AMENDED AND RESTATED GUARANTY AND COLLATERAL AGREEMENT

Exhibit 4.22

Execution Copy

 

 

AMENDED AND RESTATED
GUARANTY AND COLLATERAL AGREEMENT

dated as of April 2, 2008

among

KIDS LINE, LLC,

SASSY, INC.,

LAJOBI, INC.,

and

and

LASALLE BANK NATIONAL ASSOCIATION,
as the Administrative Agent

 

 

AMENDED AND RESTATED
GUARANTY AND COLLATERAL AGREEMENT

     This Amended and Restated Guaranty and Collateral Agreement dated as of April 2, 2008 (this “ Agreement ”) is entered into among KIDS LINE, LLC , a Delaware limited liability company (“ Kids Line ”), SASSY, INC ., an Illinois corporation (“ Sassy ”), LAJOBI, INC. , a Delaware corporation (“ LaJobi ”), I & J HOLDCO, INC. , a Delaware corporation (“ I&J ”), those Subsidiaries that are or, in accordance with Section 10.10 of the Credit Agreement, may hereafter become parties to the Credit Agreement (as defined herein) as “Borrowers” (Kids Line, Sassy, LaJobi, I & J and such Subsidiaries are sometimes referred to herein collectively as the “ Borrowers ”) and those Subsidiaries that are or, in accordance with Section 10.10 of the Credit Agreement, may hereafter become parties hereto and to the Credit Agreement as “Guarantors” (collectively, the “ Guarantors ”) (the Borrowers and the Guarantors being collectively referred to herein as the “ Grantors ”, and each a “ Grantor ”) and any other person that becomes a party hereto as provided herein being, collectively, the “ Grantors ”, in favor of LASALLE BANK NATIONAL ASSOCIATION , as the “Administrative Agent” for itself and the Lenders (as defined in the Credit Agreement).

     Kids Line, Sassy, the Administrative Agent and certain Lenders previously entered into the Existing Credit Agreement (as defined in the Credit Agreement) pursuant to which the “Lenders” party thereto agreed to make certain credit facilities available to Kids Line, Sassy and any other “Borrowers” (as defined in the Existing Credit Agreement) party thereto. In connection with such extension of credit, such Borrowers and certain other parties executed that certain Guaranty and Collateral Agreement dated as of March 14, 2006 (as amended prior to the date hereof, the “ Existing Guaranty and Collateral Agreement ”) pursuant to which the “Grantors” party thereto (i) provided certain guarantees in favor of the Administrative Agent on behalf of itself and such Lenders and (ii) granted to the Administrative Agent on behalf of itself and such Lenders a security interest in the “Collateral” as defined therein.

     As of the date hereof, the Existing Credit Agreement is being amended and restated at the request of the Borrowers party thereto and the parties hereto are entering into an Amended and Restated Credit Agreement of even date herewith among the Borrowers, the other Grantors from time to time party thereto, the Lenders, and the Administrative Agent (as amended, supplemented, restated or otherwise modified from time to time, the “ Credit Agreement ”) pursuant to which the Administrative Agent and the Lenders have severally agreed to add additional Borrowers, increase the amount of the term loan facility and revolving credit facility (which includes letters of credit) available to the Borrowers, permit the Target Acquisitions and make certain other amendments thereto, in each case, upon the terms and conditions set forth therein. In connection therewith, the parties hereto desire to amend and restate the Existing Guaranty and Collateral Agreement in its entirety.

     The Administrative Agent and Lenders have severally agreed to extend credit and provide other financial accommodations to the Borrowers pursuant to the Credit Agreement. The Borrowers are affiliated with each other Grantor. The Borrowers and the other Grantors are engaged in interrelated businesses, and each Grantor will derive substantial direct and indirect benefit from extensions of credit under the Credit Agreement. It is a condition precedent to the Administrative Agent’s and each Lender’s obligation to extend credit under the Credit

Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent for the benefit of itself and all the Lenders.

     In consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Administrative Agent and the Lenders to extend credit and provide other financial accommodations thereunder, each Grantor hereby agrees with the Administrative Agent, for the benefit of itself and the Lenders, as follows:

SECTION 1 DEFINITIONS.

