ex1018rcrcform10k2009.htm


    Exhibit 10.18

    

      First
Amendment to Credit Agreement

       

      This First Amendment to Credit
Agreement is dated as of
February 12, 2009 (this “Amendment”) by and among RC2
Corporation, a Delaware corporation (the “Company”), Learning Curve
Brands, Inc., a Delaware corporation (“LCBI”), Learning Curve
Canada Limited, a corporation incorporated under the laws of Ontario, Canada
(“LCCL”), RC2 (Asia)
Limited, a company incorporated in Hong Kong (“RC2 Asia”), RC2 Australia
Pty., Ltd., a proprietary company duly incorporated in Victoria, Australia
(“RC2 Australia”), RC2
Deutschland GmbH, a private company duly incorporated and registered under the
laws of Germany (“RC2
Germany”), Racing Champions International Limited, a corporation
organized under the laws of England and Wales  (“RC2 UK”), Racing Champions
Worldwide Limited, a corporation organized under the laws of England and Wales
(“Racing Champions”;
and together with the Company, LCBI, LCCL, RC2 Asia, RC2 Australia, RC2 Germany,
RC2 UK, and Racing Champions collectively, the “Borrowers” and individually,
a “Borrower”), the
guarantors party hereto, the financial institutions listed on the signature
pages hereof as Lenders and Bank of Montreal (“BMO”), as administrative
agent (in such capacity, the “Administrative
Agent”).

       

      Preliminary
Statements

       

      A.   The
Borrowers, the guarantors party thereto (the “Guarantors”), the financial
institutions listed on the signature pages thereof as Lenders and the
Administrative Agent have heretofore entered into that certain Credit Agreement
dated as of November 3, 2008 (the “Credit Agreement”);
and

       

      B.   The
Borrower has asked the Required Lenders to make certain amendments to the Credit
Agreement, and the Required Lenders are willing to do so on the terms and
conditions set forth in this Amendment.

       

      Now, Therefore, in
consideration of the premises set forth above, the terms and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

      


      Article
I

      Definitions

       

      Section 1.1   Use
of Defined Terms.  Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in the Credit
Agreement shall have such meanings when used in this Amendment.

       


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

       

      Article
II

      Amendments

      


      Section
2.1.   The definition of “Adjusted EBITDA” appearing
in Section 5.1 of the Credit Agreement shall be amended and restated to read in
its entirety as follows:


       

      “Adjusted EBITDA” means, with
reference to any period, the sum of (a) the EBITDA of the Company and its
Subsidiaries for such period, plus(without duplication)
(b) EBITDA of any Person and its subsidiaries acquired pursuant to
Section 8.9(k) hereof for such period (as if any such Permitted Acquisition
had occurred on the first day of such period), plus (c) adjustments
associated with any Permitted Acquisition to the extent reasonably acceptable to
the Administrative Agent, plus
(d) non-recurring costs and extraordinary expenses incurred during the
fiscal year ended December 31, 2007 in connection with the recall of specific
components from the Thomas and Friends product line in an aggregate amount not
to exceed $28,300,000, plus
(e) other fees, costs and expenses incurred or provided for (minus
rebates and other reimbursements) related to the recall of specific components
from the Thomas and Friends product line not to exceed $5,000,000 during the
fiscal year ending December 31, 2008, plus (f) non-recurring
costs in connection with the settlement of claims with HIT Entertainment in an
aggregate amount not to exceed $15,000,000, plus (g) losses on the
sale, transfer or disposition of Property during such period, plus (h) non-recurring
costs in connection with the termination of the purchase agreement for the
children’s book division of Publications International, Limited in an aggregate
amount not to exceed $2,000,000, plus (i) non-cash charges
relating to the write-down of the Company’s investment in Meteor the Monster
Truck, Inc. not to exceed $2,100,000 in the aggregate, plus (j) non-cash,
non-recurring impairment charge relating to goodwill and certain intangible
assets incurred during the fiscal quarter ended December 31, 2008 not to exceed
$265,000,000 in the aggregate, plus (k) severance and
other related costs in connection with the workforce reduction that occurred
during the quarter ended December 31, 2008 not to exceed $1,350,000 in
the aggregate, minus
(l) gains on the sale or transfer of Property during such period, minus (m) EBITDA of any
Person and its subsidiaries sold, transferred or otherwise disposed of during
such period (as if any such sale, transfer or disposition had occurred on the
first day of such period).

