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SIXTH AMENDMENT
SIXTH AMENDMENT (this "Amendment"), dated as of March 25,
1998, to the Credit Agreement, dated as of February 22, 1995 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Toy Biz, the banks and other financial institutions from time to time
parties thereto (the "Banks") and The Chase Manhattan Bank (formerly known as
Chemical Bank), as administrative agent (in such capacity, the "Administrative
Agent") for the Banks.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Toy Biz, the Banks and the Administrative Agent are
parties to the Credit Agreement;
WHEREAS, Toy Biz has requested that the Credit Agreement be
amended in the manner provided for herein; and
WHEREAS, the Administrative Agent and the Banks are willing
to consent to such amendments, but only upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, Toy Biz, the Banks and the
Administrative Agent hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Credit Agreement shall have such meanings when used herein.
2. Amendments. (a) The Credit Agreement hereby is amended in
its entirety to reflect the terms and provisions shown in Exhibit A attached
hereto.
(b) Except for the addition of a new Exhibit H to the Credit
Agreement (as described in the definition of the term "Borrowing Base
Certificate" contained in subsection 1.1 of the Credit Agreement and as set
forth as Exhibit B hereto), the Schedules and the Exhibits to the Credit
Agreement shall not be modified by this Amendment.
3. Assignment and Acceptance. (a) Each of The Bank of New
York and Fleet Bank (the "Sellers") hereby irrevocably sells and assigns to The
Chase Manhattan Bank (the "Purchaser"), and the Purchaser hereby irrevocably
purchases and assumes from the Sellers, the full amount of each such Seller's
Commitment under the Credit Agreement, Aggregate Outstanding Extensions of
Credit and other rights and interests under the Credit Agreement. Such
assignment shall be effective as of March 25, 1998 and the Purchaser hereby
agrees to pay to each such Seller the amount equal to such Seller's Aggregate
Outstanding Extensions of Credit on such date plus any accrued but unpaid
interest and letter of credit commissions owing thereon on such date.
(b) From and after March 25, 1998, (i) the Purchaser shall
continue to be a party to the Credit Agreement and, to the extent provided
herein, have the rights and obligations of a Bank thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (ii) the
Sellers shall relinquish their rights and be released from
<PAGE>
their obligations under the Credit Agreement (including, without limitation,
all obligations pursuant to subsection 2A.4 of the Credit Agreement).
4. Supplemental Fees. Toy Biz hereby agrees to pay to the
Administrative Agent a supplemental fee in the amount equal to $50,000 on each
of the date which is six months after the effectiveness of this Amendment and
the date which is nine months after the effectiveness of this Amendment. Such
fee shall be payable to the Administrative Agent, for the ratable account of
the Banks party to the Credit Agreement on the relevant payment date, and shall
not be payable if, on the relevant payment date, the Commitments have been
terminated and no amounts are then due and payable thereunder.
5. Covenants. Toy Biz hereby covenants and agrees to provide
to the Agent, for the benefit of the Banks, a first priority, perfected
security interest in 65% of the issued and outstanding capital stock of Compana
de Juguetes S.A. de C.V. [Mexico] pursuant to documentation which is in form
and substance satisfactory to the Agent, together with such legal opinions and
other documents, instruments and agreements as the Agent reasonably shall
request to evidence such perfected security interest. Any failure to provide
such security interest and other documentation within 60 days following the
effective date of this Amendment shall be deemed to constitute an Event of
Default under the Credit Agreement.
6. Representations and Warranties. (a) Toy Biz hereby
confirms, reaffirms and restates the representations and warranties made by it
in Section 4 of the Credit Agreement; provided that each reference to the
Credit Agreement therein shall be deemed to be a reference to the Credit
Agreement after giving effect to this Amendment and to each other amendment,
supplement and other modification executed and delivered by Toy Biz or any of
its Subsidiaries on the date hereof.
(b) Toy Biz hereby further represents and warrants that, on
and as of the effective date of this Amendment:
(i) except to the extent disclosed in writing to the Lenders
prior to such date of effectiveness, no change, or development or
event involving a prospective change, has occurred since September 30,
1997 which in any such case would be reasonably likely to have a
Material Adverse Effect; and
(ii) no event of default (or condition which would constitute
an event of default with the giving of notice or the passage of time)
exists under any capital stock, financing agreements, lease agreements
or other contracts of Toy Biz or any of its Subsidiaries.
7. Continuing Effect of Credit Agreement. This Amendment
shall not constitute a waiver, amendment or modification of any other provision
of the Credit Agreement not expressly referred to herein and shall not be
construed as a waiver or consent to any further or future action on the part of
Toy Biz that would require a waiver or consent of the Banks or the
Administrative Agent. Except as expressly amended or modified herein, the
provisions of the Credit Agreement are and shall remain in full force and
effect.
8. Counterparts. This Amendment may be executed by one or
more of the parties hereto on any number of separate counterparts and all such
counterparts shall be deemed to be one and the same instrument. Each party
hereto confirms that any facsimile
<PAGE>
copy of such party's executed counterpart of this Amendment (or its signature
page thereof) shall be deemed to be an executed original thereof.
9. Effectiveness. This Amendment shall be effective upon
receipt by the Administrative Agent of:
(a) counterparts hereof, duly executed and delivered by Toy Biz and
each of the Banks;
(b) an amendment fee, for the account of the Banks (after giving
effect to this Amendment) in the amount equal to $100,000;
(c) a detailed financial model for the 1998 fiscal year of Toy Biz and
for the first and second quarters of its 1999 fiscal year, each
of which shall be in form and substance satisfactory to the
Banks;
(d) the results of an audit of the inventory and accounts receivable
of Toy Biz and its domestic Subsidiaries (other than any assets of
the Colorforms division), which audit shall be (i) reasonably
satisfactory in form and substance to the Banks, (ii) conducted by
the Collateral Agent Services Group of The Chase Manhattan Bank;
the fees and expenses of The Chase Manhattan Bank in conducting
such audit shall be for the account of Toy Biz;
(e) consents and approvals of the transactions contemplated hereby
from the Trustee of Marvel Entertainment Group, Inc., which
consents and approvals shall be in form and substance satisfactory
to the Banks; and
(f) legal opinions from independent counsel to Toy Biz and any special
and local counsel required by the Banks, each of which legal
opinions shall be in form and substance satisfactory to the Banks.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
TOY BIZ, INC.
By:____________________
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK (formerly
known as Chemical Bank), as Administrative
Agent and as a Bank
By:___________________________
Name:
Title:
THE BANK OF NEW YORK
By:___________________________
Name:
Title:
FLEET BANK
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT A
===============================================================================
TOY BIZ, INC.
--------------------
$30,000,000
CREDIT AGREEMENT
Dated as of February 22, 1995
-------------------
CHEMICAL BANK,
as Administrative Agent
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
SECTION 1. DEFINITIONS......................................................................................... 1
1.1 Defined Terms....................................................................................... 1
1.2 Other Definitional Provisions....................................................................... 20
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS.................................................................... 21
2.1 Commitments......................................................................................... 21
2.2 Obligations of Toy Biz.............................................................................. 21
2.3 Procedure for Borrowing Loans....................................................................... 21
2.4 Use of Proceeds of Loans............................................................................ 22
2.5 [INTENTIONALLY OMITTED]............................................................................. 22
SECTION 2A. LETTERS OF CREDIT.................................................................................. 22
2A.1 L/C Commitment..................................................................................... 22
2A.2. Procedure for Issuance of Letters of Credit....................................................... 23
2A.3. Fees, Commissions and Other Charges............................................................... 23
2A.4 L/C Participations................................................................................. 23
2A.5 Reimbursement Obligation of Toy Biz................................................................ 24
2A.6 Obligations Absolute............................................................................... 25
2A.7 Letter of Credit Payments.......................................................................... 25
2A.8 Application........................................................................................ 25
SECTION 3. PROVISIONS RELATING TO THE LOANS; FEES AND PAYMENTS................................................. 25
3.1 Voluntary Termination or Reduction of Commitments. ................................................. 25
3.2 Optional Prepayments................................................................................ 26
3.3 Mandatory Prepayments and Commitment Reductions..................................................... 26
3.4 Interest Rate and Payment Dates..................................................................... 27
3.5 Conversion Options, Minimum Tranches and Maximum Interest Periods................................... 27
3.6 Inability to Determine Interest Rate................................................................ 28
3.7 Illegality.......................................................................................... 28
3.8 Requirements of Law; Changes of Law................................................................. 29
3.9 Indemnity........................................................................................... 30
3.10 Taxes.............................................................................................. 30
3.11 Fees............................................................................................... 32
3.12 Computation of Interest and Fees................................................................... 32
3.13 Pro Rata Treatment and Payments.................................................................... 33
3.14 Payments on Account of Loans, Reimbursement Obligations and Fees................................... 34
SECTION 4. REPRESENTATIONS AND WARRANTIES...................................................................... 34
4.1 Corporate Existence................................................................................. 34
4.2 Corporate Power..................................................................................... 34
4.3 No Legal Bar to Loans............................................................................... 35
4.4 No Material Litigation.............................................................................. 35
