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FORM 10-Q
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 3, 1996.
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to
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COMMISSION FILE NUMBER 0-21862
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OROAMERICA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2385342
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
443 NORTH VARNEY STREET, BURBANK, CALIFORNIA 91502
(Address of principal executive offices) (Zip Code)
(818)848-5555
(Registrant's telephone number, including area code)
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
The number of shares outstanding of each of the issuer's classes of common
stock was 6,248,378 shares of common stock, par value $.01, outstanding at
June 13, 1996.
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OROAMERICA, INC.
REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MAY 3, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets............ 1
Consolidated Statements of Income...... 2
Consolidated Statements of Cash Flows.. 3
Notes to Condensed Consolidated
Financial Statements............. 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.......................... 7
PART II - OTHER INFORMATION
Items 1. through 5. (Not applicable)
Item 6. Exhibits and Reports on Form 8-K......... 10
SIGNATURES........................................... 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
OROAMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
February 2, May 3,
1996 1996
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $12,310 $23,424
Accounts receivable less allowance for
returns and doubtful accounts of
$9,948 and $7,325............................... 23,567 18,874
Other accounts and notes receivable............... 747 677
Inventories (Note 2).............................. 11,007 7,035
Deferred income tax charges....................... 2,384 2,384
Prepaid income taxes.............................. 142 -
Prepaid items and other current assets............ 925 1,124
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Total current assets...................... 51,082 53,518
Property and equipment, net.......................... 10,937 11,040
Excess of purchase price over net assets
acquired, net..................................... 4,689 4,615
Patents, net......................................... 6,155 6,033
Investments in and advances to affiliates............ 642 642
Other assets......................................... 39 127
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$73,544 $75,975
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................. $737 $767
Notes payable (Note 3)............................ - -
Accounts payable.................................. 5,874 7,547
Accrued expenses.................................. 5,449 6,051
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Total current liabilities...................... 12,060 14,365
Deferred income taxes payable........................ 383 383
Long-term debt, less current portion (Note 3)........ 3,800 3,639
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Total liabilities.............................. 16,243 18,387
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Stockholders' equity:
Preferred stock, 500,000 shares authorized
$.001 par value; none issued and outstanding
Common stock, 10,000,000 shares authorized, $.001
par value; 6,248,378 shares issued and
outstanding.................................... 6 6
Paid-in capital................................... 42,951 42,951
Retained earnings................................. 14,344 14,631
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Total stockholders' equity........................... 57,301 57,588
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$73,544 $75,975
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
April 28, May 3,
1995 1996
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<S> <C> <C>
Net sales............................................ $42,337 $44,915
Cost of goods sold, exclusive of
depreciation...................................... 35,156 36,669
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Gross profit...................................... 7,181 8,246
Selling, general and administrative
expenses.......................................... 6,391 6,918
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Operating income..................................... 790 1,328
Interest expense..................................... 675 788
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Income before income taxes........................... 115 540
Provision for income taxes........................... 48 253
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Net income........................................... $67 $287
======= =======
Net income per share (Note 1)........................ $.01 $.05
======= =======
Weighted average shares outstanding.................6,272,629 6,249,415
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
April 28, May 3,
1995 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $67 $287
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization............... 618 646
Provision for losses on accounts receivable. 165 165
Provision for estimated returns............. (1,800) (2,812)
Gain on sale of fixed assets................ - (21)
Change in assets and liabilities:
Accounts receivable............................ 6,817 7,340
Other accounts and notes receivable............ 409 70
Inventories.................................... (8) 3,972
Prepaid income taxes and income taxes payable.. 28 142
Prepaid items and other assets, net............ (236) (312)
Accounts payable, accrued expenses and
deferred liabilities........................ (1,695) 2,275
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Net cash provided by operating activities............ 4,365 11,752
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Cash flows from investing activities:
Capital expenditures.............................. (1,325) (533)
Proceeds from sale of fixed assets................ - 26
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Net cash used in investing activities................ (1,325) (507)
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Cash flows from financing activities:
Gross borrowings under line-of-credit agreement... 181,400 -
Repayment of borrowings under
line-of-credit.................................(183,100) -
Principal repayments of long-term debt............ (78) (131)
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Net cash used in financing activities................ (1,778) (131)
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Increase in cash and cash equivalents................ 1,262 11,114
Cash and cash equivalents at beginning of period..... 676 12,310
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Cash and cash equivalents at end of period........... $1,938 $23,424
======= =======
Supplemental disclosure of cash flow information:
Interest paid..................................... $683 $772
Income taxes paid................................. $19 $1
Supplemental disclosure of noncash investing and
financing activity:
Capital lease obligation entered into.......... $587 -
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
OROAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein include all
adjustments, all of which are of a normal recurring nature, that, in the
opinion of management, are necessary for a fair presentation of financial
information for the thirteen week periods ended April 28, 1995 and May 3,
1996. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's February 2, 1996 audited consolidated financial
statements. The results of operations for the thirteen week period ended
May 3, 1996 are not necessarily indicative of the results for a full year.
Net income per share
Net income per share is computed by dividing net income for both periods
presented by the weighted average number of shares outstanding during each
period, including dilutive shares issuable upon the exercise of stock
options granted, calculated using the treasury stock method.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands, except per ounce data):
<TABLE>
<CAPTION>
February 2, May 3,
1996 1996
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<S> <C> <C>
(Unaudited)
Gold and other raw materials......... $1,475 $747
Manufacturing costs and other........ 12,804 9,580
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14,279 10,327
LIFO cost less than FIFO cost........ (2,414) (2,434)
Allowance for vendor advances........ (858) (858)
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Inventories.......................... $11,007 $7,035
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Gold price per ounce................. $414.50 $394.00
======= =======
</TABLE>
The Company has several consignment agreements with gold consignors,
providing for a maximum aggregate consignment of 290,000 fine troy ounces.
In accordance with the consignment agreements, title remains with the gold
consignors until purchased by the Company.
At February 2, 1996 and May 3, 1996, the Company held approximately 181,800
and 168,200 fine troy ounces of gold under consignment agreements,
respectively. Consigned gold is not included in inventory and there is no
related liability recorded at quarter end. The purchase price per ounce is
based on the daily Second
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London Gold Fixing. Manufacturing costs included in inventory represent
costs incurred to process consigned and Company owned gold into finished
jewelry products.
The gold consignors and the Company's revolving credit lender (Note 3) have
a security interest in substantially all the assets of the Company. The
Company pays to the gold consignors a consignment fee based on the dollar
equivalent of ounces outstanding, computed based on the Second London Gold
Fixing, as defined in the agreements. Each consignment agreement is
terminable on 30 days notice by the Company or the consignor.
The gold consignment agreements require the Company to comply with certain
covenants with respect to its working capital, current ratio and tangible
net worth and to maintain the aggregate of its accounts receivable and
inventory of gold at specified minimums. Additional provisions of the
agreements (a) prohibit the payment of dividends, (b) limit capital
expenditures, (c) limit the amount of debt the Company may incur, (d)
prohibit the Company from engaging in mergers and acquisitions, (e) require
the Company to maintain and assign as additional collateral key man life
insurance on its chief executive officer in the amount of $10.0 million,
(f) prohibit termination of the chief executive officer's employment for
any reason other than death or disability and prohibit any material
amendment to his employment contract and (g) require notice if the
Company's principal stockholder (who is also its chief executive officer)
ceases to own at least 40% of the Company's outstanding common stock. At
May 3, 1996, the Company was in compliance with all of the requirements of
its consignment agreements.
NOTE 3 - NOTES PAYABLE
The Company has a revolving credit facility with Bank of America, NT & SA
which varies seasonally from $20.0 million to $35.0 million and may not
exceed the lesser of the credit line, as seasonally adjusted, or 80% of
eligible accounts receivable minus a reserve amount, as provided for under
the credit facility. Advances under the credit facility bear interest at
the lender's prime rate minus 0.25%, or, at the Company's option, at short-
term fixed rates or rates determined by reference to offshore interbank
market rates plus 1.75%. The revolving credit facility also provides for
the issuance of banker's acceptances, and for the issuance of letters of
credit in an aggregate amount not to exceed $2.5 million at any one time.
Banker's acceptances bear an interest rate based on the bank's prevailing
discount rate at the time of issuance plus 1.75%. No banker's acceptances
were outstanding at February 2, 1996 and at May 3, 1996. No short-term
advances were outstanding at February 2, 1996 and at May 3, 1996. A stand-
by letter of credit outstanding at February 2, 1996 and at May 3, 1996
totaled $700,000 and $900,000, respectively. The revolving credit facility
also provides for a separate $1 million reducing-revolving line of credit,
whereby the amount of credit available decreases $200,000 annually every
June 30th until June 30, 1999, when the then outstanding principal balance
becomes payable in full. At February 2, 1996 and at May 3, 1996, advances
under the reducing-revolving credit facility were $800,000, bearing
interest at the Bank's prime rate plus .75%. The $800,000 of advances
under the reducing-revolving credit facility have been classified as long-
term. The revolving credit agreement expires August 6, 1996.
Amounts outstanding under the Bank of America credit agreement are secured
by substantially all of the Company's assets; the Company's gold consignors
also have security interests in these assets, and all of the consignors and
Bank of America are parties to a collateral sharing agreement. The
revolving credit agreement contains substantially the same covenants and
other requirements as are contained in the Company's gold
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<PAGE>
consignment agreements (Note 2). At May 3, 1996, the Company was in
compliance with all of the requirements of the revolving credit agreement.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read together with the
condensed consolidated financial statements and notes thereto.
GENERAL
The Company's business and the jewelry business in general are highly
seasonal. The third and fourth quarters of the Company's fiscal year,
which include the Christmas shopping season, historically have accounted
for approximately 60% of the Company's annual net sales and a somewhat
higher percentage of the Company's income before taxes. While the fourth
quarter generally produces the strongest results, the relative strengths of
the third and fourth quarters are subject to variation from year to year
based on a number of factors, including the purchasing patterns of the
Company's customers. The seasonality of the Company's business places a
significant demand on working capital resources to provide for a buildup of
inventory in the third quarter (which is primarily satisfied by an increase
in the amount of gold held under consignment) and in turn has led to a
seasonal buildup in customer receivables in the fourth quarter that must be
funded by increased borrowings. Consequently, the results of first quarter
operations are not necessarily indicative of the Company's performance for
an entire year.
Prices for the Company's products generally are determined by reference to
the current market price of gold. Consequently, the Company's sales could
be affected by significant increases, decreases or volatility in the price
of gold.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items included in the statements of
income.
<TABLE>
<CAPTION>
As a Percentage of Net Sales
Thirteen Weeks Ended
April 28, 1995 May 3, 1996
----------------------------
<S> <C> <C>
Net sales............................. 100.0% 100.0%
Cost of good sold..................... 83.0 81.6
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Gross profit.......................... 17.0 18.4
Selling, general and
administrative expenses........... 15.1 15.4
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Operating income...................... 1.9 3.0
Interest expense...................... 1.6 1.8
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Income before income taxes............ .3 1.2
Provision for income taxes............ .1 .6
------ ------
Net income............................ .2% .6%
====== ======
</TABLE>
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<PAGE>
THIRTEEN WEEKS ENDED MAY 3, 1996 COMPARED TO THIRTEEN WEEKS ENDED APRIL 28,
1995.
Net sales for the thirteen weeks ended May 3, 1996 increased by $2.6
million, or 6.1%, from the comparable period of the prior year. This
increase was primarily attributable to an increase in the amount of silver
jewelry (by weight) sold and increase in the average sales price of gold,
offset by a slight decrease in the amount of gold jewelry (by weight) sold.
Gross profit for the thirteen weeks ended May 3, 1996 increased by
approximately $1.1 million, or 14.8%, from the comparable period of the
prior year. As a percentage of net sales, gross profit increased from
17.0% for the thirteen weeks ended April 28, 1995 to 18.4% for the current
period. In the thirteen weeks ended May 3, 1996, cost of sales increased
by $27,000 due to a LIFO reserve adjustment of $20,000 and a $7,000
inventory adjustment. In the thirteen weeks ended April 28, 1995, cost of
sales increased by $256,000 due to a $310,000 LIFO reserve adjustment
offset by an increase in the carrying value of inventory due to price
fluctuations. Absent these factors, the gross profit margin in the
thirteen week periods ended April 28, 1995 and May 23, 1996 would have been
17.6% and 18.4%, respectively. The increase on a comparable basis, was due
to changes in sales product mix. The gold prices used to cost inventory at
January 27, 1995, April 28, 1995, February 2, 1996, and May 3, 1996 were
$378.40, $389.75, $414.50 and $394.00, respectively.
Selling, general and administrative expenses for the thirteen weeks ended
May 3, 1996 increased by approximately $.5 million, or 8.2%, from the
comparable period of the prior year. As a percentage of net sales, these
expenses increased from 15.1% in the thirteen weeks ended April 28, 1995 to
15.4% in the thirteen weeks ended May 3, 1996. The increase in the dollar
amount of selling, general and administrative expenses is primarily
attributable to increased consulting, professional and outside services of
$1.2 million. Consulting, professional and outside services have increased
primarily due to legal fees resulting from defending the Company against
various lawsuits and from a higher utilization of temporary personnel in
the Company's operations. These increases were offset primarily by a
$214,000 decrease in personnel costs, a $160,000 decrease in selling and
product expenses and a $281,000 increase in other income due to investment
of excess cash.
