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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 31, 1995
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THE SCORE BOARD, INC.
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(Exact Name of Registrant as specified in its charter)
New Jersey 0-16913 22-2766077
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1951 Old Cuthbert Road, Cherry Hill, New Jersey 08034
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 354-9000
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ITEM 5. OTHER EVENTS
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On July 31, 1995, the Registrant entered into a three-year credit agreement
with Congress Financial Corporation, a subsidiary of Corestates Financial Corp.,
pursuant to which the Registrant may borrow up to $12,000,000. The line of
credit is collateralized by the assets of Registrant, and actual borrowings are
limited to available credit, as defined in the credit agreement. The line of
credit bears interest at a rate of two percent (2%) in excess of the prime rate,
and replaces Registrant's previous credit facility with Mellon Bank, N.A.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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The following Exhibits are filed as part of this report:
10.1 Loan and Security Agreement, dated July 31,
1995, by and between Congress Financial
Corporation and The Score Board, Inc.
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SIGNATURES
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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 hereunto duly authorized.
THE SCORE BOARD, INC.
By: /s/Ken Goldin
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Ken Goldin,
Chairman of the Board,
Chief Executive Officer
and President
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.1 Loan and Security Agreement, dated July
31, 1995, by and between Congress Financial
Corporation and The Score Board, Inc.
</TABLE>
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EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION
AS LENDER
AND
THE SCORE BOARD, INC.
AS BORROWER
DATED: JULY 31, 1995
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TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS........................................................................ 1
SECTION 2. CREDIT FACILITIES
2.1 Loans................................................................................ 9
2.2 Letter of Credit Accommodations..................................................... 10
2.3 Availability Reserves............................................................... 12
SECTION 3. INTEREST AND FEES
3.1 Interest............................................................................ 12
3.2 Servicing Fee....................................................................... 12
3.3 Unused Line Fee..................................................................... 12
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations........... 13
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations............... 15
SECTION 5. GRANT OF SECURITY INTEREST........................................................ 15
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account............................................................. 16
6.2 Statements.......................................................................... 16
6.3 Collection of Accounts.............................................................. 17
6.4 Payments............................................................................ 18
6.5 Authorization to Make Loans......................................................... 18
6.6 Use of Proceeds..................................................................... 18
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting................................................................ 19
7.2 Accounts Covenants.................................................................. 19
7.3 Inventory Covenants................................................................. 20
7.4 Equipment Covenants................................................................. 21
7.5 Power of Attorney................................................................... 21
7.6 Right to Cure....................................................................... 22
7.7 Access to Premises.................................................................. 22
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SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1 Corporate Existence, Power and Authority; Subsidiaries.............................. 23
8.2 Financial Statements; No Material Adverse Change.................................... 23
8.3 Chief Executive Office; Collateral Locations........................................ 23
8.4 Priority of Liens; Title to Properties.............................................. 24
8.5 Tax Returns......................................................................... 24
8.6 Litigation.......................................................................... 24
8.7 Compliance with Other Agreements and Applicable Laws................................ 24
8.8 Intellectual Property; License Agreements........................................... 24
8.9 Mergers............................................................................. 25
8.10 Accuracy and Completeness of Information............................................ 25
8.11 Survival of Warranties; Cumulative.................................................. 25
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence............................................................ 26
9.2 New Collateral Locations............................................................ 26
9.3 Compliance with Laws, Regulations, Etc.............................................. 26
9.4 Payment of Taxes and Claims......................................................... 26
9.5 Insurance........................................................................... 26
9.6 Financial Statements and Other Information.......................................... 27
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc............................. 28
9.8 Encumbrances........................................................................ 29
9.9 Indebtedness........................................................................ 30
9.10 Loans, Investments, Guarantees, Etc................................................. 31
9.11 Dividends and Redemptions........................................................... 31
9.12 Transactions with Affiliates........................................................ 32
9.13 License Agreements.................................................................. 32
9.14 Working Capital..................................................................... 33
9.15 Tangible Net Worth.................................................................. 33
9.16 Costs and Expenses.................................................................. 33
9.17 Further Assurances.................................................................. 34
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default................................................................... 34
10.2 Remedies............................................................................ 36
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver............... 37
11.2 Waiver of Notices................................................................... 38
11.3 Amendments and Waivers.............................................................. 38
11.4 Waiver of Counterclaims............................................................. 38
11.5 Indemnification..................................................................... 39
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SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term................................................................................ 39
12.2 Notices............................................................................. 40
12.3 Partial Invalidity.................................................................. 40
12.4 Successors.......................................................................... 40
12.5 Entire Agreement.................................................................... 41
</TABLE>
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INDEX TO
EXHIBITS AND SCHEDULES
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<TABLE>
<S> <C>
Exhibit A Information Certificate
Schedule 8.1 Intellectual Property owned by The
Score Board Holding Corporation
Schedule 8.4 Existing Liens
Schedule 8.8 License Agreements
Schedule 9.9 Existing Indebtedness
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<PAGE>
LOAN AND SECURITY AGREEMENT
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This Loan and Security Agreement dated July 31, 1995 is entered into by and
between Congress Financial Corporation, a California corporation ("Lender") and
The Score Board, Inc., a New Jersey corporation ("Borrower").
W I T N E S S E T H:
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WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
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All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Borrower and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3 or is cured in a manner satisfactory to Lender. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meanings customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii)
the assets, business or prospects of Borrower or any Obligor or (iii) the
security interests and other rights of Lender in the Collateral
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(including the enforceability, perfection and priority thereof), or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been incomplete, inaccurate or misleading in any material respect, or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof, or (d) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or would with notice or
passage of time or both constitute an Event of Default.
1.3 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.4 "Capital Stock" shall mean any and all shares, interests,
participations, options, warrants, rights or other equivalents (however
designated) of or with respect to corporate stock or partnership interests.
1.5 "Change of Control" shall mean (a) all or substantially all of the
assets of Borrower are sold, in one or in a series of transactions, to any
"Person" or "Group" (as such terms are used in Section 14(d)(2) and 13(d)(3),
respectively, of the Exchange Act); (b) Kenneth L. Goldin, the estate of Paul
Goldin, Carole Goldin and any Permitted Transferee shall at any time own and
control, in the aggregate, less than fifteen (15%) percent of the combined
voting power of the then outstanding securities of Borrower ordinarily (and
apart from rights accruing to the holders of one or more classes of preferred
securities under certain circumstances) having the right to vote in the election
of directors; or (c) after the date of this Agreement, the replacement of a
majority of the Board of Directors of Borrower from the directors who constitute
the Board of Directors as of the date of this Agreement.