       

      Section
2.2.   Section 8.12 of the Credit Agreement shall be and
hereby is amended by deleting the period at the end of such section and
inserting in its place “;
and”, and immediately thereafter inserting a new clause (v) to read in
its entirety as follows:

       

      (v) the
Company’s repurchase of options for shares of the Company’s capital stock from
employees of the Company and its Subsidiaries; provided that (A) no
Default or Event of Default has occurred and is continuing at such time or would
be directly or indirectly caused as a result thereof on an actual or pro forma basis and
(B) the aggregate amount for such repurchase shall not exceed $1,000,000
during the term of the facilities.

       

      Section
2.3.   Exhibit E of the Credit Agreement shall be amended
and restated in its entirety in the form of Exhibit E attached
hereto.


      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      Article
III

      Representations
And Warranties

       

      Section 3.1   Credit
Agreement Representations.  In order to induce the Required
Lenders and the Administrative Agent to enter into this Amendment, each Borrower
and Guarantor (collectively, the “Loan Parties”) hereby
reaffirms, as of the date hereof after giving effect to this Amendment, its
representations and warranties contained in Section 6 of the Credit
Agreement and additionally represents and warrants to the Administrative Agent
and each Lender as set forth in this Article III.

       

      Section 3.2  Due Authorization,
Non-Contravention, etc.  The execution, delivery and
performance by each Loan Party of this Amendment are within such Loan Party’s
powers, have been duly authorized by all necessary corporate action, and do
not:

       

      (a)   
contravene such Loan Party’s constituent documents;

       

      (b)   
contravene any contractual restriction, law or governmental regulation or court
decree or order binding on or affecting such Loan Party; or

       

      (c)   
result in, or require the creation or imposition of, any Lien on any of such
Loan Party’s properties.

       

      Section 3.3   Government
Approval, Regulation, etc.  No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body or other Person is required for the due execution, delivery or
performance by the Loan Parties of this Amendment.

       

      Section 3.4   Validity,
etc.  This Amendment constitutes the legal, valid and binding
obligation of the Loan Parties enforceable in accordance with its
terms.

      


      Article
IV

      Conditions
Precedent

      


      Section 4.1  Effectiveness.
This Amendment shall be deemed effective as of November 30, 2008 upon the
execution and delivery of this Amendment by each Loan Party and the Required
Lenders.

      


      Article
V

      Miscellaneous
Provisions

       

      Section 5.1   Ratification
of and References to the Credit Agreement.  Except for the
amendments expressly set forth above, the Credit Agreement and each other Loan
Document is hereby ratified, approved and confirmed in each and every
respect.  Each Loan Party hereby acknowledges and agrees that (i) the
Liens created and provided for by the Collateral Documents continue to secure,
among other things, the Obligations, Hedging Liability and Funds Transfer and
Deposit Account Liability arising under the Credit Agreement as amended hereby
and (ii) the Collateral Documents and the rights and remedies of the
Administrative Agent thereunder, the obligations of each Loan Party thereunder,
and the Liens created and provided for thereunder, remain in full force and
effect and shall not be affected, impaired or discharged
hereby.  Nothing herein contained shall in any manner affect or impair
the priority of the Liens and security interests created and provided for by the
Collateral Documents as to the indebtedness which would be secured thereby prior
to giving effect to this Amendment.  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.


      
        
           


        

        
          3

          
            

          

        

        
           


        

      


       

      Section 5.2   Headings.  The
various headings of this Amendment are for convenience of reference only, are
not part of this Amendment and shall not affect the construction of, or be taken
into consideration in interpreting, this Amendment.