Interest expense for the thirteen weeks ended May 3, 1996 increased by
$113,000, or 16.7%, from the comparable period of the prior year. This
increase is primarily attributable to additional financing costs related to
an increase in forward purchase contracts in the current quarter as
compared to the same period last year.
The effective tax rate in the thirteen weeks ended May 3, 1996 was 46.9% as
compared to 42.1% in the comparable period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has satisfied its working capital requirements through
internally generated funds, a gold consignment program and borrowings under
its revolving credit facilities.
A substantial portion of the Company's gold supply needs have been
satisfied through gold consignment arrangements with various banks and
bullion dealers. Under the consignment arrangements, the Company may defer
the purchase of gold used in the manufacturing process and held in
inventory until the time of sale of finished goods to customers. Financing
costs under the consignment arrangements currently are approximately 3% per
annum of the market value of the gold held under consignment, computed
daily. The gold consignment agreements contain covenants restricting the
amount of consigned gold that the Company may reconsign or
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<PAGE>
otherwise have outside its possession at any one time. The aggregate
amount of gold that the Company may acquire under its consignment
arrangements was approximately 290,000 ounces at May 3, 1996 and is subject
to fluctuations based on changes in the market value of gold. At May 3,
1996 the Company held approximately 168,200 ounces of gold on consignment.
The Company anticipates that, subject to the effects of fluctuations in the
credit or precious metals markets and changes in the Company's operating
plans, on an ongoing basis, it generally will maintain its level of owned
gold at a substantially reduced level. However, from time to time the
amount of gold owned by the Company temporarily may increase as a result of
the timing of customer shipments and purchases of gold for production
requirements. So long as the Company's ownership of gold is maintained at
a substantially reduced level, period accounting adjustments resulting from
fluctuations in the price of gold should not have a material effect on the
Company's gross profit margins or results of operations.
For further information regarding the Company's gold consignment agreements
and revolving credit facilities, see Notes to Condensed Consolidated
Financial Statements.
Cash and cash equivalents increased $11.1 million from $12.3 million at
February 2, 1996 to $23.4 million at May 3, 1996. This increase results
primarily from collections on accounts receivable and reduction in
inventory balances during the first quarter of fiscal 1997.
Net accounts receivable decreased from $23.6 million at February 2, 1996 to
$18.9 million at May 3, 1996. The decrease in net accounts receivable
results primarily from the decrease in net sales in the first quarter of
fiscal 1997 as compared to the fourth quarter of fiscal 1996.
Inventories decreased from $11.0 million at February 2, 1996 to $7.0
million at May 3, 1996. At May 3, 1996, a substantial portion of the gold
included in the Company's finished goods and work in process consisted of
gold acquired pursuant to the Company's consignment program. Consigned
gold is not included in inventory.
The allowance for returns and doubtful accounts decreased from $9.9 million
at February 2, 1996 to $7.3 million at May 3, 1996. The decrease in the
amount of the allowance at May 3, 1996 is primarily attributable to
seasonal adjustments in the reserve for returns.
Accounts payable increased from $5.9 million at February 2, 1996 to $7.5
million at May 3, 1996. This increase is primarily attributable to
seasonal gold purchases and the timing of payments. Accrued expenses
increased from $5.4 million at February 2, 1996 to $6.1 million at May 3,
1996. This increase results from increases in amounts accrued for
professional fees and payroll expenses, offset by decreases in amounts
accrued for cooperative advertising.
The Company expects to incur capital expenditures of approximately $600,000
during the balance of fiscal 1997, principally for improvement of
manufacturing facilities and the purchase of manufacturing and computer
equipment. The Company believes that cash and cash equivalent balances,
funds generated from operations, the gold consignment program and the
borrowing capacity under its revolving credit facilities will be sufficient
to finance its working capital and capital expenditure requirements for the
next 12 months. The Company anticipates no problems in renewing its revolving
credit facility, which expires August 6, 1996.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits
(a) Exhibits:
10.1 Consignment Agreement with Banque Paribas dated
March 15, 1996.
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the thirteen
weeks ended May 3, 1996.
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<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.
OROAMERICA, INC.
Date: June 13, 1995 By: /S/ SHIU SHAO
--------------------------------
SHIU SHAO, Vice President
and Chief Financial Officer
Date: June 13, 1995 By: /S/ BETTY SOU
--------------------------------
BETTY SOU, Controller
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<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- - -------- ----------------------------------
10.1 Consignment Agreement with Bank Paribas
dated March 15, 1996.
27 Financial Data Schedule
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<PAGE>
CONSIGNMENT AGREEMENT
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CONSIGNMENT AGREEMENT ("Agreement") made as of the 15th day of March, 1996,
by and between BANQUE PARIBAS, a corporation organized and existing under the
laws of France, with an office at 787 Seventh Avenue, New York, New York
10019 ("Consignor") and OROAMERICA, INC., a Delaware corporation with its
principal office at 443 North Varney Street, Burbank, California 91502
("Consignee").
Consignee has requested that Consignor deliver precious metals on consignment
for sale to Consignee and Consignor may make those deliveries and sales on
the terms and conditions of this Consignment Agreement. To effectuate this
arrangement, Consignor and Consignee agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
"Affiliate Foreign Vendor" shall mean any vendor of Consignee's products
located outside of the United States in which Consignee has a forty-five
percent (45%) or greater ownership interest and which is listed on
Exhibit A-3 attached hereto.
"Collateral Agent" shall mean Fleet Precious Metals Inc., a Rhode Island
corporation, as collateral agent for itself, Consignor and others
pursuant to the Intercreditor Agreement.
"Consignee's Counsel" shall mean Ervin, Cohen & Jessup, or such other
counsel as Consignee may retain.
"Consignment Limit" shall mean the lesser of: (i) Thirty Thousand
(30,000) ounces of fine gold; or (ii) Consigned Precious Metal with a
Fair Market Value equal to Twelve Million Dollars ($12,000,000).
<PAGE>
"Consigned Precious Metal" shall mean Precious Metal which Consignor has
consigned to Consignee pursuant to the terms of this Agreement for which
full payment has not been received or which has not been Redelivered to
Consignor.
"Credit Agreement" shall mean the Agreement between Consignee and Bank of
America National Trust and Savings Association dated as of July 22, 1994,
as amended, pursuant to which Consignee borrows working capital secured
by accounts receivable and other collateral, and all amendments,
refinancings, renewals, extensions, substitutions and replacements
thereof, with the same or different lenders.
"Daily Consignment Fee" shall mean, for each day, the sum obtained by
multiplying the Consignment Fee, as defined in the Pricing Schedule, by
one-three hundred sixtieth (1/360) by the Fair Market Value of the
Consigned Precious Metal for that day, or such other amount as Consignor
shall determine in its sole discretion on thirty (30) days prior Notice
to Consignee.
"Deliver" shall mean, as determined by Consignor, either to actually ship
or to credit Precious Metal to the account of Consignee with one or more
third parties when no physical movement thereof is contemplated by the
parties.
"Delivery" shall mean, as determined by Consignor, either actual shipment
or Consignor's crediting Precious Metal to the account of Consignee with
one or more third parties when no physical movement thereof is
contemplated by the parties.
"Duly Authorized Officer" shall mean the President of Consignee 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.
"EBIDA" shall mean, for any fiscal year of Consignee, the sum of the
following, all determined in accordance with generally accepted
accounting principles consistently applied: (a) the consolidated net
income of Consignee and its consolidated subsidiaries; plus (b) to the
extent deducted from consolidated net income, all provisions for
<PAGE>
depreciation and amortization made by Consignee and its consolidated
subsidiaries for such period; plus (c) to the extent deducted from
consolidated net income, the consolidated interest expense of Consignee
and its consolidated subsidiaries, including but not limited to: (i)
capitalized and noncapitalized interest; (ii) consignment fees, including
but not limited to Daily Consignment Fees payable under this Agreement;
(iii) the interest component of rentals under capitalized leases; and
(iv) imputed non-cash interest in respect of zero-coupon indebtedness
(collectively, "Consolidated Interest Expense").
"Event of Default" shall mean an event of default under Section 13 of
this Agreement.
"Fair Market Value" on any day shall mean: (a) in the case of gold, the
Second London Gold Fixing for that day; and (b) in the case of silver,
Handy & Harman's published silver base price for that day. If no such
price is available for a particular day, the price shall be fixed at the
level for the next previous day for which a price is available.
"Financial Statements" shall mean the balance sheet of Consignee, income
statement of Consignee and cash flow statements of Consignee for the year
or other period then ended, together with supporting schedules, prepared
on a consolidated basis in accordance with generally accepted accounting
principles consistently applied and, in the case of the balance sheet,
income statements, retained earnings statements and cash flow statement,
as at the close of and for the fiscal year of Consignee, certified by
Consignee's independent certified public accountants.
"Guarantor" shall mean Jerry Madison Jewelry, Inc., a California
corporation and wholly-owned subsidiary of Consignee.
"Guaranty" shall mean that certain Limited Guaranty executed by Guarantor
in favor of Consignor, the Agent and others dated July 22, 1994, as
amended and as the same may be amended from time to time.
<PAGE>
"Intercreditor Agreement" shall mean that certain Second Amended and
Restated Intercreditor Agreement by and among Consignor, the Collateral
Agent and others, as acknowledged by Consignee, dated as of July 22, 1994
(which amends and restates that certain Amended and Restated
Intercreditor Agreement dated as of February 25, 1995), as amended and as
the same may be amended and/or amended and restated from time to time.
"Inventory Precious Metal" shall have the meaning set forth in Section 12
(n) hereof.
"Non-Affiliate Foreign Vendor" shall mean any vendor of Consignee's
products located outside of the United States in which Consignee has no
ownership interest or less than a forty-five percent (45%) ownership
interest and which is listed on Exhibit A-3 attached hereto.
"Notice" or "Notices" shall mean all requests, demands and other
communications, in writing (including telegraphic communications), mailed
by registered or certified mail, return receipt requested, sent by
overnight delivery service, telegraph, telecopier or facsimile, or
hand-delivered to a Duly Authorized Officer of the other party at that
party's Principal Office. Any Notice or Notices shall be deemed to have
been given: (a) if sent by registered or certified mail, three (3)
business days following deposit in the United States mail; (b) if sent by
overnight delivery service, one (1) business day following delivery to
the overnight delivery service; (c) if sent by telegraph, telecopier or
facsimile, when receipt of such transmission is acknowledged; or (d) if
sent by hand delivery, upon actual delivery.
"Precious Metal" shall mean: (a) gold having a fineness of not less than
.9990, without regard to whether such gold or silver is alloyed or
unalloyed, in bullion form or is contained in or processed into other
materials which contain elements other than gold or silver.
<PAGE>
"Pricing Schedule" shall mean that certain letter agreement by and
between Consignor and Consignee of even date herewith setting forth
consignment fees, market premium fees and other fees and amounts payable
by Consignee to Consignor hereunder.
"Prime Rate" on any date shall mean the rate of interest designated by
Consignor as being its prime rate of interest for that date.
"Principal Office " shall mean:
For Consignor:
Banque Paribas
787 Seventh Avenue
New York, NY 10019
Attention: Ms. Amy N. Kirshner
Vice President
For Consignee:
OroAmerica, Inc.
443 North Varney Street
Burbank, California 91502
Attention: Mr. Shiu Shao
Chief Financial Officer
"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.
"Redeliver" or "Redelivery" shall mean that Consignee deliver to
Consignor's Principal Office or to such other location as may be directed
by the Consignor, at Consignee'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 Agreement" shall mean that certain Amended and Restated
Security Agreement by and between Consignee and the Collateral Agent,
dated as of February 22, 1994, as amended and as the same may be amended
from time to time.
<PAGE>
"Subordinated Indebtedness" shall mean indebtedness of Consignee which is
subordinated to Consignee's obligations to Consignor upon terms
satisfactory to Consignor.
"Tangible Net Worth" at any time shall mean the excess of Consignee's
total assets over its total liabilities at such time computed on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied, plus Subordinated Indebtedness
outstanding at such time and less all of its intangible assets and
deferred charges at such time, including without limitation, goodwill,
debt discount, organization expenses, trademarks and tradenames, patents,
deferred product development costs and similar items, also so computed.
"Working Capital" at any time shall mean the excess of Consignee's
current assets over its current liabilities at such time, computed on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied.
2. AMOUNT OF CONSIGNMENT
Provided no notice of termination 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 may,
in its discretion, Deliver from time to time to Consignee upon Consignee's
request Precious Metal under the terms and conditions of this Agreement; in
no event shall Consignor be obligated to Deliver Precious Metal if the number
of troy ounces or Fair Market Value of Precious Metal requested when added to
Consigned Precious Metal (plus any outstanding amounts of unpaid Purchase
Price) exceeds Consignee's Consignment Limit. Consignee acknowledges and
confirms: (a) that Consignor has no obligation to deliver Precious Metal to
Consignee; (b) that each request made by Consignee for a Delivery of Precious
Metal shall be reviewed by Consignor on a case-by-case basis; (c) that the
decision to make any Delivery shall be made by the Consignor in its sole and
absolute discretion and irrespective of whether Consignee is in compliance
with the requirements of this Agreement; and (d) that Consignor has made no
commitment to Consignee to make any Delivery of Precious Metal to Consignee.