          1.1 Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the UCC: Accounts, Account Debtor, Certificated Security, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Goods, Instruments, Inventory, Leases, Letter-of-Credit Rights, Money, Payment Intangibles, Supporting Obligations, Tangible Chattel Paper.

          1.2 When used herein the following terms shall have the following meanings:

      Assigned Agreements means (i) the Acquisition Documents, together with all security agreements, and all liens, security interest and other encumbrances granted thereunder, (ii) any agreement executed from time to time in favor of any Grantor by their customers securing the purchase price of goods purchased by such customers from such Grantor (or any of them), and (iii) each material document, instrument and agreement to be executed in connection with each Permitted Acquisition.

      Agreement has the meaning set forth in the preamble hereto.

      Borrower Obligations means all Obligations of the Borrowers.

      Chattel Paper means all “chattel paper” as such term is defined in Section 9-102(a)(11) of the UCC and, in any event, including with respect to any Grantor, all Electronic Chattel Paper and Tangible Chattel Paper.

      Collateral means (a) all of the personal property now owned or at any time hereafter acquired by any Grantor or in which any Grantor now has or at any time in the future may acquire any right, title or interest, including all of each Grantor’s Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments, Intellectual Property, Inventory, Investment Property, Leases, Letter-of-Credit Rights, Money, Supporting Obligations, and Identified Claims, (b) all of the real property mortgaged by any Grantor to the Administrative Agent, (c) all books and records pertaining to any of the foregoing and to each Grantor’s business, (d) any other property of any Grantor now or hereafter in the possession, custody or control of the Administrative Agent, or any Lender or any participant with any Lender in the Loans, for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise), (e) all additions and accessions to, substitutions for, and replacements, products and Proceeds of any of the foregoing, including without limitation, proceeds of all insurance policies insuring the foregoing property, and (f) all collateral security and guaranties given by any Person with respect to any of the

foregoing. Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof. Notwithstanding the foregoing, in no event shall any equity interest of any Second-Tier Foreign Subsidiary or more than 65% of the total outstanding equity interests of any First-Tier Foreign Subsidiary of any Grantor be deemed at any time to be “Collateral” hereunder. Anything contained in this Agreement to the contrary notwithstanding, the term “Collateral” shall not include any rights or interests in any real property lease or any contract, permit, license, charter or other agreement covering personal property that are now or hereafter held by any Grantor in the event that as a result of an assignment thereof or grant of a security interest therein, such Grantor’s rights in or with respect to such real property lease, contract, permit, license, charter, or other agreement would be forfeited or such Grantor would be deemed to have breached or defaulted under such real property lease, contract, permit, license, charter or other agreement pursuant to restrictions contained in such real property lease, contract, permit, license, charter, or other agreement (but only to the extent such prohibition is enforceable at law) (such real estate leases, contracts, permits, licenses, charters and other agreements in existence as of the date hereof are set forth on Schedule 1.1A attached hereto, as the same may be updated in accordance with Section 5.10(f)(y) ; all such real estate leases, contracts, permits, licenses, charters and other agreements being the “ Restricted Agreements ”); provided that the security interest granted herein and the term “Collateral” shall include the right to receive payments and other Proceeds with respect to such Restricted Agreements and the Goods produced under such Restricted Agreements and the Proceeds thereof (except for the Restricted Agreements set forth on Schedule 1.1B attached hereto as the same may be updated monthly to reflect any additions or changes thereto); and provided further that the applicable Grantor shall, after the Administrative Agent’s request, have used its reasonable efforts to provide notice to the Administrative Agent of such restrictions contained in any Restricted Agreement to an assignment thereof or a grant of a security interest therein. In addition, the term “Collateral” shall not include Equipment which is subject to a Permitted Lien described in Section 11.2(d) of the Credit Agreement, which pursuant to and for so long as the terms of any lease or financing agreement with respect thereto prohibits the granting of a security interest in such Equipment (so long as such restriction is limited to the particular Equipment financed or leased thereunder).

      Contract Rights means all of the Grantors’ rights and remedies with respect to the Assigned Agreements.