       

      Section 5.3   Execution
in Counterparts.  This Amendment may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single agreement.  Delivery of a counterpart hereof
by facsimile transmission or by e-mail transmission of an Adobe portable
document format file (also known as “PDF” file) shall be effective as delivery
of a manually executed counterpart hereof. 

       

      Section 5.4.   No
Other Amendments.  Except for the amendments expressly set
forth above, the text of the Credit Agreement and the other Loan Documents shall
remain unchanged and in full force and effect, and the Lenders and the
Administrative Agent expressly reserve the right to require strict compliance
with the terms of the Credit Agreement and the other Loan
Documents.

       

      Section 5.5.   Costs
and Expenses.  The Borrower agrees to pay on demand all costs
and expenses of or incurred by the Administrative Agent in connection with the
negotiation, preparation, execution and delivery of this Amendment, including
the reasonable fees and expenses of counsel for the Administrative
Agent.

       

      Section 5.6.   Governing
Law.  This Amendment shall be
construed in accordance with and governed by the law of the State of
Illinois. 

       

      [Signature
Pages to Follow]


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      In Witness Whereof, the
parties hereto have caused this Amendment to be duly executed and delivered by
their respective duly authorized officers as of the day and year first above
written.

       

      
      

       

      
        	 	“Borrowers”
	 	
                RC2
      Corporation

                Learning
      Curve Brands, Inc.

                Learning
      Curve Canada Limited

                RC2
      Australia Pty., Ltd.

                RC2
      Deutschland GmbH

                Racing
      Champions International Limited

                Racing
      Champions Worldwide Limited

              
	 	 
	 	By
       /s/  Curt
      Stoelting                                          
	 	    
      Name  Curt Stoelting
	 	    
      Title    CEO
	 	 
	 	RC2 (Asia)
      Limited
	 	 
	 	By /s/  Helena
      S F
      Lo                                          
	 	    
      Name  Helena S F Lo
	 	    
      Title    Managing Director
	 	 
	 	 
	 	“Guarantors”
	 	 
	 	
                RCE
      Holdings, LLC

                Learning
      Curve International, Inc.

                Learningcurveshop.com,
      Inc.

                Learning
      Curve Canada Holdco, Inc.

              
	 	 
	 	By /s/  Curt
      Stoelting                                          
	 	    
      Name  Curt Stoelting
	 	    
      Title    CEO


      

       

      
      

      
      

      
      


      
        
           


        

        
          S-1 


          
            

          

        

        
           


        

      


      
        	
              	“Administrative
      Agent”
	 	 
	 	
                Bank
      of Montreal

              
	 	 
	 	By /s/  Paul
      R. Feaser
      III                                      
	 	    
       Name  Paul R. Feaser III
	 	     
      Title    Vice
President


      

       

       


      
        
           


        

        
          S-2 


          
            

          

        

        
           


        

      

       

       

      
        	
              	“Lenders”
	 	 
	 	BMO
      Capital Markets Financing, Inc.
	 	 
	 	By /s/  Paul
      R. Feaser
      III                                      
	 	    
      Name  Paul R. Feaser III
	 	    
      Title    Vice
President


      

       

       

       

      
        
           


        

        
          S-3 


          
            

          

        

        
           


        

      


      
        
          	
                	
                  National
      City Bank

                
	 	 
	 	
                  By /s/  Stephanie
      Kline                                       

                
	 	    
      Name  Stephanie Kline
	 	     Title    Senior Vice
      President
	 	 
	 	 


        

         

      

       

      
        
           


        

        
          S-4 


          
            

          

        

        
           


        

      

       

       

      
        
          	
                	
                  U.S.
      Bank National Association

                
	 	 
	 	
                  By
      _______________________________

                
	 	    
      Name ___________________________
	 	     Title
      ____________________________
	 	 
	 	 


        

         



      
        
           


        

        
          S-5 


          
            

          

        

        
           


        

      

       

      
        
          	
                	
                  Fifth
      Third Bank (Chicago), a Michigan Banking corporation

                
	 	 
	 	
                  By /s/  Kim
      Puszczewicz                                     

                
	 	    
