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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 8, 1996
ACCLAIM ENTERTAINMENT, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
0-16-986 38-2698904
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(Commission File Number) (IRS Employer Identification Number)
One Acclaim Plaza, Glen Cove, New York 11542
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (516) 656-5000
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ITEM 5. OTHER EVENTS
Acclaim Entertainment, Inc. (the "Company") has a revolving credit and
security agreement dated as of January 1, 1993 (as amended, the "BNY Agreement")
with BNY Financial Corporation ("BNY"), its principal domestic bank. During the
three months ended February 28, 1997, BNY granted the Company a series of
waivers with respect to defaults under the BNY Agreement and BNY and the Company
executed certain amendments to the BNY Agreement, the effect of which was to (a)
extend the term of the BNY Agreement to January 31, 2000; (b) amend and make
more restrictive the factored receivables and inventory formula which the
Company must satisfy in order to draw BNY working capital advances and open
letters of credit under the BNY Agreement; (c) amend and restate in their
entirety the financial covenants contained in the BNY Agreement; and (d) add
certain additional covenants and Events of Default under the BNY Agreement. The
Company was, at February 28, 1997, in compliance with its obligations under the
BNY Agreement.
On February 24, 1997, the Company and BNY entered into an amendment of the
Company's factoring agreement with BNY the effect of which was to extend the
term of the factoring agreement to January 31, 2000.
On February 4 and 21, 1997, the Company entered into a waiver and
restructuring agreement (collectively the "Fleet Letter Agreement") with Fleet
Bank, N.A. ("Fleet") relating to the mortgage on its Corporate headquarters.
Pursuant to the terms of the Fleet Letter Agreement, the Company made a $2
million payment to Fleet on February 28, 1997 on account of this indebtedness,
the amortization of the remaining indebtedness was changed to a five year
schedule with quarterly payments of principal and interest and an additional
payment of $500,000 due on December 31, 1997. In addition the interest rate on
the mortgage loan was increased to the bank's prime rate plus 1.00% and all
financial covenants were deleted. The Company was, at February 28, 1997, in
compliance with its obligations under the Fleet facility.
On February 28, 1997, the Company repaid in full all of the outstanding
obligations of Acclaim Comics, Inc. to Midland Bank plc in the amount of
$16,204.293.43.
2
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibits:
10.4 Revolving Credit and Security Agreement, dated as of January 1, 1993,
between the Company, Acclaim Distribution Inc., LJN Toys, Ltd., Acclaim
Entertainment Canada, Ltd. and Arena Entertainment Inc., as borrowers, and
BNY Financial Corporation, as lender, as amended and restated on February
28, 1995 (incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1995
(File No. 0-16986) (the "1995 10-Q")) and as further amended and modified
by the (i) Waiver and Amendment dated November 8, 1996, (ii) Amendment
dated November 15, 1996, (iii) Blocked Account Agreement, dated November
14, 1996, (iv) Letter Agreement, dated December 13, 1996 and (v) Letter
Agreement dated February 24, 1997.
10.5 Restated and Amended Factoring Agreements, dated as of February 28, 1995,
between the Company and BNY Financial Corporation ("BNY") (incorporated by
reference to Exhibit 10.2 to the 1995 10-Q), as amended and modified by
the Amendment to Factoring Agreements, dated February 24, 1997, between
the Company and BNY.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACCLAIM ENTERTAINMENT, INC.
By /s/ J. Mark Hattendorf
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Name: J. Mark Hattendorf
Title: Executive Vice
President and Chief Financial
and Accounting Officer
Dated: March 14, 1997
4
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EXHIBIT INDEX
Exhibit
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10.4 Revolving Credit and Security Agreement, dated as of January 1, 1993,
between the Company, Acclaim Distribution Inc., LJN Toys, Ltd., Acclaim
Entertainment Canada, Ltd. and Arena Entertainment Inc., as borrowers, and
BNY Financial Corporation, as lender, as amended and restated on February
28, 1995 (incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1995
(File No. 0-16986) (the "1995 10-Q")) and as further amended and modified
by the (i) Waiver and Amendment dated November 8, 1996, (ii) Amendment
dated November 15, 1996, (iii) Blocked Account Agreement, dated November
14, 1996, (iv) Letter Agreement, dated December 13, 1996 and (v) Letter
Agreement dated February 24, 1997.
10.5 Restated and Amended Factoring Agreements, dated as of February 28, 1995,
between the Company and BNY Financial Corporation ("BNY") (incorporated by
reference to Exhibit 10.2 to the 1995 10-Q), as amended and modified by
the Amendment to Factoring Agreements, dated February 24, 1997, between
the Company and BNY.
Exhibit 10.4 (i)
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ACCLAIM ENTERTAINMENT
BNY - NOVEMBER 8, 1996
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OTTERBOURG, STEINDLER, HOUSTON & ROSEN, P.C.
200 PARK AVENUE
NEW YORK, N.Y. 10169-0078
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(2I2) 661-9100
ALAN KARDON CABLE ADRESS: "OTLERTON"
MEMBER OR THE FIRM FACSIMILE (2I2) 682-6IO4
ADMITTED TO PRACTICE IN NEW YORK AND CONNECTICUT TELEX. 960916
November 8, 1996
BY HAND
Mr. Robert P. Grbic
Senior Vice President
BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Re: Acclaim Entertainment, Inc.
Dear Bob:
Enclosed are three execution copies of the Waiver and Amendment. Pages 1
through 14 can be substituted for the same numbered pages of the Waiver and
Amendment which was executed on Thursday, November 7, 1996. A fully executed
copy of the Agreement may be delivered to Acclaim. Also, enclosed are pages 10
and 13 marked to show changes.
Best regards.
Very truly yours,
/s/ Alan Kardon
Alan Kardon
Enclosure
cc: Bruce Tenzer, Esq. (By Hand)
Deborah Aschheim, Esq. (By Hand)
<PAGE>
November 8, 1996
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION NC.
LJN TOYS LTD.
ACCLAIM ENTERTAINMENT CANADA, LTD.
ARENA ENTERTAINMENT INC.
One Acclaim Plaza
Glen Cove, New York 11542-2708
Re: Waiver of Financial Covenant Non-Compliance and Amendment to
Credit Agreement
Gentlemen:
Reference is hereby made to the Revolving Credit and Security Agreement,
dated as of January 1, 1993, by and among ACCLAIM ENTERTAINMENT, INC. ("AEI"),
ACCLAIM DISTRIBUTION INC. ("ADI"), LJN TOYS, LTD. ("UN"), ACCLAIM ENTERTAINMENT
CANADA, LTD. ("Canada") and ARENA ENTERTAINMENT INC. ("Arena"; together with
AEI, ADI, LJN and Canada, collectively the "Borrowers") and BNY FINANCIAL
CORPORATION (the "Lender") as amended and restated on February 28, 1995 (as so
amended and restated, and as thereafter further amended, the "Credit
Agreement"). All capitalized terms used and not otherwise defined herein shall
have the respective meanings ascribed to them in the Credit Agreement.
As of August 31, 1996, the Borrowers were not in compliance with Section
6.4 (Tangible Net Worth), Section 6.5 (Working Capital), Section 6.6 (Capital
Expenditures), Section 6.7 (Ratio of Total Indebtedness to Tangible Net Worth),
Section 6.8 (Fixed Charge Ratio) and Section 6.9 (Maximum Losses) of the Credit
Agreement.
In response to the Borrowers' request for a waiver of the aforementioned
non-compliance under the Credit Agreement, subject to the terms of this
agreement, the Lender hereby waives such non-compliance under the Credit
Agreement for the period on or prior to August 31, 1996, provided, that, the
Lender hereby reserves all rights and remedies granted to the Lender under the
Credit Agreement or other documents, applicable law or otherwise, and nothing
contained herein shall be construed to limit, impair or otherwise affect the
right of the Lender to declare a default with respect to any future
non-compliance with any covenant, term or provision of the Credit Agreement or
any other document now or hereafter executed and delivered in connection
therewith.
Borrowers have further requested that Lender consent to AEI entering into a
$10,000,000 subordinated long term facility with The First National Bank of
Boston (the "Bank Boston Facility"), as outlined in the term sheet provided to
Lender, and have represented to Lender that AEI's entering into the Bank Boston
Facility will not create an Event of Default under the Credit
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Agreement assuming that Borrowers have obtained the consent of each of their
other lenders as required by the Bank Boston Facility. This will confirm
Lender's consent to AEI entering into the Bank Boston Facility on the condition
that its entering into such Facility does not create an Event of Default under
the Credit Agreement assuming that Borrowers have obtained the consent of each
of their other lenders as required by the Bank Boston Facility, that prior to
closing of the Bank Boston Facility, Bank Boston shall have entered into an
intercreditor agreement with Lender in form and substance satisfactory to
Lender, and that funding of the Bank Boston Facility occur by November 30, 1996.
In addition, the Borrowers have requested that the Lender make certain
amendments to the Credit Agreement and the Lender has agreed to do so, subject
to the terms and provisions contained herein.
Accordingly, the Borrowers and the Lender agree that the Credit Agreement
is hereby amended as follows:
1. The following definitions in Section 1.2 of the Credit Agreement are
hereby amended and restated in their entirety to read as follows:
"'Default Rate' means a rate equal to two (2%) percent per annum in
excess of the Contract Rate or the Overformula Rate, as the case may be."
"'Early Termination Fee' shall mean a fee of $125,000 per month or
part thereof, calculated from the effective termination date of the Agreement in
accordance with Section 10.1 or Section 12.1(a)(ii) hereof, through and
including January 31, 1999, or should such effective termination date occur
after January 31, 1999, through and including January 31 in the Calendar Year
next occurring (notwithstanding any termination in accordance with Sections 10.1
or 12.1(a)(ii) hereunder and/or any effective termination date of this Agreement
that may occur, pursuant to the terms hereof, on a date earlier than the last
day of such Term)."
"'Eligible Inventory' shall mean and include all finished goods
interactive entertainment software Inventory of each of the Borrowers (but not
of any of the Material Subsidiaries) for the Sega or Sony 32-bit systems and the
Nintendo 64-bit system which is (a) less. than 60 days old; and (b) located in
the United States of America and all of which Inventory shall in each instance:
(1) be in good condition; (2) be readily saleable at prices not less than cost;
(3) exclude any work-in-process, and (4) exclude all Inventory-in-transit, and
which Inventory, Lender, in its reasonable discretion exercised in good faith,
shall not otherwise deem ineligible, based on such considerations as Lender may
from time to time deem appropriate
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including, without limitation, whether (A) the Inventory is subject to a
perfected1 first priority security interest in favor of Lender, other than
Permitted Encumbrances, (B) third party waivers requested by the Lender have
been executed (in form and substance reasonably acceptable to the Lender) and
delivered to the Lender by landlords or warehousemen and (C) the Inventory
conforms to all standards imposed by any governmental agency, division or
department thereof which has regulatory authority over such goods or the use or
sale thereof."
"'Material Adverse Effect' shall mean a material adverse effect on (i)
the financial condition, operations, performance, assets, properties,
liabilities, or business of AEI and its consolidated Subsidiaries, taken as a
whole, (ii) the ability of any of the Borrowers to pay or perform its respective
Obligations in accordance with the terms thereof, (iii) the Collateral or the
value of the Collateral, taken as a whole, or Liens on the Collateral taken as a
whole in favor of Lender, or the perfection or priority of any such Lien,
subject to any permitted Encumbrances, or (iv) any of Lender's rights or
remedies under this Agreement or any of the Other Documents."