1.6 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.7 "Eligible Accounts" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
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delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days after
the original due date of the invoice for them but in any event which are not
unpaid more than one hundred twenty (120) days after the original invoice date;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent (other than (i)
the right of return granted by Borrower to customers in the ordinary course of
the business of Borrower in accordance with the return policies of Borrower in
effect on the date hereof and (ii) the right of QVC, Inc. to offset against
Accounts owed by QVC, Inc. to Borrower for goods returned to QVC, Inc. by its
customers pursuant to the terms of the letter agreement, dated April 29, 1992,
between Borrower and QVC, Inc. as in effect on the date hereof);
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(e) (i) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of America or any
Province in Canada; provided, that, with respect to Accounts of an account
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debtor with its chief executive office located in a Province of Canada: (A)
such Accounts do not constitute more than ten (10%) percent of all otherwise
Eligible Accounts (but the portion of the Accounts not in excess of such
percentage may be deemed Eligible Accounts) and (B) at any time, promptly upon
Lender's request, Borrower shall execute and deliver, or cause to be executed
and delivered, such other agreements, documents and instruments as may be
required by Lender to perfect the security interests of Lender in those Accounts
of an account debtor with its chief executive office in Canada in accordance
with the applicable laws of the Province of Canada in which such chief executive
office is located and take or cause to be taken such other and further actions
as Lender may request to enable Lender as secured party with respect thereto to
collect such Accounts under the applicable laws of the Province of Canada, or
(ii) if the chief executive office of the account debtor with respect to such
Accounts is not located in the United States of America or any Province of
Canada, then if, at Lender's option, either: (A) the account debtor has
delivered to Borrower an irrevocable letter of credit issued or confirmed by a
bank satisfactory to Lender, sufficient to cover such Account, in form and
substance satisfactory to Lender in good faith, and, if required by Lender, the
original of such letter of credit has been delivered to Lender or Lender's agent
and the issuer thereof notified of the assignment of the proceeds of such letter
of credit to Lender, or (B) such Account is subject to credit insurance payable
to Lender issued by an insurer and on terms and in an amount acceptable to
Lender in good faith, or (C) such Account is otherwise acceptable in all
respects to Lender in good faith (subject to such lending formula with respect
thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill and
hold invoices or retainage invoices, except as to bill and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts, except if Lender shall have received an agreement, in form and
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substance satisfactory to Lender, by such account debtor in favor of Lender
pursuant to which such account debtor agrees not to exercise such right of
setoff, duly authorized, executed and delivered by such account debtor;
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable under the terms thereof or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
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(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner reasonably
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) the aggregate amount of such Accounts of a single account
debtor and its affiliates, other than QVC, Inc., Walmart and Sam's, do not
constitute more than twenty (20%) percent of all otherwise Eligible Accounts and
such Accounts of QVC, Inc. do not constitute more than twenty-five (25%) percent
of all otherwise Eligible Accounts and the aggregate amount of such Accounts of
Walmart and Sam's do not constitute more than thirty (30%) percent of all
otherwise Eligible Accounts (but in each case the portion of the Accounts not in
excess of such percentage may be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than sixty (60) days after the original due date of the
invoice for them but in any event which are not unpaid more than one hundred
twenty (120) days after the original invoice date, which constitute more than
fifty (50%) percent of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Borrower from time to time in the ordinary
course of business, to the extent such credit limits are satisfactory to Lender,
and if not, then as otherwise determined by Lender (but the portion of the
Accounts not in excess of such credit limit may still be deemed Eligible
Accounts);
(p) such Accounts do not arise from arrangements for the licensing,
sublicensing by Borrower of any trademark, logos, designs, representations or
other intellectual property, provided, that, Lender may, in its discretion, from
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time to time consider any of such Accounts to be Eligible Accounts;
(q) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender, as determined in good faith by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.8 "Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of Borrower and raw
materials for such finished goods which are acceptable to Lender based on the
criteria set forth below. In general, Eligible Inventory shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Borrower's business; (f) Inventory at premises other than those
owned and controlled by Borrower, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
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acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (h) bill and hold
goods; (i) Inventory paid for by the customer or for which the customer has
given Borrower a deposit, but which has not been delivered to the customer; (j)
unserviceable, obsolete or slow moving Inventory; (k) Inventory consisting of
trading cards which is not sold and delivered by, or on behalf of, Borrower to
its customers within one hundred twenty (120) days after the date such Inventory
is printed; (l) Inventory consisting of sports memorabilia bearing autographs of
sports celebrities if Borrower is not entitled to sell such sports memorabilia
under the terms of its arrangements with the sports celebrities whose autograph
is on it; (m) Inventory bearing autographs of sports celebrities to the extent
no certificate of authenticity for such Inventory is available in connection
therewith; (n) Inventory bearing any trademarks, logos, designs, representations
or other intellectual property which are not owned by Borrower (i) to the extent
Borrower is required to deliver an agreement in writing from the licensor and
owner of such trademarks, logos, designs, representations or other intellectual
property, in form and substance satisfactory to Lender, permitting Lender to use
such trademarks, logos, designs, representations or other intellectual property
for the purpose of selling such Inventory pursuant to Section 9.13(c) hereof,
and Lender has not received such an agreement or (ii) to the extent the license
or other agreement of Borrower with such owner and licensor is not in full force
and effect or any default thereunder exists or has occurred (except if Borrower
has the right to continue to use the trademarks, logos, designs, representations
or other intellectual property subject to the license or other agreement, even
if it is not in full force and effect or after any default thereunder, for the
purpose of selling such Inventory); (o) Inventory which is not subject to the
first priority, valid and perfected security interest of Lender; (p) damaged
and/or defective Inventory; (q) existing Inventory sold under the name of
Classic Games which was located in Atlanta, Georgia for which there is no demand
as determined by Lender; and (r) Inventory purchased or sold on consignment.
General criteria for Eligible Inventory may be established and revised from time
to time by Lender in good faith. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
1.9 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.10 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.11 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the amount of the Loans
available to Borrower as of such time based on the applicable lending formulas
multiplied by the Net Amount of Eligible Accounts and Value of Eligible
Inventory, as determined by Lender, and subject to the sublimits and
Availability Reserves from time to time established by Lender hereunder and (ii)
the Maximum Credit, minus (b) the sum of: (i) the amount of all then
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outstanding and unpaid Obligations, plus (ii) the aggregate amount of all trade
payables of Borrower which are more than thirty (30) days past due as of such
time.
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1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.13 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.14 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.14 and 9.15 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.15 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.16 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.17 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower of its obligations to such issuer.
1.18 "License Agreements" shall have the meaning set forth in Section 8.8
hereto.
1.19 "Loans" shall mean the loans now or hereafter made by Lender to or
for the benefit of Borrower on a revolving basis (involving advances, repayments
and readvances) as set forth in Section 2.1 hereof.
1.20 "Mergers" shall mean the mergers of California Gold, Inc., a Delaware
corporation, Catch a Star Collectibles, Inc., a New Jersey corporation, Pro
Legends, Inc., a New Jersey corporation, Score Board Retail Corp., a New Jersey
corporation, Score Board Sub, Inc., a Delaware corporation, and Borrower with
Borrower as the surviving corporation.
1.21 "Merger Agreements" shall mean collectively, the Agreement and Plan
of Merger, dated as of March 30, 1994, by and among California Gold, Inc., a
Delaware corporation, Catch a Star Collectibles, Inc., a New Jersey corporation,
Pro Legends, Inc., a New Jersey corporation,
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<PAGE>
Score Board Retail Corp., a New Jersey corporation, Score Board Sub, Inc., a
Delaware corporation, and Borrower, the certificates of merger with respect
thereto, and all related agreements, documents, and instruments, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.22 "Maximum Credit" shall mean the amount of $12,000,000.
1.23 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits, deposits and allowances of
any nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
1.24 "Net Income" shall mean as to any Person, with respect to any period,
the net income (loss) of such Person for such period (excluding to the extent
included therein any extraordinary gains) after deducting all charges which
should be deducted before arriving at the net income (loss) for such period, all
in accordance with GAAP and after deducting the Provision for Taxes for such
period. For the purposes of this definition, (a) net income excludes (i) any
gain (but not loss) together with any related Provision for Taxes for such gain
(but not loss) realized upon the sale or other disposition of any assets that
are not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or of any Capital
Stock or indebtedness of such Person or a subsidiary of such Person, (ii) any
net income realized as a result of changes in accounting principles or the
application thereof to such Person or its subsidiaries, and (iii) as to
Borrower, any non-cash losses of Borrower pursuant to the Securities Litigation
Settlement; and (b) the term "Provision for Taxes" shall mean an amount equal to
all taxes imposed on or measured by income, whether federal, state or local, and
whether foreign or domestic, that are paid or payable by any Person in respect
of any period in accordance with GAAP.
1.25 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute (including, without limitation, the payment of interest and other
amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.26 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.27 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.28 "Permitted Transferee" shall mean (a) any corporation, partnership or
other entity controlled by, controlling or under common control with Kenneth L.
Goldin or the estate of Paul Goldin, (b) the heirs, executors, administrators,
testamentary trustee, legatees or beneficiaries of Kenneth L. Goldin or the
estate of Paul Goldin, and (c) a trust, the beneficiaries of which, or a
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corporation or partnership, the stockholders or general or limited partners of
which, include only Kenneth L. Goldin or the estate of Paul Goldin, their
respective spouses or lineal descendants (by blood or adoption) or which are
controlled by Kenneth L. Goldin or the estate of Paul Goldin. For purposes of
this definition, the term "control" (including the correlative meanings, the
terms "controlled by" and "under common control with"), as used with respect to
any Person shall mean the possession, directly, or indirectly, of the power to
direct or cause the direction of the managements and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
1.29 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability corporation, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.
1.30 "Prime Rate" shall mean the rate from time to time publicly announced
by CoreStates Bank, N.A., or its successors, at its office in Philadelphia,
Pennsylvania, as its prime rate, whether or not such announced rate is the best
rate available at such bank.
