FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 26, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-14394
TOWN & COUNTRY CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2384321
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification number)
25 Union Street, Chelsea, Massachusetts 02150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 884-8500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
On June 21, 1996, the Registrant had outstanding 23,288,187 shares of Class A
Common Stock, $.01 par value and 2,664,941 shares of Class B Common Stock, $.01
par value. The Registrant also had 1,297,963 shares of Convertible Preferred
Stock, $1 par value, outstanding on June 21, 1996. These shares are immediately
convertible into 2,595,926 shares of Class A Common Stock.
<PAGE>
TOWN & COUNTRY CORPORATION
Form 10-Q Page 2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 26, February 25,
1996 1996
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 4,502,093 $ 5,151,929
Restricted cash 102,613 102,012
Accounts receivable--
Less allowances for doubtful
accounts of $2,231,000 at
5/26/96 and $2,120,000 at
2/25/96 55,985,594 51,294,879
Inventories (Note 3) 83,719,033 90,138,403
Prepaid expenses and other
current assets 2,716,103 1,956,537
Total current assets 147,025,436 148,643,760
PROPERTY, PLANT & EQUIPMENT, at cost 84,684,583 84,073,513
Less - Accumulated depreciation 44,847,311 43,814,604
39,837,272 40,258,909
INVESTMENT IN AFFILIATES 15,385,482 15,385,482
OTHER ASSETS 6,752,701 6,841,345
$ 209,000,891 $ 211,129,496
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 3
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
May 26, February 25,
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable to banks (Note 2) $ 24,412,507 $ 15,193,176
Current portion of long-term debt (Note 2) 250,896 244,928
Accounts payable 17,168,788 20,237,262
Accrued expenses 9,247,706 15,078,569
Accrued taxes 565,850 659,744
Total current liabilities 51,645,747 51,413,679
LONG-TERM DEBT, less current portion
(Note 2) 92,708,986 93,174,432
OTHER LONG-TERM LIABILITIES 1,146,376 1,122,625
Total liabilities 145,501,109 145,710,736
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 5,199,328 5,228,363
EXCHANGEABLE PREFERRED STOCK, $1.00
par value--$14.59 preference value-
Authorized--200,000 shares
Issued and outstanding--152,217 shares 2,283,132 2,319,476
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value-
Authorized and unissued--800,000 shares -- --
Convertible preferred stock, $1.00 par
value, $6.50 preference value
Authorized--4,000,000 shares
Issued and outstanding--1,977,905 and
2,288,567 shares, respectively 1,977,905 2,288,567
Class A Common Stock, $ .01 par value-
Authorized--40,000,000 shares
Issued and outstanding--21,928,103
and 21,235,246 shares, respectively 219,281 212,352
Class B Common Stock, $.01 par value-
Authorized--8,000,000 shares
Issued and outstanding--2,664,941 shares 26,649 26,649
Additional paid-in capital 74,703,142 74,175,437
Retained deficit (20,909,655) (18,832,084)
Total stockholders' equity 56,017,322 57,870,921
$ 209,000,891 $ 211,129,496
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 4
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
May 26, May 28,
1996 1995
<S> <C> <C>
NET SALES $ 58,264,124 $ 68,970,983
COST OF SALES 38,065,900 47,074,559
Gross profit $ 20,198,224 $ 21,896,424
SELLING, GENERAL &
ADMINISTRATIVE
EXPENSES 18,975,526 19,100,906
Income from
operations $ 1,222,698 $ 2,795,518
INTEREST EXPENSE, (3,026,151) (2,971,881)
net
MINORITY INTEREST 29,035 (122,299)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 5
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
May 26, May 28,
1996 1995
<S> <C> <C>
LOSS BEFORE
INCOME TAXES $ (1,774,418)$ (298,662)
PROVISION FOR
INCOME TAXES 80,025 215,762
NET LOSS $ (1,854,443)$ (514,424)
ACCRETION OF DISCOUNT
AND DIVIDENDS ON
PREFERRED STOCKS 223,128 243,735
LOSS ATTRIBUTABLE
TO COMMON
STOCKHOLDERS $ (2,077,571)$ (758,159)
LOSS PER COMMON
SHARE (Note 4): $ (0.09)$ (0.03)
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING
(Note 4): 24,317,210 23,575,577
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
May 26, May 28,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (1,854,443) $ (514,424)
Adjustments to reconcile net loss
to net cash used in operating activities-
Depreciation and amortization 708,983 1,204,708
Undistributed earnings of affiliates,
net of minority interest (29,035) 122,299
Interest paid with issuance of debt -- 4,200,569
Change in assets and liabilities--
Decrease (increase) in accounts
receivable (4,690,715) (6,399,943)
Decrease (increase) in inventory 6,419,370 713,886
Decrease (increase) in prepaid
expenses and other current assets (759,566) (347,519)
Decrease (increase) in other assets 11,929 (14,176)
Increase (decrease) in accounts
payable (3,068,474) (3,405,381)
Increase (decrease) in accrued
expenses (5,830,863) (1,330,368)
Increase (decrease) in accrued taxes (93,894) 84,019
Increase (decrease) in other
liabilities 23,751 24,264
Net cash used in operating
activities (9,162,957) (5,662,066)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (630,070) (536,106)
Proceeds from sale of certain assets 19,000 11,376
Net cash used in investing
activities (611,070) (524,730)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 7
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
May 26, May 28,
1996 1995
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C>
Payments on revolving credit facilities $ (50,435,747) $ (58,650,746)
Proceeds from borrowings under
revolving credit facilities 59,655,078 67,283,383
Payments on long-term debt (59,038) (246,527)
Proceeds from issuance of common stock 31,125 --
Payment of dividends (66,626) --
Decrease (increase) in restricted cash (601) (243,680)
Net cash provided by
financing activities $ 9,124,191 $ 8,142,430
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ (649,836) $ 1,955,634
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 5,151,929 3,336,921
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 4,502,093 $ 5,292,555
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 5,382,974 $ 1,016,172
Income taxes 205,006 134,685
Supplemental Disclosure of Noncash Investing and Financing Activities (Note 5)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 26, 1996
(1) Significant Accounting Policies
The unaudited consolidated financial statements presented herein have been
prepared by the Company and contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly and on a basis consistent
with the consolidated financial statements for the year ended February 25, 1996,
the Company's financial position as of May 26, 1996, and the results of its
operations and cash flows for the quarters ended May 26, 1996 and May 28, 1995.
The results of operations for the quarter ended May 26, 1996, are not
necessarily indicative of the results to be expected for the year due to the
seasonal nature of the Company's operations.
The significant accounting policies followed by the Company are set forth in
Note (2) of the Company's consolidated financial statements for the year ended
February 25, 1996, which have been included in the Annual Report on Form 10-K,
Commission File Number 0-14394, for the fiscal year ended February 25, 1996.
Except as disclosed below, the Company has made no change in these policies
during the quarter ended May 26, 1996.
Long-Lived Assets
On February 26, 1996, the Company adopted Financial Accounting Standard Board's
Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of".
SFAS No. 121 addresses accounting and reporting requirements for long-term
assets based on their fair market values. The Company's financial condition and
results of operations were not materially impacted as a result of adopting SFAS
No. 121.
Stock Options
On February 26, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation". The Company intends to continue accounting for its
stock based compensation plans for employees in accordance with Accounting
Principles Board Opinion (APB) No. 25. Under SFAS 123, companies choosing to
continue to use APB No. 25 to account for stock based compensation plans for
employees, must make footnote disclosure of the effects that use of the
valuation methods described in SFAS 123 would have on their earnings per share.
The Company will disclose this information in the notes to its financial
statements for the fiscal year ended February 23, 1997. The company accounts for
non-employee stock based compensation under SFAS 123.
<PAGE>
(2) Loan Arrangements
On July 3, 1996, the Company entered into a new credit agreement with Foothill
Capital Corporation ("Foothill"). The agreement provides senior secured
financing consisting of a $40 million revolving credit facility and a $30
million letter of credit in support of a Gold Consignment Facility provided by
Fleet Precious Metals ("Fleet"); however, the aggregate amount of the combined
facilities which may be outstanding at any date is $65 million. The agreement is
for a period of two years and provides Foothill with an option to renew for
three additional years. The loans bear interest at a rate per annum equal to the
greater of (a) 2% above the reference rate announced by an identified group of
major banks selected by Foothill or (b) 8%. The agreement contains standard
covenants for facilities of this type including financial covenants relating to
interest coverage, minimum net worth, minimum working capital, debt to net worth
and current ratios and limitations on dividends, distributions and capital
expenditures. Advances under the credit line are based on eligible accounts
receivables and inventory. Foothill has first security priority interest in
receivables, inventory and substantially all real estate and fixed assets owned
by the Company and its domestic subsidiaries subject to Fleet's first position
as gold consignor, supported by the letter of credit.
During the first quarter of fiscal 1996, the Company used its final PIK to make
the semiannual interest payment due May 13, 1995, on the 13% Senior Subordinated
Notes, due May 31, 1998, with approximately $4.2 million of additional notes.
The Company makes semiannual cash interest payments of approximately $4.5
million including a payment on May 15, 1996.
As of May 26, 1996, approximately $24.4 million was outstanding under the
Company's revolving credit agreement with Foothill.
During the first quarter of fiscal 1997, the Company agreed to reduce its
domestic gold facilities from 67,000 troy ounces to 63,000 troy ounces. A
subsidiary of the Company has an agreement with a gold supplier to provide
secured gold consignment availability of approximately 4,800 troy ounces. As of
May 26, 1996, approximately 67,700 ounces of gold valued at approximately $26.4
million were on consignment under the Company's gold consignment facilities.
(3) Inventories
Inventories consisted of the following at May 26, 1996, and February 25, 1996:
<TABLE>
<CAPTION>
May 26, February 25,
1996 1996
<S> <C> <C>
Raw Materials $12,130,929 $14,820,768
Work-in-Process 8,884,225 9,947,057
Finished Goods 62,703,879 65,370,578
$83,719,033 $90,138,403
</TABLE>
<PAGE>
(4) Loss Per Common Share
Loss per common share is computed by adjusting the Company's net loss for the
accretion of discount and dividends on preferred stocks and dividing by the
weighted average number of common shares outstanding during each period.
(5) Supplemental Disclosure of Noncash Investing and Financing Activity
On May 15, 1995, the Company issued approximately $4.2 million in new 13% Senior
Subordinated Notes due May 31, 1998, as payment of the semiannual interest
installment. Approximately $2.5 million of this amount was classified as accrued
expenses in the February 26, 1995, Consolidated Balance Sheet.
(6) Subsequent Event
On May 20, 1996, the Company entered into an agreement to sell assets and
liabilities of its Balfour and Gold Lance subsidiaries constituting
substantially all of the operations of Balfour and Gold Lance to Class Rings,
Inc. (CRI), a new company formed by Castle Harlan Partners II, L.P. and the
Company. Separately, CRI entered into an agreement with CJC Holdings, Inc. (CJC)
to acquire its school ring business.
The Company's agreement with CRI is subject to a number of significant
contingencies including approval by the Federal Trade Commission and CRI's
ability to raise sufficient capital to consummate the acquisition of Balfour and
Gold Lance and the acquisition of CJC's school ring business.
Under the Company's agreement with CRI, the Company will receive cash of $55
million, adjustable for the fluctuation in working capital as of the date of
closing, 8% of the common stock of CRI and the cash equivalent to the value of
gold on hand as of the date of closing. In addition, the Company may receive
additional shares of common stock of CRI based on CRI's exceeding certain
defined levels of profitability. Under this contingent earnout arrangement, the
Company can earn up to an additional 10% interest in the common stock of CRI. If
the Company is able to consummate the transaction as contemplated, it is not
expected that the transaction would have an unfavorable impact on the Company's
financial position and operating results.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations for the Quarter Ended May 26, 1996, Compared to the
Quarter Ended May 28, 1995
Net sales for the fiscal quarter ended May 26, 1996, decreased approximately
$10.7 million or 15.5% from approximately $69.0 million in fiscal 1996 to
approximately $58.3 million in fiscal 1997. This decrease has been primarily in
sales of fine jewelry which the Company believes have been affected by a general
softening of demand for colored-stone products. The Company believes that in the
highly competitive colored-stone and diamond product categories, it needs to
improve its ability to meet customer expectations.
<PAGE>
Gross profit for the fiscal quarter ended May 26, 1996, was $20.2 million
compared with $21.9 million for the first quarter of fiscal 1996. Lower sales of
lower margin fine jewelry products coupled with level sales of higher margin
scholastic products have resulted in a change in product mix. This change
combined with modest margin improvements at the Company's Balfour subsidiary
have resulted in an improvement in gross profit margin from 31.7% for the
quarter ended May 28, 1995, to 34.6% for the quarter ended May 26, 1996.
Selling, general and administrative (SG&A) expenses for the fiscal quarter ended
May 26, 1996, were approximately the same as during the corresponding period in
fiscal 1996. As a percentage of net sales, SG&A expenses increased from 27.7% in
fiscal 1996 to 32.6% in fiscal 1997. This percentage increase primarily relates
to SG&A expenses for the Company's fine jewelry businesses remaining level with
the first quarter of fiscal 1996 while net sales in these businesses have
decreased.
Net interest expense for the fiscal quarter ended May 26, 1996, was
approximately the same as during the corresponding quarter of fiscal 1996. The
Company's average borrowings for the fiscal quarter ended May 26, 1996,
increased approximately $2 million from approximately $111 million in fiscal
1996 to approximately $113 million in fiscal 1997. The weighted average interest
rate was approximately 11.4% for the first quarter of fiscal 1996 and
approximately 11.2% for the first quarter of fiscal 1997.
Although the Company had a taxable loss for the fiscal quarter ended May 26,
1996, the Company recorded a tax provision of approximately $80,000. The tax
provision was primarily due to the Company's inability to fully recognize the
tax benefits of operating losses in certain jurisdictions as well as state and
foreign income taxes.
Liquidity and Working Capital
Cash used in operating activities during the quarter ended May 26, 1996, was
approximately $9.1 million compared with $5.7 million for the same quarter of
fiscal 1996. The difference in cash used in operations from fiscal 1997 to
fiscal 1996 is principally due to the $4.5 million interest payment made in
fiscal 1997 which was made with the issuance of additional notes in fiscal 1996.
Cash used in investing activities for the quarter ended May 26, 1996, was $0.6
million compared to $0.5 million in fiscal 1996. The increase is due to higher
capital expenditures in the current period.
Cash provided by financing activities was approximately $9.1 million for the
quarter ended May 26, 1996, compared with $8.1 million for the quarter ended May
28, 1995. The change in cash provided by financing activities is the result of
higher net borrowings on the Company's revolving credit facility.
<PAGE>
The Company's net cash position increased from approximately $5.2 million at
February 25, 1996, to approximately $4.5 million at May 26, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Material Contracts
10.1 Loan Agreement among Town & Country Corporation, Town & Country
Fine Jewelry Group, Inc., Gold Lance, Inc., L.G. Balfour Company
Inc. and Foothill Capital Corporation dated July 3, 1996.
10.2 Second Amended and Restated Consignment Agreement by and between
Fleet Precious Metals Inc. and Town & Country Corporation, Town &
Country Fine Jewelry Group, Inc., L.G. Balfour Company and Gold
Lance, Inc. dated July 3, 1996.
10.3 Creditor Agreement by and between Foothill Capital Corporation and
Fleet Precious Metals, Inc. dated July 3, 1996.
11 Earnings Per Share Computations
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no Form 8-K filings during the first quarter ended May 26,
1996.
<PAGE>
SIGNATURES
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOWN & COUNTRY CORPORATION
(Registrant)
Date: July 9, 1996 /s/ Francis X. Correra
---------------------------------
Francis X. Correra
Senior Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
TOWN & COUNTRY CORPORATION EXHIBIT 11
Earnings Per Share Computations
(Unaudited)
For the Three Months Ended
May 26, May 28,
1996 1995
PRIMARY EPS:
<S> <C> <C>
Net loss $ (1,854,443)$ (514,424)
Accretion of discount and dividends
on preferred stocks 223,128 243,735
Loss attributable to common
stockholders $ (2,077,571)$ (758,159)
Weighted average common
shares outstanding 24,317,210 23,575,577
Weighted shares issued from
exercise and assumed execise of:
warrants -- --
options -- --
Shares for EPS
calculation 24,317,210 23,575,577
REPORTED EPS:
Net loss $ (0.08)$ (0.02)
Accretion of discount and dividends
on preferred stocks (0.01) (0.01)
Loss per common share $ (0.09)$ (0.03)
FULLY DILUTED EPS:
For the periods presented in this exhibit, there is no dilution from Primary
EPS.
</TABLE>
This exhibit should be reviewed in conjunction with Note 4 of Notes to
Consolidated Financial Statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000768608
<NAME> Robert C. MacCready
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Feb-23-1997
<PERIOD-START> Feb-26-1996
<PERIOD-END> May-26-1996
<EXCHANGE-RATE> 1
<CASH> 4,502,093
<SECURITIES> 0
<RECEIVABLES> 58,216,594
<ALLOWANCES> 2,231,000
<INVENTORY> 83,719,033
<CURRENT-ASSETS> 147,025,436
<PP&E> 84,684,583
<DEPRECIATION> 44,847,311
<TOTAL-ASSETS> 209,000,891
<CURRENT-LIABILITIES> 51,645,747
<BONDS> 92,708,986
2,283,132
1,977,905
<COMMON> 245,930
<OTHER-SE> 53,793,487
<TOTAL-LIABILITY-AND-EQUITY> 209,000,891
<SALES> 58,264,124
<TOTAL-REVENUES> 58,264,124
<CGS> 38,065,900
<TOTAL-COSTS> 38,065,900
<OTHER-EXPENSES> 18,705,357
<LOSS-PROVISION> 270,169
<INTEREST-EXPENSE> 3,026,151
<INCOME-PRETAX> (1,774,418)
<INCOME-TAX> 80,025
<INCOME-CONTINUING> (1,854,443)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,077,571)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
Exhibit 10.1
<PAGE>
LOAN AGREEMENT
among
TOWN & COUNTRY CORPORATION,
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
GOLD LANCE, INC.
L.G. BALFOUR COMPANY, INC.,
and
FOOTHILL CAPITAL CORPORATION
Dated as of July 3, 1996
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 24
1.3 Code 24
1.4 Construction 24
1.5 Schedules and Exhibits 24
2. LOAN AND TERMS OF PAYMENT 24
2.1 Revolving Advances 24
2.2 Overadvances 25
2.3 Mandatory Prepayments 25
2.4 Interest: Rates, Payments, and Calculations 26
2.5 Crediting Payments 27
2.6 Statements of Obligations 27
2.7 Fees 27
2.8 Letters of Credit and Letter of Credit Guarantees 28
3. CONDITIONS; TERM OF AGREEMENT 30
3.1 Conditions Precedent to Initial Revolving Advance
or Letter of Credit 30
3.2 Conditions Concurrent to Initial Revolving Advance
or Letter of Credit 33
3.3 Conditions Precedent to all Revolving Advances
and Letters of Credit 33
3.4 [Intentionally Omitted] 33
3.5 Term; Renewal 33
3.6 Effect of Termination 34
3.7 Early Termination by Borrower 34
3.8 Termination Upon Event of Default 35
4. COLLATERAL 35
4.1 Collection of Accounts, General Intangibles, Negotiable
Collateral 35
4.2 Delivery of Additional Documentation Required 36
4.3 Power of Attorney 36
4.4 Right to Inspect; Payment of Certain Costs, Fees, and
Expenses Relating to Collateral 36
5. REPRESENTATIONS AND WARRANTIES 37
5.1 No Prior Encumbrances 37
5.2 Eligible Accounts 37
5.3 Eligible Inventory 37
5.4 Location of Inventory and Equipment 37
5.5 Inventory Records 37
5.6 Location of Chief Executive Office 37
5.7 Due Organization and Qualification 38
5.8 Due Authorization; No Conflict 38
5.9 Litigation 38
5.10 No Material Adverse Change in Financial Condition 38
5.11 Solvency 38
5.12 ERISA 38
5.13 Environmental Condition 39
5.14 Ownership of Subsidiaries; Inactive Subsidiaries 39
5.15 Reliance by Foothill; Cumulative 39
6. AFFIRMATIVE COVENANTS 40
6.1 Accounting System 40
6.2 Collateral Reports 40
6.3 Schedules of Accounts 40
6.4 Financial Statements, Reports, Certificates 41
6.5 Tax Returns 42
6.6 Designation of Inventory 42
6.7 Returns 42
6.8 Title to Equipment 42
6.9 Maintenance of Equipment 42
6.10 Taxes 42
6.11 Insurance 43
6.12 Foothill Expenses 43
6.13 Financial Covenants 43
6.14 No Setoffs or Counterclaims 45
6.15 Location of Inventory and Equipment 45
7. NEGATIVE COVENANTS 45
7.1 Indebtedness 45
7.2 Liens 47
7.3 Restrictions on Fundamental Changes 47
7.4 Extraordinary Transactions and Disposal of Assets 47
7.5 Change Name 47
7.6 Guarantee 47
7.7 Nature of Business; Fiscal Year 47
7.8 Prepayments 47
7.9 Change of Control 48
7.10 Capital Expenditures 48
7.11 Consignments 48
7.12 Distributions 48
7.13 Accounting Methods 48
7.14 Investments 49
7.15 Transactions with Affiliates 49
7.16 Suspension 49
7.17 Compensation 49
7.18 Use of Proceeds 50
7.19 Amendment of Certain Documents 50
7.20 Specific Gold Covenants 50
8. EVENTS OF DEFAULT 51
9. FOOTHILL'S RIGHTS AND REMEDIES 53
9.1 Rights and Remedies 54
9.2 Remedies Cumulative 56
10. TAXES AND EXPENSES REGARDING THE COLLATERAL 56
11. WAIVERS; INDEMNIFICATION 56
11.1 Demand; Protest; etc. 56
11.2 Foothill's Liability for Inventory or Equipment 56
11.3 Indemnification 57
11.4 Suretyship Waivers and Consents 57
12. NOTICES 60
13. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER 61
14. DESTRUCTION OF BORROWER'S DOCUMENTS 62
15. GENERAL PROVISIONS 62
15.1 Effectiveness 62
15.2 Successors and Assigns 62
15.3 Section Headings 62
15.4 Interpretation 62
15.5 Severability of Provisions 63
15.6 Amendments in Writing 63
15.7 Counterparts; Telecopy Execution 63
15.8 Revival and Reinstatement of Obligations 63
15.9 Integration 63
15.10 Renegotiation of Certain Provisions
in Certain Instances 63
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT, is entered into as of July 3, 1996, among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of business
located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California
90025-3333, on the one hand, and, on the other hand, TOWN & COUNTRY CORPORATION,
a Massachusetts corporation ("T&C"), with its chief executive office located at
25 Union Street, Chelsea, Massachusetts 02150, TOWN & COUNTRY FINE JEWELRY
GROUP, INC., a Massachusetts corporation ("Group"), with its chief executive
office located at 25 Union Street, Chelsea, Massachusetts 02150, GOLD LANCE,
INC., a Massachusetts corporation ("GLI"), with its chief executive office
located at 1920 North Memorial Drive, Houston, Texas 77007, and L.G. BALFOUR
COMPANY, INC., a Delaware corporation ("Balfour"), with its chief executive
office located at 15 John Dietsch Boulevard, P.O. Box 1999, North Attelborough,
MA 02763. Effective on the Closing Date, this Agreement amends and restates in
its entirety that certain Loan Agreement dated as of May 14, 1993, between the
parties hereto (the "Prior Agreement"); provided that Section 11.3 of the Prior
Agreement shall not be terminated or superseded hereby. All "Obligations" (as
defined in the Prior Agreement) outstanding on the Closing Date automatically
shall become Obligations hereunder, as if new Revolving Advances were made or
Letters of Credit issued on the Closing Date, provided that all outstanding
advances and L/C's or L/C Guaranties issued under the Prior Agreement shall in
fact remain outstanding hereunder and shall not be deemed to have been repaid,
cancelled, or reissued merely because of the amendment and restatement provided
for herein.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have the
following definitions:
"Account Debtor" means any Person who is or may become obligated under, with
respect to, or on account of an Account.
"Accounts" means all presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to a Debtor arising out of the
sale or lease of goods or the rendition of services by such Debtor, irrespective
of whether earned by performance, and any and all credit insurance, guaranties,
or security therefor.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms controlling", "controlled by," and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly ten percent (10%) or more of the securities having
ordinary voting power for the election of directors or other members of the
governing body of a Person or ten percent (10%) or more of the partnership or
other ownership interests of a Person (other than as a limited partner of such
Person) shall be deemed to control such Person; (b) each director or officer of
a Person shall be deemed to be an Affiliate of such Person; and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed to be an Affiliate of such Person.
"Agreement" means this Loan Agreement and any extensions, riders, supplements,
notes, amendments, or modifications to or in connection with this Loan
Agreement.
"Asset Disposition" means any direct or indirect sale, conveyance, transfer,
lease or other disposition to any person other than Borrower or a Subsidiary in
one transaction or a series of related transactions, of any capital stock or
other interests (including partnership interests) any Subsidiary (other than
directors' qualifying shares) or any other property or asset of Borrower or any
Subsidiary (each referred to for purposes of this definition as a
"disposition"), including any disposition by means of a merger, consolidation or
similar transaction.
"Authorized Officer" means any officer of Borrower.
"Average Unused Portion of the Available Maximum Combined Facility" means: (a)
the lesser of (x) the Maximum Combined Facility, and (y) the Maximum Foothill
Amount plus the Syndicated Amount; less (b) the sum of (i) the average Daily
Balance of Revolving Advances that were outstanding during the immediately
preceding calendar month, plus (ii) the average Daily Balance of the L/C Amount
that was outstanding during the immediately preceding calendar month.
"Balfour" has the meaning ascribed thereto in the preamble to this Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. Section 101
et seq.), as amended from time to time.
"Borrower" means Balfour, GLI, Group, and T&C, individually and collectively,
and jointly and severally, and their respective successors and assigns.
"Borrower's Books" means all of each Debtor's books and records including:
ledgers; records indicating, summarizing, or evidencing such Debtor's assets or
liabilities, or the Collateral; all information relating to such Debtor's
business operations or financial condition; and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Borrowing Base" means (i) the sum of (a) Balfour's Net Eligible Accounts
Availability Component, (b) GLI's Net Eligible Accounts Availability Component,
(c) Group's Net Eligible Accounts Availability Component, and (d) T&C's Net
Eligible Accounts Availability Component, plus (ii) the lesser of (y) Twelve
Million Five Hundred Thousand Dollars ($12,500,000), and (z) the sum of (a)
Balfour's Eligible Inventory Availability Component, (b) GLI's Eligible
Inventory Availability Component, (c) Group's Eligible Inventory Availability
Component, and (d) T&C's Eligible Inventory Availability Component.
"Business Day" means any day which is not a Saturday, Sunday, or other day on
which national banks are authorized or required to close.
"Certificate of Designation" means the Certificate of Vote of Directors
Establishing the Exchangeable Preferred Stock that is certified by the Clerk of
T&C with respect to the rights and preferences of the New Exchangeable Preferred
Stock.
"Change of Control" means the occurrence of any of the following events:
(i) the sale or transfer of all or substantially all of the assets of
Borrower (or any entity composing Borrower) as an entirety to any Person or
related group of Persons other than an Affiliate or Affiliates of Borrower (or
any entity composing Borrower), other than pur to a transaction permitted under
Section 7.3 or Section 7.4 hereof;
(ii) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
(A) C.William Carey, (B) any relative or spouse of C. William Carey who has the
same principal residence as C. William Carey, or any relative of such spouse who
has the same principal residence as C. William Carey, (C) any trust or other
estate in which C. William Carey or any relative or spouse (who has the same
principal residence as C. William Carey) of C. William Carey (or any relative of
such spouse who has the same principal residence as C. William Carey) has a
substantial beneficial interest or as to which he or she, as the case may be,
serves as trustee or in a similar fiduciary capacity, or (D) any mutual fund or
other investment fund managed by Fidelity Management & Research Company, Inc.,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of 25% or more of the Voting Stock of
Borrower (or any entity composing Borrower);
(iii) Borrower (or any entity composing Borrower) engages in any merger,
consolidation, sale of capital stock, or any other transaction or series of
transactions with any other Person, with the effect that the stockholders of
Borrower (or any entity composing Borrower) immediately prior thereto own,
directly or indirectly, in the aggregate, less than 75% of the total voting
power entitled to vote in the election of directors of (x) Borrower if Borrower
is the surviving entity, or (y) the surviving or resulting entity if Borrower
is not the surviving entity, in each such case immediately after such
transaction; or
(iv) Borrower (or any entity composing Borrower) is liquidated, dissolved,
or adopts a plan of liquidation pursuant to the Bankruptcy Code or any other
bankruptcy law.
