Case KLP Doc 3431 Filed 06/15/18 Entered 06/15/18 19:00:24 Desc Main Document Page 1 of 19

Transcription

1 Document Page 1 of 19 Edward O. Sassower, P.C. James H.M. Sprayregen, P.C. Joshua A. Sussberg, P.C. (admitted pro hac vice) Anup Sathy, P.C. KIRKLAND & ELLIS LLP Chad J. Husnick, P.C. (admitted pro hac vice) KIRKLAND & ELLIS INTERNATIONAL LLP Emily E. Geier (admitted pro hac vice) 601 Lexington Avenue KIRKLAND & ELLIS LLP New York, New York KIRKLAND & ELLIS INTERNATIONAL LLP Telephone: (212) North LaSalle Facsimile: (212) Chicago, Illinois Telephone: (312) and- Facsimile: (312) Michael A. Condyles (VA 27807) Peter J. Barrett (VA 46179) Jeremy S. Williams (VA 77469) KUTAK ROCK LLP 901 East Byrd Street, Suite 1000 Richmond, Virginia Telephone: (804) Facsimile: (804) Co-Counsel to the Debtors and Debtors in Possession IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) TOYS R US, INC., et al., 1 ) Case No (KLP) ) Debtors. ) (Jointly Administered) ) NOTICE OF SETTLEMENT TERM SHEET PLEASE TAKE NOTICE that on June 14, 2018, Toys R Us, Inc., Toys R Us - Delaware, Inc., Wayne Real Estate Parent Company, LLC, Geoffrey Holdings, LLC, Geoffrey, LLC, Geoffrey International, LLC, an ad hoc group of B-4 lenders (the Ad Hoc Group of B-4 Lenders ), 2 the Official Committee of Unsecured Creditors, and an ad hoc group of 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are set forth in the Order (I) Directing Joint Administration of Chapter 11 Cases and (II) Granting Related Relief [Docket No. 78]. The location of the Debtors service address is One Geoffrey Way, Wayne, New Jersey The B-4 lenders in the Ad Hoc Group of B-4 Lenders consist of funds and accounts managed or advised by Angelo, Gordon & Co., L.P.; Franklin Mutual Advisors, LLC; Highland Capital Management, LP; Oaktree Capital Management, L.P.; and Solus Alternative Asset Management LP.

2 Document Page 2 of 19 postpetition vendor administrative claimants (the Ad Hoc Vendor Group ) 3 entered into the settlement term sheet attached hereto as Exhibit 1 (the Term Sheet ). PLEASE TAKE FURTHER NOTICE that, as stated in the Term Sheet, the proposed settlement described in the Term Sheet is subject to the completion of definitive documentation and Court approval. The Debtors intend to address the timing for submission of such documentation and the Court approval process for the proposed settlement, including the confirmation timeline for the chapter 11 plan contemplated in the Term Sheet, at the omnibus hearing scheduled on June 25, PLEASE TAKE FURTHER NOTICE that copies of this notice and any other filings in these chapter 11 cases are available: (a) upon request to Prime Clerk LLC by calling (844) (toll free) or, for international callers, (917) ; (b) by visiting the website maintained in these chapter 11 cases at or (c) for a fee via PACER by visiting [Remainder of page intentionally left blank] 3 The Ad Hoc Vendor Group consists of merchandise vendors represented by Foley & Lardner LLP, Fox Rothschild LLP; Schiff Hardin LLP; Saul Ewing Arnstein & Lehr LLP; Morris, Nichols, Arsht & Tunnell; and Wasserman, Jurista & Stolz, P.C.

3 Document Page 3 of 19 Richmond, Virginia Dated: June 15, 2018 /s/ Jeremy S. Williams KUTAK ROCK LLP KIRKLAND & ELLIS LLP Michael A. Condyles (VA 27807) KIRKLAND & ELLIS INTERNATIONAL LLP Peter J. Barrett (VA 46179) Edward O. Sassower, P.C. Jeremy S. Williams (VA 77469) Joshua A. Sussberg, P.C. (admitted pro hac vice) 901 East Byrd Street, Suite Lexington Avenue Richmond, Virginia New York, New York Telephone: (804) Telephone: (212) Facsimile: (804) Facsimile: (212) Michael.Condyles@KutakRock.com edward.sassower@kirkland.com Peter.Barrett@KutakRock.com joshua.sussberg@kirkland.com Jeremy.Williams@KutakRock.com -and- Co-Counsel to the Debtors and Debtors in Possession James H.M. Sprayregen, P.C. Anup Sathy, P.C. Chad J. Husnick, P.C. (admitted pro hac vice) Emily E. Geier (admitted pro hac vice) 300 North LaSalle Chicago, Illinois Telephone: (312) Facsimile: (312) Co-Counsel to the Debtors and Debtors in Possession james.sprayregen@kirkland.com anup.sathy@kirkland.com chad.husnick@kirkland.com emily.geier@kirkland.com

