Credit Agreement [Amendment No. 6] - Toy Biz and The Chase Manhattan Bank, The Bank of New York and Fleet Bank
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
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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
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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:
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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
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TOY BIZ, INC.
--------------------
$30,000,000
CREDIT AGREEMENT
Dated as of February 22, 1995
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CHEMICAL BANK,
as Administrative Agent
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TABLE OF CONTENTS
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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
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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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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
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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
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<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
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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
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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);
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"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 notify each Bank which has
made Loans affected by such notice thereof. On the date on which such
conversion is being made, each Bank shall take such action as is necessary to
effect such conversion. All or any part of the outstanding Eurodollar Loans or
Alternate Base Rate Loans may be converted as provided herein.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of an Interest Period with respect thereto by Toy Biz's giving the
Administrative Agent at least three Working Days' irrevocable notice for
continuation thereof; provided that no Eurodollar Loan may be continued as such
when any Default or Event of Default has occurred and is continuing, and,
instead, such Eurodollar Loans shall be automatically converted to an Alternate
Base Rate Loan on the last day of the Interest Period for which a Eurodollar
Rate was determined by the Administrative Agent prior to the Administrative
Agent's obtaining knowledge of such Default or Event of Default. The
Administrative Agent shall notify the relevant Banks promptly that such
automatic conversion shall occur.
<PAGE>
(c) In the event that a timely notice of conversion or
continuation with regard to Eurodollar Loans is not given in accordance with
this subsection 3.5, then, unless the Administrative Agent shall have received
timely notice in accordance with subsection 3.2 that Toy Biz elects to prepay
such Eurodollar Loans on the last day of such Interest Period, Toy Biz shall be
deemed irrevocably to have requested that such Eurodollar Loans be converted
into Alternate Base Rate Loans on the last day of such Interest Period.
(d) Any borrowing or continuation of Eurodollar Loans, or
conversion to or from Eurodollar Loans, or payments or prepayments of
Eurodollar Loans, shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, (i) the aggregate principal
amount of each Tranche of Eurodollar Loans shall be $1,500,000 or a whole
multiple (to the extent possible) of $500,000 in excess thereof, (ii) the
aggregate principal amount of all Alternate Base Rate Loans shall be $1,000,000
or a whole multiple (to the extent possible) of $100,000 in excess thereof and
(iii) there shall not be more than three Tranches of Eurodollar Loans at any
one time outstanding.
3.6 Inability to Determine Interest Rate. (a) In the event
that the Administrative Agent shall have determined (which determination, in
the absence of manifest error, shall be conclusive and binding upon Toy Biz)
that by reason of circumstances affecting the relevant interbank eurocurrency
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for any Interest Period with respect to (i) proposed Loans that
Toy Biz has requested be made as Eurodollar Loans, (ii) a Eurodollar Loan that
will result from the requested conversion of all or part of the Alternate Base
Rate Loans into Eurodollar Loans, or (iii) the continuation of a Eurodollar
Loan as such for an additional Interest Period (any such Loan described in
clauses (i), (ii) or (iii) of this subsection 3.6(a) being herein called an
"Affected Loan"), the Administrative Agent shall forthwith give telecopy or
telephonic notice of such determination, confirmed in writing, to Toy Biz and
the Banks at least two Business Days prior to, as the case may be, the
borrowing date for such Loan, the conversion date for such Alternate Base Rate
Loan or the last day of the Interest Period applicable to such Loan. Unless Toy
Biz shall have notified the Administrative Agent promptly upon receipt of such
telecopy or telephonic notice that it wishes to rescind or modify its request
regarding such Affected Loans, then any requested Eurodollar Loan shall be made
as, continued as, or converted into an Alternate Base Rate Loan, as the case
may be. Until any such notice has been withdrawn by the Administrative Agent,
no further Affected Loans shall be made.
(b) In the event that the Majority Banks determine that the
rate quoted by the Administrative Agent does not accurately reflect the cost of
making or maintaining any Loans that Toy Biz has requested be made or continued
as or converted to Eurodollar Loans, the Administrative Agent shall forthwith
give telecopy or telephonic notice of such determination to Toy Biz on or
before the requested borrowing, conversion or continuation date for such Loans
or the next succeeding Interest Period for such Loans. Unless Toy Biz shall
have notified the Administrative Agent promptly after receipt of such telecopy
or telephonic notice that it wishes to rescind or modify its request regarding
such Loans, then any such Eurodollar Loans shall be made as or converted to
Alternate Base Rate Loans.
3.7 Illegality. Notwithstanding any other provision herein,
if any change in law, rule, regulation, treaty or directive or in the
interpretation or application thereof, shall make it unlawful for any Bank to
make or maintain Eurodollar Loans as contemplated by this Agreement or to
accept deposits in order to make or maintain such Eurodollar Loans, (a) such
Bank shall promptly notify the Administrative Agent and Toy Biz thereof, (b)
the agreements of such Bank hereunder to make or convert to Eurodollar Loans
shall be
<PAGE>
suspended forthwith and (c) such Bank's Loans then outstanding as Eurodollar
Loans, if any, shall automatically become Alternate Base Rate Loans for the
duration of the respective Interest Periods applicable thereto (or, if
permitted by applicable law, at the end of such Interest Periods). Toy Biz
agrees promptly to pay to any Bank any additional amounts necessary to
compensate such Bank for any costs incurred by such Bank as a consequence of
Toy Biz making any conversion in accordance with this subsection 3.7,
including, without limitation, any interest or fees payable by such Bank to
lenders of funds obtained by it in order to make or maintain its Eurodollar
Loans. A certificate as to any such costs payable pursuant to this subsection
3.7 submitted by an officer of any Bank, through the Administrative Agent, to
Toy Biz shall be conclusive, in the absence of manifest error.
3.8 Requirements of Law; Changes of Law. (a) In the event
that the adoption of or any change in law, rule, regulation, treaty or
directive or in the interpretation or application thereof, or compliance by any
Bank with any request or directive (whether or not having the force of law)
issued after the date hereof from any central bank or other Governmental
Authority:
(i) imposes upon any Bank any tax of any kind whatsoever
with respect to this Agreement, its Notes, any Letter of Credit, any
Application or any Loan, or changes the basis of taxation of payments
to such Bank of principal, commitment fee, interest or any other
amount payable hereunder (except for (x) income and franchise taxes
imposed on such Bank by the jurisdiction under the laws of which such
Bank is organized or any political subdivision or taxing authority
thereof or therein, or by any jurisdiction in which any office of such
Bank is located or any political subdivision or taxing authority
thereof or therein, (y) taxes resulting from the substitution of any
such system by another system of taxation, provided that the taxes
payable by Banks subject to such other system of taxation are not
generally charged to borrowers from such Banks having loans or
advances bearing interest at a rate similar to the Eurodollar Rate and
(z) taxes imposed by way of deduction or withholding, which shall be
exclusively governed by subsection 3.10);
(ii) imposes, modifies or holds applicable any reserve,
special deposit, compulsory loan or similar requirement against any
Loan made, or assets held by, or credit extended by, or deposits or
other liabilities in or for the account of, or acquisition of funds by
or for the account of, any office of such Bank, which is not otherwise
included in the determination of the Eurodollar Rate hereunder; or
(iii) imposes on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank of
making, renewing or maintaining Loans or issuing or participating in Letters of
Credit or to reduce any amount receivable by it in respect of its Eurodollar
Loans, then, in any such case, Toy Biz shall promptly pay such Bank any
additional amounts necessary to compensate such Bank for such additional cost
or reduced amount receivable as reasonably determined by such Bank with respect
to this Agreement, its Notes, its Letters of Credit or its Loans after taking
into account any amounts paid or payable pursuant to subsection 3.10(a). If a
Bank becomes entitled to claim any additional amounts pursuant to this
subsection 3.8(a), it shall promptly notify Toy Biz, through the Administrative
Agent, of the event by reason of which it has become so entitled. A certificate
as to any additional amounts payable pursuant to the foregoing sentence
submitted by an officer of a Bank, through the Administrative Agent, to Toy Biz
shall be conclusive, in the absence of manifest error.
<PAGE>
(b) In the event that any Bank shall have determined that the
adoption of any law, rule, regulation or guideline adopted pursuant to or
arising out of the International Convergence of Capital Measurement and Capital
Standards or of any Requirement of Law otherwise regarding capital adequacy, or
any change therein or in the interpretation or application thereof or
compliance by any Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or Governmental
Authority, does or shall have the effect of reducing the rate of return on such
Bank's capital as a consequence of its obligations hereunder or under any
Letter of Credit to a level below that which such Bank could have achieved but
for such adoption, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount which is reasonably
deemed by such Bank to be material, then from time to time, promptly after
submission by such Bank, through the Administrative Agent, to Toy Biz of a
written request therefor, Toy Biz shall promptly pay to such Bank such
additional amount or amounts as will compensate such Bank for such reduction.
(c) The agreements in this subsection 3.8 shall survive the
termination of this Agreement and payment of the Loans, the Reimbursement
Obligations and the Notes and all other amounts payable hereunder.
3.9 Indemnity. Toy Biz agrees to promptly pay and indemnify
each Bank for, and to hold such Bank harmless from, any loss or expense which
such Bank may sustain or incur in its reemployment of funds obtained in
connection with the making or maintaining of, or converting to, Eurodollar
Loans as a consequence of (a) any default by Toy Biz in borrowing such
Eurodollar Loans or in converting Alternate Base Rate Loans to Eurodollar Loans
after Toy Biz has given a notice in respect thereof or (b) any failure by Toy
Biz to prepay Eurodollar Loans after Toy Biz has given notice in respect
thereof or (c) any payment, prepayment (whether optional or mandatory) or
conversion (whether optional or mandatory) of any Eurodollar Loan on a day
which is not the last day of an Interest Period with respect thereto. Without
limiting the effect of the foregoing, Toy Biz agrees to pay to each Bank an
amount equal to the excess, if any, of (i) the amount of interest which
otherwise would have accrued on the principal amount paid, prepaid or not
borrowed for (A) the period from the date of such payment or prepayment to the
last day of the Interest Period applicable to such Eurodollar Loan or (B) in
the case of a failure to borrow or to convert, the Interest Period applicable
to such Eurodollar Loan which would have commenced on the date specified for
such borrowing or conversion, at the applicable rate of interest for such
Eurodollar Loan provided for herein exclusive of any margin applicable thereto
minus (ii) the interest component of the amount such Bank would have bid in the
London interbank market in respect of such Loan if such Loan were to be made on
the date of such payment, prepayment, failure to borrow or failure to convert,
as the case may be. A certificate as to any additional amounts payable pursuant
to this subsection 3.9 submitted by an officer of a Bank, through the
Administrative Agent, to Toy Biz shall be conclusive, absent manifest error.
The agreements in this subsection 3.9 shall survive termination of this
Agreement and payment of the Loans and the Notes and all other amounts payable
hereunder.
3.10 Taxes. (a) All payments made by Toy Biz under this
Agreement shall be made free and clear of, and without reduction for or on
account of, any present or future income, stamp, documentary, property, excise
or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding, in the case of the Administrative
Agent and each Bank, income and franchise taxes imposed on the Administrative
Agent or such Bank by the jurisdiction under the laws of which the
Administrative Agent or such Bank is organized or any political subdivision or
taxing authority thereof or therein, or by any
<PAGE>
jurisdiction in which such Bank is located or any political subdivision or
taxing authority thereof or therein (such non-excluded taxes being called
"Taxes"). If any Taxes are required to be withheld from any amounts payable to
the Administrative Agent or any Bank hereunder or under the Notes or the
Letters of Credit, the amounts so payable to the Administrative Agent or such
Bank shall (without any obligation on the part of Toy Biz to pay such amounts
ratably in accordance with the provisions of subsection 3.13) be increased to
the extent necessary to yield to the Administrative Agent or such Bank (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement and the Notes. Whenever
any Taxes are payable by Toy Biz, as promptly as possible thereafter, Toy Biz
shall send to the Administrative Agent, for its own account or for the account
of such Bank, as the case may be, a certified copy of an original official
receipt or other evidence reasonably satisfactory to the Administrative Agent
showing payment thereof. If Toy Biz fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, Toy Biz shall
indemnify the Administrative Agent and the Banks for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or
any Bank as a result of any such failure. If any Taxes are paid by the
Administrative Agent or any Bank to any Governmental Authority, Toy Biz shall
indemnify the Administrative Agent or such Bank, as the case may be (within 30
days after demand therefor upon Toy Biz), for any amounts so paid.