"Closing Date" means the date of the initial advance or the date of the initial
issuance of a Letter of Credit, whichever occurs first.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts; Borrower's Books; the
Equipment; the General Intangibles; the Inventory; the Negotiable Collateral;
any money, or other assets of Borrower which hereafter come into the possession,
custody, or control of Foothill; provided, however, that the foregoing shall not
include the Exchange Property; and the proceeds and products, whether tangible
or intangible, of any of the foregoing including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or other
tangible or intangible property resulting from the sale, exchange, collection,
or other disposition of the Collateral, or any portion thereof or interest
therein, and the proceeds thereof.
"Collateral Agent" means Foothill Capital Corporation, a California corporation,
in its capacity as Collateral Agent under and pursuant to the Intercreditor
Agreement.
"Collections Agents" means one or more commercial banks that are reasonably
acceptable to Foothill.
"Consigned Precious Metals" means Precious Metals consigned to Borrower by
another person or entity and not owned outright by Borrower.
"Consolidated" or "consolidated, with reference to any term defined herein,
shall mean that term as applied to the accounts of Borrower and the
Subsidiaries, consolidated in accordance with GAAP.
"Consolidated Adjusted EBITDA" means, with respect to any period, the
Consolidated Net Income for such period (i) increased by the sum, on a
consolidated basis, of (a) all interest expense, (b) depreciation and
amortization expense, and (c) non-cash taxes, in each case paid or accrued by
T&C for such period, and (ii) decreased by the amount, on a consolidated basis,
of all capital expenditures paid or accrued by T&C for such period.
"Consolidated Adjusted Net Income" means, for any period, the net income (loss)
of Borrower and the Subsidiaries determined on a consolidated basis in
accordance with GAAP for such period; provided, however, that there shall not be
included in such Consolidated Adjusted Net Income:
(i) any net income (loss) of any person if such person is not a Subsidiary,
except that Borrower's equity in the net income of any such person for such
period shall be included in such Consolidated Adjusted Net Income up to the
aggregate amount of cash actually distributed by such person during such period
to Borrower or a Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Subsidiary, to the limitations
contained in clause (iii) of this definition);
(ii) any net income (loss) of any Subsidiary if such Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions, loans or advances by such Subsidiary, directly or
indirectly, to Borrower (or on the ability of Borrower to receive or retain any
such dividend, distribution, loan or advance), except that Borrower's equity in
the net income of any such Subsidiary during such period shall be included in
Consolidated Adjusted Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary during any such period to Borrower or another
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to another Subsidiary, to the limitation
contained in this clause and in clause (v) of this definition);
(iii) any net income (loss) realized upon a sale or other disposition of any
property, plant or equipment of Borrower or any Subsidiary which is not sold or
otherwise disposed of in the ordinary course of business;
(iv) any gain or loss realized upon the sale or other disposition of any
capital stock of a Subsidiary; and
(v) the cumulative effect of a change in accounting principles.
"Consolidated Adjusted Total Senior Liabilities" means, as of the date of
determination thereof is to be made, the sum of Consolidated Total Senior
Liabilities plus Consolidated Precious Metal Liabilities.
"Consolidated Current Assets" means, as of the date of determination thereof is
to be made, aggregate amount of all current assets of Borrower and its
Subsidiaries calculated on a consolidated basis that would, in accordance with
GAAP, be classified on a balance sheet as current assets.
"Consolidated Current Liabilities" means, as of the date of determination
thereof is to be made, the aggregate amount of all current liabilities of
Borrower and its Subsidiaries, calculated on a consolidated basis that would, in
accordance with GAAP, be classified on a balance sheet
"Consolidated EBIT" means, with respect to any period, the Consolidated Adjusted
Net Income for such period increased (to the extent already deducted therefrom)
by the sum, on a consolidated basis, of (i) all income taxes paid or accrued by
Borrower and the Subsidiaries for such period, and (ii) all Consolidated Fixed
Charges for such period, in each case determined in accordance with GAAP.
"Consolidated Fixed Charge Ratio" means the ratio of (i) Consolidated EBIT for
the Reference Period to (ii) Consolidated Fixed Charges for the Reference
Period.
"Consolidated Fixed Charges" means the sum of (a) the aggregate amount of
interest (other than interest on the New Senior Subordinated Notes which is to
be paid in additional New Senior Subordinated Notes) required to be paid on
Indebtedness (other than Indebtedness incurred for the acquisition from the Gold
Consignor of gold or other precious metals pursuant to the Gold Consignment
Agreement) of Borrower and the Subsidiaries, plus (b) the imputed portion of
rental expense representing the interest factor of lease payments of Borrower
and the Subsidiaries, plus (c) the aggregate amount of distributions required to
be paid under the terms of any capital stock of Borrower, including the New
Exchangeable Preferred Stock, that may not be deferred at the option of
Borrower, plus (d) the net interest expenses and consignment fees associates
with the Gold Consignment Agreement, plus (e) the net interest expense and
consignment fees associated with the consignment to foreign Subsidiaries of gold
and other precious or semi-precious stones.
"Consolidated Interest Coverage Ratio" means the ratio (i) Consolidated Adjusted
EBITDA to (ii) the cash interest expense of T&C and its Subsidiaries, determined
on a consolidated basis.
"Consolidated Net Income" means, for any period, the net income (loss) of
Borrower and the Subsidiaries determined on a consolidated basis in accordance
with GAAP for such period.
"Consolidated Precious Metal Liabilities" shall mean, as of the date any
determination thereof is to be made, all liabilities of Borrower and the
Subsidiaries, calculated on a consolidated basis, in respect of all
consignments, leases, and similar financings of Precious Metals.
"Consolidated Tangible Capital Base" shall mean, as of the date any
determination thereof is to be made, the sum of (i) Consolidated Tangible Net
Worth, plus (ii) the book amount of Subordinated Indebtedness, calculated on a
consolidated basis.
"Consolidated Tangible Net Worth" means, as of the date of determination thereof
is to be made, Borrower and the Subsidiaries' total stockholder's equity, minus
the intangible assets of Borrower and the Subsidiaries, calculated on a
consolidated basis.
"Consolidated Total Liabilities" means, as of the date of determination thereof
is to be made, all liabilities of Borrower and the Subsidiaries, on a
consolidated basis, exclusive of the New Exchangeable Preferred Stock and
increased by the amount of minority interests.
"Consolidated Total Senior Liabilities" means, as of the date of determination
thereof is to be made, Consolidated Total Liabilities minus the book amount of
Subordinated Indebtedness.
"Creditor Agreement" means a Creditor Agreement, in form and substance
acceptable to Foothill and Borrower, whereby Gold Consignor agrees to act for
Collateral Agent with respect to certain matters specified therein relating to
gold of, or on consignment to, Borrower. "Daily Balance" means the amount of an
Obligation owed at the end of a given day.
"Debtor" means any one of Balfour, GLI, Group, or T&C.
"Dilution Reserve" means (a)(i) as of the date of determination, the percentage
of dilution (e.g., credits, discounts, samples, returns, etc.) of all Accounts
of a Debtor (the amount of such dilution to be determined by Foothill in its
sole judgment), minus (ii) five percentage points (5%), times (b) one and
one-quarter (1.25), times (c) as of the date of determination, the aggregate
amount of Eligible Accounts then extant of such Debtor.
"Dollar" or "dollar" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section 3.7.
"Eligible Accounts" means those Accounts created by a Debtor in the ordinary
course of business that arise out of such Debtor's sale of goods or rendition of
services, that strictly comply with all of Borrower's representations and
warranties to Foothill, and that are and at all times shall continue to be
acceptable to Foothill in all respects (in the reasonable exercise of its
discretion); provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill (in the reasonable exercise of its
discretion). Eligible Accounts shall not include the following:
(a) Accounts that are more than thirty one (31), but less than sixty (60)
days past due from the due date of the applicable invoices, to the extent that
the aggregate amount of all such Accounts of all of the Debtors exceeds Five
Million Dollars ($5,000,000);
(b) Accounts that the Account Debtor has failed to pay within sixty (60)
days, or more, of the due date of the applicable invoice;
(c) Accounts originated by the EPG division of Balfour;
(d) [Intentionally omitted];
(e) Accounts with selling terms of more than ninety (90) days from the date
of the applicable invoice, with the exception of Accounts as to which Montgomery
Ward is the Account Debtor in which case the Accounts will be ineligible if they
contain selling terms of more than hundred twenty (120) days from the date of
the applicable invoice;
(f) Accounts with respect to which the Account Debtor is an officer,
employee, Affiliate, or agent of any Debtor;
(g) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, so-called
'special event sales', or other terms by reason of which the payment by the
Account Debtor may be conditional;
(h) Accounts with respect to which the Account Debtor is not a resident of
the United States or Canada, and that are not either (1) covered by credit
insurance in form and amount, and by an insurer, satisfactory to Foothill, or
(2) supported by one or more letters of credit that are assignable and have been
delivered to Foothill in an amount and of a tenor, and issued by a financial
institution, acceptable to Foothill;
(i) Accounts with respect to which the Account Debtor is the United States or
any department, agency, or instrumentality of the United States and with respect
to which Borrower has not complied with the provisions of the Federal Assignment
of Claims Act to assign the right to payment to Foothill, or Accounts with
respect to which the Account Debtor is any state of the United States or any
city, town, municipality, or division thereof;
(j) Accounts with respect to which such Debtor is or is reasonably likely to
become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to such Debtor; provided, however, that such Accounts only shall
be deemed ineligible under this clause to the extent of the actual or likely
offsetting amount as reasonably determined by Foothill;
(k) Accounts with respect to an Account Debtor whose total obligations to
Borrower exceed ten percent (10%) of all Eligible Accounts owed to Borrower, to
the extent of the obligations of such Account Debtor in excess of such
percentage; provided, however, that, (1) in the case of K-Mart Corporation, HSN
Broadcasting of Illinois, Inc., Wal-Mart Stores, Inc., Sears Roebuck & Company,
and Montgomery Ward, and such other highly creditworthy Account Debtors as to
which Foothill has agreed to in writing, the foregoing percentage may, in
Foothill's reasonable discretion, be increased to up to twenty percent (20%)
before the excess would be deemed ineligible, and (2) in the case of Zale
Corporation and Gordon Jewelry Corporation (collectively with their respective
successors hereinafter "Zale/Gordon"), the foregoing percentage for Zale/Gordon,
on a combined basis, may, in Foothill's reasonable discretion, be increased to
up to fifteen percent (15%) before the excess would be deemed ineligible;
(l) Accounts with respect to which the Account Debtor disputes liability or
makes any claim with respect thereto, or is subject to any Insolvency
Proceeding, or become insolvent, or goes out of business; provided, however,
that disputed Accounts or Accounts subject to claims only shall be deemed
ineligible under this clause to the extent of the actual or likely offsetting
amount as reasonably determined by Foothill unless Foothill, in the exercise of
its reasonable judgment, believes that the dispute or claim will jeopardize the
repayment of all or substantially all of the Account in a timely manner;
(m) Accounts which are payable in other than United States Dollars;
(n) Accounts the collection of which Foothill, in the reasonable exercise
of its judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(o) Accounts owed by an Account Debtor that has failed to pay fifty percent
(50%), or more, of its Accounts owed to such Debtor within sixty (60) days of
the due date of the applicable invoices; and
(p) Accounts arising from the sale of Inventory that is proceeds of the Zale
Bankruptcy Claim.
"Eligible Finished Goods Inventory" means (a) that portion of Eligible Inventory
consisting of finished goods less (b) to the extent not already excluded from
Eligible Inventory, the value of the Precious Metals component of such finished
goods.
"Eligible Gold" means gold that is owned by Borrower, or that is owned by Gold
Consignor and on consignment to Borrower pursuant to the Gold Consignment
Agreement and with respect to which Gold Consignor has not demanded the return
thereof from Borrower, except for and excluding gold with respect to which
Borrower is in breach of any covenant contained in the Specific Gold Covenants.
"Eligible Inventory" means Inventory consisting of first quality finished goods
held for sale in the ordinary course of a Debtor's business and raw materials
consisting solely of stones or diamonds for such finished goods, that are
located at such Debtor's premises set forth on Schedule E-1 (as such schedule
may be amended from time to time so long as concurrent therewith such Debtor
complies with the provisions of Section 6.15 regarding the establishment of new
locations), are acceptable to Foothill in all respects, and strictly comply with
all of Borrower's representations and warranties to Foothill. Eligible Inventory
shall not include any Inventory of Balfour, any Inventory of GLI, any Inventory
constituting Precious Metals, slow moving or obsolete items, restrictive or
custom items (unless the identifying markings can be readily removed at minor
expense), work in process, components which are not part of finished goods,
spare parts, packaging and shipping materials, supplies used or consumed in such
Debtor's business, Inventory at the premises of third parties, Inventory that is
subject to a security interest or lien in favor of any third Person other than
the Collateral Agent for the benefit of the Secured Parties, bill and hold
goods, Inventory that is not subject to a first priority perfected security
interest in favor of the Collateral Agent for the benefit of Foothill (or, in
the case of 'Mixed Inventory' (as that term is defined in the Intercreditor
Agreement), a first priority perfected security interest in favor of the
Collateral Agent for the benefit of Foothill and the Gold Consignor), defective
goods, 'seconds', Inventory acquired on consignment, Inventory consigned by such
Debtor to third Persons, samples, or purchased fabrication items. Eligible
Inventory shall be valued at the lower of Borrower's cost or market value, on a
first-in, first-out basis, excluding any labor or overhead component, and less
reserves (without duplication) for shrinkage, samples, obsolescence, or
revaluation as such reserves are set forth in Borrower's Books in a manner
consistent with such Debtor's past practices.
"Eligible Inventory Availability Component" means, as of the date any
determination thereof is to be made, and for each individual Debtor, an amount
equal to the lesser of:
(i) seventy-five percent (75%) of the amount of credit availability
created by such Debtor's Net Eligible Accounts; and
(ii) the sum of:
(y) forty percent (40%) of such Debtor's Eligible Finished Goods
Inventory, plus
(z) forty percent (40%) of such Debtor's Raw Materials Inventory.
"Eligible Raw Materials Inventory" means that portion of Eligible Inventory
consisting of raw materials.
"Equipment" means all of each Debtor's present and hereafter acquired machinery,
machine tools, motors, equipment, furniture, furnishings, fixtures, vehicles
(including motor vehicles and trailers), tools, parts, dies, jigs, goods (other
than consumer goods, farm products, or Inventory), and any interest in any of
the foregoing, wherever located, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to army of the
foregoing, wherever located.
"Equity Precious Metals" means Precious Metals owned outright by Borrower and
not on consignment to Borrower from other persons or entities.
"ERISA" means the Employment Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated and
whether or not foreign) which is or may hereafter become a member of a group of
which Borrower is a member and which is treated as a single employer under ERISA
Section 4001(b)(1), or IRC Section 414.
"Event of Default" has the meaning set forth in Section 8.
"Exchange Property" shall have the meaning set forth in the Trust Agreement,
dated as of May 14, 1993, between T&C and BayBank, as trustee.
"Excluded Assets" means those assets of Borrower described on Schedule E-2.
"Exiting Gold Banks" means Rhode Island Hospital Trust National Bank, Republic
National Bank, and ABN AMRO Bank, N.V.
"Foothill" has the meaning set forth in the preamble to this Agreement.
"Foothill Expenses" means all: costs or expenses (including taxes, photocopying,
notarization, telecommunication and insurance premiums) required to be paid by
any Debtor under any of the Loan Documents that are paid or advanced by
Foothill; all amounts required to be paid to Foothill pursuant to
indemnification provisions contained in any of the Loan Documents; documentation
filing, recording, publication, appraisal (including periodic Collateral
appraisals), real estate survey, environmental audit, and search fees assessed,
paid, or incurred by Foothill in connection with Foothill's transactions with
Borrower; costs and expenses incurred by Foothill in the disbursement of funds
to Borrower (by wire transfer or otherwise); charges paid or incurred by
Foothill resulting from the dishonor of checks; costs and expenses paid or
incurred by Foothill to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; out-of-pocket costs and expenses paid or incurred by Foothill in
examining Borrower's Books; costs and expenses of third party claims or any
other suit paid or incurred by Foothill in enforcing or defending the Loan
Documents; and Foothill's reasonable attorneys' fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys' fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning one or more of the Debtors), defending, or concerning the Loan
Documents, irrespective of whether suit is brought. For purposes of this
definition, the term 'Foothill' shall apply irrespective of whether Foothill is
acting in its capacity as a lender, as a representative of lenders, as the
Collateral Agent, as a subagent of the Collateral Agent, or otherwise. Without
limiting the generality of the foregoing, all costs, expenses, and fees payable
to Gold Consignor under the Gold Consignment Agreement or the Creditor Agreement
shall be Foothill Expenses to the extent that Foothill, in its sole discretion,
elects to pay same and charge same to the Loan Account (which Borrower agrees
that Foothill may do in its sole discretion, should Borrower fail to pay same
when due, but which Foothill shall not be obligated to do). Without limiting the
generality of the foregoing, if any Gold Letter of Credit, or any letter of
credit issued by another person and backed by a Gold Letter of Credit, is drawn,
or if Foothill exercises its option under the Creditor Agreement to purchase the
claims of Gold Consignor after an Event of Default has occurred under the Gold
Consignment Agreement, and if, in any such event, Foothill thereafter enters
into one or more "Hedging Contracts" (as defined in the Creditor Agreement),
then any costs and expenses incurred by Foothill in connection with any such
Hedging Contracts or in relation to obtaining or keeping in effect any letter of
credit issued by Norwest Bank Minnesota, N.A. (or any other issuing bank) in
favor of Gold Consignor to support the obligations of Foothill with respect to
any such Hedging Contracts, shall be Foothill Expenses.
"fto" means fine troy ounce.
"GAAP" means the generally accepted accounting principles, applicable in the
United States, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, that, in the case of
the calculation of the covenants in Sections 6.13 and 7.10, were used by
Borrower in the preparation of its audited financial statements as of and for
the period ended February 25, 1996, and, in all other circumstances, means such
generally accepted accounting principles as in effect from time to time, in all
circumstances, consistently applied.
"General Intangibles" means all of each Debtor's present and future general
intangibles and other personal property (including contract rights, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, monies due under any royalty or licensing
agreements, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims) other than goods and Accounts.
"GLI" has the meaning ascribed thereto in the preamble to this Agreement.
"gold" means the malleable ductile metallic chemical element known as gold, and
represented in the table of chemical elements by the symbol "Au," having a
fineness of not less than 0.9995, without regard to whether it is alloyed or
unalloyed, either in bullion form or as contained in or processed into other
materials that contain elements other than gold.
"Gold Borrowing Base" means, as of any date of determination thereof, eighty
three percent (83%) of the total Gold Value of all Eligible Gold, less a dollar
reserve equal to the aggregate dollar amount due from Borrower to all Outside
Processors.
"Gold Cap" means, as of any date of determination prior to the Pending Material
Transaction Closing Date, the dollar amount equal to seventy thousand (70,000)
times the Gold Value of one fto of gold, and, as of any date of determination on
or after the Pending Material Transaction Closing Date, the dollar amount equal
to sixty thousand (60,000) times the Gold Value of one fto of gold .
"Gold Consignment Agreement" means that certain Second Amended and Restated
Consignment Agreement among Borrower and the Gold Consignor that provides
Borrower with gold consignment availability of up to 70,000 ftos of gold, the
form and substance of which shall be reasonably satisfactory to Foothill. "Gold
Consignment Agreement" shall refer to such agreement as it may be amended or
modified from time to time in accordance with the provisions of this Agreement.
"Gold Consignor" means Fleet Precious Metals Inc., a Rhode Island corporation.
"Gold Content" means, with respect to any Eligible Gold, the exact quantity of
gold contained therein, computed on the most accurate basis practicable,
measured in ftos (including fractions thereof).
"Gold Coverage Deficiency" means, as of any date of determination, the greater
of: (a) zero dollars; and (b) the Gold L/C Amount minus the Gold Letter of
Credit Limit.
"Gold Day" means any day (a) that is a Business Day, and (b) that is a day on
which the London gold bullion market is open for business and on which gold
bullion price fixings transpire in such market.
"Gold L/C Amount" means, as of any date of determination, the aggregate L/C
Amount with respect to all Gold Letters of Credit.
"Gold Letter of Credit" means any standby Letter of Credit issued for the
benefit of Gold Consignor with respect to obligations of Borrower to Gold
Consignor that arise under or relate to the Gold Consignment Agreement.
"Gold Letter of Credit Total Exposure" means, as of any date of determination,
the Gold L/C Amount plus aggregate Gold Reimbursement Obligations.
"Gold Letter of Credit Limit" means, as of any date of determination, the least
of (a) the Maximum Gold Letter of Credit Amount, (b) the Gold Borrowing Base,
and (c) the Gold Cap.
"Gold Price" means, as of any date of determination that is a Gold Day, the
price of gold per fto in dollars determined by the Second London Gold Fixing on
such day in the London gold bullion market, as determined by Foothill by any
reasonable method, and, as of any date of determination that is not a Gold Day,
the Gold Price on the most recent prior date that was a Gold Day. In the event
that London Bullion Brokers shall discontinue or alter its usual practice of
quoting a price in dollars for gold on any day for which such a price is
necessary for the purposes hereof, Foothill may by notice to Borrower announce a
reasonable substituted index or mechanism which shall thereupon become the basis
for valuation of gold hereunder.
"Gold Reimbursement Obligation" means, as to any Gold Letter of Credit with
respect to which there has occurred one or more drawings that have not yet been
fully reimbursed by Borrower, the outstanding unreimbursed amount of all such
drawings; provided that, if Revolving Advances are made or deemed made to repay
all or any part of such amount, the amount so advanced thereafter shall be
treated as a Revolving Advance rather than as a Gold Reimbursement Obligation.
"Gold Value" means, with respect to any Eligible Gold, as of any date of
determination, the dollar amount equal to the product of the Gold Content
thereof times the Gold Price.
"Group" has the meaning ascribed thereto in the preamble to this Agreement.
"Hazardous Materials" means all or any of the following: (a) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable laws
or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity or "EP
toxicity"; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
"Inactive Subsidiaries" means (i) L.S. Holding, Inc., a Massachusetts
corporation, (ii) Gleamrich Jewelry (N.A.) Limited, a Hong Kong corporation,
(iii) TOCO Sunjay International Private Limited, an India corporation, (iv) Dara
Gold Creations, a Hong Kong corporation, (v) GM Jewelry Factory, a Hong Kong
corporation, (vi) Essex Jewelry Manufacturing Company, Ltd., a Thailand
corporation, (vii) Gleamrich Jewelry Limited, a Hong Kong corporation, and
(viii) TNC Holding B.V., a Netherlands corporation.
"Indebtedness" shall mean: (a) all obligations of any Debtor for borrowed money;
(b) all obligations of any Debtor evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of a Debtor
in respect of letters of credit, letter of credit guaranties, bankers
acceptances, interest rate swaps, controlled disbursement accounts, or other
financial products; (c) all obligations under capitalized leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any asset owned by any Debtor (including consignments intended as security),
irrespective of whether such obligation or liability is assumed; (e) all
obligations or liabilities of any Debtor arising out of the consignment of
inventory to such Debtor by a third Person; and (f) any obligation of a Debtor
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Intercreditor Agreement" means that certain Collateral Agency and Intercreditor
Agreement, dated as of May 14, 1993, among Foothill, the Gold Consignor, the
Exiting Gold Banks, the representative of the holders of the Senior Notes, the
representative of the holders of the New Senior Subordinated Notes, the
representative of the holders of the industrial revenue bonds heretofore issued
with respect to the Group facility in New York, New York (which bonds have since
been retired), the Collateral Agent, and Borrower.
"Inventory" means all present and future inventory in which any Debtor has any
interest, including goods held for sale or lease or to be furnished under a
contract of service and all of each Debtor's present and future raw materials,
work in process, finished goods, and packing and
shipping materials, wherever located, and any documents of title representing
any of the above.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
"Judicial Officer or Assignee" means any trustee, receiver, controller,
custodian, assignee for the benefit of creditors, or any other Person having
powers or duties like or similar to the powers and duties of a trustee,
receiver, controller, custodian, or assignee for the benefit of creditors.
"L/C" has the meaning set forth in Section 2.8(a).
"L/C Amount" means, as of any date that a determination thereof is to be made,
the aggregate outstanding undrawn amount under Letters of Credit issued by
Foothill pursuant to the terms of this Agreement.
"L/C Guaranty" has the meaning set forth in Section 2.8(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the context requires.
"Loan Account" means the loan account maintained by Foothill with respect to
Borrower in relation to the Obligations, wherein Foothill records charges and
payments with respect thereto.
"Loan Documents" means, collectively, this Agreement, the Intercreditor
Agreement, the Lock Box Agreements, the Mortgages, the Patent Collateral
Assignments, the Security Agreements, the Stock Pledge Agreements, the Trademark
Collateral Assignments, any note or notes executed by Borrower and payable to
Foothill, and any other agreement entered into in connection with this
Agreement, together with all alterations, amendments, changes, extensions,
modifications, refinancings, refundings, renewals, replacements, restatements,
or supplements, of or to any of the foregoing.
"Lock Box" shall have the meaning provided in the respective Lock Box
Agreements.
"Lock Box Agreements" means, collectively, those certain Tri-Party Agreements,
dated as of the Closing Date, each of which is among Borrower, Foothill, and one
of the Collection Agents.
"LSI" means Little Switzerland, Inc., a Delaware corporation.
"Maturity Date" shall mean (i) the Renewal Date if the term hereof is not
renewed pursuant to Section 3.5 hereof, or (ii) the date that is three (3) years
from the Renewal Date if the term hereof is renewed pursuant to Section 3.5
hereof.
"Maximum Amount" means, (a) from and after the Closing Date and prior to the
Pending Material Transaction Closing Date, Forty Million Dollars ($40,000,000),
and (b) on and after the Pending Material Transaction Closing Date, Thirty-Five
Million Dollars ($35,000,000), subject to reduction pursuant to Section 2.3
hereof.
"Maximum Combined Facility" means, (a) from and after the Closing Date and prior
to the Pending Material Transaction Closing Date, Sixty Five Million Dollars
($65,000,000), and (b) on and after the Pending Material Transaction Closing
Date, Fifty-Five Million Dollars ($55,000,000), subject to reduction by the
amount of any reduction of the Maximum Amount pursuant to Section 2.3 hereof.
"Maximum Foothill Amount" means that portion of the Maximum Combined Facility
for which Foothill shall be responsible, exclusive of any participations with
Participants, which amount is (a) from and after the Closing Date and prior to
the Pending Material Transaction Closing Date, Twenty Five Million Dollars
($25,000,000), and (b) on and after the Pending Material Transaction Closing
Date, Twenty Million Dollars ($20,000,000); provided, however, that each time
the Maximum Combined Facility is reduced (other than on the Pending Material
Transaction Closing Date as a result of the consummation of the Pending Material
Transaction), the Maximum Foothill Amount shall be reduced proportionately.
"Maximum Gold Letter of Credit Amount" means, from and after the Closing Date
and prior to the Pending Material Transaction Closing Date, Thirty Million
Dollars ($30,000,000), and (b) on and after the Pending Material Transaction
Closing Date, Twenty-Five Million Dollars ($25,000,00
"Monthly Gold Certificate" means, with respect to any fiscal month of Borrower,
a certificate in the form of Exhibit M-1, properly completed to include all
relevant information with respect to such period, and certified to be complete,
true, and correct by the chief financial office of T&C.
