THIRD AMENDMENT
TO LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Third
Amendment") is entered into as of January 6, 2002 by and among The Right Start,
Inc., a California corporation ("Parent"), Toy Soldier, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Toy Soldier" and, jointly,
severally, and jointly and severally with Parent, the "Borrowers"), and Xxxxx
Fargo Retail Finance, LLC (the "Lender").
RECITALS
Parent and the Lender are parties to a Loan and Security Agreement
dated as of January 23, 2001, as amended by the First Amendment to Loan and
Security Agreement dated as of September 5, 2001 by and between Parent and the
Lender and the Second Amendment to Loan and Security Agreement dated as of
December 14, 2001 by and between Parent and the Lender (as so amended and as
amended by and through the date hereof and as may be further amended, restated,
supplemented or otherwise modified from time to time, the "Loan Agreement")
pursuant to which the Lender has agreed to make certain revolving credit
advances and other financial accommodations to Parent.
Pursuant to the Asset Purchase Agreement (as amended through the date
hereof, the "FAO Purchase Agreement") dated November 19, 2001 by and among, on
the one hand, Parent and Toy Soldier and, on the other hand, Royal Vendex KBB
N.V., a Netherlands corporation ("Vendex"), F.A.O. Xxxxxxx, a New York
corporation ("FAO"), and Quality Fulfillment Services, Inc., a Virginia
corporation ("QFS" and, collectively with FAO, the "Sellers"), Toy Soldier has
agreed to purchase certain of the assets and assume certain of the liabilities
of the Sellers. The Borrowers, the Sellers and Vendex desire to consummate the
transactions contemplated by the FAO Purchase Agreement (collectively, the "FAO
Transactions") concurrently with the execution and delivery of this Third
Amendment.
In connection with the FAO Transactions, Parent has requested certain
amendments to the Loan Agreement, including the addition of Toy Soldier as a
Borrower thereunder. The Lender is willing to amend the Loan Agreement and grant
such consent as requested by Parent on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties signatory
hereto agree as follows.
1. Amendments to the Loan Agreement.
(a) The Preamble to the Loan Agreement is hereby deleted in its entirety and
restated in full as follows:
"THIS LOAN AND SECURITY AGREEMENT (this "Agreement"),
is entered into as of January 23, 2001, among, on the one hand
The Right Start, Inc., a California corporation ("Parent"),
and Toy Soldier, Inc., a Delaware corporation ("TS" and,
jointly, severally, and jointly and severally with Parent, the
"Borrowers"), each with its chief executive office located at
00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx and, on
the other hand, Xxxxx Fargo Retail Finance, LLC (the "Lender")
in consideration of the mutual covenants contained herein and
the mutual benefits to be derived herefrom."
From and after the date of this Third Amendment, for all purposes of
the Loan Agreement and all other Loan Documents, (i) the term "Borrower" shall
be replaced with the term "Borrowers" and all applicable verbs presently
expressed in the third person singular shall be replaced with the third person
plural expressions thereof, (ii) the term "Lender" shall mean Xxxxx Fargo Retail
Finance, LLC, and the term "Paragon" shall be replaced with the term "Lender"
and (iii) the term "Master Note" shall be replaced with the term "Amended and
Restated Master Note".
(b) Section 1.4 of the Loan Agreement is hereby amended by deleting the words
"Two Million ($2,000,000.00) Dollars" in subsection (j)(ii)(A) thereof and
inserting in lieu thereof the figure "$5,000,000".
(c) Section 1.9 of the Loan Agreement is hereby amended by adding a new
subsection (h) thereof, which new subsection (h) shall read in full as follows:
"(h) TS Collateral Monitoring Fee. On the last
Business Day of each calendar month, commencing March 31,
2002, the Borrowers shall pay to the Lender a TS collateral
monitoring fee of $15,000, which fee shall be fully earned and
payable as of each such payment date."
(d) Article 2 (Grant of Security Interest) of the Loan Agreement is hereby
deleted in its entirety and restated in full as follows:
"2-1. Grant of Security Interest. To secure the
Borrowers' prompt, punctual and faithful repayment of all and
each of the Liabilities (including, without limitation, any
and all obligations created under the Parent Guaranty) in
accordance with the terms and conditions of the Loan Documents
and the Borrowers' performance of each of their respective
covenants and duties under the Loan Documents, each Borrower
hereby grants to the Lender a continuing security interest in
and to all of such Borrower's currently existing and hereafter
acquired or arising tangible and intangible assets
(collectively, the "Collateral"), including, without
limitation, all of such Borrower's right, title and interest
in and to the following:
(a) Accounts,
(b) Books,
(c) Chattel Paper,
(c) DDAs,
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(d) Documents,
(e) General Intangibles,
(f) Goods (including all Inventory and
Equipment),
(g) Instruments,
(h) Investment Property,
(i) Letter of Credit Rights,
(j) Real Estate,
(k) money or other assets of Borrower that now
or hereafter come into the possession,
custody, or control of the Lender, and
(l) any and all proceeds and supporting
obligations of the foregoing.
2-2. Extent and Duration of Security Interest. This
grant of a security interest is in addition to, and
supplemental of, any security interest previously granted by
the Borrowers to the Lender and shall continue in full force
and effect applicable to all Liabilities until all Liabilities
have been paid and/or satisfied in full and the security
interest granted herein is specifically terminated in writing
by a duly authorized officer of the Lender.
2-3. Negotiable Collateral. If and to the extent that
perfection or priority of the Lender's security interest in
any of the Collateral, including proceeds, is dependent on or
enhanced by possession, the applicable Borrower, immediately
upon the written request of the Lender, shall endorse and
deliver physical possession of such Collateral to the Lender.
2-4. Delivery of Additional Documentation Required.
At any time upon the written request of the Lender, the
Borrowers shall execute and deliver to the Lender, any and all
financing statements (including, without limitation, any
amendments thereto and any "in lieu" continuation statements),
security agreements, pledges, assignments, endorsements of
certificates of title, bailee acknowledgments and all other
documents (the "Additional Documents") that the Lender may
reasonably request in the Lender's Discretion, in form and
substance satisfactory to the Lender, to perfect and continue
perfected or better perfect the Lender's Liens in the
Collateral (whether now owned or hereafter arising or
acquired), to create and perfect Liens in favor of the Lender
in any Real Estate acquired after the Closing Date, and in
order to fully consummate all of the transactions contemplated
hereby and under the other Loan Documents. Without limiting
the foregoing, the Borrowers shall give the Lender prompt
written notice of any Commercial Tort Claim of either
Borrowers not specifically identified herein and any Letter of
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Credit Right of any Borrower. The Borrowers shall grant to the
Lender a security interest in any such Commercial Tort Claim
or Letter of Credit Right and the proceeds thereof upon the
Lender's written request. So long as no Event of Default has
occurred and is continuing, the Lender agrees not to assert
rights to direct the settlement of any litigation giving rise
to any such Commercial Tort Claim and, upon prior written
notice, to provide such documentation as the Borrowers may
reasonably request to satisfy the counterparty or
counterparties to any such settlement of the applicable
Borrower's authority to settle such litigation. To the maximum
extent permitted by applicable law, each Borrower authorizes
the Lender to execute any such Additional Documents in the
applicable Borrower's name and authorize the Lender to file
such executed Additional Documents in any appropriate filing
office. In addition, on such periodic basis as the Lender
shall require, the Borrowers shall (a) provide the Lender with
a report of all new patentable, copyrightable, or
trademarkable materials acquired or generated by Borrowers
during the prior period, (b) cause all patents, copyrights,
and trademarks acquired or generated by Borrowers that are not
already the subject of a registration with the appropriate
filing office (or an application therefor diligently
prosecuted) to be registered with such appropriate filing
office in a manner sufficient to impart constructive notice of
Borrowers' ownership thereof promptly upon Lender's reasonable
written request, taking into account the value of such
intellectual property and the cost of such filing, and (c)
cause to be prepared, executed, and delivered to the Lender
supplemental schedules to the applicable Loan Documents to
identify such patents, copyrights, and trademarks as being
subject to the security interests created thereunder."
