First amendment to credit agreement

Exhibit 99.1

This First Amendment to Credit Agreement is dated as of February 12, 2009 (this “Amendment”) by and among RC2 Corporation, a Delaware corporation (the “Company”), Learning Curve Brands, Inc., a Delaware corporation (“LCBI”), Learning Curve Canada Limited, a corporation incorporated under the laws xx Xxxxxxx, Xxxxxx (“LCCL”), RC2 (Asia) Limited, a company incorporated in Hong Kong (“RC2 Asia”), RC2 Australia Pty., Ltd., a proprietary company duly incorporated in Victoria, Australia (“RC2 Australia”), RC2 Deutschland GmbH, a private company duly incorporated and registered under the laws of Germany (“RC2 Germany”), Racing Champions International Limited, a corporation organized under the laws of England and Wales (“RC2 UK”), Racing Champions Worldwide Limited, a corporation organized under the laws of England and Wales (“Racing Champions”; and together with the Company, LCBI, LCCL, RC2 Asia, RC2 Australia, RC2 Germany, RC2 UK, and Racing Champions collectively, the “Borrowers” and individually, a “Borrower”), the guarantors party hereto, the financial institutions listed on the signature pages hereof as Lenders and Bank of Montreal (“BMO”), as administrative agent (in such capacity, the “Administrative Agent”).

preliminary statements

A. The Borrowers, the guarantors party thereto (the “Guarantors”), the financial institutions listed on the signature pages thereof as Lenders and the Administrative Agent have heretofore entered into that certain Credit Agreement dated as of November 3, 2008 (the “Credit Agreement”); and

B. The Borrower has asked the Required Lenders to make certain amendments to the Credit Agreement, and the Required Lenders are willing to do so on the terms and conditions set forth in this Amendment.

Now, Therefore, in consideration of the premises set forth above, the terms and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Article I

Definitions

Section 1.1 Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in the Credit Agreement shall have such meanings when used in this Amendment.

Article II

Amendments

Section 2.1 The definition of “Adjusted EBITDA” appearing in Section 5.1 of the Credit Agreement shall be amended and restated to read in its entirety as follows:

“Adjusted EBITDA” means, with reference to any period, the sum of (a) the EBITDA of the Company and its Subsidiaries for such period, plus(without duplication) (b) EBITDA of any Person and its subsidiaries acquired pursuant to Section 8.9(k) hereof for such period (as if any such Permitted Acquisition had occurred on the first day of such period), plus (c) adjustments associated with any Permitted Acquisition to the extent reasonably acceptable to the Administrative Agent, plus (d) non-recurring costs and extraordinary expenses incurred during the fiscal year ended December 31, 2007 in connection with the recall of specific components from the Xxxxxx and Friends product line in an aggregate amount not to exceed $28,300,000, plus (e) other fees, costs and expenses incurred or provided for (minus rebates and other reimbursements) related to the recall of specific components from the Xxxxxx and Friends product line not to exceed $5,000,000 during the fiscal year ending December 31, 2008, plus (f) non-recurring costs in connection with the settlement of claims with HIT Entertainment in an aggregate amount not to exceed $15,000,000, plus (g) losses on the sale, transfer or disposition of Property during such period, plus (h) non-recurring costs in connection with the termination of the purchase agreement for the children’s book division of Publications International, Limited in an aggregate amount not to exceed $2,000,000, plus (i) non-cash charges relating to the write-down of the Company’s investment in Meteor the Monster Truck, Inc. not to exceed $2,100,000 in the aggregate, plus (j) non-cash, non-recurring impairment charge relating to goodwill and certain intangible assets incurred during the fiscal quarter ended December 31, 2008 not to exceed $265,000,000 in the aggregate, plus (k) severance and other related costs in connection with the workforce reduction that occurred during the quarter ended December 31, 2008 not to exceed $1,350,000 in the aggregate, minus (l) gains on the sale or transfer of Property during such period, minus (m) EBITDA of any Person and its subsidiaries sold, transferred or otherwise disposed of during such period (as if any such sale, transfer or disposition had occurred on the first day of such period).

Section 2.2 Section 8.12 of the Credit Agreement shall be and hereby is amended by deleting the period at the end of such section and inserting in its place “; and”, and immediately thereafter inserting a new clause (v) to read in its entirety as follows:

(v) the Company’s repurchase of options for shares of the Company’s capital stock from employees of the Company and its Subsidiaries; provided that (A) no Default or Event of Default has occurred and is continuing at such time or would be directly or indirectly caused as a result thereof on an actual or pro forma basis and (B) the aggregate amount for such repurchase shall not exceed $1,000,000 during the term of the facilities.

Section 2.3 Exhibit E of the Credit Agreement shall be amended and restated in its entirety in the form of Exhibit E attached hereto.