(b) Except as Toy Biz shall otherwise consent, each Bank
hereby severally (but not jointly) represents that, under applicable law and
treaties in effect on the date of this Agreement, no United States Federal
taxes will be required to be withheld by the Administrative Agent or Toy Biz
with respect to any payments to be made to such Bank in respect of this
Agreement. Each Bank which itself is not incorporated under the laws of the
United States of America or a state thereof or which is lending from an office
that is not incorporated under the laws of the United States of America or a
state thereof agrees severally (but not jointly) that, prior to the Closing
Date, it will deliver to Toy Biz and the Administrative Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
or successor applicable form, as the case may be, certifying in each case that
such Bank is entitled to receive all payments under this Agreement and the
Notes and Letters of Credit payable to it, without deduction or withholding of
any United States Federal income taxes. Each Bank which delivers to Toy Biz and
the Administrative Agent a Form 1001 or 4224, or successor applicable form,
pursuant to the immediately preceding sentence, further undertakes to deliver
to Toy Biz and the Administrative Agent two further completed copies of said
Form 1001 or 4224, or successor applicable form, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to Toy Biz and the
Administrative Agent, and such extensions or renewals thereof as may reasonably
be requested by Toy Biz and the Administrative Agent, certifying that such Bank
is entitled to receive payments under this Agreement without deduction or
withholding of any United States Federal income taxes, unless in any such case
any change in law, rule, regulation, treaty or directive, or in the
interpretation or application thereof, has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises Toy Biz that
it is not capable of receiving payments without any deduction or withholding of
United States Federal income tax. Notwithstanding any provision of subsection
3.10(a) to the contrary, Toy Biz shall have no obligation to pay any amount to
or for the account of any Bank on account of any Taxes pursuant to subsection
3.10(a) (including, without limitation, the second sentence thereof) to the
extent that such amount results from (i) the failure of any
<PAGE>
Bank to comply with its obligations pursuant to this subsection 3.10(b) (or, in
the case of any Transferee, pursuant to subsection 10.6(g)) or (ii) any
representation or warranty made or deemed to be made by any Bank pursuant to
this subsection 3.10(b) (or, in the case of any Transferee pursuant to
subsection 10.6(g)) proving to have been incorrect, false or misleading in any
material respect when so made or deemed to be made.
(c) Each Bank agrees to use reasonable efforts (including
reasonable efforts to change the office in which it is booking its Loans) to
avoid or to minimize any amounts which might otherwise be payable pursuant to
this subsection 3.10; provided, however, that such efforts shall not cause the
imposition on such Bank of any additional costs or legal or regulatory burdens
deemed by such Bank to be material or otherwise be deemed by such Bank to be
disadvantageous to it or contrary to its policies.
(d) In the event that such reasonable efforts pursuant to
subsection 3.10(c) are insufficient to avoid all withholding taxes which would
be payable pursuant to this subsection 3.10, then such Bank (the "Taxable
Bank") shall use its best efforts to transfer to any other Bank (which is not
subject to such withholding taxes) its Loans and Commitments hereunder;
provided, however, that such transfer shall not be deemed by such Taxable Bank,
in its sole discretion, to be disadvantageous to it or contrary to its
policies. In the event that the Taxable Bank is unable, or otherwise is
unwilling, so to transfer its Loans and Commitments, Toy Biz may designate an
alternate bank to purchase the Taxable Bank's Loans and Commitments and,
subject to the approval of the Administrative Agent (which approval shall not
be unreasonably withheld), the Taxable Bank shall transfer its Loans and
Commitments to such alternate bank and such alternate bank shall become a Bank
hereunder.
(e) The agreements in this subsection 3.10 shall survive the
termination of this Agreement and the payment of the Loans, the Reimbursement
Obligations and Notes, and all other amounts payable hereunder.
3.11 Fees. (a) Toy Biz agrees to pay to the Administrative
Agent, for the account of each Bank, a commitment fee in the amount equal to
3/8 of 1% per annum on the amount equal to the Commitment Percentage of such
Bank times the average daily Available Commitment during the period for which
such fee is payable. Such commitment fee of (a) Chemical Bank shall accrue from
January 13, 1995, and (b) each other Bank shall accrue from February 2, 1995.
Such commitment fee shall be payable on the Closing Date and in arrears on (a)
the last day of each March, June, September and December and (b) the
Termination Date. During the period prior to the Closing Date, the commitment
fee payable to Chemical Bank and each other Bank shall be paid net of any
commitment fee payable for the account of such Bank for such period under the
Existing Credit Agreement.
(b) [Intentionally Omitted].
(c) Toy Biz agrees to pay to the Administrative Agent, for
its own account, any administrative fees as agreed between Toy Biz and the
Administrative Agent in writing from time to time.
3.12 Computation of Interest and Fees. (a) Interest in
respect of Alternate Base Rate Loans bearing interest at a rate based upon the
Prime Rate and commitment fees shall be
<PAGE>
calculated on the basis of a 365 or 366-day year, as the case may be, for the
actual days elapsed. Interest in respect of Alternate Base Rate Loans bearing
interest at a rate based upon the Federal Funds Effective Rate or the Base CD
Rate and Eurodollar Loans shall be calculated on the basis of a 360-day year
for the actual days elapsed. The Administrative Agent will, as soon as
practicable, notify Toy Biz and the Banks of each determination of a Eurodollar
Rate and of any change in the Alternate Base Rate and the effective date
thereof. Any change in the Alternate Base Rate due to a change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate
shall be effective on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
(b) Except as set forth in subsection 3.6, each determination
of an interest rate by the Administrative Agent pursuant to any provision of
this Agreement shall be conclusive and binding on Toy Biz and the Banks, in the
absence of manifest error.
3.13 Pro Rata Treatment and Payments. (a) Except as otherwise
provided in subsections 3.8, 3.9 and 3.10, each borrowing by Toy Biz from the
Banks hereunder, each payment by Toy Biz on account of any commitment fee
hereunder and any reduction of the Aggregate Commitment shall be made pro rata
according to the respective Commitment Percentages of the Banks. Each payment
(including each prepayment) by Toy Biz on account of principal of and interest
on the Loans shall be made pro rata according to the respective outstanding
principal amounts of the Loans then held by the Banks. All payments (including
prepayments) to be made by Toy Biz hereunder and under the Notes and the Letter
of Credit, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for
the account of the Banks, at the Administrative Agent's office specified in
subsection 10.2, in Dollars and in immediately available funds. The
Administrative Agent shall distribute such payments to the Banks promptly upon
receipt in like funds as received. If any payment hereunder (other than
payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day unless
the result of such extension would be to extend such payment into another
calendar month, in which event such payment shall be made on the immediately
preceding Business Day.
(b) Unless the Administrative Agent shall have been notified
in writing by any Bank prior to a borrowing that such Bank will not make the
amount that would constitute its Commitment Percentage of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Bank is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
Toy Biz a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the borrowing date therefor, such
Bank shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Bank makes such amount immediately available to
the Agent. A certificate of the Administrative Agent submitted to any Bank with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Bank's Commitment Percentage of such
borrowing is not made available to the Administrative Agent by such Bank within
three Business Days of such borrowing date, the Administrative Agent shall also
be entitled to recover such amount with interest thereon at the rate per annum
applicable to Alternate Base Rate Loans hereunder, on demand, from Toy Biz.
<PAGE>
3.14 Payments on Account of Loans, Reimbursement Obligations
and Fees. All payments and prepayments on account of Loans, Reimbursement
Obligations and fees hereunder shall be made in Dollars.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Administrative Agent to
enter into this Agreement and to make the Loans and issue or participate in
Letters of Credit hereunder, Toy Biz hereby represents and warrants to each of
them that:
4.1 Corporate Existence. Each of Toy Biz and its Subsidiaries
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power to own its assets
and to transact the business in which it is presently engaged, and is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where all such failures to so
qualify and be in good standing would not, in the aggregate, be reasonably
likely to have a Material Adverse Effect.
4.2 Corporate Power. (a) Each of Toy Biz and its Subsidiaries
has the corporate power, authority and legal right to execute, deliver and
perform this Agreement, the Notes, the Applications and the other Credit
Documents (as applicable) and to borrow hereunder (as applicable), and it has
taken all necessary corporate action to authorize its borrowings (as
applicable) on the terms and conditions of this Agreement and the other Credit
Documents and to authorize the execution, delivery and performance of this
Agreement, the Notes, the Applications and the other Credit Documents (as
applicable).
(b) No consent of any other Person (including, without
limitation, stockholders or creditors of Toy Biz or any of its Subsidiaries or
of any Parent of Toy Biz), and no consent, license, permit, approval or
authorization of, exemption by, or registration, filing or declaration with,
any Governmental Authority is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, the Notes,
the Applications and the other Credit Documents (as applicable) by or against
Toy Biz and its Subsidiaries, except for (i) consents that have already been
obtained and which remain in full force and effect, (ii) any filings required
under the Uniform Commercial Code and (iii) filings with the United States
Copyright Office and the United States Patent and Trademark Office with respect
to security interests granted in Copyrights, Trademarks and Patents of Toy Biz
and its Subsidiaries, and other than all failures to obtain such consents,
licenses, permits, approvals, authorizations or exemptions and failures to make
such registrations, filings or declarations that would not, in the aggregate,
be reasonably likely to have a Material Adverse Effect.
(c) This Agreement has been, and the Notes, the Applications
and the other Credit Documents (as applicable) will be, executed and delivered
by a duly authorized officer of Toy Biz and its Subsidiaries (as applicable)
and this Agreement constitutes, and the Notes, the Applications and the other
Credit Documents (as applicable), when executed and delivered by Toy Biz and
its Subsidiaries (as applicable) and the other parties thereto, will
constitute, the legal, valid and binding obligations of Toy Biz and its
Subsidiaries party thereto, enforceable against each of them in accordance with
their respective terms except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other
<PAGE>
similar laws affecting creditors' rights generally and except as enforceability
may be limited by general principles of equity.
(d) Notwithstanding anything to the contrary contained
herein, the existence of litigation with Marvel Entertainment Group, Inc. with
respect to the proper constitution of the Board of Directors of Toy Biz and the
voting rights of the capital stock of Toy Biz which is held by Marvel
Entertainment Group, Inc. shall not, in itself and without any judgment adverse
to Toy Biz, be deemed to cause the representations and warranties contained in
this subsection 4.2 to fail to be true and correct in all material respects.
4.3 No Legal Bar to Loans. The execution, delivery and
performance of this Agreement, the Applications, the Notes and the other Credit
Documents, will not violate any Contractual Obligation or material Requirement
of Law to which Toy Biz or any of its Subsidiaries is a party, or by which Toy
Biz or any of its Subsidiaries or any of their respective material properties
or assets may be bound, and will not result in the creation or imposition of
any Lien (other than under the Security Documents) on any of their respective
material properties or assets pursuant to the provisions of any Contractual
Obligation; provided that existence of litigation with Marvel Entertainment
Group, Inc. with respect to the proper constitution of the Board of Directors
of Toy Biz and the voting rights of the capital stock of Toy Biz which is held
by Marvel Entertainment Group, Inc. shall not, in itself and without any
judgment adverse to Toy Biz, be deemed to cause the representations and
warranties contained in this subsection 4.3 to fail to be true and correct in
all material respects.
