<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended August 2, 1996.
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the transition period from to .
Commission File Number 0-21862
OROAMERICA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 94-2385342
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
443 North Varney Street, Burbank, California 91502
- -------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
(818) 848-5555
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(Registrants 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
SHARES OUTSTANDING AS OF
CLASS September 6, 1996
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Common Stock 6,252,378
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OROAMERICA, INC.
REPORT ON FORM 10-Q FOR THE
QUARTER ENDED AUGUST 2, 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 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 1. Legal Proceeding . . . . . . . . . . . . . . . . . . . . . 12
Items 2 and 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders . . . . 12
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OROAMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FEBRUARY 2, AUGUST 2,
1996 1996
----------- -----------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 12,310 $ 13,246
Accounts receivable less allowance for returns
and doubtful accounts of $9,948 and $5,137 23,567 17,150
Other accounts and notes receivable 747 932
Inventories (Note 2) 11,007 16,283
Deferred income taxes 2,384 2,384
Prepaid income taxes 142 223
Prepaid items and other current assets 925 840
----------- ----------
Total current assets 51,082 51,058
Property and equipment, net 10,937 10,724
Excess of purchase price over net assets acquired, net 4,689 4,541
Patents, net 6,155 5,911
Investments in and advances to affiliates 642 642
Other assets 39 127
----------- -----------
$ 73,544 $ 73,003
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 737 $ 755
Notes payable (Note 3) -- --
Accounts payable 5,874 6,830
Accrued expenses 5,449 4,751
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Total current liabilities 12,060 12,336
Deferred income taxes payable 383 383
Long-term debt, less current portion 3,800 3,322
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Total liabilities 16,243 16,041
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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,
$.001 par value; 6,248,378 and 6,252,378 shares
issued and outstanding at February 2, 1996 and
August 2, 1996, respectively 6 6
Paid-in capital 42,951 42,970
Retained earnings 14,344 13,986
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Total stockholders' equity 57,301 56,962
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$ 73,544 $ 73,003
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
PERIODS ENDED JULY 28, 1995 AND AUGUST 2, 1996
(Unaudited)
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
FOR THE FOR THE
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------- ----------------------
JULY 28, AUGUST 2, JULY 28, AUGUST 2,
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 33,043 $ 29,747 $ 75,380 $ 74,662
Cost of goods sold, exclusive of
depreciation 28,226 24,691 63,382 61,360
--------- --------- --------- ---------
Gross profit 4,817 5,056 11,998 13,302
Selling, general and administrative
expenses 6,043 5,354 12,434 12,272
--------- --------- --------- ---------
Operating (loss) income (1,226) (298) (436) 1,030
Interest expense 684 645 1,359 1,433
--------- --------- --------- ---------
Loss before income taxes (1,910) (943) (1,795) (403)
Benefit for income taxes (802) (298) (754) (45)
--------- --------- --------- ---------
Net loss $ (1,108) $ (645) $ (1,041) $ (358)
========= ========= ========= =========
Net loss per share (Note 1) $ (.18) $ (.10) $ (.17) $ (.05)
========= ========= ========= =========
Weighted average shares outstanding 6,248,378 6,250,749 6,248,378 6,249,045
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
FOR THE
TWENTY-SIX WEEKS ENDED
-----------------------------
JULY 28, AUGUST 2,
1995 1996
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,041) $ (358)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,250 1,306
Provision for losses on accounts receivable 246 233
Provision for estimated returns (1,400) (5,000)
Gain on sale of marketable securities (34) -
Gain on sale of property - (21)
Change in assets and liabilities:
Accounts receivable 13,170 11,184
Other accounts and notes receivable 392 (185)
Inventories (4,887) (5,276)
Prepaid income taxes (774) (81)
Prepaid items and other current assets (261) (53)
Accounts payable, accrued expenses and deferred liabilities 437 258
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Net cash provided by operating activities 7,098 2,007
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Cash flows from investing activities:
Capital expenditures (1,958) (657)
Proceeds from sale of property - 27
Proceeds from sale of marketable securities 1,565 -
----------- ---------
Net cash used in investing activities (393) (630)
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Cash flows from financing activities:
Gross borrowings under line-of-credit agreement 230,250 -
Repayment of borrowings under line-of-credit (234,950) -
Borrowings under long-term debt agreements 710 -
