Exhibit 10.17
 
THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
 
 
    This Third Amendment to Amended and Restated Credit Agreement (herein, the
“Amendment”) is entered into as of July 28, 2006 by and among RC2 Brands, Inc.
(“RC2 Brands”), RC2 South, Inc. (“RC2S”), Learning Curve International, Inc.
(“LCI”), The First Years Inc. (“TFY”), Racing Champions Worldwide Limited
(“RCWL”; RC2 Brands, RC2S, LCI, TFY, and RCWL being referred to herein
collectively as the “Borrowers”), Harris N.A., as Administrative Agent, and the
Lenders party hereto.
 
Preliminary Statements
 
A.    The Borrowers, the Lenders and the Administrative Agent entered into an
Amended and Restated Credit Agreement dated as of September 15, 2004 as
heretofore amended (the “Credit Agreement”). All capitalized terms used herein
without definition shall have the same meanings herein as such terms have in the
Credit Agreement.
 
B.    The Borrowers have requested that the Lenders modify the definition of the
terms “Applicable Margin” and “EBITDA”, provide for the ability of the Borrowers
to increase the aggregate Revolving Credit Commitments by $75,000,000 and make
certain other amendments to the Credit Agreement, and the Lenders are wiling to
do so under the terms and conditions set forth in this Amendment.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
 
SECTION 1.  Amendments.
 
Subject to the satisfaction of the conditions precedent set forth in Section 2
below, the Credit Agreement shall be and hereby is amended as follows:
 
1.1  Section 1 of the Credit Agreement shall be amended by inserting a new
Section 1.17 to read as follows:
 
“Section 1.17. Increase in Revolving Credit Commitments. The Borrowers may from
time to time in consultation with the Administrative Agent, on any Business Day
prior to the Revolving Credit Termination Date so long as no Event of Default
exists, increase the aggregate amount of the Revolving Credit Commitments by
delivering a Commitment Amount Increase Request at least 10 Business Days prior
to the desired effective date of such increase (the “Commitment Amount
Increase”) identifying the additional Revolving Credit Commitments for existing
Lender(s) agreeing to increase its/their Revolving Credit Commitment(s) (or
identifying one or more additional Lender(s) and the amount of its/their
Revolving Credit Commitment(s)); provided, however, that (i) the aggregate of
all Commitment Amount Increases shall not exceed $75,000,000, (ii) the aggregate
 

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amount of the Revolving Credit Commitments shall not at any time exceed
$175,000,000, (iii) any increase of the aggregate amount of the Revolving Credit
Commitments shall be in an amount not les than $25,000,000 and (iv) if the
Borrowers invite additional Lenders to join this Agreement, such additional
Lenders shall enter into such joinder agreements to give effect thereto as the
Administrative Agent may reasonably request. The effective date of any
Commitment Amount Increase shall be agreed upon by the Borrowers and the
Administrative Agent. Upon the effectiveness thereof, the new Lender(s) (or, if
applicable, existing Lender(s)) shall advance Revolving Loans, or the existing
Lenders shall make such assignments (which assignments shall not be subject to
the requirements set forth in Section 13.12) of the outstanding Revolving Loans
and L/C Obligations to the Lenders providing the Commitment Amount Increase so
that, after giving effect to such assignments, each Lender (including the
Lenders providing the Commitment Amount Increase) will hold Revolving Loans and
L/C Obligations equal to its Revolver Percentage of al outstanding Revolving
Loans and L/C Obligations. It shall be a condition to such effectiveness that
either no Eurodollar Loans be outstanding on the date of such effectiveness or
the Borrowers pay any applicable breakage cost under Section 1.12 incurred by
any Lender resulting from the repayment of its Revolving Loans. The Borrowers
agree to pay any reasonable expenses of the Administrative Agent relating to any
Commitment Amount Increase. Notwithstanding anything herein to the contrary, no
Lender shall have any obligation to increase its Revolving Credit Commitment and
no Lender's Revolving Credit Commitment shall be increased without its consent
thereto, and each Lender may at its option, unconditionally and without cause,
decline to increase its Revolving Credit Commitment.”
 