(e) Section 4-12 of the Loan Agreement is hereby amended by deleting the words
"head offices in Needham, Massachusetts" and inserting in lieu thereof the words
"address set forth in Section 12-1 hereof".
(f) Section 5-16 of the Loan Agreement is hereby amended by adding the words
"Except as set forth on EXHIBIT 5-16," at the beginning of such section.
(g) Section 5-17 of the Loan Agreement is hereby amended
(i) first by deleting the text of subsection (a) thereof in its entirety
and restating such subsection (a) in full as follows:
"(a) Pay any cash dividend or make any other
distribution in respect of any class of any Borrower's capital
stock, except for any cash dividends and other distributions
made by TS to Parent."
(ii) second, by deleting the text of subsection (b) thereof in its entirety
and restating such subsection (b) in full as follows:
"(b) Own, redeem, retire, purchase, or acquire any of
Parent's capital stock except for mandatory redemption of
Parent's Series A Mandatorily Redeemable Preferred stock."
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(iii) third, by deleting the words "except .Com" from subsection (c)
thereof;
(iv) fourth, by deleting the words "except .Com" from subsection (d)
thereof;
(v) fifth, by deleting the words ", except .Com" from subsection (e)
thereof; and
(vi) sixth, by adding the following paragraph to the end of such Section
5-17:
"Notwithstanding the foregoing, Parent shall be
permitted to merge with another entity so long as (i) such
merger is with a wholly-owned subsidiary of Parent and is
effected for the purpose of reincorporating Parent in another
state, and (ii) Parent has provided the Lender prior written
notice of such merger."
(h) Section 5-18 of the Loan Agreement is hereby amended by adding a new
subsection (d) thereof, which new subsection (d) shall read in full as follows:
"(d) Loans or Advances made by Parent to TS."
(i) Section 5-21 of the Loan Agreement is hereby amended by adding the
following to the end of subsection (b) thereof:
"; provided further that the FAO Transaction and
transactions between Borrowers shall not be deemed to violate
this provision."
(j) Section 6-1 of the Loan Agreement is hereby amended, first, by inserting
"(i)" after the words "except for" in the final clause of subsection (a) thereof
and, second, by adding the following to the end of such subsection (a):
"and (ii) the sale of Inventory located at the 000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx retail store location
pursuant to the Interim Operating Agreement dated as of the
date hereof among the Borrowers, FAO and Vendex so long as the
Lender has received prior written notice of such sale."
(k) Section 10-7B of the Loan Agreement is hereby amended by inserting "ZB"
before the words "Post-Closing Payments Guaranty" in such section.
(l) A new Section 10-7C of the Loan Agreement is hereby added to the Loan
Agreement, which Section 10-7C shall read in full as follows:
"10-7C. Default Under FAO Purchase Documents. The
occurrence of any material breach or default under any of the
FAO Purchase Documents."
(m) Article 10A of the Loan Agreement is hereby amended by deleting the text of
such Article 10A in its entirety and restating such text in full as follows:
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"If any Event of Default shall have occurred and be
continuing under this Agreement, the Borrowers shall be
prohibited from making any payment in respect of any
Post-Closing Obligation."
(n) Section 11-4 of the Loan Agreement is hereby amended by inserting after the
words "in which the Borrower now or hereafter has rights" the words ", to the
extent the Borrowers have a right to grant such license without the consent of
the licensor,".
(o) Section 12-1 of the Loan Agreement is hereby amended by deleting the notice
information set forth below the first paragraph thereof in its entirety, and
inserting the following in lieu thereof:
"If to the Borrowers: THE RIGHT START, INC.
00000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Legal
Fax: (000) 000-0000
with copies to: FULBRIGHT & XXXXXXXX L.L.P.
000 Xxxxx Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxx, Esq.
Fax: (000) 000-0000
If to the Lender: XXXXX FARGO RETAIL FINANCE, LLC
Xxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
with copies to: XXXXXX, HALL & XXXXXXX
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx, P.C.
Fax: (000) 000-0000"
(p) Section 13-1 of the Loan Agreement is hereby amended by deleting the words
"24th day of January (commencing January 24, 2006) of each year and ending on
January 23rd" in the first clause of such section and inserting in lieu thereof
the words "4th day of January (commencing January 4, 2005) of each year and
ending on January 3".
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(q) A new Section 14-19 is hereby added to the Loan Agreement, which Section
14-19 shall read in full as follows:
"14-19. Parent as Agent for Borrowers.
Each Borrower hereby irrevocably appoints Parent as
the borrowing agent and attorney-in-fact for all Borrowers
(the "Administrative Borrower") which appointment shall remain
in full force and effect unless and until the Lender shall
have received prior written notice signed by each Borrower
that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each
Borrower hereby irrevocably appoints and authorizes the
Administrative Borrower (i) to provide the Lender with all
notices with respect to Advances and L/Cs obtained for the
benefit of any Borrower and all other notices and instructions
under this Agreement and (ii) to take such action as the
Administrative Borrower deems appropriate on behalf of the
Borrowers to obtain Advances and L/Cs and to exercise such
other powers as are reasonably incidental thereto to carry out
the purposes of this Agreement. It is understood that the
handling of the Loan Account and Collateral of the Borrowers
in a combined fashion, as more fully set forth herein, is done
solely as an accommodation to the Borrowers in order to
utilize the collective borrowing powers of the Borrowers in
the most efficient and economical manner and at their request,
and that the Lender shall not incur liability to any Borrower
as a result hereof. Each Borrower expects to derive benefit,
directly or indirectly, from the handling of the Loan Account
and the Collateral in a combined fashion. To induce the Lender
to do so, and in consideration thereof, each Borrower hereby
jointly and severally agrees to indemnify the Lender harmless
against any and all liability, expense, loss or claim of
damage or injury, made against the Lender by any Borrower or
by any third party whosoever, arising from or incurred by
reason of (a) the handling of the Loan Account and Collateral
of Borrowers as herein provided, (b) Lender's relying on any
instructions of the Administrative Borrower, or (c) any other
action taken by Lender hereunder or under the other Loan
Documents, except that the Borrowers will have no liability to
the Lender under this Section 14-19 with respect to any
liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the
Lender's gross negligence or willful misconduct."
(r) Exhibit 1-6 (Amended and Restated Master Note) is hereby amended by deleting
the text of such Exhibit 1-6 in its entirety and inserting in lieu thereof the
text of Exhibit 1-6 attached hereto.
