Exhibit 10.20
ADVISORY
AGREEMENT
This Advisory Agreement (this
“ Agreement ”) is made and entered into as of
July 21, 2005 (the “ Effective Date ”), by and
among Toys “R” Us Holdings, Inc., a Delaware
corporation (“ Holdings ”), Toys “R”
Us, Inc., a Delaware corporation (the “ Company
”), Bain Capital Partners, LLC, a Delaware limited liability
company (“ BCP ”), Bain Capital, Ltd., a company
organized under the laws of England and Wales (“ BCL
” and, together with BCP, “ Bain ”),
Kohlberg Kravis Roberts & Co., L.P., a Delaware limited
partnership (“ KKR ”), and Vornado Truck LLC, a
Delaware limited liability company (“ Vornado ”
and together with Bain and KKR, the “ Advisors
”). Certain defined terms are defined in Section 21
.
WHEREAS, the Company desires to
retain the Advisors with respect to the services described
herein.
NOW, THEREFORE, the parties to this
Agreement agree as follows:
1. Term . This Agreement
shall be in effect for an initial term commencing on the Effective
Date and ending on the tenth anniversary of the Effective Date (the
“ Term ”), which Term shall automatically be
extended thereafter on a year to year basis unless the Company or
the Advisor Majority provides written notice of its desire to
terminate this Agreement to each of the Advisors and the Company at
least 90 days prior to the expiration of the Term or any extension
thereof. In addition, in connection with the consummation of a
Change in Control or the Initial Public Offering, the Advisor
Majority may terminate this Agreement by delivery of written notice
of termination to the Company. In the event of a termination of
this Agreement, the Company shall pay in cash to each of the
Advisors (a) all unpaid Advisory Fees (as defined in Section 3
(a) ), all unpaid Subsequent Transaction Fees (as defined in
Section 4(b) ) and expenses due under this Agreement with
respect to periods prior to the termination date, plus (b) the net
present value (using a discount rate equal to the yield as of such
termination date on U.S. Treasury securities of like maturity based
on the times such payments would have been due) of the Advisory
Fees that would have been payable with respect to the period from
the termination date through the tenth anniversary of the Effective
Date or, in the case of any extension thereof, through the end of
such extension period (assuming, for purposes of such calculation,
that each Advisor will be deemed to hold throughout such period the
same percentage of its Initial Shares as it holds at the
termination date). The provisions of Sections 1 ,
4(b) , 6 , 7 , 9 , and 17
through 21 shall survive any termination of this
Agreement.
2. Services . The Advisors
shall perform or cause to be performed such services for the
Company and/or its subsidiaries as mutually agreed by the Advisors
and the Company, which services may include, without limitation,
the following:
(a) general executive and management
services;
(b) identification, support,
negotiation and analysis of acquisitions and dispositions by the
Company and/or its subsidiaries;
(c) support, negotiation and
analysis of financing alternatives, including, without limitation,
in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(d) finance functions, including
assistance in the preparation of financial projections and
monitoring of compliance with financing agreements;
(e) real estate functions, including
management and monitoring of real estate properties and development
and implementation of real estate strategies;
(f) marketing functions, including
monitoring of marketing plans and strategies;
(g) human resources functions,
including searching and hiring of executives; and
(h) other services for the Company
and its subsidiaries upon which the Company and the Advisors
agree.
3. Advisory Fees and Expenses
.
(a) During the Term of this
Agreement, the Company will pay each Advisor an advisory fee (such
Advisor’s “ Advisory Fee ”) for each
fiscal quarter of the Company equal to the product of (x) one-third
of the Quarterly Fee Amount for such fiscal quarter times
(y) such Advisor’s Fee Allocation Percentage. Each
Advisor’s Advisory Fee will be payable in advance to such
Advisor or its designee by wire transfer of immediately available
funds on the first business day of the first month of each fiscal
quarter, except that no payment shall be due and owing in respect
of the final fiscal quarter in 2005 as a result of the payment made
on the Effective Date. The pro-rated amount of each Advisor’s
Advisory Fee for the period commencing on the Effective Date and
ending on the last day of the Company’s fiscal quarter ending
on or about October 31, 2005 will be payable by wire transfer of
immediately available funds on the Effective Date and shall be paid
in respect of services for the remainder of the 2005 fiscal
year.
(b) The Company will reimburse each
Advisor for such reasonable travel expenses and other reasonable
out-of-pocket fees and expenses (including the reasonable fees and
expenses of attorneys and, to the extent approved in advance by the
Company, accountants or other advisors retained by such Advisor) as
may be incurred by such Advisor and its partners, members,
employees or agents in connection with the rendering of services
pursuant to this Agreement. Such expenses will be reimbursed by
wire transfer of immediately available funds promptly upon the
request of such Advisor (but in any case no later than five
business days following such request) and will be in addition to
any other fees or amounts payable to such Advisor pursuant to this
Agreement. Unless requested by the Company, in no event shall any
Advisor submit its expenses to the Company more often than
monthly.
4. Transaction Fees and
Expenses .