1.2  The definitions of the terms “Applicable Margin” and “EBITDA” appearing in
Section 5.1 of the Credit Agreement shall be amended and restated in their
entirety to read, respectively, as follows:
 
““Applicable Margin” means, with respect to Loans, Reimbursement Obligations,
and the commitment fees and letter of credit fees payable under Section 2.1
hereof until the first Pricing Date, the rates per annum shown opposite Level I
below, and thereafter from one Pricing Date to the next the Applicable Margin
means the rates per annum determined in accordance with the following schedule:
 

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LEVEL
 
CASH FLOW LEVERAGE RATIO FOR SUCH PRICING DATE
 
APPLICABLE MARGIN FOR BASE RATE LOANS AND REIMBURSEMENT OBLIGATIONS SHALL BE:
 
APPLICABLE MARGIN FOR LETTER OF CREDIT FEE AND EURODOLLAR LOANS SHALL BE:
 
APPLICABLE MARGIN FOR COMMITMENT FEE SHALL BE:
 
IV
 
Greater than or equal to 1.75 to 1.0
 
0%
 
1.625%
 
0.35%
 
III
 
Less than 1.75 to 1.0, but greater than
or equal to 1.25 to 1.0
 
0%
 
  1.25%
 
0.30%
 
II
 
Less than 1.25 to 1.0, but greater than
or equal to 0.75 to 1.0
 
0%
 
  1.00%
 
0.25%
 
I
 
Less than 0.75 to 1.0
 
0%
 
  0.75%
 
0.20%
 

 
For purposes hereof, the term “Pricing Date” means, for any fiscal quarter of
the Borrowers ending on or after September 30, 30, 2006, the date on which the
Administrative Agent is in receipt of the Borrowers' most recent financial
statements (and, in the case of the year-end financial statements, audit report)
for the fiscal quarter then ended, pursuant to Section 8.5 hereof. The
Applicable Margin shall be established based on the Cash Flow Leverage Ratio for
the most recently completed fiscal quarter and the Applicable Margin established
on a Pricing Date shall remain in effect until the next Pricing Date. If the
Borrowers have not delivered their financial statements by the date such
financial statements (and, in the case of the year-end financial statements,
audit report) are required to be delivered under Section 8.5 hereof, until such
financial statements and audit report are delivered, the Applicable Margin shall
be the highest Applicable Margin (i.e., the Cash Flow Leverage Ratio shall be
deemed to be greater than 1.75 to 1.0). If the Borrowers subsequently deliver
such financial statements before the next Pricing Date, the Applicable Margin
established by such late delivered financial statements shall take effect from
the date of delivery until the next Pricing Date. In al other circumstances, the
Applicable Margin established by such financial statements shall be in effect
from the Pricing Date that occurs immediately after the end of the fiscal
quarter covered by such financial statements until the next Pricing Date. Each
determination of the Applicable Margin made by the Administrative Agent in
accordance with the foregoing shall be conclusive and binding on the Borrowers
and the Lenders if reasonably determined.
 
“EBITDA” means, for any Person and with reference to any period, Net Income of
such Person and its subsidiaries for such period plus the sum of al amounts
deducted in arriving at such Net Income amount in respect of (a) Interest
Expense of such Person and its subsidiaries for such period, (b) federal, state,
and local income taxes for such period of such Person and its subsidiaries for
such period, (c) depreciation of fixed assets and amortization of intangible
assets of such Person and its subsidiaries for such period, and (d) non-cash
expenses related to equity awards.”
 
 
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1.3  Section 5.1 of the Credit Agreement shall be further amended by inserting,
in the appropriate alphabetical order, definitions of the terms “Commitment
Amount Increase” and “Commitment Amount Increase Request” to read, respectively,
as follows:
 
    “Commitment Amount Increase” is defined in Section 1.17 hereof.
 