(s) Exhibit 3 (Definitions) is hereby amended by deleting the text of such
Exhibit 3 in its entirety and inserting in lieu thereof the text of Exhibit 3
attached hereto.
(t) Exhibit 5-2 (Related Entities) is hereby amended by deleting the text of
such Exhibit 5-2 in its entirety and inserting in lieu thereof the text of
Exhibit 5-2 attached hereto.
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(u) Exhibit 5-3 (Intellectual Property/ Mergers and Consolidations) is hereby
amended by adding to the end of such Exhibit 5-3 the text of Exhibit 5-3
attached hereto.
(v) Exhibit 5-4 (Locations of Collateral) is hereby amended by adding to the end
of such Exhibit 5-4 the text of Exhibit 5-4 attached hereto.
(w) Exhibit 5-5 (Encumbrances) is hereby amended by adding to the end of such
Exhibit 5-5 the text of Exhibit 5-5 attached hereto.
(x) Exhibit 5-6 (Indebtedness) is hereby amended by deleting the text of such
Exhibit 5-6 in its entirety and inserting in lieu thereof the text of Exhibit
5-6 attached hereto.
(y) Exhibit 5-7 (Insurance) is hereby amended by adding to the end of such
Exhibit 5-7 the text of Exhibit 5-7 attached hereto.
(z) A new Exhibit 5-8 (Licenses) to the Loan Agreement is hereby added to the
Loan Agreement, the text of which Exhibit 5-8 shall read in full as set forth on
Exhibit 5-8 hereto.
(aa) Exhibit 5-9 (Leases) is hereby amended by adding to the end of such Exhibit
5-9 the text of Exhibit 5-9 attached hereto.
(bb) A new Exhibit 5-16 (Licenses) is hereby added to the Loan Agreement, the
text of which Exhibit 5-16 shall read in full as set forth on Exhibit 5-16
hereto.
(cc) Exhibit 7-1 (DDAs) is hereby amended by adding to the end of such Exhibit
7-1 the text of Exhibit 7-1 attached hereto.
(dd) Exhibit 7-2 (Credit Card Processors) is hereby amended by adding to the end
of such Exhibit 7-2 the text of Exhibit 7-2 attached hereto.
(ee) Exhibit 9-4 (Borrowing Base Certificate) is hereby amended by deleting the
text of such Exhibit 9-4 in its entirety and inserting in lieu thereof the text
of Exhibit 9-4 attached hereto.
(ff) Exhibit 9-10 (Business Plan) is hereby amended by deleting the text of such
Exhibit 9-10 in its entirety and inserting in lieu thereof the text of Exhibit
9-10 attached hereto.
2. Conditions Precedent to Third Amendment. The satisfaction of each of
the following, unless waived or deferred by the Lender, in its sole discretion,
shall constitute conditions precedent to the effectiveness of this Third
Amendment and each and every provision hereof:
(a) The Lender shall have received each of the following documents
(collectively, the "Third Amendment Documents"), each such document in form and
substance reasonably satisfactory to the Lender, duly executed and in full force
and effect:
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(i) the Amended and Restated Master Note;
(ii) the TS-Xxxxxxx Pledge Agreement;
(iii) the Guaranty and Security Agreement;
(iv) the Copyright Security Agreement;
(v) the Trademark Security Agreement;
(vi) the FAO Intercreditor Agreement;
(vii) the Xxxxxxx Agreement;
(viii) the opinion of Kronish, Xxxx Xxxxxx & Xxxxxxx, LLP delivered
pursuant to the FAO Purchase Agreement with respect to the FAO
Transaction;
(ix) the opinion of Fulbright & Xxxxxxxx LLP;
(x) evidence satisfactory to the Lender that, commencing on the
date hereof, any amounts (in excess of any minimum balance not
to exceed $2,000) in each of the DDAs maintained by Toy
Soldier with First Union Bank shall be transferred on a daily
basis to the Concentration Account;
(xi) evidence satisfactory to the Lender that, commencing on the
date hereof, Chase Merchant Services, L.L.C. shall make all
payments of proceeds of credit card charges in respect of Toy
Soldier Inventory to an account satisfactory to the Lender;
(xii) a certificate of the Secretary of each Borrower attesting to
such Borrower's Governing Documents, the resolutions of its
board of directors authorizing its execution, delivery and
performance of this Third Amendment and the Third Amendment
Documents to which such Borrower is a party, and the
incumbency of officers;
(xiii) a certificate of a Manager of Xxxxxxx attesting to Targoff's
Governing Documents, the resolutions of its managers
authorizing its execution, delivery and performance of the
Third Amendment Documents to which it is a party, and the
incumbency of officers and/ or managers;
(xiv) a certificate of status with respect to Xxxxxxx, dated within
10 days of the date hereof, such certificate to be issued by
the appropriate officer of the jurisdiction of organization of
Xxxxxxx, which certificate shall indicate that Xxxxxxx is in
good standing in such jurisdiction;
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(xv) evidence satisfactory to the Lender that Toy Soldier has
applied for certificates of status to be issued by the
appropriate officers of each jurisdiction in which Toy Soldier
will be conducting business, which certificates shall indicate
that Toy Soldier is in good standing in such jurisdictions;
(xvi) a certificate of insurance, together with the endorsements
thereto, with respect to the assets purchased pursuant to the
FAO Purchase Documents, the form and substance of which shall
be satisfactory to Agent and its counsel;
(xvii) a certificate of officers delivered by both Borrowers
attesting that the FAO Purchase Documents attached thereto are
true, correct and complete copies of such documents and that
such documents set forth the complete agreement (whether oral
or written, including all side letters and agreements) among
the Borrowers and FAO, QFS and Vendex, together with copies of
all such FAO Purchase Documents;
(b) The FAO Transaction shall have been consummated on terms satisfactory to the
Lender.
(c) The representations and warranties in this Third Amendment, the Loan
Agreement as amended hereby and the other Loan Documents shall be true and
correct in all material respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(d) Except as expressly waived hereby, no Event of Default shall have occurred
and be continuing on the date hereof, nor shall result from the consummation of
the transactions contemplated herein;
(e) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any court or
other governmental authority against either Borrower or the Lender;
(f) The Lender shall have received a third amendment fee of $50,000 from the
Borrowers; and
(g) The Lender shall have received payment in full of its out-of pocket expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the Loan Agreement and this Third Amendment.
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3. Conditions Subsequent to Third Amendment. The obligation of the Lender
to continue to make Advances (or otherwise extend credit under the Loan
Agreement) is subject to the fulfillment, on or before the date applicable
thereto, of each of the conditions subsequent set forth below (the failure of
the Borrowers to so perform or cause to be performed constituting an Event of
Default under the Loan Agreement).
(a) Within 7 days of the date hereof, the Borrowers shall deliver:
(i) account control agreements with respect to each of the DDAs
maintained by TS at First Union Bank, each such account
control agreement in form and substance satisfactory to the
Lender, duly executed and in full force and effect; and
(ii) credit card processing agreements with all of Toy Soldier's
Credit Card Processors, such credit card processing agreements
in form and substance satisfactory to the Lender, duly
executed and in full force and effect.