      Name  Kim Puszczewicz
	 	    
      Title    Vice President
	 	 
	 	 


        

         

      

      
 

      
        
           


        

        
          S-6 


          
            

          

        

        
           


        

      


      
        
          	
                	
                  The
      Northern Trust Company

                
	 	 
	 	
                  By /s/  Peter
      J.
      Hallan                                          

                
	 	    
      Name  Peter J. Hallan
	 	    
      Title    Vice President
	 	 


        

         

        


        
          
            
            

          

          
            S-7

            
              

            

          

          
            
            

          

        

      

       

      
        
          	
                	
                  The
      PrivateBank and Trust Company

                
	 	 
	 	
                  By /s/  Michael
      F.
      Perry                                      

                
	 	    
      Name  Michael F. Perry
	 	    
      Title    Associate Managing Director
	 	 
	 	 


        

         

      

          


      
        
           


        

        
          S-8 


          
            

          

        

        
           


        

      



      Exhibit E

       

      RC2
Corporation

       

      Compliance
Certificate

       

      
      

       

      
        	To: 	Bank of Montreal, as
      Administrative Agent under, and the Lenders party to, the Credit Agreement
      described below


      

       

       

      
      

      This
Compliance Certificate is furnished to the Administrative Agent and the Lenders
pursuant to that certain Credit Agreement dated as of November 3, 2008,
among RC2 Corporation, Learning Curve Brands, Inc., Learning Curve Canada
Limited, RC2 (Asia) Limited, RC2 Australia Pty., Ltd., RC2 Deutschland GmbH,
Racing Champions Worldwide Limited, Racing Champions International Limited, the
Guarantors party thereto, the Lenders party thereto, and Bank of Montreal, as
Administrative Agent (as extended, renewed, amended or restated from time to
time, the “Credit
Agreement”).  Unless otherwise defined herein, the terms used
in this Compliance Certificate have the meanings ascribed thereto in the Credit
Agreement.

       

      The
Undersigned hereby certifies that:

       

      1.       
I am the duly elected _______________________ of RC2 Corporation;

       

      2.   I have reviewed the
terms of the Credit Agreement and I have made, or have caused to be made under
my supervision, a detailed review of the transactions and conditions of the
Borrowers and their Subsidiaries during the accounting period covered by the
attached financial statements;

       

      3.   The examinations
described in paragraph 2 did not disclose, and I have no knowledge of, the
existence of any condition or the occurrence of any event which constitutes a
Default or Event of Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Compliance Certificate, except as set forth below;

       

      4.   The financial
statements required by Section 8.5 of the Credit Agreement and being
furnished to you concurrently with this Compliance Certificate are true, correct
and complete as of the date and for the periods covered thereby;
and

       

      5.   The Schedules I
and II hereto sets forth financial data and other computations evidencing the
Borrowers’ compliance with certain covenants of the Credit Agreement, all of
which data and computations are, to the best of my knowledge, true, complete and
correct and have been made in accordance with the relevant Sections of the
Credit Agreement.

       

      Described
below are the exceptions, if any, to paragraph 3 by listing, in detail, the
nature of the condition or event, the period during which it has existed and the
action which the


      
        
           


        

        
           


          
            

          

        

        
           


        

      


       

      Borrowers
have taken, are taking, or propose to take with respect to each such condition
or event:

      _____________________________________________

      _____________________________________________

      _____________________________________________

      _____________________________________________

       

      The
foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this 3rd day of November,
2008.

       

      RC2
CORPORATION

       

      By
______________________________

           Name
_________________________

           Title
__________________________


      
        
           


        

        
          E-2 


          
            

          

        

        
           


        

      


      Schedule
I

      to
Compliance Certificate

       

      RC2
Corporation

       

      Compliance
Calculations

      for
Credit Agreement dated as of November 3, 2008

       

      Calculations
as of _____________, 2008

       

        
          

        

      

       

      


      
        	
                A.

              	
                Total
      Funded Debt (Section 8.21(a))

              	 
      
	 	 	 
	
                 

              	
                1.

