Recent Developments
On May 4, 2004 we entered into a Waiver and Amendment agreement (the Amendment) with our primary lender, GMAC Commercial Finance LLC (GMAC), under which GMAC has agreed to waive the Companys financial covenant defaults under our GMAC Credit Agreement for the quarter ended March 31, 2004. In addition, GMAC agreed to provide an additional $3 million overadvance in the form of a supplemental discretionary loan. Pursuant to the Amendment, the GMAC Credit Agreement and related financing agreements were to terminate on June 20, 2004. On June 18, 2004, we entered into an Extension Agreement with GMAC which amended the Waiver and Amendment agreement signed by us and GMAC on May 4, 2004. Under the Extension Agreement, GMAC has agreed to extend the date upon which our banking agreement with GMAC will terminate, from June 20, 2004 to August 4, 2004.
On May 4, 2004, we entered into a letter of intent with a proposed new lender, for an asset-based credit facility, with an equity component, to replace the GMAC loan facility. We are working with the proposed new lender in order to implement the new facility which is subject to the execution of definitive documentation by both parties. Timely implementation of the new facility will be crucial to avoid severe interruption of our business. See Risk Factors; Our Ability to Meet Cash Requirements and Maintain Necessary Liquidity Depends on Our Ability to Timely Transition our Credit Facility.
Also in May 2004, we received notification from The Major League Baseball Players Association (MLBPA) that we were late in making certain royalty payments and our license was terminated and that if we did not make the payments in a timely fashion, as well as certain other remedies, that our license would not be reinstated. We have made all required payments to the MLBPA and are current with our payment obligations with certain MLB players, however we have not reached agreement with the MLBPA regarding the other requested remedies and MLBPA is considering the license terminated. We disagree with MLBPAs interpretation of the license agreement provisions and have advised them as such. We are in continued discussions with MLBPA on this matter.
In April and May 2004, we received notification from Battleborne Entertainment, Inc. (Battleborne) that due to various contractual disputes between us and Battleborne regarding our development agreement with Battleborne relating to the development of the videogame entitled Combat Elite: WWII Paratroopers, they were terminating the development agreement. We disagree with their interpretations of the development agreement and demanded that Battleborne fulfill its contractual obligations under the development agreement. In June 2004, Battleborne brought an action in New York state Supreme Court, Nassau County, seeking a temporary restraining order enjoining the release of the title until the contractual disputes have been resolved. The TRO was granted and the matter was scheduled by the court for expedited discovery by both sides. We are also in continued discussions with Battleborne in an effort to resolve this matter amicably.
In June 2004, we received notification from Classic Media, Inc. (Classic), the licensor of the intellectual property Turok, that due to failure to make certain royalty payments relating to the videogame title Turok: Evolution that our license agreement with Classic was terminated. We are in discussions with Classic in an effort to resolve this matter amicably.
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