<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------------------------------------
Commission File No 0-16913
-------------------------------------------------------------
THE SCORE BOARD, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2766077
- -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1951 Old Cuthbert Road Cherry Hill, New Jersey 08034
________________________________________________________________________________
(Address of principal executive offices)
(Zip Code)
(609) 354-9000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Fiscal year end has been changed from January 31st to December 31st
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of shares outstanding on June 30, 1997 was 14,689,142 .
Total No. of Pages: 23
Exhibit Index: Page 9
<PAGE>
THE SCORE BOARD, INC.
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1997 (Unaudited) and
December 31, 1996 3
Consolidated Statements of Operations
For the Three and Six Months Ended
June 30, 1997 and July 31, 1996 (Unaudited) 4
Consolidated Statements of Cash Flow
For the Six Months Ended June 30,
1997 and July 31, 1996 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 7-8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 9
Signature Page 9
</TABLE>
- 2 -
<PAGE>
THE SCORE BOARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------ --------------
1997 1996
------------ --------------
CURRENT ASSETS: (UNAUDITED)
<S> <C> <C>
Cash $ 137,000 $ 470,000
Accounts receivable, net of reserve for returns and doubtful
accounts of $2,400,000 and $3,200,000 7,722,000 6,157,000
Inventories 9,888,000 10,250,000
Prepaid expenses 872,000 741,000
Prepaid contracts 143,000 269,000
Income taxes receivable -- --
----------- -----------
Total current assets 18,762,000 17,887,000
FIXED ASSETS, - net 1,240,000 1,578,000
INTANGIBLE AND OTHER ASSETS, - net 583,000 815,000
----------- -----------
$20,585,000 $20,280,000
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Bank indebtedness $ 6,038,000 $ 6,743,000
Accounts payable 10,420,000 6,749,000
Accrued liabilities 3,614,000 4,080,000
------------ ------------
Total current liabilities 20,072,000 17,572,000
------------ ------------
SUBORDINATED DEBENTURES 4,000,000 4,000,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value, authorized
10,000,000 shares; none issued -- --
Common stock - $.01 par value, authorized
30,000,000 shares; issued 14,689,142 shares at
March 31, 1997 and December 31, 1996 147,000 147,000
Additional paid-in capital 29,427,000 29,427,000
Accumulated deficit (33,061,000) (30,866,000)
------------ ------------
Total stockholders' equity (deficit) (3,487,000) (1,292,000)
------------ ------------
$20,585,000 $20,280,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 3
<PAGE>
THE SCORE BOARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------------------------------------
JUNE 30, 1997 JULY 31, 1996 JUNE 30, 1997 JULY 31, 1996
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
NET SALES $14,455,000 $ 9,543,000 $ 25,637,000 $ 23,710,000
----------- ------------ ------------ -------------
COST OF GOODS SOLD 9,710,000 14,342,000 17,242,000 24,954,000
----------- ------------ ------------ -------------
GROSS PROFIT 4,745,000 (4,799,000) 8,395,000 (1,244,000)
----------- ------------ ------------ -------------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 5,153,000 6,838,000 10,081,000 11,936,000
----------- ------------ ------------ -------------
REALIGNMENT, RESTRUCTURING AND DISCONTNUANCE
OF PRODUCT LINES 0.00 0.00 0.00 0.00
----------- ------------ ------------ -------------
SECURITIES LITIGATION SETTLEMENT 0.00 0.00 0.00 0.00
----------- ------------ ------------ -------------
NET PROCEEDS FROM INSURANCE -- 0.00 -- 0.00
----------- ------------ ------------ -------------
NET LOSS FROM OPERATIONS (408,000) (11,637,000) (1,686,000) (13,180,000)
----------- ------------ ------------ -------------
INTEREST EXPENSE 253,000 327,000 509,000 846,000
----------- ------------ ------------ -------------
NET LOSS BEFORE INCOME TAXES
AND EXTRAORDINARY GAIN (661,000) (11,964,000) (2,195,000) (14,026,000)
----------- ------------ ------------ -------------
INCOME TAXES (BENEFIT) 0.00 0.00 0.00 0.00
----------- ------------ ------------ -------------
NET LOSS BEFORE
EXTRAORDINARY GAIN (661,000) (11,964,000) (2,195,000) (14,026,000)
----------- ------------ ------------ -------------
EXTRAORDINARY GAIN RESULTING
FROM EARLY EXTINGUISHMENT OF
DEBT 0.00 954,000 0.00 954,000
----------- ------------ ------------ -------------
NET LOSS $ (661,000) $(11,010,000) $ (2,195,000) $ (13,072,000)
=========== ============ ============ =============
NET LOSS PER SHARE BEFORE
EXTRAORDINARY GAIN $ (0.04) $ (0.94) $ (0.15) $ (1.14)
=========== ============ ============ =============
NET LOSS PER SHARE $ (0.04) $ (0.86) $ (0.15) $ (1.06)
=========== ============ ============ =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,689,000 12,762,000 14,689,000 12,294,000
=========== ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE>
THE SCORE BOARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
JUNE 30, 1997 JULY 31, 1996
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,195,000) $ (13,072,000)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Realignment,restructuring and discontinuance of product lines