4.5 No Default.......................................................................................... 35
4.6 Ownership of Properties; Liens...................................................................... 35
-i-
<PAGE>
Page
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<CAPTION>
<S> <C>
4.7 Taxes............................................................................................... 36
4.8 ERISA............................................................................................... 36
4.9 Financial Condition................................................................................. 36
4.10 No Change.......................................................................................... 37
4.11 Federal Regulations................................................................................ 37
4.12 Not an "Investment Company"........................................................................ 37
4.13 Matters Relating to Subsidiaries................................................................... 37
4.14 Security Documents................................................................................. 37
4.15 Intellectual Property.............................................................................. 38
4.16 Disclosure......................................................................................... 38
SECTION 5. CONDITIONS PRECEDENT................................................................................ 38
5.1 Conditions to Initial Extension of Credit........................................................... 38
5.2 Conditions to Each Extension of Credit.............................................................. 41
SECTION 6. AFFIRMATIVE COVENANTS............................................................................... 41
6.1 Financial Statements................................................................................ 41
6.2 Certificates; Other Information..................................................................... 42
6.3 Payment of Obligations.............................................................................. 43
6.4 Conduct of Business and Maintenance of Existence.................................................... 44
6.5 Maintenance of Property; Insurance.................................................................. 44
6.6 Inspection of Property; Books and Records; Discussions.............................................. 44
6.7 Notices............................................................................................. 45
6.8 Maintenance of Corporate Identity................................................................... 46
6.9 Environmental Laws.................................................................................. 46
6.10 Maintenance of the Liens of the Security Documents................................................. 46
6.11 International Pledge Agreement..................................................................... 47
SECTION 7. NEGATIVE COVENANTS.................................................................................. 47
7.1 Indebtedness........................................................................................ 47
7.2 Limitation on Liens................................................................................. 47
7.3 Limitation on Contingent Obligations................................................................ 48
7.4 Limitation on Fundamental Changes................................................................... 48
7.5 Limitation on Sale of Assets........................................................................ 49
7.6 Limitation on Leases................................................................................ 49
7.7 Limitation on Dividends............................................................................. 50
7.8 Limitation on Capital Expenditures.................................................................. 50
7.9 Limitation on Investments, Loans and Advances....................................................... 50
7.10 Limitation on Optional Payments and Modifications of Subordinated Debt............................. 51
7.11 Limitation on Transactions with Affiliates......................................................... 51
7.12 Limitation on Changes in Fiscal Year............................................................... 51
7.13 Limitation on Negative Pledge Clauses.............................................................. 51
7.14 Limitation on Lines of Business.................................................................... 51
7.15 Subsidiaries....................................................................................... 51
7.16 Financial Covenants................................................................................ 52
7.17 Cash Management System............................................................................. 52
SECTION 8. EVENTS OF DEFAULT................................................................................... 53
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<PAGE>
<CAPTION>
Page
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<S> <C>
SECTION 9. THE ADMINISTRATIVE AGENT............................................................................ 56
9.1 Appointment......................................................................................... 56
9.2 Delegation of Duties................................................................................ 56
9.3 Exculpatory Provisions.............................................................................. 56
9.4 Reliance by the Administrative Agent................................................................ 56
9.5 Notice of Default................................................................................... 57
9.6 Non-Reliance on the Administrative Agent and the Other Banks........................................ 57
9.7 Indemnification..................................................................................... 58
9.8 The Administrative Agent in Its Individual Capacity................................................. 58
9.9 Successor Administrative Agent...................................................................... 58
SECTION 10. MISCELLANEOUS...................................................................................... 59
10.1 Amendments and Waivers............................................................................. 59
10.2 Notices............................................................................................ 60
10.3 No Waiver; Cumulative Remedies..................................................................... 60
10.4 Survival of Representations and Warranties......................................................... 60
10.5 Payment of Expenses and Taxes...................................................................... 60
10.6 Successors and Assigns; Loan Participations........................................................ 61
10.7 Adjustments; Setoff................................................................................ 64
10.8 Severability....................................................................................... 65
10.9 Effectiveness; Counterparts........................................................................ 65
10.10 SUBMISSION TO JURISDICTION; WAIVERS............................................................... 65
10.11 GOVERNING LAW..................................................................................... 66
</TABLE>
SCHEDULES:
Schedule I Banks; Addresses for Notices
Schedule II Commitments
Schedule III UCC Filing Jurisdictions
Schedule IV Contingent Obligations
EXHIBITS:
Exhibit A Form of Note
Exhibit B Form of Subsidiary Guarantee
Exhibit C Form of Toy Biz Pledge Agreement
Exhibit D Form of Toy Biz Security Agreement
Exhibit E Form of Subsidiary Security Agreement
Exhibit F-1 Form of Opinion of Paul, Weiss, Rifkind,
Wharton & Garrison
Exhibit F-2 Form of Opinion of Amster, Rothstein & Ebenstein
Exhibit G Form of Commitment Transfer Supplement
Exhibit H Form of Borrowing Base Certificate
-iii-
<PAGE>
CREDIT AGREEMENT, dated as of February 22, 1995, among TOY
BIZ, INC., a Delaware corporation ("Toy Biz"); the financial institutions from
time to time parties hereto (the "Banks"); and CHEMICAL BANK ("Chemical"; and,
together with the Banks, the "Lenders"), as arranger (in such capacity, the
"Arranger") and as administrative agent (in such capacity, the "Administrative
Agent") for the Banks.
W I T N E S S E T H:
- - - - - - - - - -
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following respective meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"Account": as defined in "Eligible Accounts";
"Account Debtor": with respect to any Account, the obligor
with respect to such Account;
"Administrative Agent" shall have the meaning assigned to
such term in the preamble hereto;
"Affected Loan" shall have the meaning assigned to such term
in subsection 3.6(a);
"Affiliate" of any Person shall mean any other Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the first Person. For
purposes of this definition, a Person shall be deemed to be
"controlled by" another Person if such other Person possesses,
directly or indirectly, power either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such first Person or (b) direct or cause the direction of the
management and policies of such first Person whether by contract or
otherwise;
"Aggregate Commitment" shall mean, during any period set
forth below, the amount set forth opposite such period:
Period Amount
------ ------
Prior to 09/01/98 $20,000,000
09/01/98 - 09/30/98 23,000,000
10/01/98 - 11/15/98 29,000,000
11/16/98 - 11/22/98 25,000,000
11/23/98 - 11/29/98 22,000,000
minus the amount of any reductions of the Aggregate Commitment made
after March 1, 1998 made pursuant to the terms hereof;
"Aggregate Outstanding Extensions of Credit" shall mean, as
to any Bank at any time, an amount equal to the sum of (a) the
aggregate principal amount of all
<PAGE>
Loans made by such Bank then outstanding and (b) such Bank's Commitment
Percentage of the L/C Obligations then outstanding;
"Agreement" shall mean this Credit Agreement, as the same may
be amended, supplemented or otherwise modified from time to time;
"Alternate Base Rate" for any day, shall mean a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. If for any reason
the Administrative Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate, or
both, for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance
with the terms thereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the first sentence of
this definition, as appropriate, until the circumstances giving rise
to such inability no longer exist;
"Alternate Base Rate Loans" shall mean Loans hereunder at
such time as such Loans are made and/or being maintained at a rate of
interest based upon the Alternate Base Rate;
"Applicable Margin" shall mean (a) 2% per annum with respect
to Eurodollar Rate Loans and (b) 1% per annum with respect to
Alternate Base Rate Loans;
"Application" shall mean an application, in such form as the
Issuer may specify from time to time, requesting the Issuer to open a
Letter of Credit;
"Available Commitment" at any date, shall mean the amount
equal to the difference between (a) the Aggregate Commitment at such
date and (b) the Aggregate Outstanding Extensions of Credit at such
date;
"Bankruptcy Code" shall mean Title 11, United States Code, as
amended from time to time;
"Banks" shall have the meaning assigned to such term in the
preamble hereto;
"Base CD Rate" shall mean the sum of (a) the product of (i)
the Three-Month Secondary CD Rate and (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the C/D
Reserve Percentage and (b) the C/D Assessment Rate;
"benefitted Bank" shall have the meaning assigned to such
term in subsection 10.7;
"Borrowing Base" shall mean, as of any date, an amount equal
to (a) the sum (without duplication) of:
(i) 85% of the amount equal to (A) Eligible Accounts of
the Included Divisions as of such date minus (B) the
sum of the Dilution Reserve and
<PAGE>
the Seasonal Reserve applicable to each of the