4.4 No Material Litigation. No litigation, suit, action,
investigation, inquiry or other proceeding is presently pending or, to the
knowledge of Toy Biz, threatened against Toy Biz or any of its Subsidiaries or
any of their properties or assets, by or before any arbitrator or any
Governmental Authority and no preliminary or permanent injunction or order by a
state or Federal court has been entered in connection with any Credit Document
or any of the transactions contemplated hereby, which in any of such cases
would be reasonably likely to have a Material Adverse Effect (it being
understood that the pendency of litigation with Marvel Entertainment Group,
Inc. with respect to the proper constitution of the Board of Directors of Toy
Biz and the voting rights of the capital stock of Toy Biz which is held by
Marvel Entertainment Group, Inc. shall not, in itself and without any judgment
adverse to Toy Biz, be deemed to have such a Material Adverse Effect).
4.5 No Default. Neither Toy Biz nor any of its Subsidiaries
is in default in the payment or performance of any obligations or in the
performance of any Contractual Obligation to which it is a party or by which it
or any of its properties or assets may be bound, except to the extent that such
defaults, in the aggregate, would not be reasonably likely to have a Material
Adverse Effect. After giving effect to all amendments, supplements and other
modifications to this Agreement, no Default hereunder has occurred and is
continuing. Neither Toy Biz nor any of its Subsidiaries is in default under any
order, award or decree of any court, arbitrator or Governmental Authority
binding upon or affecting it or by which any of its material properties or
assets is bound or affected, and no such order, award or decree would be
reasonably likely to have a Material Adverse Effect.
4.6 Ownership of Properties; Liens. Except as is or would be
permitted pursuant to subsection 7.2, each of Toy Biz and its Subsidiaries has
good and marketable title to all its owned real properties, subject to no Lien,
and has good title to all its owned material personal properties and assets,
subject to no Lien.
<PAGE>
4.7 Taxes. Each of Toy Biz and its Subsidiaries has timely
filed or caused to be timely filed all material tax returns (including, without
limitation, information returns) which to the knowledge of Toy Biz and its
Subsidiaries are required to be filed, and has paid all taxes shown to be due
and payable on said returns or on any assessments made against them (other than
those being contested in good faith by appropriate proceedings for which
adequate reserves (in accordance with GAAP) have been provided on the books of
Toy Biz or such Subsidiaries, as the case may be), and no tax liens have been
filed.
4.8 ERISA. No Reportable Event has occurred during the
immediately preceding six-year period with respect to any Plan that resulted or
would be reasonably likely to result in any unpaid liability that would be
reasonably likely to have a Material Adverse Effect, and each Plan (other than
any Multiemployer Plan or any multiemployer health or welfare plan) has
complied and has been administered in all material respects with the applicable
provisions of ERISA and the Code. The amount by which the present value of all
accrued benefits under each Single Employer Plan maintained by Toy Biz or any
of its Subsidiaries or any Commonly Controlled Entity (based on those
assumptions used to fund the Plans), as of the last annual valuation date
applicable thereto, exceeds the value of the assets of each such Plan allocable
to such benefits, in the aggregate for all such Plans as to which such present
value of benefits exceeds the value of its assets (the "Unfunded Pension
Amount"), is less than $1,000,000, when aggregated with the Potential
Withdrawal Liability (as hereinafter defined). Neither Toy Biz nor any of its
Subsidiaries nor any Commonly Controlled Entity has during the immediately
preceding six-year period had a complete or partial withdrawal from any
Multiemployer Plan that resulted or would be reasonably likely to result in any
unpaid withdrawal liability under Section 4201 of ERISA that would be
reasonably likely to have a Material Adverse Effect, and the withdrawal
liability under Section 4201 of ERISA to which Toy Biz or any of its
Subsidiaries or any Commonly Controlled Entity would become subject under ERISA
if Toy Biz or any of its Subsidiaries or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the most recent
valuation date applicable thereto (the "Potential Withdrawal Liability") is not
in excess of $1,000,000, when aggregated with the Unfunded Pension Amount.
Neither Toy Biz nor any of its Subsidiaries nor any Commonly Controlled Entity
has received notice that any Multiemployer Plan is in Reorganization or
Insolvent where such Reorganization or Insolvency has resulted, or would be
reasonably likely to result in an unpaid liability that would be reasonably
likely to have a Material Adverse Effect nor, to the best knowledge of Toy Biz
or any of its Subsidiaries, is any such Reorganization or Insolvency reasonably
likely to occur. The obligations of Toy Biz and each of its Subsidiaries and
each Commonly Controlled Entity for post retirement benefits to be provided to
their current and former employees under Plans which are welfare benefit plans
(as defined in Section 3(1) of ERISA) are not reasonably likely to have a
Material Adverse Effect, when aggregated with their obligations with respect to
the Unfunded Pension Amount and the Potential Withdrawal Liability.
4.9 Financial Condition. (a) The audited consolidated balance
sheet of Toy Biz for its fiscal year ended December 31, 1997, and the related
statements of earnings and stockholders' equity and cash flows for the fiscal
year then ended, heretofore furnished to the Administrative Agent and the Banks
and certified by Ernst & Young, present fairly the financial position of Toy
Biz as at such date, and the results of its operations and cash flows for the
fiscal year then ended. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved except as disclosed in the notes
thereto.
<PAGE>
(b) The unaudited consolidated balance sheet of Toy Biz for
the fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997,
and the related statements of earnings and stockholders' equity and cash flows
for the fiscal periods then ended, heretofore furnished to the Administrative
Agent and the Banks, present fairly (subject to year-end audit adjustments) the
financial position of Toy Biz as at such dates, and the results of its
operations and cash flows for the fiscal periods then ended. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved except as disclosed in the notes thereto.
(c) Except as disclosed on Schedule IV, neither Toy Biz nor
any of its Subsidiaries has any material Contingent Obligation or any material
obligation, liability or commitment, direct or contingent (including, without
limitation, any liability for taxes or any material forward or long-term
commitment), which is not (i) reflected in the foregoing statements or in the
notes thereto or (ii) permitted to be incurred under this Agreement.
4.10 No Change. There has been since December 31, 1997 no
change, or development or event involving a prospective change, which in either
case in the reasonable opinion of the Lenders would be reasonably likely to
have a Material Adverse Effect, other than to the extent disclosed in writing
to the Lenders prior to March 15, 1998.
4.11 Federal Regulations. No part of the proceeds of any
Loans will be used for "purchasing" or "carrying" any "margin stock" in
violation of Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. If requested
by any Bank or the Administrative Agent at any time or from time to time, Toy
Biz will furnish to the Administrative Agent and each Bank a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 or G-3
referred to in said Regulations U and G, respectively.
4.12 Not an "Investment Company". (a) Neither Toy Biz nor any
of its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Neither Toy Biz nor any of its Subsidiaries is subject to
regulation under any Federal or state statute or regulation which limits its
ability to incur indebtedness.
4.13 Matters Relating to Subsidiaries. On March 15, 1998, Toy
Biz International and Compana de Juguetes S.A. de C.V. [Mexico] are the only
Subsidiaries of Toy Biz.
4.14 Security Documents. The provisions of each Security
Document to which Toy Biz or any of its Subsidiaries is party are effective to
create in favor of the Administrative Agent for the ratable benefit of the
Banks a legal and valid security interest in all right, title and interest of
Toy Biz and its Subsidiaries in the Collateral described (and as defined)
therein located in the United States. When (i) financing statements in
appropriate form have been filed and recorded in the offices in the
jurisdictions listed in Schedule III, (ii) the Toy Biz Security Agreement has
been timely filed and recorded in the United States Copyright Office and (iii)
the Toy Biz Security Agreement has been timely filed and recorded in the United
States Patent and Trademark Office, the Administrative Agent shall have, for
the ratable benefit of the Banks, a fully perfected security interest in all
right, title and interest of each of Toy Biz and its Subsidiaries in such
domestic Collateral superior in right to any Liens which any third Person may
have against such Collateral or interests therein,
<PAGE>
except for Liens permitted by subsection 7.2. For purposes of this subsection
4.14, the word "timely" shall be defined consistently with the provisions of
Section 205 of 17 U.S.C. and Section 1060 of 15 U.S.C.
4.15 Intellectual Property. Each of Toy Biz and its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents, technology, know-how and processes necessary for the
conduct of its business as currently conducted that are material to the
business, condition (financial or otherwise), operations, performance,
properties or prospects of Toy Biz and its Subsidiaries taken as a whole (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person with respect to the use of any such Intellectual Property, or
challenging or questioning the validity or effectiveness of any such
Intellectual Property and Toy Biz and its Subsidiaries do not know of any valid
basis for any such claim, nor does the use of such Intellectual Property by Toy
Biz and its Subsidiaries infringe on the rights of any Person, except to the
extent of such claims and infringements which would not (including, without
limitation, any liability arising therefrom), in the aggregate, be reasonably
likely to have a Material Adverse Effect.
4.16 Disclosure. No statement, information, schedule, exhibit
or report or other document furnished by Toy Biz or any of its Subsidiaries to
the Administrative Agent or any Bank in connection with the negotiation of this
Agreement and the other Credit Documents or pursuant to the terms of this
Agreement and the other Credit Documents, as such information, schedule,
exhibit or report or other document has been amended, supplemented or
superseded by any other information, schedule, exhibit or report or other
document later delivered to the same parties receiving such information,
schedule, exhibit or report or other document, contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein, in light of the circumstances when
made, not materially misleading; provided, however, that in the case of
statements, information, schedules, exhibits or reports or other documents
made, delivered or prepared by Persons other than Toy Biz, its Subsidiaries and
their agents, such representation and warranty is subject to the qualification
that it is true and correct only to the knowledge of Toy Biz and its
Subsidiaries.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement
of each Bank to make the initial extension of credit requested to be made by it
shall be subject to the satisfaction by such Bank of the following conditions
precedent (the date on which said conditions are satisfied being herein called
the "Closing Date"):
(a) Effectiveness of Agreement. This Agreement shall have
become binding upon the parties hereto in accordance with subsection
10.9;
(b) Notes. The Administrative Agent shall have received, for
the account of each Bank which has so requested, a Note conforming to
the requirements hereof and executed and delivered by a duly
authorized officer of Toy Biz;
(c) Toy Biz Security Agreement. The Administrative Agent
shall have received the Toy Biz Security Agreement, duly executed and
delivered by Toy Biz, and the Administrative Agent shall have received
evidence satisfactory to it that all
<PAGE>
actions necessary to perfect the security interests granted by the Toy
Biz Security Agreement shall have been taken;
(d) Organizational Documents, Corporate Proceedings. The
Administrative Agent shall have received (a) true and complete copies
of the certificate of incorporation and by-laws of Toy Biz, (b) the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of Toy Biz,
authorizing (i) the execution, delivery and performance of each Credit
Document to which Toy Biz is a party, (ii) the borrowings contemplated
hereunder, and (iii) the granting by it of the Liens granted by it
pursuant to the Security Documents to which it is a party and (c) a
form of the Stockholders' Agreement, by and among Avi Arad, Isaac
Perlmutter, Isaac Perlmutter T.A., Marvel, Toy Biz, and Zib Inc.
substantially in the form of the Stockholders' Agreement to be
executed in connection with the IPO (the "Stockholders' Agreement") in
each case certified as complete and correct copies thereof by the
Secretary or an Assistant Secretary of Toy Biz, as of the Closing Date
and each such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of
the date of such certificate;
(e) Incumbency Certificates. The Administrative Agent shall
have received a certificate of the Secretary or an Assistant Secretary
of Toy Biz, dated the Closing Date, as to the incumbency and signature
of the officers of Toy Biz executing each Credit Document to which it
is a party or any certificate or other documents to be delivered by it
pursuant thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary, as the case may be;
(f) Financial Models. The Administrative Agent and the Banks
shall have received a detailed financial model for Toy Biz's 1995,
1996 and 1997 fiscal years and a written analysis of the business and
prospects of Toy Biz for such periods, each of which shall be in form
and substance satisfactory to the Banks;
(g) Certain Legal Opinions. The Administrative Agent shall
have received executed legal opinions of:
(i) Paul, Weiss, Rifkind, Wharton & Garrison,
substantially in the form of Exhibit F-1; and
(ii) Amster, Rothstein & Ebenstein, as special
intellectual property counsel, substantially in the form of Exhibit
F-2.