<PAGE>
If for any reason the number of troy ounces or Fair Market Value of all
Consigned Precious Metal (plus any outstanding amounts of unpaid Purchase
Price) at any time exceeds Consignee's Consignment Limit, Consignee 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.
At such time as Consignee shall request the consignment and Delivery of
Consigned Precious Metal hereunder, Consignee shall become obligated to pay
to Consignor a market premium per troy ounce announced by Consignor at the
time of such consignment and payable as provided on the monthly invoice sent
by Consignor to Consignee.
Consignor shall provide Consignee with a monthly statement of the
quantity of Consigned Precious Metal (in whatever form) held by Consignee.
If Consignee does not agree with the information reported in the statement,
Consignee shall give Notice of such disagreement to Consignor within thirty
(30) days of the date of receipt of such statement. If Consignee fails to
give Notice to Consignor within the thirty (30) day period, Consignee shall
be deemed to have affirmed the accuracy of the information reported in the
statement and to have waived any claim Consignee may have by reason of a
dispute as to such statement.
Consignee shall give Consignor at least one full business day's Notice of
its requirements for Precious Metal. Consignor shall not be liable to
Consignee 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 WARRANTY OF MERCHANTABILITY IN
RESPECT TO PRECIOUS METAL CONSIGNED OR SOLD UNDER THIS AGREEMENT NOR OF
FITNESS FOR ANY PARTICULAR PURPOSE NOR ANY OTHER WARRANTIES, EXPRESS OR
IMPLIED, except that Consignor does warrant to Consignee that all Precious
Metal will be of the fineness stated in Section 1 for that Precious Metal.
<PAGE>
3. DELIVERY OF PRECIOUS METAL
All Deliveries of Precious Metal by Consignor will be made to Consignee
at its Principal Office or other locations approved by Consignor or by
Consignor's crediting an account of Consignee at a third party supplier of
Precious Metal, such Deliveries to be on terms and conditions satisfactory to
Consignor. At the time of Delivery, Consignor shall provide Consignee with
particulars of the total quantity of the Precious Metal being Delivered or
credited to Consignee. All shipping expenses (including insurance) shall be
borne by Consignee, and any such expenses paid or incurred by Consignor shall
be reimbursed by Consignee within ten (10) days of receipt by Consignee of an
invoice from Consignor as to such expenses.
4. TITLE
Title to Consigned Precious Metal shall remain in Consignor and shall not
vest in Consignee until Consignor has received payment for the Consigned
Precious Metal as required by SECTION 5 of this Agreement. Upon each
Precious Metal Delivery, Consignee shall bear the entire risk of loss, theft,
damage or destruction of the Consigned Precious Metal from any cause
whatsoever, whether or not insured, irrespective of where the Consigned
Precious Metal is located, and including any loss resulting from the
bankruptcy or similar circumstances of any entity holding Consigned Precious
Metal for any purpose, including fabrication or reconsignment (except that
Consignor will bear such risk during transit of Precious Metal sent by
Consignor to Consignee's Principal Office by registered United States mail),
and Consignee agrees to hold the Consigned Precious Metal in trust for
Consignor, each of the Lenders (as defined in the Intercreditor Agreement)
and the Collateral Agent 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
During the term of this Agreement, Consignee shall have the right to
purchase any Consigned Precious Metal. To exercise the
<PAGE>
right, a Duly Authorized Officer of Consignee shall give Notice to a Duly
Authorized Officer of Consignor that Consignee wishes to purchase 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 Consignee's Notice in
writing.
Consignee 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 payment in full.) Payment shall be made in the following manner, as
elected by Consignor: (i) by bank wire to the Federal Reserve Bank of New
York for the account of Consignor; (ii) by Consignee authorizing Consignor to
charge its account with Consignor (if any); or (iii) by other means which
Consignor approves in writing. Any amount not paid when due 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 rate to be a
floating rate to be redetermined daily in accordance with changes in the
Prime Rate. Such interest shall be paid upon demand in the manner specified
above. 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 addition to all payments required above, Consignee agrees to pay to
Consignor, on or before the fifth (5th) business day following the receipt of
the monthly invoice therefor, a Daily Consignment Fee for Consignor's
services under this Agreement during the preceding month. Consignee
expressly authorizes Consignor to charge Consignee's account with Consignor
(if any) for the amount thereof.
6. COMMINGLING; REDELIVERY OF PRECIOUS METAL
Consignee may use the Consigned Precious Metal only in the ordinary
course of its business as now conducted; provided that no Consigned Precious
Metal shall be removed from Consignee's Principal Office prior to the fixing
of the Purchase Price for such Consigned Precious Metal except for removal of
Consigned Precious Metal to those locations approved by Consignor in
<PAGE>
writing. At present Consignor approves that Consigned Precious Metal may be
removed to the locations listed on Exhibit A-1, Exhibit A-2, Exhibit A-3 and
Exhibit A-4 attached hereto; provided, however, that Consignor reserves the
right to withdraw its approval of any location as it may determine in its
discretion. Notwithstanding a contrary provision in this Section, Consignee
shall have the right, on terms and conditions approved in writing by
Consignor, to remove scrap from its Principal Office for refining in the
ordinary course of its business, it being agreed that all such scrap
Consigned Precious Metal shall be and remain the property of Consignor until
purchased and paid for pursuant to Section 5 hereof.
At any time prior to termination of this Agreement, any or all of the
amount of the Consigned Precious Metal may be Redelivered by Consignee to
Consignor, and shall be Redelivered by Consignee to Consignor upon demand of
Consignor, subject to and pursuant to the provisions of Section 14 of this
Agreement, regardless of whether Consignee is in compliance with the terms of
this Agreement.
7. INSURANCE
Consignee, 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 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 the Collateral Agent. All insurance provided for in
this Section shall be effected under valid and enforceable policies, in such
form and in such amounts as may from time to time be reasonably required by
the Collateral Agent, 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 Consignee and thereafter not less than
fifteen (15) days prior to the expiration dates of insurance policies
theretofore furnished pursuant to this Agreement, Consignee shall deliver to
the Collateral Agent Accord Form 27 (2/84) or other similar forms
satisfactory to the Collateral Agent evidencing the insurance coverage
required by the Collateral Agent. All policies of
<PAGE>
insurance shall provide for: (a) thirty (30) days notification in advance of
any cancellation (except as provided below), non-renewal or material change in
policy conditions; and (b) ten (10) days notification in advance of any
cancellation for non-payment of premium.
All policies of insurance provided for or contemplated by this Agreement
shall name the Collateral Agent as a loss payee or as an additional insured,
as applicable, for the benefit of itself, Consignor and the other parties to
the Intercreditor Agreement, as their interests may appear.
All policies of insurance provided for in this Agreement shall contain
clauses or endorsements to the effect that:
(a) No act or omission of Consignee, or anyone acting for
Consignee, which might otherwise result in a forfeiture of such insurance
or any part thereof shall in any way affect the validity or
enforceability of such insurance insofar as the Collateral Agent is
concerned; and
(b) Neither the Collateral Agent nor Consignor shall be liable for
any premiums or subject to any assessments on the policies.
Losses under each policy of insurance provided for or contemplated by
this Section shall be adjusted with the insurers and/or underwriters and paid
directly to the Collateral Agent and Consignee as their interests may appear;
provided, however, that so long as: (i) Consignee is not in default
hereunder; and (ii) the total of all losses for such fiscal year is less than
Two Hundred Fifty Thousand ($250,000) Dollars in the aggregate, then payments
may be made solely to Consignee. Written notice of all losses shall promptly
be given by Consignee to the Collateral Agent. Consignee shall pay all costs
and expenses of collecting or recovering any insurance proceeds under such
policies, including, but not limited to, any and all fees of attorneys,
appraisers and adjusters. Anything herein to the contrary notwithstanding,
Consignor shall be responsible, at its expense, for collecting insurance
proceeds for any loss in transit of Precious Metal sent by Consignor to
Consignee's Principal Office by registered United States mail. Consignor
may, if it so desires, manage any one or more claims under such policies.
<PAGE>
In the event of any loss described above, except for a loss during
transit of Precious Metal sent by Consignor to Consignee's Principal Office
by registered United States mail, Consignor shall have the right to demand
that Consignee, and upon such demand Consignee shall, compensate Consignor,
upon terms acceptable to Consignor, for the full amount of such loss, whether
or not recovery has been made under any applicable policy. In the event
Consignor requires such compensation, Consignee shall be entitled to manage
the relevant claims and to retain any recovery under the applicable policy.
8. TAXES, ETC; CERTAIN RIGHTS OF CONSIGNOR
Consignee will promptly pay any and all taxes, assessments and
governmental charges upon the Consigned Precious Metal prior to the date of
any penalties. Consignee 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, wherever located, and Consignee agrees
to keep all records relating to the Consigned Precious Metal at its Principal
Office. Consignee further agrees to promptly give notice to Consignor of the
assertion of any lien or other encumbrance against the Consigned Precious
Metal and Consignee's response to such assertion.
At its option, Consignor may discharge (upon fifteen (15) days' prior
written notice to Consignee) taxes, liens, security interests or other
encumbrances at any time levied or placed on the Consigned Precious Metal
(which are not being contested in good faith), may pay for insurance on the
Consigned Precious Metal and may pay for the maintenance and preservation of
the Consigned Precious Metal. Consignee agrees to reimburse Consignor on
demand for any payment made, or any expense incurred, by Consignor in
connection with the foregoing, together with interest thereon at two percent
(2%) in excess of the Prime Rate, computed from the date of such payment or
expense until paid.
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
Consignee. Consignee represents and warrants to Consignor that:
<PAGE>
(a) Consignee has heretofore furnished to Consignor Consignee's
Financial Statements for the period ending ____________, 1995, together
with interim Financial Statements for the period ending_____________,
1995, which Financial Statements fairly present the financial condition
of Consignee as of their date, and the results of its operations for the
year or other period then ended. Consignee does not have any contingent
obligations, liabilities for taxes or unusual forward or long-term
commitments except as specifically mentioned in the Financial Statements.
Since , 1995, there has been no material adverse change in
the business, properties, assets, liabilities, operations, results of
operations, prospects or condition, financial or otherwise, of Consignee;
(b) Consignee: (i) is and will remain duly organized, validly
existing and in good standing under the laws of the state of its
incorporation as of the date hereof; (ii) has and will have full power
and authority to own its properties and to carry on business as now being
conducted and is and will remain qualified to do business in every
jurisdiction where such qualification is necessary and where failure to
be so qualified would have a material adverse effect on the business of
Consignee; (iii) has full power to execute, deliver and perform this
Agreement and any security document or documents securing the obligations
of Consignee under this Agreement; and (iv) when this Agreement and any
other document contemplated hereby have been duly authorized, executed
and delivered by Consignee, such Agreement and documents will constitute
the legal, valid and binding obligations of Consignee enforceable in
accordance with their terms, except to the extent that enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, whether enforcement is sought in equity or at law;
(c) The execution, delivery and performance by Consignee of the
terms and provisions of this Agreement and any security document or
document contemplated hereby: (i) have been duly authorized by all
requisite corporate action; (ii) will not violate any provision of law,
any order of any
<PAGE>
court or other agency of government, the corporate charter or by-laws of
Consignee; (iii) will not violate any indenture, agreement or other
instrument to which Consignee is a party, or by which Consignee or its
assets is or are bound, or be in conflict with, result in a breach of, or
constitute (with notice or lapse of time or both) a default under any
such indenture, agreement or instrument; and (iv) except as this
Agreement and any security or other document completed hereby may
provide, will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the property
or assets of Consignee pursuant to any such indenture, agreement or
instrument;
(d) There is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or other agency now pending
or, to the knowledge of Consignee, threatened, against or affecting
Consignee which, if adversely determined, could have a material adverse
effect on the business, properties, assets, liabilities, operations,
results of operations, prospects or condition, financial or otherwise, of
Consignee;
(e) Consignee is not a party to any agreement or instrument or
subject to any charter or other corporate restriction adversely affecting
its business, properties, assets, liabilities, operations, results of
operations, prospects or conditions, financial or otherwise of Consignee;
Consignee is not in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party; and
(f) Except for financing statements or agreements in favor of the
Collateral Agent or other consignors or providers of Dollar Loans or
Trade Facilities (both as defined in the Intercreditor Agreement) that
are or become party to the Intercreditor Agreement, no financing
statement or agreement is on file in any public office pertaining to or
affecting the Consigned Precious Metal or any property of Consignee, now
owned or hereafter acquired, which does or will include the Consigned
Precious Metal or portions, products or proceeds thereof.