Included Divisions at such date;
(ii) 50% of the Eligible Landed Inventory of the Included
Divisions at such date; and
(iii) 25% of Eligible In-transit Inventory of the Included
Divisions at such date;
minus (b) the Warehouse Fee Reserve at such date. The Borrowing Base
at any time in effect shall be determined by reference to the
Borrowing Base Certificate most recently delivered hereunder and
computed in accordance with the provisions of subsection 6.2(f);
provided that the information contained in the Borrowing Base
Certificate provided pursuant thereto shall not be conclusive in
calculating the amount of Eligible Accounts and Eligible Inventory and
the Agent shall be entitled to (x) adjust the amounts and other
information contained therein to the extent that it believes in its
reasonable credit judgment that such adjustment is appropriate to
reflect the then current amounts of Eligible Accounts and Eligible
Inventory or changes in the business practices of Toy Biz and its
Subsidiaries (or newly disclosed matters with respect to them and (y)
require that Toy Biz and its Subsidiaries maintain additional reserves
(for purposes of the computation of the Borrowing Base) in respect of
Eligible Accounts and Eligible Inventory, or otherwise to make
adjustments to its parameters for including Accounts and Inventory in
the Borrowing Base, to the extent that it believes that such
additional reserves and adjustments are appropriate based upon the
results of any evaluation or appraisal conducted pursuant to
subsection 6.6(b);
"Borrowing Base Certificate": a certificate, substantially in
the form of Exhibit H hereto;
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which commercial banks in New York, New York are
authorized or required by law to close;
"Cash Equivalents" shall mean (a) securities with maturities
of one year or less from the date of acquisition issued or fully
guaranteed or insured by the United States Government or any agency
thereof, (b) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition and
overnight bank deposits of any Bank or of any commercial bank having
capital and surplus in excess of $500,000,000, (c) repurchase
obligations of any Bank or of any commercial bank satisfying the
requirements of clause (b) of this definition or of Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney,
Inc. or Salomon Brothers Inc, having a term of not more than 30 days
with respect to securities issued or fully guaranteed or insured by
the United States Government, (d) commercial paper of a domestic
issuer rated at least A-2 by Standard & Poor's Corporation ("S&P") or
P-2 by Moody's Investors Service, Inc, ("Moody's"), (e) securities
with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of
the United States or by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's, (f)
securities with maturities of
<PAGE>
one year or less from the date of acquisition backed by standby
letters of credit issued by any Bank or any commercial bank
satisfying the requirements of clause (b) of this definition or (g)
shares of money market mutual or similar funds offered by the Persons
referred to in clause (c) above and Dreyfus Institutional Services
Corp.;
"C/D Assessment Rate" shall mean, for any day, the net annual
assessment rate in effect two Business Days prior to such day which is
payable by a member of the Bank Insurance Fund classified as well
capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12
C.F.R. ? 327.3(d) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or
such successor's) insuring time deposits at offices of such
institution in the United States;
"C/D Reserve Percentage" shall mean, for any day, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or
any successor), for determining the maximum reserve requirement for a
member bank of the Federal Reserve System in New York City with
deposits exceeding one billion Dollars in respect of new non-personal
time deposits in Dollars in New York City having a maturity of three
months and in an amount of $100,000 or more;
"Character" shall mean any character appearing in any product
of Toy Biz or its Subsidiaries;
"Closing Date" shall have the meaning assigned to such term
in subsection 5.1;
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time;
"Collateral" shall mean, collectively, the Collateral (as
defined in each of the Security Documents);
"Colorforms Note" shall mean the promissory note, dated
January 30, 1998, owing from University Games Corporation to Toy Biz
in the aggregate face amount of $1,350,000;
"Commercial Letter of Credit" shall have the meaning assigned
to it in subsection 2A.1(b);
"Commitment" of any Bank at any date shall mean the
obligation of such Bank at such date to make Loans to and/or issue or
participate in Letters of Credit on behalf of Toy Biz, in an aggregate
principal and/or face amount at any one time outstanding not to exceed
the amount set forth opposite such Bank's name under the caption
"Commitment" on Schedule II, as such amount shall be increased and may
be reduced from time to time in accordance with the provisions hereof;
collectively, as to all Banks, the "Commitments";
"Commitment Percentage" for any Bank at any time shall mean
the percentage of the Aggregate Commitment then constituted by such
Bank's Commitment;
"Commitment Transfer Supplement" shall have the meaning
assigned to such term in subsection 10.6(c);
<PAGE>
"Commonly Controlled Entity" shall mean an entity, whether or
not incorporated, which is under common control with Toy Biz within
the meaning of Section 4001 of ERISA or is part of a group which
includes Toy Biz and which is treated as a single employer under
Section 414 of the Code;
"Consolidated Lease Expense" for any period, shall mean the
aggregate rental obligations of Toy Biz and its Subsidiaries
determined on a consolidated basis which are payable in respect of
such period under leases of real and/or personal property (net of
income from sub-leases thereof, but including taxes, insurance,
maintenance and similar expenses which the lessee is obligated to pay
under the terms of such leases), whether or not such obligations are
reflected as liabilities or commitments on a consolidated balance
sheet of Toy Biz and its consolidated Subsidiaries or in the notes
thereto, excluding, however, obligations under leases with respect to
which the obligations of Toy Biz and its Subsidiaries are required in
accordance with GAAP to be capitalized on a balance sheet of Toy Biz
and its Subsidiaries;
"Consolidated Net Income" for any period, shall mean the net
income (or net loss) of Toy Biz and its Subsidiaries determined on a
consolidated basis in accordance with GAAP;
"Contingent Obligation" as to any Person shall mean any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends, letters of credit or other
obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any "keep-well" or "make-well" agreement,
guarantee of return on equity or other obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b)
to advance or supply funds (i) for the purchase or payment of any such
primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the
obligee under any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the obligee under such primary
obligation against loss in respect thereof;
"Contractual Obligation" of any Person shall mean any
provision of any material debt security or of any material preferred
stock or other equity interest issued by such Person or of any
material indenture, mortgage, agreement, instrument or undertaking to
which such Person is a party or by which it or any of its material
property is bound;
"Copyright" shall have the meaning ascribed thereto in the
Toy Biz Security Agreement;
"Credit Documents" shall mean this Agreement, the Notes, the
Applications, the Guarantees and the Security Documents; each, a
"Credit Document";
"Cross Default" of any Person shall mean (a) default in the
payment of any amount when due (whether at maturity or by
acceleration) on any of its Indebtedness (other than any such default
in respect of the Loans or the Notes) or in the payment of any matured
Contingent Obligation in respect of any Indebtedness of any other
Person (except for any such payments on account of any such
Indebtedness and
<PAGE>
Contingent Obligations in an aggregate principal amount at any one
time outstanding of up to $1,000,000) or (b) default in the
observance or performance of any other agreement or condition
relating to any such Indebtedness or Contingent Obligation (except
for any such Indebtedness and Contingent Obligations in an aggregate
principal amount at any one time outstanding of up to $1,000,000) or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause,
or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Contingent Obligation (or a
trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required,
such Indebtedness to become due or to be required to be redeemed or
repurchased prior to its stated maturity or such Contingent
Obligation to become payable;
"Current Ratio" shall mean (a) the sum of cash, Cash
Equivalents, net accounts receivable, net inventory and prepaid
expenses of Toy Biz and its Subsidiaries divided by (b) the sum of
accounts payable, accrued expenses, Indebtedness (excluding trade
letters of credit and non-current Indebtedness) and current income
taxes payable of Toy Biz and its Subsidiaries;
"Default" shall mean any of the events specified in Section
8, whether or not any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied;
"Dilution Factors" shall mean, with respect to the Accounts
owing to the Included Divisions at any date by Account Debtors, the
aggregate Dollar amount of any deductions made by the relevant
Included Division to the gross amount of Accounts of such Account
Debtor, including, without limitation, the amount of (a) any credit
memos, adjustments, returns and allowances affecting such Accounts,
(b) bad debt write-offs with respect to such Accounts and (c) other
non-cash credits offsetting such Accounts;
"Dilution Ratio" shall mean, at any date for an Included
Division, the amount (expressed as a percentage) equal to (a) the
aggregate amount of the Dilution Factors for the 12 consecutive fiscal
months of Toy Biz most recently ended divided by (b) total gross sales
of the relevant Included Division for such 12-month period;
"Dilution Reserve" shall mean, as of any date for an Included
Division, (a) the Dilution Ratio for such Included Division for the
period of 12 consecutive fiscal months ended most recently prior to
the date of calculation of the Borrowing Base then in effect (which
such date shall be set forth on the applicable Borrowing Base
Certificate) multiplied by (b) the Eligible Accounts of such Included
Division on such date;
"Dollars" and "$" shall mean dollars in lawful currency of
the United States of America;
"EBITDA" for any period, shall mean Consolidated Net Income
for such period, plus, without duplication and to the extent deducted
from revenues in determining Consolidated Net Income for such period,
(a) the aggregate amount of interest expense for such period, (b) the
aggregate amount of letter of credit fees paid during such period, (c)
the aggregate amount of income tax expense for such period,
<PAGE>
(d) all amounts attributable to depreciation and amortization for
such period and (e) all non-cash non-recurring charges during such
period, and minus, without duplication and to the extent added to
revenues in determining Net Income for such period, (i) interest
income for such period, and (ii) all non-cash non-recurring gains
during such period, in each case determined in accordance with GAAP;
"Eligible Accounts": with respect to the Included Divisions
at any date, the amount equal to the aggregate gross amount of
accounts receivable ("Accounts") reflected on the receivable aging
detail or other analogous statement of the Included Divisions on such
date that (x) have been invoiced and represent the bona fide sale and
delivery of merchandise, in each case in the ordinary course of
business of the Included Divisions in connection with its trade
operations and (y) are deemed by the Agent in good faith to be
eligible for inclusion in the calculation of the Borrowing Base.
