conflicts-of-law rule or principle that might result in the
application of the laws of another jurisdiction.

GRAND SLAM ACQUISITION CORP.

By:_____________________________

PINNACLE BRANDS, INC.

By:_____________________________

MLM ACQUISITION CORP.

By:____________________________

DANIEL C. SHEDRICK

________________________________

HARRIS A. CAHN

________________________________

BARRY A. HALPER

________________________________

BRUNO TOMASI

________________________________

<PAGE>
11

FRANCO HARRIS

________________________________

LARRY LAMBRECHT

________________________________

<PAGE>
10

GRAND SLAM ACQUISITION CORP.

By: /s/ John Worth
-----------------------------

PINNACLE BRANDS, INC.

By: /s/ John Worth
-----------------------------
MLM ACQUISITION CORP.

By: /s/ John Worth
-----------------------------
DANIEL C. SHEDRICK

________________________________

HARRIS A. CAHN

________________________________

BARRY A. HALPER

________________________________

BRUNO TOMASI

<PAGE>
10

GRAND SLAM ACQUISITION CORP.

By:
-----------------------------

PINNACLE BRANDS, INC.

By:
-----------------------------
MLM ACQUISITION CORP.

By: /s/ Daniel C. Shedrick
-----------------------------
DANIEL C. SHEDRICK

________________________________

HARRIS A. CAHN

________________________________

BARRY A. HALPER

________________________________

BRUNO TOMASI

<PAGE>
10

GRAND SLAM ACQUISITION CORP.

By:
-----------------------------

PINNACLE BRANDS, INC.

By:
-----------------------------
MLM ACQUISITION CORP.

By:
-----------------------------
DANIEL C. SHEDRICK

/s/ Harris A. Cahn
--------------------------------

HARRIS A. CAHN

________________________________

BARRY A. HALPER

________________________________

BRUNO TOMASI

<PAGE>
10

GRAND SLAM ACQUISITION CORP.

By:
-----------------------------

PINNACLE BRANDS, INC.

By:
-----------------------------
MLM ACQUISITION CORP.

By:
-----------------------------
DANIEL C. SHEDRICK

________________________________

HARRIS A. CAHN

/s/ Barry A. Halper
--------------------------------

BARRY A. HALPER

________________________________

BRUNO TOMASI

<PAGE>
10

GRAND SLAM ACQUISITION CORP.

By:
-----------------------------

PINNACLE BRANDS, INC.

By:
-----------------------------
MLM ACQUISITION CORP.

By:
-----------------------------
DANIEL C. SHEDRICK

/s/ Harris A. Cahn
--------------------------------

HARRIS A. CAHN

________________________________

BARRY A. HALPER

/s/ Bruno Tomasi
--------------------------------

BRUNO TOMASI

<PAGE>
11

FRANCO HARRIS

/s/ Franco Harris
--------------------------------

LARRY LAMBRECHT

--------------------------------

________________________________

<PAGE>
11

FRANCO HARRIS

--------------------------------

LARRY LAMBRECHT

/s/ Larry Lambrecht
--------------------------------

EXHIBIT 10.16

RELEASE

This Release is being executed by Grand Slam Acquisition Corp. ("GSAC"),
Pinnacle Brands, Inc. ("PBI"), and MLM Acquisition Corp. (collectively with GSAC
and PBI, the "Releasors") in favor of Larry Lambrecht ("Lambrecht").

GSAC, Lambrecht and certain other stockholders of GSAC are concurrently
entering into a transaction pursuant to which Lambrecht and such other
stockholders are transferring and assigning to GSAC all of their right, title
and interest in and to the GSAC shares held by them. This release is being
executed and delivered in connection with that transaction.

