Amended & Restated Loan And Security Agreement

AMENDED AND RESTATED


LOAN AND SECURITY AGREEMENT


BY AND AMONG


CYRK, INC.


AND


EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO


AS BORROWERS,


AND


FOOTHILL CAPITAL CORPORATION


AS LENDER


DATED AS OF FEBRUARY 15, 2001


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AMENDED AND RESTATED


LOAN AND SECURITY AGREEMENT


THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of February 15, 2001, between and among FOOTHILL CAPITAL CORPORATION, a California corporation ("Lender"), CYRK, INC. a Delaware corporation ("PARENT"), and each of Parent's Subsidiaries identified on the signature pages hereof (such Subsidiaries, together with Parent, are referred to hereinafter each individually as a "BORROWER" and, collectively, jointly and severally, as the "BORROWERS").


RECITALS


A. Lender, Borrowers, Tonkin, Inc., a Delaware corporation ("Tonkin"), and Cyrk Acquisition Corp., a Delaware corporation ("Marketing Incentives"), are parties to a Loan and Security Agreement dated as of December 28, 2000 (the "December 2000 Loan Agreement").


B. Parent has entered into a Purchase Agreement dated as of January 20, 2001 (the "Purchase Agreement") with Cyrk Holdings, Inc. (formerly Rockridge Partners, Inc.), a Massachusetts corporation (the "Buyer"). Pursuant to the Purchase Agreement, Buyer has agreed to purchase, and Parent has agreed to sell, certain of its assets, including the Stock of Tonkin and Marketing Incentives owned by it.


C. In connection with the Purchase Agreement, Parent, Cyrk.com, Inc., Tonkin and Marketing Incentives have requested Lender to (i) release its liens on the assets to be sold by Parent to Buyer, and (ii) restructure the credit facility evidenced by the December 2000 Loan Agreement such that, among other things, only Parent and Cyrk.com, Inc. remain as borrowers thereunder.


D. Lender has agreed to such restructuring on the terms and conditions set forth below.


The parties agree as follows:


1. DEFINITIONS AND CONSTRUCTION.


1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following definitions:


"ACCEPTABLE PURCHASE ORDER" means a purchase order issued to a Borrower by Philip Morris or Ty, or any other Person whose credit standing is acceptable to Lender in its Permitted Discretion, for the sale of goods by a Borrower in the ordinary course of its business to Philip Morris, Ty or such other Person, as the case may be, which:


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(i) purchase order,


(a) has been accepted by such Borrower,


(b) provides that the subject goods will be shipped to, or taken delivery of by, Philip Morris, Ty or such other Person directly from such Borrower (or its agent) at a location in the continental United States after such goods have cleared customs in the continental United States,


(c) otherwise is in a form approved by Lender, including terms satisfactory to Lender in its Permitted Discretion, and


(e) is valid, binding and enforceable against Philip Morris, Ty or such other Person; and


(ii) which goods,


(x) must be purchased by such Borrower prior to such sale to Philip Morris, TY or such other Person, which purchase by such Borrower will involve the issuance of a Letter of Credit, and


(y) upon title passing to such Borrower, shall constitute Eligible In-Transit Inventory.


"ACCEPTABLE PURCHASE ORDER LETTER OF CREDIT" means a Qualified Import Letter of Credit issued in connection with an Acceptable Purchase Order.


"ACCOUNT DEBTOR" means any Person who is or who may become obligated under, with respect to, or on account of, an Account, chattel paper, or a General Intangible.


"ACCOUNTS" means all of Borrowers' now owned or hereafter acquired right, title, and interest with respect to "accounts" (as that term is defined in the Code), and any and all supporting obligations in respect thereof.


"ACKNOWLEDGMENT AND ASSET SEGREGATION LETTER" means a letter executed and delivered by Borrowers, Buyer, Tonkin and Marketing Incentives, the form and substance of which is satisfactory to Lender.


"ACTIVE DOMESTIC SUBSIDIARY" means a Domestic Subsidiary of a Borrower which is not an Inactive Subsidiary.


"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 4.4.


"ADJUSTED LETTER OF CREDIT USAGE" means, as of the date of determination, the sum of (a) 100% of the undrawn amount of outstanding Letters of Credit (other than Acceptable Purchase Order Letters of Credit, Letters of Credit supported by the Back to Back Standby Letter of Credit and Letters of Credit


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(other than Acceptable Purchase Order Letters of Credit) which are cash collateralized in accordance with SECTION 2.12(I) or SECTION 3.1(P)), plus (b) without duplication, 100% of the amount of outstanding time drafts accepted by an Underlying Issuer as a result of drawings under Underlying Letters of Credit.