4 Document Page 4 of 19 Exhibit 1 Term Sheet

5 Document Page 5 of 19 Term Sheet for Toys-Delaware Liquidation June 14, 2018 THIS TERM SHEET (THIS TERM SHEET ) DESCRIBES A PROPOSED SETTLEMENT AMONG THE DEBTORS, THE AD HOC GROUP OF B-4 LENDERS, 1 THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS (THE CREDITORS COMMITTEE ), AND THE AD HOC GROUP OF POSTPETITION VENDOR ADMINISTRATIVE CLAIMANTS (THE AD HOC VENDOR GROUP ) IN THE TOYS R US, INC. AND TOYS R US - DELAWARE, INC. (AND CERTAIN OF ITS DEBTOR SUBSIDIARIES) CHAPTER 11 CASES PENDING IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA (THE BANKRUPTCY COURT ). 2 Term Primary Economic Terms Summary The Term DIP lenders to Toys Delaware (the DIP Lenders ) and the B-4, B-3 and B-2 lenders to Toys Delaware (the Prepetition Secured Lenders) on account of their funded debt claims and adequate protection claims will receive all remaining value in the estate of Toys R Us Delaware, Inc. ( Toys Delaware ), other than as expressly set forth in this Term Sheet. The allocation of value among the B-4, B-3 and B-2 lenders shall be governed by existing documentation and is not altered by this Term Sheet. After the repayment of the ABL/FILO DIP Facility, the following consideration will be included in the Term Loan Wind-Down Carve Out and made available only to (i) all merchandise vendors who have unpaid administrative claims arising under sections 503(b)(1) and 503(b)(9) of the Bankruptcy Code and for agreed to, but unpaid, critical vendor payments, in all such cases arising out of ordinary course sales of goods or provision of services to Toys-Delaware for the value of such goods and services, and (ii) certain holders of other unpaid administrative claims (including merchandise vendors) not otherwise accounted for in the wind-down budget (excluding, for the avoidance of doubt, professional fee claims and adequate protection claims) (collectively, the Administrative Claims Distribution Pool ), free and clear of liens, claims, and encumbrances, except as provided herein. Fixed Amounts: A fixed amount equal to $160 million, which shall include amounts required to be funded into the Merchandise Reserve pursuant to the DIP Amendment Order. [Dkt. No. 2853] This amount will be funded in August 2018 consistent with the DIP Amendment Order. Following repayment in full of the Term DIP Facility, the first $20 million in recovery from Toys Delaware will also be distributed to the Administrative Claims Distribution Pool. The fixed amounts will not be subject to any increases, offsets, discounts, or reductions. 3 1 The B-4 lenders in the Ad Hoc Group of B-4 Lenders consist of funds and accounts managed or advised by Angelo, Gordon & Co., L.P.; Franklin Mutual Advisors, LLC; Highland Capital Management, LP; Oaktree Capital Management, L.P.; and Solus Alternative Asset Management LP. 2 The Ad Hoc Vendor Group consists of merchandise vendors represented by Foley & Lardner LLP, Fox Rothschild LLP; Schiff Hardin LLP; Saul Ewing Arnstein & Lehr LLP; Morris, Nichols, Arsht & Tunnell; and Wasserman, Jurista & Stolz, P.C. 3 For the avoidance of doubt, the obligation to fund the Administrative Claims Distribution Pool with the Fixed Amount, as well as other agreements herein regarding allocation of value, shall not be affected by any 1