<PAGE>
(g) Except as disclosed on Schedule 1 attached hereto, each of
Consignee and, to the best knowledge of Consignee, any other person
relating to any real estate owned, used or leased by Consignee,
including, without limitation, Consignee's Principal Office
(collectively, the "Premises"):
(i) Has obtained all permits, licenses and other
authorizations which are required under all environmental laws and
regulations, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface
water, ground water, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes,
except to the extent failure to have any such permit, license or
authorization does not have a material adverse effect on the
business, properties, assets, liabilities, operations, results of
operations, prospects or condition, financial or otherwise, of
Consignee;
(ii) Are in compliance with all terms and conditions of the
required permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in those laws or contained in any regulation,
code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except
to the extent failure to comply does not have a material adverse
effect on the business, properties, assets, liabilities, operations,
results of operations, prospects or condition, financial or
otherwise, of Consignee;
(iii) Has never caused, permitted, or suffered to exist any
oil, friable asbestos, hazardous substance, hazardous waste, or
other hazardous material
<PAGE>
(as defined under applicable federal, state or local laws including,
but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Section
9601(14) and 33, and the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. Section 6903(5), all of which is collectively
referred to herein as "Hazardous Material"), to be spilled, placed,
held, located or disposed of on, under or about nor are any now
existing on, under or about the Premises or into the atmosphere, any
body of water or any wetlands in excess of maximum permitted
regulatory levels or about which a government agency might require
corrective action;
(iv) Has no knowledge after due inquiry that any of the
Premises has ever been used (whether by Consignee or, to the best
knowledge of Consignee, after due inquiry, by any other person) as a
treatment, storage or disposal (whether permanent or temporary) site
for any Hazardous Material in excess of maximum permitted regulatory
levels or which is otherwise not in compliance with applicable
environmental laws and regulations;
(v) Has not received any notice from any governmental agency,
tenant, occupant or operator of the Premises or from any other
person with respect to the environmental condition of the Premises
or with respect to the release of Hazardous Material at, upon, under
or within the Premises, or the past or ongoing migration of
Hazardous Material from neighboring lands to the Premises; and
(vi) Has no knowledge of any asbestos containing materials,
PCB's, radon, gas, or urea formaldehyde foam insulation at, upon,
under or within the Premises.
10. CONDITIONS OF CONSIGNMENT
Without limiting the uncommitted nature of Consignor's obligations under
this Agreement, Delivery by Consignor of any Precious Metal under this
Agreement is subject to the following conditions precedent:
<PAGE>
(a) 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 made.
(b) Consignee shall have executed and delivered to Consignor, upon
the execution of this Agreement, the following:
(i) All required security documents;
(ii) A certificate of the Secretary or Assistant Secretary of
Consignee certifying that the Consignee's Board of Directors has
duly adopted and not revoked a resolution therein set forth
authorizing the execution, delivery and performance of this
Agreement and any security or other document contemplated hereby;
(iii) A certificate of the Secretary or Assistant Secretary of
Consignee certifying the names of the officers of Consignee
authorized to sign this Agreement, any security documents and any
other documents or certificates to be delivered pursuant to this
Agreement by Consignee or any of its officers, together with the
true signatures of such officers on which certificate Consignor may
conclusively rely until it shall receive a further certificate
cancelling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate;
(iv) A certificate of the Secretary of State of the state of
incorporation of Consignee, dated reasonably near the date of this
Agreement, stating that Consignee is duly incorporated and in good
standing in such state and has filed all annual reports and has paid
all franchise taxes required to be filed or paid to the date of such
certificate;
(v) A favorable written opinion of Consignee's Counsel, dated
the date of this Agreement, satisfactory to Consignor and its
counsel in scope and substance, with respect to the matters set
forth in of this Agreement;
<PAGE>
(vi) A certificate signed by Consignee's chief executive or
chief financial officer to the effect stated in Section 10(c) below;
and
(vii) Such other supporting documents and legal opinions as
Consignor may reasonably request.
(c) 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.
11. AFFIRMATIVE COVENANTS
Consignee covenants and agrees that, until Consignee makes payment and
performs in full its indebtedness, obligations and liabilities under this
Agreement or under any other indebtedness, obligations and liabilities to
Consignor, whether now existing or arising hereafter, unless Consignor
consents in writing, Consignee will:
(a) 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; at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its property
used or useful in the conduct of its business and keep the same in good
repair, working order and condition, and from time to time, make, or
cause to be made, all needful and proper repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on in
connection therewith may be properly conducted in a manner consistent
with the ordinary course of business at all times;
(b) Comply with all applicable laws and regulations, including all
applicable securities laws, 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
<PAGE>
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; provided that Consignee shall not be required to pay and
discharge or cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be contested
in good faith by appropriate proceedings and it shall have set aside on
its books adequate reserves with respect to any such tax, assessment,
charge, levy or claim, so contested, and provided, further, that payment
with respect to any such tax, assessment, charge, levy or claim shall be
made before any of its property shall be seized and sold in satisfaction
thereof;
(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;
(e) Furnish to Consignor:
(i) Within ninety (90) days after the end of each fiscal
year, consolidated Financial Statements of Consignee certified by
independent public accountants approved by Consignor and showing its
financial condition at the close of such fiscal year, the results of
operations during such year and containing a statement to the effect
that its independent public accountants have examined the provisions
of this Agreement and that no Event of Default nor any event which
with notice or lapse of time, or both, would constitute an Event of
Default has occurred;
(ii) Within forty-five (45) days of the close of each of the
first three (3) fiscal quarters of each fiscal year of Consignee,
Financial Statements of the type specified in subsection (i) above,
certified by the Chief Financial Officer of Consignee.
<PAGE>
(iii) Within thirty-five (35) days after the end of each month
in each such fiscal year, Financial Statements for such monthly
period and the fiscal year to that date, subject to changes
resulting from year-end adjustments, together with a statement of the
aging of total accounts receivable as at the end of such period,
both in form satisfactory to Consignor, prepared and certified by
the Chief Financial Officer of Consignee to the best of his or her
information and belief;
(iv) Simultaneously with the furnishing of each of the
Financial Statements to be delivered pursuant to subsections (i) and
(ii) above at each fiscal quarter only and at any other time as
requested by Consignor with reasonable notice, a narrative statement
of the President or Chief Financial Officer of Consignee,
substantially in the form of Exhibit B attached hereto, which shall
comment upon and explain any material changes, both positive and
negative, reflected in such statements from prior periods, and which
shall also contain a declaration to the effect that such officer has
reviewed the terms of this Agreement and has no knowledge of any
event or condition which constitutes an Event of Default or which
with notice or lapse of time, or both, would constitute an Event of
Default or, if he or she has such knowledge, specifying the nature
and period of existence of such event or condition;
(v) Within thirty (30) calendar days after the end of each
calendar month: (a) a report of the amount, value and location of
inventory and consigned goods as at the date of the end of such
month, in a form satisfactory to Consignor together with a report of
the total sales during the prior month; (b) a summary report on
aging of accounts receivable of Consignee together with a list of
the ten (10) largest account debtors of Consignee by dollar amount
owed to Consignee; (c) a report showing as at such time the amount
of all borrowings and consignments, including the names of each
lender and consignor and the balance owed thereto; (d) a Precious
Metals Borrowing Base Report in the form attached hereto as Exhibit
C-1; and
<PAGE>
(e) a statement as to the aggregate amount of all loans, advances,
contributions and other transfers of property directly or indirectly
made, delivered or otherwise provided, and obligations incurred, by
Consignee to, on behalf of or for the use or benefit of Guarantor as of
the end of such month, all of the foregoing to be in reasonable detail
acceptable to Consignor and certified by the chief financial officer of
Consignee, and to include a statement to the effect that as of the date
of such statement there does not exist any Event of Default hereunder (or
specifying such Events of Default as shall exist at such date);
(vi) Within thirty-five (35) days after the end of each
calendar month, a Covenant Compliance Certificate of such period in
the form attached hereto as Exhibit C-2;
(vii) Not later than thirty (30) calendar days prior to the end
of each fiscal year, a detailed set of financial projections for
each month of the next fiscal year, including income statements,
balance sheets and cash flow projections;
(viii)Within ten (10) days after their filing, any filing made
with the Securities and Exchange Commission, including, without
limitation, Forms 10K, 10Q and 8K and any proxy statements;
All of the foregoing Financial Statements and reports provided by Consignor,
as well as the computations of the financial covenants contained within
Sections 11(j)-(m), (p), (s) and (t) and Sections 12(j) and (o) shall be on a
consolidated basis;
(f) Promptly, from time to time, furnish such other information
regarding its business, properties, assets, liabilities, operations,
results of operations, prospects or condition, financial or otherwise, as
Consignor may reasonably request;
(g) Permit agents or representatives of Consignor (i) at reasonable
times, with or without notice, to inspect the Precious Metal in the
possession and control of
<PAGE>
Consignee and Consignee's books and records to make abstracts or
reproductions of such books and records; and (ii) to conduct an audit at
reasonable cost, at Consignee's expense, of the Precious Metal in the
possession and control of Consignee, such audits to be done on a regular
basis but not more frequently than once every quarter; provided, however,
that so long as an Event of Default has occurred and is continuing,
Consignor may conduct such audits as frequently as it may desire, at
Consignee's expense. Consignee shall also permit agents or
representatives of Consignor, at reasonable times, with or without
notice, or at any time that an Event of Default has occurred and is
continuing or at any time in case of an emergency, to take a physical
inventory of the Precious Metal in the possession and control of
Consignee, at Consignee's expense. Consignee shall permit Consignor and
its designated representatives to observe the taking of such physical
inventory;
(h) Promptly advise Consignor of any material adverse change in the
business, properties, assets, liabilities, operations, results of
operations, prospects or condition, financial or otherwise, of Consignee,
and of any condition or event which constitutes, or with notice or lapse
of time or both would constitute, an Event of Default;
(i) Execute and deliver for filing any financing statement,
including any continuation statement, which Consignor or its agent deems
necessary to be executed, delivered or filed by Consignor in connection
with this Agreement, and Consignee does hereby (a) make, constitute and
appoint Consignor or its agent its true and lawful attorney-in-fact, for,
in its name and on its behalf to execute and deliver for filing any
financing statement, including any continuation statement, which
Consignor or its agent deems necessary to be executed, delivered or filed
by Consignor in connection with this Agreement, (b) ratify and confirm
all that said attorney-in-fact shall do or cause to be done by virtue of
this Section, and (c) agree to take any and all actions and execute such
other instruments as Consignor may reasonably require;
(j) Maintain at all times during the period October 1 through
December 31 of each year (including the 1996 fiscal year of Consignee), a
ratio of its current assets to
<PAGE>
its current liabilities of greater than or equal to 1.5:1, and maintain
at all other times a ratio of greater than or equal to 2:1, all such
ratios to be determined in accordance with generally accepted accounting
principles consistently applied;
(k) Maintain at all times Working Capital in an amount equal to or
in excess of Thirty-Two Million Dollars ($32,000,000);
(l) As of the end of each fiscal quarter of Consignee, increase
Consignee's Tangible Net Worth by an amount equal to at least
Seventy-Five Percent (75%) of Consignee's net operating income for the
previous fiscal quarter of Consignee; provided however, the event
Consignee shall incur a net operating loss or otherwise not have a net
operating income for any fiscal quarter, Consignee shall maintain its
Tangible Net Worth at the level attained for the previous fiscal quarter
of Consignee; provided, further, however that such increased Tangible Net
Worth shall be maintained at all times during each such fiscal quarter.