"Mortgages" shall mean one or more mortgages or deeds of trust executed by the
Debtor that owns the relevant parcel and, or in favor of, the Collateral Agent,
the form and substance of which shall be satisfactory to Foothill. The Mortgages
shall be executed by those entities and shall encumber those fee and leasehold
estates respecting the parcels of real property, and the related improvements
thereto, that are identified on Schedule M-1 attached hereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA Sections
3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of Borrower or
any ERISA Affiliate.
"Negotiable Collateral" means all of each Debtor's present and future letters of
credit, notes, drafts, instruments, certificated securities (including the
shares of stock of Balfour, GLI, and Group), documents, personal property leases
(wherein a Debtor is the lessor), chattel paper and Borrower's Books relating to
any of the foregoing.
"Net Cash Proceeds" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to, or in liquidation of, any note or installment receivable or
otherwise, but only as and when received, except that, with respect to any cash
equivalents received from an Asset Disposition, Borrower shall be deemed to have
received on the date of such Asset Disposition a cash payment equal to the fair
value of such cash equivalents on such date) therefrom, in each case net of all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred and all taxes and other charges required to be paid or accrued under
GAAP with respect to such Asset Disposition, in each case net of all payments
required to be made on any Indebtedness which is secured by a Permitted Lien on
any assets subject to such Asset Disposition which Permitted Lien has priority
over the security interest or lien in and to such asset that is held by the
Collateral Agent for the benefit of Foothill, and in each case net of all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition.
"Net Eligible Accounts" means, as of the date any determination thereof is to be
made, (i) the amount of a Debtor's Eligible Accounts, less (ii) the amount of
the Dilution Reserve, if any, applicable to such Debtor's Accounts.
"Net Eligible Accounts Availability Component" means, as of the date any
determination thereof is to be made, and for each individual Debtor, an amount
equal to the lesser of:
(i)(y) eighty percent (80%) of the amount of Net Eligible Accounts of such
Debtor that are less than thirty-one (31) days from the due date of the
applicable invoices, plus (z) fifty percent (50%) of the amount of Net Eligible
Accounts of such Debtor that are more than thirty (30) days, but less than sixty
one (61) days, from the due date of the applicable invoices, and
(ii) an amount equal to such Debtor's cash collections for the immediately
preceding (y) sixty (60) calendar day period during the months of December
through August, and (z) seventy-five (75) day period for the months September
through November.
"New Exchangeable Preferred Stock" shall mean a class of exchangeable preferred
stock of T&C, entitled to a liquidation preference which shall initially be
$14.59 per share plus accrued and unpaid dividends, which is entitled to a
liquidation preference over all common stock of T&C. Each share of New
Exchangeable Preferred Stock shall be exchangeable at the option of the holder
thereof, on a share-for-share basis, for T&C's shares of LSI. Such New
Exchangeable Preferred Stock shall provide for cumulative dividends to be
payable when, as, and if declared by the board of directors of T&C at the rate
of 6% per annum times the liquidation preference per share plus accrued and
unpaid dividends and be payable semi-annually commencing May 14, 1995.
"New Senior Subordinated Notes" shall mean up to Fifty Six Million Nine Hundred
Ninety Nine Thousand Seven Hundred Thirty Five Dollars ($56,999,735) of a class
of senior subordinated notes issued by T&C. Such New Senior Subordinated Notes
shall: (a) provide for interest to accrue from and after the Closing Date at 13%
per annum and be payable semi-annually commencing six months after the date of
issuance thereof; (b) provide that T&C shall have the option of paying the
interest accrued thereon in cash or in kind for a period of not less than two
years from and after the Closing Date; and (c) provide that no principal thereof
shall be scheduled to be payable prior to May 14, 1998.
"New Senior Subordinated Notes Guarantees" means those certain guarantees
executed and delivered by certain of the Debtors respecting the obligations of
T&C with respect to the New Senior Subordinated Notes.
"New Senior Subordinated Notes Indenture" means the indenture pursuant to which
the New Senior Subordinated Notes are issued. "New Senior Subordinated Notes
Indenture" shall refer to such indenture as it may be amended or modified from
time to time in accordance with the provisions of this Agreement.
"Non-Gold L/C Amount" means, as of any date of determination, the aggregate L/C
Amount with respect to all Non-Gold Letters of Credit.
"Non-Gold Letter of Credit" means any Letter of Credit other than a Gold Letter
of Credit.
"Non-Gold Letter of Credit Total Exposure" means, as of any date of
determination, the Non-Gold L/C Amount plus aggregate Non-Gold Reimbursement
Obligations.
"Non-Gold Reimbursement Obligation" means, as to any Non-Gold Letter of Credit
with respect to which there has occurred one or more drawings that have not yet
been fully reimbursed by Borrower, the outstanding unreimbursed amount of all
such drawings; provided that, if Revolving Advances are made or deemed made to
repay all or any part of such amount, the amount so advanced thereafter shall be
treated as a Revolving Advance rather than as a Non-Gold Reimbursement
Obligation.
"Not Insolvent" means, with respect to any Person on a particular date, that on
such date, at fair valuations, all of the assets of such Person are greater than
the sum of the debts, including contingent liabilities, of such Person. In
computing the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Obligations" means all loans, advances, debts, principal, interest (including
any interest that, but for the provisions of the Bankruptcy Code, would have
accrued), contingent reimbursement obligations owing to Foothill under any
outstanding L/Cs or L/C Guarantees, premiums, liabilities (including all amounts
charged to Borrower's loan account pursuant to any agreement authorizing
Foothill to charge Borrower's loan account), obligations, fees (including Early
Termination Premiums), lease payments, guaranties, covenants, and duties owing
by Borrower (or any Debtor composing Borrower) to Foothill of any kind and
description (whether pursuant to or evidenced by the Loan Documents, by any note
or other instrument, or by any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
any Debtor to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Other Non-Contingent Obligations" means Obligations of Borrower to Foothill
charged to the Loan Account by Foothill other than the principal of the
Revolving Advances, such as (but not limited to) interest that is accrued and
payable and Foothill Expenses that are due from Borrower, from and after the
time such Obligations are charged to the Loan Account and are not merely
contingent Obligations; provided that Reimbursement Obligations shall not be
classified as Other Non-Contingent Obligations even if charged to the Loan
Account.
"Outside Processor" means any person or entity other than Borrower in possession
of Precious Metals, or with respect to which Precious Metals are in transit from
Borrower to such person or entity, or from such person or entity to Borrower,
for the purpose of fabrication, refinement, or processing of same by such person
or entity, or for the purpose of the use or incorporation by such person or
entity of same in a manufacturing process.
"Overadvance" has the meaning set forth in Section 2.2.
"Participant" means any entity, other than Foothill, that has committed to
provide a portion of the financing contemplated herein.
"Patent Collateral Assignments" means one or more Patent Collateral Assignments,
dated as of May 14, 1993, between Balfour, GLI, Group, and T&C, on the one hand,
and, on the other hand, Collateral Agent, pursuant to which Balfour, GLI, Group,
and T&C, as applicable, grant Collateral
Agent a perfected security interest in their patents and related rights in order
to secure their obligations owing to the Secured Parties.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Pending Material Transaction" means the proposed sale by T&C of GLI and
Balfour, on terms and conditions to be approved by Foothill.
"Pending Material Transaction Closing Date" means the date, if any, that the
Pending Material Transaction closes and is consummated.
"Permitted Affiliate Transactions" means (i) transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms, and no
less favorable to Borrower than would be obtained in an arm's length transaction
with a non-Affiliate, and (ii) the transactions contemplated by the terms of,
and the performance of Borrower's obligations under, the Registration
Effectiveness Agreement; provided, however, that in no event shall a transaction
with one or more Inactive Subsidiaries be deemed to be a Permitted Affiliate
Transaction.
"Permitted Asset Disposition" means (i) the use of cash in the ordinary course
of business as currently conducted, (ii) dispositions of Inventory in the
ordinary course of business as currently conducted, (iii) subject to the
security interest of the Collateral Agent therein, licenses by Borrower or a
Subsidiary of intellectual property in the ordinary course of business as
currently conducted, (iv) isolated dispositions of capital stock or other
interests (including partnership interests) or any other property or asset of
Borrower of any Subsidiary that do not exceed $100,000 individually or that do
not aggregate in excess of $250,000 per annum, and (v) any disposition of
properties and assets of Borrower or any Subsidiary that compose Excluded
Assets, or cash or non-cash proceeds from or related to the Excluded Assets, in
accordance with the provisions of the Intercreditor Agreement, to the extent
applicable.
"Permitted Investments" means (i) obligations that carry the full faith and
credit of the United States of America with a maturity of one year or less; (ii)
certificates of deposit or acceptances with a maturity of one year or less of
any financial institution that is a member of the United States Federal Reserve
System having combined capital and surplus and undistributed profits of not less
than $500,000,000; (iii) commercial paper with a maturity of one year or less
issued by a corporation (except Borrower or any Affiliate of Borrower), bank,
trust company or national banking association organized under the laws of any
state of the United States of America or the District of Columbia and rated at
least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investor
Services, Inc. (or if neither such organization shall rate such commercial paper
at any time, a comparable rating by any nationally recognized rating
organization in the United States of America); (iv) debt of any State or
political subdivision that is rated AA or better by Standard & Poor's
Corporation or by Moody's Investor Services, Inc., and matures within one year;
and (v) the Exchange Property, if any, returned to Borrower upon termination of
the trust established pursuant to the Trust Agreement, dated as of even date
herewith, between T&C and BayBank, as trustee.
"Permitted Liens" means: (a) liens and security interests held by Foothill; (b)
liens for unpaid taxes that are not yet due and payable; (c) liens and security
interests set forth on Schedule P-2 attached hereto, and any liens securing
refinancings of the obligations originally secured thereby to the extent
permitted under Section 7.1(n) hereof; (d) liens and security interests granted
to the Collateral Agent for the benefit of the Secured Parties; (e) purchase
money security interests and liens of lessors under capitalized leases to the
extent that the acquisition or lease of the underlying asset was permitted under
Section 7.10, and so long as the security interest or lien only secures the
purchase price of the asset; (f) liens in respect of judgments, decrees, or
orders of any court, so long as such lien is the subject of a Permitted Protest
and any appropriate legal proceedings that may have been duly initiated for the
review of such judgment, decree, or order shall not have been finally terminated
or the period within which such proceedings may be initiated shall not have
expired; (g) liens arising as a result of security for payment of workers'
compensation or other insurance; (h) liens arising as a result of deposits to
secure public or statutory obligations incurred in the ordinary course of
business; (i) liens imposed by operation of law in favor of carriers,
warehousemen, landlords, mechanics, materialmen, laborers, or suppliers,
incurred in the ordinary course of business for sums that are not yet delinquent
and that, in the aggregate, do not exceed $500,000; (j) security for surety or
appeal bonds that, in the aggregate, do not exceed $2,500,000; and (k)
easements, rights-of-way, zoning and similar covenants and restrictions and
other similar encumbrances or minor title defects which exist as of the Closing
Date and that do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of Borrower.
"Permitted Protest" the right of Borrower to protest any lien, tax, or other
charge, other than any such lien or charge which secures the Obligations,
provided (i) a reserve with respect to such obligation is established on the
books of Borrower in an amount that is reasonably satisfactory to Foothill, (ii)
any such protest is instituted and diligently prosecuted by Borrower in good
faith, and (iii) Foothill is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the liens or security interests of Foothill in and to the property or assets
of Borrower.
"Plan" means any plan described in ERISA Section 3(2) maintained for employees
of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Precious Metals" has the meaning ascribed thereto in the Intercreditor
Agreement and includes gold.
"Prior Agreement" shall have the meaning ascribed to such term in the
introductory paragraph hereof.
"Prohibited Transaction" means any transaction described in Section 406 of ERISA
which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c)(2) of the IRC.
"Proposal Expiry Date" means July 12, 1996.
"Reference Period" means, with respect to any computation of the Consolidated
Fixed Charge Ratio, the most recent four full quarters ending at least 45 days
prior to the date of determination of the Consolidated Fixed Charge Ratio.
"Reference Rate" means the variable rate of interest, per annum, most recently
announced by Norwest Bank Minnesota, National Association, or any successor
thereto, as its "base rate," irrespective of whether such announced rate is the
best rate available from such financial institution.
"Registration Effectiveness Agreement" means that certain Registration
Effectiveness Agreement, dated as of May 14, 1993, among T&C, on the one hand,
and certain other parties, on the other hand.
"Reimbursement Obligation" means a Gold Reimbursement Obligation or a Non-Gold
Reimbursement Obligation.
"Renewal Date" has the meaning set forth in Section 3.5.
"Reportable Event" means a reportable event described in Section 4043 of ERISA
or the regulations thereunder, a withdrawal from a Plan described in Section
4063 of ERISA, or a cessation of operations described in Section 4068(f) of
ERISA.
"Revolving Advance" means any revolving advance made by Foothill to Borrower
pursuant to Section 2.1 hereof. In addition, any Other Non-Contingent Obligation
shall be deemed a Revolving Advance from and after the date it is charged to the
Loan Account by Foothill.
"Secured Parties" means the following: (i) Foothill; (ii) the holders of the
Senior Notes; (iii) the holders of the New Senior Subordinated Notes; (iv) the
Gold Consignor; and (v) the holders of the industrial revenue bonds relative to
the Group facility located in New York, New York (which bonds were retired
subsequent to May 14, 1993), and their respective successors and assigns.
"Security Agreements" means one or more Security Agreements, dated as of May 14,
1993, between Balfour, GLI, Group, and T&C, on the one hand, and, on the other
hand, Collateral Agent, pursuant to which Balfour, GLI, Group, and T&C grant
Collateral Agent a perfected security interest in substantially all of their
assets (including all of their assets that would constitute Collateral) in order
to secure their obligations owing to the Secured Parties.
"Senior Notes" shall mean Thirty Million Dollars ($30,000,000) of a class of
senior notes issued by T&C. Such Senior Notes shall: (a) provide for interest to
accrue from and after May 14, 1993, at 11-1/2% per annum and be payable
semi-annually commencing six months after the date of issuance thereof; and (b)
provide that no principal thereof shall be scheduled to be payable prior to
September 15, 1997.
"Senior Notes Guarantees" means those certain guarantees executed and delivered
by certain of the Debtors respecting the obligations of T&C with respect to the
Senior Notes.
"Senior Notes Indenture" means the indenture pursuant to which the Senior Notes
are issued. "Senior Notes Indenture" shall refer to such indenture as it may be
amended or modified from time to time in accordance with the provisions of this
Agreement.
"Solomon Brothers" means Solomon Brother, Ltd., a Bahamas corporation.
"Solvent" means, with respect to any Person on a particular date, that on such
date (i) at fair valuations, all of the assets of such Person are greater than
the sum of the debts, including contingent liabilities, of such Person, (ii) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (iii) such Person is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (iv) such
Person does not intend to, and does not believe that it will, incur debts beyond
such Person's ability to pay as such debts mature, and (v) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's assets would constitute unreasonably
small capital after giving due consideration to the prevailing practices in the
industry in which such Person is engaged. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount that, in light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.
"Specific Gold Covenants" means the covenants set forth in Section 7.20 hereof.
"Stock Pledge Agreements" shall mean one or more Stock Pledge Agreements (or the
equivalent thereof to the extent dictated by custom and usage of the local law
of the jurisdiction of organization of a foreign Subsidiary), dated as of May
14, 1993, between T&C (or one or more Subsidiaries) and Collateral Agent
pursuant to which T&C (or one or more of such Subsidiaries) grants Collateral
Agent, for the benefit of the Secured Parties, a first priority perfected
security interest in (a) all of the issued and outstanding shares of stock of
all of T&C's domestic Subsidiaries (including Balfour, GLI, and Group), other
than any domestic Subsidiary that is an Inactive Subsidiary, (b) sixty-five
percent (65%) of the issued and outstanding shares of stock of all of T&C's
foreign Subsidiaries, other than any foreign Subsidiary that is an Inactive
Subsidiary, and (c) all of the issued and outstanding shares of stock of Solomon
Brothers owned by T&C, in each case, in order to secure the obligations of
Borrower owing to the Secured Parties.
"Subordinated Indebtedness" shall mean Indebtedness of Borrower that is
subordinated, in writing and on terms and conditions reasonably acceptable to
Foothill, in right of payment to the prior payment in full of all of the
Obligations.
"Subsidiary" means any corporation, association, partnership, joint venture or
other business entity of which Borrower, directly or indirectly, either (i) with
respect to a corporation, owns or controls 50% or more of the voting power and
has the ability to elect at least a majority of the board of directors or
similar managing body, irrespective of whether a class or classes shall or might
have voting power by reason of the happening of any contingency, or (ii) with
respect to an association, partnership, joint venture or other business entity,
is entitled to share in 50% or more of the profits and losses, however
determined, and has voting control with respect thereto.
"Syndicated Amount" means a sub-component of the Maximum Combined Facilities
equal to the aggregate financing commitments (to the extent not breached or
terminated) of all Participants.
"T&C" has the meaning ascribed thereto in the preamble to this Agreement.
"Trademark Collateral Assignments" means one or more Trademark Collateral
Assignments, dated as of May 14, 1993, between Balfour, GLI, Group, and T&C, on
the one hand, and, on the other hand, Collateral Agent, pursuant to which
Balfour, GLI, Group, and T&C, as applicable, grant Collateral Agent a perfected
security interest in their trademarks and related rights in order to secure
their obligations owing to the Secured Parties.
"Voidable Transfer" has the meaning set forth in Section 15.8 hereof.
"Voting Stock" means capital stock of a Person that is entitled to vote in the
election of directors without the happening of any contingency or condition. Any
reference to a percentage of Voting Stock shall refer to the percentage of votes
eligible to be cast for the election of directors that are attributable to the
applicable shares of Voting Stock.
"Working Capital" means: (a) Consolidated Current Assets; less (b) Consolidated
Current Liabilities.
"Zale Payment" shall have the meaning ascribed thereto in the Intercreditor
Agreement.
"Zale Bankruptcy Claim" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. When used herein, the term 'financial
statements' shall include the notes and schedules thereto. Whenever the term
'Borrower' is used in respect of a financial covenant or a related definition it
shall be understood to mean Borrower on a consolidated basis unless the context
clearly requires otherwise.
1.3 Code. Any terms used in this Agreement which are defined in the Code shall
be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term 'including' is not limiting, and the term
'or' has, except where otherwise indicated, the inclusive meaning represented by
the phrase 'and/or.' The words 'hereof,' 'herein,' 'hereby,' 'hereunder,' and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section, subsection, clause, and
exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances. Subject to the terms and conditions of this Agreement,
and so long as no Event of Default has occurred and is continuing, Foothill
agrees to make Revolving Advances to Borrower in an amount not to exceed the
Borrowing Base.
Anything to the contrary in the definition of Borrowing Base, the definition of
Net Eligible Accounts Availability Component, or the definition of Eligible
Inventory Availability Component notwithstanding, Foothill may reduce its
advance rates based upon Net Eligible Accounts and Eligible Inventory without
declaring an Event of Default if it determines, in its reasonable discretion,
that there is a material impairment of the prospect of repayment of all or any
portion of the Obligations or a material impairment of the value or priority of
the security interests held by, or for the benefit of, Foothill in and to the
Collateral.
Foothill shall have no obligation to make Revolving Advances hereunder to the
extent they would cause any of the following limits to be exceeded at any time:
(i) outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
shall not exceed the lesser of the Borrowing Base and the Maximum Amount; (ii)
outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
plus Gold Letter of Credit Total Exposure shall not exceed the Maximum Combined
Facility; and (iii) outstanding Revolving Advances plus Non-Gold Letter of
Credit Total Exposure plus Gold Letter of Credit Total Exposure shall not exceed
the Maximum Foothill Amount plus the Syndicated Amount.
Foothill is authorized to make advances under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Officer of Borrower or, without instructions, if in Foothill's
discretion such advances are necessary to meet Obligations. Borrower agrees to
establish and maintain a single designated deposit account for the purpose of
receiving the proceeds of the advances requested by Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any
advance requested by Borrower and made by Foothill hereunder shall be made to
such designated deposit account. Amounts borrowed pursuant to this Section 2.1
may be repaid and, so long as no Event of Default has occurred and is
continuing, reborrowed at any time during the term of this Agreement.
2.2 Overadvances. If, at any time or for any reason, the amount of Obligations
owed by Borrower to Foothill pursuant to Section 2.1 is greater than either the
dollar or percentage limitations set forth in Section 2.1 (an "Overadvance")
Borrower shall immediately pay to Foothill, in cash, the amount of such excess.
2.3 Mandatory Prepayments. Except to the extent otherwise required by the terms
of the Intercreditor Agreement, immediately upon receipt by Borrower or any of
its Subsidiaries of Net Cash Proceeds of any Asset Disposition (other than a
Permitted Asset Disposition), which proceeds exceed $100,000 (it being
understood that if the proceeds exceed $100,000, the entire proceeds and not
just the portion in excess of the foregoing amount shall be subject to this
section) for any single transaction or series of related transactions or which
proceeds when aggregated with all other Net Cash Proceeds from Asset
Dispositions (other than Permitted Asset Dispositions) received during the same
fiscal year exceed $250,000 (it being understood that if the proceeds exceed
$250,000, the entire proceeds and not just the portion in excess of the
foregoing amount shall be subject to this section), Borrower shall prepay the
advances outstanding under Section 2.1 in an amount equal to the Net Cash
Proceeds of such Asset Disposition and, at Foothill's option, either (i) the
Maximum Amount shall be permanently reduced by the amount of such prepayment, or
(ii) the definition of Eligible Inventory Availability Component shall be
modified to reflect a reduction in the advance rates applicable to Eligible
Finished Good Inventory and Eligible Raw Materials Inventory to the extent
reasonably required by Foothill to reflect the absence of the asset or assets
that are the subject of the Asset Disposition from the Collateral.
2.4 Interest: Rates, Payments, and Calculations.
(a) Interest Rate and Letter of Credit Fees. Subject to Section 2.4(b), all
Obligations, except for undrawn Letters of Credit, shall bear interest, on the
average Daily Balance, at a rate of two (2) percentage points above the
Reference Rate. Subject to Section 2.4(b), Foothill shall be entitled to charge
Borrower a fee on the Non-Gold L/C Amount equal to two and one-half percent
(2.5%) per annum times the average Daily Balance of the Non-Gold L/C Amount
during the immediately preceding calendar month. Subject to Section 2.4(b),
Foothill shall be entitled to charge Borrower a fee on the Gold L/C Amount equal
to three percent (3.0%) per annum times the average Daily Balance of the Gold
L/C Amount during the immediately preceding calendar month. The foregoing Letter
of Credit fees are in addition to any fees charged by any issuer of a letter of
credit other than Foothill that is supported by a Letter of Credit issued by
Foothill.
(b) Default Rate. All Obligations, except for undrawn Letters of Credit,
shall bear interest, from and after the occurrence and during the continuance of
an Event of Default, at a rate equal to six (6) percentage points above the
Reference Rate. From and after the occurrence and during the continuation of an
Event of Default, Foothill shall be entitled to charge Borrower a fee on the
Non-Gold L/C Amount equal to six and one-half percent (6.5%) per annum times the
average Daily Balance of the Non-Gold L/C Amount during the immediately
preceding calendar month. From and after the occurrence and during the
continuation of an Event of Default, Foothill shall be entitled to charge
Borrower a fee on the Gold L/C Amount equal to seven percent (7.0%) per annum
times the average Daily Balance of the Gold L/C Amount during the immediately
preceding calendar month. The foregoing Letter of Credit fees are in addition to
any fees charged by any issuer of a letter of credit other than Foothill that is
supported by a Letter of Credit issued by Foothill.
(c) Minimum Interest. In no event shall the rate of interest chargeable
hereunder with respect to Revolving Advances or Reimbursement Obligations for
any month be less than eight percent (8%) per annum, nor shall the aggregate
amount of interest accrued and payable to Foothill be less than Two Hundred
Forty Thousand Dollars ($240,000) per annum, such amount to be pro-rated for any
partial year. To the extent that interest accrued hereunder at the rate set
forth herein (including the minimum interest rate) would yield less than the
foregoing minimum amount, the interest rate chargeable hereunder for the period
in question shall be deemed automatically increased to that rate that would
result in the minimum amount of interest being accrued and payable hereunder.
(d) Payments. Interest and fees payable hereunder shall be due and payable
monthly in arrears on the first day of each calendar month during the term
hereof. Foothill shall, at its option, charge such interest and fees, all
Foothill Expenses, and all installments due under any note payable to Foothill
to Borrower's loan account, which amounts shall thereafter accrue interest at
the rate then applicable hereunder. Any interest or fees not paid when due shall
be compounded by becoming a part of the Obligations, and such interest or fees
shall thereafter accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of this date is eight and one-quarter
percent (8.25%) per annum. In the event the Reference Rate is changed from time
to time hereafter, the applicable rate of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to the Reference
Rate change. The rates of interest charged hereunder shall be based upon the
average Reference Rate in effect during the month. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.5 Crediting Payments. The receipt of any wire transfer of funds, check, or
other item of payment by Foothill (whether from transfers to Foothill by the
Collection Agents pursuant to the Lock Box Agreements or otherwise) shall be
immediately applied to provisionally reduce the Obligations, but shall not be
considered a payment on account unless such wire transfer is of immediately
available federal funds and is made to the appropriate deposit account of
Foothill or unless and until such check or other item of payment is honored when
presented for payment. Foothill shall be entitled to charge Borrower for two (2)
Business Days of "float" at the rate set forth in Section 2.4(a) on all
collections, checks, wire transfers, or other items of payment that are received
by Borrower or processed through the Lock Boxes (irrespective of whether
forwarded by the Collection Agents to Foothill, whether owned by Foothill or
Borrower or collected as agent for another, whether provisionally applied to
reduce the Obligations or otherwise). This across-the-board two (2) Business Day
float charge on all of Borrower's receipts is acknowledged by the parties to
constitute an integral aspect of the pricing of Foothill's facility to Borrower,
and shall apply irrespective of the characterization of whether receipts are
owned by Borrower or Foothill, and irrespective of the level of Borrower's
Obligations to Foothill. Should such check or item of payment not be honored
when presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any wire transfer, check, or other
item of payment received by Foothill after 11:00 a.m. Los Angeles time shall be
deemed to have been received by Foothill as of the opening of business on the
immediately following Business Day.
2.6 Statements of Obligations. Foothill shall render statements to Borrower of
the Obligations, including principal, interest, fees, and an itemization of all
charges and expenses constituting Foothill Expenses owing, and such statements,
absent manifest error, shall be conclusively presumed to be correct and accurate
and constitute an account stated between Borrower and Foothill unless, within
thirty (30) days after receipt thereof by Borrower, Borrower shall deliver to
Foothill by registered or certified mail at its address specified in Section 12,
written objection thereto describing the error or errors contained in any such
statements.
2.7 Fees. Borrower shall pay to Foothill the following fees:
(a) Unused Line Fee. On the first day of each calendar month during the term
of this Agreement, a fee, payable monthly in arrears, in an amount equal to one
half of one percent (0.5%) per annum times the Average Unused Portion of the
Available Maximum Combined Facility;
(b) Annual Facility Fee. On the Closing Date, a fee in an amount equal to
Three Hundred Twenty Five Thousand Dollars ($325,000), which fee shall be fully
earned on the Closing Date. Thereafter, on each anniversary date of the Closing
Date, a fee in an amount equal to one-half of one percent (0.5%) of the Maximum
Combined Facility in effect on such date, each of which such fees shall be fully
earned on each such anniversary date;
(c) Financial Examination, Documentation, and Appraisal Fees. Foothill's
customary fee of Five Hundred Dollars ($650) per day per examiner, plus
out-of-pocket expenses for each financial analysis and examination of Borrower
performed by Foothill or its agents; Foothill's customary appraisal fee of One
Thousand Five Hundred Dollars ($1,500) per day per appraiser, plus out-of-pocket
expenses for each appraisal of the Collateral performed by Foothill or its
agents; the costs and expenses incurred by Foothill for engaging a licensed,
professional gemologist to evaluate and appraise the Inventory of Borrower; and
Foothill's customary fee of One Thousand Dollars ($1,000) per year for its loan
documentation review;
(d) Servicing/Agency Fee. On the first day of each month during the term of
this Agreement, and thereafter so long as any Obligations are outstanding, a
servicing/agency fee in an amount equal to Ten Thousand Dollars ($10,000) per
month. The foregoing fee includes the $3,500 per month collateral agency fee
formerly separately payable to Foothill as Collateral Agent under the written
agreement referred to in Section 46 of the Intercreditor Agreement, which
separate collateral agency fee is prospectively waived by Foothill and replaced
by this combined fee set forth in this paragraph.