Each of the foregoing legal opinions shall be accompanied by copies of
the legal opinions, if any, upon which such counsel rely, and in each
case shall contain such changes thereto as may be approved by, and as
shall otherwise be in form and substance reasonably satisfactory to,
the Administrative Agent and shall cover such other matters incident
to the transactions contemplated by the Credit Documents as the
Administrative Agent may reasonably require. Each of the counsel
delivering the foregoing legal opinions is expressly instructed to
deliver its opinion for the benefit of each of the Administrative
Agent and the Banks;
(h) Fees. The Administrative Agent shall have received, for
the accounts of the Banks and the Administrative Agent, all accrued
fees and expenses owing hereunder or in connection herewith to the
Administrative Agent and the Banks
<PAGE>
(including, without limitation, accrued fees and disbursements of
primary counsel and local counsel to the Administrative Agent), to the
extent that such fees and expenses have been presented for payment a
reasonable time prior to the Closing Date;
(i) Financial Statements. The Administrative Agent shall have
received copies of the financial statements referenced in subsection
4.9;
(j) Insurance. The Administrative Agent shall have received
evidence satisfactory to it that (i) Toy Biz and each of its
Subsidiaries has obtained the policies of insurance required by the
Security Documents and subsection 6.5, which insurance shall be in
form and substance reasonably satisfactory to the Administrative
Agent, and (ii) the Administrative Agent (in its capacity as
Administrative Agent under this Agreement) has been named insured and
loss payee with respect to all such insurance required by the Security
Documents and all other requirements of the Security Documents with
respect to insurance shall have been fulfilled;
(k) Lien Searches. The Administrative Agent shall have
received the results of a recent lien search by a Person reasonably
satisfactory to the Administrative Agent of the Uniform Commercial
Code filings and tax and judgment liens which may have been filed with
respect to the personal property of Toy Biz and each of its
Subsidiaries and such search shall reveal no Liens, except as (i)
permitted pursuant to this Agreement and (ii) otherwise acceptable to
the Administrative Agent;
(l) Audit. The Administrative Agent shall have received
copies of an audit, in form and substance reasonably satisfactory to
the Administrative Agent, of the accounts receivable and inventory of
Toy Biz prepared by representatives of Chemical Bank;
(m) No New Information. The Banks shall not have become aware
of any previously undisclosed information which would be reasonably
likely to have a Material Adverse Effect;
(n) No Defaults. There shall exist no event of default (or
condition which would constitute an event of default with the giving
of notice or the passage of time) under any capital stock, financing
agreements, lease agreements or other contracts of Toy Biz or any of
its Subsidiaries;
(o) Collateral Perfection. All filings and other actions
required to create and perfect a first priority security interest in
all Collateral shall have been duly made or taken, and all Collateral
shall be free and clear of other liens except as permitted pursuant to
subsection 7.2;
(p) The IPO. The Administrative Agent shall have received
evidence satisfactory to it that Toy Biz received at least $20,000,000
in Net Cash Proceeds in connection with the IPO;
(q) Miscellaneous Matters. The Banks shall be reasonably
satisfied with the status of all labor, tax, employee benefit and
health and safety matters involving Toy Biz and its Subsidiaries;
<PAGE>
(r) Existing Credit Agreement. All loans, accrued interest
and fees and any other amounts owing to the lenders and the
Administrative Agent under the Existing Credit Agreement shall have
been paid and the Existing Credit Agreement shall have been
terminated; and
(s) Additional Matters. All corporate and other proceedings,
and all documents, including without limitation, any employment
agreement, management compensation agreement or other financing
agreement of Toy Biz, instruments and other legal, diligence and
financial matters in connection with the transactions contemplated by
the Credit Documents shall be reasonably satisfactory in form and
substance to the Lenders.
5.2 Conditions to Each Extension of Credit. The agreement of
each Bank to make any extension of credit requested to be made by it on any
date is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by each party to each Credit
Document in or pursuant to this Agreement or any other Credit
Document, or contained in any certificate or financial statement
furnished at any time under or in connection with this Agreement or
any other Credit Document shall be true and correct in all material
respects on and as of such date as if made on and as of such date,
both before and after giving effect to such extension of credit, and
to all other extensions of credit to be made on such date and the use
of the proceeds thereof; and
(b) No Default. No Event of Default and no Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
Each borrowing by, and Letter of Credit issued on behalf of, Toy Biz hereunder
shall constitute a representation and warranty by Toy Biz, as of the date of
such borrowing, that the conditions contained in paragraphs (a) and (b) of this
subsection 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
Toy Biz hereby agrees that, until the Payment Obligations
have been Fully Satisfied:
6.1 Financial Statements. Toy Biz will furnish to each Bank,
through the Administrative Agent:
(a) as soon as available, but in any event within 100 days
after the end of each fiscal year of Toy Biz, a copy of the audited
consolidated balance sheet of Toy Biz and its Subsidiaries as at the
end of such year and the related consolidated statements of earnings
and stockholders' equity and cash flows for such year, setting forth
in each case in comparative form the figures for the previous year,
certified without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
independent certified public accountants of nationally recognized
standing not unacceptable to the Majority Banks;
<PAGE>
(b) as soon as available, but in any event within 100 days
after the end of each fiscal year of Toy Biz, a copy of the
consolidating balance sheet of Toy Biz and its Subsidiaries as at the
end of such year and the related consolidating statements of earnings
and cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer;
(c) as soon as available, but in any event within 50 days
after the end of each of the first three fiscal quarters in each
fiscal year of Toy Biz, a copy of the unaudited consolidated balance
sheet of Toy Biz and its Subsidiaries as at the end of each such
quarter and the related unaudited consolidated statements of earnings
and stockholders' equity and cash flows for such quarterly period and
the portion of the fiscal year through such date, setting forth in
each case in comparative form the figures for the previous year,
certified by a Responsible Officer (subject to normal year-end audit
adjustments);
(d) as soon as available, but in any event within 50 days
after the end of the first three fiscal quarters in each fiscal year
of Toy Biz, a copy of the unaudited consolidating balance sheet of Toy
Biz and its Subsidiaries as at the end of each such quarter and the
related unaudited consolidating statements of earnings and cash flows
for such quarterly period and the portion of the fiscal year through
such date, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer (subject to
normal year-end audit adjustments); and
(e) as soon as available, but in any event within 30 days
after the end of each of fiscal month of Toy Biz (other than the
fiscal month ending December 31, 1998, with respect to which such
financial statements shall be due on February 14, 1999), a copy of the
unaudited consolidated balance sheet of Toy Biz and its Subsidiaries
as at the end of each such month and the related unaudited
consolidated statements of earnings and stockholders' equity and cash
flows for such monthly period and the portion of the fiscal year
through such date, in such form and detail as is customarily provided
to senior management of Toy Biz and certified by a Responsible Officer
(subject to normal year-end audit adjustments).
All financial statements referred to in this subsection 6.1
shall be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as approved by
such accountants or Responsible Officer, as the case may be, and disclosed
therein). All such financial statements which reflect a change in GAAP from
prior financial statements delivered hereunder shall set forth in reasonable
detail any material effect of such changes on what the compliance calculations
in respect of the financial covenants herein would have been had such financial
covenants been based upon GAAP as from time to time in effect instead of GAAP
as in effect as of the date of, and used in, the preparation of the financial
statements referred to in subsection 4.9.
6.2 Certificates; Other Information. Toy Biz will furnish to
each Bank, through the Administrative Agent:
(a) concurrently with the delivery of the financial
statements referred to in subsection 6.1(a), a certificate of the
independent certified public accountants certifying such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;
<PAGE>
(b) concurrently with the delivery of the financial
statements referred to in subsections 6.1(a) through (d), a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, Toy Biz during such period has
observed or performed in all material respects all of its covenants
and other agreements, and satisfied in all material respects every
condition, contained in the Credit Documents to be observed, performed
or satisfied by it, and that such officer has obtained no knowledge of
any Default or Event of Default, except as specified in such
certificate;
(c) within 60 days following the commencement of each fiscal
year, the budget for Toy Biz and its Subsidiaries for such fiscal
year, showing each quarter separately;
(d) promptly upon receipt thereof, copies of all audit
reports submitted to Toy Biz by independent public accountants in
connection with each interim or special audit of the books of Toy Biz
or any of its Subsidiaries made by such accountants;
(e) within five days after the same are sent, copies of all
financial statements and reports which Toy Biz sends to holders of its
publicly traded equity securities or Indebtedness, if any, pursuant to
Section 13 or 15(d) of the Exchange Act, and within five days after
the same are filed, copies of all financial statements and reports
which Toy Biz may make to, or file with, the Securities and Exchange
Commission;
(f) not later than 20 days after the end of each calendar
month (and, if requested by the Agent at any other time when the Agent
reasonably believes that the then-existing Borrowing Base is
materially inaccurate, as soon as reasonably available but in no event
later than ten days after the date of such request), a Borrowing Base
Certificate setting forth the Borrowing Base as of the last day of
such calendar month (or as of such other requested date, as the case
may be), with supporting documentation (including, without limitation,
the documentation described in Exhibit H), duly completed and signed
by a Responsible Officer of Toy Biz (in his or her capacity as such)
and certified by such Responsible Officer as being complete and
correct; provided that (i) during the months of August through
November of 1998, Toy Biz shall also compute and certify the Borrowing
Base by the 30th day of such months, which computation shall be for
the Borrowing Base at the 15th day of such month and (ii) for purposes
of calculating the Borrowing Base at the 15th day of the months of
August through November of 1998, Toy Biz shall be permitted to use its
good faith, best estimate of Eligible Inventory and Eligible Accounts;
and
(g) promptly, such additional documents and financial and
other information with respect to Toy Biz and its Subsidiaries as the
Administrative Agent or any Bank may from time to time reasonably
request.
6.3 Payment of Obligations. Toy Biz will, and will cause each
of its Subsidiaries to, pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its
Indebtedness and other material obligations of whatever nature, except when the
amount or validity thereof is then being contested in good faith by appropriate
proceedings and reserves with respect thereto to the extent, if any, required
by GAAP have been provided on the books of Toy Biz or such Subsidiary, as the
case may be.
<PAGE>
6.4 Conduct of Business and Maintenance of Existence. Except
as permitted by this Agreement, Toy Biz and its Subsidiaries will continue to
engage in business of the same general type as now conducted by Toy Biz and its
Subsidiaries; and, except as permitted by this Agreement, Toy Biz will, and
will cause each of its Subsidiaries to, preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business, except as otherwise permitted pursuant to subsections
7.4 and 7.5 and except that Toy Biz and its Subsidiaries may fail to maintain
any such rights, privileges and franchises (including, without limitation,
Trademarks and Copyrights) which in Toy Biz's business judgment are not
necessary in the best interests of Toy Biz to be maintained, and comply with
all Contractual Obligations and Requirements of Law except to the extent that
all failures to comply therewith would not in the aggregate, be reasonably
likely to have a Material Adverse Effect. Toy Biz and its Subsidiaries will not
make any material change in its present method of conducting business.
6.5 Maintenance of Property; Insurance. Toy Biz will, and
will cause each of its Subsidiaries to, (a) keep all property useful and
necessary in its business in good working order and condition, except where the
failure to do so would not, in the aggregate, be reasonably likely to have a
Material Adverse Effect and (b) maintain with financially sound and reputable
insurance companies insurance on such of its property and against such
liabilities in at least such amounts and against at least such risks as are
customarily insured against in the same general area by companies engaged in
the same or a similar business and furnish to the Administrative Agent, upon
written request, and to each Bank which makes a written request through the
Administrative Agent, reasonable information as to the insurance carried.
6.6 Inspection of Property; Books and Records; Discussions.
(a) Toy Biz will, and will cause each of its Subsidiaries to, (i) keep proper
books of accounts and records in which entries in conformity in all material
respects with all Requirements of Law shall be made of all dealings and
transactions in relation to its businesses and activities and which shall
permit the preparation of financial statements in conformity with GAAP and (ii)
permit representatives of any Bank to visit and inspect such of its properties
as such Bank may request through the Administrative Agent and (during such
visit or inspection, or otherwise upon request through the Administrative
Agent) examine and make abstracts from such of its books and records as it may
reasonably request at any reasonable time and as often as may reasonably be
desired, and to discuss the business, condition (financial or otherwise),
performance, properties and prospects of Toy Biz and its Subsidiaries with
officers and employees of Toy Biz and its Subsidiaries and with its then
independent certified public accountants.