Principal repayments of long-term debt (183) (460)
Issuance of common stock - 19
----------- ---------
Net cash used in financing activities (4,173) (441)
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Increase in cash and cash equivalents 2,532 936
Cash and cash equivalents at beginning of period 676 12,310
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Cash and cash equivalents at end of period $ 3,208 $ 13,246
=========== =========
Supplemental disclosure of cash flow information:
Interest paid $ 1,454 $ 1,579
Income taxes paid $ 73 $ 35
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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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 and twenty-six week periods ended July 28, 1995
and August 2, 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 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 and twenty-six week
periods ended August 2, 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 all 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):
February 2, August 2,
1996 1996
----------- -----------
(Unaudited)
Gold and other raw materials $ 1,475 $ 7,554
Manufacturing costs and other 12,804 11,789
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14,279 19,343
LIFO cost less than FIFO cost (2,414) (2,202)
Allowance for vendor advances (858) (858)
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$ 11,007 $ 16,283
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Gold price per ounce $ 414.50 $ 386.35
=========== ===========
The Company has several consignment agreements with gold consignors
providing for a maximum aggregate consignment of 309,000 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 August 2, 1996, the Company held approximately
181,800 and 174,700 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
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OROAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
price per ounce is based on the daily Second 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 August 2, 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 as of February 2, 1996 and August 2, 1996. No short-term
advances were outstanding at February 2, 1996 and August 2, 1996. A stand-by
letter of credit outstanding at February 2, 1996 and August 2, 1996 totaled
$700,000 and $500,000, 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 August 2, 1996, advances under the
reducing-revolving credit facility were $800,000 and $600,000, bearing
interest at the bank's prime rate plus .75%. The advances under the
reducing-revolving credit facility have been classified as long-term at
February 2, 1996 and August 2, 1996. The revolving credit agreement has been
extended to October 31, 1996. The Company is currently negotiating the
renewal of the revolving credit facility.
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OROAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 consignment
agreements (Note 2). At August 2, 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
financial statements and notes thereto.
GENERAL
The Company's business, and the jewelry business in general, is 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 second 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 consolidated
statements of income.
AS A PERCENTAGE OF NET SALES
----------------------------
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
JULY 28, AUGUST 2, JULY 28, AUGUST 2,
1995 1996 1995 1996
-------- --------- -------- ---------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 85.4 83.0 84.1 82.2
-------- --------- -------- ---------
Gross profit 14.6 17.0 15.9 17.8
Selling, general and
administrative expenses 18.3 18.0 16.5 16.4
-------- --------- -------- ---------
Operating (loss) income (3.7) (1.0) (.6) 1.4
Interest expense 2.1 2.2 1.8 1.9
-------- --------- -------- ---------
Loss before income taxes (5.8) (3.2) (2.4) (0.5)
Benefit for income taxes (2.4) (1.0) (1.0) (0.0)
-------- --------- -------- ---------
Net loss (3.4)% (2.2)% (1.4)% (0.5)%
======== ========= ======== =========
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<PAGE>
THIRTEEN WEEKS ENDED AUGUST 2, 1996 COMPARED TO THIRTEEN WEEKS ENDED JULY 28,
1995
Net sales for the thirteen weeks ended August 2, 1996 decreased by $3.3
million, or 10.0%, from the comparable period of the prior year. This
decrease was primarily attributable to a decrease in the amount of gold
jewelry (by weight) sold by the Company offset by an increase in the amount
of silver jewelry (by weight) sold and an increase in the average sales price
of gold. The Company attributes this decrease to inventory reductions at
certain retail and wholesale customers.
Gross profit for the thirteen week period ended August 2, 1996 increased
by $239,000, or 5.0%, from the comparable period of the prior year. As a
percentage of net sales, gross profit increased from 14.6% for the thirteen
week period ended July 28, 1995 to 17.0% for the current period. In the
thirteen weeks ended August 2, 1996, there was a decrease to cost of sales of
$226,000 which was primarily attributable to a LIFO reserve adjustment. In
the thirteen weeks ended July 28, 1995, there was an increase of cost of
sales of $163,000 which was attributable to a LIFO reserve adjustment of
$132,000 and an inventory adjustment from gold price fluctuations.