(b) Within 14 days of the date hereof the Borrowers shall deliver evidence
satisfactory to the Lender that any amounts (in excess of any minimum balance
not to exceed $2,000) in each of the DDAs maintained by Toy Soldier shall be
transferred on a daily basis to the Concentration Account;
(c) Within 30 days of the date hereof, the Borrowers shall deliver:
(i) certificates of status with respect to Toy Soldier, such
certificates to be issued by the appropriate officer of the
jurisdictions in which its failure to be duly qualified or
licensed would constitute a Material Adverse Change, which
certificates shall indicate that Toy Soldier is in good
standing in such jurisdictions;
(ii) account control agreements with respect to each of the DDAs
designated as "Toy Soldier DDAs" on Exhibit 7-1 to the Loan
Agreement as amended hereby, each such account control
agreement in form and substance satisfactory to the Lender,
duly executed and in full force and effect.
(d) Notwithstanding Section 5-4 of the Loan Agreement as amended hereby, within
60 days of the date hereof, the Borrowers shall deliver landlord waivers with
respect to each of the locations acquired by Toy Soldier under the FAO Purchase
Agreement that are located in Landlord Lien States, each such landlord waiver in
form and substance satisfactory to the Lender, duly executed and in full force
and effect. For each such location for which the Lender has not received a
landlord waiver by such date, the Lender shall include an amount equal to one
month's rent for such location in Availability Reserves.
4. Representations and Warranties. Each Borrower hereby represents and warrants
to the Lender that (a) the execution, delivery, and performance of this Third
Amendment, each of the Third Amendment Documents and the Loan Agreement are
within such Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
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arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected; (b) this Third Amendment, the Loan
Agreement and the Third Amendment Documents constitute such Borrower's legal,
valid, and binding obligation, enforceable against such Borrower in accordance
with its terms; (c) this Third Amendment and the Third Amendment Documents have
been duly executed and delivered by such Borrower; (d) the Borrowers are in
compliance with all of the terms and provisions set forth in the Loan Agreement
and each of the other Loan Documents, as previously amended and as amended
hereby, on their part to be observed or performed on or prior to the date
hereof; and (e) except as expressly waived hereby, no Event of Default has
occurred and is continuing.
5. Reaffirmation by Parent. Parent further reaffirms all of its obligations, as
amended hereby, under the Loan Agreement, as amended hereby, and the other Loan
Documents.
6. Effect on Loan Agreement. The Loan Agreement, as amended hereby, shall be and
remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. The execution, delivery, and
performance of this Third Amendment shall not operate as a waiver of or, except
as expressly set forth herein, as an amendment of, any right, power, or remedy
of the Lender under the Loan Agreement, as in effect prior to the date hereof.
7. Further Assurances. The Borrowers shall execute and deliver all agreements,
documents, and instruments, in form and substance satisfactory to the Lender,
and take all actions as the Lender may reasonably request from time to time, to
perfect and maintain the perfection and priority of the security interest in the
Collateral held by the Lender and to fully consummate the transactions
contemplated under this Third Amendment and the Loan Agreement, as amended
hereby.
8. No Novation; Entire Agreement. This Third Amendment evidences solely
the amendment of the terms and provisions of the Borrower's obligations under
the Loan Agreement and is not a novation or discharge thereof. There are no
other understandings, express or implied, between the Lender and the Borrowers
regarding the subject matter hereof.
9. Choice of Law. The validity of this Third Amendment, its construction,
interpretation and enforcement, and the rights of the parties hereunder, shall
be determined under, governed by, and construed in accordance with the laws of
The Commonwealth of Massachusetts.
10. Counterparts; Telefacsimile Execution. This Third Amendment may be executed
in any number of counterparts and by different parties and separate
counterparts, each of which when so executed and delivered, shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Third Amendment by telefacsimile shall be as effective as delivery of a manually
executed counterpart of this Third Amendment. Any party delivering an executed
counterpart of this Third Amendment by telefacsimile also shall deliver a
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manually executed counterpart of this Third Amendment but the failure to deliver
a manually executed counterpart shall not affect the validity, enforceability,
and binding effect of this Third Amendment.
11. Definitions and Construction.
(a) Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Loan Agreement, as amended
hereby.
(b) This Third Amendment and the Loan Agreement shall be construed collectively
and in the event that any term, provision or condition of any of such documents
is inconsistent with or contradictory to any term, provision or condition of any
other such document, the terms, provisions and conditions of this Third
Amendment shall supersede and control the terms, provisions and conditions of
the Loan Agreement. Upon and after the effectiveness of this Third Amendment,
each reference in the Loan Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Loan Agreement, and each
reference in the other Loan Documents to "the Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Loan Agreement,
shall mean and be a reference to the Loan Agreement as modified and amended
hereby.
(c) Except to the extent expressly amended hereby, the Loan Agreement and all
other Loan Documents shall be unaffected hereby and shall continue in full force
and effect and are hereby in all respects ratified and confirmed, and the Loan
Agreement and other Loan Documents, as amended hereby, constitute the legal,
valid, binding and enforceable obligations of the Borrowers to the Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to Loan and Security Agreement to be executed as of the date first above
written.
BORROWERS:
THE RIGHT START, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Executive Vice President
TOY SOLDIER, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Executive Vice President
LENDER:
XXXXX FARGO RETAIL FINANCE, LLC,
as Lender
By: /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx,
Senior Vice President
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EXHIBIT 3
"Acceptable Inventory": Such of the Borrowers' Inventory, at such
locations, and of such types, character, qualities and quantities, (net of
Inventory Reserves), as to which Inventory, the Lender has a perfected security
interest which is prior and superior to all security interests, claims, and
Encumbrances.For purposes of determining the Borrowing Base, none of the Toy
Soldier Inventory shall be included in Acceptable Inventory if, as of any date
of determination, Excess Availability is less than $10,000,000. For purposes of
calculating Excess Availability, Toy Solder Inventory shall be included in
Acceptable Inventory.
"Account Debtor": Has the meaning given that term in the UCC.
"Accounts": All of Borrowers' now owned or hereafter acquired right,
title and interest in and to "accounts" as that term is defined from time to
time in the UCC.
"Accounts Receivable" include, without limitation, "accounts" as
defined in the UCC.
"ACH": Automated clearing house.
"Additional Documents": Is defined in Section 2-4.
"Advances": Funds advanced to the Borrowers or otherwise in accordance
with this Agreement.
"Advance Rates": The percentage(s) of the Cost of Acceptable Inventory
or Net Retail Liquidation Value used to calculate the Borrowing Base.
"Affiliate": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than twenty-five (25%) percent
of the capital stock, beneficial interests, partnership interests, or other
equity interests of the other; or (b) one has, directly or indirectly, control
of the other; or (c) not less than twenty-five (25%) percent of their respective
ownership is directly or indirectly held by the same third Person.
"Amended and Restated Master Note": Is defined in Section 1-6.
"Annual Facility Fee": Is defined in Section 1-9(a).
"Availability": At any time of determination an amount equal to the
lesser of the Borrowing Base and the Credit Limit in either case, minus (i) the
then unpaid principal balance of the Loan Account, minus (ii) 100% of the then
outstanding Stated Amount of all standby L/C's; minus (iii) 100% of the then
Stated Amount of all Documentary L/C's, plus all freight and duty charges
applicable thereto.
"Availability Reserves": Such reserves as the Lender from time to time
determines in the Lender's reasonable discretion as being appropriate to reflect
impediments to the Lender's ability to realize upon the Collateral as of the
Closing Date or any increase in such impediments subsequent to the Closing Date.