(b) Toy Biz will, and will cause each of its Subsidiaries to,
permit the Agent, the Lenders and/or professionals (including, without
limitation, investment bankers, consultants, accountants, lawyers and
appraisers) retained by the Agent to conduct at any time and from time to time
(upon reasonable advance notice to Toy Biz) evaluations and appraisals of (i)
the practices of Toy Biz in computing the Borrowing Base and (ii) the assets
included in the Borrowing Base. Toy Biz shall pay, promptly upon receipt of an
invoice therefor, the reasonable fees and expenses of the Agent (including,
without limitation, the customary fees and any expenses of the Agent's
Collateral Agent Services Group) in connection any such evaluations and
appraisals; provided that, unless a Default or Event of Default has occurred
and is continuing, Toy Biz shall not be obligated to pay such fees and expenses
with respect to (x) any such evaluations and appraisals conducted during the
<PAGE>
period from March 15, 1998 through June 30, 1998 and (y) more than two such
evaluations after June 30, 1998. In addition, Toy Biz shall pay, promptly upon
receipt of an invoice therefor, the customary fees and expenses of the Agent's
Collateral Agent Services Group in evaluating and reviewing Borrowing Base
Certificates delivered from time to time.
6.7 Notices. Toy Biz will promptly give notice to each Bank,
through the Administrative Agent, and the Administrative Agent:
(a) of the occurrence of any Default or Event of Default;
(b) of any default or event of default by Toy Biz or any of
its Subsidiaries under any Contractual Obligation of Toy Biz or any of
its Subsidiaries or the institution of, or the occurrence of any
material adverse change in the status or likely result of, any
litigation, investigation or proceeding which may exist at any time
between Toy Biz or any of its Subsidiaries and any Governmental
Authority or any other Person which, in any of the foregoing cases,
would be reasonably likely to have a Material Adverse Effect;
(c) of (i) any violation or noncompliance by Toy Biz or any
of its Subsidiaries or, to the best of its knowledge, any other Person
of any Environmental Laws which would be reasonably likely to have a
Material Adverse Effect or (ii) any liability or potential liability
to Toy Biz or any of its Subsidiaries or, to the best of its
knowledge, to any other Person under, any Environmental Laws which
would be reasonably likely to have a Material Adverse Effect;
(d) of any of the following events, as soon as possible, and
in any event, within 30 days after Toy Biz knows or has reason to know
thereof:
(i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan; or
(ii) the institution of proceedings or the taking or
expected taking of any other action by PBGC or Toy Biz or any
Commonly Controlled Entity to terminate, withdraw or
partially withdraw from any Plan and with respect to a
Multiemployer Plan, the Reorganization or Insolvency of such
Plan;
if such Reportable Event, termination, withdrawal or partial
withdrawal (and, in the case of any Multiemployer Plan, its Reorganization or
Insolvency) would be reasonably likely to result in liability to Toy Biz and
its Subsidiaries, in the aggregate, in excess of $500,000;
(e) of (i) the incurrence of any Lien (other than any Lien
permitted by subsection 7.2) on, or any claim asserted against any of
the collateral security in the Security Documents to which Toy Biz or
any of its Subsidiaries is a party or (ii) the occurrence of any other
event which would be reasonably likely to have a material adverse
effect on the aggregate value of the Collateral under the Security
Documents;
(f) of a material adverse change in the business, condition
(financial or otherwise), operations, performance, properties or
prospects of Toy Biz and its Subsidiaries taken as a whole, or of any
event which would be reasonably likely to have a Material Adverse
Effect; and
<PAGE>
(g) of any material change in the credit terms made available
by any Included Division to an Account Debtor.
Each notice pursuant to this subsection 6.7 shall be accompanied by a statement
of a Responsible Officer of Toy Biz setting forth details of the occurrence
referred to therein and stating what action Toy Biz proposes to take with
respect thereto.
6.8 Maintenance of Corporate Identity. Toy Biz will operate
its businesses and those of its Subsidiaries, and maintain their records,
independently from any Person (a "Parent") which, directly or indirectly, is in
control (as defined in Rule 12b-2 under the Exchange Act) of Toy Biz and
independently from any Subsidiary of such Parent other than Toy Biz and its
Subsidiaries; and Toy Biz will maintain bank accounts separate from the bank
accounts of each Parent of Toy Biz and act solely in its own corporate name and
through its own authorized officers and agents.
6.9 Environmental Laws. Toy Biz will, and will cause each of
its Subsidiaries to:
(a) comply with and require compliance by all tenants and
subtenants, if any, with all Environmental Laws and obtain and comply
in all respects with and maintain, and require that all tenants and
subtenants obtain and comply with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws,
except to the extent that the failure to do so would not be reasonably
likely to have a Material Adverse Effect;
(b) conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all respects
with all lawful orders and directives of all Governmental Authorities
respecting Environmental Laws, except (i) to the extent that the
failure to perform any of the obligations contained in this clause (b)
would not be reasonably likely to have a Material Adverse Effect or
(ii) to the extent that such obligations are being contested in good
faith by appropriate proceedings and the pendency of such proceedings
would not be reasonably likely to have a Material Adverse Effect; and
(c) defend, indemnify and hold harmless the Administrative
Agent and the Banks, and their respective employees, agents, officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind
or nature, known or unknown, contingent or otherwise, arising out of,
or in any way relating to the violation of or noncompliance with any
Environmental Laws by Toy Biz or any of its Subsidiaries, or any
orders, requirements or demands of Governmental Authorities related
thereto, including without limitation reasonable attorney and
consultant fees, investigation and laboratory fees, court costs and
litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party
seeking indemnification therefor. The agreements in this subsection
6.9(c) shall survive the payment of the Loans, the Notes, and all
other amounts payable hereunder.
6.10 Maintenance of the Liens of the Security Documents. Toy
Biz will, and will cause each of its Subsidiaries to, promptly, upon the
reasonable request of any Bank, at Toy Biz's expense, execute, acknowledge and
deliver, or cause the execution,
<PAGE>
acknowledgement and delivery of, and thereafter register, file or record, or
cause to be registered, filed or recorded, in an appropriate governmental
office, any document or instrument supplemental to or in conformity of the
Security Documents to which Toy Biz or any Subsidiary is a party or otherwise
reasonably deemed by the Administrative Agent to be necessary or desirable for
the continued validity, perfection and priority of the Liens on the collateral
covered thereby.
6.11 International Pledge Agreement. Toy Biz will as soon as
possible and in no event later than 30 days after the Closing Date (a) pledge
65% of the capital stock of Toy Biz International to the Administrative Agent
pursuant to the International Pledge Agreement and (b) cause the Administrative
Agent to receive, with a counterpart for each Bank, legal opinions of counsel
acceptable to the Administrative Agent covering such matters in respect of the
International Pledge Agreement as the Administrative Agent shall reasonably
request.
SECTION 7. NEGATIVE COVENANTS
Toy Biz hereby agrees that, until the Payment Obligations are
Fully Satisfied:
7.1 Indebtedness. Toy Biz will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except for:
(a) Indebtedness in respect of the Loans, the Notes and the
Letters of Credit;
(b) Indebtedness of Toy Biz to any Subsidiary and of any
Subsidiary to Toy Biz or any other Subsidiary; provided that any
interest on such Indebtedness of a Subsidiary to Toy Biz shall be paid
in cash or in kind at a rate per annum equal to at least the Alternate
Base Rate on the date of incurrence of such Indebtedness plus 1-1/2%;
(c) Indebtedness in respect of the undrawn portion of the
face amount of letters of credit issued for the account of Toy Biz or
any Subsidiary in an aggregate amount not to exceed at any one time
outstanding for Toy Biz and its Subsidiaries the amount equal to (x)
$2,000,000 minus (y) the aggregate amount of L/C Obligations then
outstanding;
(d) Indebtedness in respect of the Subordinated Debt;
(e) Indebtedness of Toy Biz in the nature of refinancings,
refundings, renewals or extension of Indebtedness otherwise permitted
under subsection 7.1(b) and (c); and
(g) Indebtedness in respect of the New Preferred Stock.
7.2 Limitation on Liens. Toy Biz will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of their properties, assets (including shares of stock) or
revenues, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are
<PAGE>
maintained on the books of Toy Biz or its Subsidiaries, as the case
may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of Toy
Biz or such Subsidiary;
(f) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to Toy Biz and all Subsidiaries)
$250,000 in aggregate amount at any time outstanding;
(g) Liens created pursuant to the Security Documents; and
(h) Liens securing letters of credit permitted under
subsection 7.1(c).
7.3 Limitation on Contingent Obligations. Except as disclosed
on Schedule IV, Toy Biz will not, and will not permit any of its Subsidiaries
to, agree to, or assume or incur, or otherwise in any way be or become
responsible or liable, directly or indirectly, with respect to, any Contingent
Obligation other than guarantees made in the ordinary course of its business by
Toy Biz of Indebtedness permitted by subsection 7.1.
7.4 Limitation on Fundamental Changes. Toy Biz will not, and
will not permit any of its Subsidiaries to, enter into any transaction in the
nature of merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, in one transaction or a series
of related transactions, all or a substantial part of the business or assets of
Toy Biz, or enter into any such transaction or series of related transactions
with regard to a group of Subsidiaries which, if merged into a single
Subsidiary, would constitute a substantial part of the business or assets of
Toy Biz, or acquire by purchase or otherwise all or substantially all the
business or assets of, or stock or other evidences of beneficial ownership of,
any Person, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of Toy Biz may be merged or consolidated
with or into Toy Biz (provided that Toy Biz shall be the continuing or
surviving corporation) or with
<PAGE>
or into any one or more wholly owned Subsidiaries of Toy Biz (provided
that the wholly owned Subsidiary or Subsidiaries shall be the
continuing or surviving corporation);
(b) any wholly owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to Toy Biz or any other wholly owned
Subsidiary of Toy Biz; and
(c) Toy Biz or any of its domestic Subsidiaries may be merged
or consolidated with or into Marvel Entertainment Group, Inc. 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; provided that any material amendment, supplement or other
modification thereto has been consented to by the Majority Banks.
7.5 Limitation on Sale of Assets. Toy Biz will not, and will
not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any of the Subsidiaries of Toy Biz,
issue or sell any shares of capital stock (other than any director's qualifying
shares), to any Person other than Toy Biz or any of its Subsidiaries, except:
(a) the sale or other disposition of obsolete or worn out
property in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) as permitted by subsections 7.2 and 7.4(b);
(d) licensing agreements entered into with respect to
Trademarks, Copyrights or Patents, or with respect to any products of
Toy Biz manufactured by or for Toy Biz for sale or molds, dies, casts,
stencils or similar tooling materials incorporating or derived from
any such Trademarks, Copyrights or Patents, in any case in the
ordinary course of business; and
(e) notwithstanding the parenthetical contained in the third
and fourth lines of the precatory language of this subsection 7.5,
receivables due and payable to Toy Biz from its customers, when (i)
such receivables are sold or otherwise conveyed to a factor or other
third party purchaser without any recourse to Toy Biz or its
Subsidiaries (other than as a result of a misrepresentation on any
matter other than the creditworthiness of the obligor of any
receivable) and (ii) in the reasonable business judgment of the Chief
Financial Officer of Toy Biz, such transaction or series of
transactions would be in the economic interest of Toy Biz under the
facts and circumstances then appertaining; provided that the aggregate
undiscounted face amount of receivables sold in reliance upon the
provisions of this subsection 7.5(e) shall not exceed $1,000,000 in
any period of 12 consecutive calendar months.
7.6 Limitation on Leases. Toy Biz will not, and will not
permit any of its Subsidiaries to, permit Consolidated Lease Expense for any
fiscal year of Toy Biz to exceed $1,500,000.