"ADMINISTRATIVE BORROWER" has the meaning set forth in SECTION 16.10.


"ADVANCES" has the meaning set forth in SECTION 2.1. "Advances" under the December 2000 Loan Agreement which are outstanding as of the date hereof shall be deemed to be Advances hereunder.


"AFFILIATE" means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; PROVIDED, HOWEVER, that, in any event: (a) any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed to control such Person; (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person; and (c) each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person.


"AGREEMENT" has the meaning set forth in the preamble hereto.


"ASSIGNEE" has the meaning set forth in SECTION 14.1(A).


"AUTHORIZED PERSON" means any officer or other employee of Administrative Borrower.


"AVAILABILITY" means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the immediately preceding Business Day, if such date of determination is not a Business Day, the amount that Borrowers are entitled to borrow as Advances under SECTION 2.1 (after giving effect to all then outstanding Obligations and all sublimits and reserves applicable hereunder).


"BACK TO BACK STANDBY LETTER OF CREDIT" means an irrevocable standby letter of credit in the amount of $668,396.71 issued to Lender, which standby letter of credit is (a) issued by a bank or other financial institution reasonably satisfactory to Lender, (b) in form satisfactory to Lender, and (c) payable to Lender in the event any draw is made on any Existing Other Underlying Letter of Credit.


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"BANKRUPTCY CODE" means the United States Bankruptcy Code, as in effect from time to time.


"BASE LIBOR RATE" means the rate per annum, determined by Lender in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/16%), on the basis of the rates at which Dollar deposits are offered to major banks in the London interbank market on or about 11:00 a.m. (California time) 2 Business Days prior to the commencement of the applicable Interest Period, for a term and in amounts comparable to the Interest Period and amount of the LIBOR Rate Loan requested by Administrative Borrower in accordance with this Agreement, which determination shall be conclusive in the absence of manifest error.


"BASE RATE" means, the rate of interest publicly announced by Wells Fargo at its principal office in San Francisco as its "prime rate", with the understanding that the "prime rate" is one of Wells Fargo's base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate.


"BASE RATE LOAN" means each portion of an Advance that bears interest at a rate determined by reference to the Base Rate.


"BASE RATE MARGIN" means one-half of one percentage point.


"BENEFIT PLAN" means a "defined benefit plan" (as defined in SECTION 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any Borrower has been an "employer" (as defined in SECTION 3(5) of ERISA) within the past six years.


"BOARD OF DIRECTORS" means the board of directors (or comparable managers) of Parent or any committee thereof duly authorized to act on behalf thereof.


"BOOKS" means all of each Borrower's now owned or hereafter acquired books and records (including all of its Records indicating, summarizing, or evidencing its assets (including the Collateral) or liabilities, all of its Records relating to its business operations or financial condition, and all of its goods or General Intangibles related to such information).


"BORROWER" and "BORROWERS" have the respective meanings set forth in the preamble to this Agreement.


"BORROWING" means a borrowing hereunder of an Advance.


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"BORROWING BASE" has the meaning set forth in SECTION 2.1.


"BORROWING BASE CERTIFICATE" means a certificate in the form of EXHIBIT B-1.


"BUSINESS DAY" means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term "Business Day" also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market.


"BUYER" has the meaning set forth in the Recitals hereof.


"BUYER NOTE" means that certain Subordinated Promissory Note, dated the date hereof, in the original principal amount of $2,300,000, made by Buyer in favor of Parent.


"CAPITAL LEASE" means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.


"CAPITALIZED LEASE OBLIGATION" means any Indebtedness represented by obligations under a Capital Lease.


"CASH COLLATERAL RESERVE" means any cash collateral held by Lender to secure the Obligations, including contingent reimbursement obligations of Borrowers relating to outstanding Letters of Credit.


"CASH COLLATERAL AGREEMENT" means a cash collateral agreement relating to the Cash Collateral Reserve executed and delivered by Parent, the form and substance of which is satisfactory to Lender.


"CASH EQUIVALENTS" means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the time of acquisition, having a rating in one of the two highest rating categories obtainable from either S&P or Moody's, (c) commercial paper maturing no more than 1 year from the date of acquisition thereof and, at the time of acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody's, and (d) certificates of deposit or bankers' acceptances maturing within 1 year from the date of acquisition thereof either (i) issued by any bank organized under the laws of the United States or any state thereof which bank has a rating of A or A2, or better, from S&P or Moody's, or (ii) certificates of deposit less than or


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equal to $100,000 in the aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation.