"'Material Subsidiary(ies)' shall mean and include each and all of the
existing and hereafter acquired or formed Subsidiaries of any of the Borrowers
and/or of any of the Corporate Guarantors, which has an aggregate asset value at
any time and in any instance of $2,500,000 or more other than Acclaim Comics,
Inc. ACTC, L.P., Oyster Bay Warehouse Corp., Acclaim Corporate Center I, Inc.
and Acclaim Cable Holdings, Inc."
"'Revolving Advance Rate' shall mean an interest rate per annum equal
to the Alternate Base Rate plus one (1%) percent."
"'Tangible Net Worth' at a particular date means (a) the aggregate
amount of all assets of AEI and its consolidated Subsidiaries, taken as a whole,
and as may be properly classified as such in accordance with GAAP consistently
applied, excluding such assets as are properly classified as intangible assets
under GAAP, less (b) the aggregate amount of all liabilities of AEI and its
consolidated Subsidiaries taken as a whole, and as may be properly classified a~
such in accordance with GAAP consistently applied."
"'Term' shall mean January 1, 1993 through and including January 31,
1999, as same may be extended, reduced or terminated in accordance with the
provisions of Section 12.1 hereof."
"'Working Capital' at a particular date, shall mean the excess, if
any, of Current Assets over Current Liabilities at such date. Solely for the
purpose of this definition, long term
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indebtedness incurred by any Borrower or Subsidiary after October 31, 1996 shall
be deemed a Current Liability."
2. The following definitions in Section 1.2 of the Credit Agreement are
hereby amended in part as follows:
"Eligible Receivables" shall be amended by amending clause (d) thereof
to read as set forth below, deleting the word "or" at the end of clause (q)
thereof, deleting the period at end of clause (r) thereof and adding the
following at the end of clause (r) thereof:
"(d) more than twenty-five percent (25%) of the aggregate account
balance of Receivables due from the Customer are more than thirty (30)
days past due;"
"; (s) in the reasonable judgment of Lender exercised in good faith,
such Receivable may not be paid by reason of the Customer's financial
inability to pay or the collection of such Receivable is otherwise
doubtful; or
(t) it does not arise from the sale of personal computer CD-ROM, Sega
or Sony 32-bit systems or Nintendo 64-bit systems."
3. The first two sentences of Section 2.1(a) of the Credit are amended and
restated in their entirety to read as
"2.1(a) Advances. Provided the aggregate amount of Credit Balances
less outstanding Letters of Credit is not less than fifty (50%) percent of the
gross amount of outstanding Receivables, and subject to the other terms and
conditions set forth in this Agreement, Lender will during the Term hereof make
Advances to the Borrowers on a combined basis and will for the Borrowers'
combined account, subject to Section 2.7 hereof, issue Lender Guarantees, issue
or cause to be issued Letters of Credit and/or create Acceptances, in a maximum
aggregate amount outstanding at any time and from time to time hereunder equal
to i) the lesser of (x) the Maximum Loan Amount or (y) the Formula Amount, minus
ii) all issued and outstanding Letters of Credit, Lender Guarantees and
Acceptances.
The "Formula Amount" shall mean the sum of the following amounts at any time and
from time to time:
(1) 70% of Eligible Receivables, other than Eligible Receivables
arising from the sale of personal computer CD-ROM software; plus
(2) 30% of Eligible Receivables arising from the sale of personal
computer CD-ROM software, provided, however,
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that the maximum amount of all outstanding Advances against such Eligible
Receivables shall not exceed $5,000,000 in the aggregate at any one time; plus
(3) 50% of the Value of the Eligible Inventory; provided, however,
that the maximum amount of all outstanding Advances against Eligible Inventory
shall not exceed $10,000,000 in the aggregate at any one time; plus
(4) 40% of the first cost of goods to be imported under Letters of
Credit which remain outstanding; less
(5) in each case, such reserves, established in Lender's reasonable
discretion exercised in good faith, as Lender may deduct in relation to
Obligations chargeable to the account(s) of any of the Borrowers or which may be
chargeable to the account(s) of any of the Borrowers thereafter ("Reserves"),
including, without limitation, a reserve in an amount equal to ten percent (10%)
of the gross amount of Receivables at any time outstanding, established from the
date Lender receives AEI's federal tax refund for its 1996 fiscal year until the
date Lender receives the next quarterly financial statements of AEI and its
consolidated Subsidiaries reflecting no Default and receives a Borrowers'
certificate reporting no known Default."
4. The second sentence of Section 2.7 of the Credit Agreement is amended in
its entirety to read as follows:
"Subject to the other terms and provisions hereof, the maximum amount
of outstanding Lender Guarantees, Letters of Credit and Acceptances
shall not exceed $20,000,000 in the aggregate at any time or from time
to time."
5. Notwithstanding anything to the contrary contained in this Agreement or
any of the Other Documents, Lender shall only issue or cause to be issued
Letters of Credit for the purchase of finished goods Inventory relating to Sega
or Sony 32-bit systems or Nintendo 64-bit systems, the sale of which Inventory
is backed by customer purchase orders which Lender deems adequate in its sole
discretion.
6. Notwithstanding anything to the contrary contained in the Credit
Agreement, but subject to all provisions of the Credit Agreement with respect to
the applicability of the Overformula Rate and the Default Rate, (a) all Advances
hereafter requested by a Borrower or deemed requested by a Borrower under the
Credit Agreement shall be Revolving Rate Advances bearing interest at the
Revolving Advance Rate, (b) no Advances hereafter requested or deemed requested
by a Borrower under the Credit Agreement shall be Libo Rate Advances bearing
interest at the Libo Rate, and (c) each Libo Rate Advance outstanding on the
date hereof
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shall, at the end of the Interest Period for which it was made, at the option of
the Borrower to whom such Libo Rate Advances was made, be converted to a
Revolving Rate Advance or repaid in full.
7. Section 3.4.of the Credit Agreement is amended and restated in its
entirety to read as follows:
"3.4 Unused Facility Fee. In the event the average outstanding closing
daily principal balance of all Obligations of the Borrowers to Lender hereunder
(which shall for purposes of this Section 3.4 include the outstanding balance of
all Letters of Credit, Lender Guarantees and Acceptances) during any fiscal
month of the Borrowers or portion thereof occurring upon termination of this
Agreement is less than the Maximum Loan Amount, determined in accordance with
Section 2.1(a) for such fiscal month or portion thereof, Borrowers shall pay to
Lender a fee (the "Unused Facility Fee") at a rate per annum equal to one half
of one (1/2 of 1%) percent of the difference between (i) the Maximum Loan Amount
and (ii) such average outstanding closing daily principal balance. Such fee, if
payable, shall be: (a) calculated as of the last day of each fiscal month or
upon the effective termination date of this Agreement, as the case may be, on
the basis of a year of 360 days and actual days elapsed; and (b) charged to the
Loan Account of the Borrowers on the first day of each fiscal month during the
Term, or upon the effective termination date of this Agreement."
8. Section 3.5 of the Credit Agreement is amended and restated in its
entirety to read as follows:
"3.5 Due Diligence/Audit Fees. Upon Lender's performance of any due
diligence, namely, any field examination, collateral analysis or other business
analysis, in connection with any Borrower and/or any Collateral, the need for
which is to be determined by Lender in its reasonable discretion exercised in
good faith, (the frequency and number of which, subject to such determination by
Lender, shall not be limited) the Borrowers shall be obligated to pay or
reimburse the Lender pursuant to this Section. The Borrowers shall pay to Lender
a per diem amount equal to Lender's then standard rate per person, for each
person employed to perform such due diligence, together with all reasonable
costs, disbursements. and expenses incurred by the Lender, including without
limitation all reasonable fees and expenses of outside examiners or auditors as
billed, and of the person performing such due diligence, all of which shall be
charged to the Loan Account of the Borrowers."
9. Section 4.5(a) of the Credit Agreement is amended by deleting the
percentage "fifteen percent (15%)" from each place it appears therein and
substituting "five percent (5%)" therefor.
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10. Section 5.9 of the Credit Agreement is amended by deleting the dollar
amount "$5,000,000" from each place it appears therein and substituting
"$2,000,000" therefor.
11. Sections 6.4, 6.5, 6.6, 6.7, 6.8, and 6.9 of the Credit Agreement are
amended and restated in their entirety to read as follows:
"6.4 Tangible Net Worth of AEI and its consolidated Subsidiaries. Not,
as at the end of any fiscal quarter of the Borrowers ended on or before February
29, 1997 and as at the end of any fiscal month of the Borrowers commencing March
31, 1997, permit the Tangible Net Worth on a consolidated basis to be less than
the minimum amounts indicated below in respect of the corresponding periods
noted below:
Minimum Tangible Net Worth At Each of
- -------------------------- ----------
(a)
$160,000,000.00 February 28, May 31 and
August 31, 1995
$175,000,000.00 November 30, 1995,
February 29, May 31 and
August 31, 1996
An amount equal to ninety (90%) November 30, 1996,
percent of Tangible Net Worth as February 29, 1997, March 31,
stated in the audited financial 1997 and at the end of each
statements of AEI and its fiscal month thereafter;
consolidated Subsidiaries for the
fiscal year ended August 31, 1996
(the "1996 Year-End Financial
Statements") but not less than
$61,000,000.00; provided, that such
amount shall be increased as of the
end of each of Borrowers' fiscal
quarters after August 31, 1997 an
amount equal to seventy-five
percent (75%) of the net profits of
AEI and its consolidated
Subsidiaries for such quarter,
plus
- ----
(b) an amount equal to eighty percent (80%) of the aggregate amount of any
capital contribution and/or equity infusion into, or any other additional
equity derived from any source by, any Borrower or any Subsidiary."
"6.5 working Capital of AEI and its consolidated Subsidiaries. Not, as
at the end of any fiscal quarter of the
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Borrowers ended on or before August 31, 1997 and as at the end of any fiscal
month of the Borrowers commencing November 30, 1997, permit the Working Capital
on a consolidated basis to be less than the minimum amounts indicated below in
respect of the corresponding periods noted below:
Minimum Working Capital At Each of
- ----------------------- ----------
(a)
$100,000,000.00 February 28, May 31 and
August 31, 1995
$115,000,000.00 November 30, 1995,
February 29, May 31 and
August 31, 1996
$ 20,000,000.00 November 30, 1996
$ 14,000,000.00 February 28, 1997
$ 14,000,000.00 May 31, 1997
$ 15,000,000.00 August 31, 1997
$ 15,000,000.00, such amount to be November 30, 1997 and
increased at the end of each of at the end of each fiscal
Borrower's fiscal quarters after month thereafter
August 31, 1997 by an amount equal
to fifty percent (50%) of the net
profits of AEI and its consolidated
Subsidiaries for each of Borrowers'
fiscal quarters thereafter,
provided, that on November 30, 1997
and at the end of each fiscal
quarter thereafter the Tangible Net
Worth of AEI and its consolidated
Subsidiaries shall not be less than
$20,000,000.00,
plus
- ----
(b) An amount equal to seventy-five percent (75%) of the aggregate
amount of any capital contribution and/or equity infusion into, or any other
additional equity derived from any source by, any Borrower or any Subsidiary."
"6.6 Capital Expenditures. Not, on a consolidated basis, make Capital
Expenditures or otherwise contract for, purchase or make any commitments for
fixed or capital assets in any fiscal year in an amount in excess of $7,500,000
in the aggregate."
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"6.7 Ratio of Total Indebtedness to Tangible Net Worth. Cause to be
maintained as at the end of each fiscal quarter of the Borrowers on a
consolidated basis, a ratio of total Indebtedness (excluding, however, the
amount of any Letters of Credit then outstanding under this Agreement) to
Tangible Net Worth of AEI and its consolidated Subsidiaries of not greater than
the ratio of three to one (3:1)."