(m) Maintain at all times during the period July 1 through August
31 of each year (including the 1996 fiscal year of Consignee), a ratio of
its total liabilities (including liabilities pursuant to the terms of
this Agreement, other consignment agreements and the Credit Agreement but
excluding Subordinated Indebtedness) to its Tangible Net Worth of less
than or equal to 2.95:1, maintain at all times from September 1 through
December 31 of each year a ratio of less than or equal to 3.25:1, and
maintain at all other times a ratio of less than or equal to 2.75:1; all
such ratios to be determined in accordance with generally accepted
accounting principles consistently applied;
(n) Deliver to Consignor, upon Consignor's request, a list
including the names, addresses and Social Security numbers of all of
Consignee's salespersons and sales representatives;
<PAGE>
(o) Defend the Consigned Precious Metal against any claims and
demands of any persons (other than Consignor) at any time claiming the
same or any interest therein;
(p) Maintain for each period of four (4) consecutive fiscal
quarters of Consignee, measured as of the end of each fiscal quarter of
Consignee, a ratio of EBIDA to Consolidated Interest Expense plus current
maturities of long term debt of Consignee and its consolidated
subsidiaries plus non-financed capital expenditures of Consignee and its
consolidated subsidiaries greater than or equal to 1.15 to 1;
(q) Maintain a "key man" life insurance policy or policies insuring
the life of Guy Benhamou providing aggregate death benefits payable to
Consignee of Ten Million Dollars ($10,000,000) which policies shall be
collaterally assigned to the Collateral Agent as agent for all
consignors;
(r) Maintain at all times one or more credit facilities for working
capital purposes, but only with lenders that are parties to the
Intercreditor Agreement, the aggregate maximum availability under such
facilities to be no less than Twenty Million Dollars ($20,000,000) and no
greater than Fifty Million Dollars ($50,000,000); provided, however,
such facilities may provide for seasonal limitations on availability;
provided, further, however, Consignee shall be permitted under such
facilities to borrow only an amount not to exceed the amount by which
Adjusted Eligible Accounts Receivable (as determined in Exhibit D
attached hereto and made a part hereof) exceed the greatest of (A), (B)
or (C) of paragraph 11(s) below;
(s) Maintain at all times: (a) Adjusted Eligible Accounts
Receivable having a dollar value, and/or (b) owned Precious Metal (free
and clear of all liens and encumbrances except in favor of Consignor and
other parties to the Intercreditor Agreement and not subject to any
forward contract or other future sale) with a Fair Market Value, in the
aggregate equal to, or greater than, the greatest of: (A) Fifteen Percent
(15%) of the Fair Market Value of the Consigned Precious Metal; (B) the
Fair Market Value of all gold located outside of the United States with
Affiliate
<PAGE>
Foreign Vendors and Non-Affiliate Foreign Vendor plus the Fair Market
Value of One Thousand Five Hundred (1,500) troy ounces of fine gold on
unsecured memorandum; or (C) Twelve Million Dollars ($12,000,000);
(t) Maintain at all times during the period November 1 through
December 31 of each year, a ratio of its total liabilities (excluding
liabilities pursuant to the terms of this Agreement and other consignment
agreements with other consignors that are or become a party to the
Intercreditor Agreement and excluding Subordinated Indebtedness) to its
Tangible Net Worth of less than or equal to 1.25:1, and maintain at all
other times a ratio of less than or equal to 1:1; all such ratios to be
determined in accordance with generally accepted accounting principles
consistently applied;
(u) With respect to environmental matters:
(i) Comply strictly and in all respects with the requirements
of all federal, state, and local environmental laws, including, but
not limited to, wetlands laws, laws pertaining to the registration
of underground storage tanks, asbestos and asbestos-containing
materials, PCBs, radon gas and urea formaldehyde foam insulation;
notify the Consignor promptly in the vent of any release, spill,
hazardous waste pollution or contamination affecting the Premises or
the discovery of the presence of asbestos and asbestos-containing
materials, PCBs, radon gas and urea formaldehyde foam insulation;
notify Consignor promptly of any notice relating to environmental
matters received from any governmental agency, tenant, occupant,
operator or other person; and pay promptly when due any fine or
assessment against the Premises;
(ii) Except for Hazardous Material used in the ordinary
course of Consignee's jewelry manufacturing business (in accordance
with applicable law and/or regulation), not become involved, and not
permit any tenant of the Premises to become involved, in any
operations of the Premises generating, storing, disposing, or
handling Hazardous Material or any other activity that could lead to
the imposition of the Consignee, the Consignor, or the
<PAGE>
Premises of any liability or lien under any environmental laws;
(iii) Immediately contain, remediate and remove any Hazardous
Material found on the Premises not used in the ordinary course of
Consignee's jewelry manufacturing business, to the extent the amount
of such Hazardous Material violates any law or regulatory threshold,
or correct any violation of environmental laws found on the
Premises, which work must be done in compliance with applicable laws
and at Consignee's expense; and Consignee hereby agrees that
Consignor has the right, at its sole option but at Consignee's
expense, to have an environmental engineer or other representative
selected by Consignor review the work being done;
(iv) Promptly upon the request of the Consignor, based upon
the Consignor's reasonable belief that a hazardous waste or other
environmental problem exists with respect to the Premises, provide
Consignor with an environmental site assessment report or an update
of any existing report, all in scope, form and content and performed
by such company as may be reasonably satisfactory to Consignor,
provided, however, that the Consignee also hereby grants to
Consignor the right to go upon the Premises to have such a report or
update done, at the Consignee's expense, if the Consignee shall not
provide the Consignor with such report or update; and
(v) Indemnify, defend, and hold Consignor harmless from and
against any claim, cost, damage (including, without limitation,
consequential damages), expenses (including, without limitation,
attorneys' fees and expenses), loss, liability, or judgment now or
hereafter arising as a result of any claim for environmental cleanup
costs, any resulting damage to the environment and any other
environmental claims against Consignee, Consignor, or the Premises.
The provisions of this subparagraph (v) shall continue in effect and
shall survive (among other events) any termination of this
Agreement, foreclosure, a deed in lieu of foreclosure transaction,
payment and satisfaction of any and all indebtedness under this
Agreement, and release of any collateral;
<PAGE>
(vi) Maintain at all times a ratio of the sum of cash,
short-term cash investments, marketable securities not classified as
long-term investments and Accounts (as defined in Exhibit D attached
hereto and made a part hereof) to current liabilities of greater
than or equal to 1:1, determined in accordance with generally
accepted accounting principles consistently applied; and
(vii) Maintain for the twelve (12) month period ending as of
the end of the second fiscal quarter of each fiscal year of
Consignee and maintain for each fiscal year of Consignee, a positive
net operating income, the calculation of net operating income to be
determined in accordance with generally accepted accounting
principles consistently applied.
12. NEGATIVE COVENANTS
Consignee covenants and agrees that, until Consignee makes payment and
performs in full its indebtedness, obligations, and liabilities under this
Agreement or under any other indebtedness, obligations and liabilities to
Consignor, whether now existing or arising hereafter, unless Consignor
consents in writing, Consignee will not, directly or indirectly:
(a) Create, incur, assume or suffer to exist any mortgage, pledge,
lien, charge or other encumbrance of any nature whatsoever on any of the
Consigned Precious Metal or any products or property now or hereafter
owned which does or will include the Consigned Precious Metal, except in
favor of Consignor and other consignors or providers of Dollar Loans
or Trade Facilities that are or become party to the Intercreditor
Agreement;
(b) Sell, lease, transfer or otherwise dispose of its properties,
assets, rights, licenses and franchises to any person, except in the
ordinary course of its business, or turn over the management of, or enter
into a management contract with respect to, such properties, assets,
rights, licenses and franchises;
(c) Dissolve, liquidate, consolidate with or merge with, or
acquire all or substantially all of the assets or properties of, any
other person or business or change the
<PAGE>
Consignee's corporate name, provided, however, that Consignor consents
(a) to the acquisition of certain of the assets of A.K.S. Jewelry
Manufacturing Corp. ("AKS") by Consignee (the "AKS Acquisition"); (b) to
the acquisition of Jerry Madison Enterprises, Inc. as a wholly-owned
subsidiary of Consignee (the "Madison Acquisition"); (c) to the merger of
Guarantor into Consignee provided that Consignee is the surviving
corporation; and (d) to the dissolution of Guarantor provided that the
assets of Guarantor are distributed free from any lien or other
encumbrance to Consignee;
(d) Sell, assign, encumber, pledge, discount or otherwise dispose
of in any way any accounts receivable, promissory notes or trade
acceptances held by Consignee, with or without recourse, except for
collection (including endorsements) in the ordinary course of business
and except for liens in favor of Consignor or other Lenders that are or
become party to the Intercreditor Agreement;
(e) Grant any security interest or ownership rights to any
customer of Consignee with respect to any Precious Metal while at
Consignee's premises whether or not such customers have prepaid orders
for Precious Metal or any products or property which does or will
include Precious Metal;
(f) Guarantee, endorse or otherwise in any way become or be
responsible for obligations of any other person, except endorsements of
negotiable instruments for collection in the ordinary course of
business;
(g) Enter into any arrangements, directly or indirectly, with
any person whereby Consignee shall sell or transfer any property, real,
personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property;
(h) Purchase, invest in or otherwise acquire or hold
securities, including, without limitation, capital stock and evidences
of indebtedness of, or make loans or advances to, or enter into any
arrangement for the purpose of providing funds or credit to, any person
except:
<PAGE>
(i) advances to employees for business expenses or for
personal needs not to exceed Fifty Thousand Dollars ($50,000) in
the case of any one (1) employee and not to exceed One Hundred
Thousand Dollars ($100,000) in the aggregate to all such employees
outstanding at one time; provided, however, the Consignee may make
advances to Guy Benhamou in an amount not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate at any one time
outstanding;
(ii) investments in securities listed on a national securities
exchange or actively traded in the over-the-counter securities
market not to exceed at any time a market value of $250,000 in the
aggregate;
(iii) investments in readily marketable short term direct
obligations of the United States of America or United States federal
government agencies or instrumentalities;
(iv) certificates of deposit, time deposits or banker's
acceptances issued by the Consignor or any affiliate of the
Consignor, any other Lender that is or becomes party to the
Intercreditor Agreement or commercial banks of recognized standing
organized and existing under the laws of the United States of
America and having a commercial paper rating in one of the two
highest categories of Standard & Poor's Corporation or Moody's
Investor's Service Inc.;
(v) commercial paper rated in one of the two highest
categories by Standard & Poor's Corporation or Moody's Investor's
Service Inc.;
(vi) other readily marketable debt securities maturing in
three (3) years or less and rated in one of the two highest
categories by Standard & Poor's Corporation or by Moody's Investor's
Service Inc.; and
(vii) repurchase agreements the underlying securities for which
consist of securities of the type described in subparagraph (iii)
above provided that such repurchase agreements are entered into with
<PAGE>
commercial banks meeting the requirements of subparagraph (iv) above;
(viii) the ownership of 100% of the capital stock of Guarantor,
and the funding of Guarantor's operations, including but not limited
to advances of cash and merchandise in an amount not to exceed
Guarantor's reasonable business needs (provided, however, that
Consignee agrees not to materially change the nature of Guarantor's
business needs nor materially expand the operations of Guarantor
without the prior written consent of Consignor;
(i) Declare or pay any dividends, or make any distribution of cash
or property, or both, to holders of shares of its capital stock, or
directly or indirectly, redeem, purchase or otherwise acquire for a
consideration any shares of its capital stock, of any class.
(j) [[[INTENTIONALLY OMITTED]]]
(k) Terminate or suffer or permit to be terminated the employment
of Guy Benhamou at any time prior to January 31, 1997, for any reason
other than the death or permanent disability of Guy Benhamou, or
materially amend the compensation provisions of the Employment Agreement
dated as of June 10, 1993, between Consignee and Guy Benhamou;
(l) Permit the number of Consignee's salesperson sample lines off
premises of Consignee to exceed eighteen (18) or permit the number of
troy ounces of fine gold in any single sample line to exceed one hundred
fifty (150) troy ounces, or permit the aggregate number of troy ounces of
fine gold in all salesperson sample lines to exceed two thousand seven
hundred (2,700);
(m) Permit Precious Metal to be removed from its Principal Office,
except in accordance with the limitations set forth in Exhibit A attached
hereto and made a part hereof;
(n) Reconsign Consigned Precious Metal or consign Precious Metal
owned by Consignee or otherwise in the inventory of Consignee ("Inventory
Precious Metal") in the
<PAGE>
aggregate in excess of Forty Thousand (40,000) troy ounces at any one
time; provided, however, that Consignee may not reconsign any Consigned
Precious Metal or consign any Inventory Precious Metal unless: (i)
Consignor has approved in writing the locations where the reconsigned
Consigned Precious Metal or Inventory Precious Metal is to be located;
and (ii) Consignee has obtained a grant of a senior security interest
from its consignee (to include but not be limited to Consigned Precious
Metal and/or Inventory Precious Metal) which security interest shall be
duly perfected. Consignee hereby grants to Consignor a senior security
interest, pari passu with other Lenders that are or become party to the
Intercreditor Agreement, in any security interest Consignee obtains in
any reconsigned Consigned Precious Metal and/or consigned Inventory
Precious Metal and agrees to execute and deliver such documents and take
such further steps as Consignor requires to perfect such security
interest. In any such case, Consignee promptly shall inform Consignor of
its reconsignment or consignment and the proposed location of the
reconsigned Consigned Precious Metal and/or the Inventory Precious Metal.
Consignee represents that attached hereto as Exhibit A-4 is a correct and
complete list of the locations where reconsigned Consigned Precious Metal
and consigned Inventory Precious Metal currently is located. Upon the
request of Consignor, Consignee shall supply the recording information
regarding the UCC filings relating to its reconsignments and/or
consignments. Notwithstanding the foregoing, Consignor agrees that
Consignee may reconsign or consign One Thousand Five Hundred (1,500) troy
ounces of the foregoing Forty Thousand (40,000) troy ounces of Consigned
Precious Metal and/or Inventory Precious Metal in the aggregate at any
time on an unsecured basis;
(o) Permit the value added to Precious Metal in finished product
form which is held as Collateral (as defined in the Security Agreement)
to exceed fifteen (15%) percent of the Tangible Net Worth of Consignee
and, for the purposes of this subparagraph, Tangible Net Worth shall be
calculated excluding Subordinated Indebtedness;
(p) Permit the number of troy ounces of Consigned Precious Metal
(from any source) with any Non-Affiliate
<PAGE>
Foreign Vendor to exceed four thousand (4000) troy ounces at any one
time;
(q) Permit the aggregate amount under the Consignment Limit plus
the "Consignment Limit" under all other Consignment Agreements with other
parties to the Intercreditor Agreement to be less than Two Hundred
Thousand (200,000) or greater than Three Hundred Eighty Thousand
(380,000) ounces of fine gold;
(r) Reconsign Precious Metal or consign Inventory Precious Metal:
(i) to its customers which, in the aggregate, has a Fair Market Value
greater than Thirty Percent (30%) of Consignee's Tangible Net Worth; and
(ii) to any one (1) of its customers which, in the aggregate, has a Fair
Market Value greater than Ten Percent (10%) of Consignee's Tangible Net
Worth;
(s) Permit the aggregate number of troy ounces of Consigned
Precious Metal and Inventory Precious Metal with, or in transit to, any
Affiliate Foreign Vendor or any Non-Affiliate Vendor: (i) from December 1
of each year to March 31 of the next year, to exceed Twenty-Five Thousand
(25,000) troy ounces; and (ii) at all other times, to exceed Forty
Thousand (40,000) troy ounces; and
(t) At any time from February 1 to July 31 of each year, permit the
number of troy ounces of Precious Metal consigned to Consignee from any
source to exceed One Hundred Sixty Percent (160%) of the aggregate number
of troy ounces of Precious Metal at Consignee's Principal Office and New
York locations, and at any time from August 1 to January 31 of each year,
permit the number of troy ounces of Precious Metal consigned to Consignee
from any source to exceed One Hundred Seventy Percent (170%) of the
aggregate number of troy ounces of Precious Metal at Consignee's
Principal Office and New York locations.