Unless otherwise approved from time to time in writing by the Agent,
no Account shall be an Eligible Account if:
(a) (i) Toy Biz or the relevant Included Division
shall not be sole payee with respect to, or otherwise shall
not have sole lawful and absolute title to, such Account or
(ii) the sale to the Account Debtor giving rise to such
Account is on a bill-and-hold, guaranteed sale,
sale-and-return, ship-and-return, sale on approval or
consignment or other similar basis or made pursuant to any
other written agreement providing for repurchase or return of
any merchandise which has been claimed to be defective or
otherwise unsatisfactory (other than consumer returns in the
ordinary course of business) or (iii) the goods giving rise
to such Account have not been shipped and delivered to and
accepted by the Account Debtor, or the transaction giving
rise to such Account otherwise does not represent a completed
sale; or
(b) such Account arises out of a sale made by Toy
Biz or any Subsidiary thereof to a Subsidiary or an
Affiliate; or
(c) (i) such Account (other than any Account owing
from Toys 'r Us which has November 10th dating) is unpaid
more than 60 days from the original due date thereof or is
unpaid for more than 120 days from the original invoice date
thereof or (ii) in the case of any Account owing from Toys 'r
Us which has November 10th dating, such Account is unpaid
more than 15 days from the original due date thereof or (iii)
such Account has been written off the books of such person or
has been otherwise designated as uncollectible or (iv) more
than 50% in face amount of all Accounts of the same Account
Debtor and its known affiliates, taken together, are
ineligible pursuant to clauses (i), (ii) and (iii) above or
(v) a check, promissory note, draft, trade acceptance or
other instrument for the payment of money with respect to all
or any part of such Account has been received, presented for
payment and returned uncollected for any reason or (vi)
except to the extent that such Account arises post-petition
and the relevant Account Debtor has obtained
debtor-in-possession credit facilities which are in form and
substance acceptable to the Agent, the Account Debtor with
respect to such Account is insolvent or the subject of any
bankruptcy, insolvency or material adverse legal proceeding
of any kind; or
(d) the Account is not payable in Dollars or the
Account Debtor is not incorporated under the laws of the
United States of America or any State
<PAGE>
thereof or the Account Debtor is located outside (or has its
principal place of business or substantially all of its
assets outside) the continental United States; or
(e) the Account Debtor with respect to such Account
(i) is a creditor of Toy Biz, (ii) has or has asserted a
right of setoff against Toy Biz, (iii) has disputed its
liability (whether by chargeback or otherwise) or made any
claim with respect to the Account which has not been resolved
or (iv) the Account is subject to any adverse security
deposit, progress payment or other similar advance made by or
for the benefit of the Account Debtor, in each case, without
duplication, to the extent of the amount owed by Toy Biz to
the Account Debtor, the amount of such actual or asserted
right of setoff, the amount of such dispute or claim, the
amount of such adverse security deposit, progress payment or
other similar advance or the amount owed to such taxing
authority, as the case may be; or
(f) the Account is a chargeback; provided that, to
the extent that such chargeback is less than 120 days old,
only 50% of such Account shall be deemed to be ineligible;
(g) the Account does not comply in all material
respects with all requirements of applicable law, including
without limitation the Federal Consumer Credit Protection
Act, the Federal Truth in Lending Act and Regulation Z of the
Board of Governors of the Federal Reserve System; or
(h) (i) such Account is not subject to a valid and
perfected first priority Lien in favor of the Agent (for the
benefit of the Banks), subject to no other Liens or (ii) such
Account does not otherwise conform in all material respects
to the representations and warranties contained in the Credit
Documents; or
(i) the Account Debtor with respect to such Account
is the United States of America or any department, agency or
instrumentality thereof, unless Toy Biz duly assigns its
rights to payment of such Account to the Agent pursuant to
the Assignment of Claims Act of 1940, as amended, which
assignment and related documents and filings shall be in form
and substance reasonably satisfactory to the Agent.
In determining the aggregate amount of Accounts from the same Account
Debtor that are unpaid more than 90 days from the original date of
invoice or more than 60 days from the original due date (or, in the
case of Accounts owing from Toys 'r Us with November 10th dating, more
than 15 days after the original due date) pursuant to clause (c)
above, there shall be excluded the amount of any net credit balances
relating to Accounts owing from such Account Debtor with invoice dates
more than 60 days from the original due date or 90 days from the
original date of invoice (or, in the case of Accounts owing from Toys
'r Us with November 10th dating, more than 15 days after the original
due date);
"Eligible Assignee" shall mean (a) a commercial bank
organized under the laws of the United States, or any State thereof,
having total assets in excess of $1,000,000,000; (b) a commercial bank
organized under the laws of any other country having total assets in
excess of $1,000,000,000; and (c) a finance company, insurance
<PAGE>
company or other financial institution or fund which is engaged in
making, purchasing or otherwise investing in commercial loans for its
own account in the ordinary course of its business and which has
total assets in excess of $150,000,000;
"Eligible In-Transit Inventory" shall mean, at any date with
respect to the Included Divisions, all finished goods which are
In-Transit, net of any Inventory Reserves and subject to the same
eligibility criteria as are set forth in the definition of the term
"Eligible Landed Inventory" contained in this subsection 1.1.
"Eligible Landed Inventory": shall mean, with respect to the
Included Divisions at any date, the amount equal to the value
(determined in accordance with the Inventory Valuation Standard and
expressed in Dollars) of all inventory located within the continental
United States of the Included Divisions (the "Inventory"), net of any
Inventory Reserves. Unless otherwise approved from time to time in
writing by the Agent, no Inventory shall be "Eligible Landed
Inventory" if:
(a) such item of Inventory is comprised of (i)
componentry or raw materials or (ii) packing, packaging
and/or shipping supplies or materials; or
(b) such item of Inventory is held on consignment,
is owned by Toy Biz or any of its Subsidiaries and has been
consigned to other Persons, or is located at, or in the
possession of, a vendor of Toy Biz or such Subsidiary; or
(c) such item of Inventory is located on a leasehold
(including, without limitation, a leased department of a
retail store), except to the extent that such Inventory is
segregated or otherwise separately identifiable from goods of
all others, if any, stored on the premises and the lessor has
entered into a landlord's waiver and consent (in form and
substance reasonably satisfactory to the Agent) providing to
the Agent (i) a waiver of any applicable warehouseman's (or
analogous) Lien (whether arising by contract or otherwise),
(ii) the right to receive notice of default, (iii) the right
to repossess such item of Inventory (without the making of
any payment to such landlord) at any time upon the occurrence
or during the continuance of a Default or Event of Default
and (iv) such other rights as may be reasonably acceptable to
the Agent; or
(d) such item of Inventory has been returned or
rejected by a customer or is in transit to a third party
(other than to a warehouse site described in clause (c)
above); or
(e) such item of Inventory (i) is damaged or not in
good condition (to the extent not provided for by Inventory
Reserves as described above), (ii) is a sample used for
marketing purposes, or (iii) does not meet all material
standards imposed by any Governmental Authority having
regulatory authority over such item of Inventory, its use or
its sale or (iv) shall be a discontinued item or otherwise be
believed by the Agent (using its commercially reasonable
judgment, after consultation with Toy Biz) to be not readily
usable or salable under the customary terms upon which it
usually is sold (with it being presumed that any Inventory
which is more than 12 months old is not readily usable or
salable under such customary terms); or
<PAGE>
(f) Toy Biz shall not have good, marketable and
unencumbered title as sole owner of such item of Inventory or
any claim disputing the title of Toy Biz to, or right to
possession of or dominion over, such item of Inventory shall
have been asserted; or
(g) any representation or warranty contained in this
Agreement or in any other Credit Document applicable to
either Inventory in general or to any such specific item of
Inventory has been breached in any material respect with
respect to such item of Inventory; or
(h) such item of Inventory is evidenced by an
Account; or
(i) such item of Inventory is subject to any
licensing, patent, royalty, trademark, trade name or
copyright agreements with any third party from whom Toy Biz
or any of its Subsidiaries has received notice of a dispute
in respect of any such agreement to the extent that such
dispute could reasonably be expected to prevent the sale of
such item of Inventory; or
(j) such item of Inventory is not assignable or a
first priority, perfected security interest in such item of
Inventory has not been obtained by the Agent pursuant to the
Security Agreements; or
(k) such item of Inventory is subject to any Lien
whatsoever, other than Liens which are permitted to encumber
Inventory pursuant to the Loan Documents;
"Environmental Laws" shall mean any and all Federal,
national, state, provincial, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements of
any Governmental Authority within or outside of the United States
regulating, relating to or imposing liability or standards of conduct
concerning any Hazardous Materials or environmental protection, as now
or may at any time hereafter be in effect, including, without
limitation, the Clean Water Act, also known as the Federal Water
Pollution Control Act ("FWPCA"), 33 U.S.C. ? 1251 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. ? 136
et seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30
U.S.C. ? 1201 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ? 9601 et seq.
(as amended by the Superfund Amendment and Reauthorization Act of 1986
("SARA"), Public Law 99-499, 100 Stat. 1613), the Emergency Planning
and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ? 1101 et seq.,
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ? 6901
et seq., the Safe Drinking Water Act ("SDWA"), 42 U.S.C. ? 300F et
seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ? 2601 et
seq., together, in each case, with each amendment thereto, and the
regulations adopted and publications promulgated thereunder and all
substitutions therefor;
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time;
"Eurocurrency Reserve Requirements" with respect to any
Interest Period for any Eurodollar Loan shall mean the aggregate of
the rates (expressed as a decimal) of reserve requirements current on
the date two Working Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal
and
<PAGE>
emergency reserves under any regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having
jurisdiction with respect thereto), as now and from time to time
hereafter in effect, dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) required to be maintained
by a member bank of such System;
"Eurodollar Base Rate" with respect to each Eurodollar Loan
of each Bank for each Interest Period shall mean the rate per annum
equal to the rate at which the Administrative Agent is offered Dollar
deposits two Working Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the foreign currency
and exchange operations or eurodollar funding operations of the
Administrative Agent are customarily conducted at or about 11:00 A.M.