"6.8 Fixed Charge Ratio. AEI and its consolidated Subsidiaries shall
cause to be maintained at each of the fiscal quarters of the Borrowers indicated
below a Fixed Charge Ratio of not less than the ratio indicated below in each
case tested on a quarterly basis:
Minimum Fixed
Charge Ratio Fiscal Quarter Ending
------------ ---------------------
5:1 November 30, 1996
0:0 February 28, 1997
5:1 May 31, 1997
7:1 August 31, 1997
1:1 November 30, 1997 and each of
Borrowers' fiscal quarters
thereafter"
6.9 Maximum Losses. AEI and its consolidated Subsidiaries shall not
incur, or permit to be incurred, losses taken as a whole, in respect of any
fiscal quarter, at any time to exceed the maximum amounts indicated below in
respect of the corresponding periods noted below:
Maximum Losses Fiscal Quarter Ending
-------------- ---------------------
$5,000,000.00 November 30, 1996
$9,000,000.00 February 28, 1997
$2,000,000.00 May 31, 1997
None August 31, 1997 and each of
Borrowers' fiscal quarters
thereafter"
12. Section 6.14 of the Credit Agreement is amended by deleting the dollar
amount "$5,000,000" from clause (a) thereof and substituting "$500,000" therefor
and by amending the last sentence thereof in its entirety to read as follows:
"Without limiting the foregoing, Lender's consent shall not be deemed
to have been unreasonably withheld in any circumstance where (A) any such
acquisition, formation, merger, reorganization or other change has or may have a
Material Adverse Effect; or (B) following any such acquisition, formation,
merger, reorganization or other change: (1) an Event of Default would then exist
under this Agreement or any of the Other Documents; or (2) any additional
Corporate Guarantee(s) and/or Collateral
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<PAGE>
documentation would be required in connection with the maintenance, perfection
or priority of Liens in favor of Lender in all Collateral as described herein or
in the Other Documents, or as otherwise would be required to be executed and
delivered to the Lender under the Agreement or the Other Documents, in any case
which has not been received by the Lender, unless and until so furnished to
Lender."
13. The following shall be added to the Credit Agreement as Sections
6.17, 6.18, 6.19 and 6.20 thereof:
"6.17 Limitation on Loans and Investments in ACTC, L.P. Not, directly
or indirectly, make any loans to ACTC, L.P., or invest in (by capital
contribution or otherwise) or purchase the stock or Indebtedness or all or a
substantial part of the assets or properties of ACTC, L.P. or guarantee, assume,
endorse or otherwise become responsible (directly or indirectly) for the
Indebtedness, performance or obligations of ACTC, L.P., or agree to do any of
the foregoing, except, make loans or capital contributions to ACTC, L.P. (i) not
to exceed $3,250,000 in each fiscal quarter of Borrowers' 1997 fiscal year and
(ii) not to exceed $4,000,000 in each fiscal quarter thereafter."
"6.18 Tax Refund Proceeds. Direct and cause all proceeds of any tax
refund for any fiscal year of the Borrowers to be delivered directly to Lender,
including by completing all tax return forms filed with any taxing authority
indicating the name and address of the applicable Borrower c/o BNY Financial
Corporation, 1290 Avenue of the Americas, New York, New York 10104, Attention:
Mr. Robert P. Grbic, or such other address as Lender may designate from time to
time. In addition to and not in limitation of the foregoing, if any Borrower
files Internal Revenue Form 8302 "Application for Electronic Funds Transfer
(EFT) of Tax Refund of $1 Million or More", or any similar form of any taxing
authority, then the Borrower(s) shall complete such form by indicating the bank
account to which any tax refund will be wire transferred in accordance with the
bank account information provided to Borrower(s) by Lender."
"6.19 Limitation on Prepayment of Indebtedness. Make, and permit its
Subsidiaries to make, unless otherwise permitted by Lender in writing, only
regularly scheduled payments of principal and interest in respect of any long
term Indebtedness (other than to Lender), including, but not limited to, long
term Indebtedness to Midland and Fleet Bank, N.A., in accordance with the terms
of the agreement or instrument evidencing or giving rise to such Indebtedness as
in effect on October 31, 1996."
"6.20 Negative Pledge. Not hereafter guaranty, or hereafter permit any
Subsidiary to guaranty, to any Person (other than Lender) the payment or
performance of the obligations of any other Borrower or Subsidiary and not
hereafter grant, or hereafter permit any Subsidiary to grant, to any Person
(other
-10-
<PAGE>
than Lender) any Lien, other than Permitted Encumbrances, upon or security
interest in any of its assets or the assets of any such Subsidiary, except that
AEI or its Subsidiaries shall be permitted to guaranty to a non-Affiliate the
payment by another Borrower or any Subsidiary of any Borrower of royalties,
including minimum royalties, which become due and payable in the ordinary course
of business."
14. Section 8.9 of the Credit Agreement is amended and restated in its
entirety to read as follows:
"8.9 Monthly Financial Statements. Furnish the Lender within forty
five (45) days after the end of each month, commencing with the month ending
March 31, 1997, an unaudited balance sheet of the Borrowers and an unaudited
statement of income and stockholders' equity and statement of cash flows of
Borrowers reflecting resu1ts~of operations from the beginning of the fiscal year
to the end of such month and for such month, prepared on a basis consistent with
prior practices-and complete and correct in all material respects, subject to
normal interim and year end adjustments."
15. Section 8.12 is amended and restated in its entirety to read as
follows:
"8.12 Variances From Operating Budget. Furnish Lender, (i)
concurrently with the delivery of any financial statements to be delivered
hereunder, a written report summarizing all material variances from budgets
submitted by the Borrowers and a discussion and analysis by management with
respect to such variances, (ii) within fifteen (15) days after the end of each
month a cash flow variance report detailing variances in respect of domestic
sales, disbursements, dilution, outstanding Receivables and outstanding Letters
of Credit, and (iii) concurrently with the delivery of monthly financial
statements, balance sheet and income statement variance reports."
16. Clause (h) of Article IX of the Credit Agreement is amended and
restated in its entirety to read as follows:
"(h) (i) any event of default, whether or not declared, waived or
forborne, of any of the Borrowers under any agreement now or hereafter in effect
with Fleet Bank, N.A., HKSB and/or Midland, or (ii) a default of the obligations
of any of the Borrowers with respect to any other Indebtedness and/or any other
contractual obligation, in each case subject to Section 5.9 and/or 5.10 of this
Agreement."
17. Clauses (k) and (1) of Article IX of the Credit Agreement are amended
and restated in their entirety to read as follows:
"(k) any Change of Ownership;
-11-
<PAGE>
(1) should any of the Factoring Agreements, other than AEC's, be
terminated for any reason whatsoever, or should any Event of Default exist
thereunder;
18. The following shall be added to Article IX of the Credit Agreement at
the end thereof:
"(m) termination of any license agreement of any of the Borrowers with
Sony or Nintendo or prohibition by Sega of the sale by any Borrower of any Sega
product;
(n) failure by any of the Borrowers to promptly deliver to Lender any
and all proceeds of Collateral, including, but not limited to, the proceeds of
any tax refund, which any of the Borrowers may receive;
(o) delivery to Lender of financial projections projecting financial
results which if realized would cause an Event of Default under any other clause
of this Article IX; or
(p) dilution in collections on Receivables for the last three (3)
consecutive months exceeds thirty percent (30%)."
19. Section 12.1 of the Credit Agreement is amended and restated in its
entirety to read as follows:
"12.1 Term. This Agreement shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of the Borrowers
and the Lender and shall become effective on the date hereof and continue in
full force and effect until January 31, 1999 unless: (a) sooner terminated by:
(i) the Borrowers, upon giving the Lender at least ninety (90) days prior
written termination notice in advance and effective as of the end of the initial
Term or any successive Term hereunder; (ii) the Borrowers, at an earlier
effective termination date than is specified in subsection (i) above, as more
fully described in Section 12.2 below; (iii) the Lender, pursuant to Section 10
hereof; or (iv) the Lender, upon giving the Borrower at least ninety (90) days
prior written termination notice in advance and effective as of the end of the
initial Term or any successive Term hereunder; or (b) extended in accordance
with the final sentence of this Section. Any termination in accordance with
subsection 12.1(u) shall be deemed to be effective provided that all Obligations
shall be paid in full to Lender by no later than the effective termination date
of this Agreement and provided that by such date, the indemnity provided for in
Section 2.8(b) hereof as to al1-;~utstanding Letters of Credit, Lender
Guarantees and Acceptances shall have been executed and delivered to the Lender.
Subject to the foregoing, the Term shall be automatically extended for
successive periods of one (1) year each through and including January 31 of each
Calendar Year after 1999 such that this Agreement will remain in full force and
effect, unless terminated by either party at the
-12-
<PAGE>
end of the initial Term or any successive Term by giving the other party at
least ninety (90) days prior written notice."
20. Section 14.6 (B) is amended and restated in its entirety to read as
follows:
"(B) If to any of the Borrowers, to each of them at:
Acclaim Entertainment, Inc.
70 Glen Street
Glen Cove, New York
Attn: Mark Hattendorf, CFO
Telephone: (516) 624-8888
FAX:(516) 624-5846
with a copy to: Rosenman & Colin
575 Madison Avenue
New York, NY 10022
Attn: Eric M. Lerner, Esq.
Telephone: (212) 940-7157
FAX: (212) 940-8776"
21. Schedule 2.3 to the Credit Agreement entitled "Standard Rates for
Import Trade Services &Guarantees", is amended by deleting therefrom the current
fee set forth opposite "Daily Average Balance" and substituting therefor "~ of
1% Per Month, Minimum $75.00 (360 day year)".
To induce the Lender to agree to the waivers and amendments herein
contained, and in consideration thereof, AEI covenants and agrees with the
Lender that (a) on or before November 15, 1996, as security for all of the
Obligations of the Borrower to the Lender, AEI shall pledge to and deposit with
the Lender all of the issued and outstanding stock of Acclaim Cable Holdings,
Inc. pursuant to such agreements as may be required by the Lender, including,
but not limited to, a pledge and security agreement in favor of the Lender, all
in form and substance satisfactory to the Lender, and (b) on or before November
18, 1996 AEI shall obtain from each of any Borrower's other institutional
lenders, including, without limitation, Midland, (i) waivers of any and all
defaults under such Borrower's agreements with such institutional lenders and
(ii) amendments to such agreements reflecting all financial projections
heretofore furnished by AEI to the Lender and/or Midland, all of such waivers
and amendments to be in form and substance satisfactory to the Lender. The
failure of any of the Borrowers to timely perform any agreement to be performed
by it pursuant to this paragraph shall constitute an Event of Default under the
Credit Agreement.
This agreement shall be effective as of the date hereof, except that the
third paragraph and paragraph 11 of this agreement amending and restating in
their entirety Sections 6.4, 6.5, 6.6, 6.7, 6.8 and 6.9 of the Credit Agreement
shall not
-13-
<PAGE>
become effective until the date on which AEI has complied with the first
sentence of the immediately preceding paragraph provided, that such compliance
occurs on or before November 18, 1996.
Each of the Borrowers hereby acknowledge, confirm and agree that all
amounts charged or credited to the Loan Account as of the date hereof are
correct and binding upon each of the Borrowers and that all amounts reflected to
be due and owing in the Loan Account as of the date hereof are due and owing
without defense, offset or counterclaim.
Except as specifically set forth herein, no other changes or modifications
to the Credit Agreement are intended or implied, and, in all other respects, the
Credit Agreement shall continue to remain in full force and effect in accordance
with its terms as of the date hereof. Except as specifically set forth herein,
nothing contained herein shall evidence a waiver or amendment by the Lender of
any other provision of the Credit Agreement.