<PAGE>
7.7 Limitation on Dividends. Toy Biz will not, and will not
permit any of its Subsidiaries to, declare or pay any dividend (other than
dividends payable solely in common stock of Toy Biz) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any
shares of any class of capital stock of Toy Biz or any warrants or options to
purchase any such stock, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether
in cash or property or in obligations of Toy Biz or any Subsidiary.
7.8 Limitation on Capital Expenditures. Toy Biz will not, and
will not permit any of its Subsidiaries to, make or commit to make (by way of
the acquisition of securities of a Person or otherwise) any expenditure in
respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations), except for
expenditures in the ordinary course of business not exceeding, in the aggregate
for Toy Biz and its Subsidiaries, $15,000,000 during the 1998 fiscal year of
Toy Biz and $3,000,000 during the portion of the 1999 fiscal year of Toy Biz
prior to the Termination Date.
7.9 Limitation on Investments, Loans and Advances. Toy Biz
will not, and will not permit any of its Subsidiaries to, make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of Toy Biz or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for Toy Biz and its
Subsidiaries not to exceed $700,000 at any one time outstanding;
(d) investments by Toy Biz in its Subsidiaries and
investments by such Subsidiaries in Toy Biz and in other Subsidiaries;
(e) investments (including, without limitation, advances
against royalties) in license rights and investments incident to the
exploitation of such rights in the ordinary course of business;
(f) loans and advances to Avi Arad for the sole purpose of
providing financing to him for any income tax liability in excess of
$7,100,000 (the "Incremental Liability") actually incurred by him as a
result of the exercise by him of certain options with respect to the
capital stock of Toy Biz; provided, that (i) Avi Arad shall grant to
Toy Biz (and Toy Biz shall maintain) a first priority, perfected
security interest in such capital stock of Toy Biz held by Avi Arad as
Toy Biz shall deem appropriate, (ii) such loans and advances shall
bear interest from time to time at the rate then payable by Toy Biz
hereunder (with such interest to accrue during the life of such loans
and advances and to be payable upon their final maturity) and (iii)
the aggregate amount of such loans and advances do not exceed the
after-tax benefit to Toy Biz from the Incremental Liability;
<PAGE>
(g) investments in the capital stock of Marvel Entertainment
Group, Inc. made 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; provided that any material
amendment, supplement or other modification thereto has been consented
to by the Majority Banks.
7.10 Limitation on Optional Payments and Modifications of
Subordinated Debt. Toy Biz will not, and will not permit any of its
Subsidiaries to, (a) make any optional payment or prepayment on or redemption
of any Subordinated Debt, provided that the foregoing shall not prohibit
optional payments, prepayments or redemptions of Subordinated Debt with any Net
Cash Proceeds received as a result of the issuance of equity securities in
connection with the IPO, (b) amend, modify or change, or consent or agree to
any amendment, modification or change to any of the terms of any Subordinated
Debt (other than any such amendment, modification or change which would extend
the maturity or reduce the amount of any payment of principal thereof or which
would reduce the rate or extend the date for payment of interest thereon), or
(c) amend the subordination provisions of any Subordinated Debt.
7.11 Limitation on Transactions with Affiliates. Toy Biz will
not, and will not permit any of its Subsidiaries to, enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of Toy Biz's or such Subsidiary's business and (c) upon fair
and reasonable terms no less favorable to Toy Biz or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate; provided that nothing contained in this
subsection 7.11 shall be deemed to prohibit the consummation of the
transactions contemplated by subsections 7.4(c) and 7.9(g).
7.12 Limitation on Changes in Fiscal Year. Toy Biz will not
permit the fiscal year of Toy Biz to end on a day other than December 31.
7.13 Limitation on Negative Pledge Clauses. Toy Biz will not,
and will not permit any of its Subsidiaries to, enter into with any Person any
agreement, other than (a) this Agreement and (b) any industrial revenue bonds,
purchase money mortgages or Financing Leases permitted by this Agreement (in
which cases, any prohibition or limitation shall only be effective against the
assets financed thereby), which prohibits or limits the ability of Toy Biz or
any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired.
7.14 Limitation on Lines of Business. Toy Biz will not, and
will not permit any of its Subsidiaries to, enter into any business, either
directly or through any Subsidiary, except for those businesses in which Toy
Biz and its Subsidiaries are engaged on the date of this Agreement or which are
of a nature similar to the nature of, or that constitute reasonable extensions
of, the business carried on by Toy Biz and its Subsidiaries as of the date of
this Agreement.
7.15 Subsidiaries. Toy Biz will not, and will not permit any
of its Subsidiaries to, create, acquire or otherwise suffer to exist any
Subsidiary which was not a direct or indirect Subsidiary of Toy Biz on the
Closing Date unless:
<PAGE>
(a) such new Subsidiary is organized under the laws of a
jurisdiction within the United States and is party to a Subsidiary
Guarantee and a Subsidiary Security Agreement in form and substance
reasonably satisfactory to the Administrative Agent or otherwise has
provided to the Administrative Agent a fully perfected, first priority
security interest in substantially all of the assets of such new
Subsidiary located in the United States pursuant to documentation
reasonably satisfactory to the Administrative Agent and the
Administrative Agent has received a fully perfected, first priority
security interest pursuant to documentation in form and substance
reasonably satisfactory to the Administrative Agent, in all of the
issued and outstanding capital stock of such new Subsidiary owned by
Toy Biz or any of its Subsidiaries, together with such related
documents, instruments, agreements and legal opinions as the
Administrative Agent reasonably may require; or
(b) such new Subsidiary is organized under the laws of a
jurisdiction outside of the United States and the Administrative Agent
has received a fully perfected, first priority security interest
pursuant to documentation in form and substance reasonably
satisfactory to the Administrative Agent, in 65% of the issued and
outstanding capital stock of such new Subsidiary owned by Toy Biz or
any of its Subsidiaries together with such related documents,
instruments, agreements or legal opinions as the Administrative Agent
reasonably may require.
7.16 Financial Covenants. Toy Biz will not:
(a) Minimum EBITDA. Permit EBITDA for the fiscal quarter
ending on each date set forth below to be less than the amount set
forth below opposite such date:
Date Amount
12/31/97 $(16,500,000)
03/31/98 4,526,000
06/30/98 9,264,000
09/30/98 11,020,000
12/31/98 12,880,000
(b) Current Ratio. Permit the Current Ratio as of each date
set forth below to be less than the ratio set forth opposite such date:
Date Ratio
12/31/97 1.75 to 1.0
03/31/98 1.94 to 1.0
06/30/98 2.06 to 1.0
09/30/98 1.63 to 1.0
12/31/98 2.04 to 1.0
7.17 Cash Management System. Toy Biz will not, and will not
permit any of its domestic Subsidiaries to establish or maintain, or permit to
be established or maintained, any bank accounts in the name of, or for the
benefit of, Toy Biz or any of its Subsidiaries, with any Person other than The
Chase Manhattan Bank.
<PAGE>
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following events:
(a) Payments. Failure by Toy Biz to pay any principal of or
interest on any Loan, any Reimbursement Obligation or Note when due in
accordance with the terms thereof and hereof, or failure by Toy Biz to
pay any fee or other amount payable by it in connection with any
Credit Document within five days after the date when due; or
(b) Representations and Warranties. Any representation or
warranty made or deemed made by Toy Biz or any of its Subsidiaries in
any Credit Document or which is contained in any certificate or
financial statement furnished at any time under or in connection
herewith or therewith shall prove to have been incorrect, false or
misleading in any material respect on or as of the date when made or
deemed to have been made; or
(c) Negative Covenants. Default by Toy Biz or any of its
Subsidiaries in the observance or performance of any negative covenant
or agreement contained in Section 7; or
(d) Security Document Covenants. Default by Toy Biz or any of
its Subsidiaries in the observance or performance of any covenant or
agreement contained in any Security Document and such default shall
continue unremedied for a period of 15 Business Days; or
(e) Other Covenants. Default by Toy Biz or any of its
Subsidiaries in the observance or performance of any other covenant or
agreement contained or incorporated by reference in this Agreement or
in any other Credit Document other than as provided in clauses (a)
through (d) above, and such default shall continue unremedied for a
period of 30 days; or
(f) Effectiveness of the Security Documents and the
Subsidiary Guarantee. On or after the Closing Date, (i) for any reason
(other than any act on the part of the Administrative Agent or any
Bank) any Security Document or any Guarantee ceases to be or is not in
full force and effect or any Liens intended to be created by any
Security Document on any Collateral which, individually or in the
aggregate, is material, ceases to be or is not a valid and perfected
Lien having the priority contemplated thereby or (ii) Toy Biz or any
of its Subsidiaries shall assert in writing that any Security Document
or any Guarantee has ceased to be or is not in full force and effect;
or
(g) Cross Default. Toy Biz or any of its Subsidiaries shall
Cross Default; or
(h) Commencement of Bankruptcy or Reorganization Proceeding.
(i) Toy Biz or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it as
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, wind-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking
<PAGE>
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets; or,
(ii) there shall be commenced against Toy Biz or any of its
Subsidiaries any such case, proceeding or other action referred to in
subsection (i) which results in the entry of an order for relief or
any such adjudication or appointment remains undismissed, undischarged
or unbonded for a period of 60 days, provided that Toy Biz, for itself
and on behalf of each of its Subsidiaries, hereby expressly authorizes
the Administrative Agent and each Bank to appear in any court
conducting any such case, proceeding or other action during said
60-day period to preserve, protect and defend their rights under the
Credit Documents; or (iii) there shall be commenced against Toy Biz or
any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not
have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) Toy Biz or any of its
Subsidiaries shall take any action authorizing, or in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of
the acts set forth above in this paragraph (h); or (v) Toy Biz or any
of its Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
(i) ERISA. (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or
to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Majority Banks, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) Toy Biz or any Commonly Controlled Entity of Toy Biz shall,
or in the reasonable opinion of the Majority Banks is likely to, incur
any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist, with respect to a Plan; provided that,
in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
would be reasonably likely to have a Material Adverse Effect; or
(j) Material Judgments. (i) One or more judgments or decrees
shall be entered against Toy Biz or any of its Subsidiaries involving
in the aggregate a liability (not covered by insurance) of $1,000,000
or more or (ii) any non-monetary judgment or order shall be rendered
against Toy Biz or any of its Subsidiaries that is reasonably likely
to have a Material Adverse Effect, and in the case of either clause
(i) or (ii), there shall be any period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect unless such
judgment or order shall have been vacated, satisfied, discharged or
bonded pending appeal; or
(k) Master Toy License Agreement. The Master Toy License
Agreement shall terminate or ceases to be or is not in full force and
effect; or
<PAGE>
(l) Majority of the Board. Joseph M. Ahearn, Avi Arad, James
Carluccio, Alan Fine, James Halpin, Morton Mandel, Isaac Perlmutter,
Alfred Piergallini, General Donald Rosenblum and Paul Verkuil (and any
other Persons whose election to the Board of Directors of Toy Biz was
supported by the majority of the foregoing individuals who held office
as a Director of Toy Biz on the date of such election) shall cease to
constitute a majority of the Board of Directors of Toy Biz; or
(m) Ownership by Messrs. Perlmutter and Arad. Either of Isaac
Perlmutter and Avi Arad shall cease to be the record and beneficial
owner of at least 50% of the capital stock of Toy Biz held by him on
December 31, 1997;
then, and in any such event, (x) if such event is an Event of Default specified
in clause (i), (ii) or (iii) of paragraph (h) of this Section 8, automatically
the Commitments shall immediately terminate and the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder), the Notes and the other Credit
Documents shall immediately become due and payable, and (y) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Banks, the Administrative Agent
may, or upon the request of the Majority Banks, the Administrative Agent shall,
by notice to Toy Biz, declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and/or (ii) with the
consent of the Majority Banks, the Administrative Agent may, or upon the
request of the Majority Banks, the Administrative Agent shall, by notice to Toy
Biz, declare all or any part of the Loans (with accrued interest thereon) and
any other amounts owing under this Agreement (including, without limitation,
all amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder), the Notes and the other Credit Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, Toy Biz shall at such time deposit in a
cash collateral account opened by the Agent an amount equal to 105%of the
aggregate then undrawn and unexpired amount of such Letters of Credit. Toy Biz
hereby grants to the Agent, for the benefit of the Issuer and the L/C
Participants, a security interest in such cash collateral to secure all
obligations of Toy Biz under this Agreement and the other Loan Documents.