(London time) for delivery on the first day of such Interest Period
for the number of days contained therein and in an amount equal to a
representative amount of such deposits;
"Eurodollar Loan" shall mean each Loan hereunder at such time
as it is made and/or being maintained at a rate of interest based upon
the Eurodollar Rate;
"Eurodollar Rate" with respect to each Eurodollar Loan for
each Interest Period shall mean the rate per annum (rounded upwards to
the nearest whole multiple of 1/100th of one percent) equal to the
following:
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Event of Default" shall mean any of the events specified in
Section 8, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied;
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended;
"Existing Credit Agreement" shall mean the Credit Agreement,
dated as of April 30, 1993 (as amended, supplemented or otherwise
modified from time to time), among Toy Biz, certain lenders parties
thereto and Chemical Bank, as Administrative Agent;
"Federal Funds Effective Rate" for any day, shall mean the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Administrative Agent from
three federal funds brokers of recognized standing selected by it;
"Financing Lease" shall mean any lease of property, real or
personal, the obligations of the lessee in respect of which are
required in accordance with GAAP to be capitalized on a balance sheet
of a lessee;
"Formation and Contribution Agreement" shall mean the
Formation and Contribution Agreement, dated as of March 19, 1993,
among Old Toy Biz, Isaac
<PAGE>
Perlmutter, Isaac Perlmutter T.A., a Florida trust, Marvel, Avi Arad
and Toy Biz (as the same may be amended, supplemented or otherwise
modified from time to time);
"Fully Satisfied" shall mean, with respect to the Payment
Obligations as of any date, that, on or before such date, (a) the
principal of and interest accrued to such date on such Payment
Obligations (other than the Undrawn L/C Obligations) shall have been
paid in full in cash, (b) all fees, expenses and other amounts then
due and payable which constitute Payment Obligations (other than the
Undrawn L/C Obligations) shall have been paid in full in cash, (c) the
Commitments shall have expired or irrevocably been terminated, and (d)
the Undrawn L/C Obligations shall have been Fully Secured.
"Fully Secured" shall mean, with respect to any Undrawn L/C
Obligations as of any date, that, on or before such date, such Undrawn
L/C Obligations shall have been secured by the grant to the relevant
Issuer by Toy Biz of a first priority, perfected security interest in,
and Lien on, (a) cash in an amount at least equal to the excess of the
amount of such Undrawn L/C Obligations over the amount of the
Aggregate Commitment on such date or (b) other collateral security
which is acceptable to such Issuer and the Majority Banks;
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect as of the date of, and used
in, the preparation of the audited consolidated financial statements
referred to in subsection 4.9, except that, with respect to the
presentation of financial statements required to be furnished
hereunder, GAAP shall mean generally accepted accounting principles in
the United States of America as in effect from time to time;
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including,
without limitation, any governmental department, commission, board,
bureau, agency or instrumentality, or other court or arbitrator, in
each case whether of the United States or foreign) and the National
Association of Insurance Commissioners;
"Guarantees" shall mean the collective reference to the
guarantees hereinafter delivered to the Administrative Agent
guaranteeing the obligations of Toy Biz to the Banks hereunder;
"Hazardous Materials" shall mean any hazardous materials,
hazardous wastes, hazardous or toxic substances, defined or regulated
as such in or under any Environmental Law, including without
limitation asbestos, Petroleum Products and material exhibiting the
characteristics of ignitability, corrosivity, reactivity or extraction
procedure toxicity, as such terms are defined in connection with
hazardous materials or hazardous wastes or hazardous or toxic
substances in any Environmental Law;
"Included Divisions" shall mean the Toy Biz and Spectra
divisions of Toy Biz and its domestic Subsidiaries (it being
understood that assets attributable to the Colorforms division of Toy
Biz shall be deemed not to constitute assets of an Included Division);
<PAGE>
"Incremental Liability" shall have the meaning assigned to
such term in subsection 7.9(f);
"Indebtedness" of a Person shall mean (a) indebtedness of
such Person for borrowed money whether short-term or long-term and
whether secured or unsecured, (b) indebtedness of such Person for the
deferred purchase price of services or property, which purchase price
(i) is due twelve months or more from the date of incurrence of the
obligation in respect thereof or (ii) customarily or actually is
evidenced by a note or other written instrument (including, without
limitation, any such indebtedness which is non-recourse to the credit
of such Person but is secured by assets of such Person), (c)
obligations of such Person under Capital Leases, (d) obligations of
such Person arising under acceptance facilities, (e) the undrawn face
amount of, and unpaid reimbursement obligations in respect of, all
letters of credit (including, without limitation, the Letters of
Credit) issued for the account of such Person, (f) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (g) all obligations of such Person upon which interest
charges are customarily paid, (h) all obligations of such Person under
conditional sale or other title retention agreements relating to
property purchased by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (i) obligations
of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants,
rights or options to acquire such capital stock (with redeemable
preferred stock being valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends),
(j) all executory obligations of such Person in respect of interest
rate agreements and foreign exchange and other financial hedge
contracts (including, without limitation, equity hedge contracts), (k)
the face amount of all bankers' acceptances created for the account of
such Person, (l) all Indebtedness of the types referred to in clauses
(a) through (k) above for which such Person is obligated under a
Contingent Obligation and (m) renewals, extensions, refundings,
deferrals, restructurings, amendments and modifications of any such
indebtedness, obligation or guarantee;
"Indemnified Liabilities" shall have the meaning assigned to
such term in subsection 10.5;
"Insolvency" shall mean with respect to any Multiemployer
Plan, the condition that such Plan is insolvent within the meaning of
such term as used in Section 4245 of ERISA;
"Insolvent" shall pertain to a condition of Insolvency;
"In-Transit" shall mean, with respect to Inventory, that such
Inventory is in-transit from the contract manufacturer with respect
thereto to a distribution warehouse;
"Intellectual Property" shall have the meaning assigned to
such term in subsection 4.15;
"Interest Payment Date" shall mean (a) as to any Alternate
Base Rate Loan, the last day of each March, June, September and
December, commencing on the first of such days to occur after such
Alternate Base Rate Loan is made or Eurodollar Loans
<PAGE>
are converted to Alternate Base Rate Loans and on each date principal
is due, (b) as to any Eurodollar Loan, the last day of the Interest
Period with respect thereto and (c) in any event, the Termination
Date;
"Interest Period" shall mean, (a) initially, with respect to
any Eurodollar Loan, the period commencing on the borrowing date or
the initial date of conversion with respect to such Eurodollar Loan
and ending one, two or three months thereafter as selected by Toy Biz
in a notice of borrowing or conversion, as the case may be, as
provided herein and (b) thereafter, each period commencing on the last
day of the immediately preceding Interest Period applicable to such
Eurodollar Loan and ending one, two or three months thereafter, in any
such case as selected by Toy Biz in accordance with the provisions of
subsection 3.5; provided that all of the foregoing provisions relating
to Interest Periods are subject to the following:
(x) if any Interest Period relating to a Eurodollar
Loan would otherwise end on a day which is not a Working Day,
such Interest Period shall be extended to the next succeeding
Working Day, unless the result of such extension would be to
carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately
preceding Working Day;
(y) Toy Biz shall not select an Interest Period
relating to any Eurodollar Loan which extends beyond the
Termination Date and any Interest Period relating to any
Eurodollar Loan that would otherwise extend beyond the
Termination Date shall end on such date; and
(z) if any Interest Period relating to a Eurodollar
Loan begins on the last Working Day of a calendar month (or
on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period),
such Interest Period shall end on the last Working Day of a
calendar month;
"International Pledge Agreement" shall mean a pledge
agreement, in form and substance reasonably satisfactory to the
Administrative Agent, executed and delivered by Toy Biz and pledging
65% of the capital stock of Toy Biz International in favor of the
Administrative Agent;
"Inventory": as defined in "Eligible Landed Inventory";
"Inventory Reserves": the amount equal to the sum of (a) the
amount by which the value of the perpetual Inventory on such date
exceeds the value of the Inventory on the general ledger on such date,
(b) any profits or transfer price additions accrued in connection with
transfers of such Inventory between Toy Biz and its Subsidiaries or
among Subsidiaries of Toy Biz, (c) the amount of any reserve
maintained by Toy Biz and its Subsidiaries (consistent with their
respective historical practices) for inactive, excess and obsolete
inventory, shrinkage, and markdowns and (d) the amount of any accrued
and unpaid costs and expenses (such as freight, duty and insurance)
required to be paid by Toy Biz and its domestic Subsidiaries in order
to take possession at a facility of Toy Biz or any of its domestic
Subsidiaries of any Inventory which is In-Transit and which is
included in the Borrowing Base;
<PAGE>
"Inventory Valuation Standard" shall mean at the time of any
determination thereof, the lower of:
(a) cost (less any appropriate revaluation reserves or reserve
for obsolete Inventory and any profits accrued in
connection with transfers of Inventory between Toy Biz
and its Subsidiaries or between any such Subsidiaries),
determined in accordance with the standard cost method of
accounting, adjusted to (i) deduct favorable variances
from the value of Eligible Landed Inventory, in the event
variances under the standard cost method are capitalized
and (ii) cause the standard cost of Eligible Landed
Inventory to approximate actual cost, in the event that
variances under the standard cost method are expensed;
and
(b) the fair market value of the Eligible Landed
Inventory at such time (expressed in Dollars);
"IPO" shall mean the initial public offering of common stock
of Toy Biz contemplated by the Registration Statement on Form S-1
filed with the Securities and Exchange Commission on December 12,
1994;
"Issuer" shall mean The Chase Manhattan Bank, in its capacity
as issuer of any Letter of Credit;
"L/C Commitment" shall be $2,000,000;
"L/C Fee Payment Date" shall be the last day of each March,
June, September and December;