"CASH MANAGEMENT BANK" has the meaning set forth in Section 2.7(a).


"CASH MANAGEMENT ACCOUNT" has the meaning set forth in Section 2.7(a).


"CASH MANAGEMENT AGREEMENTS" means those certain cash management service agreements, in form and substance satisfactory to Lender, each of which is among Administrative Borrower, Lender, and one of the Cash Management Banks.


"CHANGE OF CONTROL" means (a) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) other than Overseas Toys, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20%, or more, of the Stock of Parent having the right to vote for the election of members of the Board of Directors, or (b) a majority of the members of the Board of Directors do not constitute Continuing Directors, or (c) any Borrower ceases to directly own and control 100% of the outstanding capital Stock of each of its Subsidiaries extant as of the Closing Date, except to the extent such cessation of ownership and control results from a transaction permitted by SECTION 7.3(B).


"CLOSING DATE" means the date of the making of the initial Advance (or other extension of credit) hereunder or the date on which Lender sends Borrowers a written notice that each of the conditions precedent set forth in SECTION 3.1 either have been satisfied or have been waived.


"CODE" means the Uniform Commercial Code, as adopted and as in effect from time to time in the Commonwealth of Massachusetts.


"COLLATERAL" means all of each Borrower's now owned or hereafter acquired right, title, and interest in and to each of the following:


(a) Accounts,


(b) Books,


(c) Equipment,


(d) General Intangibles,


(e) Inventory,


(f) Investment Property,


(g) Negotiable Collateral,


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(h) Real Property Collateral,


(i) money or other assets of each such Borrower that now or hereafter come into the possession, custody, or control of Lender, and


(j) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, and any and all Accounts, Books, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real Property, money, deposit accounts, or other tangible or intangible property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof.


"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the Equipment or Inventory, in each case, in form and substance reasonably satisfactory to Lender.


"COLLATERAL ASSIGNMENT" means a collateral assignment of undertakings under the Purchase Documents executed and delivered by Parent and Lender, the form and substance of which is satisfactory to Lender.


"COLLECTIONS" means all cash, checks, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of Borrowers.


"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of EXHIBIT C-1 delivered by the chief financial officer of Parent to Lender.


"CONTINUING DIRECTOR" means (a) any member of the Board of Directors who was a director (or comparable manager) of Parent on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was nominated and recommended for election to the Board of Directors pursuant to Section 4.5(e) of the Overseas Toys Securities Purchase Agreement, or was appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors of Parent (as such terms are used in Rule 14a-11 under the Exchange Act) and whose initial assumption of office resulted from such contest or the settlement thereof.


"CONTROL AGREEMENT" means a control agreement, in form and substance satisfactory to Lender.


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"COPYRIGHT SECURITY AGREEMENT" means an amended and restated copyright security agreement in form and substance satisfactory to Lender executed and delivered by each Borrower, which amends and restates that certain Copyright Security Agreement, dated as of December 28, 2000, executed and delivered by the Borrowers, Tonkin, Marketing Incentives and Lender in connection with the December 2000 Loan Agreement.


"DAILY BALANCE" means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day.


"DDA" means any checking or other demand deposit account maintained by any Borrower.


"DEFAULT" means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.


"DECEMBER 2000 FEE AGREEMENT" means that certain Fee Agreement, dated as of December 28, 2000, executed and delivered by Borrowers, Tonkin, Marketing Incentives and Lender in connection with the December 2000 Loan Agreement.


"DECEMBER 2000 LOAN AGREEMENT" has the meaning set forth in the Recitals hereof.


"DESIGNATED ACCOUNT" means account number 268-94227 of Administrative Borrower maintained with the Designated Account Bank, or such other deposit account of Administrative Borrower (located within the United States) that has been designated as such, in writing, by Administrative Borrower to Lender.


"DESIGNATED ACCOUNT BANK" means Fleet National Bank, whose office is located at 100 Federal Street, Boston, MA 02110 and whose ABA number is 011-000-138.


"DILUTION" means, as of any date of determination, a percentage, based upon the experience of the immediately prior 90 days (or such time period as determined by Lender in the exercise of its Permitted Discretion), that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to the Accounts during such period, by (b) Borrowers' Collections with respect to Accounts during such period (excluding extraordinary items) plus the Dollar amount of clause (a).


"DILUTION RESERVE" means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by one percentage point for each percentage point by which Dilution is in excess of 5%.


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"DISBURSEMENT LETTER" means an instructional letter executed and delivered by Administrative Borrower to Lender regarding the extensions of credit to be made on the Closing Date, the form and substance of which is satisfactory to Lender.