Cash used in restructuring -- (324,000)
Depreciation 372,000 748,000
Provision for doubtful accounts and reserve for returns 180,000 449,000
Amortization of intangible assets 106,000 452,000
Gain on early extinguishment of debt0.00 - (954,000)
Changes in operating assets and liabilities:
Accounts receivable (1,745,000) 5,688,000
Inventories 362,000 4,278,000
Prepaid expenses and contracts (5,000) 3,079,000
Other assets 126,000 (308,000)
Accounts payable 3,671,000 2,189,000
Accrued liabilities (414,000) 453,000
Income tax receivable -- --
------------ ------------
Net cash provided by operating activities 458,000 2,678,000
------------ ------------
INVESTING ACTIVITIES:
Business acquisitions -- --
Purchases of fixed assets (34,000) (537,000)
Proceeds from sales of fixed assets --
------------ ------------
Net cash used in investing activities -- --
------------ ------------
FINANCING ACTIVITIES:
Repayments of bank indebtedness (705,000) (2,218,000)
Proceeds from the exercise of stock options 0.00 115,000
Payments of capital lease obligations (52,000) (94,000)
Deferred financing costs -- --
------------ ------------
Net cash used in financing activities (757,000) (2,197,000)
------------ ------------
NET DECREASE IN CASH (333,000) (56,000)
CASH, BEGINNING OF PERIOD 470,000 142,000
------------ ------------
CASH, END OF PERIOD $ 137,000 $ 86,000
============ ============
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ 694,000 $ 865,000
============ ============
Cash received for income taxes -- --
============ ============
Capital leases $ -- 354,000
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
Page 5
<PAGE>
THE SCORE BOARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The financial information furnished herein includes, in the opinion of
management, all adjustments (only consisting of normal recurring accruals)
necessary for a fair presentation of financial position as of June 30, 1997 and
the results of operations and cash flow for the six months ended June 30, 1997
and July 31, 1996.
2. CHANGE IN REPORTING PERIOD
In December 1996, the Company changed its fiscal year end from January 31st to
December 31st, making the second quarter of the current reporting year end on
June 30th, as compared to the prior year quarter which ended on July 31st.
3. NET LOSS PER SHARE
Net loss per share is based on the weighted average number of shares of common
stock and common stock equivalents outstanding during the respective periods.
Common stock equivalents are not considered in the calculation of net loss per
share since they would be antidilutive.
4. BANK INDEBTEDNESS
The Company has a three-year revolving credit facility with Congress Financial
Corporation which expires in July 1998. Borrowings under the facility are
available up to $12,000,000, subject to availability, based on eligible accounts
receivable and inventories, as defined. Interest is charged at prime plus 2%.
The facility is secured by essentially all of the Company's assets and subject
to financial and non-financial covenants. The available credit, based on
collateral at June 30, 1997, was $6,791,000, of which $6,038,000 was
outstanding.
5. LITIGATION
On February 14, 1995, Upper Deck Authenticated, Ltd. ("UDA") filed suit against
the Company and three unaffiliated entities in the United States District Court
for the Southern District of California alleging, among other things, that the
Company had engaged in unfair competition and violated UDA's right to use the
indicia of certain athletes on sports memorabilia and collectibles. The Company
responded to UDA's suit by denying all wrongdoing and filing its own claims
against UDA, Upper Deck Company and their president, charging them with unfair
competition, defamation and tortious interference with current and prospective
contractual relations. The Company has reached an agreement to settle these
actions and exchange mutual releases. The effect of this settlement is not
material to the accompanying financial statements.
6. LONG-TERM OBLIGATIONS
On May 28, 1996, one of the holders of the Company's convertible subordinated
debentures exchanged $3,500,000 and $3,000,000 in principal amount of the
subordinated debentures, due September 1, 2002 and February 1, 2003,
respectively, for 912,000 shares of the Company's Common Stock. The early
retirement of the debentures resulted in a one-time extraordinary pre-tax gain
of approximately $954,000, or $0.075 per share.
- 6 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS.
- -------------
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended June 30, 1997 Compared to The Three Months Ended July 31,
- ----------------------------------------------------------------------------
1997.
- -----
Following is a comparison of sales by major product category :
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
June 30, 1997 July 31, 1996
------------- -------------
<S> <C> <C>
Trading Cards $ 5,528,000 $3,273,000
Memorabilia 4,057,000 2,625,000
Phone Cards 3,888,000 2,920,000
Other 982,000 725,000
----------- ----------
$14,455,000 $9,543,000
=========== ==========
</TABLE>
The increase in net sales is due to increased memorabilia sales, primarily
through cable television outlets, and an increase in prepaid telephone calling
card sales compared to the prior year's period.
The change in gross profit from a negative gross profit of $4,799,000 for the
three months ended July 31, 1996 to a positive gross profit of $4,745,000 was
the result of certain reserves for inventory ($6,000,000) and player contracts
and returns recorded in the 1996 period that did not occur in the 1997 period.
The Company's selling expenses decreased from $3,868,000 in 1996 to $2,926,000
in 1997. The three months ended July 31, 1996 included writedowns of guaranteed
payments under various entertainment license agreements which did not reoccur in
1997. General and administrative expenses, principally payroll and related
expenses, decreased ($2,227,000 in 1997 as compared to $2,963,000 in 1996) as a
result of the Company's cost control program.
Interest expense decreased $74,000 as a result of the conversion of subordinated
debentures into the Company's Common Stock.
Following is a comparison of sales by major product category for the six months
ended June 30, 1997 and July 31, 1996, respectively:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
June 30, 1997 July 31, 1996
------------- -------------
<S> <C> <C>
Trading Cards $ 8,991,000 $ 6,040,000
Memorabilia 9,147,000 10,372,000
Phone Cards 4,672,000 5,648,000
Other 2,827,000 1,650,000
----------- -----------
$25,637,000 $23,710,000
=========== ===========
</TABLE>
- 7 -
=====
<PAGE>
Net sales for the six month period of the current year increased over the prior
period due to an increase in miscellaneous revenues. Although memorabilia sales
increased in the three months ended June 30, 1997, the sales for the six months
decreased as a result of low demand in the first quarter of 1997. Net sales for
the six month period were also negatively impacted by a decrease in sales of
collectible prepaid telephone calling cards. Gross profit increased mainly due
to the reasons noted above. Selling, general and administrative expenses were
lower than the previous year primarily due to the items noted above.
Interest expense decreased $337,000 as a result of the conversion of
subordinated debentures discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $458,000 in cash flow from operations primarily due to an
increase in accounts payable. These sources of cash were offset by the net
loss from operations. Accounts receivable increased primarily due to the
timing of sales at the end of the quarter. Accounts payable increased due to
increases in purchasing and the timing of payments.
The Company has a three year revolving credit facility from Congress Financial
Corporation (the "Bank") which expires in July 1998. Borrowings under the
facility are available up to $12,000,000, subject to availability, based on
eligible inventory and accounts receivable, as defined. Interest is charged at
prime rate plus 2%. The facility is secured by essentially all of the Company's
assets. At August 12, 1997, the outstanding balance was $6,122,000, which is
the maximum credit available.
The Company has incurred significant losses during each of the past three fiscal
years and during the six months ended June 30, 1997. Total stockholders equity
has decreased to a deficit of $3,487,000, and the Company had negative working
capital of $1,310,000 at June 30, 1997. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
continued existence is dependent upon its ability to attain satisfactory levels
of future cash flows from profitable operations, and the ability to meet
covenant requirements of the Bank.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- --------------------------
As previously disclosed, on February 14, 1995, Upper Deck Authenticated, Ltd.
("UDA") filed an action against the Company and three unaffiliated entities in
the United States District Court for the Southern District of California
alleging, among other things, that the Company had engaged in unfair competition
and that it violated UDA's right to use the indicia of certain athletes in
connection with the sale of sports memorabilia and collectibles. The Company
responded to UDA's suit by denying all wrongdoing and filing its own claims
against UDA, Upper Deck Company and their president, charging them with unfair
competition, defamation and tortious interference with current and prospective
contractual relations. In a series of Orders, the court granted the Company
partial summary judgment with respect to several claims asserted against it.
Shortly before the June 10, 1997 trial date, the parties negotiated a
comprehensive Settlement Agreement, under which the parties have amicably
resolved all of their disputes and exchanged mutual releases. As a part of the
settlement, the Company's insurance company made a nominal payment to Upper
Deck, LLC.
- 8 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -----------------------------------------
(a) Exhibits
(10.1) Amendment to Employment Agreement with Ken Goldin.
(10.2) Employment Agreement with John F. White.
(27) Financial Data Schedule
(b) The Company has not filed any reports on Form 8-K during the quarter for
which this report is being filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SCORE BOARD, INC.
Date: August 14, 1997 By: /s/ Ken Goldin
------------------------
Ken Goldin, Chairman and
Chief Executive Officer
Date: August 14, 1997 By: /s/ William D. Minich
------------------------
William D. Minich
Controller
- 9 -
<PAGE>
EXHIBIT 10.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is made this 23rd
day of July, 1997, by and between The Score Board, Inc., a New Jersey
corporation with offices at 1951 Old Cuthbert Road, Cherry Hill, New Jersey
08034 (the "Corporation"), and Kenneth Goldin, an individual residing at 22 East
Holly Oak, Voorhees, New Jersey 08043 (the "Employee"). All capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
Employment Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, Corporation and Employee are parties to a certain Employment
Agreement dated November 5, 1996 (the "Employment Agreement"); and
WHEREAS, Corporation and Employee wish to amend the Employment agreement in
accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree to amend the Employment Agreement as
follows:
1. Paragraph 2 - Term. Paragraph 2 of the Employment Agreement is hereby
------------------
amended and restated in its entirety as follows:
"2. Term. The term of employment of Employee under this Agreement
----
shall commence on November 1, 1996, and shall continue, unless
terminated in accordance with the provisions of Paragraph 5 or 6
hereof, through February 19, 1998."
2. Paragraph 3(a) - Office and Duties. Paragraph 3(a) of the
----------------------------------
Employment Agreement is hereby amended and restated in its entirety as follows:
<PAGE>
"(a) During the term hereof, Employee shall serve as Chairman and
Chief Executive Officer of the Corporation. Subject to any
restrictions set forth in the By-Laws of the Corporation or which may
be imposed from time to time by the Board of Directors of the
Corporation, Employee shall perform such duties as are customary for
an officer holding such position in a public company in the United
States and such other duties as may from time to time be assigned to
him by the Board of Directors of the Corporation. Employee shall have
direct reporting responsibilities to the Board of Directors only.
Employee shall perform his duties hereunder in a professional manner,
shall use his best efforts to perform such duties in conformity with
all applicable laws, rules and regulations of federal, state and local
jurisdictions and shall perform such duties in a manner which will
faithfully and diligently further the business and interests of the
Corporation. By way of clarification and without any implication to
the contrary, the Corporation shall not be entitled to terminate this
Agreement upon a breach by Employee of the terms of this Paragraph
3(a) unless such breach constitutes a "termination for cause" under
Section 6(a) hereof."
3. Paragraphs 4(a) and 4(b) - Compensation. Paragraphs 4(a) and 4(b) of
---------------------------------------
the Employment Agreement are hereby amended and restated in their entirety as
follows:
"(a) Salary. A base salary for such services at the annual rate of
------
$375,000 through February 28, 1997, and at the annual rate of $250,000
thereafter, payable in bimonthly installments.
(b) Bonus. The Corporation may, from time to time, pay Employee such
-----
bonuses as the Board of Directors may determine, but there is no
agreement regarding any such bonuses and the existence and amounts of
which shall be within the Board of Director's sole discretion."
4. Paragraph 6(a) - Termination of Employment. The second sentence
------------------------------------------
of Paragraph 6(a) of the Employment Agreement is amended to read as follows:
<PAGE>
"Termination for cause" shall mean discharge by the Corporation by
reason of any of the following (occurring at any time after the date
of this Agreement):"
and Paragraph 6(a)(ii) of the Employment Agreement is hereby amended and
restated in its entirety as follows:
"(ii) Dishonesty or willful misconduct which adversely affects the
reputation or business activities of the Corporation, substance abuse
for which Employee fails to undertake and maintain treatment within 15
days after being requested by the Corporation, or misappropriation of
assets."
5. Paragraph 6(b) - Termination of Employment Without Cause.
--------------------------------------------------------
Paragraph 6(b) of the Employment Agreement is hereby amended and restated in its
entirety as follows:
"(b) The Corporation may terminate the Employee without cause at any
time. In the event of any termination of Employee without cause prior
to February 19, 1998, unless Employee shall provide the Company with
written notice (a "Covenant Termination Notice") within five (5)
business days after the effective date of such termination that he
wishes the restrictions contained in Section 7(a) to terminate
immediately, (i) the Corporation shall pay or provide to Employee (in
addition to the salary, bonus and other compensation to which Employee
shall be entitled or shall have earned pursuant to Paragraph 4 hereof
through the date of such termination and any benefits referred to in
Paragraph 4 hereof in which Employee has a vested right under the
terms and conditions of the plan or program pursuant to which such
benefits were granted), (A) the base salary then in effect pursuant to
the provisions of Paragraph 4(a) hereof through February 19, 1998,
payable in bimonthly installments and (B) the medical and health
insurance coverage pursuant to the provisions of Paragraph 4(c)
through February 19, 1998, (ii) any partially vested options to
purchase the Corporation's Common Stock granted to Employee by the
Corporation will become vested and the expiration date of such options
shall be based upon the date of expiration of each individual option
grant and (iii) the restrictions contained in Paragraph 7(a) shall
only be applicable through February 19, 1998. In the event the
Corporation shall terminate the Employee without cause prior to
February 19, 1998 and Employee delivers a Covenant Termination Notice
<PAGE>
to the Corporation within the five (5) business day period following
the effective date of such termination, Employee shall only be
entitled to (x) such salary, bonus and other compensation to which
Employee shall be entitled or shall have earned pursuant to Paragraph
4 hereof through the date of such termination and (y) any benefits
referred to in Paragraph 4 hereof in which Employee has a vested right
under the terms and conditions of the plan or program pursuant to
which such benefits were granted and the Corporation shall not be
obligated to pay or provide to Employee any compensation or other
benefits after the effective date of such termination. Upon
termination of this Agreement on February 19, 1998 in accordance with
the terms hereof or at any time thereafter (if the term of this
Agreement is extended), all obligations of the Corporation and
Employee under this Agreement will cease as of the date of such
termination, except Employee's obligations under Paragraph 7 will
survive and Employee shall be entitled to all accrued salary, bonuses
and other compensation hereunder which relate to the period prior to
February 19, 1998."
6. Paragraph 7(a) - Restrictive Covenants. The first paragraph of
--------------------------------------
Paragraph 7(a) of the Employment Agreement is hereby amended and restated in
its entirety as follows:
"(a) Employee agrees, as a condition to the Corporation agreeing to
employ Employee and to the performance by the Corporation of its
obligations hereunder, particularly its obligations under Paragraph 4
hereof, that until the later of the termination of this Agreement
(including any renewals and extensions hereof) and February 19, 1998,
Employee shall not, without the prior written approval of the Board of
Directors of the Corporation, directly or indirectly through any other
person, firm or corporation, whether individually or in conjunction
with any other person, or as an employee, agent, consultant,
representative, partner or holder of any interest in any other person,
firm, corporation or other association:"
7. Other Items. All other terms of the Employment Agreement remain
-----------
in full force and effect and the terms thereof, as hereby amended, may not be
changed, waived or terminated except in writing signed by the parties hereto.
<PAGE>
IN WITNESS HEREOF, the parties have caused this amendment to be duly
executed and delivered as of the date first written above.
THE SCORE BOARD, INC.
By: /s/ John F. White
-----------------------
Name: John F. White
Title: President
/s/ Kenneth Goldin
------------------------
Kenneth Goldin
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Agreement is dated as of February 1, 1997 (the "Agreement"), by and
between The Score Board, Inc., a New Jersey corporation with offices at 1951
Old Cuthbert Road, Cherry Hill, New Jersey 08034 ("Employer"), and John F.
White, residing at 133 Oak Avenue, Moorestown, New Jersey 08057 ("Employee").
W I T N E S S E T H:
WHEREAS, Employer engages in the manufacture, distribution and marketing of
sports and entertainment memorabilia, trading cards and other products; and
WHEREAS, Employee has experience and expertise in corporate, marketing,
operational and financial matters; and
WHEREAS, Employee desires to accept employment by Employer upon the terms
and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts such employment, upon the terms and conditions hereinafter set forth,
effective February 1, 1997.
2. TERM. The term of this Agreement shall commence February 1, 1997 and
expire January 31, 1999 (the "Initial Term"). After the Initial Term, this
Agreement will automatically renew for consecutive one-year terms (each one-year
term being subject to this renewal provision and being collectively referred to
herein as the "Renewal Term") unless either party delivers to the other written
notice of its desire not to renew at least thirty (30) days prior to the end of
the then current contract year. The Initial Term and the Renewal Term, if any,
are hereinafter referred to collectively as the "Term."
3. DUTIES.
(a) Employee is hereby employed as President and Chief Operating Officer of
Employer. Employee's powers and duties shall be as may be determined by
Employer's Board of Directors, to whom Employee will report, and as are
generally consistent with Employer's Bylaws and the capacities in which Employee
serves.
1
<PAGE>
(b) During the term of this Agreement, Employee shall devote as much time
as is reasonably necessary in the performance of his duties, and faithfully and
diligently serve and further the interests of Employer according to the best of
his ability. Employee may, however, continue to act as Chairman of The
Outsourcing Partnership, L.L.C. ("Outsourcing"), subject to the following
conditions: (i) Employee will not have any day-to-day responsibility for the
management of Outsourcing; (ii) Employee will not be a full-time employee of,
nor will he receive any salary or other remuneration based on services performed
from, Outsourcing; and (iii) any action taken by Employee in his role as
Chairman of Outsourcing will not conflict with or detract from the performance
of his duties to Employer. Employee covenants and agrees that he will abide by
the foregoing conditions, and further covenants and agrees that if either he or
Outsourcing is presented with a business opportunity in Employer's line of
business, Employee will immediately disclose such opportunity to both the Chief
Executive Officer and General Counsel of Employer. Employer shall have the
opportunity to evaluate such opportunity and, in its sole discretion, determine
whether or not Employee or Outsourcing may pursue the opportunity.
4. COMPENSATION.
(a) SALARY. For all services rendered to Employer by Employee during the
Initial Term of this Agreement, Employer shall pay Employee an annual salary of
$210,000, such amount to be payable in accordance with Employer's practices for
payment of salaries to its employees. Employee's performance will be reviewed
upon conclusion of the first year of the Initial Term; Employer may, in the
exercise of its reasonable business judgment based upon Employee's performance,
increase Employee's salary for the second year of the Initial Term. During the
Renewal Term of this Agreement, if any, the annual salary shall be as may be
mutually agreed upon by the parties by written amendment to this Agreement.
(b) STOCK OPTIONS.
(i) Employer hereby grants to Employee a non-incentive stock option
to purchase 200,000 shares of Employer's Common Stock pursuant to Employer's
1992 Stock Incentive Plan, as amended (the "Plan"). The purchase price of the
shares of Common Stock underlying the option shall be $2.00. The term of the
option will expire January 31, 2002. The option will become exercisable at the
times and in the installments set forth below:
2
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Date Vesting on Said Date
---- --------------------
<S> <C>
February 1, 1998 50,000
February 1, 1999 50,000
February 1, 2000 50,000
February 1, 2001 50,000
</TABLE>
(ii) On June 1, 1997, Employer shall grant to Employee a non-
incentive stock option to purchase 50,000 shares of Employer's Common Stock
pursuant to the Plan at a purchase price equal to the closing price per share of
Employer's Common Stock, as reported by the National Association of Securities
Dealers Automated Quotation System/National Market System ("NASDAQ"), on such
date, provided that Employee's employment has not previously been terminated.
The term of the option will expire June 1, 2002. The option will become
exercisable at the times and in the installments set forth below:
<TABLE>
<CAPTION>
Number of Shares
Date Vesting on Said Date
---- --------------------
<S> <C>
June 1, 1998 12,500
June 1, 1999 12,500
June 1, 2000 12,500
June 1, 2001 12,500
</TABLE>
(iii) On June 1, 1998, Employer shall grant to Employee a non-
incentive stock option to purchase 50,000 shares of Employer's Common Stock
pursuant to the Plan at a purchase price equal to the closing price per share of
Employer's Common Stock, as reported by NASDAQ, on such date, provided that
Employee's employment has not previously been terminated. The term of the
option will expire June 1, 2003. The option will become exercisable at the
times and in the installments set forth below:
<TABLE>
<CAPTION>
Number of Shares
Date Vesting on Said Date
---- --------------------
<S> <C>
June 1, 1999 12,500
June 1, 2000 12,500
June 1, 2001 12,500
June 1, 2002 12,500
</TABLE>
Except as otherwise provided herein, vesting of all options after the Initial
Term is subject to the renewal of this Agreement for the appropriate Renewal
Terms. If this Agreement is not renewed but Employee remains an employee of
Employer, the options granted hereunder will vest and be exercisable in
accordance with the Plan.
3
<PAGE>
Any options not previously exercised will become void upon, and will not be
exercisable after, termination of Employee's employment pursuant to Section 8(c)
or termination of this Agreement by Employee pursuant to Section 8(f) hereof.
In the event that Employee's employment is terminated pursuant to Sections
8(a), (b), (d) or (e), or by Employer pursuant to Section 8(f), all options that
have not vested as of the date of termination shall be immediately canceled, and
shall not be exercisable; those options that have vested shall be exercisable in
accordance with the Plan.
If a Change of Control (as defined below), occurs prior to February 1,
1998, the option granted under paragraph 4(b)(i) will immediately vest and be
exercisable with respect to the shares otherwise vesting on February 1, 1998 and
February 1, 1999. If a Change of Control occurs on or after February 1, 1998,
all options granted or to be granted under paragraphs 4(b)(i), (ii) and (iii)
will immediately vest and be exercisable. A "Change of Control" is deemed to
have taken place if (i) any person or group of affiliated or related persons
acting in concert, or any corporation, partnership or other entity (hereinafter
referred to as a "Party") becomes the beneficial owner (as defined below) of
shares of Common Stock or voting securities of Employer having in excess of 20%
and less than 30% of the total number of votes that may be cast for the election
of directors, unless the Board of Directors, within twenty (20) days from the
date such Party becomes such beneficial owner, determines that the purpose of
such ownership is investment only without any intention of influencing the
management, business or affairs of Employer; or (ii) a Party becomes the
beneficial owner of shares of Employer having 30% or more of the total number of
votes that may be cast for the election of directors; or (iii) as the result of,
or in connection with, any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions, those persons who were directors of Employer
before the transaction and were otherwise unaffiliated with any Party to the
transaction other than Employer shall cease to constitute a majority of the
Board of Directors of Employer or any successor to Employer. For purposes
hereof, the terms "beneficial owner" or "beneficial ownership" means the actual
ownership of shares of Common Stock or voting securities of Employer, with no
consideration given to any shares of Common Stock or voting securities issuable
upon exercise, conversion or exchange of any other securities.
(c) BENEFITS. Employee shall be entitled to participate in and to receive
such health and medical insurance and other benefits, including but not limited
to any pension, profit sharing, disability or similar plan now existing or
established hereafter (to the extent that he is eligible under the general
provisions thereof), as are generally made available to employees of Employer.
4
<PAGE>
(d) VACATIONS. Employee shall be entitled to three (3) weeks paid vacation
during each year of the Term. Vacations shall be scheduled at a time which is
mutually convenient to Employer and Employee. Unused vacation days will be
forfeited and will not accrue to subsequent years of the Term.
(e) REIMBURSEMENT OF EXPENSES. Employee shall be entitled to reimbursement
of all reasonable business expenses actually and properly incurred by Employee
in the discharge of Employee's duties hereunder, following submission to
Employer of satisfactory documentation therefor.
(f) DISCRETIONARY COMPENSATION. In addition to the foregoing, Employee
shall be entitled to participate, to the extent determined by Employer's Board
of Directors, in such officer/executive bonus plans as may be adopted by
Employer.
5. CONFIDENTIALITY. Employee agrees that any and all knowledge and
information concerning Employer, its affairs, its subsidiaries and affiliates
and their affairs obtained by Employee during the course of Employee's
employment by Employer shall be deemed Confidential Information (as hereinafter
defined) which shall be held inviolate, and that Employee will not disclose the
same to any other persons, including but not limited to competitors of Employer,
at any time during or after the Term. Employee agrees, upon expiration or
earlier termination of this Agreement, to immediately surrender and deliver to
Employer all books, forms, records, designs, contracts and all other papers and
writings relating to Employer and all other property belonging to Employer, it
being understood and agreed that the same are the sole property of Employer.
As used herein, the term "Confidential Information" means:
(a) any data or information that is sensitive material and not generally
known to the public, including but not limited to trade secrets, contracts with
third parties, sales and marketing information, financial data, lists of actual
or potential customers, customer account records, training and operations
materials and memoranda, personnel records, pricing and financial information
relating to the business, accounts, customers, clients, agents and suppliers of
any of the foregoing, possible acquisitions, mergers and/or business
combinations, and internal performance results relating to past, present or
future business activities of Employer, its subsidiaries and affiliated
companies and the customers, clients, agents and suppliers of any of the
foregoing; and
(b) any other information designated "Confidential" by Employer, its
subsidiaries and affiliated companies.
Employee's obligations under this Section 5 shall survive expiration or
termination of this Agreement.
5
<PAGE>
6. RESTRICTIVE COVENANTS.
(a) IN-TERM. Except as provided in Section 3(b), during the term of
Employee's employment Employee shall not, directly or indirectly, alone or as a
member of a partnership, or as an officer, director, stockholder, partner,
employee or agent of any other corporation or entity, be engaged in or concerned
with any other duties or pursuits whatsoever requiring Employee's personal
services, nor shall Employee actively engage in or acquire any passive interest
in any business which may be deemed to be directly competitive with the type of
business conducted by Employer.
(b) AFTER-TERM. For a period of one (1) year following the Term (or the
earlier termination of this Agreement), Employee shall not, directly or
indirectly, own, manage, operate, control, be employed by, participate in, or be
connected in any manner with the ownership, management, operation or control of
any business that: (i) enters into contracts, agreements or understandings with
individual athletes for the purpose of acquiring autographs or the right or
license to commercially exploit the indicia of such athletes on trading cards,
prepaid telephone calling cards or any other collectible product; (ii)
manufactures prepaid telephone calling cards or trading cards; or (iii) offers
for sale, sells or distributes trading cards, prepaid telephone calling cards or
autographed memorabilia.
7. ADHERENCE TO COMPANY POLICIES. Employee recognizes Employer's policy
to refrain from accepting from, or soliciting, offering or paying to, any of
Employer's customers or suppliers, their agents or representatives, any monies,
services or other consideration ("Prohibited Activities") for the purpose of (a)
selling or offering to sell product or (b) obtaining or seeking to obtain
product or components comprising products sold by Employer, other than pursuant
to legal contracts and arrangements entered into by Employer. Employee
recognizes that, in furtherance of this policy, Employer prohibits employees,
representatives and affiliates from conducting any Prohibited Activities.
Employee hereby agrees to adhere to and promote adherence to this policy, and to
inform Employer of any incidents and activities in violation of this policy.
8. TERMINATION. This Agreement, and Employee's employment hereunder,
shall terminate:
(a) upon expiration of the Term described in Section 2 hereof; or
(b) upon the mutual written agreement of Employer and Employee; or
(c) at any time for "cause," which shall mean (i) any material breach by
Employee of his obligations hereunder, including without limitation his
obligations under Sections 5, 6 or 7 of this Agreement, and (ii) conduct of
6
<PAGE>
Employee involving any type of disloyalty to Employer or willful misconduct with
respect to Employer, including without limitation fraud, embezzlement or
dishonesty in the course of his employment, or conviction of a felony or a crime
involving moral turpitude;
(d) upon permanent disability (Employee's failure to perform the duties
assigned to him for a period of 90 consecutive days or 90 days during any
consecutive 365 day period) of Employee;
(e) upon the death of Employee; or
(f) thirty days (30) after delivery of written notice by one party to the
other of its intention to terminate this Agreement.
Termination for any reason set forth in subparagraphs (a) through (d) above
shall be effected by written notice thereof delivered by the appropriate party
and shall be effective as of the date of termination specified in such notice.
Upon termination of this Agreement pursuant to subparagraphs (a) through
(d), neither party shall have any further obligation to the other, except that
(i) Employee shall remain bound by the provisions of Sections 5 and 6 hereof and
(ii) Employer shall be obligated to pay Employee any base salary accrued up to
the date of termination. Upon termination of this Agreement pursuant to
subparagraph (e), Employer shall be obligated to pay to Employee's estate any
base salary accrued up to the date of termination. Upon termination of this
Agreement pursuant to subparagraph (f), neither party shall have any further
obligation to the other, except that: (i) Employee shall remain bound by the
provisions of Sections 5 and 6 hereof; (ii) Employer shall be obligated to pay
Employee any base salary accrued up to the date of termination; and (iii) if the
Agreement was terminated by Employer (and not by Employee), Employer shall be
obligated to pay Employee an amount equal to three month's base salary, such
amount to be payable over a three month period in accordance with Employer's
practices for payment of salaries to its employees.
9. REMEDIES FOR BREACH OF CONFIDENTIALITY OR RESTRICTIVE COVENANTS. In
recognition of the special and unique nature of the services to be rendered by
Employee under this Agreement, and the nature of the Confidential Information to
which Employee will gain access during the Term, notwithstanding any other
provision of this Agreement, in the event of Employee's actual or threatened
breach of the provisions of Section 5, 6 or 7 of this Agreement, Employer shall
be entitled to seek an injunction restraining Employee therefrom. Nothing in
this Section 9 shall be construed as prohibiting Employer from pursuing any
other available legal, equitable and administrative remedies for such breach or
threatened breach, including, without limitation, the recovery of damages from
Employee.
7
<PAGE>
10. NOTICES. Any notice or other written instrument required or permitted
to be given, made or sent hereunder shall be in writing, signed by the party
giving or making the same, and shall be deemed delivered on the date sent if
hand-delivered or one day after the date sent by registered or certified mail or
through courier delivery service to the other party hereto at the address set
forth on the first page of this Agreement. Notices to Employer should be sent
to the attention of the General Counsel. Any party hereto shall have the right
to change the place to which any such notice or writing shall be sent by a
similar notice sent in like manner to the other party hereto.
11. WAIVER OF BREACH. The waiver of either party of a breach by the other
party of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by such party. No waiver shall be valid unless
in writing and signed by an authorized officer of Employer or by Employee, as
applicable.
12. ASSIGNMENT. Employer and Employee acknowledge that the relationship
established hereby is unique and personal and that neither Employer nor Employee
may assign or delegate any of their respective rights and/or obligations
hereunder without the prior written consent of the other party.
13. INVALID PROVISION(S). If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the Term, such provision shall be fully severable and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision, but shall continue
to be legal, valid and enforceable, and the parties hereto agree to be bound by
and perform the same, as thus modified.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
15. GOVERNING LAW; JURISDICTION; VENUE; DISPUTES. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New
Jersey, without regard to the conflicts of laws provisions thereof. Employer
and Employee agree that any action or proceeding arising out of or relating to
this Agreement may be brought only in a court located in Camden County, New
Jersey, and both parties agree to submit to and accept the jurisdiction and
venue of the aforesaid courts.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties hereto. This Agreement may not be changed, modified or
amended, except by an agreement in writing signed by the parties hereto.
8
<PAGE>
17. NO OTHER REPRESENTATIONS. No representation, promise or inducement
has been made by any party that is not embodied in this Agreement, and no party
shall be bound by or liable for any alleged representation, promise or
inducement not so set forth.
18. CAPTIONS. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of February 1, 1997.
THE SCORE BOARD, INC.
By: /s/ Allan R. Lyons
-------------------------
Allan R. Lyons
Chairman, The Score Board, Inc.
Compensation Committee
/s/ John F. White
-------------------------
JOHN F. WHITE
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AS OF, AND
FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 137
<SECURITIES> 0
<RECEIVABLES> 10,122
<ALLOWANCES> 2,400
<INVENTORY> 9,888
<CURRENT-ASSETS> 18,762
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,585
<CURRENT-LIABILITIES> 20,072
<BONDS> 4,000
0
0
<COMMON> 147
<OTHER-SE> (3,634)
<TOTAL-LIABILITY-AND-EQUITY> 20,585
<SALES> 25,637
<TOTAL-REVENUES> 25,637
<CGS> 17,242
<TOTAL-COSTS> 17,242
<OTHER-EXPENSES> 10,081
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 509
<INCOME-PRETAX> (2,195)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,195)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,195)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