(a) The Company will pay the
Advisors or their respective designees a fee in the aggregate
amount of $75,000,000 for services rendered in connection with debt
financing of the transactions (the “ Merger ”)
contemplated by the Agreement and Plan of Merger, dated as of March
17, 2005, among the Company, Global Toys Acquisition, LLC, a
Delaware limited liability company, and Global Toys Acquisition
Merger Sub, Inc., a Delaware corporation. Such fee shall be
allocated among the Advisors as follows: one-third to Bain;
one-third to KKR; and
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one-third to Vornado. Each
Advisor’s allocated portion of such fee will be payable to
such Advisor or its designee by wire transfer of immediately
available funds on the Effective Date. In addition, the Company
will reimburse each Advisor or its designee, by wire transfer of
immediately available funds on the Effective Date, for its
reasonable travel expenses and other reasonable out-of-pocket fees
and expenses (including the fees and expenses of accountants,
attorneys and other advisors retained by such Advisor) incurred in
connection with the foregoing and the investigation, negotiation,
and consummation of the Merger.
(b) The Company will pay the
Advisors or their designees a transaction fee (each, a “
Subsequent Transaction Fee ”) in connection with the
consummation of each transaction that is completed during the Term
(or completed after any termination of this Agreement, if such
transaction was contemplated at the time of termination of the
Agreement) resulting in a Change in Control, acquisition,
disposition or divestiture, spin-off, split-off, or financing
(whether debt or equity financing) by or involving Holdings, the
Company or their respective subsidiaries in an amount equal to 1%
of the aggregate value of each such transaction (in each case,
whether such transaction is by way of merger, purchase or sale of
stock, purchase or sale or other disposition of assets,
recapitalization, reorganization, consolidation, tender offer,
public or private offering or otherwise, and whether consummated
directly by Holdings, the Company or their respective subsidiaries
or, in the case of a Change in Control, indirectly by their
respective stockholders, and determining the value of debt
financing without regard to whether such debt financing is actually
drawn upon). Each Advisor shall be entitled to a portion of such
Subsequent Transaction Fee equal to the product of (x) the amount
of such Subsequent Transaction Fee, times (y) a fraction,
the numerator of which is the Fee Allocation Percentage of such
Advisor, and the denominator of which is the aggregate Fee
Allocation Percentages of all Advisors. Each Advisor’s
allocated portion of a Subsequent Transaction Fee will be payable
to such Advisor or its designee by wire transfer of immediately
available funds on the date on which such transaction resulting in
a Subsequent Transaction Fee is consummated.
5. Personnel . Each Advisor
will provide and devote to the performance of this Agreement such
partners, employees and agents of such Advisor as it shall deem
appropriate to the furnishing of the services mutually agreed upon
by the Company and the Advisors; it being understood that no
minimum number of hours is required to be devoted by any or all of
the Advisors on a weekly, monthly, annual, or other basis. The fees
and other compensation specified in this Agreement will be payable
by the Company regardless of the extent of services requested by
the Company pursuant to this Agreement, and regardless of whether
or not the Company requests an Advisor to provide any such
services. The Company acknowledges that the services of each of the
Advisors are not exclusive, and that each of the Advisors will
render similar services to other Persons (including with the same
partners, employees, and agents thereof as may render services to
the Company).
6. Liability . None of the
Advisors nor any of their respective Affiliates, nor any of their
respective partners, shareholders, directors, officers, members,
employees or agents (collectively, the “ Advisor Group
”) shall be liable to Holdings, its subsidiaries or any of
their Affiliates or stockholders for any loss, liability, damage or
expense (including attorneys’ fees and expenses)
(collectively, a “ Loss ”) arising out of or in
connection with the performance of services contemplated by this
Agreement or otherwise provided by any of the Advisors to, or
otherwise in connection with the operations of, Holdings or any of
its subsidiaries or Affiliates,
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other than as a result of the willful misconduct
or gross negligence of such Advisor or any member of its Advisor
Group. No Advisor makes any representations or warranties, express
or implied, in respect of the services provided by any member of
the Advisor Group. Except as an Advisor may otherwise agree in
writing after the date hereof with respect to itself or its
Affiliates: (i) each member of the Advisor Group shall have the
right to, and shall have no duty (contractual or otherwise) not to,
directly or indirectly: (A) engage in the same or similar business
activities or lines of business as Holdings, its subsidiaries or
any of their Affiliates and (B) do business with any client or
customer of Holdings, its subsidiaries or any of their Affiliates;
(ii) no member of the Advisor Group shall be liable to Holdings,
its subsidiaries or any of their Affiliates or stockholders for
breach of any duty (contractual or otherwise) by reason of any such
activities or of such Person’s participation therein; and
(iii) in the event that any member of the Advisor Group acquires
knowledge of a potential transaction or matter that may be a
corporate opportunity for Holdings, its subsidiaries or any of
their Affiliates or stockholders on the one hand, and any member of
the Advisor Group, on the other hand, or any other Person, no
member of the Advisor Group shall have any duty (contractual or
otherwise) to communicate or present such corporate opportunity to
Holdings, its subsidiaries or any of their Affiliates or
Stockholders and, notwithstanding any provision of this Agreement
to the contrary