Absent these factors, the gross profit margin in the thirteen week periods
ended August 2, 1996 and July 28, 1995 would have been 16.2% and 15.1% of
sales, respectively. The increase on a comparable basis, was due to changes
in sales product mix. The gold prices used to cost inventory at August 2,
1996, May 3, 1996, July 28, 1995, and April 28, 1995, were $386.35, $394.00,
$383.00, and $389.75 per ounce, respectively.
Selling, general and administrative expenses for the thirteen weeks ended
August 2, 1996 decreased by $689,000, or 11.4%, from the comparable period
of the prior year. As a percentage of net sales, these expenses decreased
from 18.3% in the thirteen weeks ended July 28, 1995 to 18.0% in the thirteen
weeks ended August 2, 1996. The decrease in the dollar amount of selling,
general and administrative expenses is primarily attributable to decreased
personnel costs of $123,000, decreased selling and product expenses of
$585,000 and a $232,000 increase in other income due to investment of excess
cash. These decreases were offset by an increase in professional, consulting
and outside services of $355,000. Selling and product expenses declined due
to a reduction in co-operative advertising with certain customers.
Professional, consulting and outside services expense increased due to a
higher utilization of computer consultants and temporary personnel in the
Company's operations.
Interest expenses for the thirteen weeks ended August 2, 1996 decreased
by approximately $39,000, or 5.7%, from the comparable period of the prior
year. This decrease is primarily attributable to reduced borrowings on the
Company's consignment agreements, offset by 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 benefit rate in the thirteen weeks ended August 2, 1996
was 31.6% as compared to 42.0% in the comparable period of the prior year.
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TWENTY-SIX WEEKS ENDED AUGUST 2, 1996 COMPARED TO TWENTY-SIX WEEKS ENDED
JULY 28, 1995
Net sales for the twenty-six weeks ended August 2, 1996 decreased by
$718,000, or 1.0%, from the comparable period of the prior year. This
decrease was primarily attributable to a decrease in the amount of gold
jewelry (by weight) sold by the Company, offset by an increase in the amount
of silver jewelry (by weight) sold and an increase in the average sales price
of gold.
Gross profit for the twenty-six week period ended August 2, 1996
increased by $1.3 million, or 10.9% from the comparable period of the prior
year. As a percentage of net sales, gross profit increased from 15.9% for
the twenty-six weeks ended July 28, 1995 to 17.8% for the current period. In
the twenty-six week period ended August 2, 1995, there was a decrease in cost
of sales of $163,000, which was attributable to a LIFO reserve adjustment of
$212,000 offset by an inventory adjustment of $49,000 from gold price
fluctuations. In the twenty-six week period ended July 28, 1995, there was
an increase in cost of goods sold of $418,000, which was attributable to a
LIFO reserve adjustment of $441,000 offset by a $23,000 decrease in the
carrying value of inventory due to gold price fluctuations. Absent these
factors, the gross profit margin in the twenty-six weeks ended August 2,1996
and July 28, 1995 would have been 17.6% and 16.5%, respectively. The
increase on a comparable basis is due to changes in sales product mix. The
gold prices used to cost inventory at August 2, 1996, February 2, 1996, July
28, 1995 and January 27, 1995 were $386.35, $414.50, $383.00, $378.40 per
ounce, respectively.
Selling, general and administrative expenses for the twenty-six weeks
ended August 2, 1996 decreased by $162,000 or 1.3%, from the comparable
period of the prior year. As a percentage of net sales, these expenses
decreased from 16.5% in the twenty-six weeks ended July 28, 1995 to 16.4% in
the current period. The decrease in the dollar amount of selling, general
adminstrative expenses is primarily attributable to decreased selling and
products costs of $781,000, decreased personnel costs of $337,000 and a $.5
million increase in other income due to the investment of excess cash. These
decreases were offset by increased consulting, professional and outside
services of $1.6 million. Consulting, professional and outside services have
increased primarlily due to legal fees resulting from defending the Company
against various lawsuits and from a higher utilization of computer
consultants and temporary personnel in the Company's operations.