The terms and provisions of this agreement shall be for the benefit of the
parties hereto and their respective successors and assigns; no other person,
firm, entity or corporation shall have any right, benefit or interest under this
agreement.
This agreement may be signed in counterparts, each of which shall be an
original and all of which taken together constitute one agreement. In making
proof of this agreement, it shall not be necessary to produce or account for
more than one counterpart signed by the party to be charged.
This agreement sets forth the entire agreement and understanding of the
parties with respect to the matters set forth herein and supersedes any and all
understandings, discussions, negotiations, correspondence, memoranda and
agreements (whether written or oral) of the parties hereto with respect to the
foregoing, all of which are hereby merged herein.
-14-
<PAGE>
This agreement cannot be changed, modified, amended or terminated except in
a writing executed by the party to be charged.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Robert Grbic
-----------------------------------
Robert Grbic
Senior Vice President
ACKNOWLEDGED AND AGREED:
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
UN TOYS, LTD.
ARENA ENTERTAINMENT INC.
By: /s/ J. Mark Hattendorf
---------------------------------
Title: EVP & CFO
------------------------------
ACCLAIM ENTERTAINMENT CANADA, LTD.
By: /s/ J. Mark Hattendorf
---------------------------------
Title: EVP & CFO
------------------------------
-15-
Exhibit 10.4 (ii)
<PAGE>
ACCLAIM ENTERTAINMENT
BNY - NOVEMBER 15, 1996
<PAGE>
Rosemnan ROSENMAN & COLIN LLF
575 MADISON AVENUE
NEW YORK, N.Y. 10022-2365
TELEPHONE: (212) 640-6600
FACSIMILE: (212) 640-6770
WEB SITE: http://www.rosenman.com
January 9, 1997
WASHINGTON OFFICE
1200 19th STREET. NW.
WASHINGTON D. C 20025
NEW JERSEY OFFICE
ONE GATEWAY CENTER
NEWARK N.J. 07102-9207
SPECIAL COUNSEL
DEBORAH S. ASCHHEIM
(212) 940-6456
E-MAIL ADDRESS
[email protected]
BY HAND
Alan Kardon, Esq.
Otterbourg, Steindler,
Houston & Rosen, P.C.
230 Park Avenue
New York, NY 10169-OO75
Re: Acclaim Entertainment Inc./BNY Financial Corporation
Dear Alan:
As you requested, enclosed are five (5) execution copies of the amendment to
Credit Agreement dated November 15, 1996.
Cordially,
/s/ Deborah S. Aschheim
Deborah S. Aschheim
/mam
Enclosure
<PAGE>
November 15, 1996
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LJN TOYS, LTD.
ACCLAIM ENTERTAINMENT CANADA, LTD.
ARENA ENTERTAINMENT INC.
One Acclaim Plaza
Glen Cove, New York 11542-2708
Re: Amendment to Credit Agreement
Gentlemen:
Reference is hereby made to the Revolving Credit and Security Agreement,
dated as of January 1,1993, by and among ACCLAIM ENTERTAINMENT, INC. ("AEI"),
ACCLAIM DISTRIBUTION INC. ("ADI"), LJN TOYS, LTD. ("LJN"), ACCLAIM ENTERTAINMENT
CANADA, LTD. ("Canada") and ARENA ENTERTAINMENT INC. ("Arena"; together with
AEI, ADI, LJN and Canada, collectively the "Borrowers") and BNY RNANCIAL
CORPORATION (the "Lender") as amended and restated on February 28, 1995 (as so
amended and restated, and as thereafter further amended, the "Credit
Agreement"). All capitalized terms used and not otherwise defined herein shall
have the respective meanings ascribed to them in the Credit Agreement
The Borrowers have requested that the Lender make certain amendments to the
Credit Agreement and the Lender has agreed to do so, subject to the terms and
provisions contained herein.
Accordingly, the Borrowers and the Lender agree that the Credit Agreement
is hereby amended as follows:
"6.18 Tax Refund Proceeds. Direct and cause all proceeds of any tax refund
for any fiscal year of the Borrowers to be delivered directly to Lender,
including by filing on or before November 19, 1996 Internal Revenue Form 2MB
"Power of Attorney and Declaration of Representative" appointing Bernard Augen,
Senior Vice
<PAGE>
President of Lender and a Certified Public Accountant to receive tax refund
checks in accordance with line 6 of said Form 2848. In addition, AEI shall file
Internal Revenue Form 8302 "Application for Electronic Funds Transfer (EFT) of
Tax Refund of $1 Million or More", any similar form of any taxing authority1 and
shall complete such form by indicating the bank account to which any tax refund
will be wire transferred in accordance with the bank account information
provided to AEI by Lender."
Pursuant to that certain Waiver of Financial Covenant Non-Compliance and
Amendment to Credit Agreement dated November 8, 1996 among Lender and the
Borrowers, AEI covenanted and agreed with the Lender that, among other things,
on or before November 18, 1996 ("Document Delivery Date"), AEI shall obtain from
each of any Borrower's other institutional lenders, including, without
limitation Midland, (i) waivers of any and all defaults under such Borrower's
agreements with such institutional lenders and ('i) amendments to such
agreements reflecting all financial projections heretofore furnished by AEI to
the Lender and/or Midland, all of such waivers and amendments to be in form and
substance satisfactory to the Lender. with respect to the request of AEI for a
modification of the Document Delivery Date, the Borrowers and Lender hereby
acknowledge, confirm and agree that the Document Delivery Date shall be November
27, 1996. The failure of any of the Borrowers to timely perform any agreement to
be performed by it on or by the Document Delivery Date pursuant to this
paragraph shall constitute an Event of Default under the Credit Agreement.
Except as specifically set forth herein, no other changes or modifications
to the Credit Agreement are intended or implied, and, in all other respects, the
Credit Agreement shall continue to remain in full force and effect in accordance
with its terms as of the date hereof. Except as specifically set forth herein,
nothing contained herein shall evidence a waiver or amendment by the Lender of
any other provision of the Credit Agreement.
The terms and provisions of this agreement shall be for the benefit of the
parties hereto and their respective successors and assigns; no other person,
firm, entity or corporation shall have any right, benefit or interest under this
agreement.
This agreement may be signed in counterparts, each of which shall be an
original and all of which taken together constitute one agreement In making
proof of this agreement, it shall not be necessary to produce or account for
more than one counterpart signed by the party to be charged
This agreement sets forth the entire agreement and understanding of the
parties with respect to the matters set forth herein and supersedes any and all
understandings, discussions, negotiations, correspondence, memoranda and
agreements (whether written or oral) of the parties hereto with respect to the
foregoing, all of which are hereby merged herein. This agreement cannot be
-2-
<PAGE>
changed, modified, amended or terminated except in a writing executed by the
party to be charged.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Robert Grbic
-------------------------------
Robert Grbic
Senior Vice President
ACKNOWLEDGED AND AGREED:
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTlON INC.
LIN TOYS, LTD.
ARENA ENTERTAINMENT INC.
By: /s/ J. Mark Hattendorf
-------------------------------
Title: Exec VP & CFO
----------------------------
ACCLAIM ENTERTAINMENT CANADA, LTD.
By: /s/ J. Mark Hattendorf
-------------------------------
Title: Exec VP & CFO
----------------------------
-3-
Exhibit 10.4 (iii)
8
<PAGE>
ACCLAIM ENTERTAINMENT
BNY - BLOCKED ACCOUNT
<PAGE>
[Letterhead of Otterbourg, Steindler, Houston & Rosen, P.C.]
November 22, 1996
Deborah Aschheim, Esq.
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Re: Acclaim Entertainment, Inc., et al.
Dear Debra:
As requested, enclosed is a photocopy of the fully executed Blocked
Account Agreement dated November 14, 1996. A copy of the fully executed November
15, 1996 Amendment to Credit Agreement will be forwarded to you under separate
cover.
Very truly yours,
/s/ Alan Kardon
--------------------------
Alan Kardon
Attachment
<PAGE>
BLOCKED ACCOUNT AGREEMENT
THIS BLOCKED ACCOUNT AGREEMENT ("Agreement") is made and entered into as
of November 14, 1996, by and among THE BANK OF NEW YORK, ("Bank"), ACCLAIM
ENTERTAINMENT, INC. ("Company"), and BNY FINANCIAL CORPORATION ("Lender").
A. Pursuant to that certain Revolving Credit and Security Agreement dated
as of January 1, 1993 among Company, certain of its subsidiaries and Lender (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), Lender has agreed to make loans and extend other financial
accommodations to Company.
B. Company has established Account No. 8900320869 with Bank (the "Blocked
Account").
C. The parties hereto desire to enter into this Agreement in order to set
forth their relative rights and duties with respect to the Blocked Account and
all funds on deposit therein from time to time.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
1. Effectiveness. This Agreement shall take effect immediately upon its
execution by all parties hereto.
2. Security Interest; Agency. As collateral security for Company's
"Obligations" to Lender under and as defined in the Credit Agreement, Company
hereby grants to Lender a present and continuing security interest in (a) the
Blocked Account, (b) all contract rights and privileges in respect of the
Blocked Account, and (c) all cash, checks, money orders and other items of value
of Company constituting payment of any tax refund from any federal, state or
local taxing authority, including without limitation, payment of any such tax
refund for Company's fiscal year ending August 31, 1996, now or hereafter paid,
deposited, credited, held (whether for collection, provisionally or otherwise)
or otherwise in the possession or under the control of, or in transit to, Bank
or any agent, bailee or custodian thereof (collectively, "Receipts"), and all
proceeds of the foregoing. Lender hereby appoints Bank as Lender's bailee and
pledgee-in-possession for Blocked Account and all Receipts, and Bank hereby
accepts such appointment and agrees to be bound by the terms of this Agreement.
Company hereby agrees to such appointment and further agrees that Bank, on
behalf of Lender, shall be entitled to exercise, upon the written instructions
of Lender, any and all rights which Lender may have under the Credit Agreement,
"Other Documents", as defined in the Credit Agreement, or under applicable law
with respect to the Blocked Account, all Receipts.
3. Control of Blocked Account. The Blocked Account shall be under the sole
dominion and control of Lender and neither Company nor any other person or
<PAGE>
entity, through or under Company, shall have any control over the use of, or any
right to withdraw andy amount from, the Blocked Account.
4. Procedures for Blocked Account. Bank shall follow the following
procedures with respect to the Blocked Account and, except as provided in this
Agreement, shall take no other action in respect thereof:
(a) Apply and credit for deposit to the Blocked Account all Receipts
from time to time tendered by or on behalf of Company for deposit therein,
including without limitation all wire transfers and other payments directed to
the Blocked Account.
(b) Bank shall determine, on each business day, the balance of all
available funds on deposit in the Blocked Account and automatically transfer all
such funds not later than 10:00 a.m. (New York Time) on such business day to the
account designated below, or to such other account as may be agreed upon in
writing from time to time by Lender and Company, for application to the
Company's Obligations to Lender pursuant to the Credit Agreement (the "Lender
Collateral Account"):
BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
ABA No. 021000018
Account No. 8090653114
Name: Acclaim Entertainment, Inc. Collateral Account
Lender shall apply such funds as follows: first, to the payment of $15,00,000 of
Company's Obligations to Lender then outstanding, second, to the payment of
Overformula Amount, as defined in the Credit Agreement, then outstanding, third,
to the establishment of a reserve for Company's Obligations to Lender in an
amount equal to ten percent (10%) of the aggregate amount of Receivables, as
defined in the Credit Agreement, then outstanding, and the balances of such
funds, if any, shall, provided there is no Event of Default, as defined in the
Credit Agreement, then existing, be paid by Lender to Company.
