Exhibit 10.57
FAO SCHWARZ, INC. SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of April 23, 2003, is made by FAO Schwarz,
Inc. (fka Toy Soldier, Inc.), a Delaware corporation ("Grantor"), in favor of
KBB Retail Assets Corp. (fka F.A.O. Schwarz), a New York corporation (the
"Subordinated Secured Party"), the holder of that certain Subordinated Note (the
"Subordinated Note") issued by Grantor pursuant to the Plan (as defined below)
to Subordinated Secured Party, with reference to the following facts:
RECITALS
A.
PURSUANT TO THE ASSET PURCHASE AGREEMENT BY
AND AMONG GRANTOR, FAO, INC. (FKA RIGHT START, INC.), A DELAWARE CORPORATION
(THE "PARENT"), ROYAL VENDEX KBB N.V., A NETHERLANDS CORPORATION, QUALITY
FULFILLMENT SERVICES, INC., A VIRGINIA CORPORATION ("QFS") AND THE SUBORDINATED
SECURED PARTY, DATED NOVEMBER 19, 2001 (THE "ASSET PURCHASE AGREEMENT"), THE
SUBORDINATED SECURED PARTY AND QFS AGREED TO ACCEPT, IN PARTIAL PAYMENT OF THE
INITIAL PURCHASE PRICE (AS DEFINED IN THE ASSET PURCHASE AGREEMENT), CERTAIN
SUBORDINATED NOTES.
B.
ON JANUARY 13, 2003 THE PARENT AND
GRANTOR COMMENCED THEIR RESPECTIVE REORGANIZATION CASES BY FILING VOLUNTARY
PETITIONS FOR RELIEF UNDER CHAPTER 11 OF THE BANKRUPTCY CODE.
C.
THE SUBORDINATED NOTE IS BEING ISSUED TO
THE SUBORDINATED SECURED PARTY PURSUANT TO THE PARENT'S AND THE GRANTOR'S FIRST
AMENDED JOINT PLAN OF REORGANIZATION AS CONFIRMED ON APRIL 4, 2003 BY THE UNITED
STATES BANKRUPTCY COURT DISTRICT OF DELAWARE IN CASE NO. 03-10119(LK) (THE
"PLAN") IN COMPROMISE OF THE EARLIER ISSUED SUBORDINATED NOTES ISSUED BY
GRANTOR.
D.
THE PLAN REQUIRES THAT GRANTOR ENTER INTO
THIS SECURITY AGREEMENT AND GRANT SECURITY INTERESTS TO THE SUBORDINATED SECURED
PARTY AS HEREIN PROVIDED.
E.
THE SECURITY INTERESTS CREATED UNDER
THIS SECURITY AGREEMENT ARE JUNIOR AND SUBORDINATED AS SPECIFIED IN SECTION 8
HEREOF.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which hereby is acknowledged, Grantor hereby represents, warrants, covenants,
agrees, assigns and grants as follows:
1.
Definitions.
Terms defined in the
Subordinated Note and not otherwise defined in this Agreement shall have the
meanings defined for those terms in the Subordinated Note.
Terms defined in the
New York Uniform Commercial Code and not otherwise defined in this Agreement or
in the Subordinated Note shall have the meanings defined for those terms in the
New York Uniform Commercial Code.
As used in this Agreement, the following
terms shall have the meanings respectively set forth after each:
"Agreement" means this Security Agreement, and any extensions, modifications,
renewals, restatements, supplements or amendments hereof.
1
"Collateral" means all of Grantor's now owned or hereafter acquired right, title
and interest in and to each of the following:
(a)
accounts, contract rights, and all other forms of
obligations owing to Grantor arising out of the sale or lease of goods or the
rendition of services by Grantor, irrespective of whether earned by performance,
and any and all credit insurance, guaranties, or security therefor;
(b)
books and records including: ledgers; records
indicating, summarizing, or evidencing Grantor's properties or assets or
liabilities; all information relating to Grantor's business operations or
financial condition;