(e) Syndication Fee. A fee of Two Hundred Fifty Thousand Dollars ($250,000)
due and payable and fully earned on the Closing Date.
2.8 Letters of Credit and Letter of Credit Guarantees.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to issue standby letters of credit (or amendments thereof consented to by the
beneficiaries thereof) for the account of Borrower (each, including any such
amendment, an "L/C") or to issue standby letters of credit (or amendments
thereof consented to by the beneficiaries thereof) or guarantees of payment (or
amendments thereof consented to by the beneficiaries thereof; each such letter
of credit or guaranty, including any such amendment, an "L/C Guaranty") with
respect to commercial or standby letters of credit (or amendments thereof
consented to by the beneficiaries thereof) issued by another person for the
account of Borrower in an aggregate outstanding undrawn face amount not to
exceed: (A) with respect to Non-Gold Letters of Credit, the lesser of: (i) the
Borrowing Base less the combined amount of outstanding Revolving Advances and
Non-Gold Reimbursement Obligations, and (ii) One Million Dollars ($1,000,000);
and (B) with respect to Gold Letters of Credit, the lesser of: (i) the Gold
Borrowing Base less outstanding Gold Reimbursement Obligations, and (ii) the
Gold Letter of Credit Limit. Borrower expressly understands and agrees that
Foothill shall have no obligation to arrange for the issuance by other financial
institutions of L/Cs that are to be the subject of L/C Guarantees. Except as
Foothill may otherwise agree in its sole discretion, each such L/C (including
those that are the subject of L/C Guarantees) shall have an expiry date no later
than sixty (60) days prior to the date on which this Agreement is scheduled to
terminate under Section 3.5 and all such L/Cs and L/C Guarantees shall be in
form and substance acceptable to Foothill in its sole discretion. Foothill shall
not have any obligation to issue any Letter of Credit to the extent that, after
giving effect thereto, any of the following limits would be exceeded: (i)
outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
shall not exceed the lesser of the Borrowing Base and the Maximum Amount; (ii)
outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
plus Gold Letter of Credit Total Exposure shall not exceed the Maximum Combined
Facility; (iii) outstanding Revolving Advances plus Non-Gold Letter of Credit
Total Exposure plus Gold Letter of Credit Total Exposure shall not exceed the
Maximum Foothill Amount plus the Syndicated Amount; and (iv) Gold Letter of
Credit Total Exposure shall not exceed the Gold Letter of Credit Limit. The
Non-Gold Letters of Credit issued under this Section 2.8 shall be used by
Borrower, consistent with this Agreement, for working capital purposes. The Gold
Letters of Credit issued under this Section 2.8 shall be used by Borrower,
consistent with this Agreement, for the purpose of supporting obligations of
Borrower to the Gold Consignor pursuant to the Gold Consignment Agreement. If
Foothill is obligated to advance funds under a Letter of Credit, the related
Reimbursement Obligation shall be immediately due and payable to Foothill, shall
be immediately reimbursed by Borrower to Foothill unless otherwise agreed by
Foothill in its sole discretion (provided that Borrower may direct Revolving
Advances to be made to reimburse same to the extent of availability and subject
to the terms and conditions set forth herein), and shall bear interest as if it
were a Revolving Advance; and, without limiting the foregoing, Foothill at its
sole option may make a Revolving Advance for the account of Borrower without
notice to Borrower to repay such Reimbursement Obligation, or may elect to deem
such Reimbursement Obligation to be a Revolving Advance made by Foothill to
Borrower pursuant to Section 2.1 which, thereafter, shall bear interest on the
terms and conditions provided in Section 2.4.
(b) Borrower hereby agrees to indemnify, save, defend, and hold Foothill
harmless from any loss, cost, expense, or liability, including payments made by
Foothill, expenses, and reasonable attorneys' fees incurred by Foothill arising
out of or in connection with any L/Cs or L/C Guarantees. Borrower agrees to be
bound by the issuing bank's regulations and interpretations of any L/Cs
guarantied by Foothill and opened to or for Borrower's account or by Foothill's
interpretations of any L/C issued by Foothill to or for Borrower's account, even
though this interpretation may be different from Borrower's own, and Borrower
understands and agrees that Foothill shall not be liable for any error,
negligence (other than gross negligence of Foothill), or mistakes, whether of
omission or commission, in following Borrower's instructions or those contained
in the L/Cs or any modifications, amendments, or supplements thereto. Borrower
understands that the L/C Guarantees may require Foothill to indemnify the
issuing bank for certain costs or liabilities arising out of claims by Borrower
against such issuing bank. Borrower hereby agrees to indemnify, save, defend,
and hold Foothill harmless with respect to any loss, cost, expense (including
attorneys fees), or liability incurred by Foothill under any L/C Guaranty as a
result of Foothill's indemnification of any such issuing bank.
(c) Borrower hereby authorizes and directs any bank that issues an L/C
guaranteed by Foothill to deliver to Foothill all instruments, documents, and
other writings and property received by the issuing bank pursuant to the L/C,
and to accept and rely upon Foothill's instructions and agreements with respect
to all matters arising in connection with the L/C and the related application.
Borrower may or may not be the "account party" on such L/Cs.
(d) Any and all service charges, commissions, fees and costs incurred by
Foothill relating to the L/Cs guaranteed by Foothill shall be considered
Foothill Expenses for purposes of this Agreement and shall be immediately
reimbursable by Borrower to Foothill. Service charges, commissions, fees and
costs may be charged to Borrower's loan account at the time the service is
rendered or the cost is incurred.
(e) Immediately upon the termination of this Agreement, Borrower agrees to
either: (i) provide cash collateral to Foothill in an amount equal to the
maximum amount of Foothill's obligations under L/Cs plus the maximum amount of
Foothill's obligations to any issuing bank under outstanding L/C Guarantees, or
(ii) cause to be delivered to Foothill releases of all of Foothill's obligations
under its outstanding L/Cs and L/C Guarantees. At Foothill's discretion, any
proceeds of Collateral received by Foothill may be held as the cash collateral
required by this Section 2.8(e).
(f) Should there exist, at any time, for any reason, a Gold Coverage
Deficiency, Foothill may, at its sole option, (i) demand that Borrower
immediately cause one or more outstanding Gold Letters of Credit to be reduced
in outstanding undrawn amount (by amendment thereof accepted by the beneficiary
thereof, and to which Borrower hereby consents in advance) so as to reduce the
Gold Letter of Credit Undrawn Exposure by an amount sufficient to eliminate such
Gold Coverage Deficiency, (ii) prior to any such reduction under clause (i), or
in lieu thereof, impose reserves against the Borrowing Base for Revolving
Advances in an amount up to such Gold Coverage Deficiency, (iii) prior to any
such reduction under clause (i), or in lieu thereof, demand that Borrower post
cash collateral with Foothill sufficient to cover such Gold Coverage Deficiency
(with which demand Borrower immediately shall comply).
3. CONDITIONS; TERM OF AGREEMENT
3.1 Conditions Precedent to Initial Revolving Advance or Letter of Credit. The
obligation of Foothill to make the initial Revolving Advance or to provide the
initial Letter of Credit hereunder is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) the Closing Date shall occur on or before the Proposal Expiry Date;
(b) Foothill shall have received copies of each Debtor's By-laws and
Articles or Certificate of Incorporation, as amended, modified, or supplemented
to the Closing Date, certified by the Secretary or Clerk of each such Debtor;
(c) Foothill shall have received a certificate of corporate status with
respect to each Debtor, dated within twenty (20) days of the Closing Date, by
the Secretary of State of the state of incorporation of such Debtor, which
certificate shall indicate that such Debtor is in good standing in such state;
(d) Foothill shall have received a certificate from the Secretary or Clerk
of each Debtor attesting to the resolutions of such Debtor's Board of Directors
authorizing its execution and delivery of this Agreement and the other Loan
Documents to which such Debtor is a party and authorizing specific officers of
such Debtor to execute same;
(e) [Intentionally omitted];
(f) Foothill shall have received the insurance certificates or certified
copies of the policies of insurance required by Section 6.11 hereof along with
a 438BFU Lender's Loss Payable Endorsement, or an equivalent endorsement, naming
the Collateral Agent and each of the Secured Parties as loss payees or
additional assureds, as applicable, as their interests may appear, all in form
and substance satisfactory to Foothill and its counsel;
(g) To the extent that such documents were not delivered in connection with
the Prior Agreement, Foothill shall have received each of the following
documents, duly executed, and each of the following documents (including those
delivered in connection with the Prior Agreement) shall be and remain in full
force and effect after giving effect to this Agreement:
(i) the Intercreditor Agreement;
(ii) the Lock Box Agreements;
(iii) the Mortgages;
(iv) the Creditor Agreement;
(v) the Patent Collateral Assignments;
(vi) the Security Agreements;
(vii) the Stock Pledge Agreements; and
(viii) the Trademark Collateral Assignments;
(h) Foothill shall have received confirmation that the Collateral Agent (or
its subagent, in the case of shares of stock of foreign Subsidiaries) is in
possession of (i) all of the issued and outstanding shares of stock of all of
T&C's domestic Subsidiaries (including Balfour, GLI, and Group), other than any
domestic Subsidiary that is an Inactive Subsidiary, (ii) sixty-five percent
(65%) of the issued and outstanding shares of stock of all of T&C's foreign
Subsidiaries, other than any foreign Subsidiary that is an Inactive Subsidiary,
and (iii) all of the issued and outstanding shares of stock of Solomon Brothers
owned by T&C, as well as stock powers with respect thereto endorsed in blank;
(i) Foothill shall have received such searches as it may require reflecting
the filing of the Collateral Agent's financing statements and fixture filings,
and the Collateral Agent shall have received certificates of title with respect
to the Collateral which shall have been duly executed in order to perfect all of
the security interests granted to the Collateral Agent;
(j) Foothill shall have received an opinion of Borrower's counsel in form
and substance satisfactory to Foothill in its sole discretion;
(k) To the extent that Foothill is not already in possession of same with
respect to the Prior Agreement, Foothill shall have received landlord waivers
from the lessors of those locations listed on Schedule 6.15B attached hereto;
(l) Foothill shall have received a certificate from Borrower, dated as of
the Closing Date, duly executed by an Authorized Officer and a Secretary or
Clerk of each Debtor composing Borrower, certifying that no Event of Default has
occurred and is continuing on the Closing Date;
(m) Foothill shall have received executed disbursement instructions from
Borrower, addressed to Foothill, with respect to the advances to be made on the
Closing Date, directing Foothill to disburse the proceeds of such advances in
accordance with the terms of Section 7.18 hereof;
(n) Foothill shall have received a compliance certificate from Borrower, dated
as of the Closing Date, duly executed either by the chief financial officer of
Borrower or by Robert Hannon as the assistant clerk of and attorney-in-fact for
Borrower, detailing the calculations made by Borrower, by which Borrower has
determined that it is in compliance with the covenants contained in Section 6.13
which are applicable as of the Closing Date;
(o) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the due consummation of the transactions
contemplated hereby shall have been issued and remain in force by any
governmental authority against Borrower, Foothill, any of the other Secured
Parties, or any of their Affiliates;
(p) Foothill shall have received a copy of the fully executed Gold
Consignment Agreement, together with a certificate of a Clerk of T&C certifying
same to be a true and correct copy thereof;
(q) [Intentionally omitted];
(r) Foothill shall have received confirmation that the notification to the
Attorney General of the Commonwealth of Massachusetts that is required to exempt
the transactions hereunder from the provisions of the usury laws of
Massachusetts has been sent to and received by such office; and
(s) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
3.2 Conditions Concurrent to Initial Revolving Advance or Letter of Credit. The
obligation of Foothill to make the initial Revolving Advance or to provide the
initial Letter of Credit hereunder is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
concurrent on the Closing Date:
(a) all obligations of Borrower to the Exiting Gold Banks shall have been
satisfied, any gold owned by the Exiting Gold Banks and consigned to Borrower
shall have been purchased by Borrower, returned to the Exiting Gold Banks, or
transferred by the Exiting Gold Banks to Gold Consignor to be on consignment to
Borrower pursuant to the Gold Consignment Agreement, all claims of the Exiting
Gold Banks to any security interests or liens on Collateral shall have been
terminated or released by the Exiting Gold Banks, and each of the foregoing
items shall have been demonstrated to Foothill to its reasonable satisfaction;
(b) the proceeds of any initial advances made hereunder on the Closing Date
shall be used for the purposes set forth in Section 7.18 of this Agreement;
3.3 Conditions Precedent to all Revolving Advances and Letters of Credit. The
following shall be conditions precedent to all Revolving Advances and Letters of
Credit hereunder:
(a) the representations and warranties of Borrower contained in this
Agreement and the Loan Documents shall be true and correct in all respects on
and as of the date of such Revolving Advance or Letter of Credit as though made
on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date); and
(b) no Event of Default or event which with the giving of notice or passage
of time would constitute an Event of Default shall have occurred and be
continuing on the date of such Revolving Advance or Letter of Credit, nor shall
either result from the making or issuance of the Revolving Advance or Letter
of Credit.
3.4 [Intentionally Omitted].
3.5 Term; Renewal. This Agreement shall become effective as of the date first
set forth herein upon the execution and delivery hereof by Borrower and Foothill
and, except as otherwise set forth herein, shall continue in full force and
effect for a term ending on the date (the "Renewal Date") that is two (2) years
from such date first set forth herein. This Agreement may be renewed by
Foothill, prior to the Renewal Date, at Foothill's sole option, for an
additional term of three (3) years following the Renewal Date, by notice from
Foothill to Borrower given not less than sixty (60) days prior to the Renewal
Date, if this Agreement has not been sooner terminated pursuant to the terms
hereof. In the event Foothill so extends the term hereof, such extended term
shall expire on the date that is five (5) years from the date first set forth
herein. Borrower may not terminate this Agreement prior to the expiration of the
term hereof (including the three-year extended term if Foothill so elects to
extend the term hereof), except in accordance with Section 3.7 hereof. The
foregoing notwithstanding, Foothill shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence of an Event of Default.
3.6 Effect of Termination. On the date of termination, all Obligations
(including contingent reimbursement obligations under any outstanding Letters of
Credit) shall become immediately due and payable without notice or demand. No
termination of this Agreement, however, shall relieve or discharge Borrower of
Borrower's duties, Obligations, or covenants hereunder, and the Collateral
Agent's continuing security interest in the Collateral for the benefit of
Foothill shall remain in effect until all Obligations have been fully discharged
and Foothill's obligation to extend credit hereunder is terminated.
3.7 Early Termination by Borrower. The provisions of Section 3.5 that restrict
the ability of Borrower to terminate this Agreement by Borrower notwithstanding,
at any time after the Closing Date, Borrower has the option, upon ninety (90)
days prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations (including any contingent reimbursement
obligations of Foothill under Letters of Credit), together with a premium (the
"Early Termination Premium") equal to:
(a) If such termination occurs on or before the first anniversary of the
date first set forth herein, an amount equal to five percent (5.0%) of the
Maximum Combined Facility;
(b) If such termination occurs after the first anniversary of the date first
set forth herein and on or before the second anniversary of the date first set
forth herein, an amount equal to four percent (4.0%) of the Maximum Combined
Facility;
(c) If Foothill exercises its option to extend the term hereof for three
years after the Renewal Date, and if such termination occurs after the second
anniversary of the date first set forth herein and on or before the third
anniversary of the date first set forth herein, an amount equal to three percent
(3.0%) of the Maximum Combined Facility;
(d) If Foothill exercises its option to extend the term hereof for three
years after the Renewal Date, and if such termination occurs after the third
anniversary of the date first set forth herein and on or before the fourth
anniversary of the date first set forth herein, an amount equal to two percent
(2.0%) of the Maximum Combined Facility; and
(e) If Foothill exercises its option to extend the term hereof for three
years after the Renewal Date, and if such termination occurs after the fourth
anniversary of the date first set forth herein and before the fifth anniversary
of the date first set forth herein, an amount equal to one percent (1.0%) of the
Maximum Combined Facility.
The foregoing notwithstanding, any payments by Borrower required in conjunction
with any reductions required as a result of consummation of the Pending Material
Transaction shall be without premium or penalty.
3.8 Termination Upon Event of Default. If Foothill terminates this Agreement
upon the occurrence of an Event of Default, in view of the impracticability and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Foothill's lost profits as a result
thereof, Borrower shall pay to Foothill upon the effective date of such
termination, a premium in an amount equal to the Early Termination Premium. The
Early Termination Premium shall be presumed to be the amount of damages
sustained by Foothill as the result of the early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. The Early
Termination Premium provided for in this Section 3.8 shall be deemed included in
the Obligations.
4. COLLATERAL
4.1 Collection of Accounts, General Intangibles, Negotiable Collateral. On or
before the Closing Date, Foothill, Borrower, and the Collection Agents shall
enter into the Lock Box Agreements, in form and substance satisfactory to
Foothill in its sole discretion, pursuant to which all of Borrower's cash
receipts, checks, and other items of payment will be forwarded to Foothill on a
daily basis; provided, however, that the foregoing shall not apply to any
property or asset that composes the Excluded Assets. At any time, Foothill or
Foothill's designee may (in the reasonable exercise of its discretion): (a)
notify customers or Account Debtors of Borrower that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Foothill or that
Foothill is the beneficiary of a security interest therein; and (b) collect the
Accounts, General Intangibles, and Negotiable Collateral directly and charge the
collection costs and expenses to Borrower's loan account; provided, however,
that the foregoing shall not apply to any property or asset that composes the
Excluded Assets. Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any cash receipts, checks, and other items of payment that
it receives on account of the Accounts, General Intangibles, or Negotiable
Collateral and immediately will deliver said cash receipts, checks, and other
items of payment to Foothill in their original form as received by Borrower;
provided, however, that the foregoing shall not apply to any property or asset
that composes the Excluded Assets. In the event that Foothill receives the
proceeds of any Excluded Assets, Foothill shall dispose of such proceeds in
accordance with the terms and conditions of the Intercreditor Agreement. In this
regard, Foothill and Borrower have agreed that, prior to the occurrence and
continuance of an Event of Default, any Zale Payments are to be made available
to Borrower with Borrower being responsible to remit the portion thereof
constituting a portion of the Zale Bankruptcy Claim to the representative of the
Secured Party with the first priority interest therein. From and after the
occurrence and during the continuance of an Event of Default, Foothill may
exercise control over the Zale Payments and require same to be paid to an
account controlled solely by Foothill. If Foothill does exercise such control
over and with respect to the Zale Payments, Foothill shall determine the amount
thereof that is allocable to the Zale Bankruptcy Claim and, subject to the terms
of the Intercreditor Agreement, shall remit such portion to the representative
of the Secured Party with the first priority interest therein. In order to
effectuate such understanding, Borrower and Foothill have agreed to establish a
joint account with one of the Collection Agents and to provide such Collection
Agent with standing instructions designed to implement such agreement.
4.2 Delivery of Additional Documentation Required. Borrower shall execute and
deliver to Foothill or the Collateral Agent, as the case may be, at any time and
from time to time at the request of Foothill, all financing statements,
continuation financing statements, fixture filings, security agreements, chattel
mortgages, pledges, assignments, endorsements of certificates of title,
applications for title, affidavits, reports, notices, schedules of accounts,
letters of authority, and all other documents that Foothill may reasonably
request, in form reasonably satisfactory to Foothill, to perfect and continue
perfected the security interests of the Collateral Agent in the Collateral and
in order to fully consummate all of the transactions contemplated under the Loan
Documents.
4.3 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Collateral Agent and Foothill, in its capacity as a subagent of the
Collateral Agent under the Intercreditor Agreement (and any of Foothill's
officers, employees, or agents designated by Foothill) as Borrower's true and
lawful attorney, with power (in Collateral Agent's or Foothill's reasonable
discretion) to: (a) if Borrower fails to, or refuses timely to execute and
deliver any of the documents described in Section 4.2, sign the name of Borrower
on any of the documents described in Section 4.2 or on any other similar
documents to be executed, recorded, or filed in order to perfect or continue
perfected the Collateral Agent's security interest in the Collateral (so long as
such act is not prohibited by the terms of the Intercreditor Agreement); (b)
sign Borrower's name on any invoice or bill of lading relating to any Account,
drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors; (c) send requests for
verification of Accounts; (d) endorse Borrower's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment or security that may
come into Collateral Agent's or Foothill's possession; (e) at any time that an
Event of Default has occurred, notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Collateral
Agent or Foothill, to receive and open all mail addressed to Borrower, and to
retain all mail relating to the Collateral and forward all other mail to
Borrower; (f) at any time that an Event of Default has occurred or Foothill
reasonably deems itself insecure, make, settle, adjust all claims under, and
make all determinations and decisions with respect to Borrower's policies of
insurance relating to the Collateral as to which Foothill holds, or is the
beneficiary of, a first priority security interest; and (g) at any time that an
Event of Default has occurred or Foothill reasonably deems itself insecure,
settle and adjust disputes and claims respecting the Accounts directly with
Account Debtors, for amounts and upon terms which Faithful determines to be
reasonable, and Collateral Agent or Foothill may cause to be executed and
delivered any documents and releases which Collateral Agent or Foothill
reasonably determines to be necessary. The appointment of Collateral Agent and
Foothill as Borrower's attorney, and each and every one of Collateral Agent's
and Foothill's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.4 Right to Inspect; Payment of Certain Costs, Fees, and Expenses Relating to
Collateral. Foothill (through any of its officers, employees, agents, or
independent contractors (including the Gold Consignor)) shall have the right, at
Borrower's expense, from time to time hereafter to inspect the Collateral and
Borrower's Books and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral. So long as no Event of
Default has occurred and is continuing, Foothill and Borrower agree that any
such inspections shall occur during normal business hours. Without limiting the
generality of the foregoing, subject to the Intercreditor Agreement, Borrower
shall pay when due all costs, expenses, and fees charged to it by Gold Consignor
pursuant to the Gold Consignment Agreement or the Creditor Agreement.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Foothill as follows:
5.1 No Prior Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of liens, claims, security interests, or encumbrances
except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are, at the time of the creation
thereof and as of each date on which Borrower includes them in a Borrowing Base
calculation or certification, bona fide existing obligations created by the sale
and delivery of Inventory or the rendition of services to Account Debtors in the
ordinary course of Borrower's business, and, to the best of Borrower's
knowledge, unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. At the time of the creation of an Eligible Account and as of
each date on which Borrower includes an Eligible Account in a Borrowing Base
calculation or certification, Borrower has not received notice of actual or
imminent bankruptcy, insolvency, or material impairment of the financial
condition of any applicable Account Debtor regarding such Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is now and at all times hereafter
shall be of good and marketable quality.
5.4 Location of Inventory and Equipment. The Inventory and Equipment are not
stored with a bailee, warehouseman, or similar party (without Foothill's prior
written consent) and are located only at the locations identified on Schedule
6.15A or otherwise permitted by Sections 6.15 and 7.11.
5.5 Inventory Records. Borrower now keeps, and hereafter at all times shall
keep, correct and accurate records itemizing and describing the kind, type,
quality, and quantity of the Inventory, and Borrower's cost therefor; it being
expressly understood, however, that the EPG division of Balfour and GLI do not
maintain a perpetual inventory reporting system.
5.6 Location of Chief Executive Office. The chief executive office of each
Debtor is located at the address indicated in the first paragraph of this
Agreement and Borrower covenants and agrees that it will not, without thirty
(30) days prior written notification to Foothill, relocate any of such chief
executive offices.
5.7 Due Organization and Qualification. Each Debtor is and shall at all times
hereafter be duly organized and existing and in good standing under the laws of
the state of its incorporation and qualified and licensed to do business in, and
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified or where the failure to
be so licensed or qualified could reasonably be expected to have a material
adverse effect on the business, operations (financial or otherwise), finances,
or prospects of Borrower.
5.8 Due Authorization; No Conflict. The execution, delivery, and performance of
the Loan Documents are within each Debtor's corporate powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in such Debtor's Articles or Certificate of Organization or
Incorporation, or By-laws, nor will they constitute an event of default under
any material agreement to which such Debtor is a party.
5.9 Litigation. There are no actions or proceedings pending by or against
Borrower before any court or administrative agency and Borrower does not have
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for ongoing collection matters in which Borrower is
the plaintiff, matters disclosed on Schedule 5.9, and matters arising after the
date hereof that, if decided adversely to Borrower, would not materially impair
the prospect of repayment of any portion of the Obligations or materially impair
the value or priority of Foothill's beneficial security interest in the
Collateral.
5.10 No Material Adverse Change in Financial Condition. All financial statements
relating to Borrower that have been or may hereafter be delivered by Borrower to
Foothill have been prepared in accordance with GAAP and fairly present
Borrower's financial condition as of the date thereof and Borrower's results of
operations for the period then ended. There has not been a material adverse
change in the financial condition of Borrower as measured against the most
recent financial statements delivered to Foothill pursuant to the Prior
Agreement.
5.11 Solvency. Each of T&C and Group is Solvent. Each of GLI and Balfour is Not
Insolvent. No transfer of property is being made by any Debtor and no obligation
is being incurred by any Debtor in connection with the transactions contemplated
by this Agreement or the other Loan Documents with the intent to hinder, delay,
or defraud either present or future creditors of such Debtor.
5.12 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has been in
violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a) or any of the published interpretations
thereunder. No notice of intent to terminate a Plan has been filed under Section
4041 of ERISA, nor has any Plan been terminated under Section 4041(e) of ERISA.
The PBGC has not instituted proceedings to terminate, or appoint a trustee to
administer, a Plan and no event has occurred or condition exists that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan. Neither Borrower nor any ERISA
Affiliate would be liable for any amount pursuant to Sections 4062, 4063, or
4064 of ERISA if all Plans terminated as of the most recent valuation dates of
such Plans. Neither Borrower nor any ERISA Affiliate have: withdrawn from a
"multiple employer Plan" during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; or failed to make a payment
to a Plan required under Section 302(f)(1) of ERISA such that security would
have to be provided pursuant to Section 307 of ERISA. No lien upon the assets of
Borrower has arisen with respect to a Plan. No prohibited transaction or
Reportable Event has occurred with respect to a Plan. Neither Borrower nor any
ERISA Affiliate has incurred any withdrawal liability with respect to any
Multiemployer Plan. Borrower and each ERISA Media have made all contributions
required to be made by them to any Plan or MultiempLoyer Plan when due. There is
no accumulated funding deficiency in any Plan, whether or not waived.
5.13 Environmental Condition. Except to the extent disclosed on Schedule 5.13,
none of Borrower's properties or assets has ever been used by Borrower or, to
the best of Borrower's knowledge, by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, except for the storage and handling of immaterial amounts
of Hazardous Materials commonly and lawfully used in office buildings and
distribution centers and in the manufacture of jewelry. Except to the extent
disclosed on Schedule 5.13, none of Borrower's properties or assets has ever
been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by Borrower. Except to the extent
disclosed on Schedule 5.13, Borrower has not received a summons, citation,
notice, or directive from the Environmental Protection Agency or any other
federal or state governmental agency concerning any action or omission by
Borrower resulting in the releasing or disposing of Hazardous Materials into the
environment.
5.14 Ownership of Subsidiaries; Inactive Subsidiaries. Schedule 5.14 attached
hereto accurately sets forth (i) the correct legal name of each of the
Subsidiaries owned, directly or indirectly, by T&C, (ii) the number of
authorized, issued, and outstanding shares of capital stock of each such
Subsidiary, (iii) the ownership of such shares of capital stock, and (iv)
whether such shares are fully paid and non-assessable. All of the shares of
stock of each of such Subsidiaries owned by T&C, or one or more of the
Subsidiaries, are free and clear of all liens, security interests, or other
encumbrances other than those in favor of the Collateral Agent for the benefit
of the Secured Parties. The Inactive Subsidiaries do not have any properties or
assets, except perhaps properties or assets of de minimis value, nor are they
conducting any business or operations.