15
Without limiting the generality of the foregoing, Availability Reserves may
include (but are not limited to) reserves based on (but in each case not greater
than) the following:
(a) Rent (in the amount of past due rent and in which no
landlord's waiver, acceptable to the Lender, has been received by the Lender in
accordance with Section 5.4).
(b) In store customer credits and gift certificates.
(c) Payables (based upon payables which are past due
normal trade terms).
(d) Taxes and other governmental charges, including, ad
valorem, personal property, and other taxes which may have priority over the
security interests of the Lender in the Collateral.
(e) Held or post-dated checks.
"Average Unused Portion of the Credit Limit": As of any date of
determination, (a) the Credit Limit, minus (b) the sum of (i) the average daily
balance of advances that were outstanding during the immediately preceding
month, plus (ii) the average daily balance of the undrawn L/C's outstanding
during the immediately preceding month.
"Banking Day": Any day other than (a) a Saturday, Sunday; (b) any day
on which banks in Boston, Massachusetts are not open to the general public for
the purpose of conducting commercial banking business; or (c) a day on which the
Lender is not open to the general public to conduct business.
"Bankruptcy Case": Collectively, the jointly-administered cases filed
by the Debtors under Chapter 11 of the Bankruptcy Code with the Bankruptcy
Court, with a lead case no. 01-1749, or any successor case thereto.
"Bankruptcy Code": The United States Bankruptcy Code (11 U.S.C.ss.101
et seq.), as amended, and any successor statute.
"Bankruptcy Court": The United States Bankruptcy Court for the
District of Delaware, or such other successor court where the Bankruptcy Case is
pending.
"Base": The Base Rate announced from time to time by Xxxxx Fargo Bank,
N.A. (or any successor in interest to Xxxxx Fargo Bank, N.A.). In the event that
said bank (or any such successor) ceases to announce such a rate, "Base" shall
refer to that rate or index announced or published from time to time as the
Lender, in good faith, designates as the functional equivalent to said Base
Rate. Any change in "Base" shall be effective, for purposes of the calculation
of interest due hereunder, when such change is made effective generally by the
bank on whose rate or index "Base" is being set.
"Basis Point(s)": An amount which is equal to 1/100th of one (1%)
percent. For example, one and one-half (1.5%) percent equals 150 basis points.
"Blocked Account": Is defined in Article 7-1(b)(i).
16
"Books": All of Borrowers' books and records including: ledgers;
records indicating, summarizing, or evidencing Borrowers' properties or assets
(including the Collateral) or liabilities; all information relating to
Borrowers' business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.
"Borrowers": Is defined in the Preamble.
"Borrowing Base": As of any date of determination, amounts up to the
lesser of (a) the Credit Limit and (b) the total of (i) the Borrowing Base
Percentage of Acceptable Inventory plus (ii) the Borrowing Base Percentage of
the then Stated Amount of all Documentary L/Cs minus (iii) Availability
Reserves.
"Borrowing Base Percentage": A factor, expressed as a percentage,
equal to 0.85 multiplied by the Net
Retail Liquidation Value.
"Borrowing Base Certificate": The certificate in the same for attached
as EXHIBIT 9-4, provided to Lender in connection with any request for advances
and/or L/C's, setting forth, among other things, Availability.
"Business Plan": The Borrowers' business plan annexed hereto as EXHIBIT
9-10 and any revision, amendment, or update of such business plan to which the
Lender has provided its written sign-off.
"Capital Expenditures": The expenditure of funds or the incurrence of
liabilities which may be capitalized in accordance with GAAP.
"Capital Lease": Any lease which may be capitalized in accordance with
GAAP.
"Chattel Paper": All of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "chattel paper", including, without
limitation, "tangible chattel paper" and "electronic chattel paper", as such
terms are defined from time to time in the Code, and any and all supporting
obligations in respect thereof.
"Closing Date": The date of the first to occur of the making of the
initial Advance or the issuance of the initial L/C.
"Collateral": Is defined in Section 2-1.
"Concentration Account": Is defined in Section 7-3.
"Control": The direct or indirect power to direct or cause the
direction of the management and policies of another Person, whether through
ownership of voting securities, by contract, or otherwise. Included among such
powers, with respect to a corporation, are power to cause any of following: (a)
the election of a majority of its Board of Directors; (b) the issuance of
additional shares of its common stock; (c) the issuance and designation of
rights and shares of its preferred stock (if any); (d) the distribution and
17
timing of dividends; (e) the award of performance bonuses to its management; (f)
the termination or severance of officers or key employees; and (g) all or any
similar matters.
"Copyright Security Agreement": A copyright security agreement executed
and delivered by each of Toy Soldier and the Lender, the form and substance of
which is satisfactory to the Lender.
"Cost": The calculated costs of purchases, as determined from invoices
received by the Borrowers, the Borrowers' Purchase Journal or Stock Ledger,
based upon the Borrowers' accounting practices, known to the Lender, which
practices are in effect on the date on which this Agreement was executed. "Cost"
does not include any inventory capitalization costs inclusive of advertising,
but may include other charges used in the Borrowers' determination of cost of
goods sold and bringing goods to market, all within Lender's sole discretion and
in accordance with GAAP.
"Cost Factor": The result of 1 minus the Borrowers' then cumulative
markup percent derived from the Borrowers' purchase journal on a rolling twelve
(12) month basis.
"Costs of Collection": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by the Lender's
attorneys, and all reasonable costs incurred by the Lender in the administration
of the Liabilities and/or the Loan Documents, including without limitation,
reasonable costs and expenses associated with travel on behalf of the Lender,
which costs and expenses are directly or indirectly related to or in respect of
the Lender's: administration and management of the Liabilities; negotiation,
documentation, and amendment of any Loan Document; or efforts to preserve,
protect, collect, or enforce the Collateral, the Liabilities, and/or the
Lender's Rights and Remedies and/or any of the Lender's rights and remedies
against or in respect of any guarantor or other Lender liable in respect of the
Liabilities (whether or not suit is instituted in connection with such efforts).
The Costs of Collection are Liabilities, and at the Lender's option may bear
interest at the highest post-default rate which the Lender may charge the
Borrowers hereunder as if such had been lent, advanced, and credited by the
Lender to, or for the benefit of, the Borrowers.
"Credit Card Processor": Any Person which acts as a credit card
clearinghouse or processor or credit car payments accepted by Borrowers.
"Credit Limit": $17,500,000.
"Debtors": Collectively, Zany Brainy, Inc., Children's Products, Inc.,
Children's Distribution, LLC, Children's Development, Inc., Noodle Kidoodle,
Inc., and Zany Brainy Direct LLC.
"DDA": Any "deposit account" (as that term is defined from time to
time in the UCC) maintained by the Borrowers.
"Document": All of Borrowers' now owned or hereafter acquired right,
title, and interest with respect to any "document" as that term is defined from
time to time in the UCC, and any and all supporting obligations in respect
thereof.