      Copyrights means all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, including those listed on Schedule 5 hereto, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office, and the right to obtain all renewals of any of the foregoing.

      Copyright Licenses means all written agreements naming any Grantor as licensor or licensee, including those listed on Schedule 5 hereto, granting any right under any Copyright, including the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright.

      Credit Agreement has the meaning set forth in the recitals hereto.

      Existing Guaranty and Collateral Agreement has the meaning set forth in the preamble hereto.

      Fixtures means all of the following, whether now owned or hereafter acquired by a Grantor: plant fixtures; business fixtures and other fixtures, wherever located; and all additions and accessories thereto and replacements therefor.

      General Intangibles means all “general intangibles” as such term is defined in Section 9-102(a)(42) of the UCC and, in any event, shall include with respect to any Grantor, all Payment Intangibles, all contracts and Contract Rights (including all Assigned Agreements and Seller Undertakings), agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same from time to time may be amended, supplemented or otherwise modified, including, without limitation, (a) all rights of such Grantor to receive monies due and to become due to it thereunder or in connection therewith, (b) all rights of such Grantor to damages arising thereunder and (c) all rights of such Grantor to perform and to exercise all remedies thereunder; provided , that the foregoing limitation shall not affect, limit, restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Receivable or any money or other amounts due or to become due under any such Payment Intangible, contract, agreement, instrument or indenture.

      Grantor means the collective reference to the Borrowers and each other Person that becomes a party to this Agreement in accordance with Section 8.16 .

      Guarantor Obligations means, collectively, with respect to each Guarantor, all Obligations of such Guarantor.

      Guarantors means the collective reference to each Grantor other than the Borrowers.

      Identified Claims means the Commercial Tort Claims described on Schedule 7 as such schedule shall be supplemented from time to time.

      Intellectual Property means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

      Intercompany Note means any promissory note evidencing loans made by any Grantor to any other Grantor.

      Investment Property means the collective reference to (a) all “investment property” as such term is defined in Section 9-102(a)(49) of the UCC (other than the equity interest of any Foreign Subsidiary excluded from the definition of Pledged Equity), (b) all “financial assets” as such term is defined in Section 8-102(a)(9) of the UCC, and (c) whether or not constituting “investment property” as so defined, all Pledged Notes and all Pledged Equity.

      Issuers means the collective reference to each issuer of any Investment Property.

      LaJobi Sellers means LaJobi Industries, Lawrence Bivonia and Joseph Bivonia.

      Paid in Full means (a) the payment in full in cash and performance of all Secured Obligations (other than unasserted contingent and indemnification obligations), (b) the termination of all Commitments and (c) either (i) the cancellation and return to the Administrative Agent of all Letters of Credit or (ii) the cash collateralization of all Letters of Credit in accordance with the Credit Agreement.

      Patents means (a) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, including any of the foregoing referred to in Schedule 5, (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including any of the foregoing referred to in Schedule 5, and (c) all rights to obtain any reissues or extensions of the foregoing.

      Patent Licenses means all agreements, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including any of the foregoing referred to in Schedule 5 .

      Pledged Equity means the equity interests listed on Schedule 1 , together with any other equity interests, certificates, options or rights of any nature whatsoever in respect of the equity interests of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect; provided that in no event shall more than 65% of the total outstanding equity interests of any First-Tier Foreign Subsidiary be required to be directly or indirectly pledged hereunder; and provided , further that in no event shall any of the equity interests of any Second-Tier Foreign Subsidiary be required to be directly or indirectly pledged hereunder.

      Pledged Notes means all promissory notes listed on Schedule 1 , all Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than (a) promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business and (b) any individual promissory note which is less than $250,000 in principal amount, up to an aggregate of $500,000 for all such promissory notes excluded under this clause (b)).

      Proceeds means all “proceeds” as such term is defined in Section 9-102(a)(64) of the UCC and, in any event, shall include all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.

      Receivable means any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including any Accounts).

      Restricted Agreements has the meaning set forth in the definition of “Collateral.”

      Secured Obligations means, collectively, the Borrower Obligations and Guarantor Obligations.