5. Statements and Other Information. Bank shall send to Lender copies of
all returned and dishonored Receipts promptly upon Bank's receipt thereof, and
upon Lender's request Bank shall provide Lender with copies of the regular
monthly bank statements provided to Company and such other information relating
to the Blocked Account as shall reasonably be requested by Lender. Bank shall
also deliver a copy of all notices and statements required to be sent to Company
pursuant to any agreement governing or related to the Blocked Account to Lender
at such times as provided therein.
-2-
<PAGE>
6. Fees. Company agrees to pay on demand all usual and customary service
charges, transfer fees and account maintenance fees (collectively, "Fees") of
Bank in connection with the Blocked Account. In the event Company fails to
timely make a payment to Bank of any Fees, Bank may thereafter exercise its
right of set-off against the Blocked Account for such amounts. Lender shall not
have any responsibility or liability for the payment of any Fees.
7. Uncollected Funds. If any Receipts deposited in the Blocked Account are
returned unpaid or otherwise dishonored Bank shall have the right to charge any
and all such returned or dishonored items against the Blocked Account or to
demand reimbursement therefor directly from Company.
8. Set-off. Bank hereby agrees that, prior to the effective date of a
termination of this Agreement, Bank will not exercise or claim any right of
set-off or banker's lien against the Blocked Account or any Receipts on deposit
therein, and Bank hereby further waives until such date any such right or lien
which it may have against any Receipts deposited in the Blocked Account, except
to the extent expressly set forth in paragraphs 6 and 7 above.
9. Exculpation of Bank; Indemnification by Company. Company and Lender
agree that Bank shall have no liability to either of them for any loss or damage
that either or both may claim to have suffered or incurred, either directly or
indirectly, by reason of this Agreement or any transaction or service
contemplated by the provisions hereof, unless occasioned by the gross negligence
or willful misconduct of Bank. In no event shall Bank be liable for losses or
delays resulting from computer malfunction, interruption of communication
facilities, labor difficulties or other causes beyond Bank's reasonable control
or, unless occasioned by the gross negligence or willful misconduct of the Bank,
for indirect, special or consequential damages. Company agrees to indemnify Bank
and hold it harmless from and against any and all claims, other than those
caused by the gross negligence or willful misconduct of Bank, and from and
against any damages, penalties, judgments, liabilities, losses or expenses
(including reasonable attorney's fees and disbursements) incurred as a result of
the assertion of any claim, by any person or entity, arising out of, or
otherwise related to, any transaction conducted or service provided by Bank
through the use of any account at Bank pursuant to the procedures provided for
or contemplated by this Agreement.
10. Termination. This Agreement may be terminated by Company only upon
delivery to Bank of a written notification thereof jointly executed by Company
and Lender. This Agreement may be terminated by Lender at any time, with or
without cause, upon its delivery of written notice thereof to each of Company
and Bank. This Agreement may be terminated by Bank at any time on not less than
30 days prior written notice delivered to each of Company and Lender. Upon
delivery or receipt of such notice of termination to or by Bank, Bank will: (a)
immediately transmit to the Lender Collateral Account (i) all funds, if any,
then on deposit in, or otherwise to the credit of, the Blocked Account, and (ii)
upon receipt, all funds
-3-
<PAGE>
received after such notice for deposit in, or otherwise to the credit of, the
Blocked Account; and (b) deliver directly to Lender all Receipts consisting of
checks, money orders, drafts and other instruments or items of value, whether
then in the possession of Bank or received by Bank after such notice, without
depositing such Receipts in the Blocked Account or any other account. The
provisions of paragraphs 2, 3 and 8 shall survive termination of this Agreement
unless and until specifically released by Lender in writing. All rights of Bank
under paragraphs 6, 7 and 9 shall survive any termination of this Agreement.
11. Irrevocable Agreements. Company acknowledges that the agreements made
by it and the authorizations granted by it in paragraph 2, 3, and 4 hereof are
irrevocable and that the authorizations granted in paragraphs 2, 3 and 4 hereof
are powers coupled with an interest.
12. Notices. All notices, requests or other communications given to
Company, Lender or Bank shall be given in writing (including by facsimile) at
the address specified below:
Lender: BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Robert P. Grbic
Telephone: (212) 408-7292
Facsimile: (212) 408-4384
Bank: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Michelle Allan
Telephone: (212) 815-4852
Facsimile: (212) 815-3928
Company: Acclaim Entertainment Inc.
One Acclaim Plaza
Glen Cove, New York
Attention: Mark Hattendorf
Telephone: (516) 856-5000
Facsimile: (516) 856-2039
Any party may change its address for notices hereunder by notice to each other
party hereunder given in accordance with this paragraph 12. Each notice, request
or other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this paragraph 12
and confirmation of receipt is made by the appropriate party, (b) if given by
overnight courier, 24 hours after such communication is deposited with the
overnight courier for delivery,
-4-
<PAGE>
addressed as aforesaid, or (c) if given by any other means, when delivered at
the address specified in this paragraph 12.
13. Miscellaneous.
(a) This Agreement may be amended only by a written instrument
executed by Lender, Bank, and Company acting by their respective duly authorized
representatives.
(b) This Agreement shall be binding upon and shall issue to the
benefit of the parties hereto and their respective successors and assigns, but
neither Company nor Bank shall be entitled to assign or delegate any of its
rights or duties hereunder without first obtaining the express prior written
consent of Lender. This Agreement may be assigned by Lender only in connection
with the assignment by Lender of the Credit Agreement.
(c) This Agreement may be executed in any number of several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(d) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES).
IN WITNESS WHEREOF, each of the parties has executed and delivered this
Blocked Account Agreement as of the day and year first above set forth.
ACCLAIM ENTERTAINMENT, INC.
By: /s/ J. Mark Hattendorf
--------------------------
Title: EXEC V.P. & CFO
THE BANK OF NEW YORK
By: /s/ Frank J. Wang (2754)
--------------------------
Title: Vice President
BNY FINANCIAL CORPORATION
By: /s/ Robert Grbic
--------------------------
Title: SVP
-5-
Exhibit 10.4 (iv)
<PAGE>
ACCLAIM ENTERTMNMENT
BNY - DECEMBER 13, 1996
<PAGE>
[EXECUTION COPY]
BNY FINANCIAL CORPORATION
1290 Avenue of the Americas
New York, New York 10104
December 13, 1996
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LJN TOYS, LTD.
ACCLAIM ENTERTAINMENT CANADA, LTD.
ARENA ENTERTAINMENT INC.
One Acclaim Plaza
Glen Cove, New York 11542-2708
Re: Waiver of Covenant Non-Compliance and Amendment to Credit
Agreement
Gentlemen:
Reference is made to the Revolving Credit and Security Agreement, dated as
of January 1, 1993, by and among ACCLAIM ENTERTAINMENT, INC. ("AEI"), ACCLAIM
DISTRIBUTION INC. ("ADI"), LJN TOYS, LTD. ("UN"), ACCLAIM ENTERTAINMENT CANADA,
LTD. ("Canada") and ARENA ENTERTAINMENT INC. ("Arena"; together with AEI, ADI,
LJN and Canada, collectively the "Borrowers'1) and BNY FINANCIAL CORPORATION
(the "Lender") as amended and restated on February 28, 1995 (as so amended and
restated, and as thereafter further amended, the 1'Credit Agreement"). All
capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Credit Agreement.
Pursuant to the Waiver of Financial Covenant Non-Compliance and Amendment
to Credit Agreement, dated November 8, 1996, among the Lender and the Borrowers
(as amended, the "November 8, 1996 Amendment"), AEI covenanted and agreed with
the Lender that, among other things, on or before November 15, 1996 (the "Pledge
Delivery Date") AEI would pledge to and deposit with the Lender all of the
issued and outstanding stock of Acclaim Cable Holdings, Inc. ("Cable") pursuant
to such documents as might be required by the Lender (the "Pledge Documents").
The Lender required the delivery of the stock certificate evidencing such stock,
the execution and delivery by AEI of a Stock Pledge and Security Agreement, a
Special Power of Attorney and a Stock Power, all in favor of the Lender, and
execution and delivery of a Consent, Waiver and Recognition Agreement among AEI,
Cable, Tele-Communications, Inc., TCI GameCo Ventures, Inc. and the Lender (the
"Consent to Pledge"). On or before the Pledge Delivery Date, the Borrower
delivered to the Lender the Pledge Documents except for the Consent to Pledge.
AEI also covenanted and agreed pursuant to the November 8, 1996 Amendment
to obtain certain documents as specified therein
<PAGE>
from each Borrower's other institutional lenders (the "Institutional Lender
Documents") and to deliver the same to the Lender on or before November 27, 1996
(the "Institutional Lender Document Delivery Date").
AEI did not comply with the November 8, 1996 Amendment by reason of (i) its
failure to deliver the Consent to Pledge by the Pledge Delivery Date and (ii)
its failure to deliver the Institutional Lender Documents by the Institutional
Lender Document Date
AEI has requested a waiver of the aforementioned non-compliance with the
November 8, 1996 Amendment. In response to such request, subject to the terms of
this agreement, the Lender hereby waives such non-compliance, provided, that,
the Lender hereby reserves all rights and remedies granted to the Lender under
the Credit Agreement, the Other Documents, applicable law or otherwise, and
nothing contained herein shall be construed to limit, impair or otherwise affect
the right of the Lender to declare a default with respect to any future
non-compliance with any covenant, term or provision of the Credit Agreement or
any other document now or hereafter executed and delivered in connection
therewith which has not been waived as of the date hereof.
AEI has further requested that the Lender agree not to require the pledge
of the Cable stock and to return to AEI the original Pledge Documents previously
delivered to the Lender. In consideration of the mutual agreements herein
contained, Lender agrees that after the Borrowers execute and deliver this
agreement to the Lender, the Lender shall promptly return to AEI the original
Pledge Documents previously delivered to the Lender.
In addition, AEI has requested that the Lender make certain amendments to
the Credit Agreement and the Lender has agreed to do so, subject to the terms
and provisions contained herein.
Accordingly, the Borrowers and the Lender agree that the Credit Agreement
is hereby amended as follows:
1. The second sentence of Section 2.1(a) of the Credit Agreement is amended
and restated in its entirety to read as follows:
"The 'Formula Amount' shall mean the sum of the following amounts at
any time and from time to time:
(1) 70% of Eligible Receivables, other than Eligible Receivables
arising from the sale of personal computer CDROM software; plus
(2) 30% of Eligible Receivables arising from the sale of personal
computer CD-ROM software, provided, however, that the maximum amount of all
outstanding Advances against such
-2-
<PAGE>
Eligible Receivables shall not exceed $5,000,000 in the aggregate at any one
time; plus
(3) 50% of the Value of the Eligible Inventory; provided,
however, that the maximum amount of all outstanding Advances against Eligible
Inventory shall not exceed $10,000,000 in the aggregate at any one time; plus
(4) 40% of the first cost of goods to be imported under Letters
of Credit which remain outstanding; less
(5) in each case, such reserves, established in Lender's
reasonable discretion exercised in good faith, as Lender may deduct in relation
to Obligations chargeable to the account(s) of any of the Borrowers or which may
be chargeable to the account(s) of any of the Borrowers thereafter ("Reserves"),
including, without limitation, a permanent reserve in the amount of $6,000,000."
