March 22, 2002
Royal Vendex KBB N.V.
KBB Retail Assets Corp.
Quality Fulfillment Services, Inc.
De Klencke 6, NL-1083
Postbus 7997, 1008 AD
Amsterdam, The Netherlands
Re: Asset Purchase Agreement by and among The Right Start,Inc.,
Toy Soldier, Inc., Royal Vendex KBB N.V., KBB Retail Assets
Corp. (fka F.A.O. Xxxxxxx) and Quality Fulfillment Services,
Inc. dated as of November 19, 2001 (the "Purchase Agreement)
Gentlemen:
Under Sections 2.3(e) and (f) of the Purchase Agreement (capitalized
terms used in the Letter Agreement without definition shall have the meanings
set forth in the Purchase Agreement) the parties agreed to make payments one to
the other depending on the difference between actual Operating Working Capital
Ongoing Business and the estimate used by the parties in Section 2.3(c) of the
Purchase Agreement as it may have been adjusted in accordance with Section
2.3(d) of the Purchase Agreement. The parties hereby agree as follows:
1. The parties agree that the calculation of Operating Working
Capital Ongoing Business delivered by the Buyer to the Sellers and
Shareholder on February 13, 2002 (the "Buyer Calculation"), shows
that the Sellers owe $7,628,286 to the Buyer.
2. The parties agree that, based on their discussions regarding the
Buyer Calculation and the matters raised in the response to the
Buyer Calculation set forth in the letter of KBB Retail U.S.A.,
Inc., dated February 28, 2002 (the Seller Response), the amount
("Reimbursable Amount") due to the Buyer under Section 2.3(f) of
the Asset Purchase Agreement, together with all other matters
reflected or referred to in the Buyer Calculation and the Seller
Response, shall be $6,714,238, notwithstanding the Buyer
Calculation or the provisions of Section 2.3(f) of the Asset
Purchase Agreement.
3. The parties agree that the Reimbursable Amount shall be paid
by Shareholder (or by Sellers if Shareholder chooses) to Buyer as
follows:
a. $3.0 million in cash on March 5, 2002;
b. $1,444,775 in cash at such time as:
i. The Right Start, Inc. has provided a guaranty;
ii. Buyer, Parent, KBB Retail Assets Corp. and Shareholder
have executed a mutually acceptable Interim Operating
Agreement with respect to the Chicago flagship store;
iii. KBB Retail Assets Corp. has received an executed Note
in the aggregate principal amount of $1.5 million
secured on a subordinated basis by the inventorylocated
at the Chicago flagship store (the "New Note");
iv. KBB Retail Assets Corp. has received a security
agreement; and
c. $2,269,463 through a reduction in the aggregate principal
amount of the Subordinated Notes by notation made on
Subordinated Note issued by Toy Soldier, Inc. to KBB Retail
Assets Corp. in the manner provided in such notes
4. The Sellers and the Shareholder agree that the New Note shall be
subject to the Subordination and Intercreditor Agreement dated as
of January 6, 2002 (the Subordination Agreement"), by and between
the Sellers, the Shareholder and Xxxxx Fargo Retail Finance, LLC
("Xxxxx") and that Xxxxx may rely on and enforce the agreement set
forth in this Section 4 of this Letter Agreement as fully as if it
had been made in the Subordination Agreement.
5. The parties agree that the aggregate principal amount of
Subordinated Note No. FAO-1 issued by Toy Soldier, Inc. to KBB
Retail Assets Corp. shall be reduced to $14,830,637 (which,
together with Subordinated Note No. QFS-1 issued to Quality
Fulfillment Services, Inc., totals $15,730,537) reflecting the
adjustments noted in item 3(c) above plus an additional $2,000
with respect to the assignment of the Chestnut Hill and Water
Tower stores, or reduced to $14,829,637 if the Water Tower
Store is not assigned.
This Letter Agreement contains the entire agreement between the parties
with respect to the calculation of Operating Working Capital Ongoing Business
and payments for any difference between the estimated and actual Operating
Working Capital Ongoing Business as would otherwise be dealt with through
Section 2.3 of the Purchase Agreement and all the other subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect to such matters. Any provision of this Letter Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the parties hereto, or in the case of a waiver, by
the party against whom the waiver is to be effective. This Letter Agreement
shall be governed by and construed under the law of the State of New York
without regard to conflicts-of-laws principals that would require the
application of any other law. This Letter Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
If you agree with the matters set forth in this Letter Agreement, please
execute and return one copy to us and keep the other for your records.
2
Sincerely,
THE RIGHT START, INC.
By: /s/ Xxxxxxxx X. Xxxxx
Name: Xxxxxxxx X. Xxxxx
Title: Senior Vice President
TOY SOLDIER, INC.
By: /s/ Xxxxxxxx X. Xxxxx
Name: Xxxxxxxx X. Xxxxx
Title: Senior Vice President
AGREED AND ACCEPTED
ROYAL VENDEX KBB N.V.
By: /s/ Xxxx ter Hark
Name: Xxxx ter Hark
Title: Director of Corporate Development
KBB RETAIL ASSETS CORP.
By: /s/ Xxx Xxxxx
Name: Xxx Xxxxx
Title: Secretary
QUALITY FULFILLMENT SERVICES, INC.
By: /s/ Xxx Xxxxx
Name: Xxx Xxxxx
Title: Secretary