(u) Enter into any transaction, nor permit any of its subsidiaries
to enter into any transaction, including, without limitation, any
purchase, sale, consignment, lease or exchange of property or rendering
of any service with any affiliate unless such transactions are otherwise
permitted by the terms of this Agreement, or are in the ordinary
<PAGE>
course of Consignee's or such subsidiary's business and are upon fair and
reasonable terms not less favorable to Consignee or such subsidiary, as
the case may be, than it would obtain in a comparable arm's length
transaction with a person or entity which is not an affiliate.
(v) Permit the advances outstanding under the Credit Agreement to
exceed Five Million Dollars ($5,000,000) in the aggregate for a period of
not less than thirty (30) consecutive days between the last day of
February and June 30 of each year during the term of this Agreement.
13. EVENT OF DEFAULT
The occurrence of any of the following events shall constitute an Event
of Default:
(a) 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 respect;
(b) Consignee fails to make punctual payment or timely perform any
obligation required by the provisions of Section 2,5,6 or 14 of this
Agreement;
(c) Consignee fails to pay any amounts due hereunder or any other
indebtedness, obligations or liabilities of Consignee 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;
(d) Consignee 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 Consignee of its failure or an Event of Default shall occur
under the Security Agreement, and such Event of Default shall continue
unremedied beyond any grace or cure period contained therein;
<PAGE>
(e) Consignee defaults, receives notice of default or notice of
impending default with respect to any evidence of indebtedness,
obligations or liabilities or other material agreement of Consignee
(including but not limited to other consignment agreements), if the
effect of such default is to accelerate the maturity of such
indebtedness, obligations or liabilities or to permit the holders thereof
(or any portion thereof) to cause such indebtedness, obligations or
liabilities to become due prior to the stated maturity thereof, or if any
indebtedness of Consignee is not paid, when due and payable, whether at
the due date thereof or by acceleration or otherwise;
(f) Consignee shall (i) apply for, consent to, or suffer the
appointment of a custodian, receiver, trustee or liquidator of it or any
of its property, (ii) admit in writing its inability to pay its debts as
they mature, (iii) make a general assignment for the benefit of
creditors, (iv) fail to pay its debts generally as they become due, (v)
file, or have filed against it, a petition for relief under Title 11 of
the United States Code, (vi) 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, or (vii) suffer a material adverse change in its
business, properties, assets, liabilities, operations, results of
operations, prospects or condition, financial or otherwise;
and which, in the case of any involuntary proceeding under (i), (iii),
(iv), (v) or (vi) is not dismissed or discharged within thirty (30) days
of its commencement;
(g) An order, judgment or decree shall be entered, without the
application, approval or consent of Consignee by any court of competent
jurisdiction, approving a petition seeking reorganization of Consignee or
appointing a custodian, receiver, trustee or liquidator of Consignee or
of all or a substantial part of the assets of Consignee;
<PAGE>
(h) Occurrence of any material loss, theft, or destruction of or
damage to the Consigned Precious Metal or Precious Metal or any products
or property which includes Consigned Precious Metal or Precious Metal;
(i) Consignee discontinues or suspends or threatens to discontinue
or suspend the operation of Consignee's fine jewelry import and/or
manufacturing business or a substantial part thereof (as presently
conducted) for any reasons;
(j) For any reason the present chief financial officer shall cease
to be or function as the chief financial officer of Consignee and a
successor is not appointed within ninety (90) days of such cessation;
(k) For any reason the present President shall cease to be or
function as the chief executive officer of Consignee and a successor is
not appointed within sixty (60) days of such cessation;
(l) Guy Benhamou shall cease to own directly at least forty percent
(40%) of the outstanding voting stock of Consignee and neither the
foregoing shareholder nor Consignee shall have given Consignor at least
sixty (60) days prior written notice of the cessation of such level of
ownership by such shareholder;
(m) all or a substantial part of the assets of Consignee or any of
Consignee's subsidiaries or affiliates is seized, nationalized,
expropriated or compulsorily acquired by or under the authority of any
governmental authority and such action has a material adverse effect on
the business, properties, assets, liabilities, operations, results of
operations, prospects or condition, financial or otherwise, of Consignee;
(n) any Event of Default shall occur under the Guaranty;
(o) Consignee fails to notify Consignor in writing within thirty
(30) days following the date upon which one or more suits are filed
against Consignee by a trade creditor or trade creditors of Consignee
demanding relief in the
<PAGE>
aggregate amount of One Million Dollars ($1,000,000) or more; or
(p) one or more judgments or arbitration awards are entered against
Consignee, or Consignee enters into any settlement agreements with
respect to any litigation or arbitration, in the aggregate amount of One
Million Dollars ($1,000,000) or more on a claim or claims not covered by
insurance.
Upon the occurrence of any such Event of Default and at any
time thereafter during the continuance of such Event of Default,
Consignor may, by Notice to Consignee, terminate this Agreement as
provided in Section 14 and declare all liabilities, indebtedness or
obligations of Consignee to be due and payable, provided, however, that
the foregoing listing of Events of Default shall not be deemed to limit
Consignor's right at any time, even if an Event of Default has not
occurred, to demand that Consignor Redeliver Consigned Precious Metal and
to demand payment of all liabilities, indebtedness or obligations of
Consignee to Consignor, subject to and pursuant to the provisions of
Section 14 of this Agreement. Upon Consignor's declaration or demand,
and subject to the terms and conditions of the Intercreditor Agreement,
such indebtedness shall become immediately due and payable, both as to
principal and/or interest, 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. Notwithstanding the
foregoing, in the case of an Event of Default under Section 13(f)(i),
(ii), (iii), (iv) or (vi)(and assuming that the thirty (30) day period
provided for in Section 13(f), if applicable, has expired) or under
Section 13(g) of this Agreement, this Agreement shall terminate
immediately and automatically upon the occurrence of such Event of
Default, and all of the liabilities, indebtedness or obligations of
Consignee shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived by Consignee, anything contained herein or in any other evidence
of such indebtedness, obligations and liabilities to the contrary
notwithstanding. Subject to the terms and conditions of the Intercreditor
Agreement,
<PAGE>
Consignor may enforce payment of the same and exercise any or all of the
rights, powers and remedies possessed by Consignor, under this Agreement
or under any agreement securing the obligations of Consignee 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. Consignee
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 agreement securing the liabilities, indebtedness or
obligations of Consignee to Consignor, whether such enforcement is
directly by Consignor or through its agent.
14. TERMINATION
This Agreement shall terminate, at the election of Consignor, upon the
occurrence of any Event of Default. Unless otherwise terminated in
accordance with the terms hereof, this Agreement shall continue until either
Consignor or Consignee elects to terminate this Agreement by not less than
thirty (30) day's prior Notice to the other party. Termination of this
Agreement shall not affect Consignee's duty to pay and perform in full its
obligations to Consignor hereunder. On the effective date of the termination
of this Agreement, Consignee 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 effective date of termination.
15. MISCELLANEOUS
(a) This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant
hereto, shall survive the execution and delivery to Consignor of this
Agreement, and shall continue in full force and effect so long as this
Agreement and any other indebtedness, obligations and liabilities of
Consignee to Consignor is outstanding and unpaid. 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
<PAGE>
Agreement by or on behalf of Consignee shall inure to the benefit of the
successors and assigns of Consignor.
(b) Consignee will reimburse Consignor upon demand for all
out-of-pocket costs, charges and expenses of Consignor (including
reasonable fees and disbursements of counsel to Consignor) incurred in
connection with (i) the preparation, execution and delivery of this
Agreement and any security document, intercreditor agreement or
collateral sharing agreement related to this Agreement; (ii) the
consummation of the transactions contemplated hereby or thereby; (iii)
any amendments, modifications, consents or waivers in respect hereof
or thereof; and (iv) any enforcement hereof or thereof. Notwithstanding
the generality of the foregoing, Consignee will defend, indemnify and
hold harmless Consignor, its employees, agents, officers and directors,
from and against any and all reasonable claims, demands, penalties,
causes of action, fines, liabilities, settlements, damages, penalties,
costs or expenses of whatever kind or nature known or unknown, foreseen
or unforeseen, contingent or otherwise arising out of any breach by
Consignee of any of the provisions of this Agreement.
(c) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(d) No modification or waiver of any provision of this Agreement,
or of any other document contemplated hereby, nor consent to any
departure of Consignee 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 Consignee, in any one case, shall entitle Consignee 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 therefore, shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise, or the exercise of any other right, power or
privilege.
<PAGE>
(f) Consignee shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of
Consignor.
(g) 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.
(h) 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.
(i) CONSIGNEE HEREBY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATES OF RHODE ISLAND AND NEW YORK AND THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF RHODE ISLAND AND THE SOUTHERN DISTRICT OF NEW
YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY
BE TAKEN OR OTHER REVIEW SOUGHT FROM THE AFORESAID COURTS, FOR THE
PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF
CONSIGNEE'S OBLIGATIONS UNDER OR WITH RESPECT TO THIS AGREEMENT
(PROVIDED, HOWEVER, THAT ANY SUCH SUIT, ACTION OR OTHER PROCEEDING
BROUGHT IN THE FEDERAL OR STATE COURTS LOCATED IN THE STATE OF NEW YORK
SHALL ONLY BE BROUGHT IN THE CITY OF NEW YORK IN THE BOROUGH OF
MANHATTAN), AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO
VENUE IN ANY OF SUCH COURTS. CONSIGNEE AND CONSIGNOR EACH WAIVES TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF
THEM AGAINST THE OTHER ON ANY MATTER WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS AGREEMENT, ANY OTHER DOCUMENTS EXECUTED IN
CONNECTION HEREWITH OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR
THEREIN). NO PARTY TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY
ASSIGNEE OR SUCCESSOR OF A PARTY, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON,
OR ARISING OUT OF, THIS AGREEMENT, ANY
<PAGE>
RELATED INSTRUMENTS. ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN THE PARTIES. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION,
IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH
A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY
AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS
SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, Consignor and Consignee have caused this Agreement to
be duly executed by their duly authorized officers, all as of the day and
year first above written.
BANQUE PARIBAS
Lincoln Payton
----------------------
By: Lincoln Payton
Title:
Amy N. Kirschner
----------------------
By: Amy N. Kirschner
Title: Vice President
OROAMERICA, INC.
Shiu Shao
----------------------
By: Shiu Shao
Title: Senior Vice President
Chief Financial Officer
<PAGE>
EXHIBIT A-1
- - -----------------------------------------------
Approved Locations for Consigned Precious Metal
- - -----------------------------------------------
OroAmerica, Inc.
443 North Varney Street
Burbank, CA 91502
OroAmerica, Inc.
580 Fifth Avenue, Suite 300
New York, NY 10036
OroAmerica, Inc.
550 So. Hill Street
Suites 685 and 688
Los Angeles, CA 90013
OroAmerica, Inc.
455 N. Moss Street
Burbank, CA 90502
<PAGE>
EXHIBIT A-2
DOMESTIC VENDORS
- - -----------------
A & S
712 S. Olive St. #602
Los Angeles, CA 90014
Adamian Jewelry
U.S. Gold Trading Co., Inc.
610 S. Broadway #630
Los Angeles, CA 90014
Angel's Jewelry Mfg. Co. Inc.
712 S. Olive St.#301
Los Angeles, CA 90014
Badakian Co.
610 S. Broadway
Suites 518-519
Los Angeles, CA 90014
Bali Jewelry, Ltd.
50 Wallabout St.
Brooklyn, NY 11211
Boliden Metech, Inc.
P.O. Box 500
1 Main St.
Burrillville, RI 02839
C.U.T. Mfg. Co., Inc.
Forest Road Shopping Center
500 Forest Road
Monroe, NY 10950
Chain & Charm Co.
412 W. 6th St.
Ste. #1104
Los Angeles, CA 90014
Chain Smith Jewelry Co.
5128 Walnut Grove Ave.
San Gabriel, CA 91776
<PAGE>
Crafford Tool & Die Co.
Crafford Precision Products Co.
1 Industrial Court
East Providence, RI 02915
Don Cross
250 W. McIntyre
Key Biscayne, FL 33149
D & W Jewelry Co., Inc.
45 West 45th Street
New York, NY 10036
D & Z Jewelry
404 W. 7th Street, #1222
Los Angeles, CA 90014
Danvik Corp.
404 W. 7th St.
Suites 415-417-420
Los Angeles, CA 90014
Do-All Jewelry Mfg. Co. Inc.
44 Burlews Court
Hackensack, NJ 07601
Domenech Mfg.
7105 S.W. 47th St. #409
Miami, FL 33155
Eden Jewelers & Repair
323 C Eden Meadow Road
Eden, NC 27288
Elegant Designs, Inc.