1.31 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.32 "Securities Litigation Settlement" shall mean the Stipulation of
Settlement by and among the parties to the eight actions brought in the United
States District Court for the District of New Jersey as class actions by
purchasers of the common stock of Borrower on behalf of themselves and other
purchasers against Borrower and certain persons who served as officers and/or
directors of Borrower, known as In re: The Score Board, Inc. Litigation, Master
----------------------------------------
File No. 94-CV-3719 (SSB).
1.33 "Subordinated Note Documents" shall mean, individually and
collectively, the following (as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced): (a) the
Subordinated Notes; (b) the Subordinated Note Indentures, together with all
schedules and exhibits thereto; and (c) all other agreements, documents and
instruments executed and/or delivered in connection with the transactions
contemplated thereby.
1.34 "Subordinated Note Indentures" shall mean, individually and
collectively, the following (as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced): (a) the
Indenture, dated as of August 1, 1992, , between the Subordinated Note Trustee
and Borrower with respect to the Subordinated Notes due September 1, 2002 and
(b) the Indenture, dated as of January 15, 1993, between the Subordinated Note
Trustee and Borrower with respect to the Subordinated Notes due February 1,
2003.
1.35 "Subordinated Notes" shall mean, individually and collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated
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or replaced): (a) the 9% Convertible Subordinated Debentures due September 1,
2002 issued by Borrower pursuant to the Indenture, dated as of August 1, 1992,
between the Subordinated Note Trustee and Borrower in the aggregate principal
amount of $7,500,000 and (b) the 9% Convertible Subordinated Debentures due
February 1, 2003 issued by Borrower pursuant to the Indenture, dated as of
January 15, 1993, between the Subordinated Note Trustee and Borrower in the
aggregate principal amount of $3,000,000.
1.36 "Subordinated Note Trustee" shall mean BankAmerica Trust Company of
New York, a New York corporation, in its capacity as Trustee under the
Subordinated Note Indentures, and any successor trustee appointed pursuant to
the terms of the Subordinated Note Indentures.
1.37 "Tangible Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets (excluding the book value of patents, trademarks, trade names, licenses,
good will, prepaid expenses and other intangible assets) of such Person and its
subsidiaries, calculating the book value of inventory for this purpose on a
first-in-first-out basis, after deducting from such book values all appropriate
reserves in accordance with GAAP (including all reserves for doubtful
receivables, obsolescence, depreciation and amortization) and (ii) the aggregate
amount of the indebtedness and other liabilities of such Person and its
subsidiaries (including tax and other proper accruals) plus (b) indebtedness of
----
such Person and its subsidiaries which is subordinated in right of payment to
the full and final payment of all of the Obligations on terms and conditions
acceptable to Lender.
1.38 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value; in either case as reduced by
overhead value relating to such matters as labor for assembly of Inventory,
shipping, packaging and similar items as determined by Lender.
1.39 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose on a first-in-first-out basis, and (b) all current
liabilities of such Person and its subsidiaries (as determined in accordance
with GAAP), provided, that, as to Borrower, for purposes of Section 9.14, the
-------- ----
liabilities of Borrower and its subsidiaries to Lender under this Agreement
shall not be considered current liabilities (whether or not classified as
current liabilities in accordance with GAAP).
SECTION 2. CREDIT FACILITIES
-----------------
2.1 Loans.
-----
(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Loans to Borrower from time to time in amounts requested
by Borrower up to the amount equal to the sum of:
(i) sixty (60%) percent of the Net Amount of Eligible Accounts,
plus
----
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<PAGE>
(ii) the lesser of: (A) forty (40%) percent of the Value of
Eligible Inventory or (B) the amount equal to $5,000,000,
less
----
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) business days prior notice to Borrower, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Lender determines
in good faith that: (A) the dilution with respect to the Accounts for any period
(based on the ratio of (1) the aggregate amount of reductions in Accounts other
than as a result of payments in cash to (2) the aggregate amount of total sales)
has increased in any material respect or may be reasonably anticipated to
increase in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined or (ii) reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines in good faith that: (A) the number of days of the turnover of the
Inventory for any period has changed in any material respect or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has deteriorated. In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing
Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(d) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon written demand by Lender, which may be made
at any time or from time to time, immediately repay to Lender the entire amount
of any such excess(es) for which payment is demanded within five (5) business
days of the date of such demand.
2.2 Letter of Credit Accommodations.
-------------------------------
(a) Subject to, and upon the terms and conditions contained herein,
at the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrower
pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrower
shall pay to Lender a letter of credit fee at a rate equal to two (2%) percent
per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month. Such letter of credit fee
shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed and the obligation of Borrower to pay such fee shall survive
the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Loans available to Borrower
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(subject to the Maximum Credit and any Availability Reserves) are equal to or
greater than: (i) if the proposed Letter of Credit Accommodation is for the
purpose of purchasing Eligible Inventory, the sum of (A) sixty (60%) percent of
the cost of such Eligible Inventory, plus (B) freight, taxes, duty and other
amounts which Lender estimates must be paid in connection with such Inventory
upon arrival and for delivery to one of Borrower's locations for Eligible
Inventory within the United States of America and (ii) if the proposed Letter of
Credit Accommodation is for any other purpose, an amount equal to one hundred
(100%) percent of the face amount thereof and all other commit ments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, an Availability Reserve shall
be established in the applicable amount set forth in Section 2.2(c)(i) or
Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed
$500,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's written request, Borrower will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations, and in either case, the Loans otherwise
available to Borrower shall not be reduced as provided in Section 2.2(c) to the
extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation, except for any such losses, claims,
damages, liabilities, costs and expenses suffered or incurred by Lender as a
result of its gross negligence or wilful misconduct as determined pursuant to a
final appealable order of a court of competent jurisdiction. Borrower assumes
all risks with respect to the acts or omissions of the drawer under or
beneficiary of any Letter of Credit Accommodation and for such purposes the
drawer or beneficiary shall be deemed Borrower's agent. Borrower assumes all
risks for, and agrees to pay, all foreign, Federal, State and local taxes,
duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder. Borrower
hereby releases and holds Lender harmless from and against any acts, waivers,
errors, delays or omissions, whether caused by Borrower, by any issuer or
correspondent or otherwise with respect to or relating to any Letter of Credit
Accommodation. The provisions of this Section 2.2(e) shall survive the payment
of Obligations and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of non-
compliance of documents, (B) give any instructions as to
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acceptance or rejection of any documents or goods or (C) execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
and (ii) at all times, (A) grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances, or documents,
and (B) agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Lender may take such
actions either in its own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Availability Reserves. All Loans otherwise available to Borrower
---------------------
pursuant to the lending formulas and subject to the Maximum Credit and other
applicable limits hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves.
SECTION 3. INTEREST AND FEES
-----------------
3.1 Interest.
--------
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the rate of two (2%)
percent per annum in excess of the Prime Rate, except that Borrower shall pay to
Lender interest, at Lender's option, without notice, at the rate of four (4%)
percent per annum in excess of the Prime Rate: (i) on the principal amount of
the non-contingent Obligations for (A) the period from and after the date of
termination or non-renewal hereof until such time as Lender has received full
and final payment of all such Obligations (notwithstanding entry of any judgment
against Borrower) or (B) the period from and after the date of the occurrence of
an Event of Default and for so long as such Event of Default is continuing and
(ii) on the Loans at any time outstanding in excess of the amounts available to
Borrower under Section 2 (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default). All interest accruing hereunder on and after the occurrence
of any of the events referred to in Sections 3.1(a)(i) or 3.1(a)(ii) above shall
be payable on demand.
(b) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on the Prime Rate
in effect on the last day of the month in which any such change occurs. In no
event shall charges constituting interest payable by Borrower to Lender exceed
the maximum amount or the rate permitted under any applicable law or
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<PAGE>
regulation, and if any part or provision of this Agreement is in contravention
of any such law or regulation, such part or provision shall be deemed amended to
conform thereto.