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"Documentary L/C": A documentary L/C issued to support the purchase by
Borrowers of Inventory prior to its transport to a location set forth on EXHIBIT
5-4 that provides that all draws thereunder must require presentation of
customary documentation (including, if applicable, commercial invoices, packing
lists, certificate of origin, xxxx of lading, an airway xxxx, customs clearance
documents, quota statement, certificate, beneficiaries statement and xxxx of
exchange, bills of lading, dock warrants, dock receipts, warehouse receipts or
other documents of title), in form and substance reasonably satisfactory to
Lender and reflecting passage to Borrowers of title to first quality Inventory
conforming to Borrowers' contract with the seller thereof.
"Duly Authorized Person": Any individual authorized by the Borrowers
to request loans or financial accommodations and/or sign reports to Lender.
"EBITDA": The Borrowers' earnings from continuing operations (excluding
extraordinary items), before interest, taxes, depreciation and amortization,
each as determined in accordance with GAAP.
"Effective Advance Rate": The percentage obtained by dividing the sum
of the then existing balance of the Loan Account plus the Stated Amount of
outstanding L/C's by the then Cost value of Acceptable Inventory.
"Employee Benefit Plan": As defined in ERISA.
"Encumbrance": Each of the following:
(a) security interest, mortgage, pledge, hypothecation, lien
attachment, or charge of any kind (including any agreement to give any of the
foregoing); the interest of a lessor under a Capital Lease; conditional sale or
other title retention agreement; sale of accounts receivable or chattel paper;
or other arrangement pursuant to which any Person is entitled to any preference
or priority with respect to the property or assets of another Person or the
income or profits of such other Person or which constitutes an interest in
property to secure an obligation; each of the foregoing whether consensual or
nonconsensual and whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) the filing of any financing statement under the UCC or
comparable law of any jurisdiction.
"End Date": The date upon which both (a) all Liabilities have been paid
in full and (b) all obligations of the Lender to make loans and advances and to
provide other financial accommodations to the Borrowers hereunder shall have
been irrevocably terminated.
"Environmental Laws": (a) Any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements which regulates or relates to, or imposes any standard of
conduct or liability on account of or in respect to environmental protection
matters, including, without limitation, Hazardous Materials, as is now or
hereafter in effect; and (b) the common law relating to damage to Persons or
property from Hazardous Materials.
19
"Equipment" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "equipment", as that term is defined
from time to time in the UCC, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA": The Employee Retirement Security Act of 1974, as amended.
"ERISA Affiliate": Any Person which is under common control with the
Borrowers within the meaning of Section 4001 of ERISA or is a part of a group
which includes the Borrowers and which would be treated as a single employer
under Section 414 of the Internal Revenue Code of 1986, as amended.
"Estate": Collectively, the estates of the Debtors created under
Section 541 of the Bankruptcy Code by virtue of the Bankruptcy Case.
"Event of Default": Is defined in Article 10.
"Excess Availability": As of any date of determination, the amount
equal to (i) 85% of Net Retail Liquidation Value less (ii) the sum of
Availability Reserves plus the then outstanding balance of the Loan Account
(including, without limitation, all outstanding L/Cs).
"Executive Agreement": Any agreement or understanding (whether or not
written) to which either Borrower is a party or by which such Borrower may be
bound, which agreement or understanding relates to Executive Pay.
"Executive Officer": With respect to Parent, each of Xxxxx X. Xxxxx,
Xxxxxxx X. Xxxxxxxx and Xxxxxxx Xxxxxxxx and, with respect to TS, each of Xxxxx
X. Xxxxx and Xxxxxxx X. Xxxxxxxx, and any other Person who (without regard to
title) is the successor to such individual(s) appointed within sixty (60) days
of the date when such individual(s) is/are no longer an Executive Officer for
any reason, and who is reasonably satisfactory to Lender.
"Executive Pay": All salary, bonuses, and other value directly or
indirectly provided by or on behalf of the Borrowers to or for the benefit of
any Executive Officer of any Affiliate, spouse, parent, or child of any
Executive Officer.
"FAO": F.A.O. Xxxxxxx, a New York corporation.
"FAO Intercreditor Agreement": An intercreditor and subordination
agreement executed and delivered by Vendex, FAO, QFS and the Lender, the form
and substance of which is satisfactory to the Lender.
"FAO Notes": Collectively, the Subordinated Notes (as defined in the
FAO Purchase Agreement) in the original principal amount of up to $18,000,000
issued by Toy Soldier to FAO and QFS and any promissory note delivered by Toy
Soldier in connection with the payment of the Settlement Balance (as defined in
the FAO Purchase Agreement).
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"FAO Payment Obligations": Any obligation of Toy Soldier and/ or Parent
to make any payment to FAO, QFS or Vendex in respect of the FAO Notes, the
Settlement Balance, and/ or any other obligation under any of the FAO Purchase
Documents.
"FAO Purchase Agreement": The Asset Purchase Agreement dated November
19, 2001 by and among Parent, Toy Soldier, Vendex, FAO and QFS.
"FAO Purchase Documents": Collectively,
(a) the FAO Notes;
(b) the Security Agreement dated as of the date hereof
made by Toy Soldier in favor of FAO and QFS;
(c) the Guaranty dated as of the date hereof made by
Parent in favor of FAO and QFS;
(d) the Security Agreement dated as of the date hereof
made by Parent in favor of FAO and QFS; and
(e) all other material agreements, documents and/ or
instruments executed and delivered in connection with the foregoing and/ or the
FAO Purchase Agreement.
"FAO Transaction": Collectively, the transactions contemplated by the
FAO Purchase Agreement and the other FAO Purchase Documents in which Toy Soldier
is purchasing certain of the assets of FAO and QFS.
"Funding Account": Is defined in Section 7-6.
"GAAP": Principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to that accounting period in respect of
which reference to GAAP is being made.
"General Intangibles": All of Borrowers' now or hereafter acquired
right, title and interest in and to "general intangibles" as that term is
defined from time to time in the UCC.
"Goods": All of Borrowers' now owned or hereafter acquired right,
title, and interest with respect to "goods", as that term is defined from time
to time in the UCC, including, without limitation, any and all Inventory and
Equipment.
"Governing Documents": The certificate or articles of incorporation,
by-laws, certificate of formation, operating agreement or other organizational
or governing documents of any Person.
"Gross Margin": With respect to the subject accounting period for which
being calculated, (i) the difference of Sales minus Cost of Goods Sold divided
by (ii) Sales (determined in accordance with the cost method of accounting).
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"Guaranty and Security Agreement": A Guaranty and Security Agreement
executed and delivered by Xxxxxxx and the Lender, the form and substance of
which is satisfactory to the Lender.
"Hazardous Materials": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as to any of the
foregoing) are defined or regulated as a hazardous material in or under any
Environmental Law and (b) oil in any physical state other than, in each case,
cleaning materials in ordinary amounts used in the ordinary course of Borrowers'
business.
"Indebtedness": All indebtedness and obligations of or assumed by any
person on account of or in respect to any of the following:
(a) In respect of money borrowed (including any indebtedness
which is non-recourse to the credit of such Person but which is secured by an
Encumbrance on any asset of such Person) whether or not evidenced by a
promissory note, bond, debenture or other written obligation to may money.
(b) For the payment of the purchase price of goods or services
deferred for more than thirty (30) days beyond then current trade terms provided
to such Person by the supplier of such goods or services.
(c) In connection with any letter of credit or acceptance
transaction (including, without limitation, the face amount of all letters of
credit and acceptances issued for the account of such Person or reimbursement on
account of which such Person would be obligated).