              	
                Total
      Funded Debt of the Company and its Subsidiaries

              	
                $___________

              
	 	 	 	 
	
                 

              	
                2.

              	
                Net
      Income of the Company and its Subsidiaries for past 4
    quarters

              	
                ___________

              
	 	 	 	 
	
                 

              	3. 
      	
                Interest
      Expense of the Company and its Subsidiaries for past 4
      quarters

              	
                ___________

              
	 	 	 	 
	 
      	4.	
                Income
      taxes of the Company and its Subsidiaries for past 4
    quarters

              	
                ___________

              
	 	 	 	 
	 
      	5.	
                Depreciation
      and amortization expense of the Company and its Subsidiaries for past 4
      quarters

              	
                ___________

              
	 	 	 	 
	 
      	6.	
                Non-Cash
      expenses related to equity awards of the Company and its Subsidiaries for
      past 4 quarters

              	
                ___________

              
	 	 	 	 
	 
      	7.	
                Sum
      of Lines A2, A3, A4, A5 and A6 (the Company’s “EBITDA”)

              	
                ___________

              
	 	 	 	 
	 
      	8.	
                EBITDA
      of any Person (and is subsidiaries) acquired pursuant to
      Section 8.9(i) hereof for such period

              	
                ___________

              
	 	 	 	 
	 
      	9.	
                Authorized
      adjustments associated with Permitted Acquisitions during such
      period

              	
                ___________

              
	 	 	 	 
	 
      	10.	
                Non-recurring
      costs and extraordinary expenses incurred in connection with the recall of
      specific components from the Thomas and Friends product line not to exceed
      $28,300,000

              	
                ___________

              
	 	 	 	 
	 
      	11.	
                Other
      fees, costs and expenses incurred (net of rebates and other
      reimbursements), related to the recall of specific components from the
      Thomas and Friends product line not to exceed $5,000,000 during the fiscal
      year ended December 31, 2008

              	
                ___________

              


         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        	 
      	12.	
                Non-recurring
      costs in connection with the settlement of claims with HIT Entertainment
      in an aggregate amount not to exceed $15,000,000

              	
                ___________

              
	 	 	 	 
	 
      	13.	
                Losses
      on the sale, transfer or disposition of Property of the Company and its
      Subsidiaries during the past 4 fiscal quarters

              	
                ___________

              
	 	 	 	 
	 
      	14.	
                Non-recurring
      costs in connection with the termination of Publications acquisition not
      to exceed $2,000,000 in the aggregate

              	
                ___________

              
	 	 	 	 
	 
      	15.	
                Non-cash
      charges related to the write-down of the Company’s investment in Meteor
      the Monster Truck, Inc. not to exceed $2,100,000 in the
      aggregate

              	
                ___________

              
	 	 	 	 
	 
      	16.	
                Non-cash,
      non-recurring impairment charge relating to goodwill and certain
      intangible assets incurred during the fiscal quarter ended December 31,
      2008 not to exceed $265,000,000 in the aggregate

              	
                ___________

              
	 	 	 	 
	 
      	17.	
                Severance
      and other related costs in connection with the workforce reduction that
      occurred during the quarter ended December 31, 2008 not to
      exceed $1,350,000 in the aggregate

              	
                ___________

              
	 	 	 	 
	 
      	18.	
                Sum
      of Lines A7, A8, A9, A10, A11, A12, A13, A14, A15, A16 and
    A17

              	
                ___________

              
	 	 	 	 
	 
      	19.	
                Gains
      on the Sale or transfer of Property of the Company and its Subsidiaries
      during the past 4 quarters

              	
                ___________

              
	 	 	 	 
	 
      	20.	
                EBITDA
      of any Person and its subsidiaries sold, transferred or otherwise disposed
      of during such period

              	
                ___________

              
	 	 	 	 
	 
      	21.	
                Sum
      of lines A19 and A20

              	
                ___________

              
	 	 	 	 
	 
      	22.	
                Line
      A18 minus A21 (“Adjusted
      EBITDA”)

              	
                ___________

              
	 	 	 	 
	 
      	23.	
                Ratio
      of Line A1 to Line A22

              	
                ____
      : 1.0

              
	 	 	 	 
	 
      	24.	
                Line
      A23 ratio must not exceed

              	
                2.50
      : 1.0

              
	 	 	 	 
	 
      	25. 
      	