5.15 Reliance by Foothill; Cumulative. Each warranty and representation
contained in this Agreement shall be automatically deemed repeated with each
Revolving Advance or issuance of a Letter of Credit and shall be conclusively
presumed to have been relied on by Foothill regardless of any investigation made
or information possessed by Foothill. The warranties and representations set
forth herein shall be cumulative and in addition to any and all other warranties
and representations that Borrower shall now or hereinafter give, or cause to be
given, to Foothill.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until payment in full of the Obligations, and unless Foothill
shall otherwise consent in writing, each Debtor composing Borrower shall do all
of the following:
6.1 Accounting System. Borrower at all times hereafter shall maintain a standard
and modern system of accounting in accordance with GAAP with ledger and account
cards or computer tapes, discs, printouts, and records pertaining to the
Collateral which contain information as from time to time may be reasonably
requested by Foothill. Borrower shall also keep proper books of account showing
all sales, claims, and allowances on its Inventory.
6.2 Collateral Reports. Borrower shall deliver to Foothill, no later than the
tenth (10th) Business Day of each fiscal month of Borrower during the term of
this Agreement, a Monthly Gold Certificate, a detailed aging, by total, of the
Accounts, a reconciliation statement, and a summary aging, by vendor, of all
accounts payable and any book overdraft. Borrower shall deliver to Foothill,
each Business Day, or at such less frequent intervals as may from time to time
be required by Foothill, a Gold roll-forward report, setting forth the opening
balance of Gold (owned and consigned) of Borrower in fto (which opening balance
shall be the same as the closing balance from the last such report, additions in
fto for the period covered by the report, subtractions in fto for the period
covered by the report, and the closing balance in fto as at the end of the
period covered by the report, the purpose of which roll-forward reports shall be
to enable Foothill to be updated as to the status of Gold (owned and consigned)
of Borrower in between receipt of Monthly Gold Certificates, and which
roll-forward reports shall be in such format as may reasonably be required by
Foothill. Original sales invoices evidencing daily sales shall be mailed by
Borrower to each Account Debtor with, at Foothill's request, a copy to Foothill,
and, at any time that an Event of Default has occurred or Foothill reasonably
deems itself insecure, at Foothill's request, the invoices shall indicate on
their face that the Account has been assigned to Foothill and that all payments
are to be made directly to Foothill. Borrower shall deliver to Foothill, as
Foothill may from time to time reasonably require, collection reports, sales
journals, invoices, original delivery receipts, customer's purchase orders,
shipping instructions, bills of lading, and other documentation respecting
shipment arrangements. Absent such a request by Foothill, copies of all such
documentation shall be held by Borrower as custodian for Foothill. In addition
to the foregoing, Borrower shall comply with all reporting requirements of Gold
Consignor under the Gold Consignment Agreement or the Creditor Agreement.
6.3 Schedules of Accounts. With such regularity as Foothill shall reasonably
require, Borrower shall provide Foothill with schedules describing all Accounts.
Foothill's failure to request such schedules or Borrower's failure to execute
and deliver such schedules shall not affect or limit Foothill's security
interest or other rights in and to the Accounts.
6.4 Financial Statements, Reports, Certificates. Borrower agrees to deliver to
Foothill: (a) as soon as available, but in any event within thirty (30) days
after the end of each month during each of Borrower's fiscal years, a company
prepared balance sheet, income statement, and cash flow statement covering
Borrower's operations during such period; and (b) as soon as available, but in
any event within ninety (90) days after the end of each of Borrower's fiscal
years, financial statements of Borrower for each such fiscal year, audited by
independent certified public accountants reasonably acceptable to Foothill and
certified, without any qualifications, by such accountants to have been prepared
in accordance with GAAP, together with a certificate of such accountants
addressed to Foothill stating that such accountants do not have knowledge of the
existence of any event or condition constituting an Event of Default, or that
would, with the passage of time or the giving of notice, constitute an Event of
Default. Such audited financial statements shall include a balance sheet, profit
and loss statement, and cash flow statement, and, to the extent prepared, such
accountants' letter to management. Borrower shall have issued written
instructions to its independent certified public accountants authorizing them to
communicate with Foothill and to release to Foothill whatever financial
information concerning Borrower that Foothill may request. In addition to the
financial statements referred to above, Borrower agrees to deliver financial
statements prepared on a consolidating basis so as to present Borrower and each
of its Subsidiaries separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to Foothill T&C's Form 10-Q
Quarterly Reports, Form 10-K Annual Reports, and Form 8-K Current Reports, and
any other filings made by T&C with the Securities and Exchange Commission, if
any, within fifteen (15) days after the same are filed, or any other information
that is provided by T&C to its shareholders generally, and any other report
reasonably requested by Foothill relating to the Collateral or the financial
condition of Borrower.
Each month, together with the financial statements provided pursuant to Section
6.4(a), Borrower shall deliver to Foothill a certificate signed by T&C's chief
financial officer to the effect that: (a) all reports, statements, or computer
prepared information of any kind or nature delivered or caused to be delivered
to Foothill hereunder have been prepared in accordance with GAAP and fully and
fairly present the financial condition of Borrower; (b) Borrower is in timely
compliance with all of its covenants and agreements hereunder; (c) the
representations and warranties of Borrower contained in this Agreement and the
Loan Documents are true and correct in all material respects on and as of the
date of such certificate, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an earlier
date); and (d) on the date of delivery of such certificate to Foothill there
does not exist any condition or event which constitutes an Event of Default (or,
in each case, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action Borrower
has taken, is taking or proposes to take with respect thereto).
Borrower hereby irrevocably authorizes and directs all auditors, accountants, or
other third parties to deliver to Foothill, at Borrower's expense, copies of
Borrower's financial statements, papers related thereto, and other accounting
records of any nature in their possession, and to disclose to Foothill any
information they may have regarding Borrower's business affairs and financial
conditions.
6.5 Tax Returns. Borrower agrees to deliver to Foothill copies of each of T&C's
future federal income tax returns, and any amendments thereto, within thirty
(30) days of the filing thereof with the Internal Revenue Service.
6.6 Designation of Inventory. Borrower shall now and from time to time
hereafter, but not Less frequently than monthly, execute and deliver to Foothill
a designation of Inventory specifying Borrower's cost and the wholesale market
value of Borrower's raw materials, work in process, and finished goods, and
further specifying such other information (including the percentage of such
value that is composed of precious metals) as Foothill may reasonably request.
6.7 Returns. Returns and allowances, if any, as between Borrower and its Account
Debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. If at any time prior to the occurrence of an Event of
Default, any Account Debtor returns any Inventory to Borrower, Borrower shall
promptly determine the reason for such return and, if Borrower accepts such
return, issue a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor. Borrower shall notify Foothill on a
daily basis of all returns and recoveries (other than so-called 'memo'
transactions) and of all disputes and claims involving amounts in excess of
$20,000.
6.8 Title to Equipment. At any time that an Event of Default has occurred or
Foothill reasonably deems itself insecure, at Foothill's request, Borrower shall
immediately deliver to the Collateral Agent, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment.
6.9 Maintenance of Equipment. Borrower shall keep and maintain the Equipment in
good operating condition and repair (ordinary wear and tear excepted), and make
all necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and the Equipment is now and shall at all times remain
personal property.
6.10 Taxes. All assessments and taxes, whether real, personal, or otherwise, due
or payable by, or imposed, levied, or assessed against Borrower or any of its
property have been paid, and shall hereafter be paid in full, before deficiency
or before the expiration of any extension period. Borrower shall make due and
timely payment or deposit of all federal, state, and local taxes, assessments,
or contributions required of it by law, and will execute and deliver to
Foothill, on demand, appropriate certificates attesting to the payment or
deposit thereof. Borrower will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable law, including those
Laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and
federal income taxes, and will, upon request, furnish Faithful with proof
satisfactory to Foothill indicating that Borrower has made such payments or
deposits. The foregoing to the contrary notwithstanding, Borrower shall not be
required to pay or discharge any such assessment or tax so long as the validity
thereof shall be the subject of a Permitted Protest.
6.11 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrower's ownership and use of the Collateral, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All such policies of insurance (except those of public liability and property
damage) shall contain a 438BFU lender's loss payable endorsement, or all
equivalent endorsement in a form satisfactory to Foothill, showing the
Collateral Agent and each of the Secured Parties as Loss payees or additional
assureds thereof, as the case may be, and as their interests may appear, and
shall contain a waiver of warranties, and shall specify that the insurer must
give at least thirty (30) days prior written notice to the Collateral Agent and
Foothill before canceling its policy for any reason. Borrower shall deliver to
Foothill certificates respecting such policies of insurance and, upon request
therefor by Foothill, evidence of the payment of all premiums therefor. Except
to the extent that the Intercreditor Agreement may provide otherwise, all
proceeds payable under any such policy with respect to Collateral as to which
Foothill has, or is the beneficiary of, a first priority security interest shall
be payable to Foothill to be applied on account of the Obligations.
6.12 Foothill Expenses. Borrower shall immediately, upon written notice,
reimburse Foothill for all sums expended by Foothill which constitute Foothill
Expenses and Borrower hereby authorizes and approves all advances and payments
by Foothill for items constituting Foothill Expenses and authorizes Foothill,
without prior written notice, to charge Borrower's loan account for the amount
thereof as and when incurred or expended.
6.13 Financial Covenants. Borrower shall maintain:
(a) Current Ratio. A ratio of Consolidated Current Assets divided by
Consolidated Current Liabilities of at least one and three-quarters to one
(1.75:1.0), measured on a fiscal quarter basis.
(b) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth of at
least Forty-Eight Million Dollars ($48,000,000), measured on a fiscal quarter
basis.
(c) Working Capital. Working Capital of not less than Seventy Five Million
Dollars ($75,000,000), measured on a fiscal quarter basis.
(d) Consolidated Interest Coverage Ratio. A Consolidated Interest Coverage
Ratio of not less than three-quarters to one (.75:1.0), measured on a fiscal
quarter basis (for the purposes hereof, the Consolidated Interest Coverage Ratio
will be calculated based upon the most recently completed twelve (12) month
period.
(e) Consolidated Total Senior Liabilities to Consolidated Tangible Capital
Base. A ratio of Consolidated Total Senior Liabilities divided by Consolidated
Tangible Capital Base of not more than nine tenths to one (.90:1.0), measured on
a fiscal quarter basis.
(f) Consolidated Adjusted Total Senior Liabilities to Consolidated Tangible
Capital Base. A ratio of Consolidated Adjusted Total Senior Liabilities divided
by Consolidated Tangible Capital Base of not more than one and fifteen
one-hundredths to one (1.15:1.0), measured on a fiscal quarter basis.
(g) Consolidated Operating Income. Borrower shall not permit its
consolidated operating income to be less than Twelve Million Dollars
($12,000,000) for any fiscal year of Borrower commencing with Borrower's fiscal
year ending February 23, 1997.
(h) Operating Income at Town & Country Fine Jewelry Group, Inc. Borrower
shall not permit Group's operating income to be less than Ten Million Three
Hundred Thousand Dollars ($10,300,000) for any fiscal year of Group commencing
with Group's fiscal year ending February 23, 1997.
(i) Operating Income at L.G. Balfour Company, Inc. Borrower shall not permit
Balfour's operating income to be less than Two Million Eight Hundred Thousand
Dollars ($2,800,000) for any fiscal year of Balfour commencing with Balfour's
fiscal year ending February 23, 1997.
(j) Gross Profit at Town & Country Fine Jewelry Group, Inc. Borrower shall
not permit Group's gross profit to be less than Twenty Six Million One Hundred
Thousand Dollars ($26,100,000) for any fiscal year of Group commencing with
Group's fiscal year ending February 23, 1997.
With respect to the foregoing covenants, Foothill and Borrower agree that
Borrower has made a good faith estimate of the expenses incurred or to be
incurred relating to the restructuring of its Gold facility (which expenses are
estimated at $900,000) and the Pending Material Transaction (which expenses are
estimated at $1,100,000). Of such $2,000,000, T&C expensed $450,000 in its
fiscal year ended February 25, 1996. Borrower believes there should not be any
significant increase in these expenses, which therefore currently would be
expected to have an approximate $1,550,000 impact on its financial statements
for its fiscal year ending in 1997. Foothill agrees that up to, but not more
than, $2,000,000 of such expenses shall be disregarded for purposes of making
all financial covenant calculations that pertain to Borrower's fiscal year
ending Febraury 23, 1997.
Should the Pending Material Transaction be consummated with the consent of
Foothill, Borrower and Foothill will negotiate in good faith to reset the
foregoing covenants at reasonable levels within forty-five days following the
Pending Material Transaction Closing Date, taking into account the effect of the
consummation of the Pending Material Transaction.
6.14 No Setoffs or Counterclaims. All payments hereunder and under the other
Loan Documents made by or on behalf of Borrower shall be made without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.15 Location of Inventory and Equipment. The Inventory and Equipment shall not
at any time now or hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent. Except as otherwise provided in
the last sentence of this Section 6.15, Borrower shall keep the Inventory and
Equipment only at the locations identified on Schedule 6.15A; provided, however,
that Borrower may amend Schedule 6.15A so long as such amendment occurs by
written notice to Foothill not less than thirty (30) days prior to the date on
which the Inventory or Equipment is moved to such new location and so long as,
at the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Collateral Agent's security interest in such assets and also provides to
Foothill a landlord's waiver in form and substance satisfactory to Foothill;
provided further, however, that the foregoing shall not prevent Borrower from
providing Inventory to its sales personnel or from providing Inventory 'samples'
to customers or potential customers so long as such activities are in the
ordinary course of Borrower's business, consistent with its past practices, and
involve a de minimis amount of Inventory. The foregoing notwithstanding,
Borrower may permit not more than 800 fto of Precious Metals in the aggregate at
any time to be in the possession of Outside Processors at locations not listed
on Schedule 6.15A, so long as not more than 100 fto of such Precious Metals are
maintained at any time at any such location, and so long as such Precious Metals
are accounted for in the Monthly Gold Certificates provided by Borrower to
Foothill in accordance with the provisions of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until payment in full of the Obligations, each Debtor composing
Borrower will not do any of the following without Foothill's prior written
consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness,
except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness existing as of the closing Date and set forth on Schedule
7.1 attached hereto;
(c) Indebtedness evidenced by the Senior Notes, together with the Senior
Notes Guarantees with respect thereto;
(d) Indebtedness evidenced by the New Senior Subordinated Notes and such
additional New Senior Subordinated Notes as may be issued after the date on
which the New Senior Subordinated Notes are originally issued in lieu of the
payment of cash interest on the New Senior Subordinated Notes in accordance with
the original terms and conditions of the New Senior Subordinated Notes and the
New Senior Subordinated Notes Indenture therefor, together with the New Senior
Subordinated Notes Guarantees with respect thereto;
(e) [intentionally omitted];
(f) [intentionally omitted];
(g) Indebtedness evidenced by the Gold Consignment Agreement;
(h) [intentionally omitted];
(i) Indebtedness secured by Permitted Liens;
(j) Indebtedness of any Debtor owing to any other Debtor or to any
Subsidiary, so long as such Indebtedness is subordinated, in writing, in right
of payment to the payment in full of the Obligations on terms and conditions
reasonably satisfactory to Foothill;
(k) Indebtedness evidenced by the New Exchangeable Preferred Stock, together
with accrued but unpaid dividends thereon;
(l) interest rate protection agreements of Borrower covering Indebtedness of
Borrower, (which Indebtedness (i) bears interest at fluctuating interest rates,
and (ii) is otherwise permitted to be issued under this Section 7.1), in each
case, only if the notional principal amount of such interest rate protection
agreement does not exceed the principal amount of the Indebtedness to which the
interest rate protection agreement relates;
(m) Indebtedness arising under the provisions of the Registration
Effectiveness Agreement; and
(n) refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) through (l) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrower, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly,
any lien on or with respect to any of its property or assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Permitted Liens that are continued or
renewed as permitted under Section 7.1(n)).
7.3 Restrictions on Fundamental Changes. Enter into any acquisition, merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one traction or a series of transactions, all or substantially all of its
business, property, or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the assets, stock, or
other evidence of beneficial ownership of any Person or entity.
7.4 Extraordinary Transactions and Disposal of Assets. Enter into any
transaction not in the ordinary and usual course of Borrower's business,
including any Asset Disposition; provided, however, that the foregoing shall not
prevent the making of any Permitted Asset Disposition or any disposition of real
property listed on Schedule 7.4 on substantially the terms previously disclosed
to Foothill.
7.5 Change Name. Change its name, business structure, or identity, or add any
new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with respect to
the obligations of any third party in an aggregate amount in excess of $250,000,
except by endorsement or instruments or items of payment for deposit to the
account of Borrower or which are transmitted or turned over to Foothill and
except that one Debtor may guarantee or otherwise become liable with respect to
any Indebtedness of another Debtor so long as the underlying Indebtedness is
permitted under Section 7.1 hereof.
7.7 Nature of Business; Fiscal Year. Make any change in the nature of Borrower's
business or the commencement and expiration of its fiscal year.
7.8 Prepayments. Except as permitted by Section 7.l(n), prepay, redeem, or
repurchase any Indebtedness owing to any third party; provided, however, that
this Section 7.8 shall not prohibit: (i) the performance by T&C of its mandatory
redemption obligations set forth in Sections 3.02, 4.05, 4.08, 4.11, or 4.13 of
the Senior Notes Indenture, and/or the redemption by T&C of Senior Notes
pursuant to Section 3.09 of the Senior Notes Indenture (as added by the First
Supplemental Indenture thereto dated as of August 31, 1993) from "Collateral
Proceeds" (as such term is defined in the Senior Notes Indenture); and (ii) so
long as no Event of Default has occurred and is continuing and so long as to do
so would not be in contravention of the subordination terms contained in such
New Senior Subordinated Notes Indenture, the performance by T&C of its mandatory
redemption obligations as set forth in Sections 4.04, 4.08, 4.10, and 4.12 of
the New Senior Subordinated Notes Indenture. In addition, Borrower agrees that
it will not pay in cash any interest that it is contractually permitted to
pay-in-kind.
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly, any
Change of Control.
7.10 Capital Expenditures. Make any capital expenditure, or any commitment
therefor, in excess of One Million Dollars ($l,000,000) for any individual
transaction or where the aggregate amount of such capital expenditures, made or
committed for in any fiscal year, is in excess of Four Million Dollars
($4,000,000). Should the Pending Material Transaction be consummated with the
consent of Foothill, Borrower and Foothill will negotiate in good faith to reset
the foregoing covenants at reasonable levels within forty-five days following
the Pending Material Transaction Closing Date, taking into account the effect of
the consummation of the Pending Material Transaction.
7.11 Consignments. Consign any Inventory, sell any Inventory on bill and hold,
sale or return, sale on approval, or other conditional terms of sale; provided,
however, that the foregoing shall not prevent Borrower from consigning Inventory
to third Persons in the ordinary course Borrower's business, consistent with its
past practices, so long as at the time of any such consignment, Borrower takes
such steps as may be necessary so as to ensure that such consigned Inventory is
not subject to the claims of the consignees creditors or that Borrower has
priority over any perfected security interests in the inventory of such
consignee.
7.12 Distributions. Make any distribution or declare or pay any dividends (in
cash or in stock) on, or purchase, acquire, redeem, or retire any of Borrower's
capital stock, of any class, whether now or hereafter outstanding; provided,
however, that this Section 7.12 shall not prohibit: (i) the payment of dividends
payable solely in shares of a class of stock (other than stock that has a
mandatory dividend or redemption obligation) to the holders of that class or a
dividend consisting solely of options or warrants or other rights to purchase
capital stock (other than stock that has a mandatory dividend or redemption
obligation); (ii) the performance by T&C of its obligations under the
Registration Effectiveness Agreement; (iii) the exchange of shares of New
Exchangeable Preferred Stock for shares of common stock of LSI to the extent and
as provided for in the Certificate of Designation; (iv) dividends or
distributions payable by a Debtor to another Debtor; and (v) so long as no Event
of Default has occurred and is continuing and so long as the Consolidated Fixed
Charge Ratio is greater than 1.25 to 1 at the time of and after giving effect to
such declaration and payment, dividends payable to holders of the New
Exchangeable Preferred Stock.
7.13 Accounting Methods. Modify or change its method of accounting or enter
into, modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of Borrower's accounting records without said
accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Foothill pursuant to or in accordance with this Agreement, and agrees that
Foothill may contact directly any such accounting firm or service bureau in
order to obtain such information.
7.14 Investments. Directly or indirectly make or acquire any beneficial interest
in (including stock, partnership interest, or other securities of), or make any
loan, advance, or capital contribution to, any Person, except for the following:
(a) Permitted Investments;
(b) investments by a Debtor in another Debtor;
(c) loans by one or more of the Debtors to one or more of the foreign
Subsidiaries of T&C (other than a foreign Subsidiary that is an Inactive
Subsidiary), so long as the aggregate amount of all such loans outstanding at
any one time does not exceed $2,000,000;
(d) loans to employees of Borrower in an aggregate principal amount at any
time outstanding not in excess of $500,000;
(e) the shares of stock of Solomon Brothers and LSI owned by T&C as of the
Closing Date, together with any non-cash dividends and distributions issued,
from time to time, with respect thereto; and
(f) any reorganization securities issued to Borrower in connection with
Borrower's claim filed in the chapter 11 bankruptcy proceedings relating to Zale
Corporation and certain of its Affiliates.
Anything contained in this Agreement to the contrary notwithstanding, in no
event shall Borrower or any of the Subsidiaries, directly or indirectly, make or
ache any further beneficial interest in (including stock, partnership interest,
or other securities of), or make any loan, advance, or capital contribution to,
one or more of the Inactive Subsidiaries.
7.15 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of Borrower except for Permitted
Affiliate Transactions. To the extent that any such proposed transaction
involves $250,000 or more, Borrower shall provide Foothill with prior notice and
the details thereof.
7.16 Suspension. Suspend or go out of a substantial portion of its business.
7.17 Compensation. Pay or accrue compensation, during any year, to the officers
and senior management employees (exclusive of those who also serve as officers
or senior management employees of T&C) of any of the Subsidiaries in excess of
the amounts that have been pre-approved by the senior officers of T&C; pay or
accrue compensation, during any year, to the officers and senior management
employees of T&C (inclusive of those who also serve as officers or senior
management employees of T&C) in excess of the amounts that have been
pre-approved by the Compensation Committee of the Board of Directors of T&C,
which committee shall be composed solely of independent directors. Borrower
agrees that it shall not accept the resignation of an officer or senior
management employee of T&C and appoint such individual as an officer or senior
management employee of any of the Subsidiaries unless there is a valid business
purpose to do so and so long as the resignation and appointment is not motivated
by a desire to circumvent the requirements of this Section 7.17.
7.18 Use of Proceeds. Use the proceeds of the advances made hereunder for any
other purpose than (i) to repay or retire obligations due the Exiting Gold
Banks; (ii) to refinance in full, on the Closing Date, the outstanding
principal, accrued interest, accrued fees and any other "Obligations" (as
therein defined) owing under the Prior Agreement; (iii) to pay Transaction
Costs; and (iv) thereafter, consistent with the terms and conditions hereof, for
Borrower's lawful and permitted corporate purposes.
7.19 Amendment of Certain Documents.
(a) Agree to any amendment to, or waive any of its rights with respect to,
the terms and provisions regarding interest rates, principal or interest payment
amounts, total principal amounts or similar material terms and provisions of any
or all of the Senior Notes or the Senior Notes Indenture, or the New Senior
Subordinated Notes or the New Senior Subordinated Notes Indenture, or any
related documents or agreements, or any amendments or waivers with respect to
any of the foregoing, without in each case obtaining the prior written consent
of Foothill to such amendment or waiver; provided, however, that the foregoing
shall not restrict any amendment of any indenture pursuant to which such
debentures or notes were or are issued in order to conform such documents with
the provisions of the Trust Indenture Act.
(b) Agree to any amendment to or waiver of the subordination terms and
provisions of any or all of the New Senior Subordinated Notes, without obtaining
the prior written consent of Foothill thereto.
(c) Agree to any amendment to or waiver of the events of default, redemption
provisions, or affirmative and negative covenants of any or all of the Senior
Notes or the Senior Notes Indenture, or the New Senior Subordinated Notes or the
New Senior Subordinated Notes Indenture (including the defined terms related to
any of the foregoing), which would make such terms or conditions materially more
onerous or restrictive to Borrower, without obtaining the prior written consent
of Foothill to such amendment or waiver.
Anything contained herein to the contrary notwithstanding, this Section 7.19
shall not prohibit or restrict the refinancing of any Indebtedness to the extent
permitted by Section 7.1 hereof.
7.20 Specific Gold Covenants.
(a) Consign or deliver Precious Metals to foreign Subsidiaries or foreign
sales representatives.
(b) Deliver "memo Inventory" (including Precious Metals) anywhere outside
the United States of America.
(c) Consign or deliver goods containing an aggregate, at any one time, of
more than seven thousand five hundred (7,500) fto of Precious Metals to the
sales representatives or agents of Borrower.
(d) Consign or deliver (including on memo or any similar arrangement) goods
containing an aggregate, at any time, of more than fifteen thousand (15,000) fto
of Precious Metals to customers of Borrower (and, for the purpose of this
paragraph, Balfour sales representatives' sample lines will be treated as
consignments to customers of Borrower).
(e) Consign or deliver (including on memo or any similar arrangement) goods
containing an aggregate, at any time, of more than five thousand (5,000) fto of
Precious Metals to any single customer (and, for the purpose of this paragraph,
Balfour sales representatives' sample lines, as a whole, will be treated as
consignments to a single customer of Borrower).
(f) Have more than thirteen thousand (13,000) fto of Precious Metals in the
aggregate, at any time, at, or in transit to or from, Outside Processors.
(g) Fail to maintain Equity Precious Metals in an aggregate amount equal to
or greater than the aggregate amount of Precious Metal of Borrower on memo or
consignment to customers of Borrower (and, for the purpose of this paragraph,
Balfour sales representatives' sample line will be treated as consignments to
customers of Borrower).
(h) Permit the aggregate number of fto of Precious Metals of Borrower
(whether consisting of Consigned Precious Metals or Equity Precious Metals), at
any time, without duplication, (i) at, or in transit to or from, Outside
Processors, (ii) on consignment to customers of Borrower, (iii) at, or in
transit to or from, customers of Borrower pursuant to "memo" transactions, or
(iv) in the possession of sales representatives of Borrower, minus one hundred
percent (100%) of the aggregate number of fto of Equity Precious Metals, to
equal or exceed ten percent (10%) of the aggregate number of fto of Consigned
Precious Metals.
(i) Obtain Precious Metals on consignment from a third person or entity
except for consignments by Gold Consignor to Borrower pursuant to the Gold
Consignment Agreement.