"L/C Obligations" shall mean, at any time, the collective
reference to (o) the aggregate amount of the Undrawn L/C Obligations
then outstanding and (b) the aggregate amount of the then unreimbursed
Reimbursement Obligations;
"L/C Participants" shall mean the collective reference to all
the Banks other than the Issuer;
"Letters of Credit" shall have the meaning assigned to it in
subsection 2A.1(a);
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other) or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, (a) any conditional sale or other title retention
agreement, (b) any financing lease having substantially the same
economic effect as any of the foregoing, (c) the filing of any
financing statement under the Uniform Commercial Code (other than any
such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing
and (d) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities (other
than, in the case of securities other than the capital stock of any
Subsidiary of Toy Biz, pursuant to normal settlement terms));
"Loan" and "Loans" shall have the meanings assigned to such
terms in subsection 2.1;
<PAGE>
"Majority Banks" shall mean, at any date, the holders of at
least 66-2/3% of the Aggregate Commitment in effect on such date; or
if the Aggregate Commitment has been terminated or reduced to zero,
the holders of at least 66-2/3% of the aggregate unpaid principal
amount of the Notes on such date;
"Marvel" shall mean Marvel Entertainment Group, Inc., a
Delaware Corporation;
"Master Toy License Agreement" shall mean the License
Agreement, dated April 30, 1993, by and between Toy Biz and Marvel, as
amended on December 1, 1994 and as further amended on February 14,
1995;
"Material Adverse Effect" shall mean a material adverse
effect upon (a) the business, assets, operations, condition (financial
or otherwise) or prospects of Toy Biz and its Subsidiaries taken as a
whole, (b) the ability of Toy Biz and each of its Subsidiaries to
perform its obligations under the Credit Documents or (c) the rights
and remedies available to the Administrative Agent and/or the Banks
under any Credit Document;
"Multiemployer Plan" shall mean a Plan (other than a welfare
plan as defined in Section 3(1) of ERISA) which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA;
"Net Cash Proceeds" shall mean in connection with any
issuance by Toy Biz or any of its Subsidiaries of any equity
securities, the cash proceeds received from such issuance, net of
investment banking fees, legal fees, accountants' fees, underwriting
discounts and commissions and other customary fees and expenses
actually incurred in connection therewith;
"New Preferred Stock" shall mean the preferred stock of Toy
Biz to be issued in connection with the purchase of certain assets of
Spectra Star, Inc., which preferred stock shall have terms
substantially similar to those set forth in Exhibit A to the First
Amendment and Consent Number 1, dated as of August 29, 1995, to this
Agreement;
"Note" shall have the meaning assigned to such term in
subsection 2.2(c);
"Old Toy Biz" shall mean Toy Biz, Inc., a Delaware
corporation controlled by Isaac Perlmutter;
"Parent" shall have the meaning assigned to such term in
subsection 6.8;
"Participants" shall have the meaning assigned to such term
in subsection 10.6(b);
"Patent" shall have the meaning ascribed thereto in the Toy
Biz Security Agreement;
"Payment Obligations" shall mean (a) all principal, interest,
fees, charges, expenses, attorneys' fees and disbursements,
indemnities and any other amounts payable by any Person under any
Credit Document and (b) any amount in respect of any of the foregoing
that the Administrative Agent or any Bank, in its sole discretion,
<PAGE>
may elect to pay or advance under this Agreement on behalf of such
Person after the occurrence and during the continuance of a Default or
an Event of Default;
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA;
"Person" shall mean an individual, a partnership, a
corporation, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority
or any other entity of whatever nature;
"Petroleum Products" shall mean gasoline, diesel fuel, motor
oil, waste or used oil, heating oil, kerosene and any other petroleum
products, including crude oil or any fraction thereof;
"Plan" shall mean at any particular time, any employee
benefit plan which is covered by ERISA and in respect of which Toy Biz
or a Commonly Controlled Entity is (or, if such plan was terminated at
such time, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA;
"Potential Withdrawal Liability" shall have the meaning
assigned to such term in subsection 4.8;
"Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as
its prime rate in effect at its principal office in New York City
(each change in the Prime Rate to be effective on the date such change
is publicly announced);
"Purchasing Banks" shall have the meaning assigned to such
term in subsection 10.6(c)(ii);
"Register" shall have the meaning assigned to such term in
subsection 10.6(d);
"Reimbursement Obligation" shall mean the obligation of Toy
Biz to reimburse the Issuer pursuant to subsection 2A.5(a) for amounts
drawn under Letters of Credit;
"Reorganization" shall mean with respect to any Multiemployer
Plan, the condition that such Plan is in reorganization within the
meaning of such term as used in Section 4241 of ERISA;
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the
30-day notice period is waived under subsections .13, .14, .16, .18,
.19 or .20 of PBGC Reg. ? 2615;
"Requirement of Law" for any Person shall mean the
Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon
such Person or any of its material property or to which such Person or
any of its material property is subject;
<PAGE>
"Responsible Officer" shall mean any officer at the level of
Vice President or higher of Toy Biz, or, with respect to financial
matters, the Chief Financial Officer, Chief Accounting Officer or
Treasurer of Toy Biz;
"Security Documents" shall mean the Toy Biz Security
Agreement, each Subsidiary Security Agreement and all other security
documents hereafter delivered to the Administrative Agent granting a
security interest in any asset or assets of any Person to secure the
Payment Obligations of Toy Biz hereunder and under the Notes, or to
secure any guarantee of any such Payment Obligations;
"Single Employer Plan" shall mean any Plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA;
"Spectra Division Seasonal Reserve" shall mean, with respect
to any Borrowing Base Certificate due during the period from March 1
through July 31 of each year, the greater of (i) 25% of the prior
month's sales of the Spectra division and (ii) $500,000;
"Standby Letter of Credit" shall have the meaning assigned to
it in subsection 2A.1(b);
"Stockholders' Agreement" shall have the meaning assigned to
such term in subsection 5.1(d).
"Subordinated Debt" shall mean the collective reference to
the Entertainment Note and the Perlmutter Note as each such term is
defined in the Formation and Contribution Agreement;
"Subsidiary" of any Person shall mean a corporation or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other
Persons performing similar functions for such entity, are owned,
directly or indirectly, by such Person; unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of Toy Biz and
all references to a "wholly owned Subsidiary" or to "wholly pledged
Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of Toy Biz of which Toy Biz directly or indirectly owns
all of the capital stock (other than directors' qualifying shares);
"Subsidiary Guarantee" shall mean the Subsidiary Guarantee
substantially in the form of Exhibit B;
"Subsidiary Security Agreement" shall mean the Subsidiary
Security Agreement substantially in the form of Exhibit E;
"Taxable Bank" shall have the meaning assigned to such term
in subsection 3.10(d);
"Taxes" shall have the meaning assigned to such term in
subsection 3.10(a);
"Termination Date" shall mean the earliest of (a) February
21, 1999, (b) the date upon which Toy Biz or any of its Subsidiaries
is merged or consolidated with or into
<PAGE>
Marvel Entertainment Group, Inc. (or any of its Affiliates or
Subsidiaries) pursuant to the Plan of Reorganization of Marvel
Entertainment Group, Inc. described in the Disclosure Statement
approved by the United States Bankruptcy Court for the District of
Delaware on March 13, 1998, as the same may be amended, supplemented
or otherwise modified from time to time and (c) such earlier date upon
which the Commitments shall terminate in accordance with the terms
hereof;
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported
as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the "Board") through the
public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on
such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate
of deposit dealers of recognized standing selected by it;
"Toy Biz" shall have the meaning assigned to such term in the
recitals hereto;
"Toy Biz Division Seasonal Reserve" shall mean, with respect
to any Borrowing Base Certificate due during the period from October 1
through January 31 of each year, the greater of (i) 25% of the prior
month's sales of the Toy Biz division and (ii) $6,000,000;
"Toy Biz Pledge Agreement" shall mean the Toy Biz Pledge
Agreement substantially in the form of Exhibit C;
"Toy Biz International" shall mean Toy Biz International
Ltd., a Hong Kong corporation and a Subsidiary of Toy Biz;
"Toy Biz Security Agreement" shall mean the Toy Biz Security
Agreement, to be executed and delivered by Toy Biz in favor of the
Administrative Agent, substantially in the form of Exhibit D, as the
same may be amended, supplemented or otherwise modified from time to
time;
"Toy Biz Stock Option Plan" shall mean the Toy Biz 1995 Stock
Option Plan;
"Trademark" shall have the meaning ascribed thereto in the
Toy Biz Security Agreement;
"Tranche" shall be the collective reference to Eurodollar
Loans the Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans
shall originally have been made on the same day);
"Transferee" shall have the meaning assigned to such term in
subsection 10.6(f);
<PAGE>
"Undrawn L/C Obligations" shall mean the portion, if any, of
the Payment Obligations constituting the contingent obligation of Toy
Biz to reimburse each Issuer in respect of the then undrawn and
unexpired portions of the Letters of Credit issued by such Issuer
pursuant to subsection 2A.5;
"Unfunded Pension Amount" shall have the meaning assigned to
such term in subsection 4.8;
"Uniform Commercial Code" and "UCC" shall mean the Uniform
Commercial Code as in effect from time to time in the State of New
York;
"Uniform Customs" shall mean the Uniform Customs and Practice
for Documentary Credits (1983 Revision), International Chamber of
Commerce Publication No. 400, as the same may be amended from time to
time;
"Warehouse Fee Reserve" shall mean, at any date, the amount
equal to (a) three months of warehouse fees for Inventory of the
Included Divisions (based on average fees for the immediately
preceding twelve month period) plus (b) at any date occurring during
the period from December 1 through February 28 of each year, $100,000;
"Work" shall mean any work which is or may be subject to
copyright protection pursuant to Title 17 of the United States Code;
and
"Working Day" shall mean any Business Day other than a
Business Day on which commercial banks in London, England are
authorized or required by law to close.
. (a) All terms defined in this Agreement shall have the defined meanings when
used in the Notes, the Security Documents, any other Credit Document or any
certificate or other document made or delivered pursuant hereto or thereto
unless otherwise defined therein.
