GUARANTY
(The Right Start, Inc.)
This GUARANTY, dated as of January 6, 2002, is made by The Right Start,
Inc., a California corporation ("Guarantor"), in favor of the holders from time
to time (collectively, the "Subordinated Note Holders") of a certain
subordinated note (the "Chicago Note") issued by Toy Soldier, Inc., a Delaware
corporation ("Issuer") and wholly-owned subsidiary of Guarantor:
RECITALS
A. Pursuant to the Letter Agreement by and among Guarantor, the Issuer,
Royal Vendex KBB N.V., a Netherlands corporation ("Vendex"), Quality Fulfillment
Services, Inc. ("QFS") and KBB Retail Assets Corp. f/k/a F.A.O. Xxxxxxx ("KBB"),
dated March 22, 2002 (the "Letter Agreement"), the Subordinated Note Holders
have agreed to accept the Chicago Note in payment of the purchase price for the
inventories and other property related to the store located at 000 X. Xxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx (the "Chicago Store") purchased pursuant to that
certain Interim Operating Agreement dated as of January 6, 2002, by and among
Issuer, Guarantor, KBB and Vendex (the "Interim Operating Agreement").
B. As a condition to acceptance of the Chicago Note by the Subordinated
Note Holders, Guarantor is required to enter into this Guaranty and to guaranty
the Guarantied Obligations as hereinafter provided.
AGREEMENT
NOW, THEREFORE, in order to induce the Subordinated Note Holders to accept
the Chicago Note, and for other good and valuable consideration, the receipt and
adequacy of which hereby are acknowledged, Guarantor hereby represents,
warrants, covenants, agrees and guaranties as follows:
1. Definitions. Guarantor is The Right Start, Inc. Terms defined in the
Chicago Note and not otherwise defined in this Guaranty shall have the meanings
given those terms in the Chicago Note when used herein and such definitions are
incorporated herein as though set forth in full. In addition, as used herein,
the following terms shall have the meanings respectively set forth after each:
"Guarantied Obligations" means any and all present and future obligations
of Issuer to Subordinated Note Holders arising under or related to the Chicago
Note and/or any one or more of them, whether due or to become due, matured or
unmatured, or liquidated or unliquidated, including interest that accrues after
the commencement of any bankruptcy or insolvency proceeding by or against any
Subordinated Note Holder, Issuer or any other person.
"Guaranty" means this Guaranty, and any extensions, modifications,
renewals, restatements, reaffirmations, supplements or amendments hereof.
2. Subordination Agreement. This instrument and the rights and obligations
evidenced hereby are subordinate in the manner and to the extent set forth in
that certain Subordination and Intercreditor Agreement dated as of January 6,
2002 (as amended, supplemented or otherwise modified from time to time, the
"Subordination Agreement") among Vendex, QFS, KBB , Issuer and Xxxxx Fargo
Retail Finance, LLC, to the indebtedness (including interest) owed by Guarantor
pursuant to the loan and security agreement between Guarantor, Issuer and Xxxxx
Fargo Retail Finance, LLC, dated as of January 23, 2001 (as amended,
supplemented or otherwise modified from time to time, the "Xxxxx Loan
Agreement") and to indebtedness refinancing the indebtedness under the Xxxxx
Loan Agreement (the "Xxxxx Indebtedness") as contemplated by the Subordination
Agreement, and to any other secured indebtedness of Guarantor for borrowed money
permitted by the Xxxxx Loan Agreement, and each holder of the Chicago Note, by
acceptance thereof, has agreed to be bound by the provisions of the
Subordination Agreement. In the event that any provisions of this Guaranty are
deemed to conflict with the Subordination Agreement, the provisions of the
Subordination Agreement shall govern.
3. Guaranty of Guarantied Obligations. Guarantor hereby irrevocably and
unconditionally guaranties and promises to pay on demand the Guarantied
Obligations and each and every one of them, including all amendments,
modifications, supplements, renewals or extensions of any of them, whether such
amendments, modifications, supplements, renewals or extensions are evidenced by
new or additional instruments, documents or agreements or change the rate of
interest on any Guarantied Obligation or the security therefor, or otherwise.
4. Nature of Guaranty. This Guaranty is irrevocable and continuing in
nature and relates to any Guarantied Obligations now existing or hereafter
arising. This Guaranty is a guaranty of prompt and punctual payment and is not
merely a guaranty of collection.
5. Relationship to Other Agreements. Nothing herein shall in any way modify
or limit the effect of terms or conditions set forth in any other document,
instrument or agreement executed by Guarantor in connection with the Guarantied
Obligations, but each and every term and condition hereof shall be in addition
thereto. All provisions contained in the Chicago Note are fully applicable to
this Guaranty and are incorporated herein by this reference.