6 Document Page 6 of 19 Term Contingent Amounts: Summary Once the aggregate post-petition recovery of all B-4 lenders from Toys Delaware and Wayne Real Estate Parent Company, LLC inclusive of monthly adequate protection payments made under paragraph 18(d) of the final DIP financing order [Dkt. 711] (but not of any fees or expenses paid to any advisors under the final DIP financing order or otherwise), and exclusive of any recoveries from Geoffrey, LLC or sources besides Toys Delaware and Wayne Real Estate Parent Company, LLC reaches 50% of the face amount of their B-4 claims as of the petition date: 4 (1) the Prepetition Secured Lenders will receive 50% of any further recoveries from Toys Delaware and the remaining 50% will be distributed to the Administrative Claims Distribution Pool; and (2) the B-4 lenders will receive 50% of any further recoveries from Wayne Real Estate Parent Company, LLC and the remaining 50% will be distributed to the Administrative Claims Distribution Pool. (For the avoidance of doubt, lender recoveries on account of equity interests held by Toys Delaware or Wayne Real Estate Parent Company, LLC will be included as assets of such entities for purposes of calculating contingent sharing amounts set forth herein, but no recoveries from any of the Geoffrey Debtors will be shared under this provision.) Other Consideration: Any non-released causes of action held by Toys Delaware, Toys R Us, Inc., or their respective estates against the Debtors 5 directors, officers, or managers (including Sponsor appointed directors, officers, and managers), and any non-released chapter 5 avoidance claims held by Toys Delaware or Toys R Us, Inc. or their respective estates (collectively, the Non-Released Claims ), including any preference claims against vendors not otherwise released herein and the proceeds of any directors & officers insurance policy, shall be transferred to a trust funded in the amount of $5.0 million (the Non-Released Claims Trust ), which funding will come solely from the Administrative Claims Distribution Pool (or from third-parties who determine in their sole discretion to fund such trust) and will not come from the Prepetition Secured Lenders collateral or recoveries. 6 The proceeds of the settlement or litigation of any Non-Released Claims in the Non-Released Claims Trust shall be distributed (i) first, to the Administrative Claims Distribution Pool until the amount provided to fund the trust has been recovered, and (ii) thereafter, 80% to the Administrative Claims Distribution Pool, and 20% to the Prepetition Secured Lenders. The Debtors agree to retain and preserve any documents, information (including electronically stored information), and other evidence potentially relevant to any Non-Released Claims (or claims of the subsequent events during the bankruptcy cases, including without limitation any subsequent Event of Default under the Term DIP Facility or the Term Loan Facility or any covenant breaches under such facilities. 4 The aggregate face amount of the B-4 claims as of the petition date included approximately $998 million in outstanding principal and $5 million in accrued and unpaid interest. 5 Except where otherwise indicated, for purposes of this Term Sheet, Debtors shall mean, collectively, Toys R Us, Inc., Toys-Delaware, Wayne Real Estate Parent Company, LLC, and the Geoffrey Debtors (as defined herein). 6 To the extent any Non-Released Claims held by Toys R Us, Inc. are not otherwise resolved in connection with any chapter 11 plan or sale of the assets of TRU Taj, LLC, the allocation or sharing of recoveries from such Non-Released Claims among creditors of Toys R Us, Inc. (other than Toys Delaware or its estate) and the beneficiaries of the Non-Released Claims Trust set forth herein will be set forth in the definitive documentation of this settlement. 2