Article III

Representations And Warranties

Section 3.1 Credit Agreement Representations. In order to induce the Required Lenders and the Administrative Agent to enter into this Amendment, each Borrower and Guarantor (collectively, the “Loan Parties”) hereby reaffirms, as of the date hereof after giving effect to this Amendment, its representations and warranties contained in Section 6 of the Credit Agreement and additionally represents and warrants to the Administrative Agent and each Lender as set forth in this Article III.

Section 3.2 Due Authorization, Non-Contravention, etc. The execution, delivery and performance by each Loan Party of this Amendment are within such Loan Party’s powers, have been duly authorized by all necessary corporate action, and do not:

(a) contravene such Loan Party’s constituent documents;

(b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting such Loan Party; or

Section 3.3 Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Loan Parties of this Amendment.

Section 3.4 Validity, etc. This Amendment constitutes the legal, valid and binding obligation of the Loan Parties enforceable in accordance with its terms.

Article IV

Conditions Precedent

Section 4.1 Effectiveness. This Amendment shall be deemed effective as of November 30, 2008 upon the execution and delivery of this Amendment by each Loan Party and the Required Lenders.

Article V

Miscellaneous Provisions

Section 5.1 Ratification of and References to the Credit Agreement. Except for the amendments expressly set forth above, the Credit Agreement and each other Loan Document is hereby ratified, approved and confirmed in each and every respect. Each Loan Party hereby acknowledges and agrees that (i) the Liens created and provided for by the Collateral Documents continue to secure, among other things, the Obligations, Hedging Liability and Funds Transfer and Deposit Account Liability arising under the Credit Agreement as amended hereby and (ii) the Collateral Documents and the rights and remedies of the Administrative Agent thereunder, the obligations of each Loan Party thereunder, and the Liens created and provided for thereunder, remain in full force and effect and shall not be affected, impaired or discharged hereby. Nothing herein contained shall in any manner affect or impair the priority of the Liens and security interests created and provided for by the Collateral Documents as to the indebtedness which would be secured thereby prior to giving effect to this Amendment. Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.

Section 5.2 Headings. The various headings of this Amendment are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.

Section 5.3 Execution in Counterparts. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single agreement. Delivery of a counterpart hereof by facsimile transmission or by e-mail transmission of an Adobe portable document format file (also known as “PDF” file) shall be effective as delivery of a manually executed counterpart hereof.

Section 5.4 No Other Amendments. Except for the amendments expressly set forth above, the text of the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect, and the Lenders and the Administrative Agent expressly reserve the right to require strict compliance with the terms of the Credit Agreement and the other Loan Documents.

Section 5.5 Costs and Expenses. The Borrower agrees to pay on demand all costs and expenses of or incurred by the Administrative Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, including the reasonable fees and expenses of counsel for the Administrative Agent.

Section 5.6 Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of Illinois.

[Signature Pages to Follow]

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.

“Borrowers”

RC2 Corporation

Learning Curve Brands, Inc.

Learning Curve Canada Limited

RC2 Australia Pty., Ltd.

RC2 Deutschland GmbH

Racing Champions International Limited

Racing Champions Worldwide Limited

By /s/ Xxxx Xxxxxxxxx

Name Xxxx Xxxxxxxxx

Title CEO

RC2 (Asia) Limited

By /s/ Helena S F Lo

Name Helena S. F. Lo

Title Managing Director

“Guarantors”

RCE Holdings, LLC

Learning Curve International, Inc.

Xxxxxxxxxxxxxxxxx.xxx, Inc.

Learning Curve Canada Holdco, Inc.

By /s/ Xxxx Xxxxxxxxx

Name Xxxx Xxxxxxxxx

Title CEO

S-1

“Administrative Agent”

Bank of Montreal

By /s/ Xxxx X. Xxxxxx III

Name Xxxx X. Xxxxxx III

Title Vice President

S-2

“Lenders”

BMO Capital Markets Financing, Inc.

By /s/ Xxxx X. Xxxxxx III

Name Xxxx X. Xxxxxx III

Title Vice President

S-3

National City Bank

By /s/ Xxxxxxxxx Xxxxx

Name Xxxxxxxxx Xxxxx

Title SVP

S-4

U.S. Bank National Association

By ____________________________

Name__________________________

Title___________________________

S-5

Fifth Third Bank (Chicago), a Michigan

Banking corporation

By /s/ Xxx Xxxxxxxxxxx

Name Xxx Xxxxxxxxxxx

Title Vice President

S-6

The Northern Trust Company

By /s/ Xxxxx X. Xxxxxx

Name Xxxxx X. Xxxxxx

Title Vice President

S-7

The PrivateBank and Trust Company

By /s/ Xxxxxxx X. Xxxxx

Name Xxxxxxx X. Xxxxx

Title Associate Managing Director

S-8

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First amendment to credit agreement

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