Should the Pending Material Transaction be consummated with the consent of
Foothill, Borrower and Foothill will negotiate in good faith to reset the
foregoing covenants at reasonable levels within forty-five days following the
Pending Material Transaction Closing Date, taking into account the effect of the
consummation of the Pending Material Transaction.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an event of default
(each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrower fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in any
of the Loan Documents, or in any other present or future agreement between
Borrower and Foothill (irrespective of whether in its capacity as a lender, as a
representative of lenders, as the Collateral Agent, as a subagent of the
Collateral Agent, or otherwise);
8.3 If, in the reasonable judgment of Foothill, there is a material impairment
of the prospect of repayment of any portion of the Obligations owing to Foothill
or a material impairment of the value or priority of the security interests held
by, or for the benefit of, Foothill in and to the Collateral;
8.4 If any material portion of Borrower's assets is attached, seized, subjected
to a writ or distress warrant, or is levied upon, or comes into the possession
of any Judicial Officer or Assignee;
8.5 If an Insolvency Proceeding is commenced by any Debtor;
8.6 If an Insolvency Proceeding shall be commenced against any Debtor and any of
the following events occur: (1) such Debtor consents to the institution of the
Insolvency Proceeding against such Debtor; (2) the petition commencing the
Insolvency Proceeding is not timely controverted; (3) the petition commencing
the Insolvency Proceeding is not dismissed within sixty (60) calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, Foothill shall be relieved of its obligation to make additional
advances or to issue additional L/Cs or L/C Guarantees; (4) an interim trustee
is appointed to take possession of all or a substantial portion of the assets
of, or to operate all or any substantial portion of the business of, any Debtor;
or (5) an order for relief shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by court order
(which order is not stayed or discharged) from continuing to conduct all or any
material part of its business affairs;
8.8 (a) If a notice of lien, levy, or assessment is filed of record with respect
to any of Borrower's assets by the United States Government, or any department,
agency, or instrumentality thereof, or if any taxes or debts owing at any time
hereafter to the United States Government, or any department, agency, or
instrumentality thereof, becomes a lien, whether choate or otherwise, upon any
of Borrower's assets; or (b) if a notice of lien, levy, or assessment is filed
of record with respect to any material portion of Borrower's assets by any
state, county, municipal, or governmental agency, or if any taxes or debts in an
aggregate amount in excess of $250,000, or more, owing at any time hereafter to
any one or more of such entities becomes a lien, whether choate or otherwise,
upon any of Borrower's assets and the same is not paid on the payment date
thereof;
8.9 If there is a default in any material agreement to which Borrower is a party
with third parties (including, the Senior Notes Indenture, the New Senior
Subordinated Notes Indenture, or the Gold Consignment Agreement) resulting in a
right by such third parties, irrespective of whether exercised, to accelerate
the maturity of Borrower's Indebtedness thereunder (or the right of Gold
Consignor to demand return of consigned Precious Metals);
8.10 If Borrower is obligated to redeem or repurchase (or to offer to redeem or
repurchase) any or all of the Senior Notes under and pursuant to the terms and
conditions of the Senior Notes Indenture, other than redemptions or repurchases
required under Sections 3.02, 4.08, and 4.11 of such indenture;
8.11 If Borrower is obligated to redeem or repurchase (or to offer to redeem or
repurchase) any or all of the New Senior Subordinated Notes under and pursuant
to the terms and conditions of the New Senior Subordinated Notes Indenture,
other than redemptions or repurchases required under Sections 4.08 and 4.10 of
such indenture;
8.12 [Intentionally omitted];
8.13 If Borrower makes any payment on account of Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.14 If any material misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or report made to Foothill by
Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn by any officer or director; or
8.15 If a Prohibited Transaction or Reportable Event shall occur with respect to
a Plan which could have a material adverse effect on the financial condition of
Borrower; if any lien upon the assets of Borrower in connection with any Plan
shall arise; if Borrower or any ERISA Affiliate shall completely or partially
withdraw from a Multiemployer Plan or Multiple Employer Plan of which Borrower
or such ERISA Affiliate was a substantial employer, and such withdrawal could,
in the opinion of Foothill, have a material adverse effect on the financial
condition of Borrower; if Borrower or any of its ERISA Affiliates shall fail to
make full payment when due of all amounts which Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer Plan as one
or more contributions thereto; if Borrower or any of its ERISA Affiliates
creates or permits the creation of any accumulated funding deficiency, whether
or not waived; or upon the voluntary or involuntary termination of any Plan
which termination could, in the opinion of Foothill, have a material adverse
effect on the financial condition of Borrower.
9. FOOTHILL'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event of Default Foothill
may, at its election, without notice of its election and without demand, do any
one or more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit (including L/Cs or L/C
Guarantees) to or for the benefit of Borrower under this Agreement, under any of
the loan Documents, or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of Foothill, but without affecting Foothill's
rights and security interest in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Foothill considers advisable and which are
commercially reasonable, and in such cases, Foothill will credit Borrower's loan
account with only the net amounts received by Foothill in payment of such
disputed Accounts after deducting all Foothill Expenses incurred or expended in
connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for Foothill,
segregate all returned Inventory from all other property of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of Foothill;
(f) Without notice to or demand upon Borrower, make such payments and do
such acts as Foothill considers necessary or reasonable to protect its security
interest in the Collateral. So long as to do so would not be inconsistent with
the superior rights, if any, of one or more of the other Secured Parties,
Borrower agrees to assemble the Collateral if Foothill so requires, and to make
the Collateral available to Foothill as Foothill may designate. Borrower
authorizes Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien that in
Foothill's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With respect
to any of Borrower's owned premises, Borrower hereby grants Foothill a license
to enter into possession of such premises and to occupy the same, without
charge, for up to one hundred twenty (120) days in order to exercise any of
Foothill's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived) set off
and apply to the Obligations any and all (i) balances and deposits of Borrower
held by Foothill (including any amounts received in the Lock Boxes established
pursuant to the Lock Box Agreements), or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Foothill. In this regard,
Borrower agrees that Foothill may hold such cash collateral to secure the
Obligations (including the L/C Amount) and need not apply same to reduce the
Obligations unless and until it holds an amount equal to one hundred and two
percent (102%) of the L/C Amount at which time the excess amount shall be
applied in reduction of the remaining Obligations and the amount that is
continued to be held as cash collateral shall be applied to satisfy a drawing
under an L/C or L/C Guaranty at such time as the drawing is paid or, if the L/C
or L/C is retired undrawn, the allocable amount shall be applied to the balance
of the Obligations;
(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. To the extent that Borrower has the legal right to do so, Foothill
is hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to Foothill's benefit;
(i) Sell, or cause the Collateral Agent (or its agents) to sell, the
Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as Foothill determines is commercially
reasonable. It is not necessary that the Collateral be present at any such sale;
(j) Foothill (or the Collateral Agent) shall give notice of the disposition
of the Collateral as follows:
(1) Foothill (or the Collateral Agent) shall give Borrower and each
holder of a security interest in the Collateral who has filed with Foothill (or
the Collateral Agent) a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral, then the
time on or after which the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least five (5) Business Days
before the date fixed for the sale, or at least five (5) Business Days before
the date on or after which the private sale or other disposition is to be made,
unless the Collateral is perishable or threatens to decline speedily in value.
Notice to Persons other than Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have furnished to Foothill (or the
Collateral Agent);
(3) If the sale is to be a public sale, Foothill (or the Collateral
Agent) also shall give notice of the time and place by publishing a notice one
time at least five (5) calendar days before the date of the sale in a newspaper
of general circulation in the county, parish, or the equivalent thereof, in
which the sale is to be held;
(k) Foothill may credit bid and purchase at any public sale; and
(l) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower. Any excess will be returned
promptly, without interest and subject to the rights of third parties, by
Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Foothill shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or inequity. No exercise by Foothill of one right or remedy
shall be deemed an election, and no waiver by Foothill of any Event of Default
shall be deemed a continuing waiver. No delay by Foothill shall constitute a
waiver, election, or acquiescence by it. Absent an effective waiver or
modification contained herein or in one or more of the Loan Documents, the
rights and remedies of Foothill and the Collateral Agent with respect to the
Collateral following an Event of Default shall be subject to the provisions of
Chapter 5 of Division 9 of the Code.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL
If Borrower fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third Persons or entities, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could have a material adverse effect on
Foothill's interests in the Collateral, in its discretion and without prior
notice to Borrower, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in Borrower's
loan account as Foothill deems necessary to protect Foothill from the exposure
created by such failure, provided that Foothill agrees to endeavor to provide
Borrower with prompt notice of the amount of such reserves as and when
established; or (c) obtain and maintain insurance policies of the type described
in Section 6.11, and take any action with respect to such policies as Foothill
deems prudent. Any amounts paid or deposited by Foothill shall constitute
Foothill Expenses, shall be immediately charged to Borrower's loan account and
become additional Obligations, shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Foothill shall not constitute an agreement by Foothill to make similar
payments in the fixture or a waiver by Foothill of any Event of Default under
this Agreement. Foothill need not inquire as to, or contest the validity of, any
such expense, tax, security interest, encumbrance, or lien and the receipt of
the usual official notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Foothill on which Borrower may in any way be liable.
11.2 Foothill's Liability for Inventory or Equipment. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to indemnify Foothill and its officers,
employees, and agents and hold Foothill harmless against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party arising
out of or relating to the transactions contemplated by this Agreement or any
other Loan Document, and (b) all losses in any way suffered, incurred, or paid
by Foothill as a result of or in any way arising out of, following, or
consequential to the transactions contemplated by this Agreement or any other
Loan Document, except, in any such case, to the extent that the same arises from
the gross negligence or willful misconduct of Foothill or its officers, agents,
or employees. This provision shall survive the termination of this Agreement.
11.4 Suretyship Waivers and Consents. Each Debtor acknowledges that the
obligations of such Debtor undertaken herein might be construed to consist, at
least in part, of the guaranty of obligations of Persons or entities other than
such Debtor (including the other Debtors party hereto) and, in full recognition
of that fact, each Debtor consents and agrees that Foothill may, at any time and
from time to time, without notice or demand, whether before or after any actual
or purported termination, repudiation or revocation of this Agreement by any one
or more Debtors, and without affecting the enforceability or continuing
effectiveness hereof as to each Debtor: (a) supplement, restate, modify, amend,
increase, decrease, extend, renew, accelerate or otherwise change the time for
payment or the terms of the Obligations or any part thereof, including any
increase or decrease of the rate(s) of interest thereon; (b) supplement,
restate, modify, amend, increase, decrease or waive, or enter into or give any
agreement, approval or consent with respect to, the Obligations or any part
thereof, or any of the Loan Documents or any additional security or guarantees,
or any condition, covenant, default, remedy, right, representation or term
thereof or thereunder; (c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof; (d) accept partial payments on the Obligations;
(e) receive and hold additional security or guarantees for the Obligations or
any part thereof; (f) release, reconvey, terminate, waive, abandon, fail to
perfect, subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of sale
thereof as Foothill in its sole and absolute discretion may determine; (g)
release any Person from any personal liability with respect to the Obligations
or any part thereof; (h) settle, release on terms satisfactory to Foothill or by
operation of applicable laws or otherwise liquidate or enforce any Obligations
and any security therefor or guaranty thereof in any manner, consent to the
transfer of any security and bid and purchase at any sale; or (i) consent to the
merger, change or any other restructuring or termination of the corporate or
partnership existence of any Debtor or any other Person, and correspondingly
restructure the Obligations, and any such merger, change, restructuring or
termination shall not affect the liability of any Debtor or the continuing
effectiveness hereof, or the enforceability hereof with respect to all or any
part of the Obligations.
Upon the occurrence and during the continuance of any Event of Default, Foothill
may enforce this Agreement independently as to each Debtor and independently of
any other remedy or security Foothill at any time may have or hold in connection
with the Obligations, and it shall not be necessary for Foothill to marshal
assets in favor of any Debtor or any other Person or to proceed upon or against
or exhaust any security or remedy before proceeding to enforce this Agreement.
Each Debtor expressly waives any right to require Foothill to marshal assets in
favor of any Debtor or any other Person or to proceed against any other Debtor
or any collateral provided by any Person, and agrees that Foothill may proceed
against Debtors or any collateral in such order as it shall determine in its
sole and absolute discretion.
Foothill may file a separate action or actions against any Debtor, whether
action is brought or prosecuted with respect to any security or against any
other Person, or whether any other Person is joined in any such action or
actions. Each Debtor agrees that Foothill and any Debtor and any Affiliate of
any Debtor may deal with each other in connection with the Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the continuing efficacy of this Agreement. Each Debtor expressly
waives the benefit of any statute of limitations affecting its liability
hereunder or the enforcement of the Obligations or any rights of Foothill
created or granted herein.
Foothill's rights hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by Foothill, all as though such amount had not been
paid. The rights of Foothill created or granted herein and the enforceability of
this Agreement at all times shall remain effective to cover the full amount of
all the Obligations even though the Obligations, including any part thereof or
any other security or guaranty therefor, may be or hereafter may become invalid
or otherwise unenforceable as against any Debtor and whether or not any other
Debtor shall have any personal liability with respect thereto.
To the maximum extent permitted by applicable law, each Debtor expressly waives
any and all defenses now or hereafter arising or asserted by reason of (a) any
disability or other defense of any other Debtor with respect to the Obligations,
(b) the unenforceability or invalidity of any security or guaranty for the
Obligations or the lack of perfection or continuing perfection or failure of
priority of any security for the Obligations, (c) the cessation for any cause
whatsoever of the liability of any other Debtor (other than by reason of the
full payment and performance of all Obligations), (d) any failure of Foothill to
marshal assets in favor of any Debtor or any other Person, (e) any failure of
Foothill to give notice of sale or other disposition of collateral to any Debtor
or any other Person or any defect in any notice that may be given in connection
with any sale or disposition of collateral, (f) any failure of Foothill to
comply with applicable law in connection with the sale or other disposition of
any collateral or other security for any Obligation, including any failure of
Foothill to conduct a commercially reasonable sale or other disposition of any
collateral or other security for any Obligation, (g) any act or omission of
Foothill or others that directly or indirectly results in or aids the discharge
or release of any of any Debtor or the Obligations or any security or guaranty
therefor by operation of law or otherwise, (h) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation,
(i) any failure of Foothill to file or enforce a claim in any bankruptcy or
other proceeding with respect to any Person, (j) the election by Foothill of the
application or non-application of Section 1111(b)(2) of the Bankruptcy Code, (k)
any extension of credit or the grant of any lien under Section 364 of the
Bankruptcy Code, (l) any use of cash collateral under Section 363 of the
Bankruptcy Code, (m) any agreement or stipulation with respect to the provision
of adequate protection in any bankruptcy proceeding of any Person, (n) the
avoidance of any lien in favor of Foothill for any reason, or (o) any action
taken by Foothill that is authorized by this section or any other provision of
any loan Document. Until such time, if any, as all of the Obligations have been
paid and performed in full and no portion of any commitment of Foothill to
Borrower under any Loan Document remains in effect, no Debtor shall have any
right of subrogation, contribution, reimbursement or indemnity, and each Debtor
expressly waives any right to enforce any remedy that Foothill now has or
hereafter may have against any other Person and waives the benefit of, or any
right to participate in, any collateral now or hereafter held by Foothill. Each
Debtor expressly waives all setoffs and counterclaims and all presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Obligations, and
all notices of acceptance of this Agreement or of the existence, creation or
incurring of new or additional Obligations.
In the event that all or any part of the Obligations at any time are secured by
any one or more deeds of trust or mortgages or other instruments creating or
granting liens on any interests in real property, each Debtor authorizes
Foothill (or the Collateral Agent (or its agents) on Foothill's behalf), upon
the occurrence of and during the continuance of any Event of Default, at its
sole option, without notice or demand and without affecting the obligations of
any Debtor, the enforceability of this Agreement, or the validity or
enforceability of any liens of, or for the benefit of Foothill on any
collateral, to foreclose any or all of such deeds of trust or mortgages or other
instruments by judicial or nonjudicial sale.
To the fullest extent permitted by applicable law, each Debtor expressly waives
any defenses to the enforcement of this Agreement or any rights of Foothill
created or granted hereby or to the recovery by Foothill against any Debtor or
any other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale, even though such a foreclosure or sale may
impair the subrogation rights of Debtors and may preclude Debtors from obtaining
reimbursement or contribution from other Debtors. Each Debtor expressly waives
any defenses or benefits that may be derived from California Code of Civil
Procedure ee 580a, 580b, 580d or 726, or comparable provisions of the laws of
any other jurisdiction, and all other suretyship defenses it otherwise might or
would have under California law or other applicable law. Each Debtor expressly
waives any right to receive notice of any judicial or nonjudicial foreclosure or
sale of any real property or interest therein of another Debtor that is subject
to any such deeds of trust or mortgages or other instruments and any Debtor's
failure to receive any such notice shall not impair or affect such Debtor's
obligations or the enforceability of this Agreement or any rights of Foothill
created or granted hereby.
Debtors and each of them warrant and agree that each of the waivers and consents
set forth herein are made after consultation with legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, destroy or
otherwise adversely affect rights which Debtors otherwise may have against other
Debtors, Foothill or others, or against Collateral, and that, under the
circumstances, the waivers and consents herein given are reasonable and not
contrary to public policy or law. If any of the waivers or consents herein are
determined to be contrary to any applicable law or public policy, such waivers
and consents shall be effective to the maximum extent permitted by law.
12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
therewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by prepaid overnight courier service,
telex, TWX, telefacsimile, or telegram (with messenger delivery specified) to
Borrower or to Foothill, as the case may be, at its addresses set forth below:
If to Borrower: TOWN & COUNTRY CORPORATION 25 Union Street Chelsea,
Massachusetts 02150 Attn: Chief Financial Officer
TOWN & COUNTRY FINE JEWELRY GROUP, INC.
25 Union Street
Chelsea, Massachusetts 02150
Attn: Chief Financial Officer
GOLD LANCE, INC.
25 Union Street
Chelsea, Massachusetts 02150
Attn: Chief Financial Officer
L.G. BALFOUR COMPANY, INC.
25 Union Street
Chelsea, Massachusetts 02150
Attn: Chief Financial Officer
with copies to: GOODWIN, PROCTER & HOAR, LLP
53 State Street
Boston, Massachusetts 02109
Attn: Kevin M. Dennis, Esq.
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
and to: FOOTHILL CAPITAL CORPORATION
60 State Street, Suite 1150
Boston, MA 02109
Attn: Loan Administration Manager
with copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: Jeffrey S. Turner, Esq.
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section 12, other than notices
by Foothill in connection with Sections 9504 or 9505 of the Code, shall be
deemed received on the earlier of the date of actual receipt or three (3)
calendar days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505 of
the Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION
OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. EACH DEBTOR AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. EACH DEBTOR AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH DEBTOR AND FOOTHILL REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings, or other papers delivered to
Foothill may be destroyed or otherwise disposed of by Foothill four (4) months
after they are delivered to or received by Foothill, unless Borrower requests,
in writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS
15.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided,
however, that Borrower may not assign this Agreement or any rights or duties
hereunder without Foothill's prior written consent and any prohibited assignment
shall be absolutely void. No consent to an assignment by Foothill shall release
Borrower from its Obligations. Foothill may assign this Agreement and its rights
and duties hereunder. Foothill reserves the right to sell, assign, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Foothill's rights and benefits hereunder. In connection therewith, Foothill may
disclose all documents and information which Foothill now or hereafter may have
relating to Borrower or Borrower's business; provided, however, that, with
respect to any potential participants or assignees that are first contacted by
Foothill on or after the Closing Date, Foothill agrees to use its best efforts
to secure a confidentiality agreement from such potential participants or
assignees in form and substance reasonably satisfactory to Borrower. To the
extent that, Foothill assigns its rights and obligations hereunder to a third
party, Foothill shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
15.3 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each paragraph applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Foothill or Borrower, whether
under any rule of construction or otherwise. On the contrary, this Agreement has
been reviewed by all parties and shall be construed and interpreted according to
the ordinary meaning of the words used so as to fairly accomplish the purposes
and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement cannot be changed or terminated
orally. All prior agreements, understandings, representations, warranties, and
negotiations, if any, are merged into this Agreement.
15.7 Counterparts; Telecopy Execution. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile shall also deliver a executed counterpart of
this Agreement but the failure to deliver a manually counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by Borrower or the transfer by Borrower to Foothill of any
property of Borrower should for any reason subsequently be declared to be
improper under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required to repay or restore,
and as to all reasonable costs, expenses and attorneys' fees of Foothill related
thereto, the liability of Borrower shall automatically be revived, reinstated,
and restored and shall exist as though such Voidable Transfer had never been
made.
15.9 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted, modified, or
qualified by any other agreement, oral or written, whether before or after the
date hereof.
15.10 Renegotiation of Certain Provisions in Certain Instances. Should the
Pending Material Transaction be consummated with the consent of Foothill,
Borrower and Foothill will negotiate in good faith to revise any
representations, warranties, or covenants specifically affected thereby, in a
reasonable and appropriate manner, within forty-five days following the Pending
Material Transaction Closing Date, taking into account the effect of the
consummation of the Pending Material Transaction, provided that nothing in this
section shall require Foothill to renegotiate the reductions in dollar or fto
levels specifically set forth herein as applicable with respect to the
consummation of the Pending Material Transaction (such as, by way of example
only, and without limitation, the reduction of the dollar level of the "Maximum
Amount" or the reduction of the fto level of the "Gold Cap" that occur on the
Pending Material Transaction Closing Date), nor shall this section require
Foothill to renegotiate the pricing, fee structure, or term hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
TOWN & COUNTRY CORPORATION,
a Massachusetts corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
a Massachusetts corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
GOLD LANCE, INC.,
a Massachusetts corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
L.G. BALFOUR COMPANY, INC.,
a Delaware corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By___/s/ Anthony Aloi________________
Its__Assistant Vice President________
<PAGE>
Exhibits
Exhibit M-1 Monthly Gold Certificate
Schedules
Schedule E-1 Locations of Eligible Inventory
Schedule E-2 Excluded Assets
Schedule M-1 Mortgaged Properties
Schedule P-1 [Intentionally Omitted]
Schedule P-2 Permitted Liens
Schedule 6.15A Locations of Inventory and Equipment
Schedule 6.15B Locations Requiring Landlord Waivers
Schedule 5.9 Litigation
Schedule 5.13 Environmental Condition
Schedule 5.14 Subsidiaries
Schedule 7.1 Permitted Indebtedness
Schedule 7.4 Permitted Real Property Dispositions
Exhibit 10.2
<PAGE>
SECOND AMENDED AND RESTATED CONSIGNMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED CONSIGNMENT AGREEMENT (this
"Agreement") is made as of the 3rd day of July, 1996, by and between FLEET
PRECIOUS METALS INC., a Rhode Island corporation ("Consignor"), and TOWN &
COUNTRY CORPORATION, a Massachusetts corporation ("T&C"), TOWN & COUNTRY FINE
JEWELRY GROUP, INC., a Massachusetts corporation ("Group"), L.G. BALFOUR
COMPANY, a Delaware corporation ("Balfour"), and GOLD LANCE, INC., a
Massachusetts corporation ("GLI") (T&C, Group, Balfour and GLI are herein
referred to, jointly and severally, as "Buyer").
Consignor and Buyer are parties to a certain Amended and Restated
Consignment Agreement dated as of May 14, 1993 (the "1993 Consignment
Agreement") pursuant to which Consignor has from time to time delivered precious
metal to Buyer. Buyer has requested Consignor to continue such consignment
relationship in effect and to deliver Precious Metal (as defined herein) on
consignment for sale to Buyer, and Consignor is willing to make those deliveries
and sales on the terms and conditions contained in this Agreement, provided that
the parties amend and restate the 1993 Consignment Agreement in its entirety as
hereinafter set forth. To effectuate this arrangement, Consignor and Buyer
(jointly and severally) hereby amend and restate the 1993 Consignment Agreement
in its entirety and hereby agree as follows:
1. Definitions. For the purposes of this Agreement:
"Consigned Precious Metal" shall mean Precious Metal which Consignor has
consigned to Buyer pursuant to the terms of this Agreement for which payment has
not been received or which has not been Redelivered to Consignor.
"Consignment Limit" shall mean that amount calculated from time to time as the
least of (a) seventy thousand (70,000) troy ounces of fine gold, (b) subject to
the provisions of Section 5 hereof, Consigned Precious Metal with a Fair Market
Value (or unpaid Purchase Price in the case of Consigned Precious Metal for
which the Purchase Price has been agreed but as to which payment has not been
received by Consignor) equal to Twenty-Eight Million Five Hundred Thousand
Dollars ($28,500,000.00) or (c) subject to the provisions of Section 5 hereof,
Consigned Precious Metal with a Fair Market Value (or unpaid Purchase Price in
the case of Consigned Precious Metal for which the Purchase Price has been
agreed but as to which payment has not been received by Consignor) equal to
ninety-five percent (95%) of the available face amount of all effective Letters
of Credit issued to Consignor pursuant to and in accordance with Section 10(b).
"Cross-Default" shall have the meaning set forth in Section 13(c)(ix).
"Daily Consignment Fee" shall mean, for each day, the sum obtained by
multiplying two and nine-tenths percent (2.90%) (or such other percentage as
Consignor shall determine in its sole discretion on seven (7) days' prior notice
to Buyer in the form of Exhibit A attached hereto) by one-three hundred sixtieth
(1/360) by the Fair Market Value of the Consigned Precious Metal for that day.
"Deliver" or "Delivery" shall mean either actual shipment, creating the right in
Buyer to demand actual shipment through a writing, instrument or a statement of
account, or Consignor's crediting Precious Metal to the account of Buyer with
one or more third parties when no physical movement thereof is contemplated by
the parties.
"Dollar Lender" shall mean Foothill Capital Corporation, a California
corporation, its successors and assigns.
"Duly Authorized Officer" shall mean the President or Senior Vice President of
Buyer or Consignor, or other officer or employee of either party who is
authorized by the party's Board of Directors or an executive committee of such
Board of Directors. Buyer shall deliver to Consignor a certificate or letter
certifying to the name(s) of all person(s) who are Duly Authorized Officers.
Consignor may conclusively rely on such certificate or letter until it shall
receive a further certificate from Buyer in form acceptable to Consignor
canceling or amending the prior list of Duly Authorized Officers. Any person
identifying himself or herself as a Duly Authorized Officer of Buyer shall have
the right to effect transactions under this Agreement. Consignor acting in good
faith shall have no responsibility or obligation to ascertain whether the person
is in fact the Duly Authorized Officer of Buyer which he or she claims to be or
is, in fact, authorized to effect the transaction. At its option, Consignor may
verify any telephonic or telegraphic request for transaction by calling a Duly
Authorized Officer, and where more than one Duly Authorized Officer is so
authorized, by calling a Duly Authorized Officer or other individual other than
the caller or the individual initiating the transaction. Buyer authorizes
Consignor at its option to record electronically all telephonic requests for
transactions that Consignor may receive from Buyer or any other person
purporting to act on behalf of Buyer.
"Event of Default" shall mean an Event of Default under Section 13(c) of this
Agreement.
"Fair Market Value" on any day shall mean the Second London Gold Fixing for that
day. In the event that the London Bullion Brokers shall discontinue or alter its
usual practice of quoting a price in United States Dollars for gold on any day
for which such a price is necessary for the purposes hereof, Consignor shall so
notify Buyer and Consignor shall at its option announce a substituted index or
mechanism which shall thereupon become the method of valuation hereunder.
"Financial Statements" shall mean the consolidated balance sheet, income
statement, statement of cash flows and retained earnings statement of Buyer for
the year or other period then ended, together with supporting schedules and
notes, certified (in the case of year-end statements) by Arthur Andersen & Co.
or by other independent public accountants approved by Consignor and prepared in
accordance with generally accepted accounting principles consistently applied.
"Indebtedness" shall mean the principal amount of indebtedness for borrowed
money which would appear as a liability upon a balance sheet in accordance with
generally accepted accounting principles, consistently applied, and shall
additionally mean consignment fees and indebtedness incurred for the acquisition
of Precious Metal, including the Fair Market Value of any Consigned Precious
Metal.
"Letter of Credit" shall have the meaning set forth in Section 10(b).
"Material Claims" for the purposes set forth in Section 11(h), shall have the
meaning set forth in Section 11(h).
"Notice" or "Notices" shall mean all requests, demands and other communications,
in writing either mailed by first-class registered or certified mail, return
receipt requested, delivered by overnight courier, or hand-delivered, addressed
to a Duly Authorized Officer of the other party at that party's Principal
Office.
"Precious Metal" shall mean gold having a fineness of not less than .9995,
without regard to whether such gold is alloyed or unalloyed, in bullion form or
is contained in or processed into other materials which contain elements other
than gold.
"Prime Rate" on any date shall mean the rate of interest announced by Fleet
National Bank, a national banking association, as being its "prime rate" for
that day.
"Principal Office" shall mean:
For Consignor:
Fleet Precious Metals Inc.
111 Westminster Street
Providence, Rhode Island 02903
Attention: Anthony J. Capuano,
Senior Vice President
Telecopier Number: 401-278-3077
For Buyer:
25 Union Street
Chelsea, Massachusetts 02150
Attention: President
Telecopier Number: 617-889-6707
"Purchase Date" shall mean the date which is a business day on which Consignor
conducts normal Precious Metal transactions and on which payment of the Purchase
Price is received by Consignor prior to 2:00 p.m. Providence, Rhode Island time.
"Purchase Price" shall mean a price to which both parties' Duly Authorized
Officers agree and shall be stated in dollars per troy ounce of Precious Metal
content. If for any reason the parties shall fail to agree on a Purchase Price,
Consignor may determine and establish the Purchase Price in accordance with its
usual and customary business practices.