7 Document Page 7 of 19 Term Summary Geoffrey Debtors) and will not knowingly or intentionally, after the good faith exercise of reasonable diligence and inquiry, take any action to compromise or interfere with, or knowingly or intentionally, after the good faith exercise of reasonable diligence and inquiry, fail to take any action if such failure would knowingly or intentionally, after the good faith exercise of reasonable diligence and inquiry, jeopardize, compromise, or interfere with, insurance coverage applicable to such claims. For the avoidance of doubt, neither the Debtors nor any other possible target of the Non-Released Claims (or claims of the Geoffrey Debtors) shall have any obligation to provide any documents, information, or other evidence protected by the attorney-client privilege or work product doctrine, absent further order of the court. Notwithstanding the above, any claims or causes of action of Toys Delaware (whether against affiliated debtors or others) seeking to recover the value or proceeds of the sale of the Emeryville property will not be transferred to the Non-Released Claims Trust; such claims or causes of action will be funded by either the DIP Lenders or Prepetition Secured Lenders, as applicable, and will not be funded out of the Administrative Claims Distribution, and the proceeds of such claims or causes of action will be deemed to be recoveries from Toys Delaware and distributed to the DIP Lenders or Prepetition Secured Lenders along with other Toys Delaware property, subject only to the contingent sharing provision above. Following payment in full of the Prepetition Secured Lenders of Toys Delaware including all principal amounts outstanding as of the petition date, plus all allowed claims for post-petition interest and any other contractually owed amounts all other proceeds of the liquidation will be distributed to holders of administrative expense claims until such claims are paid in full. Consideration allocated to the Administrative Claims Distribution Pool shall be placed in a segregated account and treated in the same manner as the funds in the Merchandise Reserve on the terms set forth in the DIP Amendment Order. The Debtors, the Creditors Committee, and the Ad Hoc Group of B-4 Lenders will agree to support the pro rata distribution of the funds in the Administrative Claims Distribution Pool. The Parties will seek a finding from the Court in the proposed order approving this settlement that no party shall have liability, including to any vendor that supplied merchandise after March 5, 2018, as a result of the pro rata distribution of the Administrative Claims Distribution Pool to all administrative creditors. Budget In light of the settlements encompassed in this Term Sheet, the most recently updated winddown budget for the Delaware debtors will be further updated to reflect at least $10 million in expense savings, which budget will be filed by the Debtors as soon as reasonably practicable. Such expense savings are summarized in Exhibit A hereto. Geoffrey The Debtors and the Creditors Committee will support entry of an order approving the section 363 bidding procedures motion filed on June 11 for consideration at the June 25, 2018 hearing. The Prepetition Secured Lenders shall have the right to credit bid for such equity and assets and the Creditors Committee will not object to or seek to impede such credit bid; provided, however, that the Prepetition Secured Lenders will consult with the Debtors and the Creditors Committee about the terms of any such credit bid. The Debtors and the Creditors Committee will continue to support (and the Debtors will act to implement) the ongoing sale process for the equity and any other assets of Geoffrey Holdings, LLC, Geoffrey, LLC and Geoffrey International, LLC (the Geoffrey Debtors ), whether through a chapter 11 plan or a section 363 sale. The Ad Hoc Group of B-4 Lenders, the Debtors 3

8 Document Page 8 of 19 Term Summary and the Creditors Committee will consult on whether to consummate the sale through a chapter 11 plan or a section 363 sale. In either case the asset sale will be completed by August 31, For the avoidance of doubt, assets of Geoffrey Holdings, LLC, Geoffrey, LLC and Geoffrey International, LLC (the Geoffrey Debtors ) including causes of action, will not be available for distribution to the Administrative Claims Distribution Pool. No claims or causes of actions of the Geoffrey Debtors will be released or otherwise impaired pursuant to this settlement; provided, however, that, notwithstanding the foregoing, the Geoffrey Debtors will limit their recoveries against (and ultimately release, as applicable) the individual officers, directors, and managers of the Debtors, to the same extent that Toys Delaware is limiting recoveries against such officers, directors and managers as set forth in the Releases and Process section below; provided, further, however, notwithstanding the foregoing, the Geoffrey Debtors shall release any claims against the Sponsors (other than Sponsor-appointed directors, officers, and managers). To the extent any claims or causes of action of the Geoffrey Debtors are not otherwise resolved in connection with any chapter 11 plan or sale of the assets of TRU Taj, LLC, the settlement agreement or any other definitive documentation will include terms providing for coordination between the Geoffrey Debtors and the Non-Released Claims Trust in pursuing claims against and sharing and/or allocating any proceeds of insurance to the extent any judgments or settlements exceed the policy. Releases and Process 9019 Motion. The Parties will support approval and implementation of this settlement through a motion and settlement agreement under Bankruptcy Rule 9019, which shall be binding regardless of whether the cases proceed in Chapter 11 or in Chapter 7 (in which case they will be binding on the Chapter 7 trustee (if any)), or are otherwise dismissed. Simultaneously therewith, the Debtors will seek, and the other Parties will support (and to the extent solicited, vote in favor of) confirmation of a chapter 11 plan for Toys Delaware by no later than August 31, 2018 that is consistent with the terms set forth in this Term Sheet and otherwise reasonably acceptable to the Creditors Committee, the Ad Hoc Group of B-4 Lenders, and the Ad Hoc Vendor Group. In the event that the Debtors, the Creditors Committee, or the Ad Hoc Group of B-4 Lenders conclude prior to the confirmation hearing, based on formal or informal objections to the disclosure statement or the plan, that denial of confirmation is reasonably likely, the Debtors (with the support of the Ad Hoc Group of B-4 Lenders, the Creditors Committee, and the Ad Hoc Vendor Group) will use reasonable best efforts to submit a motion to dismiss the Toys Delaware chapter 11 case to be considered as soon as practicable after denial of confirmation, including at the confirmation hearing, if possible. The Parties agree that the terms of this Term Sheet, including all releases and provisions relating to value allocation, shall be included in the order of dismissal. Opt-Outs. Holders of administrative expense claims will provide the releases described herein in order to participate in the Administrative Claims Distribution Pool, provided that such holders will have the ability to opt-out of participation if they do not want to provide or receive the releases set forth herein. The Prepetition Secured Lenders and the Debtors will have the option not to complete this settlement if holders of more than 7.5% of administrative claims against Toys Delaware opt out of the settlement. 7 Any portion of the Administrative Claims Distribution Pool allocable to opt outs will be paid to the Prepetition Secured Lenders. 8 D&O Insurance Claims. All claims or causes of action, if any, held by Toys R Us, Inc. and 7 For purposes of this provision, the Debtors will refer to the schedule of administrative expense claims dated June 14, The settlement agreement or other definitive documentation will address the implementation of the opt-out mechanism described herein. 4