Interest expense for the twenty-six weeks ended August 2, 1996 increased
by $74,000, or 5.4%, from the comparable period of the prior year. This
increase is primarily attributable to additonal financing costs related to an
increase in forward purchase contracts in the current period as compared to
the same period last year.
The effective tax benefit rate in the twenty-six weeks ended August 2,
1996 was 11.2% as compared to 42.0% 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.
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<PAGE>
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 the Company may reconsign or 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 309,000 ounces at August
2, 1996 and is subject to fluctuations based on changes in the market value
of gold. At August 2, 1996, the Company held approximately 174,700 ounces of
gold on consignment.
In July 1996, the Company extended its revolving credit facility with
Bank of America NT & SA to October 31, 1996. The credit facility provides
for borrowings which vary seasonally from $20.0 million to $35.0 million and
are subject to 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.
For further information regarding the Company's gold consignment
agreements and revolving credit facilities, see Notes to Condensed
Consolidated Financial Statements.
Net accounts receivable decreased from $23.6 million at February 2, 1996
to $17.2 million at August 2, 1996. The decrease in net accounts receivable
results primarily from seasonal fluctuations in sales. The allowance for
returns and doubtful accounts decreased from $9.9 million at February 2, 1996
to $5.1 million at August 2, 1996. The decrease in the amount of the
allowance at August 2, 1996 is primarily attributable to seasonal adjustments
in the reserve for returns. As a percentage of gross accounts receivable,
the reserve for returns has decreased from 25.4% at February 2, 1996 to 15.7%
at August 2, 1996. This decrease results from reserving for returns at a
rate more indicative of current period results.
Inventories increased from $11.0 million at February 2, 1996 to $16.3
million at August 2, 1996. This increase is primarily attributable to
seasonal gold purchases. At August 2, 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.
Accounts payable increased from $5.9 million at February 2, 1996 to $6.8
million at August 2, 1996. This increase is primarily attributable to
seasonal gold purchases and the timing of payments. Accrued expenses
decreased from $5.4 million at February 2, 1996 to $4.8 million at August 2,
1996. This decrease results from reduced amounts accrued for cooperative
advertising and interest expense.
The Company expects to incur capital expenditures of approximately $400,000
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
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<PAGE>
borrowing capacity under its revolving credit facility, which is currently
being re-negotiated, will be sufficient to finance its working capital and
capital expenditure requirements for at least the next 12 months.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 2, 1996, Grando, Inc. ("Grando") and the Company and its Chief
Executive Officer ("the OroAmerica Parties") reached a confidential
settlement agreement in connection with the complaint filed by Grando against
the OroAmerica Parties, in the United States District Court for Central
District of California, Western Division (Case No. CV-95-4737-IH), as
reported in Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended February 2, 1996. Under the terms of the confidential settlement
agreement, the Company agreed to pay Grando certain monies, assign certain
rights under its insurance policy to Grando, and assign certain patents and
copyrights to Grando. Additionally, the Company agreed to discontinue sales
of the products under dispute and to melt any related inventory. The Company
believes that the settlement will not have a material adverse effect on its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on July 16,
1996. At the Annual Meeting, Guy Benhamou, David Rousso, Bertram K. Massing,
Ronald A. Katz and Shiu Shao were elected as directors of the Company. Of the
5,841,173 shares of common stock represented in person or by proxy at the Annual
Meeting, Messrs. Benhamou, Rousso, Massing, Katz, and Shao received 5,830,123,
5,830,923, 5,829,923, 5,828,923 and 5,830,123 votes in favor of the election,
respectively.
At the Annual Meeting, the stockholders also approved the proposal to
ratify the selection of Price Waterhouse LLP as independent accountants for
fiscal 1997, such proposal receiving 5,836,073 votes for approval and 4,200
votes against approval, with 900 votes abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Consignment Agreement with Union Bank of Switzerland.