(b) As used herein, in the Notes, in the Security Documents,
in the other Credit Documents and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in
subsection 1.1, and accounting terms partly defined in subsection 1.1 to the
extent not defined, shall have the respective meanings given to them under
GAAP. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under GAAP, the definitions
contained herein shall control.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement, the Notes, any Security Documents
or any other Credit Document shall refer to this Agreement, such Note, such
Security Document or such other Credit Document, as the case may be, as a whole
and not to any particular provision of this Agreement, such Note, such Security
Document or such other Credit Document, as the case may be; and Section,
subsection, Schedule and Exhibit references contained in this Agreement are
references to Sections, subsections, Schedules and Exhibits in or to this
Agreement, unless otherwise specified.
<PAGE>
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS
2.1 Commitments. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make loans in Dollars (individually, a
"Loan"; collectively, the "Loans") to Toy Biz from time to time during the
period from the Closing Date to the Termination Date in an aggregate principal
amount at any one time outstanding which, when added to such Bank's Commitment
Percentage of the then outstanding L/C Obligations, does not exceed the amount
equal to the lesser of (a) the Commitment Percentage of such Bank times the
Aggregate Commitment as of such date, but in no event more than the Commitment
of such Bank and (b) the Commitment Percentage of such Bank times the Borrowing
Base then in effect. During the period commencing on the Closing Date and
ending on the Termination Date, Toy Biz may use the Commitments by borrowing,
repaying the Loans in whole or in part and reborrowing, all in accordance with
the terms and conditions hereof.
2.2 Obligations of Toy Biz. (a) Toy Biz agrees that each Loan
made by each Bank pursuant hereto shall constitute the unconditional promise
and obligation of Toy Biz to pay to the Administrative Agent, for the benefit
of such Bank, at the office of the Administrative Agent, 270 Park Avenue, New
York, New York 10017, in lawful money of the United States of America and in
immediately available funds the aggregate unpaid principal amount of all Loans
made by such Bank pursuant to subsection 2.1, which amounts shall be due and
payable (whether at maturity or by acceleration) as set forth in this Agreement
and, in any event, on the Termination Date.
(b) Toy Biz agrees that each Bank is authorized to record (i)
the date and amount of each Loan made by such Bank pursuant to subsection 2.1,
(ii) the date of each interest rate conversion pursuant to subsection 3.5 and
the principal amount subject thereto, (iii) the date and amount of each payment
or prepayment of principal of each Loan and (iv) in the case of each Eurodollar
Loan, the interest rate and Interest Period, in the books and records of such
Bank and in such manner as is reasonable and customary for such Bank and a
certificate of an officer of such Bank, setting forth in reasonable detail the
information so recorded, shall constitute prima facie evidence of the accuracy
of the information so recorded; provided that the failure to make any such
recording shall not in any way affect the Payment Obligations of Toy Biz
hereunder.
(c) Toy Biz agrees that, upon the request to the
Administrative Agent by any Bank at any time, such Bank's Loans shall be
evidenced by a promissory note of Toy Biz, substantially in the form of Exhibit
A with appropriate insertions as to date and principal amount (a "Note"),
payable to the order of such Bank and representing the obligation of Toy Biz to
pay a principal amount equal to the amount of the Commitment of such Bank or,
if less, the aggregate unpaid principal amount of all Loans made by such Bank,
with interest on the unpaid principal amount thereof from time to time
outstanding under such Note as prescribed in subsection 3.4. Upon the request
to the Administrative Agent by any Bank at any time, Toy Biz shall execute and
deliver to such Bank two Notes, one of which shall evidence the portion of such
Bank's Loans represented by Eurodollar Loans, and the other which shall
evidence the portion of such Bank's Loans represented by Alternate Base Rate
Loans.
2.3 Procedure for Borrowing Loans. (a) Toy Biz may request a
borrowing from time to time under the Aggregate Commitment prior to the
Termination Date on any Business Day (if the Loans to be borrowed are Alternate
Base Rate Loans) or on any Working Day (if the Loans to be borrowed are
Eurodollar Loans) by giving irrevocable notice to the
<PAGE>
Administrative Agent, specifying (i) the aggregate principal amount to be
borrowed, (ii) the requested borrowing date, (iii) whether the Loans to be
borrowed are to be Eurodollar Loans or Alternate Base Rate Loans or a
combination thereof and, if a combination, the respective aggregate amount of
each type of borrowing and (iv) if the Loans to be borrowed are Eurodollar
Loans, the length of the Interest Period or Interest Periods applicable
thereto. Any such notice of borrowing must be signed by a Responsible Officer
of Toy Biz and be received by the Administrative Agent prior to 11:00 A.M., New
York City time, three Working Days prior to the requested borrowing date, in
the case of Eurodollar Loans, and one Business Day prior to the requested
borrowing date, in the case of Alternate Base Rate Loans. Each borrowing under
the Commitments shall be in an aggregate principal amount equal to the lesser
of (x) $1,500,000 or a whole multiple of $500,000 in excess thereof (in the
case of Eurodollar Loans) or $1,000,000 or a whole multiple of $100,000 in
excess thereof (in the case of Alternate Base Rate Loans) or (y) the Available
Commitment. Upon receipt of any such notice, the Administrative Agent will
promptly notify each Bank thereof. Each Bank will make available to the
Administrative Agent at the office of the Administrative Agent specified in
subsection 10.2 (or at such other location as the Administrative Agent may
direct), by 1:00 P.M., New York City time, on the requested borrowing date, an
amount equal to the Commitment Percentage of such Bank times the aggregate
amount of Loans requested to be borrowed on such date, in funds immediately
available to the Administrative Agent. The proceeds of Loans received by the
Administrative Agent hereunder shall promptly be made available to Toy Biz by
the Administrative Agent's crediting the account of Toy Biz, at the office of
the Administrative Agent specified in subsection 10.2, with the aggregate
amount actually received by the Administrative Agent from the Banks and in like
funds as received by the Administrative Agent.
(b) The failure of any Bank to make the Loan to be made by it
on any requested borrowing date shall not relieve any other Bank of its
obligation hereunder to make its Loan on such borrowing date, but no Bank shall
be responsible for the failure of any other Bank to make the Loan to be made by
such other Bank on such borrowing date.
2.4 Use of Proceeds of Loans. The proceeds of the Loans
hereunder shall be used by Toy Biz for working capital and other general
corporate purposes of Toy Biz and its Subsidiaries.
. 2.5 [INTENTIONALLY OMITTED]
SECTION 2A. LETTERS OF CREDIT
2A.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuer, in reliance on the agreements of the other Banks set forth
in subsection 2A.4(a) agrees to issue letters of credit ("Letters of Credit")
for the account of Toy Biz on any Business Day in such form as may reasonably
be approved from time to time by the Issuer; provided that the Issuer shall
have no obligation to issue any Letter of Credit if, after giving effect to
such issuance, (i) the L/C Obligations would exceed the L/C Commitment, (ii)
the Available Commitment would be less than zero or (iii) the Aggregate
Outstanding Extensions of Credit of all Banks will exceed the Borrowing Base
then in effect.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either
(1) a standby letter of credit issued to support obligations of Toy
Biz, contingent or otherwise, the payment
<PAGE>
of which Toy Biz would be permitted to utilize the proceeds of Loans
hereunder (a "Standby Letter of Credit"), or (2) a commercial letter
of credit issued in respect of the purchase of goods or services by
Toy Biz and its Subsidiaries in the ordinary course of business (a
"Commercial Letter of Credit") and
(ii) expire no later than five days prior to the
Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) The Issuer shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuer or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
2A.2 Procedure for Issuance of Letters of Credit. Toy Biz may
from time to time request that the Issuer issue a Letter of Credit by
delivering to the Issuer at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuer, and such
other certificates, documents and other papers and information as the Issuer
may reasonably request. Upon receipt of any Application, the Issuer will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuer be required to issue any Letter of
Credit earlier than three Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuer and Toy
Biz. The Issuer shall furnish a copy of such Letter of Credit to Toy Biz
promptly following the issuance thereof.
2A.3 Fees, Commissions and Other Charges. (a) Toy Biz shall
pay to the Agent, for the account of the Issuer and the L/C Participants, a
letter of credit commission with respect to each Letter of Credit, computed for
the period from the date of such payment to the date upon which the next such
payment is due hereunder at the rate per annum equal to 1% on the face amount
of each such Letter of Credit, calculated on the basis of a 365 day (or 366
day, as the case may be) year. In addition, a fronting fee shall be payable to
the Issuer, for its own account, in the amount equal to 1/4 of 1% per annum on
the face amount of each Letter of Credit. Such commissions shall be payable
quarterly, in advance, on the date of issuance of each Letter of Credit and on
each L/C Fee Payment Date to occur thereafter while such Letter of Credit
remains outstanding and shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, Toy
Biz shall pay or reimburse the Issuer for such normal and customary costs and
expenses as are incurred or charged by the Issuer in issuing, effecting payment
under, amending, negotiating or otherwise administering any Letter of Credit.
(c) The Agent shall, promptly following its receipt thereof,
distribute to the Issuer and the L/C Participants all fees and commissions
received by the Agent for their respective accounts pursuant to this
subsection.