9 Document Page 9 of 19 Term Summary Toys Delaware, and their respective estates or creditors against the Debtors directors, officers or managers (including Sponsor-appointed directors, officers, and managers) are preserved (such claims the D&O Insurance Claims and each such party a D&O Party ), and shall be transferred and/or assigned to the Non-Released Claims Trust, provided that: (i) any recovery by the Non-Released Claims Trust (and the beneficiaries thereof) on account of any D&O Insurance Claim, including in each case by way of settlement or judgment, shall be satisfied solely by and to the extent of the proceeds of the Debtors available D&O liability insurance policies, if any, after payment from such D&O liability insurance policies of any and all covered costs and expenses incurred by all of the D&O Parties in connection with the defense of the D&O Insurance Claims; (ii) no party, including any trustee or any beneficiary of the Non- Released Claims Trust, shall (a) execute, garnish or otherwise attempt to collect on any settlement of or judgment in the D&O Insurance Claims upon any assets of any D&O Party beyond available insurance coverage, (b) record any judgment against any D&O Party, or (c) otherwise attempt to collect from the personal assets of any D&O Party; and (iii) all of the D&O Insurance Claims shall be released automatically and fully discharged only upon the earlier of (x) such a release being given as part of any later settlement of the D&O Insurance Claims; (y) final resolution of any coverage claims asserted against the Debtors available D&O liability insurance policies on account of the D&O Insurance Claims; or (z) exhaustion of the available insurance coverage. For the avoidance of doubt, any release of the D&O Insurance Claims shall not become effective until one of the three conditions stated in subsection (iii) above has been met. The Parties further agree that nothing in this D&O Insurance Claims section is or shall be construed as an admission of liability or an agreement to settle any D&O Insurance Claims, and that any director, officer or manager targeted by such claims will cooperate with its or their insurance carriers in the defense of those claims and will fulfill each and every contractual provision in such insurance policies. Releases Among Non-Debtor Parties: The Creditors Committee and its members, the Ad Hoc Vendor Group, the DIP Lenders, the Prepetition Secured Lenders, and the Sponsors (other than the Sponsor-appointed directors, officers, and managers) each of their professionals, and all Toys Delaware creditors other than any creditors that affirmatively opt-out of participating in the Administrative Claims Distribution Pool, will release all claims and causes of action against one another relating to pre- or post-petition transactions. The release by the Creditors Committee will encompass any claims against the ABL or Term DIP lenders or the Prepetition Secured Lenders that the Creditors Committee could seek to assert on behalf of any estate, including Toys Delaware and Wayne Real Estate Parent Company LLC, and based on any theory, including fraudulent transfer, preference, section 506(c), or section 552(b) equities of the case. Releases by the Debtors: The Debtors and their estates will release: All claims and causes of action, if any, against the merchandise vendors that participate in the Administrative Claims Distribution Pool, 9 including from (a) all claims or causes of action relating to credits, rebates, advertising incentives, and like items, and (b) any claims for disgorgement or claw-back of any payments made on account of trade agreements or 503(b)(9) claims, provided that any claims described in clause (a) of this paragraph relating to credits, rebates, advertising incentives, and like items, may be asserted in a defensive manner as off-sets to the claims of merchandise vendors in the claims reconciliation procedures set forth herein and in the DIP Amendment Order (or in any litigation in the event of a challenge to the reconciliation); 9 The Debtors reserve the right to reconcile the claims asserted by merchandise vendors based on trade allowances, credits or other trade agreements, and all merchandise vendors reserve and retain the right to challenge any such claim by the Debtors. 5

