RC2 December 31, 2006 Form 10-K


    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 

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    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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