6. Waivers and Consents. Guarantor acknowledges that the obligations
undertaken herein involve the guaranty of obligations of persons other than
Guarantor and, in full recognition of that fact, consents and agrees that
Subordinated Note Holders, together with Issuer, may, at any time and from time
to time, without notice or demand, and without affecting the enforceability or
continuing effectiveness hereof (a) supplement, modify, amend, extend, renew,
accelerate or otherwise change the time for payment or the terms of the
Guarantied Obligations or any part thereof, including any increase or decrease
of the rate of interest thereon; (b) supplement, modify, amend or waive, or
enter into or give any agreement, approval or consent with respect to, the
Guarantied Obligations or any part thereof, or the Chicago Note to which
Guarantor is not a party or any additional security or guaranties, or any
condition, covenant, default, remedy, right, representation or term thereof or
thereunder; (c) accept new or additional instruments, documents or agreements in
exchange for or relative to the Chicago Note or the Guarantied Obligations or
any part thereof; (d) accept partial payments on the Guarantied Obligations; (e)
receive and hold additional security or guaranties for the Guarantied
Obligations or any part thereof; (f) release, reconvey, terminate, waive,
abandon, fail to perfect, subordinate, exchange, substitute, transfer and/or
enforce any security or guaranties, and apply any security and direct the order
or manner of sale thereof as Subordinated Note Holders in conjunction with
Issuer may determine; (g) release any person from any personal liability with
respect to the Guarantied Obligations or any part thereof; (h) settle, release
on terms satisfactory to Subordinated Note Holders or by operation of applicable
laws or otherwise liquidate or enforce any Guarantied Obligations and any
security or guaranty therefor in any manner, consent to the transfer of any
security and bid and purchase at any sale; and/or (i) consent to the merger,
change or any other restructuring or termination of the corporate or other
existence of Issuer and correspondingly restructure the Guarantied Obligations,
and any such merger, change, restructuring or termination shall not affect the
liability of Guarantor or the continuing effectiveness hereof, or the
enforceability hereof with respect to all or any part of the Guarantied
Obligations.
2
Upon the occurrence and during the continuance of any Event of Default,
Subordinated Note Holders may enforce this Guaranty independently of any other
remedy or security Subordinated Note Holders at any time may have or hold in
connection with the Guarantied Obligations. Guarantor expressly waives any right
to require the Subordinated Note Holders to marshal assets in favor of Issuer,
or to proceed against Issuer, or upon or against any security or remedy, before
proceeding to enforce this Guaranty. Guarantor agrees that the Subordinated Note
Holders may proceed against Issuer, or upon or against any security or remedy,
in such order as they shall determine in their sole and absolute discretion.
Subordinated Note Holders may file a separate action or actions against Issuer
and/or Guarantor without respect to whether action is brought or prosecuted with
respect to any security or against any other person, or whether any other person
is joined in any such action or actions. Guarantor agrees that Subordinated Note
Holders, Issuer, any other obligors and any affiliates of Issuer or such
obligors may deal with each other in connection with the Guarantied Obligations
or otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the security of this Guaranty. Subordinated Note Holders' rights
hereunder shall be reinstated and revived, and the enforceability of this
Guaranty shall continue, with respect to any amount at any time paid on account
of the Guarantied Obligations which thereafter shall be required to be
disgorged, restored or returned by Subordinated Note Holders upon the
bankruptcy, insolvency or reorganization of Issuer or any other person, or
otherwise, all as though such amount had not been paid. The rights of
Subordinated Note Holders created or granted herein and the enforceability of
this Guaranty with respect to Guarantor at all times shall remain effective to
guaranty the full amount of all the Guarantied Obligations even though the
Guarantied Obligations, or any part thereof, or any security or guaranty
therefor, may be or hereafter may become invalid or otherwise unenforceable as
against Issuer or any other guarantor or surety or any other person and whether
or not Issuer or any other person shall have any personal liability with respect
thereto. Guarantor expressly waives any and all defenses now or hereafter
arising or asserted by reason of (a) any disability or other defense of Issuer
or any other obligor with respect to the Guarantied Obligations, (b) the
unenforceability or invalidity of any security or guaranty for the Guarantied
Obligations or the lack of perfection or continuing perfection or failure of
priority of any security for the Guarantied Obligations, (c) the cessation for
any cause whatsoever of the liability of Issuer or any other obligor (other than
by reason of the full payment and performance of all Guarantied Obligations),
(d) any failure of Subordinated Note Holders to marshal assets in favor of
Issuer or any other person, (e) except as otherwise provided in this Guaranty,
any failure of Subordinated Note Holders to give notice of sale or other
disposition of Collateral to Guarantor or any other person or any defect in any
notice that may be given in connection with any sale or disposition of
Collateral, (f) except as otherwise provided in this Guaranty, any failure of
Subordinated Note Holders to comply with applicable laws in connection with the
sale or other disposition of any Collateral or other security for any Guarantied
obligations, including without limitation, any failure of Subordinated Note
Holders to conduct a commercially reasonable sale or other disposition of any
Collateral or other security for any Guarantied Obligation, (g) any act or