10 Document Page 10 of 19 Term Summary To the extent not already released in the final DIP financing order [Dkt. No. 711] (the Final DIP Order ), any remaining claims or causes of action against the ABL or Term DIP Lenders or the Prepetition Secured Lenders; All claims and causes of action, if any, against the Sponsors (other than the Sponsor-appointed directors, officers, and managers); and All claims and causes of action, if any, against the Creditors Committee, its members, and each of their respective professionals. Intercompany Claims. For the avoidance of doubt, all claims or causes of action between or among the Debtors and their direct or indirect subsidiaries, including all claims or causes of action of Toys Delaware or the Geoffrey Debtors against Toys R Us, Inc. or any of its direct or indirect subsidiaries (both Debtor or non-debtor subsidiaries, including without limitation Toys (Labuan) Holding Limited) will be fully preserved under the settlement agreement and will not be released or compromised absent further agreement. Claims of Toys Delaware under the ITASSA, and claims of the Geoffrey Debtors under intellectual property and licensing agreements, are thus expressly preserved. Vendor Professionals Fees and Expenses. The Debtors (or the Ad Hoc Vendor Group and the vendor Committee members with the support of the Debtors and the Creditors Committee) will seek approval of a substantial contribution claim under section 503(b) of the Bankruptcy Code in the amount of $2 million (which may be included as part of an order approving this Term Sheet), which amount will be satisfied solely from the Fixed Amount distributed to the Administrative Claims Distribution Pool and will be used to pay the professional fees and expenses of the members of the Ad Hoc Vendor Group and the vendor Committee members in connection with the negotiation of the Wind-Down Order, the DIP Amendment Order and this Term Sheet. The Ad Hoc Vendor Group and the vendor Committee members professionals will agree among themselves as to an allocation of these funds. The Committee, the Ad Hoc Vendor Group, and any other party receiving a distribution from the Administrative Claim Distribution Pool agree not to seek substantial contribution claims from the Debtors estates for any other fees and expenses incurred. Preference and Avoidance Claims Without limiting the scope of the releases set forth above in this Term Sheet, the Debtors and their estates will waive and release or otherwise not pursue all chapter 5 claims against any noninsider creditors (including, without limitation, vendors, suppliers, landlords, employees, and other creditors, each in their capacity as such) other than any creditors that affirmatively opt-out of participation in the Administrative Claims Distribution Pool (whether or not they are eligible to participate in the Administrative Claims Distribution Pool). For the avoidance of doubt, notwithstanding anything in this section to the contrary, all chapter 5 claims against a D&O Party are expressly preserved, subject to the limitations set forth in the Releases and Process section of this Term Sheet. Estimated Administrative Claims For illustrative purposes only, this proposal assumes that the administrative claims eligible to participate in the Administrative Claims Distribution Pool are approximately $800 million. The Debtors will work with the Committee members and the Ad Hoc Vendor Group in good faith to reconcile the claims held by each member of the Committee and the Ad Hoc Vendor Group prior to the implementation of the settlements described herein. Other Debtor Except as expressly set forth herein, nothing herein shall impact, impair, or restrict the Creditors Committee s role or ability to continue to act on account of creditors in connection 6