27 Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the thirteen weeks ended
August 2, 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: September 6, 1996 By: SHIU SHAO
----------------- -----------------------------------
SHIU SHAO, Vice President and
Chief Financial Officer
Date: September 6, 1996 By: BETTY SOU
----------------- -----------------------------------
BETTY SOU, Controller
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Consigment Agreement with Union Bank of Switzerland
27 Financial Data Schedule
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<PAGE>
EXHIBIT 10.1
CONSIGNMENT AGREEMENT
CONSIGNMENT AGREEMENT ("Agreement") made as of the 17th day of June, 1996,
1996, by and between UNION BANK OF SWITZERLAND, NEW YORK BRANCH, with its
principal branch at 299 Park Avenue, New York, New York 10171 ("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 and, in some instances, for sale to Consignee and Consignor is able
and willing to 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" shall mean a Delivery of Precious Metal pursuant to this
Agreement.
"Consignment Limit" shall mean the LESSER of: (i) Twenty-Five Thousand
(25,000) ounces of fine gold; or (ii) Consigned Precious Metal with a Fair
Market Value equal to Ten Million Dollars ($10,000,000).
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"1995 Consignment Agreement" shall mean that certain Consignment
Agreement by and between Consignor and Consignee dated as of May 30, 1995,
as the same may be extended, amended or restated from time to time.
"Consignment Period" shall mean with respect a Consignment, the period
beginning on (and including) the date of Delivery of such Precious Metal so
consigned (or in the case of previously Consigned Precious Metal, the date
on which the Consignment of such Precious Metal (or any portion thereof) is
continued in accordance with a Continuation Notice [as defined in the
Pricing Schedule]) by the Consignor to the Consignee pursuant to the terms
of this Consignment Agreement and shall end on (but exclude) the day which
numerically corresponds to such date one, two, or three months (or such
other period, if agreed to in writing by the Consignor and Chemical)
thereafter or, if such month has no numerically corresponding day, on the
last business day of such month, Consignor shall confirm in its notice to
Consignee pursuant to Section 3 hereof.
"Consigned Precious Metal" shall mean Precious Metal which Consignor
has consigned to Consignee pursuant to the terms of this Consignment
Agreement for which full payment has not been received or which has not
been Redelivered to Consignor.
"Consolidated Interest Expense" shall have the meaning set forth
within the definition of "EBIDA" herein.
"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" as applied to each outstanding Consignment
shall mean, for each day, the sum obtained by multiplying the applicable
Consignment Fee for such Consignment, as defined in the Pricing Schedule,
BY one-three hundred sixtieth (1/360) BY the Fixed Amount, or such other
amount as Consignee shall determine in its sole discretion on thirty (30)
days prior Notice to Consignee.
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The sum of all Daily Consignment Fees for all outstanding Consignments shall
be the Daily Consignment Fees.
"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 an 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 (to the extent deducted
in determining consolidated net income) (b) all provisions for federal,
state and other income taxes 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: the Second London Gold
Fixing 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 or at Consignor's election based upon such other
recognized market index announced by Consignor.
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"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.
"Fixed Amount" shall mean Fair Market Value of the Consigned Precious
Metals established on the applicable Valuation Date with regard to a
particular Consignment.
"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 further amended from time to time.
"Intercreditor Agreement" shall mean that certain Second Amended and
Restated Intercreditor Agreement by and among Consignor, Chemical Bank
("Chemical") the Collateral Agent and others, as acknowledged by Consignee
and Guarantor, dated as of July 22, 1994 (which amends and restates that
certain Amended and Restated Intercreditor Agreement dated as of
February 25, 1994), as amended by a Third Amendment and Agreement dated as
of May 30, 1995, a Fourth Amendment and Agreement dated as of July 28,
1995, a Fifth Amendment and Agreement dated as of March 15, 1996, and a
Sixth Amendment and Agreement dated of even date herewith and as the same
may be further 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.
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"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.
"Payment Due Date" shall have the meaning specified in Section 14 of
this Agreement.
"Precious Metal" shall mean: gold having a fineness of not less than
.995; without regard to whether such gold is alloyed or unalloyed, in
bullion form or is contained in or processed into other materials which
contain elements other than gold.