(d) In connection with the sale or discount of accounts
receivable or chattel paper of such Person.
(e) On account of deposits or advances.
(f) As lessee under Capital Leases.
"Indebtedness" of any Person shall also include:
(a) Indebtedness of others secured by an Encumbrance on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person.
(b) Any guaranty, endorsement, suretyship or other undertaking
pursuant to which that Person may be liable on account of any obligation of any
third party.
(c) The Indebtedness of a partnership or joint venture in
which such Person is a general partner or joint venturer.
"Indemnified Person": Is defined in Section 14-11.
22
"Instruments": All of Borrowers' now owned or hereafter acquired right,
title, and interest with respect to "instruments", including, without
limitation, any "promissory notes", as such terms are defined from time to time
in the UCC.
"Inventory": All Borrowers' now owned or hereafter acquired right,
title, and interest with respect to "inventory", as that term is defined from
time to time in the UCC, including, without limitation, goods held for sale or
lease or to be furnished under a contract of service, goods that are leased by a
Borrower as lessor, goods that are furnished by a Borrower under a contract of
service, and raw materials, work in process, or materials used or consumed in a
Borrowers' business.
"Inventory Reserves": Such reserves as may be established from time to
time by the Lender in the Lender's discretion with respect to the determination
of conditions affecting the saleability, at retail, of the Acceptable Inventory
or which reflect such other factors as affect the current Retail or market value
of the Acceptable Inventory and which conditions or factors having changed
materially from those existing at the time of execution of this Agreement.
Without limiting the generality of the foregoing, Inventory Reserves may include
(but are not limited to) reserves based on the following:
(a) Obsolescence (determined based upon Inventory on hand
beyond a given number of days), consistent with (i) Borrowers' past history with
respect to such obsolescence and (ii) Borrowers' Business Plan.
(b) Seasonality.
(c) Shrinkage.
(d) Imbalance.
(e) Change in Inventory character, composition or mix.
(f) Markdowns (both permanent and point of sale).
(g) Retail markons or markups inconsistent with prior period
practice and performance; current business plans; or advertising calendar and
planned advertising events.
(h) The relationship between the amount expended for
Inventory purchases and the cost of goods sold.
"Investment Property": All of Borrowers' now owned or hereafter
acquired right, title and interest in and to "investment property" as that term
is defined from time to time in the UCC.
"Issuer": The issuer of any L/C.
"L/C": Any letter of credit, the issuance of which is procured by the
Lender for the account of either Borrower and any acceptance made on account of
such letter.
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"Landlord Lien State": Any state or other jurisdiction under whose
statutory or common law the rights of a landlord in assets of that landlord's
tenant, for unpaid rent, are senior to a perfected security interest in such
assets.
"Lease": Any lease or other agreement, no matter how styled or
structured, which either Borrower is entitled to the use or occupancy of any
space.
"Leasehold Interests": The Borrowers' leasehold estate or interest in
each of the properties at or upon which the Borrowers conduct business, offers
any Inventory for sale, or maintains any of the Collateral, whether or not for
retail sale, together with Borrowers' interest in any of the improvements and
fixtures located upon or appurtenant to each leasehold interest.
"Lender's Rights and Remedies": Is defined in Section 11-6.
"Letter of Credit Rights": All of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "letter of credit rights",
as that term is defined from time to time in the UCC.
"Liabilities" (in the singular, "Liability"): Includes, without
limitation, all and each of the following, whether now existing or hereafter
arising:
(a) Any and all direct and indirect liabilities, debts, and
obligations of the Borrowers to the Lender under any Loan Document, as amended
from time to time, each of every kind, nature, and description.
(b) Each obligation to repay any loan, advance, indebtedness,
note, obligation, overdraft, or amount now or hereafter owing by the Borrowers
to the Lender (including all future advances whether or not made pursuant to a
commitment by the Lender) under any Loan Documents, as amended from time to
time, whether or not any of such are liquidated, unliquidated, primary,
secondary, secured, unsecured, direct, indirect, absolute, contingent, or of any
other type, nature, or description, or by reason of any cause of action which
the Lender may hold against the Borrowers under any Loan Documents, as amended
from time to time.
(c) All notes and other obligations of the Borrowers under any
Loan Documents now or hereafter assigned to or held by the Lender, each of every
kind, nature, and description.
(d) All interest, fees, and charges and other amounts which
may be charged by the Lender to the Borrowers and/or which may be due from the
Borrowers to the Lender from time to time under any Loan Documents.
(e) All costs and expenses incurred or paid by the Lender in
respect of any agreement between the Borrowers and the Lender under any Loan
Documents, as amended from time to time or instrument furnished by the Borrowers
to the Lender under any Loan Documents, as amended from time to time (including,
without limitation, Costs of Collection, attorneys' reasonable fees, and all
court and litigation costs and expenses).
24
(f) Any and all covenants of the Borrowers to or with the
Lender and any and all obligations of the Borrowers to act or to refrain from
acting in accordance with any agreement between the Borrowers and the Lender or
instrument furnished by the Borrowers to the Lender.
"Lien" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Estate.
"Loan Account": Is defined in Section 1-5.
"Loan Documents": This Agreement, the TS-Xxxxxxx Pledge Agreement, the
Guaranty and Security Agreement, the Master Note, the Trademark Security
Agreement, the Copyright Security Agreement, the FAO Intercreditor Agreement,
and any other agreement, certificate, instrument or other document entered into,
now or in the future, by any Borrower and the Lender in connection with this
Agreement.
"Local DDA": A depository account maintained by the Borrowers, the only
contents of which may be transfers from the Funding Account and actually used
solely (i) for xxxxx cash purposes; or (ii) for payroll.
"Loan Maintenance Fee": Is defined in Section 1-9(b).
"Material Adverse Change": (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrowers, including, without limitation,
a material adverse change in the business, prospects, operations, results of
operations, assets, liabilities or condition since the date of the latest
financial information submitted to Lender on or before the Closing Date, and
since the date of the latest financial information supplied hereunder or at any
time as compared to the Business Plan attached hereto on the date of execution
hereof as EXHIBIT 9-10; (b) the material impairment of Borrowers' ability to
perform its obligations under the Loan Documents to which it is a party or of
Lender to enforce the Liabilities or realize upon the Collateral, (c) a material
adverse effect on the value of the Collateral or the amount that Lender would be
likely to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material impairment
of the priority of Lender's liens with respect to the Collateral, other than as
permitted under this Agreement.
"Maturity Date": January 4, 2005.
"Net Retail Liquidation Value": The appraised liquidation value
(expressed as a percentage) of Acceptable Inventory less liquidation expenses as
25
reasonably determined by Lender or its agents from time to time, consistent with
the appraisal prepared by Lender as of the Closing Date, or any subsequent
appraisal.
"One Turn State": Any state or other jurisdiction under whose statutory
or common law the relative priority of the rights of a landlord in assets of
that landlord's tenant, for unpaid rent, vis a vis the rights of the holder of a
perfected security interest therein is dependent upon whether such security
interest arose prior or subsequent to the subject asset's coming onto the
demised premises.
"Overadvance":Any amounts advanced hereunder which exceed Availability.