3.2 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
-------------
in an amount equal to $2,500 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
3.3 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
---------------
fee at a rate equal to one-quarter (1/4%) percent per annum calculated upon the
amount by which the Maximum Credit exceeds the average daily principal balance
of the outstanding Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions Precedent to Initial Loans and Letter of Credit
----------------------------------------------------------
Accommodations. Each of the following is a condition precedent to Lender making
--------------
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory
to Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by Mellon Bank, N.A. of its
financing arrangements with Borrower and the termination and release by it of
any interest in and to any assets and properties of Borrower and each Obligor,
duly authorized, executed and delivered by it, including, but not limited to,
UCC termination statements for all UCC financing statements previously filed by
it or their predecessors, as secured party and Borrower or any Obligor, as
debtor;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral;
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<PAGE>
(e) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Loans available to Borrower, the results of which shall
be satisfactory to Lender, not more than three (3) business days prior to the
date hereof;
(f) Lender shall have received, in form and substance satisfactory
to Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including, without limitation, (i) waivers by lessors,
owners and/or mortgagees of any security interests, liens or other claims by
such persons in and to assets of Borrower, and agreements by such persons
permitting Lender access to the premises to exercise the rights and remedies of
Lender and otherwise deal with the assets of Borrower and (ii) acknowledgments
by processors, consignees and warehousemen at any time in possession of any
assets of Borrower of the security interests and liens of Lender, waivers by
such persons of any security interests, liens or other claims by such persons in
and to assets of Borrower, and agreements by such persons to follow the
directions of Lender with respect to the release and delivery of any assets of
Borrower at any time in their possession and (iii) agreements from owners and
licensors of trademarks, logos, designs, representations and other intellectual
property to Borrower, if any, permitting Lender to use the marks, logos,
designs, representations or other intellectual property licensed by such parties
to Borrower to exercise the rights and remedies of Lender and otherwise deal
with the assets of Borrower;
(g) Lender shall have received, in form and substance satisfactory
to Lender, the limited guarantee by Kenneth L. Goldin in favor of Lender (which
guarantee shall be limited to $400,000, plus interest from the date payment
thereunder is due and costs, expenses and other charges related to collection
thereunder) and the unlimited guarantees by each of the subsidiaries of Borrower
in favor of Lender, in each case duly authorized, executed and delivered by each
of them;
(h) Lender shall have received, in form and substance satisfactory
to Lender, an intercreditor agreement by and between Lender and Great Western
Press, Inc., as acknowledged and agreed to by Borrower, providing for, inter
-----
alia, the subordination of the security interests of Great Western Press, Inc.
----
in the Collateral to the security interests of Lender in the Collateral and
related matters, duly authorized, executed and delivered by Great Western Press,
Inc. and Borrower;
(i) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Borrower has entered into an agreement, in form and
substance satisfactory to Lender, with a bank or other financial institution or
other person to facilitate, service, process and manage the credit
authorization, billing transfer and payment procedures on behalf of Borrower
with respect to Borrower's sales arising from purchases by customers from
Borrower using credit cards or debit cards;
(j) Lender shall have received the audited financial statements of
Borrower (including balance sheets, statements of income and loss, statements of
cash flow and statements of shareholders' equity) for the fiscal year of
Borrower ending January 31, 1995 not less than fifteen (15) days prior to the
date hereof, together with the unqualified opinion of independent certified
public accountants that such financial statements have been prepared in
accordance with GAAP and present fairly the results of operations and financial
condition of Borrower and its subsidiaries as of the end of and for such fiscal
year;
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<PAGE>
(k) Lender shall have received, in form and substance satisfactory
to Lender, evidence that the Merger Agreements have been duly executed and
delivered by and to the appropriate parties thereto and the transactions
contemplated under the terms of the Merger Agreements have been consummated
prior to or contemporaneously with the execution of this Agreement;
(l) Lender shall have received, in form and substance satisfactory
to Lender, evidence that the certificates of merger with respect to the Mergers
have been filed with the Secretary of State of the State of Delaware and of the
State of New Jersey and the Mergers are valid and effective in accordance with
the terms and provisions of the Merger Agreements and the applicable corporation
statutes of the State of Delaware and the State of New Jersey;
(m) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(n) Lender shall have received, in form and substance satisfactory
to Lender, the collateral assignment of the life insurance policy or policies
maintained by Borrower on the life of Kenneth L. Goldin (which shall be in an
amount not less than $5,000,000);
(o) Borrower shall have established a blocked account and lockbox
for its collections and the transfer thereof to Lender, which shall be in form
and substance satisfactory to Lender;
(p) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $500,000 after giving effect to the initial Loans
made or to be made and Letter of Credit Accommodations issued or to be issued in
connection with the initial transactions hereunder;
(q) Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request; and
(r) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
----------------------------------------------------------------------
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing
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<PAGE>
on and as of the date of the making of such Loan or providing each such Letter
of Credit Accommodation and after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds (including, but not limited
to, the tax refund payable to Borrower and/or any of its subsidiaries from the
State of Georgia), registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee (including, but not limited to, all right, title and
interest of Borrower as licensor, licensee or otherwise pursuant to any license,
sublicense or similar arrangements with respect to trademarks, logos, designs,
representations or other intellectual property), all amounts at any time payable
to Borrower pursuant to any license, sublicense or similar arrangements with
respect to trademarks, logos, designs, representations or other intellectual
property or other property, choses in action and other claims and existing and
future leasehold interests in equipment, real estate and fixtures), chattel
paper, documents, instruments, letters of credit, bankers' acceptances and
guaranties;
5.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
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SECTION 6. COLLECTION AND ADMINISTRATION
-----------------------------
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
-----------------------
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Borrower each month a statement
----------
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be presumed correct and accepted by Borrower and presumptively binding upon
Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
----------------------
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. The banks at which the
Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or deposited
in the Blocked Accounts are the property of Lender to the extent of the
Obligations, that the depository bank has no lien upon, or right to setoff
against, the Blocked Accounts, the items received for deposit therein, or the
funds from time to time on deposit therein and that the depository bank will
wire, or otherwise transfer, in immediately available funds, on a daily basis,
all funds received or deposited into the Blocked Accounts to such bank account
of Lender as Lender may from time to time designate for such purpose ("Payment
Account"). Borrower agrees that all payments made to such Blocked Accounts or
other funds received and collected by Lender, whether on the Accounts or as
proceeds of Inventory or other Collateral or otherwise shall be the property of
Lender.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations two (2) business days following the date of
receipt of immediately available funds by Lender in the Payment Account. For
purposes of calculating the amount of the Loans available to Borrower such
payments will be applied (conditional upon final collection) to the Obligations
on the business day of receipt by Lender in the Payment Account, if such
payments are received within sufficient time (in accordance with Lender's usual
and customary practices as in effect from time to time) to credit Borrower's
loan account on such day, and if not, then on the next business day.
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<PAGE>
(c) Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender (to the extent of the Obligations), any monies, checks,
notes, drafts or any other payment relating to and/or proceeds of Accounts or
other Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of such
bank or person. The obligation of Borrower to reimburse Lender for such amounts
pursuant to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
--------
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrower or for the
account of Borrower (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Lender determines. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrower. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
---------------------------
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower
designated for such purposes or other authorized person or, at the discretion of
Lender, if such Loans are necessary to satisfy any amounts owing by Borrower to
Lender hereunder or otherwise (including, but not limited to, interest, fees,
costs and expenses) or are otherwise made by Lender pursuant to the exercise of
its rights and remedies provided for herein or in any of the other Financial
Agreements. All requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a business day) and the
amount of the requested Loan. Requests received after 11:00 a.m. New York City
time on any day shall be deemed to have been made as of the opening of business
on the immediately following business day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower when deposited
to the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.
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<PAGE>
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the Loans
---------------
provided by Lender to Borrower hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
----------------------------------
7.1 Collateral Reporting. Borrower shall provide Lender with the
--------------------
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts created, collections received and
credit memos issued and reports of invoices and collections for sales on a cash-
in-advance basis; (b) on a monthly basis or more frequently as Lender may
reasonably request, (i) perpetual inventory reports, (ii) inventory reports by
category, (iii) agings of accounts payable, (iv) agings of Inventory consisting
of trading cards based on the date such Inventory is printed, (v) the reserves
established by Borrower based on the estimates of Borrower of potential returns,
as adjusted each month and (vi) the undrawn amounts of any letters of credit
issued for the account of Borrower in connection with any of the License
Agreements, (c) upon Lender's reasonable request, (i) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (ii) copies of shipping and delivery
documents and (iii) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower; (d) agings of accounts
receivable on a monthly basis or more frequently as Lender may reasonably
request; and (e) such other reports as to the Collateral as Lender shall request
from time to time. If any of Borrower's records or reports of the Collateral
are prepared or maintained by an accounting service, contractor, shipper or
other agent, Borrower hereby irrevocably authorizes such service, contractor,
shipper or agent to deliver such records, reports, and related documents to
Lender and to follow Lender's instructions with respect to further services at
any time that an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
------------------
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information relating
to the financial condition of any account debtor and (iii) any event or
circumstance which, to Borrower's knowledge would cause Lender to consider any
then existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the ordinary
course of Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender. So long as no Event of Default exists
or has occurred and is continuing,
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<PAGE>
Borrower shall settle, adjust or compromise any claim, offset, counterclaim or
dispute with any account debtor. At any time that an Event of Default exists or
has occurred and is continuing, upon notice to Borrower, Lender shall, at its
option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.