      Securities Act means the Securities Act of 1933, as amended.

      Seller Undertakings means, collectively, all representations, warranties, covenants and agreements in favor of any Grantor, and all indemnifications for the benefit of any Grantor relating thereto, pursuant to the Assigned Agreements.

      Sellers means, collectively, (i) the CoCaLo Sellers and the LaJobi Sellers, (ii) customers of any Grantor that have executed an agreement in favor of such Grantor securing the purchase price of goods purchased from such Grantor and (iii) any party obligated to a Grantor under any material document, instrument or agreement executed in connection with a Permitted Acquisition.

      Trademarks means (a) all trademarks, trade names, corporate names, the Grantors’ names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, including any of the foregoing referred to in Schedule 5 , and (b) the right to obtain all renewals thereof.

      Trademark Licenses means, collectively, each agreement, whether written or oral, providing for the grant by or to any Grantor of any right to use any Trademark, including any of the foregoing referred to in Schedule 5 .

      UCC means the Uniform Commercial Code as in effect on the date hereof and from time to time in the State of New York, provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect on or after the date hereof in any other jurisdiction, “UCC” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy.

SECTION 2 GUARANTY.

          2.1 Guaranty . (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, as a primary obligor and not only a surety, guaranties to the Administrative Agent, for the benefit of itself and of the Lenders, and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrowers when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations.

          (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guarantied by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2 ).

          (c) Each Guarantor agrees that the Secured Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guaranty contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any Lender hereunder.

          (d) The guaranty contained in this Section 2 shall remain in full force and effect until all of the Secured Obligations shall have been Paid in Full.

          (e) No payment made by the Borrowers, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Lender from the Borrowers, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Secured Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Secured Obligations or any payment received or collected from such Guarantor in respect of the Secured Obligations), remain liable for the Secured Obligations up to the maximum liability of such Guarantor hereunder until the Secured Obligations are Paid in Full.

          2.2 Right of Contribution . Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 2.3 . The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guarantied by such Guarantor hereunder.

          2.3 No Subrogation . Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrowers or any other Guarantor or any collateral security or guaranty or right of offset held by the Administrative Agent or any Lender for the payment of the Secured Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrowers or any other Guarantor in respect of payments made by such Guarantor hereunder, until all of the Secured Obligations are Paid in Full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Secured Obligations shall not have been Paid in Full, such amount shall be held by such Guarantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Secured Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.

          2.4 Amendments, etc. with respect to the Secured Obligations . Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Secured Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender and any of the Secured Obligations continued, and the Secured Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guaranty therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders or all the Lenders, as the case may be) and, to the extent required thereunder, the other parties thereto may deem advisable from time to time. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Secured Obligations or for the guaranty contained in this Section 2 or any property subject thereto.

          The Administrative Agent or any Lender may, from time to time, at its sole discretion and without notice to any Guarantor (or any of them), take any or all of the following actions: (a) retain or obtain a security interest in any property to secure any of the Secured Obligations or any obligation hereunder, (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the undersigned, with respect to any of the Secured Obligations, (c) extend or renew any of the Secured Obligations for one or more periods (whether or not longer than the original period), alter or exchange any of the Secured Obligations, or release or compromise any obligation of any of the undersigned hereunder or any obligation of any nature of any other obligor with respect to any of the Secured Obligations, (d) release any guaranty or right of offset or its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Secured Obligations or any obligation hereunder, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property, and (e) resort to the undersigned (or any of them) for payment of any of the Secured Obligations when due, whether or not the Administrative Agent or such Lender shall have resorted to any property securing any of the Secured Obligations or any obligation hereunder or shall have proceeded against any other of the undersigned or any other obligor primarily or secondarily obligated with respect to any of the Secured Obligations.

          2.5 Waivers . Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Secured Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon the guaranty contained in this Section 2 or acceptance of the guaranty contained in this Section 2 ; the Secured Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guaranty contained in this Section 2 , and all dealings between the Borrowers and any of the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guaranty contained in this Section 2 . Each Guarantor

waives (a) diligence, presentment, protest, demand for payment and notice of default, dishonor or nonpayment and all other notices whatsoever to or upon the Borrowers or any of the Guarantors with respect to the Secured Obligations, (b) notice of the existence or creation or non-payment of all or any of the Secured Obligations and (c) all diligence in collection or protection of or realization upon any Secured Obligations or any security for or guaranty of any Secured Obligations.

          2.6 Payments . Each Guarantor hereby guaranties that payments by such Guarantor hereunder will be paid to the Administrative Agent without set-off or counterclaim in Dollars at the office of the Administrative Agent specified in the Credit Agreement.

SECTION 3 GRANT OF SECURITY INTEREST.

          3.1 Grant . Each Grantor hereby collaterally assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the benefit of itself and the Lenders, a continuing security interest in all of its Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations or the Guarantor Obligations, as the case may be.

          3.2 Collateral Assignment of Rights under the Assigned Agreements . Each Grantor hereby irrevocably authorizes and empowers the Administrative Agent or its agents, in their sole discretion, to assert, either directly or on behalf of any Grantor, at any time that an Event of Default has occurred and is continuing, any claims any Grantor may from time to time have against the Sellers or any of their affiliates with respect to any and all of the Contract Rights to the extent permitted by the applicable Assigned Agreement or with respect to any and all payments or other obligations due from the Sellers or any of their affiliates to any Grantor under or pursuant to the Assigned Agreements (“ Payments ”), and to receive and collect any damages, awards and other monies resulting therefrom and to apply the same on account of the Secured Obligations. After the occurrence of any Event of Default, the Administrative Agent may provide notice to the Sellers or any of their affiliates that all Payments shall be made to or at the direction of the Administrative Agent for so long as such Event of Default shall be continuing. Following the delivery of any such notice, the Administrative Agent shall promptly notify the Sellers upon the termination or waiver of any such Event of Default. Each Grantor hereby irrevocably makes, constitutes and appoints the Administrative Agent (and all officers, employees, or agents designated by the Administrative Agent) as such Grantor’s true and lawful attorney (and agent-in-fact) for the purpose of enabling the Administrative Agent or its agents to, during the occurrence and continuance of an Event of Default, assert and collect such claims and to apply such monies in the manner set forth hereinabove.

SECTION 4 REPRESENTATIONS AND WARRANTIES.

          To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrowers thereunder, each Grantor jointly and severally hereby represents and warrants to the Administrative Agent and each Lender that:

          4.1 Title; No Other Liens . Except for Permitted Liens, the Grantors own each item of the Collateral free and clear of any and all Liens. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except filings evidencing Permitted Liens and filings for which termination statements have been delivered to the Administrative Agent.

          4.2 Perfected First Priority Liens . The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 2 (exclusive of any filings or other actions required to perfect a security interest in the Pledged Equity of any Foreign Subsidiary in any jurisdiction outside of the United States) (which, in the case of all filings and other documents referred to on Schedule 2 , have been delivered to the Administrative Agent in completed and duly executed form) and payment of all necessary filing fees will constitute valid perfected security interests in all of the Collateral in favor of the Administrative Agent, for the benefit of itself and the Lenders as collateral security for each Grantor’s Obligations, enforceable in accordance with the terms hereof (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing) against all creditors of each Grantor and any Persons purporting to purchase any Collateral from each Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for Permitted Liens for which priority is accorded under applicable law. Subject to the payment of all necessary filing fees, the filings and other actions specified on Schedule 2 (exclusive of any filings or other actions required to perfect a security interest in the Pledged Equity of any Foreign Subsidiary in any jurisdiction outside of the United States) constitute all of the filings and other actions necessary to perfect all security interests granted hereunder; provided , that notwithstanding anything contained in this Agreement to the contrary, in no event shall any Grantor be required to file, register, record or otherwise perfect any lien or security interest in any jurisdiction outside of the United States with respect to the Pledged Equity of any Person (other than any of the foregoing required in connection with the Pledged Equity of Kids Line UK LTD and Kids Line Australia Pty. LTD) until such time as such Person has revenue in excess of $500,000.

          4.3 Grantor Information . On the date hereof, Schedule 3 sets forth (a) each Grantor’s jurisdiction of organization, (b) the location of each Grantor’s chief executive office, (c) each Grantor’s exact legal name as it appears on its organizational documents and (d) each Grantor’s organizational identification number (to the extent a Grantor is organized in a jurisdiction which assigns such numbers) and federal employer identification number.

          4.4 Collateral Locations . On the date hereof, Schedule 4 sets forth (a) each place of business of each Grantor (including its chief executive office), (b) all locations where all Inventory and the Equipment owned by each Grantor is kept, except with respect to locations at which Inventory and Equipment with a fair market value of less than $10,000 in the aggregate for each location (up to an aggregate of $200,000 for all locations) and excluding Inventory with respect to “bill and hold” or consignment arrangements with fair market value of less than $10,000 in the aggregate for each location (up to an aggregate of $200,000 for all locations) which may be located at other locations and (c) whether each such Collateral location and place of business (including each Grantor’s chief executive office) is owned or leased (and if leased,

specifies the complete name and notice address of each lessor). No Collateral is located outside the United States (excluding In-Transit Inventory) or in the possession of any lessor, bailee, warehouseman or consignee, except as indicated on Schedule 4 or except for Collateral with a fair market value of less than $10,000 in the aggregate for each location and $200,000 in the aggregate for all locations of the Grantors.

          4.5 Certain Property . None of the Collateral constitutes, or is the Proceeds of, (a) Farm Products, (b) Health Care Insurance Receivables or (c) vessels, aircraft or any other property subject to any certificate of title or other registration statute of the United States, any State or other jurisdiction, except for vehicles owned by the Grantors and used by employees of the Grantors in the ordinary course of business with an aggregate fair market value of less than $200,000 (in the aggregate for all Grantors).

          4.6 Investment Property . (a) The Pledged Equity pledged by each Grantor hereunder constitute all the issued and outstanding equity interests of each Issuer owned by such Grantor and, in the case of any First-Tier Foreign Subsidiary, 65% of all issued and outstanding equity interests of such First-Tier Foreign Subsidiary.

          (b) All of the Pledged Equity has been duly and validly issued and is fully paid and nonassessable.

          (c) Each of the Intercompany Notes and, to the applicable Grantor’s knowledge, each of the other Pledged Notes in favor of such Grantor constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing).

          (d) Subject to quarterly updates to reflect any additions or changes thereto, Schedule 1 lists all Investment Property owned by each Grantor having a fair market value or remaining principal balance, as applicable, in excess of $250,000 each, or $500,000, in aggregate among all Grantors. Each Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except Permitted Liens.

          4.7 Receivables . (a) No amount in excess of $200,000 payable to any such Grantor (or $250,000 in aggregate among all Grantors) under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Administrative Agent.

          (b) The amounts represented by such Grantor to the Lenders from time to time as owing to such Grantor in respect of the Receivables (to the extent such representations are required by any of the Loan Documents) will at all such times be accurate in all material respects; provided however that such amounts included in any Borrowing Base Certificate shall be accurate in all respects on the date represented in such Borrowing Base Certificate.

          4.8 Intellectual Property . (a) Subject to quarterly updates to reflect any additions or changes thereto, Schedule 5 lists all material registered or applied for Intellectual Property owned by such Grantor in its own name on the date hereof.

          (b) On the date hereof, all material Intellectual Property owned or licensed by any Grantor is valid, subsisting, unexpired and enforceable and has not been abandoned.

          (c) Subject to quarterly updates to reflect any additions or changes thereto, except as set forth in Schedule 5 , none of the material Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor.

          (d) Each Grantor owns and possesses or has a license or other right to use all Intellectual Property as is necessary for the conduct of the businesses of such Grantor, without any infringement upon rights of others which could reasonably be expected to have a Material Adverse Effect.

          4.9 Depositary and Other Accounts . All depositary and other accounts maintained by each Grantor are described on Schedule 6 hereto (subject to quarterly updates to reflect any additions or changes thereto), which description includes for each such account the name of the Grantor maintaining such account, the name, address, telephone and fax numbers of the financial institution at which such account is maintained and the account number of such account.

          4.10 Eligible Accounts . Each Account which the Grantors shall request the Administrative Agent to classify as an Eligible Account shall, as of the time when such request is made or deemed made, meet all requirements of and constitute an “Eligible Account” for purposes of the Credit Agreement at such time.

SECTION 5 COVENANTS.

          Each Grantor covenants and agrees with the Administrative Agent and the Lenders that, from and after the date of this Agreement until the Secured Obligations shall have been Paid in Full:

          5.1 Delivery of Instruments, Certificated Securities and Chattel Paper . If any amount payable under or in connection with any of the Collateral in excess of $250,000 (in the aggregate for all Grantors) shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be delivered to the Administrative Agent within five (5) Business Days of the applicable Grantor’s receipt thereof, duly indorsed in a manner reasonably satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement. Notwithstanding the foregoing, in the event that an Event of Default shall have occurred and be continuing, upon the written request of the Administrative Agent, any Instrument, Certificated Security or Chattel Paper not theretofore delivered to the Administrative Agent and at such time being held by any Grantor shall be promptly delivered to the Administrative Agent, duly indorsed in a manner reasonably satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement.

          5.2 Maintenance of Perfected Security Interest; Further Documentation . (a) Except with respect to actions affirmatively taken by the Administrative Agent with respect to its Liens or any failure by the Administrative Agent to continue any such Lien prior to the lapse thereof due to the passage of time, such Grantor shall maintain such security interest as a perfected security interest having at least the priority described in Section 4.2 and shall defend such security interest against the claims and demands of all Persons whomsoever.

          (b) Such Grantor will furnish to the Administrative Agent and the Lenders from time to time statements and schedules further identifying and describing the assets and property of such Grantor and such other reports in connection therewith as the Administrative Agent may reasonably request, all in reasonable detail.

          (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, but not limited to, (i) filing any financing or continuation statements under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and, (ii) subject to Section 4.6(a) hereof in the case of Investment Property and any other relevant Collateral, taking any actions necessary or reasonably advisable to enable the Administrative Agent to obtain “control” (within the meaning of the applicable UCC) with respect thereto, including obtaining Account Control Agreements.

          (d) Such Grantor shall not permit any of the Collateral with a fair market value in excess of $250,000, in aggregate for all Grantors, to become a Fixture to any real property unless such real property is subject to a mortgage by such Grantor in favor of Administrative Agent.

          5.3 Changes in Locations, Name, etc . Such Grantor shall not, except upon twenty (20) days’ prior written notice to the Administrative Agent and delivery to the Administrative Agent of (a) all additional financing statements and other documents reasonably requested by the Administrative Agent as to the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 4 showing any additional location at which Inventory or Equipment shall be kept (other than locations at which Inventory or Equipment shall be kept with a fair market value not to exceed $10,000 in the aggregate for each location and $200,000 in the aggregate for all locations for all Grantors):

     (i) permit any of the Inventory or Equipment (other than In-Transit Inventory or Inventory related to any “bill and hold” or consignment arrangement, with a fair market value not to exceed $10,000 in the aggregate for each location and $200,000 in the aggregate for all locations for all Grantors) to be kept at a location other than those listed on Schedule 4 ;

     (ii) change its jurisdiction of organization or the location of its chief executive office from that specified on Schedule 3 or in any subsequent notice delivered pursuant to this Section 5.3 ; or

     (iii) change its name, identity or corporate structure.

          5.4 Notices . Such Grantor will advise the Administrative Agent promptly, in reasonable detail, of:

          (a) any Lien (other than Permitted Liens) on any of the Collateral which would adversely affect the ability of the Administrative Agent to exercise any of its remedies hereunder; and

          (b) the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the Liens created hereby.

          5.5 Investment Property . (a) If such Grantor shall become entitled to receive or shall receive any certificate, option or rights in respect of the equity interests (other than the equity interests not required to be pledged hereunder) of any Issuer of Pledged Equity, whether in addition to, in substitution of, as a conversion of, or in exchange for, any of the Pledged Equity, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Administrative Agent and the Lenders, hold the same in trust for the Administrative Agent and the Lenders and, if certificated, deliver the same forthwith to the Administrative Agent in the exact