"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, mechanics in for
determining Purchase Price and amounts payable by Consignee to Consignor
hereunder, as the same may be amended from time to time.
"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:
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Attention: Ms. Cathleen Callahan
Vice President
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For Consignee:
OroAmerica, Inc.
443 North Varney Street
Burbank, California 91502
Attention: Mr. Shiu Shao
Chief Financial Officer
For Chemical:
Chemical Bank
633 Third Avenue
7th Floor
New York, NY 10171
Attention: Irene B. Specter
Vice President
"Purchase Price" shall mean a price announced by Consignor from time
to time pursuant to this Agreement, the Pricing Schedule or otherwise 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 the Collateral Agent, dated as
of February 22, 1994, as amended and as the same may be amended from time
to time.
"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,
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goodwill, debt discount, organization expenses, trademarks and tradenames,
patents, deferred product development costs and similar items, also so
computed.
"Valuation Date" shall mean with respect to a particular Consignment,
the date on which the Fixed Amount is established by Consignor.
"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.
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 as provided under the terms
of the Pricing Schedule 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
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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 specified in the definition of "Precious Metal"
set forth in Section 1 hereof.
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 [or in the case of previously Consigned
Precious Metal, at the time when such Consignment of Consigned Precious Metal
is continued in accordance with a Continuation Notice [as defined in the
Pricing Schedule]], Consignor shall provide Consignee with particulars of the
total quantity of the Precious Metal being Delivered or credited to Consignee,
the applicable Fixed Amount, Daily Consignment Fee, Market Premium payable and
Consignment Period. 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
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or SECTION 14 (as applicable) 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 OF PRECIOUS METAL/DAILY CONSIGNMENT FEES.
Subject to the terms and conditions set forth in the Pricing Schedule,
and subject to the terms concerning purchases of Consigned Precious Metal
after the Payment Due Date set forth in SECTION 14 hereof, Consignee shall
have the right to purchase any Consigned Precious Metal. To exercise the
right, a Duly Authorized Officer of Consignee shall give Notice to a Duly
Authorized Officer of Consignor that Consignee desires to purchase specified
quantities of Consigned Precious Metal subject to the terms and conditions
and in accordance with the mechanism set forth in the Pricing Schedule. The
Purchase Price for the Consigned Precious Metal shall be established as set
forth in the Pricing Schedule. A Duly Authorized Officer of Consignor shall
confirm to Consignee the terms of such purchase in writing.
Consignee shall pay the full Purchase Price, plus any applicable sales or
use tax, and other fees due to Consignor in accordance with the terms of the
Pricing Schedule. (The Daily Consignment Fee shall continue in effect until
payment in full.) Payment shall be made in the following manner: (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 the obligation of
Consignee to deliver Precious Metal under 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
<PAGE>
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 Daily
Consignment Fees for Consignor's services under this Agreement. The Daily
Consignment Fees shall be payable on the final day of each Consignment Period
or as otherwise specified in the Pricing Schedule. 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. 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 the Consignor's obligations to
Deliver Precious Metal under this Consignment Agreement, and subject to the
terms and conditions of the Pricing Schedule, any or all of the amount of the
Consigned Precious Metal may be Redelivered by Consignee.
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
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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 and Chemical that:
(a) Consignee has heretofore furnished to Consignor and Chemical
Consignee's Financial Statements for the period ending October 27, 1995,
together with interim Financial Statements for the period ending December
29, 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 December 29, 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)
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have been duly authorized by all requisite corporate action; (ii) will
not violate any provision of law, any order of any court or other agency
of government, 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 Lenders (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, the inventory of Consignee
consisting to any extent of Precious Metal or any property of Consignee,
now owned or hereafter acquired, which does or will include the Precious
Metal or portions, products or proceeds thereof.
(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
<PAGE>
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 (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
<PAGE>
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.
Delivery by Consignor of any Precious Metal under this Agreement is subject
to the following conditions precedent:
(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;
<PAGE>
(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
SECTIONS 9(B), (C), (D) AND (E) of this Agreement;
(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.