(b) Borrower shall promptly report to Lender any return of
Inventory by an account debtor pursuant to the schedules and reports to be
delivered by Borrower to Lender as set forth in Section 7.1 hereof. At any time
that Inventory is returned, reclaimed or repossessed, the related Account shall
not be deemed an Eligible Account to the extent of the portion of the Accounts
which relates to the sale by Borrower to the account debtor of the returned,
reclaimed or repossessed Inventory. In the event any account debtor returns
Inventory when an Event of Default exists or has occurred and is continuing,
Borrower shall, upon Lender's request, (i) hold the returned Inventory in trust
for Lender, (ii) segregate all returned Inventory from all of its other
property, (iii) dispose of the returned Inventory solely according to Lender's
instructions, and (iv) not issue any credits, discounts or allowances with
respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete when made, (ii) no payments shall be made thereon except
payments promptly delivered to Lender pursuant to the terms of this Agreement,
(iii) no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for
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<PAGE>
its failure to collect or enforce the payment thereof nor for the negligence of
its agents or attorneys with respect thereto and (iv) take whatever other action
Lender may deem necessary or desirable for the protection of its interests. At
any time that an Event of Default exists or has occurred and is continuing, at
Lender's request, all invoices and statements sent to any account debtor shall
state that the Accounts and such other obligations have been assigned to Lender
and are payable directly and only to Lender and Borrower shall deliver to Lender
such originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
-------------------
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto (and Lender acknowledges that, as of
the date hereof, the inventory records of Borrower are reasonably satisfactory
to Lender); (b) Borrower shall conduct a physical count of the Inventory at
least once each year, but at any time or times as Lender may request on or after
an Event of Default, and promptly following such physical inventory shall supply
Lender with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Lender, except: (i) for sales of Inventory in the
ordinary course of Borrower's business, (ii) to move Inventory directly from one
location set forth or permitted herein to another such location, and (iii) to
move samples or other Inventory having a value of less than $250,000 to other
locations for the purpose of display or sale at trade shows in the ordinary
course of the business of Borrower or to enable sports celebrities or other
celebrities to autograph such Inventory, in each case for period of not more
than ten (10) business days; (d) upon Lender's request, Borrower shall, at its
expense, no more than once in any twelve (12) month period, but at any time or
times as Lender may request on or after an Event of Default, deliver or cause to
be delivered to Lender written reports or appraisals as to the Inventory in
form, scope and methodology acceptable to Lender and by an appraiser acceptable
to Lender, addressed to Lender or upon which Lender is expressly permitted to
rely; (e) Borrower shall produce, use, store and maintain the Inventory, with
all reasonable care and caution and in accordance with applicable standards of
any insurance and in conformity with applicable laws (including, but not limited
to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended
and all rules, regulations and orders related thereto); (f) Borrower assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (g) Borrower shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate Borrower to repurchase such Inventory, except
for the right of return granted by Borrower to customers in the ordinary course
of the business of Borrower in accordance with the return policies of Borrower
as in effect on the date hereof; (h) Borrower shall keep the Inventory in good
and marketable condition; and (i) Borrower shall not, without prior written
notice to Lender, acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon Lender's
-------------------
request, Borrower shall, at its expense, at any time or times as Lender may
reasonably request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) Borrower shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) Borrower shall use
the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrower's business
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<PAGE>
and not for personal, family, household or farming use; (e) Borrower shall not
remove any Equipment from the locations set forth or permitted herein, except to
the extent necessary to have any Equipment repaired or maintained in the
ordinary course of the business of Borrower or to move Equipment directly from
one location set forth or permitted herein to another such location and except
for the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) Borrower assumes all responsibility
and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
-----------------
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
(i) demand payment on Accounts or other proceeds of Inventory or other
Collateral, (ii) enforce payment of Accounts by legal proceedings or otherwise,
(iii) exercise all of Borrower's rights and remedies to collect any Account or
other Collateral, (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Lender deems advisable, (v) settle,
adjust, compromise, extend or renew an Account, (vi) discharge and release any
Account, (vii) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or other similar document against an account debtor, (viii) notify
the post office authorities to change the address for delivery of Borrower's
mail to an address designated by Lender, and open and dispose of all mail
addressed to Borrower (provided, that, upon Borrower's request, Lender shall
-------- ----
provide to Borrower at Lender's office or such other location reasonably
acceptable to Lender all mail addressed to Borrower and received by Lender
pursuant to the exercise by Lender of Lender's rights under this Section 7.5(a)
which does not relate to the Obligations or any of the Collateral), and (ix) do
all acts and things which are necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment or
proceeds thereof, (ii) have access to any lockbox or postal box into which
Borrower's mail is deposited, (iii) endorse Borrower's name upon any items of
payment or proceeds thereof and deposit the same in the Lender's account for
application to the Obligations, (iv) endorse Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto or any other Collateral, (v) sign
Borrower's name on any verification of Accounts and notices thereof to account
debtors and (vi) execute in Borrower's name and file any UCC financing
statements or amendments thereto. Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) after prior notice to
-------------
Borrower, cure any default by Borrower under any agreement with an account
debtor relating to any of the Accounts or under any other agreement with a third
party as may otherwise be required in the good faith determination of Lender to
facilitate the collection of any of the Accounts or the sale or other
disposition of any Inventory or to enable Lender to have access to any of the
Collateral or any Equipment in which any of the Records are stored, (b) after
prior notice to Borrower, pay or bond on appeal any judgment entered against
Borrower which upon levy, execution, attachment or other exercise of any similar
remedy with respect thereto would result in a lien on any of the Collateral or
impair the ability of Lender to obtain possession of, realize upon or collect
any of the Collateral, (c)
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<PAGE>
discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (d) pay any amount,
incur any expense or perform any act which, in Lender's judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender may add any amounts so expended
to the Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrower. Any payment made or other
action taken by Lender under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as reasonably requested by
------------------
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall
have complete access to all of Borrower's premises during normal business hours
and after notice to Borrower, or at any time and without notice to Borrower if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including, without limitation, the Records, and (b) Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may reasonably request, and (c) use during normal business
hours such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing (and Borrower and Lender shall cooperate
with each other to reduce any adverse effect of such use by Lender on the
conduct of the business of Borrower to the extent practical) and if an Event of
Default exists or has occurred and is continuing for the collection of Accounts
and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is a
------------------------------------------------------
corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within Borrower's corporate powers, have been duly authorized
and are not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate. None of the subsidiaries of
Borrower are engaged in any business or commercial activity or have any assets
or liabilities, except: (a) the intangible assets consisting of their respective
------
names and (b) the intellectual property owned by The Score Board Holding
Corporation and licensed to Borrower set forth on Schedule 8.1 hereto. All of
the issued and outstanding shares of Capital Stock of the
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<PAGE>
subsidiaries of Borrower are directly and beneficially owned and held by
Borrower and have been duly authorized and are fully paid and non-assessable,
free and clear of any claims, liens, pledges and encumbrances of any kind,
except in favor of Lender.
8.2 Financial Statements; No Material Adverse Change. All financial
------------------------------------------------
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent audited financial statements furnished by Borrower to Lender
prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
--------------------------------------------
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
--------------------------------------
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
-----------
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
----------
is no present investigation by any governmental agency pending, or to the best
of Borrower's knowledge threatened, against or affecting Borrower, its assets or
business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower's knowledge threatened, against Borrower or
its assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, which if adversely determined against Borrower would result in
any material adverse change in the assets, business or prospects of Borrower or
would impair the ability of Borrower to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce any Obligations or realize upon any Collateral.