2A.4 L/C Participations. (a) The Issuer irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuer to
issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from the Issuer, on the
terms and conditions hereinafter stated, for
<PAGE>
such L/C Participant's own account and risk an undivided interest equal to such
L/C Participant's Commitment Percentage in the Issuer's obligations and rights
under each Letter of Credit issued hereunder and the amount of each draft paid
by the Issuer thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuer that, if a draft is paid under any Letter of Credit for
which the Issuer is not reimbursed in full by Toy Biz in accordance with the
terms of this Agreement, such L/C Participant shall pay to the Issuer upon
demand at the Issuer's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage of the amount of such draft, or
any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuer pursuant to paragraph 2A.4(a) in respect of any unreimbursed
portion of any payment made by the Issuer under any Letter of Credit is paid to
the Issuer within three Business Days after the date such payment is due, such
L/C Participant shall pay to the Issuer on demand an amount equal to the
product of (i) such amount, times (ii) the daily average Federal funds rate, as
quoted by the Issuer, during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuer, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to paragraph
2A.4(a) is not in fact made available to the Issuer by such L/C Participant
within three Business Days after the date such payment is due, the Issuer shall
be entitled to recover from such L/C Participant, on demand, such amount with
interest thereon calculated from such due date at the rate per annum applicable
to Alternate Base Rate Loans hereunder. A certificate of the Issuer submitted
to any L/C Participant with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuer has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 2A.4(a), the Issuer
receives any payment related to such Letter of Credit (whether directly from
Toy Biz or otherwise, including proceeds of collateral applied thereto by the
Issuer), or any payment of interest on account thereof, the Issuer will
distribute to such L/C Participant its pro rata share thereof; provided,
however, that in the event that any such payment received by the Issuer shall
be required to be returned by the Issuer, such L/C Participant shall return to
the Issuer the portion thereof previously distributed by the Issuer to it.
2A.5 Reimbursement Obligation of Toy Biz (a) Toy Biz agrees
to reimburse the Issuer on each date on which the Issuer notifies Toy Biz of
the date and amount of a draft presented under any Letter of Credit and paid by
the Issuer for the amount of (i) such draft so paid and (ii) any taxes, fees,
charges or other costs or expenses incurred by the Issuer in connection with
such payment. Each such payment shall be made to the Issuer at its address for
notices specified herein in lawful money of the United States of America and in
immediately available funds.
(b) Interest shall be payable on any and all amounts
remaining unpaid by Toy Biz under this subsection from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate which would be payable on any outstanding Alternate
Base Rate Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall constitute
a request by Toy Biz to the Agent for a borrowing pursuant to subsection 2.3 of
Alternate Base Rate Loans in
<PAGE>
the amount of such drawing. The Borrowing Date with respect to such borrowing
shall be the date of such drawing.
2A.6 Obligations Absolute. (a) Toy Biz's obligations under
this Section 2A shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which Toy Biz may have or have had against the Issuer or any
beneficiary of a Letter of Credit.
(b) Toy Biz also agrees with the Issuer that the Issuer shall
not be responsible for, and Toy Biz's Reimbursement Obligations under
subsection 2A.5(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged,
or (ii) any dispute between or among Toy Biz and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be transferred
or (iii) any claims whatsoever of Toy Biz against any beneficiary of such
Letter of Credit or any such transferee.
(c) The Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except
for errors or omissions caused by the Issuer's gross negligence or willful
misconduct.
(d) Toy Biz agrees that any action taken or omitted by the
Issuer under or in connection with any Letter of Credit or the related drafts
or documents, if done in the absence of gross negligence of willful misconduct
and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on Toy Biz and shall
not result in any liability of the Issuer to Toy Biz.
2A.7 Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the Issuer shall promptly
notify Toy Biz of the date and amount thereof. The responsibility of the Issuer
to Toy Biz in connection with any draft presented for payment under any Letter
of Credit shall, in addition to any payment obligation expressly provided for
in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.
2A.8 Application. Except to the extent the Majority Banks and
the Issuer otherwise agree, to the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 2A, the provisions of this Section 2A shall apply.
SECTION 3. PROVISIONS RELATING TO THE LOANS; FEES
AND PAYMENTS
3.1 Voluntary Termination or Reduction of Commitments.(a) Toy
Biz shall have the right at any time, upon not less than five Business Days'
notice to the Administrative Agent, to terminate or, from time to time, reduce
the Aggregate Commitment, with any such voluntary reduction being in an amount
equal to the lesser of (i) $1,500,000 or a whole multiple of $500,000 in excess
thereof and (ii) the Aggregate Commitment then in effect. Any such termination
or reduction shall permanently terminate or reduce, as the case may be, the
Aggregate Commitment then in effect.
<PAGE>
(b) Any termination of the Aggregate Commitment pursuant to
subsection 3.1(a) shall be accompanied by prepayment in full (together with
accrued interest thereon through the date of such prepayment) by Toy Biz of any
Loans then outstanding and payment of any other amounts necessary to cause the
Payment Obligations with respect to the Loans and the L/C Obligations to be
Fully Satisfied.
3.2 Optional Prepayments. Toy Biz may, at any time and from
time to time, prepay the Loans then outstanding, in whole or in part, without
premium or penalty (other than amounts payable pursuant to subsection 3.9),
upon at least three Working Days' irrevocable notice to the Administrative
Agent, in the case of Eurodollar Loans, and one Business Day's irrevocable
notice to the Administrative Agent, in the case of Alternate Base Rate Loans,
specifying (a) the Loans to be prepaid, (b) the date and amount of such
prepayment and (c) whether the prepayment is of Eurodollar Loans or Alternate
Base Rate Loans or a combination thereof, and, if of a combination thereof, the
amount of prepayment allocable to each (and, with respect to such Eurodollar
Loans, each Tranche thereof). Upon receipt of any such notice, the
Administrative Agent will promptly notify each Bank thereof. If any such notice
is given, Toy Biz will make the prepayment specified therein, and such
prepayment shall be due and payable on the date specified therein. Each partial
prepayment of the Loans pursuant to this subsection 3.2 shall be in an amount
equal to the lesser of (x) $1,500,000 or a whole multiple of $500,000 in excess
thereof and (y) the aggregate principal amount of the Loans then outstanding.
3.3 Mandatory Prepayments and Commitment Reductions. (a) On
the Termination Date, the Aggregate Commitment shall terminate and Toy Biz
shall cause all Payment Obligations to be Fully Satisfied.
(b) If, at any time and from time to time, the Aggregate
Outstanding Extensions of Credit of all Banks then outstanding exceeds the
Aggregate Commitment (including, without limitation, as a result of any
permanent reduction in the Aggregate Commitment provided for in subsection 3.1
or this subsection 3.3) or the Borrowing Base then in effect, Toy Biz shall
immediately repay the Loans and cash collateralize the L/C Obligations by the
amount equal to such excess.
(c) If Toy Biz or any of its Subsidiaries shall receive any
Net Cash Proceeds as a result of the sale or issuance of equity securities
(other than in connection with (i) the IPO and (ii) stock options outstanding
on the date hereof or hereafter issued in connection with the Toy Biz Stock
Option Plan) or the incurrence of Indebtedness (other than any Indebtedness
incurred in reliance upon the provisions of subsection 7.1), then the Aggregate
Commitment shall immediately be reduced (and, to the extent that a Default or
Event of Default is then continuing, the Loans shall be repaid and the L/C
Obligations shall be cash collateralized) by an amount equal to such Net Cash
Proceeds.
(d) If Toy Biz or any of its Subsidiaries shall receive any
Net Cash Proceeds from the sale, lease or other disposition by Toy Biz or any
of its Subsidiaries of any assets, other than assets sold in reliance upon the
provisions of subsection 7.5, then the Aggregate Commitment shall immediately
be reduced (and, to the extent that a Default or Event of Default is then
continuing, the Loans shall be repaid and the L/C Obligations shall be cash
collateralized) by an amount equal to such Net Cash Proceeds.
(e) If Toy Biz or any of its Subsidiaries shall receive any
payments of principal under the Colorforms Note, then the Aggregate Commitment
shall immediately be reduced (and, to the extent that a Default or Event of
Default is then continuing, the Loans shall be
<PAGE>
repaid and the L/C Obligations shall be cash collateralized) by the amount
equal to such payment.
3.4 Interest Rate and Payment Dates. (a) The Eurodollar Loans
shall bear interest on the unpaid principal amount thereof for each day during
each Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate for such Interest Period plus the Applicable Margin.
(b) The Alternate Base Rate Loans shall bear interest on the
unpaid principal amount thereof at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin.
(c) If all or a portion of any amount owing hereunder shall
not be paid when due, then, for so long as such amount remains unpaid, (i) if
the overdue amount represents principal, such overdue amount shall bear
interest at a rate per annum which is 2% above the rate which would otherwise
be applicable pursuant to subsection 3.4(a) or (b), as the case may be, and
(ii) if the overdue amount represents overdue interest, fees or other amounts
(other than the amounts described in clause (i) of this paragraph (c)) due
under the Credit Documents, such overdue amount shall bear interest at a rate
per annum equal to the Alternate Base Rate plus 3%. During such time as any
principal of or interest on any Eurodollar Loans remains unpaid, such
Eurodollar Loans shall be converted to Alternate Base Rate Loans at the end of
the respective Interest Periods applicable thereto.
(d) Interest on each Loan accrued to but not including each
Interest Payment Date applicable thereto shall be payable in arrears on such
Interest Payment Date; provided, however, that interest accruing on the
principal of or (to the extent permitted by applicable law) interest or any
other amount payable in connection with any Loan not paid when due (whether at
stated maturity, by acceleration or otherwise), shall be payable from time to
time upon demand of the Administrative Agent.
3.5 Conversion Options, Minimum Tranches and Maximum Interest
Periods. (a) Toy Biz may elect from time to time to convert outstanding Loans
from Eurodollar Loans to Alternate Base Rate Loans by giving the Administrative
Agent at least one Business Day's prior irrevocable notice of such election.
Toy Biz may elect from time to time and at any time to convert outstanding
Loans from Alternate Base Rate Loans to Eurodollar Loans by giving the
Administrative Agent at least three Working Days' irrevocable notice of such
election; provided that no Loans may be converted to Eurodollar Loans when any
Default or Event of Default has occurred and is continuing. Upon receipt of
such notice, the Administrative Agent shall promptly notif |