2. Sections 6.4, 6.5, 6.7, 6.8 and 6.9 of the Credit Agreement are amended
and restated in their entirety to read as follows:
"6.4 Tangible Net Worth of AEI and its consolidated Subsidiaries. Not,
as at the end of any fiscal quarter of the Borrowers ended on or before February
28, 1997 and as at the end of any fiscal month of the Borrowers commencing May
31, 1997, permit the Tangible Net Worth on a consolidated basis to be less than
the minimum amounts indicated below in respect of the corresponding periods
noted below:
Minimum Tangible Net Worth At Each of
- -------------------------- ----------
(a)
$160,000,000.00 February 28, May 31 and
August 31, 1995
$175,000,000.00 November 30, 1995,
February 29, May 31 and
August 31, 1996
An amount equal to ninety November 30, 1996,
(90%) percent of Tangible February 28, 1997, May 31,
Net Worth as stated in the 1997 and at the end of each
audited financial statements fiscal month thereafter,
of AEI and its consolidated August 31, 1997 and at the
Subsidiaries for the fiscal end of each fiscal month
year ended August 31, 1996 thereafter
(the "1996 Year-End Financial
Statements"), but not less
than $37,000,000.00 as at
November 30, 1996,
$35,000,000.00 as at
February 28, 1997 and at the
-3-
<PAGE>
end of each month thereafter
up to but not including May
31, 1997, $33,000,000 as at
May 31, 1997 and at the end of
each fiscal month thereafter
up to but not including August
31, 1997, and $48,000,000.00
as at August 31, 1997 and at
the end of each fiscal month
thereafter; provided, that
such amount shall be increased
as of the end of each of
Borrowers' fiscal quarters
after August 31, 1997 by an
amount equal to seventy-five
percent (75%) of the net
profits of AEI and its
consolidated Subsidiaries for
such quarter,
plus
- ----
(b) an amount equal to eighty percent (80%) of the aggregate amount of any
capital contribution and/or equity infusion into, or any other additional
equity derived from any source by, any Borrower or any Subsidiary."
"6.5 working Capital of AEI and its consolidated Subsidiaries. Not, as
at the end of any fiscal quarter of the Borrowers, permit the Working Capital on
a consolidated basis to be less than the minimum amounts indicated below in
respect of the corresponding periods noted below:
Minimum Working Capital At Each of
- ----------------------- ----------
(a)
$100,000,000.00 February 28, May 31 and
August 31, 1995
$115,000,000.00 November 30,1995, February 29,
May 31 and August 31, 1996
($23,000,000.00) November 30, 1996
($23,000,000.00) February 28, 1997
($22,500,000.00) May 31, 1997
($ 5,000,000.00) August 31, 1997
($ 5,000,000.00), such amount November 30, 1997, February 28,
to be increased at the end of 1997, May 31, 1997 and at the
each of Borrower's fiscal end of each fiscal month
quarters after August 31, 1997 thereafter
by an amount equal to fifty
-4-
<PAGE>
percent (50%) of the net
profits of AEI and its
consolidated Subsidiaries for
each of Borrowers' fiscal
quarters thereafter, provided,
that on November 30, 1997 and
at the end of each fiscal
quarter thereafter the
Tangible Net Worth of AEI and
its consolidated Subsidiaries
shall not be less than
$0.00,
plus
- ----
(b) An amount equal to seventy-five percent (75%) of the aggregate
amount of any capital contribution and/or equity infusion into, or any other
additional equity derived from any source by, any Borrower or any Subsidiary."
"6.7 Ratio of Total Indebtedness to Tangible Net Worth. Cause to be
maintained as at the end of each fiscal quarter of the Borrowers on a
consolidated basis, a ratio of total Indebtedness (excluding, however, the
amount of any Letters of Credit then outstanding under this Agreement) to
Tangible Net Worth of AEI and its consolidated Subsidiaries of not greater than
the ratio indicated below in each case tested on a quarterly basis:
Maximum Ratio
of Total Indebtedness Fiscal Quarter
to Tangible Net Worth Ending
--------------------- ---------------------
3.50:1 November 30, 1996
3.50:1 February 28, 1997
3.25:1 May 31, 1997
3.00:1 August 31, 1997
and each of the
Borrowers' fiscal
quarters thereafter
"6.8 Fixed Charge Ratio. AEI and its consolidated Subsidiaries shall
cause to be maintained during each of the fiscal quarters of the Borrowers
indicated below a Fixed Charge Ratio of not less than the ratio indicated below
in each case tested on a quarterly basis:
Minimum Fixed
Charge Ratio Fiscal Quarter Ending
------------ ---------------------
1.4:1 November 30, 1996
1.0:1 February 28, 1997
0.5:1 May 31, 1997
1.2:1 August 31, 1997
-5-
<PAGE>
2.0:1 November 30, 1997 and each of
Borrowers' fiscal quarters
thereafter"
"6.9 Maximum Losses. AEI and its consolidated Subsidiaries shall not
incur, or permit to be incurred, losses taken as a whole, in respect of any
fiscal quarter, at any time to exceed the maximum amounts indicated below in
respect of the corresponding periods noted below:
Maximum Losses Fiscal Quarter Ending
-------------- ---------------------
$24,000,000.00 November 30, 1996
$20,000,000.00 February 28, 1997
$ 2,000,000.00 May 31, 1997
None August 31, 1997 and each of
Borrowers' fiscal quarters
thereafter"
3. Section 6.17 of the Credit Agreement is amended in its entirety to read
as follows:
"6.17 Prohibition on Loans to or Investments in Acclaim Cable
Holdings, Inc. and ACTC, L.P. Not, directly or indirectly, make any loans to
Acclaim Cable Holdings, Inc. or ACTC, L.P., or invest in (by capital
contribution or otherwise) or purchase the stock or Indebtedness or all or a
substantial part of the assets or properties of Acclaim Cable Holdings, Inc. or
ACTC, L.P. or hereafter guarantee, assume, endorse or otherwise become
responsible (directly or indirectly) for the Indebtedness, performance or
obligations of Acclaim Cable Holding, Inc. or ACTC, L.P. (each of the foregoing
individually, an "Investment" and collectively, "Investments"), or agree to do
any of the foregoing except an Investment which a Borrower may be presently
contractually obligated to make under certain contingencies, each Borrower
hereby warranting and representing to the Lender that the only Investments any
such Borrower may be contractually obligated to make are as set forth in the
Parents Agreement dated as of October 19, 1994 between AEI and
Tele-Communications, Inc. and the Guaranty by AEI to TCI Games Ventures, Inc. of
the obligations of Acclaim Cable Holdings, Inc. as set forth therein.
4. Clause (h) of Article IX of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(h) (i) any event of default occurring on or after September 1, 1997,
whether or not declared, waived or forborne, of any of the Borrowers under any
agreement now or hereafter in effect with Midland or HKSB , or (ii) any
-6-
<PAGE>
event of default occurring on or after September 1, 1997 of any of
Borrowers or any of the Subsidiaries under any agreement, document, note,
mortgage or guaranty now or hereafter executed and delivered by any of the
Borrowers or any of the Subsidiaries in favor of Fleet Bank, N.A., or (iii)
a default of the obligations of any of the Borrowers with respect to any
other Indebtedness and/or any other contractual obligations, and in the
case of the foregoing clauses (i), (ii) and (iii), subject to Section 5.9
and/or 5.10 of this Agreement.'1
5. Clauses (o) and (p) of Article IX of the Credit Agreement are
amended and restated in their entirety to read as follows:
"(0) delivery to the Lender of financial projections projecting
financial results which if realized would cause an Event of Default under
any other clause of this Article IX;
(p) dilution in collections on Receivables for the last three (3)
consecutive months exceeds thirty percent (30%);"
6. The following clause shall be added to Article IX of the Credit
Agreement at the end thereof:
"(q) the acceleration by any institutional lender, other than Lender,
including, without limitation, Midland and Fleet Bank, N.A., of the
maturity of any of the Indebtedness of any Borrower or of any Subsidiary of
any Borrower to any such institutional lender; or
(r) the receipt by Lender of notice from any other institutional
lender of an event of default under such institutional lender's respective
credit agreements with any Borrower or any Subsidiary provided such notice
commences (i) any "standstill period" during which period such
institutional lender has agreed with the Lender not to take any steps to
enforce any of such institutional lender's rights in or to any of the
Collateral or any of the other property of any Borrower or any Subsidiary
pending the expiration of such "standstill period", or (ii) any period
during which an institutional lender may direct the Lender to remove any of
the Collateral from the premises of any Borrower or any Subsidiary upon
which premises such institutional lender has a lien."
7. The last full paragraph on page 13 and the carry over paragraph on
pages 13 and 14 of the November 8, 1996 Amendment are amended in their
entirety to read as follows:
"To induce the Lender to agree to the waivers and amendments herein
contained, and in consideration thereof, AEI covenants and agrees with the
Lender that on or before September 1, 1997 AEI shall obtain from Midland
-7-
<PAGE>
and Fleet Bank, N.A., (i) waivers of any and all defaults under such
Borrower's agreements with such institutional lenders, and (ii)
amendments to such agreements reflecting all financial projections
heretofore furnished by AEI to the Lender and/or Midland, all of such
waivers and amendments to be in form and substance satisfactory to the
Lender. The failure of any of the Borrowers to timely perform any
agreement to be performed by it pursuant to this paragraph shall, at
the option of the Lender, constitute an Event of Default under the
Credit Agreement."
In consideration of the agreement by the Lender to the waivers and
amendments contained herein and, including, without limitation, the increased
credit risk borne by the Lender by reason of its agreement to the immediately
preceding paragraph 7 of this agreement, (i) the Borrowers agree, jointly and
severally, to pay a non-refundable waiver fee in the amount of $50,000, which
fee shall be fully earned as of the date hereof and shall be charged by the
Lender to the account of the Borrowers upon the execution and delivery of this
agreement, and (ii) in the event the Borrowers do not obtain the requisite
waivers and amendments from their institutional lenders as now required by the
November 8, 1996 Amendment on or before February 28, 1997, then the Borrowers
agree, jointly and severally, to pay to the Lender a non-refundable,
noncompliance fee in the amount of $150,000 which shall be fully earned as of
February 28, 1997 and charged to an account of the Borrowers on or after March
3, 1997.
AEI hereby agrees to deliver or cause to be delivered to the Lender, no
later than 30 days after the date of this agreement, a letter agreement in the
form of Exhibit A attached hereto duly executed by Midland. The failure by AEI
to timely perform its agreement as set forth in this paragraph shall, at the
option of the Lender, constitute an Event of Default under the Credit Agreement.
Notwithstanding anything to the contrary contained in Section 8.7 of the
Credit Agreement, Borrowers' failure to provide management prepared financial
statements within 90 days after the end of the fiscal year ended August 31, 1996
shall not constitute an Event of Default under the Credit Agreement.
This agreement shall be effective as of the date hereof, except that
paragraph 4 of this agreement shall be effective as of September 1, 1996.
Except as specifically set forth herein, no other changes or modifications
to the Credit Agreement are intended or implied, and, in all other respects, the
Credit Agreement shall continue to remain in full force and effect in accordance
with its terms as of the date hereof. Except as specifically set forth herein,
nothing contained herein shall evidence a waiver or amendment by the Lender of
any other provision of the Credit Agreement.
The terms and provisions of this agreement shall be for the benefit of the
parties hereto and their respective successors and
-8-
<PAGE>
assigns; no other person, firm, entity or corporation shall have any right,
benefit or interest under this agreement.
This agreement may be signed in counterparts, each of which shall be an original
and all of which taken together constitute one agreement. In making proof of
this agreement, it shall not be necessary to produce or account for more than
one counterpart signed by the party to be charged.
This agreement sets forth the entire agreement and understanding of the parties
with respect to the matters set forth herein and superseded any and all
understandings, discussions, negotiations, correspondences, memoranda and
agreements (whether written or oral) of the parties hereto with respect to the
foregoing, all of which are hereby merged herein. This agreement cannot be
changed, modified, amended or terminated except in a writing executed by the
party to be charged.
Very truly yours,
KEY FINANCIAL CORPORATION
By: /s/ Robert Grbic
-----------------------------------
Robert Grbic
Senior Vicec President
ACKNOWLEDGED AND AGREED
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LJN TOTS, LTD.