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<PAGE>
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is not
----------------------------------------------------
in default in any respect under, or in violation in any respect of any of the
terms of, any agreement, contract, instrument, lease or other commitment to
which it is a party or by which it or any of its assets are bound and Borrower
is in compliance in all respects with all applicable provisions of laws, rules,
regulations, licenses, permits, approvals and orders of any foreign, Federal,
State or local governmental authority, except to the extent such default,
violation or non-compliance would not result in or cause a material adverse
change in the assets, business or prospects of Borrower, or would have an
adverse effect on the legality, validity or enforceability of this Agreement or
any of the other Financing Agreements or the perfection or priority of the
security interests or liens of Lender in the Collateral, or would impair the
ability of Borrower to perform its obligations under this Agreement or under any
of the other Financing Agreements, or of Lender to enforce any Obligations or
realize upon any Collateral.
8.8 Intellectual Property; License Agreements. Schedule 8.8 sets forth
-----------------------------------------
all of the agreements or other arrangements of Borrower pursuant to which
Borrower has a license or other right to use any trademarks, logos, designs,
representations or other intellectual property owned by another person as in
effect on the date hereof (collectively, together with any such agreements or
arrangements entered into by Borrower after the date hereof, the "License
Agreements" and sometimes individually referred to herein as a "License
Agreement") and the dates of the expiration of such agreements or other
arrangements of Borrower as in effect on the date hereof. Borrower owns or
licenses all patents, trademarks, service-marks, logos, designs,
representations, tradenames, trade secrets, know-how, copyrights, or licenses
and other rights with respect to any of the foregoing, which are necessary for
the operation of its business as presently conducted and reasonably contemplated
to be conducted from time to time. No trademark, service-mark, logo or similar
item at any time used by Borrower which is owned by another person or owned by
Borrower subject to any security interest, lien, collateral assignment, pledge
or other encumbrance in favor of any person other than Lender is affixed to any
Eligible Inventory, except to the extent permitted under the License Agreements.
To the best of Borrower's knowledge, no product, process, method, substance,
part or other material presently contemplated to be sold by or employed by
Borrower infringes any patent, trademark, service-mark, tradename, copyright,
license or other right owned by any other Person and no claim or litigation is
pending or threatened against or affecting Borrower contesting its right to sell
or use any such product, process, method, substance, part or other material.
8.9 Mergers.
-------
(a) Each of the Mergers are valid and effective in accordance with
the terms of the Merger Agreements and the corporation statutes of the States of
Delaware and New Jersey and Borrower is the surviving corporation pursuant to
the Mergers.
(b) All actions and proceedings required by the Merger Agreements,
applicable law and regulation (including, but not limited to, compliance with
the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended) have been
taken and the transactions required thereunder had been duly and validly taken
and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Merger Agreements and no governmental action or
proceeding has been threatened or commenced seeking any
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<PAGE>
injunction, restraining order or other order which seeks to void or otherwise
modify the transactions described in the Merger Agreements.
(d) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Merger Agreements.
8.10 Accuracy and Completeness of Information. All information furnished
----------------------------------------
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred which has had or could reasonably be
expected to have a material adverse affect on the business, assets or prospects
of Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.11 Survival of Warranties; Cumulative. All representations and
----------------------------------
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
9.1 Maintenance of Existence. Borrower shall at all times preserve, renew
------------------------
and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
------------------------
the continental United States provided Borrower (a) gives Lender thirty (30)
days prior written notice of the intended opening of any such new location and
(b) executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including, without limitation, UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc. Borrower shall, at all times,
---------------------------------------
comply in all material respects with all laws, rules, regulations, licenses,
permits, approvals and orders of any Federal, State or local governmental
authority applicable to it.
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<PAGE>
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
---------------------------
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed
on Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
--------
that, nothing contained herein shall be construed to require Borrower to pay any
----
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
---------
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrower shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain non-
contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
------------------------------------------
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrower and its subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender: (i) within forty-five (45) days after the end of each fiscal month,
monthly unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and, if Borrower has any subsidiaries, consolidating
financial statements of Borrower and its subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail,
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<PAGE>
fairly presenting the financial position and the results of the operations of
Borrower and its subsidiaries as of the end of and for such fiscal year,
together with the opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Borrower and
reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrower and its subsidiaries as of the end of and
for the fiscal year then ended. As of the date hereof, the independent
accounting firm of BDO Seidman is acceptable to Lender.
(b) Borrower shall promptly notify Lender in writing of the details
of (i) any material loss or damage relating to the Collateral or any other
property which is security for the Obligations or which would result in any
material adverse change in Borrower's business, properties, assets, goodwill or
condition, financial or otherwise, (ii) any investigation, action, suit,
proceeding or claim relating to the Collateral or any other property which is
security for the Obligations or which would result in any material adverse
change in Borrower's business, properties, assets, goodwill or condition,
financial or otherwise and (iii) the occurrence of any Event of Default or event
which, with the passage of time or giving of notice or both, would constitute an
Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrower to any
court or other government agency or to any participant or assignee or
prospective participant or assignee. Borrower hereby irrevocably authorizes and
directs all accountants or auditors to deliver to Lender, at Borrower's expense,
copies of the financial statements of Borrower and any reports or management
letters prepared by such accountants or auditors on behalf of Borrower and to
disclose to Lender such information as they may have regarding the business of
Borrower. Any documents, schedules, invoices or other papers delivered to
Lender may be destroyed or otherwise disposed of by Lender one (1) year after
the same are delivered to Lender, except as otherwise designated by Borrower to
Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
--------------------------------------------------------
shall not, directly or indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, except,
------
that, any Subsidiary of Borrower may merge into or with or consolidate with
----
Borrower, provided, that, each of the following conditions is satisfied as
-------- ----
determined by Lender: (i) Lender shall have received not less than ten (10) days
prior written notice of the intention of Borrower to so merge and such other
information with respect thereto as Lender may request, (ii) as of the effective
date of the merger or consolidation and after giving effect thereto, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default, shall exist or have occurred and be
continuing, (iii) Lender shall have received true, correct and complete copies
of all agreements, documents and
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<PAGE>
instruments relating to such merger, including, but not limited to, the
certificate or certificates of merger as filed with each appropriate Secretary
of State, (iv) Borrower shall be the surviving entity and shall immediately upon
the effectiveness of the merger expressly confirm in writing pursuant to an
agreement, in form and substance satisfactory to Lender, its continuing
liability in respect of the Obligations and the Financing Agreements and execute
and deliver such other agreements, documents and instruments as Lender may
reasonably request in connection therewith, (v) the surviving entity shall,
immediately after giving effect to such transaction or series of transactions,
have a consolidated net worth as determined in accordance with GAAP (including,
without limitation any indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transactions or series of transactions)
equal to or greater than the consolidated net worth of Borrower as determined in
accordance with GAAP immediately prior to such transaction or series of
transactions, and (vi) Borrower shall not become obligated with respect to any
indebtedness, nor any of its property become subject to any lien, unless
Borrower could incur such indebtedness or create such lien hereunder; or
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any Capital Stock or indebtedness to any other Person or any of its assets to
any other Person, except for:
(i) sales of Inventory in the ordinary course of business,
(ii) the disposition of worn-out or obsolete Equipment or
Equipment no longer used in the business of Borrower so long as (A) if an Event
of Default exists or has occurred and is continuing, any proceeds are paid to
Lender and (B) such sales do not involve Equipment having an aggregate fair
market value in excess of $100,000 for all such Equipment disposed of in any
fiscal year of Borrower,
(iii) the sale of the assets constituting the California
Gold Division of Borrower which are leased by Borrower to Record Time Design,
Inc. pursuant to the letter agreement, dated February 2, 1995, by and between
Borrower and Record Time Design, Inc., as in effect on the date hereof,
(iv) the issuance and sale by Borrower of Capital Stock of
Borrower consisting of common stock after not less than thirty (30) days prior
written notice of such issuance and sale by Borrower to Lender, which notice
shall specify the material terms and conditions of such Capital Stock, the total