11 Document Page 11 of 19 Estates Term Summary with any restructuring, sale or liquidation of the assets of any Debtor, including Toys Delaware (consistent with this Term Sheet), the Taj Debtors, Toys, Inc., and PropCo II, and all such rights are expressly preserved. In the event that the holders of a majority of the Toys R Us Inc. unsecured notes reach agreement with Toys Delaware and the Ad Hoc Group of B-4 Lenders on a restructuring of the Taj Debtors or allocation of the proceeds of a sale of the equity or assets of the Taj Debtors, the Creditors Committee will reasonably cooperate with the trustee for the Toys R Us Inc. unsecured notes in connection with such agreement. Binding Nature of Term Sheet The settlements described in this Term Sheet shall be subject to definitive documentation, and upon the execution of this Term Sheet all Parties shall be obligated to proceed in good faith as expeditiously as possible to negotiate, finalize, execute and deliver all such documentation. Notwithstanding the foregoing, this Term Sheet itself is a binding agreement between the Parties other than the Debtors, who will become bound by the Term Sheet following Bankruptcy Court approval. New York law shall govern this Term Sheet. Prior to June 29, 2018, to the extent the Creditors Committee becomes aware of facts and/or circumstances relating to the releases contemplated herein (other than releases pertaining to claims subject to the Committee s challenge period set forth in the Final DIP Order) that cause the Committee to conclude that proceeding with the transactions contemplated by this Term Sheet would be inconsistent with the continued exercise of fiduciary duties, the Committee may determine to terminate its obligations under this Term Sheet, in which case all obligations hereunder would be terminated. All Parties will exercise reasonable best efforts to submit the settlement agreement for Court approval by June 29, 2018 and in any event by no later than July 6, The Parties agree that the Bankruptcy Court shall retain jurisdiction over the Parties to enforce the terms of this Term Sheet and any definitive documentation relating thereto, and to enter such other relief as the Bankruptcy Court deems appropriate. This Term Sheet may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Signatures delivered by facsimile or by in PDF format shall constitute originals for all purposes. The Parties agree that this Term Sheet shall be filed publicly by the Debtors within one business day of the Term Sheet being executed. Support of Chapter 11 Cases The Debtors and the Ad Hoc Group of B-4 Lenders will reasonably cooperate upon request in facilitating an initial distribution from the Administrative Claims Distribution Pool by the earlier of the Effective Date of a chapter 11 plan of liquidation or September 30, As set forth above, the Debtors, the Creditors Committee, the Ad Hoc Vendor Group and the Ad Hoc Group of B-4 Lenders will support and act to implement a chapter 11 plan of liquidation or structured dismissal at Toys Delaware that preserves all of the terms of this settlement and facilitates distributions to the Prepetition Secured Lenders and the beneficiaries of the Administrative Claims Distribution Pool from Toys Delaware as soon as possible. The Claims Oversight Representative will continue to be involved in overseeing the reconciliation of unpaid administrative expense claims. The Debtors, the Creditors Committee, the Ad Hoc Group of B-4 Lenders, and merchandise vendors that participate in the Administrative Claims Distribution Pool will not (i) file any motion to convert or dismiss the chapter 11 cases of Toys Delaware or its debtor subsidiaries or (ii) file any motion to appoint an examiner in the chapter 11 cases of Toys Delaware or its 7

12 Document Page 12 of 19 Term Summary debtor subsidiaries, so long as the parties act in compliance with the terms hereof. The Debtors, the Creditors Committee and the Ad Hoc Group of B-4 Lenders will oppose any such motions filed by any other party-in-interest. All Parties to this Term Sheet agree to take all reasonable actions to support the Debtors motion to extend the exclusive periods to January 15, 2019 which will be heard at the July Omnibus Hearing. 8

13 Document Page 13 of 19

14 Document Page 14 of 19

15 Document Page 15 of 19

16 Document Page 16 of 19

17 Document Page 17 of 19 IN WITNESS WHEREOF, the Parties execute this Agreement as of the date first written above. Kramer Levin Naftalis & Frankel LLP Wachtell, Lipton, Rosen & Katz By: /s/ Rachael L. Ringer Kenneth H. Eckstein Adam C. Rogoff Rachael L. Ringer 1177 Avenue of the Americas New York, NY Counsel for the Creditors Committee By: /s/ Emil A. Kleinhaus Joshua A. Feltman Emil A. Kleinhaus 51 West 52 nd Street New York, NY Counsel for the Ad Hoc Group of B-4 Lenders Schiff Hardin, LLP Foley & Lardner LLP By: /s/ Louis T. DeLucia Louis T. DeLucia 666 Fifth Avenue, Suite 1700 New York, New York Counsel for Dorel Industries Inc. (d/b/a Dorel Home Products), Dorel Juvenile Group, Inc., Dorel Asia, Inc., Pacific Cycle Inc. (f/k/a/ Pacific Cycle C), and Dorel Home Furnishings Inc. (f/k/a Ameriwood Industries, Inc.) By: /s/ Erika L. Morabito Erika L. Morabito Brittany J. Nelson 3000 K Street, N.W., Suite 600 Washington, DC Counsel for Kids II Far East Limited, Kids II, Inc., The Step2 Holding Company, LLC, The Step2 Company, LLC, Step2 Direct, Step2 Discovery and Backyard Discovery Fox Rothschild, LLP Wasserman, Jurista & Stolz, P.C. By: /s/ Paul J. Labov Paul J. Labov 101 Park Avenue, 17 th Floor New York, NY By: /s/ Donald W. Clarke Donald W. Clarke 110 Allen Road, Suite 304 Basking Ridge, NJ Counsel for Just Play, LLC and Certain of its Subsidiaries Counsel for. Kent International, Inc., USA Helmet Sub Kent Int l., Inc. and Kazam, LLC Morris, Nichols, Arsht & Tunnel LLP Saul Ewing Arnstein & Lehr LLP By: /s/ Gregory W. Werkheiser Gregory W. Werkheiser 1201 N. Market St., 16th Floor Wilmington, DE By: /s/ John D. Demmy John D. Demmy 1201 North Market Street, Suite 2300 Wilmington, DE Co-Counsel for Crayola LLC Counsel to Artsana (USA) Inc., The Boppy Company LLC, and Caben Asia Pacific Ltd. [Signature Page to Term Sheet]