The Releasors, intending to be legally bound, agree as follows:

1. Release. The Releasors hereby irrevocably release and discharge
-------
Lambrecht and his heirs, executors, administrators, successors and assigns
(collectively with Lambrecht, the "Releasees") from any and all claims,
agreements, obligations and causes of action whatsoever, whether known or
unknown, suspected or unsuspected, at law or in equity or otherwise, which the
Releasors or any of them now have, ever had or (to the extent arising from or in
connection with any action taken or omitted or state of facts existing on or
prior to the date hereof) may hereafter have against the Releasees or any of
them arising out of Lambrecht's employment by any of the Releasors. The
Releasors shall refrain from asserting any matter released or purported to be
released hereby against any Releasee in any manner, including, but not limited
to, by way of counterclaim, offset or defense and shall actively resist any
effort to assert any such matter on their behalf.

3. Governing Law. This release and all questions relating to its
--------------
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of action) shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to any conflicts-of-law rule or principle that might result in the
application of the laws of another jurisdiction. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
release may be brought against any of the parties in the courts of the State of
New York or the United States District Court for the Southern District of New
York, and each of the parties hereby consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world, whether within or without the State of New York.

Dated: September __, 1995

GRAND SLAM ACQUISITION CORP.

<PAGE>

By:____________________________

PINNACLE BRANDS, INC.

By:____________________________

MLM ACQUISITION CORP.

By:____________________________

Exhibit 10.17

RELEASE

The Releasors, intending to be legally bound, agree as follows:

2. Representation. The Releasors hereby represent and warrant that they
--------------
have not assigned any interest in any matter released or purported to be
released hereby to any other person or entity and that they have full power to
execute, deliver and perform this Release.

3. Governing Law. This release and all questions relating to its
-------------
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning

<PAGE>

limitations of action) shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to any conflicts-of-law
rule or principle that might result in the application of the laws of another
jurisdiction. Any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this release may be brought against any of
the parties in the courts of the State of New York or the United States District
Court for the Southern District of New York, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world, whether within or
without the State of New York.

Dated: September __, 1995

___________________________________
Daniel C. Shedrick

___________________________________
Harris A. Cahn

___________________________________
Barry A. Halper

___________________________________
Bruno Tomasi

___________________________________
Franco Harris

___________________________________
Larry Lambrecht

Exhibit 10.18

RELEASE

The Releasors, intending to be legally bound, agree as follows:

<PAGE>
connection with the assertion by or on behalf of the Releasors of any claim or
other matter purported to be released pursuant hereto.

Dated: September __, 1995

GRAND SLAM ACQUISITION CORP.

By:____________________________

PINNACLE BRANDS, INC.

By:____________________________

<PAGE>
MLM ACQUISITION CORP.

By:____________________________

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.

ARTHUR ANDERSEN LLP

Dallas, Texas
July 15, 1996

<ARTICLE> 5
<LEGEND>
THE SCHEDULED CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS OF PINNACLE BRANDS INC. AND SUBSIDIARIES, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1996
<CASH> 222,000 240,000
<SECURITIES> 0 0
<RECEIVABLES> 22,236,000 35,862,000
<ALLOWANCES> 341,000 260,000
<INVENTORY> 16,893,000 10,503,000
<CURRENT-ASSETS> 47,166,000 47,917,000
<PP&E> 11,209,000 10,269,000
<DEPRECIATION> 7,064,000 6,542,000
<TOTAL-ASSETS> 129,296,000 88,121,000
<CURRENT-LIABILITIES> 35,695,000 40,567,000
<BONDS> 193,093,000 137,429,000
0 0
40 40
<COMMON> 207 207
<OTHER-SE> (99,492,000) (89,875,000)
<TOTAL-LIABILITY-AND-EQUITY> 129,296,000 88,121,000
<SALES> 49,905,000 130,183,000
<TOTAL-REVENUES> 49,905,000 130,183,000
<CGS> 34,503,000 90,388,000
<TOTAL-COSTS> 34,503,000 90,388,000
<OTHER-EXPENSES> 15,659,000 26,310,000
<LOSS-PROVISION> 180,000 324,000
<INTEREST-EXPENSE> 9,555,000 16,594,000
<INCOME-PRETAX> (9,617,000) (2,452,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (9,617,000) (2,452,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,617,000) (2,452,000)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>