amount which it is anticipated will be realized from the issuance and sale of
such stock, the net cash proceeds which it is anticipated will be received by
Borrower from such sale and all other material terms thereof; provided, that,
-------- ----
(A) Borrower shall not be required to pay any dividends or repurchase or redeem
such Capital Stock or make any other payments in respect thereof at any time
prior to the end of the then current term of this Agreement, (B) the terms of
such Capital Stock and the terms of the purchase and sale thereof shall not
include terms and conditions which are more restrictive or burdensome to
Borrower or its affiliates in any material respect than the terms and conditions
of any existing class of Capital Stock as in effect on the date hereof, and (C)
as of the date of such issuance and sale and after giving effect thereto, no
Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default shall exist or have occurred,
and
(v) the issuance by Borrower of Capital Stock of Borrower
consisting of common stock to the escrow agent under the Securities Litigation
Settlement having a value of $2,000,000 (with each share thereof valued at
$4.6469 per share, unless the daily average of the
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<PAGE>
sales to ten (10) days prior to the issuance thereof is less than $4.6469, in
which case the value per share shall be adjusted accordingly), in accordance
with the terms of the Securities Litigation Settlement as in effect on the date
hereof;
(c) form or acquire any subsidiaries;
(d) wind up, liquidate or dissolve; or
(e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
------------
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral, except: (a) liens and security interests of Lender;
------
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Borrower as presently conducted thereon or materially impair the value of the
real property which may be subject thereto; (e) purchase money security
interests (including capital leases) in Equipment, other than Equipment
consisting of computer hardware, and purchase money mortgages on real estate, so
long as (i) the aggregate amount of the indebtedness incurred in any fiscal year
of Borrower secured by such purchase money security interests and purchase money
mortgages commencing with the fiscal year of Borrower ending January 31, 1996,
does not exceed $100,000 (calculated on a cumulative basis, so that if not
incurred in any one year, such indebtedness may be incurred in subsequent years,
for the initial term of this Agreement), (ii) such purchase money security
interests and purchase money mortgages do not apply to any property of Borrower
other than the Equipment or real estate so acquired, and (iii) the indebtedness
secured thereby does not exceed the cost of the Equipment or real estate so
acquired, as the case may be; (f) purchase money security interests in Equipment
(including capital leases) consisting of computer hardware not to exceed
$500,000 in the aggregate at any time outstanding, so long as such security
interests do not apply to any property of Borrower other than the Equipment so
acquired and the indebtedness secured thereby does not exceed the cost of the
Equipment so acquired, as the case may be; (g) liens and security interests of
Great Western Press, Inc. to secure normal trade obligations of Borrower to
Great Western Press, Inc. in the ordinary course of their respective business,
which liens and security interests are and shall be subject and subordinate in
priority to the liens and security interests of Lender as set forth in the
intercreditor agreement between Lender and Great Western Press, Inc.; and (h)
liens and security interests set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or be
------------
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except
------
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<PAGE>
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which the Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower, and with respect to
which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) arising
after the date hereof to the extent not incurred or secured by liens (including
capital leases) in violation of any other provision of this Agreement;
(d) indebtedness of Borrower evidenced by the Subordinated Notes
issued by Borrower pursuant to the Subordinated Note Indentures; provided, that,
-------- ----
(i) such indebtedness is and shall at all times remain unsecured, (ii) the
Obligations constitute and shall at all times constitute "Senior Indebtedness"
as such term is defined in the Subordinated Note Indentures, (iii) such
indebtedness shall not exceed $10,500,000 (less the aggregate amount of all
repayments or repurchases of principal in respect thereof) plus interest thereon
at the rate set forth in the Subordinated Notes (as in effect on the date
hereof), (iv) such indebtedness is subject to, and subordinate in right of
payment to, the right of Lender to receive the prior payment in full of all of
the Obligations, (v) Borrower shall not, directly or indirectly, make any
payments in respect of such indebtedness, including, but not limited to, any
prepayments or other non-mandatory payments, except that, until an Event of
------ ----
Default, Borrower may make regularly scheduled payments of interest in respect
of such indebtedness in accordance with the terms of the Subordinated Notes as
in effect on the date hereof, (vi) Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change any terms of the Subordinated Notes or any of
the other Subordinated Note Documents or (B) redeem, retire, defease, purchase
or otherwise acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose except to the extent Borrower may redeem,
retire or otherwise acquire such indebtedness for shares of Capital Stock which
Borrower is permitted to issue under Section 9.7(b) above, and (vii) Borrower
shall furnish to Lender all notices or demands in connection with such
indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be;
(e) unsecured indebtedness of Borrower to Carole Goldin arising
pursuant to the terms of the employment agreement of Borrower with Paul Goldin;
provided, that, (i) such indebtedness shall not exceed $627,917.80, less the
-------- ----
aggregate amount of all repayments or repurchases of principal and interest in
respect thereof and (ii) Borrower shall only make monthly payments of $20,000
each month in respect of such indebtedness;
(f) obligations or indebtedness set forth on Schedule 9.9 hereto;
provided, that, (i) Borrower may only make regularly scheduled payments of
-------- ----
principal and interest in respect of such indebtedness in accordance with the
terms of the agreement or instrument evidencing or giving rise to such
indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof, or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrower shall furnish to Lender all notices or demands in
connection with such indebtedness either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
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<PAGE>
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly or
------------------------------------
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
------
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of the Borrower or to bearer and
delivered to Lender, and (iii) commercial paper rated A1 or P1; provided, that,
-------- ----
as to any of the foregoing, unless waived in writing by Lender, Borrower shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments; (c) loans and advances by Borrower to
employees of Borrower not to exceed the principal amount of $100,000 in the
aggregate at any time outstanding for reasonable and necessary work-related
travel or other ordinary business expenses to be incurred by such employees in
connection with their work for Borrower; and (d) the guarantees set forth in the
Information Certificate; provided, that, (i) Borrower shall not, directly or
-------- ----
indirectly, (A) amend, modify, alter or change the terms of such guarantees as
in effect on the date hereof, or (B) redeem, retire, defease, purchase or
otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all notices or demands in connection with such
guarantee or other indebtedness subject to such guarantee either received by
Borrower or on its behalf, promptly after the receipt thereof, or sent by
Borrower or on its behalf, concurrently with the sending thereof, as the case
may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
-------------------------
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing.
9.12 Transactions with Affiliates. Borrower shall not, directly or
----------------------------
indirectly, (a) purchase, acquire or lease any property from, sell, transfer or
lease any property to, any officer, director, agent or other person affiliated
with Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favorable to the Borrower than Borrower would obtain in a comparable arm's
length transaction with an unaffiliated person or (b) make any payments of
management, consulting or other fees for management or similar services, or of
any indebtedness owing to any officer, employee, shareholder, director or other
person affiliated with Borrower except reasonable compensation to officers,
employees and directors for services rendered to Borrower in the ordinary course
of business and the payments of indebtedness owing to Carole Goldin permitted
pursuant to Section 9.9(e) above.
9.13 License Agreements.
------------------
(a) Borrower shall (i) promptly and faithfully observe and perform
all of the terms, covenants, conditions and provisions of the License Agreements
to be observed and performed by it, at the times set forth therein, if any, (ii)
not do, permit, suffer or refrain from doing anything, as a result of which
there could be a default under or breach of any of the terms of any of the
License
- 32 -
<PAGE>
Agreements, (iii) not cancel, surrender, modify, amend, waive or release any of
the License Agreements or any term, provision or right of the licensee
thereunder, or consent to or permit to occur any of the foregoing; except, that,
------ ----
subject to Section 9.13(b) below, Borrower may cancel, surrender or release any
of the License Agreements in the ordinary course of the business of Borrower;
provided, that, Borrower shall give Lender not less than thirty (30) days prior
-------- ----
written notice of its intention to so cancel, surrender and release any of the
License Agreements, (iv) give Lender immediate written notice of any License
Agreement entered into by Borrower after the date hereof, together with a true,
correct and complete copy thereof and such other information with respect
thereto as Lender may request, (v) give Lender immediate written notice of any
breach of any obligation, or any default, by any party under any of the License
Agreements, and deliver to Lender (promptly upon the receipt thereof by Borrower
in the case of a notice to Borrower, and concurrently with the sending thereof
in the case of a notice from Borrower) a copy of each notice of default and
every other notice and other communication received or delivered by Borrower in
connection with any of the License Agreements which relates to the right of
Borrower to continue to use the property subject to such License Agreements, and
(vi) furnish to Lender, promptly upon the request of Lender, such information
and evidence as Lender may require from time to time concerning the observance,
performance and compliance by Borrower or the other party or parties thereto
with the terms, covenants or provisions of the License Agreements.