"Redeliver" or "Redelivery" shall mean that Buyer delivers to Consignor's
Principal Office, at Buyer's sole risk and expense, Precious Metal of a fineness
equal to the fineness specified for that Precious Metal and of a type and
quality and in a form acceptable to Consignor.
"Security Documents" shall mean any and all agreements, whether now existing or
hereafter arising, which secure the payment and performance of Buyer's
obligations hereunder, including, without limitation, those several Security
Agreements dated as of May 14, 1993, by and between the respective corporations
comprising Buyer, as debtors thereunder, and Consignor and certain other "Gold
Banks" (as defined therein) as secured parties, and Consignor as agent for said
Gold Banks. Said Security Agreements shall remain in full force and effect in
favor of Consignor, notwithstanding the satisfaction of Buyer's obligations to
such Gold Banks other than Consignor.
"Termination Notice" shall mean a Notice from one party to the other stating
that the Notice giver has elected to terminate this Agreement in accordance with
Section 13 hereof.
2. Amount of Consignment.
Provided no Termination Notice has been given by either party and no Event of
Default nor any event which with notice or lapse of time, or both, would
constitute an Event of Default has occurred hereunder, Consignor will deliver
from time to time to Buyer upon its request Precious Metal under the terms and
conditions of this Agreement; in no event shall Consignor be obligated to
deliver Precious Metal if the amount of troy ounces or Fair Market Value of
Precious Metal requested when added to Consigned Precious Metal then outstanding
exceeds Buyer's Consignment Limit.
Each of the entities included within the term "Buyer" hereby irrevocably
designates each of T&C and Group, acting singly, to act on its behalf in making
all requests for delivery of Precious Metal pursuant to this Agreement and
agrees to be bound by such actions or requests of either T&C or Group. Each
request from T&C or Group for delivery of Precious Metal shall include a
designation of the number of troy ounces of Precious Metal to be delivered to or
for the account of one or more specified entities included in "Buyer."
If for any reason the number of troy ounces or Fair Market Value (or unpaid
Purchase Price in the case of Consigned Precious Metal for which the Purchase
Price has been agreed but payment has not been received by Consignor) of all
Consigned Precious Metal at any time exceeds Buyer's Consignment Limit, Buyer
shall immediately Redeliver to Consignor, or purchase and pay for, Precious
Metal of a quantity, or with a Fair Market Value, sufficient to eliminate such
excess.
Consignor shall provide Buyer with a monthly statement of the quantity of
Consigned Precious Metal (in whatever form) held by Buyer. If Buyer does not
agree with the information reported in the statement, Buyer shall give Notice of
such disagreement to Consignor within fifteen (15) days of the date of receipt
of such statement. If Buyer fails to give Notice to Consignor within such
fifteen (15) day period, Buyer shall be deemed to have affirmed the accuracy of
the information reported in the statement and to have waived any claim Buyer may
have by reason of a dispute as to such statement.
Buyer shall give Consignor at least one full business day's Notice of its
requirements for Precious Metal. Consignor shall not be liable to Buyer if
Consignor fails to Deliver the Precious Metal by reason of an Act of God or
other catastrophe, force majeure, lack of supply, delay in transportation, war
or other hostilities, strike, lockout, epidemic, acts of government or other
public authority, requirements of any regulatory board, agency or authority,
unavoidable casualties or any other causes beyond Consignor's control. CONSIGNOR
MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRECIOUS METAL CONSIGNED OR TO BE SOLD HEREUNDER, WHETHER AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER MATTER, AND
CONSIGNOR HEREBY DISCLAIMS ALL SUCH WARRANTIES except that Consignor does
warrant to Buyer that all Precious Metal will be of the fineness stated in
Section 1 for that Precious Metal unless Buyer shall specifically request and
Consignor shall agree to supply precious metal of a different fineness.
3. Delivery of Precious Metal.
All Deliveries of Precious Metal by Consignor will be made to Buyer at Buyer's
Principal Office or other Permitted Locations (subject to the limitations herein
contained), such Deliveries to be on terms and conditions reasonably
satisfactory to Consignor. At the time of Delivery, Consignor shall provide
Buyer with particulars of the total quantity of the Precious Metal being
Delivered to Buyer. If Precious Metal is Delivered to Buyer's Principal Office,
a Duly Authorized Officer of Buyer receiving any Delivery shall give a receipt
to Consignor for the same in a form reasonably satisfactory to Consignor. All
shipping expenses (including insurance) shall be borne by Buyer, and any such
expenses paid or incurred by Consignor shall be reimbursed by Buyer immediately
in the same manner as payments under Section 5 hereof.
4. Title.
Title to Consigned Precious Metal shall remain in Consignor and shall
not vest in Buyer until Consignor has received payment for the Consigned
Precious Metal as required by Section 5 of this Agreement. Upon each Precious
Metal Delivery, Buyer shall bear the entire risk of loss, theft, damage or
destruction of the Consigned Precious Metal from any cause whatsoever, whether
or not insured, and Buyer agrees to hold the Consigned Precious Metal in trust
for Consignor and to indemnify and hold harmless Consignor against any and all
liabilities, damages, losses, costs, expenses, suits, claims, demands or
judgments of any nature (including, without limitation, attorneys' fees and
expenses) arising from or connected with any loss, theft, damage or destruction
of the Consigned Precious Metal.
5. Purchase Price; Payments.
At such time as Buyer shall request the consignment and delivery of Precious
Metal hereunder, it shall become obligated to pay to Consignor a market premium
per troy ounce announced by Consignor at the time of such consignment. Such
payment is to be made within five (5) business days of
Buyer's receipt of Consignor's monthly invoice by check or by bank wire to a
bank of Consignor's choice.
During the term of this Agreement, Buyer shall have the right to purchase any
Consigned Precious Metal. To exercise the right, a Duly Authorized Officer of
Buyer shall give notice to a Duly Authorized Officer of Consignor that Buyer is
purchasing specified quantities of Consigned Precious Metal. The parties' Duly
Authorized Officers shall mutually agree on a Purchase Price for the Consigned
Precious Metal. A Duly Authorized Officer of Consignor shall confirm Buyer's
notice in writing.
Buyer shall pay the full Purchase Price, plus any applicable sales or use tax,
to Consignor within two (2) business days of the date of the fixing of such
Purchase Price. The Daily Consignment Fee shall continue in effect until (but
excluding) the Purchase Date. Payment of the Purchase Price and all other
amounts due by Buyer to Consignor under this Agreement shall be made in the
following manner: (i) by bank wire to the Federal Reserve Bank of Boston for the
account of Consignor, (ii) by Buyer authorizing Consignor to charge its account
with Consignor, or (iii) by other means which Consignor approves in writing. If
Consignor in its discretion grants payment terms different from the foregoing
for particular purchases, then the Purchase Price shall not be deemed to be paid
in full for the purposes of this Agreement until all payments under such terms
have been made in good funds received by Consignor.
In addition to all other payments required hereunder, Buyer agrees to pay to
Consignor (a) a Daily Consignment Fee for Consignor's services under this
Agreement payable monthly within five (5) business days of receipt by Buyer of
Consignor's invoice therefor, and (b) an Administration Fee of $100,000 per
year, payable quarterly within five (5) business days of receipt by Buyer of
Consignor's invoice therefor, and if payment is not made within any such five
(5) business day period, Buyer expressly authorizes Consignor to charge Buyer's
account with Consignor for the amount thereof. Consignor's invoice shall be
deemed to be received by Buyer no later than five (5) days after the mailing
thereof.
Any amount not paid when due under this Agreement shall bear interest at four
percent (4%) in excess of the Prime Rate until paid in full (whether or not this
Agreement has been terminated), such interest to be paid in the manner provided
above.
6. Commingling; Redelivery of Precious Metal.
Buyer may use the Consigned Precious Metal only in the ordinary course of its
business as now conducted; provided, however, that Buyer may use its initial
consignment occurring after the date hereof, to obtain Precious Metal which will
be used to satisfy Buyer's obligations to return consigned Precious Metal from
each of Rhode Island Hospital Trust National Bank, ABN AMRO Bank N.V. - New York
branch, and Republic National Bank . At any time prior to termination of this
Agreement, any or all of the amount of the Consigned Precious Metal may be
Redelivered by Buyer to Consignor.
7. Insurance.
Buyer, at its sole cost and expense, shall procure and maintain property
insurance to cover all locations where Consigned Precious Metal will be located
on an "all risk" form, including flood and earthquake and such other insurance
(including but not limited to, fidelity insurance for all employees, including
officers) with respect to the Consigned Precious Metal as may from time to time
be reasonably required by Consignor. All insurance provided for in this Section
shall be effected under valid and enforceable policies, in such forms and in
such amounts as may from time to time be reasonably required by Consignor,
issued by financially sound and responsible insurance companies which are
admitted in the jurisdiction in which the Consigned Precious Metal is located,
or are approved under the applicable states' surplus lines insurance laws. At
least ten (10) days prior to Consignor's first Delivery of Precious Metal to
Buyer and thereafter not less than thirty (30) days prior to the expiration
dates of insurance policies theretofore furnished pursuant to this Agreement,
Buyer shall deliver to Consignor copies of all insurance policies (together with
Accord Form 27 (2/84) or other similar forms satisfactory to Consignor)
evidencing the insurance coverage required by Consignor. All policies of
insurance shall provide for thirty (30) days notification in advance of any
cancellation, non-renewal or material change in policy conditions, including
cancellation for non-payment of premium.
8. Taxes, Etc.; Certain Rights of Consignor.
Buyer will promptly pay any and all taxes, assessments and governmental charges
upon the Consigned Precious Metal and all other Precious Metal in Buyer's
inventory prior to the date of any penalties. Buyer will not use the Consigned
Precious Metal in violation of any statute or ordinance. Consignor may examine
and inspect the Consigned Precious Metal at any time, during normal business
hours, wherever located, and Buyer agrees to keep all records relating to the
Consigned Precious Metal at its Principal Office.
At its option, Consignor may discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on the Consigned Precious Metal and
all other Precious Metal in Buyer's inventory (which are not being contested in
good faith), may pay for insurance on the Consigned Precious Metal and all other
Precious Metal in Buyer's inventory consistent with Section 7 of this Agreement
and may pay for the reasonable maintenance and preservation of the Consigned
Precious Metal and all other Precious Metal in Buyer's inventory upon Buyer's
default in payment of such items. Buyer agrees to reimburse Consignor on demand
for any payment properly made, or any expense properly incurred, by Consignor in
connection with the foregoing, together with interest thereon at the Prime Rate
plus four percent (4%), computed from the date of such payment or expense until
(but excluding) the date upon which paid by Buyer.
9. Representations and Warranties.
The following representations and warranties shall survive the delivery of this
Agreement and the Delivery of Precious Metal by Consignor to Buyer. Buyer
represents and warrants to Consignor that:
(a) Buyer has heretofore furnished to Consignor Buyer's most recent
Financial Statements which fairly present the financial condition of Buyer as of
their date, and the results of its operations for the year or other period then
ended in conformity with generally accepted accounting principles consistently
applied;
(b) Buyer (i) is duly organized, validly existing and in good standing
under the laws of the state of its incorporation, (ii) has full power and
authority to own its properties and to carry on business as now being conducted
and is qualified to do business in every jurisdiction where the failure to so
qualify would have a material adverse effect on its business or properties and
(iii) has full power to execute, deliver and perform this Agreement and any
security document or documents securing the obligations of Buyer under this
Agreement;
(c) The execution, delivery and performance by Buyer of the terms and
provisions of this Agreement and any security document or documents securing the
obligations of Buyer under this Agreement (i) have been duly authorized by all
requisite corporate action, (ii) will not violate any provision of law, any
order of any court or other agency of government, or the corporate charter or
by-laws of Buyer, and (iii) will not violate, in any material respect, any
indenture, agreement or other instrument to which it is a party, or by which it
is bound, or be in conflict with, result in a breach of, or constitute (with
notice or lapse of time or both) a default under such agreement in any material
respect;
10. Conditions of Consignment.
(a) Delivery by Consignor of any Precious Metal under this Agreement is
subject to satisfaction of the following conditions precedent:
(i) The representations and warranties set forth in Section 9 of
this Agreement shall be true and correct on and as of the date of this Agreement
and the date the Delivery is requested and on the date made.
(ii) Buyer shall have executed and delivered to Consignor, or caused
to be executed and delivered to the Consignor, upon the execution of this
Agreement, the following, in each case in form and substance acceptable to the
Consignor:
(A) A certificate of the Secretary/Clerk or Assistant
Secretary/Clerk of Buyer certifying to the votes of Buyer's Board of Directors
authorizing the execution, delivery and performance of this Agreement;
(B) A certificate of the Secretary/Clerk or Assistant
Secretary/Clerk of Buyer certifying the names of the officers of Buyer
authorized to sign this Agreement and any other documents or certificates (or
any amendments thereto) to be delivered pursuant to this Agreement (or any
amendments thereto) by Buyer or any of its officers, together with the true
signatures of such officers, on which certificates Consignor may conclusively
rely until it shall receive a further certificate canceling or amending the
prior certificate and submitting the signatures of the officers named in such
further certificate;
(C) A certificate of the Secretary of State of the state of
incorporation of Buyer, dated reasonably near the date of this Agreement,
stating that Buyer is duly incorporated and in good standing in such state and
has filed all annual reports and has paid all franchise taxes requ to be filed
or paid to the date of such certificate;
(D) A favorable written opinion of Buyer's counsel, dated the
date of this Agreement, satisfactory to Consignor and its counsel in scope and
substance;
(E) The Letter of Credit required by Section 10(b) hereof; and
(F) Such other supporting documents and legal opinions as
Consignor may reasonably request, including, without limitation, amendments and
reaffirmations of the Security Documents.
(iii) No Event of Default nor any event which with notice or the
lapse of time, or both, would constitute an Event of Default, shall have
occurred.
(b) Consignor's obligations hereunder shall at all times be subject to
Consignor's prior receipt and the continued maintenance and effectiveness of a
clean, irrevocable letter of credit issued by a financial institution at all
times acceptable to the Consignor, in form and substance satisfactory to the
Consignor (the "Letter of Credit") and in any case in an amount such that the
value of all Consigned Precious Metal outstanding on consignment hereunder from
time to time is less than or equal to ninety-five percent (95%) of the available
face amount of the Letter of Credit. Such Letter of Credit shall be in form and
substance satisfactory to the Consignor and, by its terms, shall be payable to
Consignor upon presentation of a sight draft accompanied by a signed statement
by Consignor, certifying that (i) an Event of Default has occurred under this
Agreement, (ii) the amount of the draft represents amounts due to Consignor, and
(iii) Consignor gave Dollar Lender such written notice, if any required by
Section 3 of the Creditor Agreement by Consignor, Dollar Lender and Buyer dated
of even date herewith, as the same may be amended from time to time. Buyer may,
not more frequently than twice in each calendar month unless otherwise consented
to by Fleet, cause amendments of the Letter of Credit to be issued to Consignor
to reflect increases or decreases in the value of all Consigned Precious Metal
outstanding on consignment hereunder, provided all such amendments are
acceptable to Consignor in the reasonable exercise of its discretion, and the
Letter of Credit, as so amended, complies in all respects with the requirements
of this Agreement. In the event that Consignor, in the reasonable exercise of
its discretion, shall at any time determine that the financial institution
issuing the Letter of Credit is no longer acceptable to Consignor, Buyer shall
within thirty (30) days of receipt of notice of such determination from
Consignor, cause a new Letter of Credit to be issued to Consignor in compliance
with the terms of this paragraph by a financial institution acceptable to
Consignor. In the event of any Event of Default or any failure to renew an
expiring letter of credit in accordance herewith, Consignor may draw on the
Letter of Credit upon presentation of Consignor's draft and a signed statement
as referred to above without either granting notice to or receiving the consent
of Buyer.
11. Affirmative Covenants.
Buyer covenants and agrees that, from the date of this Agreement and until
payment and performance in full by Buyer of its indebtedness, obligations and
liabilities to Consignor under this Agreement, whether now existing or arising
hereafter, Buyer shall:
(a) Except as permitted by Section 12(c) hereof, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
corporate existence, rights, licenses, permits and franchises and comply with
all laws and regulations applicable to it;
(b) Comply with all applicable laws and regulations, whether now in effect
or hereafter enacted or promulgated by any governmental authority having
jurisdiction in the premises;
(c) Pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon it or upon its
respective income and profits or upon any of its property, real, personal or
mixed, or upon any part thereof, before the same shall become in default, as
well as all lawful claims for labor, materials and supplies or otherwise, which,
if unpaid, might become a lien or charge upon such properties or any part
thereof, except in each case as to liabilities which Buyer is contesting in good
faith and against which Buyer has set up adequate reserves therefor in
accordance with generally accepted accounting principles;
(d) Give prompt written notice to Consignor of any proceedings instituted
against it by or in any Federal or state court or before any commission or other
regulatory body, Federal, state or local, which, if adversely determined, would
have a materially adverse effect upon its business, operations, properties,
assets, or condition, financial or otherwise or could result in the forfeiture
of assets of Buyer;
(e) Furnish to Consignor:
(i) Within forty-five (45) days after the end of each Fiscal Quarter in
each fiscal year, Financial Statements for such period and the fiscal year to
that date, subject to changes resulting from routine year-end audit adjustments;
in form satisfactory to Consignor. Financial Statements for this subsection (i)
may be prepared and certified by the chief financial officer of Buyer to the
best of his or her information and belief;
(ii) Within ninety (90) days after the end of each fiscal year, Financial
Statements showing its financial condition at the close of such fiscal year and
the results of operations during such year; and
(iii) Within ten (10) calendar days of the mailing, filing, submission or
other distribution thereof, copies of (A) all financial statements, reports,
notices, proxy statements and other documents sent by Buyer to its stockholders,
and (B) all statements, reports or other document which are at any time filed
with or submitted by Buyer to the Securities and Exchange Commission and which
are of a financial nature, except such filings which are given confidential
treatment under the rules and regulations of the Securities and Exchange
Commission; and
(f) Promptly, from time to time, furnish such other information regarding
its operations, assets, business affairs and financial condition as Consignor
may reasonably request;
(g) Permit agents or representatives of Consignor, at Buyer's reasonable
expense (including without limitation, the fees and expenses of such agents or
representatives), (i) to inspect or conduct field examination of, at any time
during normal business hours and without notice, the Buyer's inventory of
Precious Metal and Buyer's books and records and to make abstracts or
reproductions of such books and records, such inspections or examinations to be
done on a regular basis but not more frequently than once every calendar
quarter; and (ii) at reasonable times and at any time in case of emergency, to
take a physical inventory of the Consigned Precious Metal in Buyer's possession;
(h) Defend the Consigned Precious Metal against any Material Claims of
any persons at any time claiming the same or any interest therein; for the
purposes of this Section 11(h), Material Claims shall mean claim(s) or demand(s)
which in the aggregate at any time involve 500 fine troy ounces or more of
Consigned Precious Metal;
12. Negative Covenants.
Buyer covenants and agrees that, until Buyer makes payment and performs in full
its indebtedness, obligations and liabilities to Consignor under this Agreement,
whether now existing or arising hereafter, unless Consignor otherwise consents
in writing, Buyer will not, directly or indirectly:
(a) Dissolve or liquidate or consolidate with or merge with, or acquire all
or substantially all of the assets or properties of, any other corporation or
entity; provided, however, that any corporation included within Buyer may merge
into T&C (with T&C as the surviving entity after such merger), and any such
corporations other than T&C may merge, and any other internal reorganization of
Buyer may take place (providing that T&C remains a surviving entity), in each
case upon not less than thirty (30) days prior written notice to Consignor;
(b) Obtain Precious Metal on consignment or loan from any source other than
Consignor; provided, however, that nothing herein shall be deemed to restrict
Buyer from purchasing Precious Metal for cash;
13. Termination; Events of Default.
(a) Either Consignor or Buyer may terminate this Agreement at any time by
giving a Termination Notice to the other; provided, however, that so long as an
Event of Default does not exist at the time such Termination Notice is given
or occur thereafter, Buyer shall have thirty (30) days from the date of such
Termination Notice within which to pay and perform in full all of Buyer's
obligations to Consignor hereunder; and provided further, that unless an Event
of Default shall have occurred and is then continuing, Consignor shall not
terminate this Agreement prior to the date which is one (1) year after the date
of this Agreement.
(b) Unless otherwise agreed or consented to in writing by Consignor, no
Delivery of Precious Metal to Buyer will be made following the giving of a
Termination Notice by either Consignor or Buyer. Termination of this Agreement
shall not affect Buyer's duty to pay and perform in full its obligations to
Consignor hereunder. On the effective date of the termination of this Agreement,
Buyer shall either Redeliver or purchase and pay for all Consigned Precious
Metal which Consignor has previously Delivered and which has not been paid for
or Redelivered, the price to be based on Consignor's spot market price on the
date Consignor elects to fix the price of such Consigned Precious Metal and
shall reimburse Consignor for any and all outstanding fees, costs, expenses and
other obligations of Buyer to Consignor.
(c) The occurrence of any of the following events shall constitute an Event
of Default:
(i) Any representation or warranty made herein, or in any report,
certificate, financial statement or other instrument furnished in connection
with this Agreement, or the Delivery of Precious Metal by Consignor hereunder,
shall prove to be false or misleading in any material res
(ii) Buyer fails to make punctual payment or perform any obligation
required by the provisions of Section 2, 5, 6, 7 or 13 of this Agreement or
fails to Redeliver to Consignor or purchase and pay for, Precious Metals in
excess of Buyer's Consignment Limit as required by Section 2 this Agreement;
(iii) Buyer fails to pay any amount due hereunder or any other
indebtedness, obligation or liability of Buyer to Consignor when the same shall
become due and payable, whether at the due date thereof or at a date fixed for
prepayment or by acceleration or otherwise;
(iv) Buyer fails to observe or perform any other covenant, condition or
agreement required by the terms of this Agreement and such failure shall
continue unremedied for ten (10) days after Consignor gives Notice to Buyer of
its failure;
(v) Buyer (or any entity included within "Buyer") shall (A)
apply for, consent to, or suffer the appointment of a custodian, receiver,
trustee or liquidator of it or any of its property, (B) admit in writing its
inability to pay its debts as they mature, (C) make a general assig for the
benefit of creditors, or (D) file, or have filed against it, a petition for
relief under Title 11 of the United States Code, or file, or have filed against
it, a petition in bankruptcy, or a petition or an answer seeking reorganization
or an arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law, or corporate action shall be
taken for the purpose of effecting any of the foregoing; provided, however, that
in the event of an acceleration of Buyer's obligations as a result of the filing
of an involuntary petition against Buyer (or any entity included within
"Buyer"), such acceleration shall be rescinded, and the Buyer's rights hereunder
reinstated, if, within thirty (30) days following the filing of such involuntary
petition, such involuntary petition shall have been dismissed, and there shall
then exist no other Event of Default hereunder and no event which would
constitute such an Event of Default with the passage of time or the giving of
notice, or both;
(vi) An order, judgment or decree shall be entered, without the
application, approval or consent of Buyer by any court of competent
jurisdiction, approving a petition seeking reorganization of Buyer (or any
entity included within "Buyer") or appointing a custodian, receiver, trus or
liquidator of Buyer (or any entity included within "Buyer") or of all or a
substantial part of the assets of Buyer (or any entity included within "Buyer");
(vii) Occurrence of any loss, theft, or destruction of or damage
to Precious Metal or any products or property which includes Precious Metal;
provided, however, that an Event of Default shall not be deemed to have occurred
if the amount of such loss, theft, destruction or damage involves less than one
thousand (1,000) troy ounces of Precious Metal and less than $500,000 in value,
and either (A) Buyer makes full payment to Consignor for such Consigned Precious
Metal or Buyer establishes, within thirty (30) business days after such
occurrence, to the reasonable satisfaction of Consignor that Buyer's insurance
carrier will pay in full any claim for such loss, theft or destruction or (B)
the loss, theft, destruction or damage occurs while the Consigned Precious Metal
is in the possession of a shipper chosen by Consignor to deliver Consigned
Precious Metal to Buyer;
(viii) Discontinuance of the operation of Buyer's business for any reason;
(ix) Default (after the expiration of any applicable grace period
and/or providing of proper notice) with respect to Indebtedness of Buyer (or
any entity included within "Buyer") (other than Indebtedness to Consignor)
in excess of $1,000,000 (a "Cross-Default") (including, withou limitation,
default by Buyer in the payment or performance of its indebtedness or
obligations to the Dollar Lender), if the effect of such Cross-Default is to
accelerate the maturity of such Indebtedness or to permit the holder thereof to
cause such indebtedness to become due prior to the stated maturity thereof, or
if any such Indebtedness of Buyer (or any entity included within "Buyer") (other
than Indebtedness to Consignor) is not paid, when due and payable at maturity,
whether at the stated due date thereof or a date fixed for prepayment; provided,
however, that an Event of Default shall not have occurred hereunder if a
Cross-Default occurs but is cured, or waived by the holder of such Indebtedness,
within fifteen (15) business days from the earlier of the date upon which Buyer
first knows of such Cross-Default or the date upon which the holder of such
Indebtedness gives notice of such Cross-Default to Buyer;
(x) Buyer shall fail to renew the Letter of Credit, or any extension(s)
or replacement(s) therefor, at least sixty (60) days prior to its expiration
date, if any; or the issuer of such Letter of Credit shall seek to modify,
revoke or terminate its liability under such Letter of Credit, or any
governmental agency shall seek to limit, defer, postpone or terminate
Consignor's rights or the issuer's liability under such Letter of Credit; or
(xi) Buyer's failure to pay and perform in full all of its obligations
to Consignor hereunder within thirty (30) days of the giving of a Termination
Notice by either party.
Upon the occurrence of any such Event of Default and at any time thereafter
during the continuance of such Event of Default, Consignor may, without demand
or Notice to Buyer, terminate this Agreement as provided in Section 13(b),
declare all liabilities, indebtedness and obligations of Buyer to be immediately
due and payable, and draw under the Letter of Credit. Upon Consignor's
declaration, such liabilities, Indebtedness and obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, anything contained herein or
in any other evidence of such Indebtedness, obligations and liabilities to the
contrary notwithstanding. Consignor may enforce payment of the same and exercise
any or all of the rights, powers and remedies possessed by Consignor, under this
Agreement, under the Letter of Credit or under any Security Document securing
the obligations of Buyer hereunder, whether afforded by the Uniform Commercial
Code or otherwise afforded by law or in equity. The remedies provided for herein
are cumulative and are not exclusive of any other remedies provided by law.
Buyer agrees to pay Consignor's reasonable attorney's fees and legal expenses
incurred in enforcing Consignor's rights, powers and remedies under this
Agreement and any Security Document.
(d) Without limiting the foregoing, upon the occurrence of any Event of
Default and at any time thereafter during the continuance thereof, Consignor
shall have the right to enter and/or remain upon the Premises of Buyer or any
other place or places where any Consigned Precious Metal is located and kept
(without any obligation to pay rent to Buyer or others) and: (i) remove
Consigned Precious Metal or inventory containing the same therefrom to the
premises of Consignor or any agent of Consignor, for such time as Consignor may
desire, in order to maintain, collect, sell and/or liquidate said Consigned
Precious Metal or (ii) use such premises, together with equipment, materials,
supplies, books and records of Buyer, to maintain possession, refine and prepare
said Consigned Precious Metal for sale, liquidation, or collection. Consignor
may require Buyer to assemble the Consigned Precious Metal and make it available
to Consignor at a place or places to be designated by Consignor which is
reasonably convenient for the parties. Following the occurrence of an Event of
Default, Consignor may at any time and from time to time employ and maintain in
any Premises of Buyer or any place where any of the Consigned Precious Metal is
located a custodian selected by Consignor who shall have full authority to do
all acts necessary to protect Consignor's interests and to report to Consignor
thereon. Buyer agrees to cooperate with any such custodian and to do whatever
Consignor may reasonably request to preserve the Consigned Precious Metal. All
reasonable expenses incurred by reason of the employment of the custodian shall
be paid by Buyer pursuant to the last sentence in Section 8 hereof.