(d) Guarantor shall have executed and delivered to Consignor and/or
to the Collateral Agent, as applicable, the
<PAGE>
Guaranty, a Security Agreement in favor of Consignor, the Collateral Agent
and others, in each case, in form and substance satisfactory to the
Consignor, and such other supporting documents as Consignor and/or the Agent
may reasonably request.
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 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,
<PAGE>
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 and Chemical 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 and Chemical:
(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.
(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
<PAGE>
only and at any other time as requested by Consignor or Chemical 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 and Chemical 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
(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 Chemical 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;
<PAGE>
(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(o) and (r)?
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 or Chemical may reasonably request;
(g) Permit agents or representatives of Consignor and Chemical (i) at
reasonable times, with or without notice, to inspect the Precious Metal in
the possession and control of 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 and Chemical 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
<PAGE>
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, Chemical 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 or Chemical 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 its current liabilities of greater than or
equal to 1.5:1.0, 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 principals 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) Maintain as of January 27, 1995 a Tangible Net Worth of at least
Forty-Two Million Dollars ($42,000,000); thereafter, 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, in 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
<PAGE>
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 2.95:1.00, maintain at all
times from September 1 through December 31 of each year a ratio of less
than or equal to 3.25:1.00, and maintain at all other times a ratio of less
than or equal to 2.75:1.00; all such ratios to be determined in accordance
with generally accepted accounting principles consistently applied;
(n) Deliver to Consignor and Chemical, upon Consignor's request, a
list including the names, addresses and Social Security numbers of all of
Consignee's salespersons and sales representatives;
(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 1.00;
(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 not less than Twenty Million Dollars ($20,000,000) and not
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
<PAGE>
attached hereto and made a part hereof) exceed the greatest of (A), (B) or
(C) of SECTION 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 Foreign
Vendors and Non-Affiliate Foreign Vendors 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
and Chemical promptly in the event 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 and Chemical 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;
<PAGE>
(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 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 and Chemical
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 and Chemical, provided, however,
that the Consignee also hereby grants to Consignor and Chemical 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 and
Chemical 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
<PAGE>
any and all indebtedness under this Agreement, and release of any
collateral;
(v) 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
(w) 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 and
Chemical consent 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 the other "Lenders" as defined in 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 Consignee's corporate name, PROVIDED, HOWEVER,
that
<PAGE>
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:
(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
<PAGE>
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 State 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 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 be materially change
<PAGE>
the nature of Guarantor's business needs nor materially expand the
operations of Guarantor without the prior written consent of
Consignor and Chemical;
(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) [Section 12(j) is 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 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
<PAGE>
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 up to One Thousand Five Hundred (1,500) 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 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 the 1995 Consignment Agreement, and all other
Consignment Agreements with other "Lenders" [as defined in 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,
<PAGE>
or in transit to, any Affiliate Foreign Vendor or any Non-Affiliate Vendor:
(i) from December 1 through 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 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;
<PAGE>
(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 or the Pricing Schedule;
(c) Consignee fails to pay any amounts due hereunder, under the 1995
Consignment Agreement 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;
(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 or other agreements with the
Lenders (as defined in the Intercreditor Agreement), 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
<PAGE>
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;
(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
<PAGE>
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 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 provision 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), (v) 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
<PAGE>
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, 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.
(a) The Consignor's obligation to Deliver Precious Metal under this
Agreement shall terminate, at the Consignor's election, upon the occurrence
of any Event of Default. Unless otherwise terminated in accordance with the
terms hereof, the Consignor's obligation to Deliver Precious Metal under
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 the Consignor's obligation to Deliver
Precious Metal under this Agreement shall not affect Consignee's duty to
pay and perform in full its obligations to Consignor hereunder. On the
effective date (the "Payment Due Date") of the termination of the
Consignor's obligation to Deliver Precious Metal under this Agreement or
such other date as Consignor shall specify by Notice to Consignee,
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 purchase price to be established by
Consignor as set forth in the Pricing Schedule.