AREMA ENTERTAINMENT, INC.
By:
-----------------------------------
Title:
--------------------------------
ACCLAIM ENTERTAINMENT, CANADA, LTD.
By:
-----------------------------------
Title:
--------------------------------
-9-
<PAGE>
assigns; no other person, firm, entity or corporation shall have any right,
benefit or interest under this agreement.
This agreement may be signed in counterparts, each of which shall be an original
and all of which taken together constitute one agreement. In making proof of
this agreement, it shall not be necessary to produce or account for more than
one counterpart signed by the party to be charged.
This agreement sets forth the entire agreement and understanding of the parties
with respect to the matters set forth herein and superseded any and all
understandings, discussions, negotiations, correspondences, memoranda and
agreements (whether written or oral) of the parties hereto with respect to the
foregoing, all of which are hereby merged herein. This agreement cannot be
changed, modified, amended or terminated except in a writing executed by the
party to be charged.
Very truly yours,
KEY FINANCIAL CORPORATION
By:
-----------------------------------
Robert Grbic
Senior Vicec President
ACKNOWLEDGED AND AGREED
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LJN TOTS, LTD.
AREMA ENTERTAINMENT, INC.
By: /s/ J. Mark Hattendorf
-----------------------------------
Title: Exec. VP & CFO
--------------------------------
ACCLAIM ENTERTAINMENT, CANADA, LTD.
By: /s/ J. Mark Hattendorf
-----------------------------------
Title: Exec. VP & CFO
--------------------------------
-9-
<PAGE>
EXHIBIT A
BNY FINANCIAL CORPORATION
1290 Avenue of the Americas
New York, New York 10104
, 1996
Midland Bank
140 Broadway, 5th FL
New York, New York 10005
Re: Acclaim Entertainment, Inc.
Gentlemen:
Reference is made to the letter agreement between us dated July 29, 1994
Re: Acclaim Entertainment, Inc. (the "Intercreditor Agreement"). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Intercreditor Agreement.
Notwithstanding anything to the contrary contained in the Intercreditor
Agreement, you hereby confirm to and agree with us that (i) as of the date
hereof the 120 period referred to in paragraph 4 of the Intercreditor Agreement
(the "Standstill period") has not started to run, and (ii) after the date hereof
the Standstill Period will not start to run until the date on which we receive
written notice directly from you of a default by Acclaim Comics, Inc. under or
in connection with your credit agreement with Acclaim Comics, Inc., it being
understood and agreed that you expressly reserve your rights to give, and may
give, such notice at any time any such default exists (and at any time after 120
days thereafter may enforce any of your rights in or to any of the Collateral).
Except as hereinabove amended, the Intercreditor Agreement shall remain in
full force and effect in accordance with its terms.
Please indicate your confirmation of and agreement to the foregoing by
executing a copy of this letter where indicated below and return it to us.
Very truly yours,
BNY FINANCIAL CORPORATION
By:
----------------------------------
Title:
-------------------------------
Duly Authorized
Confirmed and Agreed:
MIDLAND BANK
By:
------------------------------
Title:
---------------------------
Duly Authorized
Exhibit 10.4 (v)
<PAGE>
ACCLAIM ENTERTMNMENT
BNY - FEBRUARY 24,1997
CREDIT AGREEMENT
<PAGE>
OTTERBOURG, STEINDLER, HOUSTON & ROSEN, P.C.
230 PARK AVENUE
NEW YORK, N.Y 10169-0075
(212) 66l~9100
RICHARD L. STEHL CABLE ADDRESS: "OTLERTON"
ADMITTED IN CONNECTICUT FACSIMILE: (212) 682-6104
TELEX: 960916
February 24, 1997
BY HAND
Deborah Aschheim, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Re: BNY Financial Corporation ("BNYFC") with
Acclaim Entertainment, Inc. ("AEI") et al. ("Borrowers")
Dear Deborah:
We enclose the following original fully executed documents:
1. Amendment to Factoring Agreements;
2. Amendment to Credit Agreement and Consent;
Please be advised that pursuant to paragraph 1(iv) of the Amendment,
BNYFC's consent to the Private Placement is expressly conditioned upon the
Borrowers' representation, agreement and covenant that "the Indenture Agreement
pursuant to which the Subordinated Notes are issued and the Subordinated Notes
shall each contain subordination provisions in form and content satisfactory to
Lender and its counsel." The Borrowers have yet to deliver the final version of
the Indenture to BNYFC for its review, and BNYFC reserves all of its rights and
remedies granted under the loan agreements, including, without limitation,
Article IX of the Credit Agreement.
Please acknowledge receipt of the documents by signing the copy of this
letter attached hereto in the place provided and returning it to our messenger
who has been instructed to wait.
Very truly yours,
OTTERBOURG, STEINDLER, HOUSTON & ROSEN, P.C.
Document Received and Acknowledged:
Name: /s/ Deborah Aschheim /s/ Richard L. Stehl
-------------------------------------- Richard L. Stehl
cc: Mr. Anthony Marsicano (via fax w/o encl.)
Mr. Robert P. Grbic (via fax w/o encl.)
Bruce Tenzer, Esq. (via fax w/o encl.)
<PAGE>
February 24 1997
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LJN TOYS, LTD.
ACCLAIM ENTERTAINMENT CANADA, LTD.
ARENA ENTERTAINMENT INC.
One Acclaim Plaza
Glen Cove, New York 11542-2708
Re: Amendment to Credit Agreement and Consent
Gentlemen:
Reference is made to the Revolving Credit and Security Agreement, dated as
of January 1, 1993, by and among ACCLAIM ENTERTAINMENT, INC. ("AEI"), ACCLAIM
DISTRIBUTION INC. ("ADI"), LJN TOYS, LTD. ("LJN"), ACCLAIM ENTERTAINMENT CANADA,
LTD. ("Canada") and ARENA ENTERTAINMENT INC. ("Arena"; together with AEI, ADI,
LJN and Canada, individually, a "Borrower" and collectively, the "Borrowers")
and BNY FINANCIAL CORPORATION ("Lender"), as amended and restated in its
entirety on February 28, 1995 (as so amended and as from time to time thereafter
amended, the "Credit Agreement"). All capitalized terms used and not otherwise
defined herein shall have the respective meanings ascribed to them in the Credit
Agreement.
1. Pursuant to the Waiver, Amendment and Consent dated January 30, 1997
(the "January 30 Amendment"), Borrowers requested that the Lender consent to AEI
entering into a Private Placement (as defined in the January 30 Amendment), the
proceeds of which Private Placement Borrowers have represented to Lender shall
be used, in part, to (a) satisfy the obligations of Acclaim Comics, Inc. and the
Borrowers to Midland, and (b) make a prepayment in the amount of $2,000,000 to
Fleet Bank, N.A. ("Fleet") with respect to the obligations of Acclaim Corporate
Center I, Inc. and Oyster Bay Warehouse Corp. to Fleet. Borrowers have
requested, and Lender has agreed based upon the foregoing representation, to
restate in its entirety the terms of the January 30 Amendment with respect to
the Private Placement (Item A on page 2 of the January 30 Amendment), and
Lender's consent thereto, as follows:
"Private Placement. Borrowers have requested that the Lender consent to the
issuance by AEI of not less than $50 million of convertible, unsecured
subordinated notes (the "Subordinated Notes" and such issuance being the
"Private Placement"). Lender hereby consents to the Private Placement,
waives any prohibition under the Credit Agreement and the Other
<PAGE>
Documents with respect to the Private Placement and agrees that the Private
Placement shall not constitute an Event of Default, provided that, (i) AEI
receives the proceeds of the Private Placement in the aggregate amount of
not less than $46.0 million, net of expenses related to the issuance of the
Subordinated Notes, by February 28,1997, (ii) the Subordinated Notes shall
not be redeemed for cash or other distribution of the Borrower's assets by
the Borrower earlier than March 1, 2000, (iii) the Subordinated Notes shall
have a rate of interest not exceeding ten (10%) percent per annum, (iv) the
Indenture Agreement pursuant to which the Subordinated Notes are issued and
the Subordinated Notes shall each contain subordination provisions in form
and content satisfactory to Lender and its counsel, and (v) Lender receives
evidence satisfactory to Lender by no later than February 28, 1997 that the
obligations of Acclaim Comics, Inc. and the Borrower to Midland have been
paid in full and that Fleet Bank, N.A. has received a payment of $2,000,000
with respect to the obligations of Acclaim Corporate Center I, Inc. and
Oyster Bay Warehouse Corp. to Fleet."
2. In addition, Borrowers have requested that Lender make certain
amendments to the Credit Agreement and Lender has agreed to do so, subject to
the terms and provisions contained herein:
(a) Section 1.2 of the Credit Agreement is hereby amended by inserting
the following definitions in their alphabetical order:
"'Companv Notice' shall have the meaning ascribed to such
term in the Indenture."
"'Indenture' shall mean the Indenture Agreement dated as of
February 26,1997 between the Trustee (as defined in the Indenture
Agreement) and AEI in connection with the issuance of the Subordinated
Notes."
"'Redemption Date' shall have the meaning ascribed to such
term in the Indenture."
"'Subordinated Notes' shall mean those 10% convertible
subordinated unsecured notes due 2002 in the aggregate amount of
$50,000,000 made by AEI on or about February 26, 1997."
(b) The following definitions in Section 1.2 of the Credit Agreement
are hereby amended and restated in their entirety as follows:
"'Tangible Net Worth' at a particular date means (a) the
aggregate amount of all assets of AEI and its consolidated
Subsidiaries, taken as a whole, and as may be properly classified as
such in accordance with AAP consistently applied, excluding such
assets as are properly
-2-
<PAGE>
classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of AEI and its consolidated Subsidiaries
taken as a whole, excluding any subordinated debt arising in
connection with the Subordinated Notes for so long as no default or
event of default exists under the Indenture or Subordinated Notes, and
as may be properly classified as such in accordance with GAAP
consistently applied.
"'Term' shall mean January 1,1993 through and including
January 31, 2000, as the same may be extended, reduced or terminated
in accordance with the provisions of Section 12.1 hereof."
(c) Sections 6.4, 6.5, 6.7, 6.8 and 6.9 of the Credit Agreement are
hereby amended and restated in their entirety to read as set forth on Exhibit A
annexed hereto and made a part hereof.
(d) Section 6.21, Section 6.22 Section 6.23 shall be added to the
Credit Agreement immediately following Section 6.20 as follows:
"Section 6.21 Prohibition of Amendments to Indenture. Not, without the
prior written consent of the Lender, amend, modify or in any way alter
the terms of the Indenture or the Subordinated Notes."
"Section 6.22 Prohibition of Grant of Collateral for Indenture. Not
grant, or permit any Subsidiary to grant, to any Person, any
Collateral or any other assets of the Borrowers or any Subsidiary, as
security for the Indenture or the Subordinated Notes or any obligation
arising thereunder or related thereto."
"Section 6.23 Notice Under the Indenture. Furnish to Lender any notice
given or received by AEI under the Indenture or the Subordinated
Notes, simultaneously upon the giving of such notice by AEI or
immediately upon receipt of such notice by AEI, as the case may be."
