Revolving Credit And Security Agreement

TABLE OF CONTENTS PAGE
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I. DEFINITIONS 2
1.1 Accounting Terms 2
1.2 General Terms 2
1.3 Uniform Commercial Code Terms 19

II. ADVANCES, PAYMENT, LENDER GUARANTEES AND LETTERS OF CREDIT 19
2.1 (a) Advances 19
(b) Discretionary Overformula Advances 20
(c) General 20
2.2 Procedure for Advances 21
2.3 Disbursement of Advance Proceeds 21
2.4 Repayment of Obligations 22
2.5 Repayment of Overformula Amount Advances 22
2.6 Statement of Account 22
2.7 Lender Guarantees, Letters of Credit and Acceptances 23
2.8 Issuance of Letters of Credit; Creation of Acceptances;
Indemnity 23
2.9 Requirements For Issuance of Lender Guarantees, Letters
of Credit, and Acceptances 24
2.10 Maximum Advance Compliance Certificates 25
2.11 Joint and Several Obligations 26

III. INTEREST AND FEES 26
3.1 Interest/Special Provisions Applicable to LIBO Rate
Advances 26
3.2 Letter of Credit Fees 27
3.3 Closing Fee 27
3.4 Unused Facility Fee 28
3.5 Due Diligence/Audit Fees 28
3.6 Computation of Interest and Fees 28
3.7 Maximum Charges 29
3.8 Increased Costs 29
3.9 Capital Adequacy 30
3.10 Fixed Rate Lending Unlawful 30
3.11 Deposits Unavailable 31
3.12 Funding Losses 31
3.13 Survival 32

IV. COLLATERAL GENERAL TERMS 32
4.1 Security Interest in the Collateral 32
4.2 Perfection of Security Interest 32
4.3 Disposition of Collateral 33
4.4 Inspection of Premises 33
4.5 Receivables 33
4.6 Inventory 34
4.7 Maintenance of Equipment 34
4.8 Exculpation of Liability 34


V. REPRESENTATIONS AND WARRANTIES 34
5.1 Authority 34
5.2 Formation and Qualification 35


5.3 Solvency 35
5.4 Litigation 35
5.5 Financial Statements 36
5.6 ERISA 36
5.7 Patents, Trademarks, Copyrights and Licenses 36
5.8 Licenses and Permits 36
5.9 Default of Indebtedness 37
5.10 No Default 37
5.11 Margin Regulations 37
5.12 Environmental Warranties 37
5.13 Validity, etc 38
5.14 Subsidiaries 38
5.15 Disclosure and Notice to Lending 38
5.16 Survival of Representations and Warranties 39

VI. COVENANTS 39
6.1 Payment of Fees 39
6.2 Conduct of Business and Maintenance of Existence and
Assets 39
6.3 Violations 39
6.4 Tangible Net Worth of AEI and its consolidated
Subsidiaries 40
6.5 Working Capital of AEI and its consolidated Subsidiaries 40
6.6 Capital Expenditures 40
6.7 Ratio of Total Indebtedness to Tangible Net Worth 41
6.8 Fixed Charge Ratio 41
6.9 Maximum Losses 41
6.10 Pledge of Credit 41
6.11 Payment of Indebtedness 41
6.12 Additional Material Subsidiaries/Corporate Guarantors 41
6.13 Fiscal Year 42
6.14 Corporate Changes 42
6.15 Environmental Liabilities 43
6.16 Additional Assurances 43

VII. CONDITIONS PRECEDENT 44
7.1 Conditions Precedent to Each Advance 44

VIII. NOTICES, INFORMATION FINANCIAL STATEMENTS, REPORTS,
COMPLIANCE CERTIFICATES 45
8.1 Disclosure and Notice of Certain Items 45
8.2 Schedules 46
8.3 Environmental Certificates 47
8.4 Litigation 47
8.5 Default Related Notices 47
8.6 Government Receivables 48
8.7 Annual Financial Statements 48
8.8 Quarterly Financial Statements 48
8.9 Monthly Financial Statements 49


8.10 Other Information and Reports 49
8.11 Projected Operating Budget 49
8.12 Variances From Operating Budget 50
8.13 Compliance Certificates 50


IX. EVENTS OF DEFAULT 50

X. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT 53
10.1 Rights and Remedies 53
10.2 Lender's Discretion 55
10.3 Setoff 55
10.4 Rights and Remedies not Exclusive 55

XI. WAIVERS AND JUDICIAL PROCEEDINGS 55
11.1 Waiver of Notice 55
11.2 Delay 55
11.3 Jury Waiver 56

XII. EFFECTIVE DATE AND TERMINATION 56
12.1 Term 56
12.2 Early Termination Fee 56
12.3 End of Term 57
12.4 Termination 57