omission of Subordinated Note Holders or others that directly or indirectly
results in or aids the discharge or release of Issuer or any other obligor or
the Guarantied Obligations or any security or guaranty therefor by operation of
law or otherwise, (h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation, (i) any failure of Subordinated Note
Holders to file or enforce a claim in any bankruptcy or other proceeding with
respect to any person, (j) the election by Subordinated Note Holders, in any
bankruptcy proceeding of any person, of the application or non-application of
Section 1111(b)(2) of the United States Bankruptcy Code, (k) any extension of
credit or the grant of any lien under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx
Bankruptcy Code, (1) any use of cash collateral under Section 363 of the United
States Bankruptcy Code, (m) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any person, (n)
3
the avoidance of any lien in favor of Subordinated Note Holders for any reason,
(o) any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, liquidation or dissolution proceeding commenced by or against any person,
including any discharge of, or bar or stay against collecting, all or any of the
Guarantied Obligations (or any interest thereon) in or as a result of any such
proceeding, (p) to the extent permitted, the benefits of any form of one-action
rule under any applicable law, or (q) any action taken by Subordinated Note
Holders that is authorized by this Section or any other provision of the Chicago
Note. Guarantor expressly waives demands for payment or performance, notices of
nonpayment or nonperformance, protests, notices of protest, notices of dishonor
and all other notices or demands of any kind or nature whatsoever with respect
to the Guarantied Obligations, and all notices of acceptance of this Guaranty or
of the existence, creation or incurrence of new or additional Guarantied
Obligations.
7. Understandings With Respect to Waivers and Consents. Guarantor warrants
and agrees that each of the waivers and consents set forth herein are made with
full knowledge of their significance and consequences, with the understanding
that events giving rise to any defense or right waived may diminish, destroy or
otherwise adversely affect rights which Guarantor otherwise may have against
Issuer, Subordinated Note Holders or others, or against any collateral.
Guarantor acknowledges that it has either consulted with legal counsel regarding
the effect of this Guaranty and the waivers and consents set forth herein, or
has made an informed decision not to do so. If this Guaranty or any of the
waivers or consents herein are determined to be unenforceable under or in
violation of applicable law, this Guaranty and such waivers and consents shall
be effective to the maximum extent permitted by law.
8. Corporate Existence. Except as set forth in this Section 8, Guarantor
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence in accordance with its organizational
documents, rights (charter and statutory), licenses and franchises; provided
however, that Guarantor shall not be required to preserve any such right,
license or franchise, if the Board of Directors of Guarantor shall determine in
good faith, which determination shall be evidenced by a board resolution, that
the preservation thereof is no longer desirable in the conduct of the business
of Guarantor and that the loss thereof is not adverse in any material respect to
Subordinated Note Holders. Notwithstanding the other provisions of this
Guaranty, Guarantor shall be permitted to merge with or into any other entity if
either (a) Guarantor shall be the continuing corporation or (b) the merger is
with and into a wholly-owned subsidiary of Guarantor and the surviving
corporation of such merger expressly assumes the performance of the obligations
of Guarantor under this Guaranty.
9. Investment Company Act. Guarantor shall not become an investment company
subject to registration under the Investment Company Act of 1940, as amended.
10. SEC Reports, Financial Reports. If the following information and
documents are not available through the internet, Guarantor shall provide
Subordinated Note Holders within 15 days after it files them with the United
States Securities and Exchange Commission (the "SEC") copies of quarterly and
annual reports and the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) that Guarantor files with the SEC pursuant to Sections 13(a) and
13(c) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Guarantor will continue to file with the SEC and to provide to the
Subordinated Note Holders, on the same timely basis such reports, information
and other documents as Guarantor would be required to file with the SEC as if
Guarantor were subject to the requirements of such Sections 13(a) and 13(d) or
15(d) of the Exchange Act, notwithstanding that Guarantor may no longer be
subject to Section 13(a) and 13(d) or 15(d) of the Exchange Act and that
Guarantor would be entitled not to file such reports, information and other
documents with the SEC.
11. Limitations on Liability. Notwithstanding anything to the contrary
elsewhere contained herein or in the Chicago Note, the aggregate liability of
Guarantor hereunder for payment of the Guarantied Obligations shall not exceed
an amount which, in the aggregate, is $1.00 less than that amount which if so
paid or performed would constitute or result in a "fraudulent transfer,"
4
"fraudulent conveyance" or terms of similar import, under applicable state or
federal law, including without limitation, Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx
Bankruptcy Code.
12. THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
5
IN WITNESS WHEREOF, Guarantor has executed this Guaranty by its duly
authorized officer as of the date first written above.
"Guarantor"
THE RIGHT START, INC.,
a California corporation
Address for Guarantor:
0000 Xxxxxxxxxxx Xxxxxxxxx,
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx, 00000
Attn.: Legal
xxxxxxx@xxxxxxxxxx.xxx
Telephone: (000) 000-0000
By:/s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
6