    “Commitment Amount Increase Request” means a Commitment Amount Increase
Request in the form of Exhibit I hereto.”
 
1.4  The Credit Agreement shall be further amended by inserting a new Exhibit I
to read as set forth on Annex A attached d hereto.
 
SECTION 2.  Conditions Precedent.
 
The effectiveness of this Amendment is subject to the satisfaction of al of the
following conditions precedent:
 
2.1  The Borrowers and the Lenders shall have executed and delivered this
Amendment.
 
2.2  The Borrowers shall have paid to the Administrative Agent, for the account
of the Lenders, an amendment fee in an amount equal to 7.5 basis points on the
aggregate Revolving Credit Commitments and the outstanding principal balance of
the Term Loans on the date hereof.
 
2.3  Legal maters incident to the execution and delivery of this Amendment shall
be satisfactory to the Administrative Agent and its counsel.
 
Any changes in pricing resulting from the amendment of the term “Applicable
Margin” as contemplated herein shall become effective upon the effectiveness of
this Amendment.
 
SECTION 3.  Representations.
 
In order to induce the Lenders to execute and deliver this Amendment, the
Borrowers hereby represent to the Lenders that, as of the date hereof, the
representations and warranties set forth in Section 6 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 6.5 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Lenders) and the Borrowers are in
compliance with the terms and conditions of the Credit Agreement and no Default
or Event of Default has occurred and is continuing under the Credit Agreement or
shall result after giving effect to this Amendment.
 
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SECTION 4.  Miscellaneous.
 
4.1  Except as specifically amended herein, the Credit Agreement shall continue
in full force and effect in accordance with its original terms. Reference to
this specific Amendment need not be made in the Credit Agreement, the Notes, or
any other instrument or document executed in connection therewith, or in any
certificate, letter or communication issued or made pursuant to or with respect
to the Credit Agreement, any reference in any of such items to the Credit
Agreement being sufficient to refer to the Credit Agreement as amended hereby.
 
4.2  This Amendment may be executed in any number of counterparts, and by the
different parties on different counterpart signature pages, al of which taken
together shall constitute one and the same agreement. Any of the parties hereto
may execute this Amendment by signing any such counterpart and each of such
counterparts shall for al purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
 
[Signature Pages Follow.]
 
 
 

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This Third Amendment to Amended and Restated Credit Agreement is entered into as
of the date and year first above written.
 

 
RC2 Brands, Inc.
RC2 South, Inc.
Learning Curve International, Inc.
The First Years, Inc., a Massachusetts corporation
Racing Champions Worldwide Limited
 
 
By   /s/ Curtis W. Stoelting                                     
Name: Curtis W. Stoelting
Title: Chief Executive Officer of
RC2 Brands, RC2S and LCI, President of
TFY and Director of RCWL

 
 
 

 
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Accepted and agreed to as of the date and year first above written.
 

 
Harris N.A., in its individual capacity and as Administrative Agent
 
By   /s/ Patrick McDonnell                          
Name  Patrick McDonnell
Title   Managing Director
     
National City Bank of the Midwest
 
By    /s/ Jennifer L. Kofod                           
Name  Jennifer L. Kofod
Title   Senior Vice President
     
U.S. Bank National Association
 
By    /s/ Jason C. Nadler                             
Its  Vice President
     
LaSalle Bank National Association
 
By   /s/ Michael F. Perry                            
Its  First Vice President
     
Fifth Third Bank (Chicago), a Michigan Banking Corporation
 
By   /s/  Kim Puszczewicz                              
Name   Kim Puszczewicz
Title  Vice President
     
The Northern Trust Company
 
By   /s/ Kanika Agarwal                                 
Its  Officer
   

 
 

 

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Associated Bank, N.A.
 
By   /s/ Daniel Holzhauer                              
Its  Vice President
     
Charter One Bank N.A.
 
By   /s/ Brian Caldwell                                    
Its  Vice President

 
 
 
 
 
 
 
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