Amounts held in such cash collateral account shall be applied by the Agent to
the payment of drafts drawn under such Letters of Credit, and the unused
portion thereof after all such Letters of Credit shall have expired or been
fully drawn upon, if any, shall be applied to repay other obligations of Toy
Biz hereunder and under the Notes. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of Toy Biz hereunder and under the Notes
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to Toy Biz. Toy Biz shall execute and deliver to the
Agent, for the account of the Issuer and the L/C Participants, such further
documents and instruments as the Agent may request to evidence the creation and
perfection of the within security interest in such cash collateral account.
Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
<PAGE>
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Bank hereby irrevocably designates and
appoints Chemical Bank (and each successor thereto which is appointed in
accordance with the provisions of subsection 9.9) as the Administrative Agent
under the Credit Documents and hereby irrevocably authorizes Chemical Bank (and
any such successors thereto), as the Administrative Agent for such Bank, to
take such action, in the Administrative Agent's discretion, on such Bank's
behalf under the provisions of the Credit Documents and to exercise such powers
and perform such duties as are expressly delegated to the Administrative Agent
by the terms of the Credit Documents, together with such other powers as are
reasonably incidental thereto. Chemical Bank hereby accepts its appointment as
the Administrative Agent and the authorization set forth above. Notwithstanding
any provision to the contrary in the Credit Documents, the Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth
in the Credit Documents, nor any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Credit Documents or otherwise exist against
the Administrative Agent in such capacity.
9.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under the Credit Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (a) liable to any of the Banks for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
the Credit Documents (except for its or such Person's own gross negligence or
willful misconduct) or (b) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by the Subsidiary
Guarantor, Toy Biz or any officer thereof contained in the Credit Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by it under or in connection with, the Credit Documents or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Credit Documents (other than with respect to its own due
execution and delivery thereof) or the perfection of any security interest
contemplated thereby or for any failure of any party thereto (other than the
Administrative Agent in such capacity) to perform its obligations thereunder.
The Administrative Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Credit Documents, or to inspect
the properties, books or records of any party to any thereof.
9.4 Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to Toy
Biz), independent accountants and other experts selected by the Administrative
Agent. The Administrative Agent may deem and treat the payee of any Note or on
account of any Loan as the owner thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof shall have been filed
with the Administrative Agent (in its capacity as such). The
<PAGE>
Administrative Agent shall be fully justified in failing or refusing to take
any action under any Credit Document unless it shall have received such advice
or concurrence of the Majority Banks as it deems appropriate or it shall have
been expressly indemnified to its satisfaction by the Banks or, at its option,
the Majority Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action
(except that no such indemnification need include any indemnification for any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Administrative Agent). Each of the
Administrative Agent and its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall in all cases be fully protected in
acting, or in refraining from acting, under the Credit Documents upon advice of
counsel or in accordance with a request of the Majority Banks (except in cases
in which a greater number of Banks is required, in which case the
Administrative Agent and its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall in all cases be fully protected in
acting, or in refraining from acting, under the Credit Documents in accordance
with a request of such Banks), and such request, and any action taken or
failure to act pursuant thereto, shall be binding upon all the Banks and all
future holders of the Loans and the Notes.
9.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Administrative Agent has received notice from a Bank or Toy
Biz referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Administrative Agent receives any such notice, it shall promptly give notice
thereof to the Banks. The Administrative Agent shall take such action with
respect to any Default or Event of Default as shall be reasonably directed by
the Majority Banks, provided that, unless and until the Administrative Agent
shall have received any such directions, it may (but shall not be obligated to)
take such action (other than any such action under clause (y) of Section 8), or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks.
9.6 Non-Reliance on the Administrative Agent and the Other
Banks. Each Bank expressly acknowledges that neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
it hereinafter taken, including any review of the affairs of Toy Biz or any
Subsidiary or any Affiliate of any of the foregoing, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Bank. Each Bank represents to the Administrative Agent that it has or will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed or will deem
appropriate, made and will make its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of Toy Biz and its Subsidiaries and Affiliates and made and
will make its own decision to make its Loans and enter into the Credit
Documents to which it is or will be a party. Each Bank also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under the Credit Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of Toy Biz and its Subsidiaries and Affiliates. Each Bank
acknowledges that no action on the part of the Administrative Agent shall
relieve such Bank from performing its own credit analysis and making its own
determination prior to, and from time to time after, its entering into this
<PAGE>
Agreement with respect to the nature of the transaction contemplated hereby and
assuming any risks or disadvantages to it that may arise out of any such
determination. Except for notices, reports and other documents expressly
required to be furnished to the Banks, or obtained, by the Administrative
Agent, under the Credit Documents, the Administrative Agent in such capacity
shall have no duty or responsibility to provide any Bank with any credit or
other information concerning the business, operations, property, financial and
other condition or creditworthiness of Toy Biz and its Subsidiaries and
Affiliates which may come into its possession or the possession of any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Banks agree to indemnify the
Administrative Agent (in its capacity as such) and its officers, directors,
employees, agents, attorneys-in-fact or affiliates, to the extent not
reimbursed by Toy Biz and without limiting the obligation of Toy Biz to do so,
ratably according to the respective amounts of their pro rata shares of the
Aggregate Commitment in effect on the date upon which indemnity is sought, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever (including, without limitation, reasonable legal fees and
disbursements) which may at any time (including, without limitation, at any
time following the payment of the Loans, the Reimbursement Obligations or the
Notes) be imposed on, incurred by or asserted against the Administrative Agent,
in such capacity, in any way relating to or arising out of the Credit
Documents, or any documents contemplated by or referred to therein or the
transactions contemplated thereby or any action taken or omitted by the
Administrative Agent, in such respective capacities, thereunder or in
connection therewith, provided that no Bank shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of the Administrative Agent, in
such capacity, or, in the case of a claim against the Administrative Agent, in
such capacity, arising from a lawsuit against the Administrative Agent if such
Bank was not given notice of said lawsuit and an opportunity to participate in
the defense thereof at its own expense. The agreements in this subsection 9.7
shall survive the payment of the Loans, the Reimbursement Obligations, the
Notes, and all other amounts payable hereunder.
9.8 The Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with Toy Biz and any of its
Subsidiaries or Affiliates as though it were not the Administrative Agent. With
respect to its Loans and any Notes or other promissory note issued to it and
with respect to any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Bank and may exercise the same as though it were not the Administrative
Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent
in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent
may resign as the Administrative Agent upon 30 days' notice to the Banks and
Toy Biz. If it shall resign as Administrative Agent, then the Majority Banks
shall appoint from among the Banks a successor Administrative Agent for the
Banks, which successor Administrative Agent shall be approved by Toy Biz, such
approval not to be unreasonably withheld (or, if the Majority Banks and Toy Biz
are unable to select such successor Administrative Agent within such 30-day
period, a successor Administrative Agent shall be selected by the
Administrative Agent), whereupon such successor agent shall succeed to the
rights, powers and duties of the resigning Administrative Agent under all of
the Credit Documents, and the term
<PAGE>
"Administrative Agent" shall mean such successor Administrative Agent effective
upon its appointment, and the former Administrative Agent's rights, powers and
duties as the Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans, Letters of Credit or
the Notes. After any retiring Administrative Agent's resignation hereunder or
as Administrative Agent, as the case may be, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent under the Credit Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. (a) Except as set forth in the
next succeeding sentence, the Administrative Agent, on the one hand, and Toy
Biz or any of its Subsidiaries, as the case may be, as party thereto, on the
other hand, may from time to time with the written consent of the Majority
Banks enter into written amendments, supplements or modifications for the
purpose of adding, deleting or modifying any provision of any Credit Document
or changing in any manner the rights, remedies, obligations and duties of the
parties thereto, and the Administrative Agent, on behalf of the Banks, may,
with the written consent of the Majority Banks, execute and deliver a written
instrument waiving, on such terms and conditions as may be specified in such
instrument, any of the requirements applicable to Toy Biz or any of its
Subsidiaries, as the case may be, party to any Credit Document, or any Default
or Event of Default and its consequences. No such waiver, amendment, supplement
or modification shall:
(i) without the written consent of each Bank directly
affected thereby, extend the final scheduled maturity of any of the
Loans, or extend the Termination Date, or the Notes or any scheduled
installment thereof, or reduce the rate or extend the time of payment
of interest thereon, or reduce the principal amount thereof, or change
the amount or terms (including, without limitation, fees and
commissions) of any Commitment, or consent to the assignment or
transfer by Toy Biz of any of its rights and obligations under this
Agreement, or change the definition of "Majority Banks" in subsection
1.1, or amend, modify or waive any provision of this subsection 10.1
or subsection 10.6;
(ii) without the written consent of all the Banks, (A)
release any material guarantee obligation provided for in any
Guarantee or (B) release any of the material collateral provided for
in any Security Document (except in accordance with their terms); or
(iii) without the written consent of the then
Administrative Agent, amend, modify or waive any provision of Section
9.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon the Banks and all future
holders of any of the Loans, the Letters of Credit and the Notes. In the case
of such waiver, the parties to the Credit Documents, the Banks and the
Administrative Agent shall be restored to their former positions and rights
hereunder and under the Notes, the Letters of Credit and the other Credit
Documents, and any Default or any Event of Default waived shall, to the extent
provided in such waiver, be deemed to be cured and not continuing; but, no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right
<PAGE>
consequent thereon. The Administrative Agent shall, as soon as practicable,
furnish a copy of each such amendment, supplement, modification or waiver to
each Bank.
10.2 Notices. All notices, consents, requests and demands to
or upon the respective parties hereto to be effective shall be in writing and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or three Business Days after being
deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when sent, addressed as follows in
the case of Toy Biz and the Administrative Agent, and as set forth in Schedule
I hereto in the case of each of the other parties hereto, or to such address or
other address as may be hereafter notified by any of the respective parties
hereto or any future holders of the Loans, the Letters of Credit or the Notes:
Toy Biz: Toy Biz, Inc.
685 Third Avenue
New York, New York 10017
Attention: Chief Financial Officer
Telecopy: (212) 588-5328
The Administrative
Agent: The Chase Manhattan Bank
270 Park Avenue - 30th Floor
New York, New York 10017
Attention: Ms. Billie Prue - Special Loan Group
Telecopy: (212) 661-8396
with a copy to: The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10008
Attention: Ms. Donna Montgomery - Agency
Services Group
Telecopy: (212) [________________]
provided that any notice, request or demand to or upon the Administrative Agent
pursuant to Sections 2, 2A and 3 shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Bank, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the Notes.
10.5 Payment of Expenses and Taxes. Toy Biz agrees (a) to pay
or reimburse the Administrative Agent for all of its reasonable out-of-pocket
costs and expenses incurred
<PAGE>
in connection with the preparation, execution and delivery of, and any
amendment, supplement or modification to, any Credit Document and any other
documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby (including, without limitation,
the fees and disbursements of primary counsel and local counsel to the
Administrative Agent, but not including any fees and expenses of counsel to the
Banks), (b) to pay or reimburse each Bank and the Administrative Agent for all
its reasonable costs and expenses incurred in connection with the enforcement
or preservation of any rights under the Credit Documents and any such other
documents, including, without limitation, fees and disbursements of counsel
(including, without limitation, the reasonable invoiced allocated costs and
expenses of in-house legal counsel or staff determined in good faith) to the
Administrative Agent and to the Banks, (c) to pay, indemnify, and to hold each
Bank and the Administrative Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other similar taxes, if any, if legal, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, the Credit Documents and any such other documents, and (d) to pay,
indemnify, and hold each Bank, the Administrative Agent and the officers,
directors, employees and agents thereof, harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, consummation, enforcement, performance and
administration of the Credit Documents and the use by Toy Biz of the proceeds
of the Loans, the Letters of Credit and other extensions of credit hereunder
(all of the foregoing, collectively, the "Indemnified Liabilities"), provided
that Toy Biz shall have no obligation hereunder with respect to Indemnified
Liabilities arising from (i) the gross negligence or willful misconduct of any
such Bank or of the Administrative Agent, (ii) legal proceedings commenced
against any such Bank or against the Administrative Agent by any security
holder or creditor (other than Toy Biz and its Subsidiaries and Affiliates)
thereof arising out of and based upon rights afforded any such security holder
or creditor solely in its capacity as such, (iii) legal proceedings commenced
against any such Bank by any other Bank or by the Administrative Agent or (iv)
amounts of the types referred to in clauses (a) through (c) above except as
provided therein. The agreements in this subsection 10.5 shall survive
repayment of the Loans and the Notes and all other amounts payable hereunder.