                The
      Company is in compliance (circle yes or no)

              	
                yes/no

              
	 	 	 	 
	B.	Fixed Charge Coverage Ratio
      (Section 8.21(b))
	 	 
	 
      	1.	
                Adjusted
      EBITDA (Line A22)

              	
                $___________

              
	 	 	 	 
	 
      	2.	
                Capital
      Expenditures of the Company and its Subsidiaries during past 4
      quarters

              	
                $___________

              
	 	 	 	 
	 
      	3.	
                Line
      B1 minus Line B2

              	
                $___________

              
	 	 	 	 
	 
      	4.	
                Scheduled
      payments of principal of the Company and its Subsidiaries for past 4
      quarters

              	
                $___________

              


         

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        	 
      	5.	
                Cash
      Interest Expense of the Company and its Subsidiaries for past 4
      quarters

              	
                $___________

              
	 	 	 	 
	 
      	6.	
                Income
      taxes of the Company and its Subsidiaries for past 4
    quarters.

              	
                $___________

              
	 	 	 	 
	 
      	7.	
                Restricted
      Payments permitted by Section 8.12(iii) for past 4
quarters

              	
                $___________

              
	 	 	 	 
	 
      	8.	
                Sum
      of Lines B4, B5, B6 and B7

              	
                $___________

              
	 	 	 	 
	 
      	9. 
      	
                Ratio
      of Line B3 to Line B8

              	
                ____
      : 1.0

              
	 	 	 	 
	 
      	10.	
                Line
      B9 ratio must not be less than

              	
                1.25
      : 1.0

              
	 	 	 	 
	 
      	11.	
                The
      Company is in compliance (circle yes or no)

              	
                yes/no

              
	 	 	 	 
	 C.	Operating Leases
      (Section 8.21(c))	 
      
	 	 	 
	 
      	1.	
                Aggregate
      amount of fixed rentals and other consideration payable by the Company and
      its Subsidiaries under all leases and similar arrangements

              	
                $___________

              
	 	 	 	 
	 
      	2.	
                Maximum
      permitted amount

              	
                $10,000,000

              
	 	 	 	 
	 
      	3.	
                The
      Company is in compliance (circle yes or no)

              	
                yes/no

              


      

      


      


      



      
        
           


        

        
          3 


          
            

          

        

        
           


        

      


      Schedule
II

      to
Compliance Certificate

       

      RC2
Corporation

       

      Compliance
Calculations

      for
Section 8.9(h) of the

      Credit
Agreement dated as of November 3, 2008

      


      Calculations
as of _____________, _______

       

       

        
          

        

      

      


      
        	 
      	
                To
      / (From)

              	
                Learning
      Curve Brands, Inc.

              	
                RC2
      Corporation

              
	
                1

              	
                Investments
      by the Company in the common stock or paid-in-capital of any Foreign
      Subsidiary after the Closing Date

              	
                $

              	
                $

              
	
                2

              	
                $53,000,000
      minus Line 1

              	
                $

              	
                $

              
	
                3

              	
                Learning
      Curve Canada Limited

              	
                $

              	
                $

              
	
                4

              	
                RC2
      Hong Kong

              	
                $

              	
                $

              
	
                5

              	
                Racing
      Champions Worldwide Limited

              	
                $

              	
                $

              
	
                6

              	
                RC2
      Deutschland GmbH

              	
                $

              	
                $

              
	
                7

              	
                RC2
      (Asia) Limited

              	
                $

              	
                $

              
	
                8

              	
                RC2
      Australia Pty., Ltd.

              	
                $

              	
                $

              
	
                9

              	
                Sum
      of Lines 3 through 8 Above

              	
                $

              	 
      
	
                10

              	
                Is
      Line 2 greater than Line 9 (Circle yes or no)

              	
                Yes
      / No