14. Survival of Representations and Warranties.
The obligations and liabilities of Buyer under this Agreement and the
representations and warranties herein shall survive and continue in full force
and effect and shall not be terminated, discharged or released, in whole or in
part, by the termination of this Agreement, irrespective of whether such
obligations and liabilities have been paid in full and irrespective of any
foreclosure under this Agreement, any sale of property pursuant to the
provisions of this Agreement or acceptance by Consignor, its nominee or wholly
owned subsidiary of a deed or assignment in lieu of foreclosure or sale.
15. Miscellaneous.
(a) In this Agreement, reference to a party shall be deemed to include
the successors and permitted assigns of such party, and all covenants and
agreements in this Agreement by or on behalf of Buyer shall inure to the benefit
of the successors and assigns of Consignor; provided, however, Buyer shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of Consignor.
(b) Buyer will reimburse Consignor upon demand for all out-of-pocket
costs, charges and expenses of Consignor (including costs of searches of public
records and filing and recording documents with public offices and reasonable
fees and disbursements of counsel to Consignor) in connection with (i) the
preparation, execution and delivery of this Agreement and any Security
Documents, or any documents reasonably required in relation thereto, (ii) any
amendments, modifications, consents or waivers in respect hereof and (iii) any
enforcement hereof (including but not limited to hedging fees or other similar
expenses incurred subsequent to the occurrence of an Event of Default
hereunder).
(c) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF RHODE ISLAND.
(d) No modification or waiver of any provision of this Agreement, or of any
security document, nor consent to any departure of Buyer from a provision, shall
be effective unless the same shall be in writing. A written consent shall be
effective only in the specific instance, and for the purpose, for which given.
No notice to, or demand on Buyer, in any one case, shall entitle Buyer to any
other or future notice or demand in the same, similar or other circumstances.
(e) Neither any failure nor any delay on the part of Consignor in exercising
any right, power or privilege hereunder, or in any other instrument given as
security therefor, shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or future exercise, or the
exercise of any other right, power or privilege.
(f) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(g) Any Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. As used in this Agreement, the term "person" shall
include any individual, corporation, partnership, joint venture, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
(h) This Agreement constitutes an amendment and statement of the 1993
Consignment Agreement in its entirety. The provisions contained herein shall,
effective the date hereof, be deemed to supersede the terms of the 1993
Consignment Agreement, as amended; provided, however that Buyer shall remain
obligated to pay to Consignor all accrued fees and charges under such agreement,
and all Precious Metal outstanding under such agreement shall hereafter be
deemed to be Consigned Precious Metal outstanding on consignment to Buyer under
the terms of this Agreement. Payment and performance of this Agreement are
secured by and entitled to the benefits of the Letter of Credit and all Security
Documents, including, without limitation, all "Security Documents" referenced in
the 1993 Consignment Agreement, which Security Documents are hereby ratified and
affirmed.
(i) The parties hereto hereby acknowledge, confirm and agree that the
foregoing description of the form and manner in which Precious Metal will be
consigned and delivered pursuant to this Agreement is intended to make clear
that Consignor is obligated to engage only in transactions involving Precious
Metal in quantities and units which it customarily maintains in its regular
inventory, but is not intended to limit such form and manner in the event that
Consignor shall agree separately to engage in other types of transactions.
Accordingly, the Precious Metal consigned pursuant to and governed by this
Agreement shall be such quantity of Precious Metal as Consignor shall confirm to
Buyer from time to time. Without limiting the generality of the foregoing,
Precious Metal in the possession or control of Buyer, or Precious Metal held by
a third party for the account of Buyer, shall constitute Precious Metal
consigned pursuant to this Agreement notwithstanding that (i) such Precious
Metal is in alloyed form or is contained in raw materials, work-in-process, or
finished goods, (ii) such Precious Metal was delivered to, or credited to the
account of, Buyer by a third party in exchange for or in consideration of
Precious Metal delivered by Consignor to such third party, (iii) such Precious
Metal was sold by Buyer to Consignor and then consigned back to Buyer pursuant
to this Agreement, or (iv) such Precious Metal is demonstrably not the Precious
Metal physically delivered by Consignor.
(j) Each covenant, agreement, obligation, representation and warranty of
Buyer contained herein constitutes the joint and several undertaking of each
entity included within "Buyer".
<PAGE>
IN WITNESS WHEREOF, Consignor and Buyer have caused this Agreement to be
duly executed by their respective duly authorized officers, all as of the day
and year first above written.
FLEET PRECIOUS METALS INC.
Consignor
By: _/s/ Anthony Capuano________________________
Title: Vice President
By: _/s/ Sharon DelFino_________________________
Title: Vice President
TOWN & COUNTRY CORPORATION, a Massachusetts corporation
By: _/s/ Robert Hannon__________________________
Title: Attorney-in-fact
TOWN & COUNTRY FINE JEWELRY GROUP, INC., a Massachusetts corporation
By: _/s/ Robert Hannon__________________________
Title: Attorney-in-fact
L.G. BALFOUR COMPANY, a Delaware corporation
By: __/s/ Robert Hannon_________________________
Title: Attorney-in-fact
GOLD LANCE, INC., a Massachusetts corporation
By: _/s/ Robert Hannon__________________________
Title: Attorney-in-fact
<PAGE>
EXHIBIT A
, 19_____
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
Attention: President
Ladies and Gentlemen:
Pursuant to Section 1 of that certain Amended and Restated Consignment Agreement
dated , 1996, as the same may have been heretofore amended (the "Consignment
Agreement") by and between you and certain of your subsidiaries (collectively,
"Buyer") and the undersigned, the undersigned Fleet Precious Metals Inc. hereby
gives notice to Buyer that, effective , 199 , the consignment rate set forth in
said Section 1 shall be changed from percent ( %) per annum to percent ( %) per
annum.
Except as amended hereby, the Consignment Agreement shall remain in full
force and effect.
Very truly yours,
FLEET PRECIOUS METALS INC.
By: __________________________
Title:
Exhibit 10.3
<PAGE>
CREDITOR AGREEMENT
This Agreement dated as of July 3, 1996 is entered into by and between FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), and FLEET PRECIOUS
METALS INC., a Rhode Island corporation ("Fleet"), and consented to by TOWN &
COUNTRY CORPORATION, a Massachusetts corporation ("T&C"), TOWN & COUNTRY FINE
JEWELRY GROUP, INC., a Massachusetts corporation ("Group"), L.G. BALFOUR
COMPANY, a Delaware corporation ("Balfour"), and GOLD LANCE, INC., a
Massachusetts corporation ("GLI") (T&C, Group, Balfour and GLI are hereinafter
referred to jointly and severally as "Buyer").
WHEREAS, Fleet has entered into a Second Amended and Restated Consignment
Agreement with Buyer of even date herewith (as the same may hereafter be amended
from time to time, the "Consignment Agreement") pursuant to which Fleet has,
subject to the terms and conditions set forth therein, agreed to consign
Precious Metal (as hereinafter defined) to Buyer for use in Buyer's operations;
and
WHEREAS, Foothill has entered into a Loan Agreement with Buyer dated as of June
, 1996 (as the same may hereafter be amended from time to time, the "Foothill
Credit Agreement") pursuant to which, Foothill has agreed subject to the terms
and conditions set forth therein to make loans and other financial
accommodations, including, without limitation, one or more letters of credit,
available to Buyer; and
WHEREAS, in order to induce Fleet to enter into the Consignment Agreement and to
consign Precious Metal to Buyer thereunder, Buyer has utilized some of its
credit availability under the Foothill Credit Agreement to cause Norwest Bank
Minnesota, N.A. ("Norwest") to issue a standby letter of credit in favor of
Fleet, which letter of credit may be amended from time to time (the "Fleet
Letter of Credit"); and
WHEREAS, the obligations and indebtedness of Buyer to each of Fleet and Foothill
are secured by a security interest in certain assets of Buyer, including,
without limitation, the Buyer's inventory containing Precious Metal, whether now
owned or hereafter acquired by Buyer (the "Precious Metal Inventory"); and
WHEREAS, to facilitate administration of the credit facilities offered by each
of Foothill and Fleet respectively to the Buyer, and at Buyer's request, Fleet
and Foothill have agreed to share certain information concerning the Buyer's
operations from time to time and to provide certain other accommodations to each
other;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged by each party hereto, the parties hereby agree as
follows:
1. Definitions. As used herein, the following terms shall have the meanings
respectively set forth after each:
"Exam Functions" shall have the meaning ascribed to such term in Section 2 of
this Agreement.
"Buyer" shall have the meaning ascribed to such term in the recitals to this
Agreement.
"Collateral" shall mean the "Collateral" as such term is defined in the
Intercreditor Agreement.
"Consignment Agreement" shall have the meaning ascribed to such term in the
recitals to this Agreement.
"Consignment Interests" shall have the meaning ascribed to such term in Section
3 of this Agreement.
"Declared Default" shall mean (i) any defined event of default under the Fleet
Agreements (after giving effect to any applicable grace or cure periods, and
after the giving of any required notices), (ii) any failure of Buyer to return
consigned Precious Metal to Fleet when required to do so under the Fleet
Agreements, or (iii) any failure of Buyer to pay for consigned Precious Metal in
lieu of returning it when required to do so under the Fleet Agreements, in each
case after giving effect to any applicable grace or cure periods, and after the
giving of any required notices.
"Fleet" shall have the meaning ascribed to such term in the recitals to this
Agreement.
"Fleet Agreements" shall mean the Consignment Agreement, and any other document
or agreement securing the obligations of the Buyer to Fleet, now existing or
hereafter incurred, under the Consignment Agreement, as each may be amended from
time to time.
"Fleet Indebtedness" shall mean all obligations and indebtedness of Buyer to
Fleet, whether now existing or hereafter incurred, under the Fleet Agreements,
whether for purchase price, fees, interest or expenses described in the Fleet
Agreements.
"Fleet Letter of Credit" shall have the meaning ascribed to such term in the
recitals to this Agreement.
"Foothill" shall have the meaning ascribed to such term in the recitals to this
Agreement.
"Foothill Agreements" shall mean the Foothill Credit Agreement and all documents
and agreements securing the obligations of Buyer to Foothill now existing or
hereafter incurred under the Foothill Credit Agreement, each as the same may be
amended from time to time.
"Foothill Credit Agreement" shall have the meaning ascribed to such term in the
recital to this Agreement.
"Foothill Indebtedness" shall mean all obligations and indebtedness of Buyer,
whether now existing or hereafter incurred for principal, interest, fees or
expenses described in the Foothill Agreements.
"Hedging Contracts" shall have the meaning ascribed to such term in Section 4 of
this Agreement.
"Hedging Expenses" shall have the meaning ascribed to such term in Section 4 of
this Agreement.
"Indemnitees" shall have the meaning ascribed to such term in Section 7 of this
Agreement.
"Intercreditor Agreement" shall mean that certain Collateral Agency and
Intercreditor Agreement dated as of May 14, 1993 by and among Foothill as Agent
and Foothill, Fleet and the other parties as claimants named therein and Buyer,
as the same may be amended from time to time.
"Norwest" shall mean Norwest Bank Minnesota, N.A.
"Post-Default Period" shall mean the period commencing on the date Fleet
provides notice to Foothill of a Declared Default and ending 365 days after the
Fleet Letter of Credit ceases to remain outstanding.
"Precious Metal" shall mean gold, in any form, and of any fineness, without
regard to whether such gold is alloyed or unalloyed in bullion form or is
contained in or processed into other materials which contain elements other than
gold.
"Precious Metal Inventory" shall have the meaning ascribed to such term set
forth in the recitals to this Agreement.
"Purchase Price" shall mean all amounts due and owing by Buyer to Fleet under
the Fleet Agreements on the date of purchase of the Consignment Interests,
including without limitation, the accrued but unpaid purchase price of the
Precious Metal on consignment under the Consignment Agreement, accrued but
unpaid fees, premiums and interest, unpaid examination expenses, attorneys fees
and other expenses.
2. Sharing of Exam Functions information. (a) Pursuant to the terms of
the Consignment Agreement, Fleet has the right, inter alia, to inspect and
conduct field examinations of the Precious Metal Inventory, to inspect Buyer's
books and records, to make abstracts and copies of Buyer's books and records, to
conduct physical inventories of the Precious Metal Inventory and generally to
perform examination functions customarily performed by Fleet in connection with
the gold consignments provided by it to its customers (collectively all the
foregoing tasks being hereinafter sometimes referred to as the "Exam
Functions"). So long as the Fleet Letter of Credit remains outstanding, and
during the Post-Default Period, Fleet hereby agrees to conduct the Exam
Functions of the Precious Metal Inventory in accordance with Fleet's customary
procedures at Foothill's request. Fleet will use its best efforts to conduct
such examinations within thirty (30) days of Foothill's written request
therefore; provided, however, that Fleet shall have no obligation to Foothill
(i) to commence legal action or to take any extraordinary efforts to obtain
access to Buyer's books and records or to Precious Metal Inventory if for any
reason Buyer or any other person shall block or deny such access to Fleet or its
agents, employees or representatives; provided, that Fleet shall promptly
endeavor to notify Foothill if it is so blocked or denied access, or (ii) to
conduct Exam Functions of the Precious Metal Inventory more frequently than once
during any calendar quarter. If practicable, Fleet will attempt to schedule its
examinations in conjunction with Foothill's audits, as reasonably requested by
Foothill. Each such examination shall be conducted by Fleet in accordance with
its customary standards and practices, including, without limitation, conducting
test samples of gold, and reconciling Fleet's books and records concerning
Precious Metal on consignment to Buyer with the books and records of Buyer.
Fleet hereby agrees that it shall provide Foothill with five (5) business days
notice before conducting an examination, and Foothill shall be afforded the
opportunity, but not the obligation, to have Foothill's auditors accompany Fleet
on such examination and/or to review Fleet's conduct of such examination.
Promptly upon completion of each such examination and in any event, not less
than thirty (30) days after completing such examination, Fleet shall provide to
Foothill a written report in the form of Exhibit A attached hereto, summarizing
Fleet's examination results in connection with the performance of such
examinations, and shall also provide to Foothill copies of Fleet's work papers
related to such examination together with a copy of any assay testing results.
(b) It is expressly understood and agreed to by Fleet, Buyer and
Foothill that Fleet has agreed to share and provide such information regarding
the Exam Functions solely as an accommodation to Buyer and Foothill, and
accordingly, Fleet shall have no liability to Foothill or Buyer for the conduct
of such Exam Functions or the content, accuracy or adequacy of such examination
reports except for liability based on its own gross negligence or willful
misconduct. Without limiting any other provision hereof that is protective of
Fleet, Fleet makes no representation or warranty of any kind to Foothill
regarding the information contained in such examination reports or other
materials furnished to Foothill in connection with the Exam Functions, and Fleet
hereby expressly disclaims all liability in connection therewith. Further,
Foothill hereby acknowledges to Fleet that Foothill has the right to conduct its
own Exam Functions, including, without limitation, examinations of Buyer and the
Precious Metal Inventory in accordance with the terms of the Foothill
Agreements.
(c) All costs and expenses of such Exam Functions and providing copies
thereof to Foothill shall be borne by Buyer. In the event Fleet is not
reimbursed for such costs and expenses by Buyer, then within ten (10) business
days of a written demand therefor by Fleet to Foothill, Foothill shall pay
Fleet's reasonable cost and expenses of conducting such Exam Functions.
Notwithstanding the foregoing, during the Post-Default Period, Fleet shall
invoice Foothill directly for all costs and expenses of conducting such Exam
Functions, and providing copies thereof to Foothill and Foothill shall pay all
such invoices in full within ten (10) business days of receipt thereof. Upon any
such payment by Foothill, such amount paid by Foothill shall constitute part of
the Foothill Indebtedness secured by the Collateral.
3. Option to Purchase. Fleet hereby grants to Foothill the right to
purchase all of Fleet's right, title and interest in and to the Fleet
Indebtedness and Fleet Agreements (herein, the "Consigned Interests") at the
times and in the manner provided for herein. Upon the declaration of any
Declared Default, and except as otherwise provided herein, prior to any draft
being presented for payment under the Fleet Letter of Credit, Fleet shall
provide not less than twenty (20) days notice to Foothill that it intends to
draw under the Fleet Letter of Credit, whereupon Foothill shall be entitled
to purchase the Consignment Interests for payment of the Purchase Price,
provided, however, notwithstanding the foregoing, Fleet shall not be required
to provide such notice to Foothill, or wait the expiration of such twenty (20)
days notice, if at any time the value of the Precious Metal outstanding on
consignment (as determined under the Consignment Agreement) is greater than
ninety-five percent (95%) of the face amount of the Fleet Letter of Credit.
The Purchase Price shall be payable in Precious Metal or in U.S. Dollars in
immediately available funds or a combination of both. Prior to exercising the
option to purchase hereunder, Foothill shall be entitled to request an estimate
of the Purchase Price payable hereunder and Fleet shall, as soon as practical
but in no event later than five (5) business days after receipt of such
request, furnish an estimate of the Purchase Price payable hereunder for the
Consignment Interests in reasonable detail setting forth the Purchase Price
by category (including, without limitation, the amount necessary to pay for the
purchase price of the Precious Metal outstanding on consignment under the
Consignment Agreement, accrued but unpaid fees and interest, and accrued but
unpaid expenses). Upon receipt of formal written notice of Foothill's exercise
of the right to purchase the Consignment Interests hereunder, Fleet hereby
agrees that it shall not consign any additional Precious Metal to Buyer under
the Fleet Agreements from and after receipt of such notice.FLEET AND FOOTHILL
HEREBY AGREE AND ACKNOWLEDGE THAT ANY SUCH PURCHASE SHALL BE AS IS AND WHERE
IS WITHOUT REPRESENTATION, RECOURSE OR WARRANTY OF ANY KIND OR CHARACTER,
EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATIONS OR
WARRANTIES OF THE PRECIOUS METAL INVENTORY'S MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, AND ANY WARRANTIES AS TO THE ENFORCEABILITY OF THE FLEET
AGREEMENTS OR THE PERFECTION OF ANY SECURITY INTERESTS OR CONSIGNMENT INTERESTS
THEREUNDER, except that Fleet shall represent and warrant to Foothill that at
the time of such purchase, Fleet is transferring all of its right, title and
interest in and to the Purchased Interests and that Fleet has all necessary
power and authority to transfer the Purchased Interests to Foothill pursuant
to the terms hereof. Upon receipt of the Purchase Price by Fleet, Fleet agrees
that it shall at Foothill's reasonable request execute any further instruments
or documents and do such other things which Foothill may reasonably believe
necessary to effectively vest in Foothill all of Fleet's right, title and
interest in and to the Purchased Interests. Additionally, upon receipt of the
Purchase Price, Fleet agrees to deliver to Foothill for cancellation the
Fleet Letter of Credit. The parties hereto acknowledge that Foothill shall have
the right, but in no event any obligation, to exercise the option to purchase
hereunder upon the occurrence of any Declared Default, provided further that
said option only may be exercised and said purchase completed before the
earlier to occur of (i) the date occurring twenty (20) days after the date
notice is provided by Fleet to Foothill of its intention to draw under the
Fleet Letter of Credit; or (ii) the date the value of the Precious Metal
outstanding on consignment (as determined under the Consignment Agreement) is
greater than ninety-five percent (95%) of the face amount of the Fleet Letter
of Credit.
4. Post-Default Hedging Contract/Information Upon Liquidation. (a)
During the Post-Default Period and subject to the prior payment in full of (i)
Fleet's draft presented under the Fleet Letter of Credit; or (ii) the Purchase
Price for the Consignment Interests, at Foothill's request, Fleet hereby agrees
to enter into one or more forward contracts with Foothill for the purchase/sale
of gold (collectively, the "Hedging Contracts") to assist Foothill with the
hedging of the Precious Metal Inventory. Upon written notice to Fleet, Foothill
may assign such right to enter into Hedging Contracts to Norwest. Fleet shall
enter into such Hedging Contracts directly with Foothill or Norwest, provided,
however, if such Hedging Contracts are to be for the account of Foothill,
Fleet's obligation to enter such Hedging Contracts is subject to the prior
receipt and continued effectiveness and maintenance of one or more letters of
credit in form and substance acceptable to Fleet issued for the account of
Foothill by an issuing bank reasonably acceptable to Fleet in its sole
discretion, for an amount at all times not less than 110% of the greater of (i)
the aggregate face amount of the Hedging Contracts; or (ii) the market value of
Precious Metal outstanding on consignment to Buyer under the Consignment
Agreement. It is hereby further agreed that as Foothill or Norwest liquidate the
hedged gold position of the Precious Metal Inventory, they may deliver at any
time (without premium or penalty) Precious Metal to Fleet for payment against
Foothill's (or if applicable, Norwest's) obligations to Fleet under the Hedging
Contracts. Foothill hereby agrees to pay to Fleet all fees and other charges
announced by Fleet in connection with such Hedging Contracts (the "Hedging
Expenses"). Upon payment to Fleet of the Hedging Expenses, Buyer hereby
acknowledges and agrees that the amount of such Hedging Expenses shall
constitute part of the Foothill Indebtedness, secured by the Collateral.
(b) Fleet hereby agrees that during such Post-Default Period, upon
request of Foothill or Norwest, Fleet shall provide information concerning the
availability of hedging arrangements relating to the gold price fluctuation of
the Precious Metal Inventory and generally, upon request by Foothill or Norwest
to do so, and shall provide information to Foothill regarding liquidation
procedures for Precious Metal Inventory; provided, however, Foothill
acknowledges and agrees that Fleet makes no representation or warranty of any
kind to Foothill regarding the information concerning hedging exposure and
liquidation of Precious Metal Inventory, and Fleet hereby expressly disclaims
all liability in connection therewith, except for liability based on its own
wilful misconduct. The foregoing notwithstanding, while Fleet shall not have any
responsibility to Foothill or Norwest for credit risks relating to Buyer or for
collateral risks relating to Precious Metals, Fleet assumes the risk of
non-performance by any counterparty to any Hedging Contract executed by Fleet on
behalf of Foothill or Norwest pursuant hereto, and shall hold Foothill and
Norwest harmless against the effect of any such non-performance.
(c) Notwithstanding anything to the contrary contained in this Section
4, Fleet shall not be liable to Foothill (or Norwest, if applicable) for Fleet's
failure to enter into any Hedging Contract by reason of an act of God or other
catastrophe, force majeure, lack of supply, war or other hostilities, strike,
act of government or other public authority, requirements of any regulatory
board, agency or authority, other cause beyond Fleet's control, or by failure of
Fleet to be permitted to enter such transactions by reason of then applicable
law or regulation.
5. Non-Reliance by Foothill; Independent Agreement. (a) Foothill hereby
acknowledges that it has independently of and without reliance upon Fleet and
based upon such documents and information as it is deemed appropriate, made its
own credit analysis and decision to enter into the transactions evidenced by the
Foothill Agreements. Foothill also acknowledges that it will independently of
and without reliance upon Fleet and based upon such documents and information as
it shall deem appropriate at the time continue to make its own independent
credit decisions in taking or admitting to take action under or in connection
with the credit provided to Buyer. Except for such information relating to the
Exam Functions expressly required to be furnished by Fleet to Foothill
hereunder, Fleet shall not have any duty or responsibility to provide Foothill
with any credit or other information concerning the affairs, financial condition
or business of Buyer that may come into the possession of Fleet. Except for any
action expressly required of Fleet hereunder, Fleet shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall be indemnified
to its reasonable satisfaction by Foothill against any and all liability and
expense which may be incurred by taking or continuing to take any such action.
Fleet shall not have any express or implied duties or responsibilities to or any
fiduciary relationship with Foothill except those expressly set forth in this
Agreement. Fleet may employ agents and attorneys in fact and shall not be
responsible for the negligence or misconduct of any such agents or attorneys in
fact selected by it with reasonable care. Neither Fleet nor any of its
directors, officers, employees, attorneys or agents shall be responsible for any
action taken or admitted to be taken by it or them hereunder except for its own
gross negligence or willful misconduct.
(b) Without limiting in any way any other provision of this Agreement
protective of Fleet, the obligations of Fleet under this Agreement are
independent of any other terms and conditions of any other agreement or document
between the parties hereto, including, without limitation, the Intercreditor
Agreement, and the Fleet Letter of Credit, and it is hereby expressly agreed
that the sole remedy available to Foothill hereunder shall be a separate,
independent lawsuit for any claims for damage arising out of Fleet's
noncompliance with any term hereof.
6. Rights and Powers of Fleet. Fleet in its capacity as a consignor and
lender to Buyer shall have the same rights and powers as Foothill as a lender,
and may exercise the same as though it were not providing Foothill with
information under this Agreement. Without limiting the foregoing, Fleet and its
affiliates may (without having to account therefor to Foothill) accept deposits
from, extend credit to and generally engage in any kind of banking, trust or
other business with Buyer as if it were not providing information to Foothill
hereunder.
7. Indemnification. Buyer agrees to indemnify, exonerate, pay and hold
harmless Fleet and its officers, directors, employees and agents and counsel to
Fleet and its affiliates (collectively, the "Indemnitees", and individually an
"Indemnitee") from and against any and all liabilities, obligations, losses,
damage, penalties, actions, causes of actions, judgments, suits, claims, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees) in connection with any investigation, administrative or judicial
proceeding, (whether or not such Indemnitee shall be designated a party
thereto), which may be imposed on, incurred by or asserted against such
Indemnitee in any manner relating to or arising out of the actions or inactions
of Fleet with respect to this Agreement or the consummation of the transactions
contemplated hereby; provided, however, that Buyer shall not be liable for any
portion of any such losses, liabilities (including liabilities for penalties)
action, suits, judgment, demands, damages, cost, disbursements or expenses
resulting from the gross negligence and willful misconduct of any Indemnitee.
8. No Joint Venture. Nothing contained in this Agreement, and no action
taken by Fleet, Foothill or their respective agents or representatives pursuant
to or in connection herewith shall be deemed to constitute Foothill and Fleet
together a partnership, association, joint venture or other entity.
9. Third Party Beneficiary/Restrictions on Assignment. (a) The Agreements
of the parties set forth herein are solely for the benefit of Fleet and Foothill
and their respective successors and assigns, and neither the Buyer nor any
other person not a party to this Agreement shall be a third party beneficiary
hereof or entitled to any rights hereunder or arising out of this Agreement.
(b) Except for the right of Foothill to assign the Option to Enter the
Hedging Contracts to Norwest under the terms of Section 4 hereof, Foothill shall
not sell, transfer, or assign this Agreement or any interest therein without the
prior written consent of Fleet.
10. Notices. All notices, and other communications hereunder shall be in
writing and shall be deemed given when delivered or deposited in the mails,
first-class postage prepaid, dispatched by hand-delivery or overnight courier
service addressed properly to a party as specified on the signature pages of
this Agreement.
11. Agreement Modifications in Writing. No amendment, modification,
supplement, termination, consent or waiver of or to any provision of this
Agreement or any consent to any departure therefrom shall in any event be
effective unless the same shall be in writing and signed by or on behalf of the
parties to be bound thereby. Any waiver of any provision of this Agreement or
any consent to a departure from the terms of any provision of this Agreement,
shall be effective only in the specific instance and for the specific purpose
for which given.
12. Counterparts; Invalid Provisions. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same agreement. In case any one or more of the provisions hereof shall be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provisions have never been contained herein.
13. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Rhode Island applicable to contracts made and to be performed
wholly within such State.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be executed by their duly authorized representatives.
FLEET PRECIOUS METALS INC.
By: /s/ Anthony Capuano
Title: Vice President
By: /s/ Sharon DelFino
Title: Vice President
Address: 111 Westminster Street
Providence, Rhode Island 02903
Attention: Anthony J. Capuano
Senior Vice President
FOOTHILL CAPITAL CORPORATION
By: /s/ Anthony Aloi
Title: Assistant Vice President
Address: 60 State Street, Suite 1150
Boston, Massachusetts 02109
Attention: Anthony Aloi
Assistant Vice President/Account Executive
(Signatures continued on next page)
The undersigned Buyer hereby irrevocably consent to the terms and provisions of
the foregoing Creditor Agreement.
TOWN & COUNTRY CORPORATION
By: /s/ Robert Hannon
Title: Attorney-in-fact
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
By: /s/ Robert Hannon
Title: Attorney-in-fact
L.G. BALFOUR COMPANY
By: /s/ Robert Hannon
Title: Attorney-in-fact
GOLD LANCE, INC.
By: /s/ Robert Hannon
Title: Attorney-in-fact