XIII.COLLECTIVE BORROWING 58
13.1 Request for Collective Borrowing 58
13.2 Single Account 58
13.3 Power of Attorney for AEI from Borrowers 58
13.4 Indemnification 59

XIV. MISCELLANEOUS 59
14.1 Governing Law 59
14.2 Restated and Amended Agreement 59
14.3 Application of Payments 59
14.4 Indemnity 59
14.5 Forum Selection and Consent to Jurisdiction 60
14.6 Notice 60
14.7 Severability 61
14.8 Expenses 61
14.9 Injunctive Relief 62
14.10 Captions 62
14.11 Counterparts 62
14.12 Construction 62
14.13 Confidentiality 62
14.14 Successors and Assigns 64

EXHIBITS

EXHIBIT A Corporate Guarantee
EXHIBIT B Letter of Credit Supplement Agreement
EXHIBIT C Maximum Advance Compliance Certificate
EXHIBIT D Request Re: LIBO Rate Advances


EXHIBIT E Legal Opinion
EXHIBIT F Financial Covenants Compliance Certificate


SCHEDULES

3.2 Letter of Credit Fees (see "Eligible
Receivables" definition)
5.2 States of Qualification and Good Standing
(Borrowers)
5.4 Litigation
5.7 Patents, Trademarks, Copyrights and Licenses
5.8 Licenses and Permits
5.12 Environmental Matters
5.14 Subsidiaries
8.1 Physical Collateral Locations (Borrowers)


REVOLVING CREDIT
AND
SECURITY AGREEMENT
As of January 1, 1993

(As Amended and Restated on February 28, 1995)
Revolving Credit and Security Agreement dated as of January 1, 1993 between Acclaim Entertainment, Inc., a Delaware corporation ("AEI"), Acclaim Distribution Inc., a Delaware corporation ("ADI"), LJN Toys, Ltd., a New York corporation ("LJN"), Acclaim Entertainment Canada, Ltd., a Canadian corporation ("AEC") and Arena Entertainment Inc., a Delaware corporation ("Arena") and BNY FINANCIAL CORPORATION ("BNY"), a corporation organized under the laws of the State of New York as amended and restated on February 28, 1995.
IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrowers and Lender hereby agree as follows:
I. DEFINITIONS.
1.1 Accounting Terms. As used in this Agreement or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP.
1.2 General Terms. For purposes of this Agreement the following terms shall have the following meanings:
"Acceptances" shall have the meaning set forth in Section 2.7 hereof.
"Advances" shall mean and include the Revolving Rate Advances and the LIBO Rate Advances.
"AEI" shall have the meaning set forth in the introductory paragraph to this Agreement, together with any permitted successors and assigns in accordance with this Agreement.
"Affiliate" of any Person shall mean (a) any Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes


-2- of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote (A) 50% or more of the securities having ordinary voting power for the election of directors of such Person with respect to a person other than AEI or (B) forty percent (40%) or more of the securities having ordinary voting power for the election of directors of AEI, or (y) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
"Agreement" shall mean this Revolving Credit and Security Agreement, as amended, supplemented, or modified from time to time.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the higher of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"Bank" shall mean The Bank of New York.
"Borrower" shall mean each of the Borrowers and any of their respective permitted successors and assigns in accordance with this Agreement.
"Borrowers" shall mean all of AEI, ADI, LJN, AEC and Arena and all of their respective permitted successors and assigns in accordance with this Agreement.
"Business Day" shall mean any day other than a day on which commercial banks in New York are authorized or required by law to close.
"Capital Expenditures" shall mean any and all payments by any of the Borrowers for the acquisition of any fixed assets or improvements, including without limitation any obligation as a lessee which, in accordance with GAAP, would appear or be disclosed on the balance sheet of any Borrower as a capital lease, or for replacements, substitutions, or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP.
"Change of Ownership" shall mean (a) any transfer (whether in one or more transactions) of ownership by the Original Owners to a Person who is neither an Original Owner nor an Affiliate of an Original Owner which would result in the ownership by the Original Owners of less than ten percent (10%) in the aggregate of the common stock of AEI (including for the purposes of the calculation of percentage ownership, any shares of common stock into which any capital stock of AEI held by any of the Original Owners is convertible or for which any such


shares of the capital stock of AEI or of any other Person may be exchanged and any shares of common stock of AEI held by any of the Original Owners is convertible or for which any such share of the capital stock of AEI or of any other Person may be exchanged


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and any shares of common stock issuable to such Original Owners upon exercise of any warrants, options or similar rights which may at the time of calculation be held by such Original Owners), or (b) any merger, consolidation or sale of substantially all of the property or assets of the Borrowers, any of the Material Subsidiaries or any of the Corporate Guarantors except to the extent permitted hereunder.
"Charges" shall mean all taxes, charges, fees, executions, attachments, seizures, warrants, imposts, injunctions, levies or other assessments or similar process, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including, without limitation, the Pension Benefit Guaranty Corporation or any environmental agency or superfund), upon the Collateral or any of the Borrowers.
"Claims" shall mean all security interests, Liens, claims or encumbrances held or asserted by any Person against any or all of the Collateral, other than (A) Charges, or (B) Permitted Encumbrances.
"Closing Fee" shall have the meaning set forth in Section 3.3 hereof.
"Collateral" shall mean and include all of the present and future assets and property falling within the following categories, of each of the Borrowers, as well as of each of the Material Subsidiaries incorporated in any state within the United States of America, however and whenever arising and wherever located:
(a) all Receivables;


(b) all Equipment;
(c) all General Intangibles; provided, that,
any copyright, patent, trademark, trade
secret or other related property owned


by any Borrower or Material Subsidiary
shall only be included herein as
Collateral if it shall be copyrighted,
patented, trademarked, or otherwise used
in the United States of America;
(d) all Inventory;
(e) all Credit Balances;


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(f) all of the right, title and interest in and of each of the Borrowers, as well as each of the Material Subsidiaries to (i) its goods and other personal property including but not limited to, all merchandise returned or rejected by Customers, relating to or securing any of the Receivables; (ii) all of the rights of each and all of the Borrowers and/or the Material Subsidiaries as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in transit, set off, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any of the Borrowers and/or the Material Subsidiaries from any Customer relating to the Receivables; (iv) other personal property, including warranty claims relating to any goods securing this Agreement; (v) if and when obtained by any of the Borrowers and/or the Material Subsidiaries, all real and personal property of third parties in which any of such Borrowers and/or the Material Subsidiaries has been granted a lien or security interest as security for the payment or enforcement of Receivables; and (vi) any other goods, personal property or real property now owned or hereafter acquired in which any of the Borrowers and/or the Material Subsidiaries has expressly granted a security interest or may in the future expressly grant a security interest to the Lender hereunder, or in any amendment or supplement hereto, or under any other agreement between the Lender on the one hand and any of the Borrowers or Material Subsidiaries on the other hand; provided, that, any copyright, patent, trademark, trade secret or other related property owned by any Borrower or Material Subsidiary shall only be included herein as Collateral if it shall be copyrighted, patented, trademarked, or otherwise used in the United States of America;
(g) all of the ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any of the Borrowers or any Material Subsidiary or in which any of them has an interest), computer programs, tapes, disks and documents of each of the Borrowers, as well as each of the Material Subsidiaries, relating to subparagraphs (a), (b), (c), (d), or (f), of this Paragraph; and
(h) all proceeds andproducts of subparagraphs (a), (b), (c),


(d), (e), (f), or (g), in whatever form, including, but not limited to: cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements or documents.
Notwithstanding the foregoing, the term "Collateral" shall not include: (1) any assets or property of Acclaim Comics, Inc., Acclaim Cable Holdings, Inc., Acclaim Corporate Center 1, Inc., Oyster Bay Warehouse Corp. and/or ACTC, L.P.; (2) any


-5- capital stock or any equity and/or partnership interest held by any of the Borrowers; or (3) any copyright, patent, trademark, trade secret or other related property and any General Intangibles in respect thereof licensed by any Borrower or Material Subsidiary to the extent that the license agreement covering the same restricts any Borrower's or any Material Subsidiary's right to grant a consensual Lien therein.
"Contract Rate" means an interest rate per annum equal: (a) in the case of LIBO Rate Advances, to the sum of (i) the applicable LIBO Rate, plus (ii) two percent (2%) and (b) in the case of all other Advances, to the Revolving Advance Rate.
"Corporate Guarantor(s)" shall mean: (a) each Borrower with respect to the Obligations of any and all other Borrowers; and (b) with respect to the Obligations of each and all of the Borrowers, (i) Oyster Bay Warehouse Corp., a New York corporation, Acclaim Corporate Center 1, Inc., a New York corporation and Iguana Entertainment, Inc., a Texas corporation; (ii) all other existing and future Subsidiaries of any of the Borrowers incorporated in any state within the United States of America; and (iii) all existing and future Material Subsidiaries of any of the Borrowers not incorporated within any state within the United States of America; except with respect to subparagraphs (ii) and (iii) immediately above, to the extent otherwise provided in Section 6.12 hereof.
"Corporate Guarantee(s)" shall mean Guarantees substantially in the form of Exhibit A hereto, guaranteeing Obligations of each and all of the Borrowers to the Lender.
"Credit Balances" means any and all existing or future credit balances, and any and all other rights to receive monies and/or other payments now or hereafter due to each and all of the Borrowers under the Factoring Agreements of any of such parties at any time and from time to time in effect, including without limitation, any Factoring Agreement(s) now or hereafter in place between any of the Borrowers and the Lender.