650 S. Hill St. #609
Los Angeles, CA 90014
Elico, Inc.
7855 McConnell Ave.
Los Angeles, CA 90045
<PAGE>
Elizabeth Jewelry Mfg. Corp.
2 W. 47th St. #1208
New York, NY 10036
Englehard West, Inc.
5510 E. La Palma Ave.
Anaheim, CA 92807
Eurospark Industries, Inc.
40-35 22nd Street
Long Island City, NY 11101
Fancy
650 S. Hill St., Ste. #228
Los Angeles, CA 90014
Fine Quality Product, Inc.
28 W. 36th St., Rm. #802
New York, NY 10018
Gee & Gee Jewelry Co., Inc.
119 W. 23rd St., #202
New York, NY 10011
Giselko Enterprises
718 So. Hill St., #300
Los Angeles, CA 90014
Gold Craft Jewelry Corp.
650 S. Hill St. #618
Los Angeles, CA 10011
Goldmark Mfg., Inc.
3611 14th Ave.
Brooklyn, NY 11218
Gori & Zucchi Inc.
521 5th Ave.
New York, NY 10175-0398
Grasant Manufacturing Co. Inc.
48-50 Main Street
Newark, NJ 07105
<PAGE>
Handy & Harman
1849 Business Center Dr.
P.O. Box B
Duarte, CA 91010-0256
Haraeus PMR, Inc.
11135 Walden Ave.
Alden, NY 14004
Horizon Metals Division
3925 N. Pulaski Road
Chicago, IL 60641
House of Bangles
2 W. 47th St.
New York, NY 10036
J. Vincent & Co.
31 W. 47th St.
New York, NY 10036
J.K. Jewelry Inc.
2024 West Henrietta Road
Suite #5F
Rochester, NY 14623
Juroh, S.A.
1145 Sawgrass Corp. Pkwy.
P.O. Box 450417
Sunrise, FL 33345-0417
K.J.M. Jewelry, Inc.
111 West 7th St., #501
Los Angeles, CA 90014
L.A. Clasps dba Novita
430 N. Halstead St.
Pasadena, CA 91107-3124
Lee's Manufacturing Co. Inc.
1700 Smith Street
North Providence, RI 02911-0037
<PAGE>
Liberty Investment Exchange
Div. of Arts Elegance Inc.
5205 Leesburg Pike #206
Falls Church, VA 22041
Loren Industries Inc.
2801 Greene St.
Hollywood, FL 33020
M. & S. Manufacturing
610 S. Broadway
Ste. #708
Los Angeles, CA 90014
Manfred Muller
366 5th Ave. #117
New York, NY 10001
Metalor USA Refining Corp.
255 John L. Dietsch Blvd.
North Attleboro, MA 02760
Mohan's Inc.
46 25 American Way Plaza
Memphis, TN 38118
Nazaryan Jewelry
404 W. 7th St. #1208
Los Angeles, CA 90014
Nubar Kegulian
610 S. Broadway
Suite #510
Los Angeles, CA 90014
O'Con Enterprises, Inc.
821 N. 21 Avenue
Hollywood, FL 33020
Odea S.A.
335 Hudson St.
Hackensack, NJ 07601
<PAGE>
Okai Corporation
687 Lehigh Ave.
P.O. Box 897
Union, NJ 07083
Olef Creations Inc.
75 Varick St. 7th Fl.
New York, NY 10013
Omega Engineering, Inc.
P.O. Box 14001
Church Street Station
New York, NY 10249-0011
Precision Etchings & Findings
380 Jefferson Blvd. Bldg. F
Warwick, RI 02886
R & D Jewelry
606 S. Hill St. #517
Los Angeles, CA 90014
R & M Fine Jewelry
610 S. Broadway, #720 & #721
Los Angeles, CA 90014
Rope Chain Enterprises
610 S. Broadway Suite #818
Los Angeles, CA 90014
Royal Quality Jewelry Mfg.
650 S. Hill St. #710
Los Angeles, CA 90014
S.N. Gold
25 W. 45th St.
Suite 702
New York, NY 10036
Sakoura Design
37-02 48th Ave.
Long Island City, NY 11101
<PAGE>
Sarkissian Designs
6859 Tujunga Ave.
N. Hollywood, CA 91605
Stamp-Rite Tools & Die Corp.
62 W. 39th St. Rm. 906
New York, NY 10018
Stan Lee Corp.
P.O. Box 580297
Dallas, TX 75258
Stern/Leach Co.
550 South Hill Street
Los Angeles, CA 90013
Technic Inc.
P.O. Box 395
Atwood, CA 92601
H.M. Tenkerian
411 W. 7th St. #505
Los Angeles, CA 90014
Touch of Gold
Manufacturers of Fine Jewelry
607 S. Hill St., Suite 844
Los Angeles, CA 90014
Unit Findings & Chain Manufacturing
41-17 28th Street
Long Island City, NY 11101
Wiesner Manufacturing Co.
150 Willard Ave.
Providence, RI 02905-2391
<PAGE>
EXHIBIT A-3
FOREIGN VENDORS
- - -------------------------
AFFILIATE FOREIGN VENDORS
- - -------------------------
Exportadores Bolivianos S.R.L.
Calle David Garzon #285
La Paz, Bolivia
L.A. Estilos - LinkZona Franca Industrial
San Pedro de Marcoris
Santo Domingo
Dominican Republic
Oroamerica Italia S.R.L.
Largo Parolini, No. 31
36061 Bassano Del Grappa
Vincenza
Italy
P.T. Nikijoyo/Oroindo
P.T. Nikijoyo
Jl. Cikurai #10
Malnag-Jatim
Indonesia
S.I.C.O.R.
Via Torino 7
Romano D'Ezzelino
Vincenza
Italy, 36060
Star Exports S.A. - Links
General Velarde 708
Suquillo
Lima, Peru
<PAGE>
EXHIBIT A-3
FOREIGN VENDORS
- - -----------------------------
NON-AFFILIATE FOREIGN VENDORS
- - -----------------------------
Adipaz Ltd.
20 Pierre Koenig St.
Talpiot
Jerusalem, Israel
Alangold Creazioni
Via Pavane, 7
36065 Mussolente
Vicenza, Italy
Allessandro Rancan
Via G. Carducci, 2/4
36070 Trissino (VI)
Italy
Alessi Domenico
Via Dei Tulipani, 3/5
36061 Bassano Del Grappa
Vicenza
Italy
ARPAS International
Ahmet Kutsi Tecer Cad, Gol
No. 26 Merter
Istanbul, Turkey
Aurex Chile LTDA
Decima Avenida 1244
San Miguel
Santiago, Chile
Aurindustria Del Peru S.A.
Pasaje Jorge Chavez #120
Urb. Miramar, San Miguel
Lima, Peru
<PAGE>
Aux S.A.
Urb. Industrial Grimaneza
Calle 2 Lote 8-19 Callao
Lima, Peru
Bassano Gold Products SRL
Via Leonardo da Vinci 17
36066 Sandrigo
Italy
Beffi Daniel Factory
Via Villafranca 18
17030 Carlenda (SV)
Italy
Bellanda E. Boratto
Via G. Durando, 30
36100 Vicenza
Italy
Chiangmai Chain & Jewelry
Chiangmai University
Chiangmai 50002
Thailand
Christie's Jewelers
Edif. Abaroa Plaza Abaroa
Belisandro Salinas
Castilla 8585
La Paz, Bolivia
Ciemmeo SRL
Via Pavane 5
36060 Mussolente
Vicenza, Italy
Claudio Fuccin
International Gold & Fine Jewelry
Piazza Garibaldi, 10-36100
Vicenza
Italy
<PAGE>
Co. Ar.
Strada E N 32 S.
Zend
52040 Arezzo
Italy
Alberto Dal Fante
Via Boidrin, 719
36100 Vicenza
Italy
David Rozenvasser Ltd.
3 Hasadna Street
P.O. Box 3590
Petah Tikwa
Israel 49130
De Oro
De Oro S.A.
Jr. Cantuarias 275
Miraflores
Lima, Peru
Eurosilber S.N.C.
Via Umberro Giordano 6/A
36100 Vincenza
Italy
Evan S.R.L.
Via S. Antonio 2/A
36060 Casoni Di Mussolente
Vicenza
Italy
Fasti
Via Pollsen, 24
10016 Montalto Dora (TO)
Italy
Finesse
Urb. La Villa
P.O. Box 09-0207
Chorrillos
Lima, Peru
<PAGE>
G. B. Catene SNC
Via Edison, 14
52100 Arezzo
Italy
Gold G.D.C.
Via De Basserone, 51
52041 Badia al Pino
Arezzo, Italy
Gold Masters
Strada Asolana, 93/A
36060 Romano D'Ezzelino
Vincenza, Italy
Goldeks Alyin Ve Douz Tic. A.S.
Piyerloti Cad No. 26-28
Cerbearlitas, Istanbul
Turkey
Goldline, SNC.
Via Toniolo, 15/2
52100 Arezzo
Italy
Goldstar
Via Fontanelle, 1
36100 Vicenza
Italy
Itam
Zona Indust. Manciano, 48/E
52043 Catiglion Fiorent.
Arrezzo
Italy
L.A.C.
Via Spin. 142
Romano Di Ezzelino
Italy
<PAGE>
Lacchetti
F.LLI Lacchetti Di Gianfranco
& Gianpaolo SNC
Via Dell'Industria
36070 Trissino
Vincenza
Italy
Locam
Via Cal Baroncello, 38
36061 Bassano Del Grappa
Vincenza
Italy
Lucchetta Armando
Via Travettore, 202
36061 Bassano Del Grappa
Vincenza
Italy
Massimiliano Scuccato
Via S. Benedetto, 19
36050 Bressanvido
Vincenza
Italy
Creazioni Michelangel
Via Manzi, 182/A
52033 Capresse, Michelangelo
Arezzo
Italy
Minero Metalugico Andina
Minero Metalugico Andino S.A.
Larraburre Y Unanue 299
Of. 704
Lima 11, Peru
Momjian
The Jerusalem Jewelry Mfg. Co.
Atarot Industrial Zone
P.O. Box 19379
91193 Jerusalem, Israel
<PAGE>
Nardi & Falsini
Loc. Castelnuovo, 208
52100 Subbiano
Arezzo
Italy
Nuovo Catena
Via Lugana, 1
36065 Mussolente
Vicenza
Italy
Organizacion de Exportacion
Arreddondo S.A.
Calle Loayza No. 167-173
La Paz, Bolivia
Oroisrael Jewelry Industries
45 Kibbutz Galuyot St.
Tel-Aviv 66550
Israel
B. Quattro
Via Louara, 1B
36070 Trissino
Vincenza
Italy
Rigo Fratelli
Oreficeria F.LLI Rico
Di Rigo G. & R. S.N.C.
Via Dell 'Industria, 73/B
36070 Trissing
Vincenza
Italy
Royal Chain Canada, Inc.
451 Millway Avenue
Unit #4
Concord, Ontario L4K3V6
Canada
<PAGE>
S.I.L.O.
Via Vecchia Aretina
2/R - Castiglion Fibocchi
Italy, 52029 (AR)
Sartori Franco SRL
Via Marasca, 22
36100 Vicenza
Italy
Sun-Ray Setting
San Juan Foreign Trade Zone 61
Building 1
Bay 1-A
Road #165, Km 2.4
Pueblo Viejo, Guaynabo
Puerto Rico 00657
Tecchio Gabriella
Via Oltreagno, 6
36070 Trissino
Vincenza
Italy
Tecnigold SPA
Via Molini, B/A
31030 Bassano Del Grappa
Vicenza
Italy
I. Toscanini
Via Fievan Landi, 38
52100 Arezzo
Italy
Triade 1992
29 Contra Santa Caterina
36100 Vicenza
Italy
Trulla del Ben
Via Vecchia Ferreira, 50
Vicenza
Italy
<PAGE>
Uno-A-Erre
Via Fiorentina, 550
52100 Arezzo
Italy
<PAGE>
EXHIBIT A-4
CUSTOMER RECONSIGNMENT PROGRAMS
- - -------------------------------
SECURED
- - -------------------------------
Abraham & Strauss
580 5th Ave.
New York, NY 10036
Barry's
111 W. Lemon Ave.
Monrovia, CA 91016
Crescent Jewelers
Victor R. Graber Co.
315 11th St.
Oakland, CA 94607
Fedco Inc.
9300 Santa Fe Springs Road
Sante Fe Springs, CA 90670
Finlay
500 8th Ave.
New York, NY 10018
Kohl's Dept. Stores
North 54 W. 13600 Woodale Dr.
Menomonee Falls, WI 53051
Q.V.C./Beverly Hills Co.
Goshen Corporate Park
1365 Enterprise Blvd.
Westchester, PA 19380
Sears
4849 Greenville Ave., Suite 1000
Dallas, TX 75206-9998
Sterling
375 Ghent Rd.
Akron, OH 44333
<PAGE>
Zales Corp.
901 W. Walnut Hill Lane
Irving, TX 75038
Zales Diamond Parks Fine Jewlery
901 W. Walnut Hill Lane
Irving, TX 75038
<PAGE>
EXHIBIT A-4
CUSTOMER RECONSIGNMENT PROGRAMS
- - -------------------------------
UNSECURED
- - -------------------------------
Elangy
Three Ethel Rd.