"Parent Guaranty": That certain Guaranty Agreement dated as of
September 5, 2001 by Parent to Xxxxx Fargo Retail Finance, LLC, as agent for all
lenders under the ZB Loan and Security Agreement.
"Parent Pledge Agreement": That certain Pledge Agreement dated as of
September 5, 2001 by and among Parent, as pledgor thereunder, ZB Company, Inc.,
as pledged stock issuer thereunder, and Xxxxx Fargo Retail Finance, LLC, as
agent for all lenders under the ZB Loan and Security Agreement.
"Participant": Is defined in Section 14-12.
"Percentage Points": The number of whole (and, if indicated, fractions
(or decimal equivalents of) integers of a percentage referred to in a financial
performance covenant. For example, if a projected percentage were fifty (50%)
percent and the actual percentage turned out to be fifty-five and 6/10 (55.6%)
percent, the variance would be 5.6 Percentage Points.
"Person": Any natural person, and any corporation, limited liability
company, trust, partnership, joint
venture, or other enterprise or entity.
"Post-Closing Obligations": Collectively, the ZB Post-Closing Payments
and the FAO Payment Obligations.
"QFS": Quality Fulfillment Services, Inc., a Virginia corporation.
"Real Estate": Any estates or interests in real property now owned or
hereafter acquired by the Borrowers.
"Receipts": All cash, cash equivalents, checks, and credit card slips
and receipts as arise out of the sale of the Collateral and any other cash, cash
equivalents or checks otherwise received by the Borrowers, whether as a result
of any loan, investment by the Borrowers, investment in the Borrowers or
otherwise.
"Receivables Collateral": That portion of the Collateral which consists
of the Borrowers' Accounts, Accounts Receivable, Contract Rights, General
Intangibles, Chattel Paper, Instruments, Investment Property, Documents of
Title, Documents, Securities, letters of credit for the benefit of the
Borrowers, and bankers' acceptances held by the Borrowers, and any rights to
payment.
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"Related Entity":
(a) Any corporation, limited liability company, trust,
partnership, joint venture, or other enterprise which: is a parent, brother,
sister, subsidiary, or affiliate, of either Borrower; has such enterprise's tax
returns or financial statements consolidated with such Borrower; is a member of
the same controlled group of corporations (within the meaning of Section
1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as amended from
time to time) of which either Borrower is a member; controls or is controlled by
such Borrower or by any Affiliate of such Borrower.
(b) Any Affiliate.
"Requirement of Law": As to any Person:
(a) All (i) statutes, rules, regulations, orders, or other
requirements having the force of law and (ii) court orders and injunctions,
arbitrator's decisions, and/or similar rulings, in each instance of or by any
federal, state, municipal, and other governmental authority, or court, tribunal,
panel, or other body which has jurisdiction over such Person, or any property of
such Person, or of any other Person for whose conduct such Person would be
responsible;
(b) That Person's charter, certificate of incorporation,
articles of organization, and/or other organizational documents, as applicable;
and
(c) That Person's by-laws and/or other instruments which deal
with corporate or similar governance, as applicable.
"Reserves": All (if any) Availability Reserves, Inventory Reserves,
and any other reserves which may be established in accordance with the Loan
Agreement.
"Retail": The Cost of Inventory divided by the Cost Factor.
"Revolving Credit": Is defined in Section 1-1.
"Xxxxxxx Agreement": Collectively, the agreement or agreements in form
and substance reasonably satisfactory to Lender between the Borrowers and the
Xxxxxxx family with respect to the license to TS of the name "F.A.O. Xxxxxxx"
and the rights related thereto or the use of the name "F.A.O. Xxxxxxx" by FAO,
QFS and/or Vendex following the consummation of the FAO Transactions.
"Stated Amount": The maximum amount for which an L/C may be honored.
"Suspension Event": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) becomes an Event of Default following
any requisite notice and/or any requisite period of time runs and such
occurrence, circumstance, or state of facts is not absolutely cured within any
applicable grace period.
"Xxxxxxx": Xxxxxxx-RS, LLC, a New York limited liability company.
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"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10-11; or (c) the date set forth in
Lender's notice to the Borrowers setting the Termination Date on account of the
occurrence of any Event of Default other than as described in Section 10.11.
"Toy Soldier Inventory": Inventory located at a location designated as
a "Toy Soldier Location" on Exhibit 5-4 or held for sale at Toy Soldier's F.A.O.
Xxxxxxx retail stores.
"TS-Xxxxxxx Pledge Agreement": A Pledge Agreement executed and
delivered by Parent, as pledgor, each of Toy Soldier and Xxxxxxx, as pledged
stock issuers, and the Lender, the form and substance of which is satisfactory
to the Lender.
"UCC": The Uniform Commercial Code as in effect in The Commonwealth of
Massachusetts from time to time (Mass. Gen. Laws, Ch. 106).
"Vendex": Royal Vendex KBB, a Netherlands corporation.
"ZB Company, Inc.": ZB Company, Inc., a Delaware corporation, wholly-
owned by Parent.
"ZB Loan and Security Agreement": That certain Loan and Security
Agreement dated as of September 5, 2001 by and among ZB Company, Inc. and Xxxxx
Fargo Retail Finance, LLC, as agent for all lenders as may from time to time be
parties thereto.
"ZB Post-Closing Payments": Collectively, the Cure Costs, Post-Closing
Payments, and the Additional Post-Closing Payments (as each such term is defined
in the ZB Purchase Agreement) and any other post-closing monetary obligations of
ZB Company, Inc. to the Estate or any other Person under the ZB Purchase
Agreement.
"ZB Post-Closing Payments Guaranty": Parent's guaranty of the
obligations of ZB Company, Inc. under the ZB Purchase Agreement.
"ZB Purchase Agreement": The Asset Purchase Agreement by and among the
ZB Company, Inc., Parent, and each of the Debtors dated as of August 31, 2001.
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EXHIBIT 5-6
Indebtedness
1. Intercompany payables between Parent and ZB Company, Inc. in amounts up to
$750,000.
2. Intercompany payables between Parent and TS.
3. Trade obligations and accruals in the ordinary course of business.
4. Purchase money indebtedness including capital leases.
5. Unsecured indebtedness.
6. Indebtedness arising under agreements providing for indemnification,
adjustment of purchase price or similar obligations, or obligations to perform
bids, trade contracts, leases, statutory obligations or surety and appeal bonds,
performance bonds and other similar obligations incurred in the ordinary course
of business.
7. Indebtedness to secure workers' compensation, unemployment insurance and
other social security legislation obligations.
8. Indebtedness of Parent incurred under the ZB Loan Agreement, the Parent
Guaranty and the Parent Pledge.
9. Indebtedness of TS existing on the closing under the FAO Purchase Documents -
TS to provide a closing balance sheet to Lender showing such debt as soon as
practical after its preparation.
10. Indebtedness of Parent and TS under the FAO Purchase Documents.
11. The subordinated notes issued under the FAO Purchase Agreement to FAO and
QFS.
12. $4.9 million in aggregate principal amount of Subordinated Convertible
Pay-in-Kind Notes due 2004
13. $3.0 million in liquidation preference of Series A Mandatorily Redeemable
Preferred Stock.
14. Indebtedness of Parent or TS incurred in exchange for or the net proceeds of
which are used to extend, refinance, renew, replace, substitute or refund
Indebtedness referred to above.
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