10.6 Successors and Assigns; Loan Participations. (a) This
Agreement shall be binding upon and inure to the benefit of Toy Biz, the
Administrative Agent, the Banks, all future holders of the Loans and the Notes,
and their respective successors and assigns, except that Toy Biz may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each Bank.
(b) Any Bank may, in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Bank, any Note held by such Bank, any
Commitment of such Bank or any other interest of such Bank hereunder or under
any other Credit Document. In the event of any such sale by a Bank of
participating interests to a Participant, such Bank's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Bank shall remain solely responsible for the performance thereof, such Bank
shall remain the holder of any such Loan or Note for all purposes under this
Agreement and Toy Biz and the Administrative Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Toy Biz agrees that if
<PAGE>
amounts outstanding under this Agreement and the Notes are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement
or any Note; provided, that such right of setoff shall be subject to the
obligation of such Participant to share with the Banks, and the Banks agree to
share with such Participant, as provided in subsection 10.7. Toy Biz also
agrees that each Participant shall be entitled to the benefits of subsections
3.8, 3.9 and 10.5 with respect to its participation in the Loans and
Commitments outstanding from time to time; provided, that no Participant shall
be entitled to receive any greater amount pursuant to such subsections than the
transferor Bank would have been entitled to receive in respect of the amount of
the participation transferred by such transferor Bank to such Participant had
no such transfer occurred.
(c) Any Bank may, in accordance with applicable law:
(i) at any time sell all or any part of its rights and
obligations under this Agreement and any of the Loans or the Notes,
the Letters of Credit and any other Credit Document to any Bank or any
Affiliate thereof;
(ii) at any time sell to one or more additional banks or
financial institutions ("Purchasing Banks") which are Eligible
Assignees, all or any part of its rights and obligations under this
Agreement and any of the Loans or the Notes, the Letters of Credit and
any other Credit Document, provided that, unless Toy Biz otherwise
consents (which consent shall not be unreasonably withheld) or unless
the selling Bank is selling all of its rights and obligations under
this Agreement and the Loans, any Notes, the Letters of Credit and
each other Credit Document, each such sale pursuant to this clause
(ii) shall be in an amount equal to at least $2,500,000; and
(iii) with the consent of Toy Biz (which consent shall not
be unreasonably withheld) sell to one or more Purchasing Banks which
are not Banks, Affiliates thereof or Eligible Assignees, all or any
part of its rights and obligations under this Agreement and the Loans
and the Notes, the Letters of Credit and any other Credit Document,
provided that, unless Toy Biz otherwise consents (which consent shall
not be unreasonably withheld), each such sale pursuant to this clause
(iii) shall be in an amount equal to at least $2,500,000;
provided, however, that, after giving effect to such sale, if the transferor
Bank retains any Commitment hereunder, such Commitment shall, unless Toy Biz
otherwise consents (which consent shall not be unreasonably withheld), be not
less than $2,500,000. Any such sale shall be made pursuant to a Commitment
Transfer Supplement, substantially in the form of Exhibit G (a "Commitment
Transfer Supplement"), executed by the Administrative Agent, such Purchasing
Bank and such transferor Bank (and, in the case of any such transfer made
pursuant to clause (iii), by Toy Biz, and delivered to the Administrative Agent
for its acceptance and recording in the Register (as defined below). Upon such
execution, delivery, acceptance and recording, from and after the Transfer
Effective Date as defined in the Commitment Transfer Supplement determined
pursuant to such Commitment Transfer Supplement, (x) the Purchasing Bank
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Bank
hereunder with Commitments as set forth therein, and (y) the transferor Bank
<PAGE>
thereunder shall, to the extent of the interest transferred, as reflected in
such Commitment Transfer Supplement, be released from its obligations under
this Agreement and the other Credit Documents (and, in the case of a Commitment
Transfer Supplement covering all or the remaining portion of a transferor
Bank's rights and obligations under this Agreement and the other Credit
Documents, such transferor Bank shall cease to be a party hereto). Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Bank and the resulting adjustment of the relevant Commitment
Percentages arising from the purchase by such Purchasing Bank of all or a
portion of the rights and obligations of such transferor Bank under this
Agreement and the Loans and the Notes. On or prior to the Transfer Effective
Date determined pursuant to such Commitment Transfer Supplement, Toy Biz, at
its own expense and upon the request of such Purchasing Bank or the transferror
Bank, shall execute and deliver to the Administrative Agent in exchange for any
surrendered Note a new Note to the order of such Purchasing Bank in an amount
equal to the relevant Commitment assumed by it pursuant to such Commitment
Transfer Supplement and, if the transferor Bank has retained such a Commitment
hereunder (and has previously requested a Note evidencing its Loans
thereunder), a new Note to the order of the transferor Bank in an amount equal
to the relevant Commitment retained by it hereunder. Any such new Note shall be
dated the date of the original Note and shall otherwise be in the form of the
Note replaced thereby. Any Note surrendered by the transferor Bank shall be
returned by the Administrative Agent to Toy Biz marked "canceled."
(d) The Administrative Agent shall maintain at its address
referred to in subsection 10.2 a copy of each Commitment Transfer Supplement
delivered to it and a register (the "Register") for the recordation of the
names and addresses of the Banks and the Commitments and Commitment Percentages
of the Loans owing to each Bank from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and Toy Biz, the
Administrative Agent and the Banks may treat -------- each Person whose name is
recorded in the Register as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
Toy Biz or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement
executed by a transferor Bank and a Purchasing Bank (and, in the case of a
Purchasing Bank that is not then a Bank or an Affiliate thereof, by Toy Biz),
together with payment to the Administrative Agent of a registration and
processing fee of $4,000 ($2,000 if the Purchasing Bank is then a Bank or an
Affiliate thereof), the Administrative Agent shall (i) promptly accept such
Commitment Transfer Supplement and (ii) on the Transfer Effective Date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Banks and
Toy Biz.
(f) Toy Biz authorizes each Bank to disclose to any
Participant or Purchasing Bank (each, a "Transferee") and any prospective
Transferee any and all financial information in such Bank's possession
concerning Toy Biz and its Subsidiaries and Affiliates which has been delivered
to such Bank by or on behalf of Toy Biz pursuant to this Agreement or any other
Credit Document, or which has been delivered to such Bank by or on behalf of
Toy Biz in connection with such Bank's credit evaluation of Toy Biz, its
Subsidiaries and its Affiliates prior to becoming a party to this Agreement;
provided that such Transferee or potential Transferee agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information provided to it concerning Toy Biz or any of its Subsidiaries or
Affiliates.
<PAGE>
(g) Unless Toy Biz shall otherwise consent, if, pursuant to
this subsection 10.6, any interest in this Agreement or any Loan or Note or
Letter of Credit is transferred to any Transferee (which, for purposes of this
subsection 10.6(g), shall include an Affiliate of a Bank to which a s/ale is
made pursuant to subsection 10.6(c)(i)) which is organized under the laws of
any jurisdiction other than the United States of America or any state thereof,
the transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Bank (for
the benefit of the transferor Bank, the Administrative Agent and Toy Biz) that
under applicable law and treaties at the time in effect no taxes will be
required to be withheld by the Administrative Agent, Toy Biz or the transferor
Bank with respect to any payments to be made to such Transferee in respect of
the Loans or Letter of Credit under this Agreement, (ii) to furnish to the
transferor Bank (and, in the case of any Purchasing Bank registered in the
Register, the Administrative Agent and Toy Biz) either United States Internal
Revenue Service Form 4224 or United States Internal Revenue Service Form 1001
or any successor applicable form, as the case may be (wherein such Transferee
claims entitlement to complete exemption from United States Federal withholding
tax on all payments hereunder) and (iii) to agree (for the benefit of the
transferor Bank, the Administrative Agent and Toy Biz) to be bound by the
provisions of subsections 3.10(b), (c) and (d) as if such Transferee were a
Bank hereunder.
(h) Nothing contained herein shall prohibit any Bank from
pledging or assigning any Note to any Federal Reserve Bank in accordance with
applicable law.
10.7 Adjustments; Setoff. (a) If any Bank (a "benefitted
Bank") shall at any time receive any payment of all or part of any of the Loans
or the Reimbursement Obligations owing to it, or interest thereon, pursuant to
a guarantee or otherwise (including, without limitation, by way of setoff
pursuant to the Subsidiary Guarantee), or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by setoff or otherwise), in a
greater proportion than any such payment to and collateral received by any
other Bank, if any, in respect of such other Bank's Loans or the Reimbursement
Obligations owing to it or interest thereon, such benefitted Bank shall
purchase for cash from the other Banks such portion of each such other Bank's
Loans or the Reimbursement Obligations owing to such other Bank, or shall
provide such other Banks with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Bank to share
the excess payment or benefits of such collateral or proceeds ratably with each
of the Banks; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Bank, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. Toy Biz agrees that each
Bank so purchasing a portion of another Bank's Loans or Reimbursement
Obligations may exercise all rights of payment (including, without limitation,
rights of setoff) with respect to such portion as fully as if such purchasing
Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks
provided by law, upon both the occurrence of an Event of Default and
acceleration of the obligations owing in connection with this Agreement, each
Bank shall have the right, without prior notice to Toy Biz, any such notice
being expressly waived to the extent permitted by applicable law, to setoff and
apply against any indebtedness, whether matured or unmatured, of Toy Biz to
such or any other Bank, any amount owing from such Bank to Toy Biz at, or at
any time after, the happening of both of the above mentioned events, and such
right of setoff may be exercised by such Bank against Toy Biz or against any
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, custodian or execution, judgment or
<PAGE>
attachment creditor of Toy Biz, or against anyone else claiming through or
against Toy Biz or such trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, receivers, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of setoff shall not have
been exercised by such Bank prior to the making, filing or issuance, or service
upon such Bank of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. Each Bank
agrees promptly to notify Toy Biz, as the case may be, and the Administrative
Agent after any such setoff and application made by such Bank, provided that
the failure to give such notice shall not affect the validity of such setoff
and application.
10.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.9 Effectiveness; Counterparts. This Agreement shall become
binding upon the parties hereto when the Administrative Agent shall have
received one or more counterparts of this Agreement, executed by a duly
authorized officer of each party hereto or, in the case of any Bank, telecopier
confirmation to the Administrative Agent that a duly authorized officer of such
Bank has executed a counterpart of this Agreement and that such counterpart has
been sent to the Administrative Agent. Notwithstanding any provision of the
immediately preceding sentence, this Agreement shall not become effective until
each of the conditions precedent contained in subsection 5.1 has been satisfied
or waived. This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
Toy Biz and the Administrative Agent.
10.10 SUBMISSION TO JURISDICTION; WAIVERS. (A) TOY BIZ HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS
FROM ANY THEREOF;
(II) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES TRIAL BY JURY AND ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;
(III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
<PAGE>
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF
MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SUBSECTION
10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(IV) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
(B) EACH OF TOY BIZ, THE ADMINISTRATIVE AGENT AND THE BANKS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING REFERRED TO IN PARAGRAPH (A) ABOVE.
10.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
TOY BIZ, INC.
By:___________________
Title:
CHEMICAL BANK, as Administrative
Agent and as a Bank
By:___________________
Title:
THE BANK OF NEW YORK
By:___________________
Title:
FLEET BANK
By:___________________
Title: