AMENDMENT NO. 1 TO DEBT CANCELLATION AND INDEMNIFICATION AGREEMENT

 

 

This Amendment No. 1, dated as of June 15, 2010 (this “Amendment”), amends that certain Debt Cancellation and Indemnification Agreement (the “Agreement”), dated as of December 18, 2009, among MMAC, LLC, a Delaware limited liability company (the “Buyer”), TRUDY CORPORATION, a Delaware corporation (the “Seller”), William W. Burnham, an individual residing in the state of Connecticut (“Mr. Burnham”) and Alice B. Burnham, an individual residing in the State of Connecticut (“Mrs. Burnham”, and together with Mr. Burnham, the “Principals”).  Capitalized terms used herein without definition have the meanings specified in the Agreement.

 

 

WHEREAS, pursuant to Section 4.8 of the Agreement, the Buyer, the Seller, and the Principals desire to amend the Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the terms and conditions herein contained, the parties hereto agree to amend the Agreement as follows:

 

1.             Assignment and Assumption.

 

(a)           Section 1.1(a)(i) of the Agreement is hereby amended and restated as follows:

 

 “(i)            the Series A Preferred Units and Common Units of the Buyer held by the Seller (the “Transferred Units”); and”

 

(b)           Section 1.1(a)(ii) of the Agreement is hereby amended and restated as follows:

 

 “(ii)           any and all of the Seller’s right, title and interest in the Buyer Note.”

 

2.             Debt Cancellation.  References to the term “Westport Credit Line” in the Agreement shall be deemed to include any substitute line of credit.

 

3.             Expense Reimbursement.  Section 1.2(b) of the Agreement is hereby amended and restated as follows:

 

 “(b)           Notwithstanding the forgoing, the parties hereto agree that following the Closing, the Buyer will reimburse Mr. Burnham for up to $17,000 in business expenses owed by the Seller to Mr. Burnham as of the Closing, subject to reduction by the amount of such expense reimbursement used to increase the principal amount of the Buyer Note pursuant to Section 3.1 of the Asset Purchase Agreement.  Following the Closing, after the NAV is finally determined and to the extent that such expense reimbursement was not added to the principal amount of the Buyer Note pursuant to Section 3.1 of the Asset Purchase Agreement, the Buyer will pay such reimbursement to Mr. Burnham in installments of $2,000 per month until paid in full.  For the avoidance of doubt, the parties hereto agree that the Seller shall not pay any expense reimbursements (including any amount of the $17,000) to Mr. Burnham between the date hereof and the Closing.”

 

4.             Capital Contribution.  A new section 1.3 (Capital Contribution) will be added to the Agreement as follows:

 

“1.3        Capital Contribution.  If the preliminary calculation of the NAV as of the Closing is less than negative $442,000 (-$442,000), Mr. Burnham will be required to make a capital contribution, in cash, to the Seller immediately prior to the Closing (the “Burnham Capital Contribution”) as set forth below.  For purposes hereof, the amount by which the NAV is less than $-442,000 shall be referred to herein as the “Deficiency Amount.”  The Deficiency Amount may be reduced as set forth below based on the availability to the Seller of certain accounting credits for returnable sales and inventory ob solescence as calculated immediately prior to the Closing by the Chief Financial Officer of the Seller pursuant to Schedule A hereto, which calculation is subject to Buyer’s reasonable review and approval.  Pursuant to Schedule A, fifty percent (50%) of the Deficiency Amount (subject to a maximum cap of $100,000) may be reduced based on the availability of such accounting credits with such credited amount being referred to as the “Accounting Treatment Credit.”  Mr. Burnham would be required to contribute an amount equal to the Deficiency Amount less the amount of the Accounting Treatment Credit.  For example, if the NAV were negative $542,000 (-$542,000) and the accounting credits for returnable sales and inventory obsolescence calculated pursuant to Schedule A totaled $60,000, the Deficiency Amount would be $100,000, the Accounting Treatment Credit would be $50,000 (50% of the Deficiency Amount (50% x $100,000) because, in this case, although accounting credit s of $60,000 were available, only $50,000 of such $60,000 may be used since the Accounting Treatment Credit may not exceed 50% of the $100,000 cap) and Mr. Burnham would make a capital contribution to the Seller in the amount of $50,000 ($100,000 minus $50,000) as the Burnham Capital Contribution.  In consideration of the Burnham Capital Contribution, the Seller will receive Common Units of the Buyer pursuant to Section 4.4(b)(iii) of the Operating Agreement, and such Common Units will be included in the definition of Transferred Units above and transferred to Mr. Burnham immediately upon the Closing.”

 

5.             No Other Changes.  Except as expressly set forth in this Amendment, all terms and provisions of the Agreement shall remain in full force and effect and in all other respects are hereby ratified and confirmed.

 

6.             References to the Agreement.  After giving effect to this Amendment, each reference in the Agreement to “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby” or words of like import referring to the Agreement shall refer to the Agreement, as amended by this Amendment.

 

7.             Counterparts; Facsimile.  This Amendment may be executed in any number of counterparts (each of which may be transmitted via facsimile or by pdf), and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

 

 

IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.

 

	THE BUYER:
	MMAC, LLC, a Delaware limited liability company
	By:	/s/ Bradley Palmer
	Name:	Bradley Palmer
	Title:	Authorized Person
	THE SELLER:
	TRUDY CORPORATION, a Delaware corporation
	By:	/s/ Ashley C. Andersen Zantop
	Name:	Ashley C. Andersen Zantop
	Title:	CEO
	THE PRINCIPALS:
	/s/ William W. Burnham
	William W. Burnham
	/s/ Alice B. Burnham
	Alice B. Burnham