Edison, NJ 08818
Fred Meyer Jewelers
3800 S.E. 22nd Ave.
Portland, Oregon 97202
Friedman & Co.
4 W. State Street
Savannah, Georgia 31401
Max Club
5432 Bolsa Ave.
Huntington Beach, CA 92649
R.J. Associates
2525 South 17th St.
Wilmington, NC 28401
<PAGE>
EXHIBIT B
- - -------------------------------------------------
MATERIAL CHANGES AND EVENT OF DEFAULT CERTIFICATE
- - -------------------------------------------------
..................., 19......
The undersigned, the Chief Financial Officer of OROAMERICA,
INC., in accordance with Section 11(e)(iv) of the Consignment
Agreements (the "Consignment Agreements") by and between
OROAMERICA, INC., and each of the following: ABN AMRO Bank N.V.,
New York Branch, Banque Paribas, Credit Suisse, Deutsche Bank AG,
New York Branch, Fleet Precious Metals Inc., Republic National
Bank of New York and Union Bank of Switzerland, New York Branch
(collectively, the "Consignors"), the undersigned does hereby
certify that I have reviewed the terms of the Consignment
Agreements and that I have reviewed the accompanying Financial
Statements and that, to the best of my knowledge, as of the date
of such Financial Statements, I have no knowledge of any event or
condition which constitutes an Event of Default or which with
notice or lapse of time, or both, would constitute an Event of
Default under the Consignment Agreements except for the
following:.......................................................
.................................................................
.................................................................
.................................................................
The following are material changes (whether positive or
negative) reflected in the accompanying Financial
Statements:......................................................
.................................................................
.................................................................
.................................................................
OROAMERICA, INC.
By:.........................................
Name:.......................................
Chief Financial Officer
Date:.................
<PAGE>
EXHIBIT C
- - ---------------
Monthly Reports
- - ---------------
Exhibit C-1
- - -------------------------------------
PRECIOUS METALS BORROWING BASE REPORT
- - -------------------------------------
Month/Year:..........................
Gold Price:..........................
Silver Price:........................
A. Consigned Ounces:
Gold:
ABN: ..........oz. $..........
Banque Paribas: ..........oz. $..........
Credit Suisse: ..........oz. $..........
Deutsche Bank: ..........oz. $..........
Fleet: ..........oz. $..........
Republic: ..........oz. $..........
UBS: ..........oz. $..........
UBS/Chemical: ..........oz. $..........
Other: ..........oz. $..........
Total Consigned
Gold Ounces: ..........oz. $..........
Silver:
ABN: ..........oz. $..........
Banque Paribas: ..........oz. $..........
Credit Suisse: ..........oz. $..........
Deutsche Bank: ..........oz. $..........
Fleet: ..........oz. $..........
Republic: ..........oz. $..........
UBS: ..........oz. $..........
UBS/Chemical: ..........oz. $..........
Other: ..........oz. $..........
Total Consigned
Silver Ounces: ..........oz. $..........
<PAGE>
B. Adjusted Eligible A/R (as defined): $..................
C. Equity Gold: ..........oz. $..................
Equity Silver: .........oz. $..................
Greater of:
B + C > or = $12MM
B + C > or = Fifteen (15%) of FMV of Consigned Precious
Metal
B + C > or = FMV of Gold in Foreign Locations with
Affiliate Foreign Vendors and Non-Affiliate Foreign
Vendors plus FMV of 1,500 oz. of Gold on Unsecured
Memorandum
Gold in Burbank: ...............oz.
Silver in Burbank: ...............oz.
Gold at Other U.S. Corporate Locations
(Ex. A-1) ...............oz.
TOTAL: ...............oz.
Gold at Domestic Vendors (Ex. A-2): ...............oz.
Gold at Non-Affiliate Foreign Vendors (Ex. A-3):
Bolivia: ...............oz.
Canada: ...............oz.
Chile: ...............oz.
Israel: ...............oz.
Italy: ...............oz.
Peru: ...............oz.
Puerto Rico: ...............oz.
Thailand: ...............oz.
Turkey: ...............oz.
Other: ...............oz.
TOTAL: ...............oz.
<PAGE>
Gold at Affiliate Foreign Vendors (Ex. A-3):
Bolivia: ...............oz.
Dominican Republic: ...............oz.
Indonesia: ...............oz.
Italy: ...............oz.
Peru: ...............oz.
Other: ...............oz.
TOTAL: ...............oz.
Secured Memorandum/Reconsignment
Programs (Ex. A-4) ("SM/RPs"): ...............oz.
Unsecured Memorandum/Reconsignment
Programs (< OR = 1,500 oz.) (Ex. A-4)
("UM/RPs"): ...............oz.
SM/RPs + UM/RPs
(< OR = 40,000 oz.): YES/NO
Sample/salesperson lines
(< OR = 2,700 oz. all salespersons:..............oz.
(< OR = 150 oz. per salesperson:...............oz.
Value Added/Tangible Net Worth
(< OR = 15%) YES/NO
Gold Abroad with Any One
Non-Affiliate Foreign Vendor (< OR = 4,000 oz.): YES/NO
Aggregate Gold Abroad with All
Affiliate Foreign Vendors and
Non-Affiliate Foreign Vendors
(< OR = 40,000 oz. 4/1-11/30; < OR = 25,000 oz.
all other times): YES/NO
Aggregate Ounces on Reconsignment/
Memorandum
(< OR = 30% of Consignee's Tangible Net Worth): YES/NO
Reconsignment Memorandum Ounces to
Any Single Customer
(< OR =10% of Consignee's Tangible Net Worth): YES/NO
<PAGE>
Total Precious Metal Consigned < 170%
(160% 2/1-7/31)
Precious Metal at
Principal Office and New York YES/NO
TOTAL consignment ounce
availability: ............oz. $...............
<PAGE>
EXHIBIT C-2
COVENANT COMPLIANCE CERTIFICATE
Month/Year:.................. Required Actual
------------------------------
Current Ratio (perpetual test): > OR = 2:1(1/1-9/30)
> 1.5:1 (10/1-12/31)..........
Working Capital (perpetual test): > $32MM ..........
Minimum Tangible Net Worth
perpetual test): > OR = $38MM (FYE 1995)
> OR = $42MM + 75% x NOI
of previous quarter ..........
Total Liabilities (GAAP)/TNW
(perpetual test) < 1.25:1 ..........
Total Liabilities (including consignments,
excluding Subordinated Indebtedness)/
TNW (perpetual test): < OR =2.75:1 (1/1-6/30);
< OR =2.95:1 (7/1-8/31)
< OR =3.25:1 (9/1-12/31)......
Interest Coverage
(as defined; annual test) > OR =1.15.1 ..........
<PAGE>
EXHIBIT D
ELIGIBLE ACCOUNTS RECEIVABLE
"Adjusted Eligible Accounts Receivable" means: (a) from
January 1 through June 30 of each year, Seventy-Five Percent (75%)
of the dollar value of the Eligible Accounts Receivable; and (b)
from July 1 through December 31 of each year, Eighty Percent (80%)
of the dollar value of the Eligible Accounts Receivable."
"Eligible Accounts Receivable" means an Account (as defined
below):
(a) arising from the sale of goods or the performance
of services by Consignee in the ordinary course of Consignee's
business as presently conducted;
(b) upon which Consignee's right to receive payment is
absolute and not contingent upon the fulfillment of any condition
whatever;
(c) against which is asserted no defense, counterclaim
or setoff, whether well founded or otherwise;
(d) that is a true and correct statement of a bona fide
indebtedness incurred in the amount of the Account for merchandise
sold and accepted by, or for services performed for and accepted
by, the Receivable Debtor (as defined below) obligated upon such
Account;
(e) with respect to which an invoice has been sent;
(f) that is owned by Consignee and not subject to any
right, claim, or interest of another other than security interests
in favor of Consignor and liens approved by Consignor;
(g) that does not arise from a sale to or performance
of services for an employee, affiliate, parent, or subsidiary of
Consignee, or an entity which has common officers or directors
with Consignee;
(h) that is not the obligation of a Receivable Debtor
that is the federal government or a political subdivision thereof
unless Consignor has agreed to the contrary in writing and
Consignee has complied with the Federal Assignment of Claims Act
of 1940, and any amendments thereto, with respect to such
obligation;
(i) that is not the obligation of a Receivable Debtor
that is any state of the United States or any city, town,
municipality or division thereof;
(j) that is not the obligation of a Receivable Debtor
located in a foreign country;
<PAGE>
(k) that is not the obligation of a Receivable Debtor
to whom Consignee is or may become liable for goods sold or
services rendered by the Receivable Debtor to Consignee;
(l) that does not arise with respect to goods which are
delivered on a cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by
the Receivable Debtor may be conditional;
(m) that is not in default. An Account shall be deemed
in default upon the occurrence of any of the following:
(1) The Account is not paid within the sixty (60)
day period starting on its due date, provided, however, that the
due date shall be no later than ninety (90) days from the invoice
date;
(2) Any Receivable Debtor obligated upon such
Account suspends business, makes a general assignment for the
benefit of creditors, or fails to pay its debts generally as they
come due; or
(3) Any petition is filed by or against any
Receivable Debtor obligated upon such Account under any bankruptcy
law or any other law or laws for the relief of debtors;
(n) that does not, when added to all other Accounts
that are obligations of the Receivable Debtor, at any time result
in a total sum that exceeds twenty percent (20%) of the total
balance then due on all Accounts;
(o) that is not the obligation of a Receivable Debtor
who is in default (as defined in subparagraph (m) above) on twenty-
five percent (25%) or more of the Accounts upon which such
Receivable Debtor is obligated;
(p) that does not arise from the sale or lease of
goods which remain in Consignee's possession or under Consignee's
control;
(q) that does not arise from the sale of minerals or
the like (including oil and gas) at the wellhead or minehead;
<PAGE>
(r) that does not arise under Consignee's guaranteed
sales program;
(s) that is not, in Consignor's sole discretion,
included in the definition of "Inventory" in the Security
Agreement; and
(t) that is otherwise acceptable to Consignor.
<PAGE>
"Account" means any right to the payment of money owned by
Consignee and arising out of the sale of goods or the rendition of
services by Consignee which is not evidenced by an instrument or
chattel paper.
"Approved Lien" means any lien, encumbrance, or security
interest on any property of Consignee that (a) Consignor has
consented to in writing, or (b) is held by a creditor or factor
with whom Consignor has entered into a written intercreditor
agreement.
"Receivable Debtor" means the person or entity obligated
upon a Receivable.
"Receivables" means all rights to the payment of money owned
by Consignee, whether due or to become due and whether or not
earned by performance including, but not limited to, Accounts,
contract rights, chattel paper, instruments and documents.
<PAGE>
SCHEDULE 1
- - ----------
Consignee's jewelry manufacturing operations routinely
involve the use of small quantities of Hazardous Materials.
Consignee's Burbank facility (the "Facility") is located in
an area of the San Fernando Valley which is either included in or
adjacent to an extensive area of groundwater contamination known
as the San Fernando Valley Superfund Site (the "Site"). In 1986,
the U.S. Environmental Protection Agency (the "EPA") included
portions of the Site on the National Priorities List of "Superfund
Sites" pursuant to the provisions of CERCLA. Consignee is not a
party to any litigation involving the Site, has not been
identified by the EPA as a potentially responsible party ("PRP")
under CERCLA and does not believe that it has contributed to the
existing groundwater contamination at the Site. However, given
the location of the Facility and the fact that Consignee's
operations involve the use of small quantities of Hazardous
Materials, no representation is made that the Consignee will not
be named as a party to litigation or as a PRP with respect to the
Site.
On or about August 9, 1990, Consignee was cited by the City
of Burbank, (the "Agency") for being out of compliance with
Industrial Waste Discharge Permit #894. Consignee promptly took
the action required by the Agency, and no further action has been
taken or threatened by the Agency.
On or about March 12, 1990, in obtaining a real estate
loan, Consignee obtained a Phase I Environmental Report (the
"Report") from Ralph Stone & Company, Inc. A copy of the Report
has been furnished to Consignor. Based on the conclusions in the
Report, Consignee has taken no remediation action with respect to
the property.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from OroAmerica,
Inc.'s Consolidated Balance Sheet at May 3, 1996 (Unaudited) and Consolidated
Statement of Income for the Thirteen Weeks Ended May 3, 1996 (Unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> MAY-03-1996
<CASH> 23,424
<SECURITIES> 0
<RECEIVABLES> 26,199
<ALLOWANCES> 7,325
<INVENTORY> 7,035
<CURRENT-ASSETS> 53,518
<PP&E> 20,440
<DEPRECIATION> 9,400
<TOTAL-ASSETS> 75,975
<CURRENT-LIABILITIES> 14,365
<BONDS> 3,639
0
0
<COMMON> 6
<OTHER-SE> 57,582
<TOTAL-LIABILITY-AND-EQUITY> 75,975
<SALES> 44,915
<TOTAL-REVENUES> 44,915
<CGS> 36,669
<TOTAL-COSTS> 36,669
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 165
<INTEREST-EXPENSE> 788
<INCOME-PRETAX> 540
<INCOME-TAX> 253
<INCOME-CONTINUING> 287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 287
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