"Credit Risk" shall have the meaning set forth in the Factoring Agreements.
"Current Assets" at a particular date, means all of the assets of AEI and its consolidated Subsidiaries, taken as a whole, which would, in conformity with GAAP, be included under current assets on a balance sheet of AEI and its consolidated Subsidiaries, taken as a whole as at such date.
"Current Liabilities" at a particular date, means all amounts which would, in conformity with GAAP, be included under current liabilities on a balance sheet of AEI and its consolidated Subsidiaries, taken as a whole as at such date.


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"Customer" shall mean and include each account debtor with respect to any of the Receivables and/or the prospective purchaser of goods, services or both with respect to any contract or other arrangement with any Borrowers, pursuant to which such Borrower is to deliver any personal property or is to perform any services.
"Default" means an event or circumstance, which upon the giving of notice or the passage of time or both, would become an Event of Default.
"Default Rate" means a rate equal to three-quarters of one percent (3/4%) per annum in excess of the Contract Rate or the Overformula Rate, as the case may be.
"Dollar" and the sign "$" shall mean lawful money of the United States of America.
"Early Termination Fee" shall mean a fee of $125,000 per month or part thereof, calculated from the effective termination date of the Agreement in accordance with Section 10.1 or Section 12.1(a)(ii) hereof, through and including January 31, 1996, or should such effective termination date occur after January 31, 1996, through and including January 31 in the Calendar Year next occurring (notwithstanding any termination in accordance with Section 10.1 or 12.1(a)(ii) hereunder and/or any effective termination date of this Agreement that may occur, pursuant to the terms hereof, on a date earlier than the last day of such Term).
"EBIDTA" means, for any period, the net income before interest and taxes of AEI and its consolidated Subsidiaries, taken as a whole, exclusive of depreciation, amortization, extraordinary gains and losses and all other non- cash charges, determined purusant to GAAP for such period.
"Eligible Inventory" shall mean and include: (i)


all finished goods interactive entertainment software Inventory of each of the Borrowers (but not of any of the Material Subsidiaries) which is: (a) less than 60 days old; and (b) located in the United States of America (or, in the case of such Inventory of AEC, in Ontario, Canada; provided that subject to Section 2.1(a)(2) hereof, no Advances in excess of $5,000,000 in the aggregate at any time shall be made in respect of such AEC Inventory located in Ontario, Canada) and (ii) all raw material Inventory of each of the Borrowers (but not of any of the Material Subsidiaries) consisting of read-only memory computer chips utilized in the manufacture or assembly of any of the Borrowers' products and which raw material is: (a) located in the United States of America, or in Lender's sole discretion, in Mexico; and (b) not, in Lender's opinion, obsolete, or unmerchantable; provided that subject to Sectio 2.1(a)(2) hereof, no Advances in excess of $2,000,000 in the aggregate at any time


-7- shall be made in respect of any such raw material Inventory, wherever located,
and all of which Inventory shall in each instance: (1) be in good condition; (2) be readily saleable at prices not less than cost; and (3) exclude any work-in-process, and which Inventory Lender, in its reasonable discretion exercised in good faith, shall not otherwise deem ineligible, based on such considerations as Lender may from time to time deem appropriate including, without limitation, whether (A) the Inventory is subject to a perfected, first priority security interest in favor of Lender, other than Permitted Encumbrances, (B) third party waivers requested by the Lender have been executed (in form and substance reasonably acceptable to the Lender) and delivered to the Lender by landlords or warehousemen and (C) the Inventory conforms to all standards imposed by any governmental agency, division or department thereof which has regulatory authority over such goods or the use or sale thereof.
"Eligible Receivables" shall mean each Receivable arising in the ordinary course of the business of each of the Borrowers (but not of any of the Material Subsidiaries) and which Lender, in its reasonable credit judgment exercised in good faith, shall deem to be an Eligible Receivable, based on such considerations as Lender may from time to time deem appropriate. Without limiting the foregoing, a Receivable shall generally not be deemed eligible unless such Receivable is an assigned, credit approved Receivable under any Borrower's Factoring Agreement with the Lender, or is an assigned non-credit approved Receivable created by any Borrower which at all times is acceptable to the Lender and, in each case, is subject ...