18 Document Page 18 of 19 Exhibit A Budget (Reflecting Expense Savings)

19 Toys "R" Us Wind Down Budget: June 14 Term Sheet ($ in Millions) Case KLP Doc 3431 Filed 06/15/18 Entered 06/15/18 19:00:24 Desc Main Document Page 19 of 19 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Remaining Wind Down Period Total Receipts (A) ,053.5 Store / DC Expenses (B) (129.8) (161.6) (107.8) (54.5) (44.5) (498.3) Wind Down Expenses (C) (27.4) (13.8) (6.9) (28.9) (17.8) (16.2) (10.8) (6.0) (9.8) (7.0) (11.0) (155.5) Asset Sales, Net (D) Other Cash Flows (E) (80.4) (100.0) (50.5) (36.1) (25.7) (165.9) (2.4) (20.0) (481.1) Net Cash Flow before Debt $ $ $ $ $ (30.6) $ (139.9) $ $ (22.1) $ (6.4) $ (3.0) $ 9.9 $ 1,298.7 Cash Schedule Beginning Cash Balance (21.2) (21.2) Net Cash Flow Before Debt (30.6) (139.9) (22.1) (6.4) (3.0) 9.9 1,298.7 ABL Paydown (100.0) (162.1) (262.1) FILO Paydown - (125.0) (325.0) (450.0) TL Paydown (100.0) (18.6) (31.8) (299.6) (450.0) Ending Cash Balance (F) $ $ $ $ $ $ $ $ $ $ $ $ ABL Roll-Forward Beginning Balance LC Collateralization Paydown (100.0) (162.1) (262.1) Ending Balance FILO Roll-Forward Beginning Balance Paydown - (125.0) (325.0) (450.0) Ending Balance DIP Term Loan Roll Forward Beginning Balance Paydown (100.0) (18.6) (31.8) (299.6) (450.0) Ending Balance Notes: Principal pay-downs on the DIP Term Loan will be done as soon as possible, given the timing of proceeds from real estate sales and other cash inflows. As contemplated in the Term Sheet, the budget reflects over $10 million of savings as compared to the Budget dated May 31, The savings result from (a) reductions in actual professional fees accrued through March 3, 2018, and reductions in projected professional fees between October and December 2018; (b) reduced projected Corporate Expenses between October and December 2018; (c) reduced projected carrying costs for Real Estate; and (d) reduced projected Wind Down Tail Expenses due to projected earlier emergence from chapter 11. (A) Proceeds from inventory liquidations, sale of furniture and equipment, sale of the Canadian business, royalty and franchise fees, credit card reserves, LC redemptions and insurance claims. (B) All operating expenses related to the stores and distribution centers during the GOB sales. (C) Go-forward wind-down expenses, including corporate G&A and professional fees. (D) Sale of owned Real Estate, leases, ground leases, furniture and equipment, and JV interest in Saltru; amounts net of closing fees and expenses. (E) Includes payment of Accrued Expenses/Fees, WARN and Statutory PTO payments, Interest on DIP Loans, carrying costs on real estate assets, payment of S&U Taxes held in trust, and funding of the Merchandise Reserve / Admin Claims Settlement amounts in August ($160MM) and October ($20MM). (F) Includes all DIP ABL/FILO and Term Loan cash collateral (including restricted cash from real estate sales) held by Toys "R" Us Delaware, Inc. and Geoffrey, LLC.