(e) Section 12.1 of the Credit Agreement is hereby amended and
restated in their entirety to read as follows:
"'Section 12.1 Term. This Agreement shall inure to the
benefit of and shall be binding upon the respective successors and
permitted assigns of the Borrowers and the Lender and shall become
effective on the date hereof until January 31, 2000 unless: (a) sooner
terminated by (i) the Borrowers, upon giving the Lender at least
ninety (90)
-3-
<PAGE>
days prior written termination notice in advance and effective as of
the end of the initial Term or any successive Term hereunder; (ii) the
Borrowers, at an earlier effective termination date than is specified
in subsection (a)(i) above, as more fully described in Section 12.2
below; (iii) the Lender, pursuant to Section 10 hereof; or (iv) the
Lender, upon giving the Borrower at least ninety (90) days prior
written termination notice in advance and effective as of the end of
the initial Term or any successive Term hereunder; or (b) extended in
accordance with the final sentence of this Section. Any termination in
accordance with subsection 12.1(ii) shall be deemed to be effective
provided that all Obligations shall be paid in full to Lender by no
later than the effective termination date of this Agreement and
provided that by such date, the indemnity provided for in Section
2.8(b) hereof as to all outstanding Letters of Credit, Lender
Guarantees and Acceptances shall have been executed and delivered to
Lender. Subject to the foregoing, the Term shall be automatically
extended for successive periods of one (1) year each through and
including January 31 of each Calendar Year after 2000 such that this
Agreement will remain in full force and effect, unless terminated by
either party at the end of the initial Term or any successive Term by
giving the other party at least ninety (90) days prior written
notice."
(f) Clauses (s) and (t) of Article IX of the Credit Agreement are
amended and restated in their entirety to read as follows:
"(s) Southcoast Capital Corporation shall (i) cease to be engaged as
the underwriter for AEI's issuance of the Subordinated Notes, or (ii)
advise AEI that the offering of such Subordinated Notes is withdrawn
or otherwise terminated or shall not be consummated by February 28,
1997;
(t) AEI shall fail to receive by February 28, 1997, cash proceeds in
an aggregate amount, net of expenses related to the issuance of the
Subordinated Notes, of not less than $46.0 million from such issuance;
or"
(g) The following clause shall be added to Article IX of the Credit
Agreement at the end thereof:
"(u) A default or event of default shall occur under the Indenture or
the Subordinated Notes;
(v) Borrower shall amend, modify or in any way alter the terms of the
Indenture or the Subordinated Notes, without the prior written consent
of Lender; or
-4-
<PAGE>
(w) A Company Notice shall be delivered under the Indenture."
3. In addition to all other Collateral, as additional security for the
Obligations, Borrowers, jointly and severally, are contemporaneously herewith
depositing with Lender the sum of $2,500,000 ("Cash Deposit"), which Cash
Deposit (i) shall be in addition to all other Collateral and shall be included
within the definition of Collateral, and (ii) shall be held by Lender pursuant
to the terms of the letter Re: Cash Deposit dated the date hereof among Lender
and the Borrowers.
4. Each of the Borrowers hereby acknowledge, confirm and agree that
all amounts charged or credited to the Loan Account as of the date hereof are
correct and binding upon each of the Borrowers and that all amounts reflected to
be due and owing in that Loan Account as of the date hereof are due and owing
without defense, offset or counterclaim.
5. Except as specifically set forth herein, no other changes or
modifications to the Credit Agreement are intended or implied, and, in all other
respects, the Credit Agreement shall continue to remain in full force and effect
in accordance with its terms as of the date hereof. Except as specifically set
forth herein, nothing contained herein shall evidence a waiver or amendment by
the Lender of any other provision of the Credit Agreement nor shall anything
contained herein be construed as a consent by the Lender to any transaction
other than those specifically consented to herein.
6. The terms and provisions of this amendment shall be for the benefit
of the parties hereto and their respective successors and assigns; no other
person, firm, entity or corporation shall have any right, benefit or interest
under this amendment.
7. This amendment may be signed in counterparts, each of which shall
be an original and all of which taken together constitute one agreement. In
making proof of this amendment, it shall not be necessary to produce or account
for more than one counterpart signed by the party to be charged.
-5-
<PAGE>
8. This amendment sets forth the entire amendment and understanding of
the parties with respect to the matters set forth herein and supersedes any and
all understandings, discussions, negotiations, correspondence, memoranda and
agreements (whether written or oral) of the parties hereto with respect to the
foregoing, all of which are hereby merged herein. This amendment cannot be
changed, modified, amended or terminated except in a writing executed by the
party to be charged.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Robert Grbic
---------------------------------
Robert Grbic
Senior Vice President
ACKNOWLEDGED AND AGREED:
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LIN TOYS, LTD.
ARENA ENTERTAINMENT INC.
ACCLAIM ENTERTAINMENT CANADA, LTD.
By: /s/ J. Mark Hattendorf
--------------------------------
Title: Exec. V.P. and CFO of each
-----------------------------
-6-
<PAGE>
EXHIBIT A TO
AMENDMENT TO CREDIT AGREEMENT AND CONSENT
DATED FEBRUARY 24, 1997
Sections 6.4, 6.5, 6.7, 6.8 and 6.9 of the Credit Agreement are
amended and restated in their entirety to read as follows:
"6.4 Tangible Net Worth of AEI and its consolidated Subsidiaries. Not,
as at the end of any fiscal quarter of the Borrowers ended on or before February
28, 1997 and as at the end of any fiscal month of the Borrowers commencing the
month after the filing of AEI's August 31, 1997 Form 10K, permit the Tangible
Net Worth on a consolidated basis to be less than the minimum amounts indicated
below in respect of the corresponding periods noted below:
Minimum Tangible Net Worth
- --------------------------
An amount equal to ninety
(90%) percent of Tangible Net
Worth as stated in the audited
financial statements of AEI
and its consolidated
Subsidiaries for the fiscal
year ended August 31, 1996
(the "1996 Year-End Financial
Statements"), but not less
than $37,000,000 as at
November 30, 1996, $45,000,000
as at February 28,1997 and at
the end of each quarter
thereafter up to but not
including May 31, 1997,
$43,000,000 as at May 31, 1997
and at the end of each fiscal
quarter thereafter up to but
not including August 31,1997,
and $40,000,000 as at August
31, 1997 and at the end of each
fiscal quarter thereafter, and
$40,000,000 as at November 30,
1997 and at the end of each
fiscal month thereafter,
provided, that such amount
shall be increased as
-7-
<PAGE>
of the end of each of
Borrowers' fiscal quarters
after August 31,1997 by an
amount equal to seventy-five
percent (75%) of the net
profits of AEI and its
consolidated Subsidiaries for
such quarter,
plus
- ----
an amount equal to eighty percent (80%) of the aggregate amount of any capital
contribution and/or equity infusion into, or any other additional equity derived
from any source by, any Borrower or any Subsidiary."
"6.5 Working Capital of AEI and its consolidated Subsidiaries. Not, as
at the end of any fiscal quarter of the Borrowers, permit the Working Capital on
a consolidated basis to be less than the minimum amounts indicated below in
respect of the corresponding periods noted below:
Minimum Working Capital At Each of
- ----------------------- ----------
(a)
($23,000,000) November 30, 1996
$5,000,000 February 28,1997
$14,000,000 May 31, 1997
$12,000,000 August 31, 1997
$12,000,000, such amount to be November 30,1997, February 28,
increased at the end of each 1998, May 31,1998 and at the
of Borrower's fiscal quarters end of each fiscal month
after August 31, 1997 by an thereafter
amount equal to fifty percent
(50%) of the net profits of
AEI and its consolidated
Subsidiaries for each of
Borrowers' fiscal quarters
thereafter,
-8-
<PAGE>
plus
(b) An amount equal to seventy-five percent (75%) of the aggregate
amount of any capital contribution and/or equity infusion into, or any other
additional equity derived from any source by, any Borrower or any Subsidiary."
"6.7 Ratio of Total Indebtedness to Tangible Net Worth. Cause to be
maintained as at the end of each fiscal quarter of the Borrowers on a
consolidated basis, a ratio of total Indebtedness (excluding, however, the net
proceeds received by the Borrowers in connection with the issuance of the
Subordinated Notes) to Tangible Net Worth of AEI and its consolidated
Subsidiaries of not greater than the ratio indicated below in each case tested
on a quarterly basis:
Maximum Ratio
of Total Indebtedness Fiscal Quarter
to Tangible Net Worth Ending
--------------------- ---------------
3:1 November 30, 1996
3:1 February 28, 1997
3:1 May 31, 1997
3:1 August 31,1997
3:1 November 30, 1997 and each of the Borrowers
fiscal quarters thereafter"
"6.8 Fixed Charge Ratio. AEI and its consolidated Subsidiaries shall
cause to be maintained during each of the fiscal quarters of the Borrowers
indicated below a Fixed Charge Ratio of not less than the ratio indicated below
in each case tested on a quarterly basis:
Minimum Fixed
Charge Ratio Fiscal Quarter Ending
------------ ---------------------
.5:1 November 30, 1997
.75:1 February 28,1998
.75:1 May 31,1998
1:1 August 31, 1998
2:1 November 30, 1998 and each of the Borrowers' fiscal
quarters thereafter"
"6.9 Maximum Losses. AEI and its consolidated Subsidiaries shall not
incur, or permit to at any time to be incurred, losses taken as a whole, in
respect of any fiscal quarter, at anytime to
-9-
<PAGE>
exceed the maximum amounts indicated below in respect of the corresponding
periods noted below:
Maximum Losses Fiscal Quarter Ending
-------------- ---------------------
$24,000,000 November 30,1996
$20,000,000 February 25, 1997
$8,000,000 May 31,1997
$5,000,000 August 31, 1997
None November 30, 1997 and at each of Borrowers' fiscal
quarters thereafter"
- 10 -
Exhibit 10.5
<PAGE>
ACCLAIM ENTERTAINMENT
BNY-FEBRUARY 24,1997
FACTORING AGREEMENT
<PAGE>
BNY FINANCIAL CORPORATION
1290 Avenue of the Americas
New York, New York 10104
February 24, 1997
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LJN TOYS, LTD.
ACCLAIM ENTERTAINMENT CANADA, LTD.
ARENA ENTERTAINMENT INC.
One Acclaim Plaza
Glen Cove, New York 11542
Re: Amendment to Factoring Agreements
Gentlemen:
Reference is made to the Restated and Amended Factoring Agreements between
us and each of you, dated on or about February 2B, 1995, (as amended and
supplemented, the "Factoring Agreements"). All capitalized terms used and not
otherwise defined herein shall have the respective meanings ascribed to them in
the Factoring Agreements.
It is hereby agreed that paragraph 9(a)(1) of each of the Factoring
Agreements shall be amended in its entirety to read as follows:
"(a) This agreement shall remain in full force and effect until
terminated as follows:
(i) This agreement shall remain in full force and effect unless
either of us gives the other party hereto written notice of
termination (by certified mail, return receipt requested) no less than
ninety (90) days prior to and effective as of January 31, 2000 or any
January 31st thereafter; or
Except as specifically set forth herein, no other changes or modification
to the Factoring Agreements are intended or implied, and, in all respects the
Factoring Agreement shall continue to remain in full force and effect in
accordance with their respective terms as of the date hereof.
This agreement may be signed in counterparts, each of which shall be an
original and all of which when taken together
<PAGE>
constitute one agreement. In making proof of this agreement, it shall not be
necessary to produce or account for more than one counterpart signed by the
party to be charged.
Please indicate your agreement to the foregoing by executing this letter
where indicated below and returning it to us.
Very truly yours,
BNY FINANIAL CORPORATION
/s/ Robert Grbic
-----------------------------
Robert Grbic
Senior Vice President
AGREED:
ACCLAIM ENTERTAINMENT, INC.
ACCLAIM DISTRIBUTION INC.
LJN TOYS, LTD.
ARENA ENTERTAINMENT INC.
By /s/ J. Mark Hattendorf
--------------------------------
Title: EXEC VP & CFO
ACCLAIM ENTERTAINMENT CANADA, LTD.
By /s/ J. Mark Hattendorf
--------------------------------
Title: EXEC VP & CFO