"DOLLARS" or "$" means United States dollars.


"DOMESTIC SUBSIDIARY" means a Subsidiary of a Borrower (other than another Borrower) which is incorporated or organized under the laws of any state of the United States.


"DUE DILIGENCE LETTER" means the due diligence letter sent by Lender's counsel to Administrative Borrower in connection with the December 2000 Loan Agreement, together with Administrative Borrower's completed responses to the inquiries set forth therein, the form and substance of such responses to be satisfactory to Lender.


"ELIGIBLE ACCOUNTS" means those Accounts created by one of Borrowers in the ordinary course of its business, that arise out of its sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made by Borrowers under the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the criteria set forth below; PROVIDED, HOWEVER, that such criteria may be fixed and revised from time to time by Lender in Lender's Permitted Discretion to address the results of any audit performed by Lender from time to time after the Closing Date. In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits, unapplied cash remitted to Borrowers, and reserves for unissued credit memoranda. Eligible Accounts shall not include the following:


(a) Accounts that the Account Debtor has failed to pay within 90 days of original invoice date or Accounts with selling terms of more than 30 days,


(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above,


(c) Accounts with respect to which the Account Debtor is an employee, Affiliate, or agent of any Borrower,


(d) Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional,


(e) Accounts that are not payable in Dollars,


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(f) Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States or Canada, (ii) is not organized under the laws of the United States, any state thereof, Canada or any province thereof or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (y) the Account is supported by an irrevocable letter of credit satisfactory to Lender (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Lender and is directly drawable by Lender, or (z) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, reasonably satisfactory to Lender,


(g) Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which the applicable Borrower has complied, to the reasonable satisfaction of Lender, with the Assignment of Claims Act, 31 USC ss. 3727), or (ii) any state of the United States (exclusive, however, of (y) Accounts owed by any state that does not have a statutory counterpart to the Assignment of Claims Act or (z) Accounts owed by any state that does have a statutory counterpart to the Assignment of Claims Act as to which the applicable Borrower has complied to Lender's reasonable satisfaction),


(h) Accounts with respect to which the Account Debtor is a creditor of any Borrower, has or has asserted a right of setoff, has disputed its liability, or has made any claim with respect to its obligation to pay the Account, to the extent of such claim, right of setoff, or dispute,


(i) Accounts with respect to an Account Debtor (other than Philip Morris) whose total obligations owing to Borrowers exceed 10% of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage,


(j) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which (i) a Borrower has received notice of an imminent Insolvency Proceeding or (ii) a material impairment of the financial condition of such Account Debtor, in Lender's Permitted Discretion, has occurred,


(k) Accounts with respect to which the Account Debtor is located in the states of New Jersey, Minnesota, or West Virginia (or any other state that requires a creditor to file a business activity report or similar document in order to bring suit or otherwise enforce its remedies against such Account Debtor in the courts or through any judicial process of such state), unless the applicable Borrower has qualified to do business in New Jersey, Minnesota, West Virginia, or such other states, or has filed a business activities


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report with the applicable division of taxation, the department of revenue, or with such other state offices, as appropriate, for the then-current year, or is exempt from such filing requirement,


(l) Accounts, the collection of which, Lender, in its Permitted Discretion, believes to be doubtful by reason of the Account Debtor's financial condition,


(m) Accounts that are not subject to a valid and perfected first priority Lender's Lien,


(n) Accounts with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor, (ii) the services giving rise to such Account have not been performed and billed to the Account Debtor, or (iii) invoices for services rendered which do not include appropriate supporting documentation,


(o) Accounts that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by the applicable Borrower of the subject contract for goods or services


(p) Accounts in respect of which an Account Debtor has made a prepayment, to the extent of such prepayment, or


(q) Accounts with respect to Ty (as Account Debtor) until Lender shall have received a copy of a signed agreement between Ty and Parent relating to the discontinued 1998-1999 "Beanie Baby" program pursuant to which Parent and Ty acknowledge and agree on the obligations owing by Parent to Ty, which agreement shall be in form and substance reasonably satisfactory to Lender; thereafter, to the extent of the obligations owing by Parent to Ty.


"ELIGIBLE IN-TRANSIT INVENTORY" means those items of Inventory that otherwise qualify as Eligible Landed Inventory, but as to which:


(a) the Inventory was acquired by a Borrower (which title may be held through or by an agent of such Borrower) to fill an Acceptable Purchase Order and was the subject of a Qualified Import Letter of Credit,


(b) such Inventory currently is in transit (whether by vessel, air, or land) from a locat ...