(b) Borrower will either exercise any option to renew or extend the
term of each of the License Agreements in such manner as will cause the term of
the License Agreements to be effectively renewed or extended for the period
provided by such option and give immediate written notice thereof to Lender or
give Lender prior written notice that Borrower does not intend to renew or
extend the term of any of the License Agreements or that the term thereof shall
otherwise be expiring, not less than ninety (90) days prior to the date of such
non-renewal or expiration. In the event of the failure of Borrower to extend or
renew any of the License Agreements, Lender shall have, and is hereby granted,
the irrevocable right and authority, at its option, to renew or extend the term
of any such License Agreements, whether in its own name and behalf, or in the
name and behalf of a designee or nominee of the Lender or in the name and behalf
of Borrower, as Lender shall determine at any time that either: (i) an Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred or (ii) if
after the Inventory on which the trademarks, logos, designs, representations or
other intellectual property subject to such License Agreement appears or to
which such License Agreement otherwise relates is not considered Eligible
Inventory, there is no Excess Availability. Lender may, but shall not be
required to, perform any or all of such obligations of Borrower under any of the
License Agreements, including, but not limited to, the payment of any or all
sums due from Borrower thereunder. Any sums so paid by Lender shall constitute
part of the Obligations.
(c) In the event that either (i) the aggregate Net Income of
Borrower for the immediately preceding four (4) fiscal quarters of Borrower,
commencing with the fiscal quarter of Borrower ending January 31, 1996 (such
that for purposes of the initial determination hereunder, the calculation is
based on such fiscal quarter and the immediately preceding three (3) fiscal
quarters) is less than $1,500,000 or (ii) an Event of Default exists or has
occurred and is continuing, in either case Lender may, at its option, request
that Borrower obtain an agreement in writing from any or all of the owners and
licensors of trademarks, logos, designs, representations or other intellectual
property subject to the License Agreements, in form and substance satisfactory
to Lender, permitting Lender to use such trademarks, logos, designs,
representations or other intellectual property for the purpose of selling such
Inventory. To the extent Lender does not receive such agreements as duly
authorized, executed and delivered by the owners and licensors of such
trademarks, logos, designs,
- 33 -
<PAGE>
representations or other intellectual property within forty-five (45) days after
the date of Lender's request to Borrower for such agreements the Inventory on
which such trademarks, logos, designs, representations or other intellectual
property appears or to which they otherwise relate, shall, at Lender's option,
not constitute Eligible Inventory.
9.14 Working Capital. Borrower shall have Working Capital as at the end
---------------
of each month in an amount not less than $20,500,000.
9.15 Tangible Net Worth. Borrower shall have a Tangible Net Worth as at
------------------
the end of each month in an amount not less than $4,750,000.
9.16 Costs and Expenses. Borrower shall pay to Lender on demand all
------------------
reasonable costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to: (a) all costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes
and fees, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) all title insurance and other insurance premiums,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Lender, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Lender arising out of the transactions contemplated hereby
and thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Lender during the course
of periodic field examinations of the Collateral and Borrower's operations, plus
a per diem charge at the rate of $600 per person per day for Lender's examiners
in the field and office; and (h) the fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
9.17 Further Assurances. At the request of Lender at any time and from
------------------
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
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<PAGE>
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
10.1 Events of Default. The occurrence or existence of any one or more of
-----------------
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay when due any of the Obligations, (ii)
Borrower fails to perform any of the covenants contained in Sections 9.2, 9.3,
9.4 or 9.16 and such failure shall continue for ten (10) days, provided, that,
-------- ----
such ten (10) day period shall not apply in the case of: (A) any failure to
observe any such covenant or agreement which is not capable of being cured at
all or within such ten (10) day period or which has been the subject of a prior
failure within the immediately preceding six (6) months or (B) an intentional
breach by Borrower or such Obligor of any such covenant or agreement, or (iii)
Borrower or any Obligor fails to perform any of the terms, covenants, conditions
or provisions contained in this Agreement or any of the other Financing
Agreements to which it is a party other than as described in Sections 10.1(a)(i)
or 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $75,000 in any one case or in excess of
$275,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets that results in or causes, or would be
reasonably expected to result in or cause a material adverse change in the
assets, business or prospects of Borrower, the legality, validity or
enforceability of this Agreement or any of the other Financing Agreements, the
perfection or priority of the security interests or liens of Lender in the
Collateral, or would impair the ability of Borrower to perform its obligations
under this Agreement or any of the other Financing Agreements, or of Lender to
enforce any Obligations or realize upon any Collateral;
(e) Borrower or any Obligor, which is a partnership or corporation,
dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor shall be unable to pay its debts
generally as they become due or admit in writing its inability to pay its debts
generally, or Borrower or any Obligor makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors in connection with the readjustment of the
indebtedness of Borrower;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether
- 35 -
<PAGE>
at law or in equity) is filed against Borrower or any Obligor or all or any part
of its properties and such petition or application is not dismissed within
forty-five (45) days after the date of its filing or Borrower or any Obligor
shall file any answer admitting or not contesting such petition or application
or indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $50,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by Borrower
or any Obligor under any material contract, lease, license or other obligation
to any person other than Lender, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) any Change of Control;
(k) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any material portion of the property of Borrower or such
Obligor;
(l) there shall be a material adverse change in the business or
assets of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
- 36 -
<PAGE>
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
-------- ----
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Borrower, which right or equity of redemption
is hereby expressly waived and released by Borrower and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, ten (10) business days prior
notice by Lender to Borrower designating the time and place of any public sale
or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrower waives any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, Borrower waives the posting of any bond which might otherwise be
required.
(c) Lender shall apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due, or as otherwise required by
applicable law of order or decree of any court or other governmental authority.
Borrower shall remain liable to Lender for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including attorneys' fees and legal expenses. After
the sale or other disposition of all of the Collateral and the indefeasible
payment and satisfaction in full of all of the Obligations, Lender shall account
to Borrower for any surplus proceeds from the sale or other disposition of the
Collateral to the extent required under applicable law.
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
- 37 -
<PAGE>
AND CONSENTS; GOVERNING LAW
--------------------------------
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
--------------------------------------------------------------
Waiver.
------
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-
exclusive jurisdiction of the Supreme Court of the State of New York in New York
County and the United States District Court for the Southern District of New
York and waive any objection based on venue or forum non conveniens with
----- --- ----------
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited in the U.S. mails, or, at
Lender's option, by service upon Borrower in any other manner provided under the
rules of any such courts. Within thirty (30) days after such service, Borrower
shall appear in answer to such process, failing which Borrower shall be deemed
in default and judgment may be entered by Lender against Borrower for the amount
of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable
- 38 -
<PAGE>
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
-----------------------
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
---------------
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrower shall pay the maximum portion which
it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
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<PAGE>
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
12.1 Term.
----
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof; provided, that, Lender may, at
-------- ----
its option, extend the Renewal Date to the date four (4) years from the date
hereof by giving Borrower notice at least sixty (60) days prior to the third
(3rd) anniversary of this Agreement. Lender or Borrower (subject to Lender's
right to extend the Renewal Date as provided above) may terminate this Agreement
and the other Financing Agreements effective on the Renewal Date or on the
anniversary of the Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
-------- ----
all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment. Such
payments and cash collateral shall be remitted by wire transfer in Federal funds
to such bank account of Lender, as Lender may, in its discretion, designate in
writing to Borrower for such purpose. Interest shall be due until and including
the next business day, if the amounts so paid by Borrower to the bank account
designated by Lender are received in such bank account later than 12:00 noon,
New York City time. In the event Lender has exercised its option to extend the
Renewal Date to the date four (4) years from the date hereof, at any time during
such fourth (4th) year, Borrower may pay all of the non-contingent Obligations
and provide Lender with such cash collateral in respect of the contingent
Obligations, as aforesaid, at which time this Agreement shall terminate and no
further fees shall be payable from the effective date of such termination.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
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<PAGE>
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C> <C>
(i) 3% of Maximum Credit July 31, 1995 to and including
July 31, 1996
(ii) 2% of Maximum Credit August 1, 1996 to and including
July 31, 1997
(iii) 1% of Maximum Credit August 1, 1997 to and including
July 31, 1998
</TABLE>
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section 12.1 shall be deemed included in
the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be in
-------
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
----------
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 Entire Agreement. This Agreement, the other Financing Agreements,
----------------
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
- 41 -
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
------ --------
CONGRESS FINANCIAL CORPORATION THE SCORE BOARD, INC.
By:_____________________________ By:_____________________________
Title:_________________________ Title:_________________________
Address: Chief Executive Office:
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1133 Avenue of the Americas 1951 Old Cuthbert Road
New York, New York 10036 Cherry Hill, New Jersey 08034
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