(b) Consignee hereby acknowledges that in order to accommodate
Consignee's request for Delivery and sale of Precious Metal under this
Agreement, Chemical has purchased a one hundred percent (100%) risk
participation in the
<PAGE>
credit extended hereunder, and further acknowledges that in order to
provide such consignments and sales of Precious Metal upon the terms set
forth herein and in the Pricing Schedule, due to the volatility in the
market price of Precious Metal, certain costs may be incurred by Consignor
and/or Chemical by Consignee's failure to Redeliver or purchase Precious
Metal when due on the Payment Due Date. Accordingly, to induce Consignor
and Chemical to enter the transactions contemplated by this Agreement,
Consignee hereby acknowledges and agrees that if Consignee fails to
Redeliver or pay for all Consigned Precious Metal on or before the
Payment Due Date, Consignee hereby irrevocably agrees that such failure, at
the option of Consignor, shall be deemed an election by Consignee to
purchase all of such outstanding Consigned Precious Metal, the Purchase
Price of such Consigned Precious Metal to be as set forth in Paragraph A(b)
of the Pricing Schedule. Consignor or Chemical, as agent for Consignor,
shall provide Notice to Consignee of such purchase of Precious Metal and
the actual Purchase Price therefore. Said Purchase Price together with any
applicable fees, premiums and other charges related to the purchase and the
Consignments shall be due and payable on the date specified in such Notice
and any amount not paid when due shall bear interest from the Payment Due
Date at the rate provided in Section 5 hereof until paid in full.
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 Agreement by or on
behalf of Consignee shall inure to the benefit of Chemical and the
successors and assigns of Consignor and Chemical.
(b) Consignee will reimburse Consignor and Chemical upon demand for
all out-of-pocket costs, charges and expenses of Consignor and Chemical
(including reasonable fees and disbursements of counsel to Consignor and
counsel to Chemical) incurred in connection with (i) the preparation,
execution and delivery of this Agreement and any security document,
intercreditor agreement, collateral
<PAGE>
sharing agreement, participation agreement or other 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, Chemical and their respective
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.
(f) The Consignee hereby acknowledges and agrees that Consignors
indebtedness and obligations under this Agreement and the Consignments made
pursuant hereto are entitled to the benefits and security of the security
documents described on EXHIBIT E hereto, each as amended from time to time.
(g) (i) This Agreement shall be binding upon and inure to the
benefit of the Consignee and the Consignor and their respective successors
and assigns, except that the Consignee shall not have the right to assign
any of its
<PAGE>
rights hereunder or delegate any of its obligations hereunder without the
prior written consent of the Consignor. Any such impermissible
assignment or delegation shall be void and of no effect. Without limiting
the generality of the foregoing, the Consignor shall have the right to
assign any of its rights hereunder or delegate any of its obligations
hereunder, in whole or in part, and to assign any/or all of its rights and
interests hereunder and under any security document securing Consignee's
obligations hereunder, as security therefor, and in furtherance thereof, to
provide to any prospective or actual assignee financial and other
information relating to the Consignee and the transactions contemplated
hereby. Without limiting the generality of the foregoing, the Consignee
shall have the right in its sole discretion to sell one or more
participations to Chemical or other parties in the Consignments and the
documents evidencing and securing such Consignments without notice or
consent of the Consignee and in connection therewith, to provide Chemical
and/or such other participant(s) with financial and other information and
copies of documents relating to the Consignee, the Consignments, and the
transactions contemplated hereby.
(h) 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.
(i) 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.
(j) 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
<PAGE>
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 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.
WITNESS: UNION BANK OF SWITZERLAND
NEW YORK BRANCH
By:
------------------------------------
Cathleen Callahan
Vice President
By:
------------------------------------
----------------------------- Title:
(Signatures continued on next page)
<PAGE>
OROAMERICA, INC.
By:
------------------------------------
Shiu Shao
Senior Vice President
Chief Financial Officer
<PAGE>
EXHIBIT E
SECURITY DOCUMENTS
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OROAMERICA,
INC.'S CONSOLIDATED BALANCE SHEET AT AUGUST 2, 1996 (UNAUDITED) AND CONSOLIDATED
STATEMENT OF INCOME FOR THE TWENTY-SIX WEEKS ENDED AUGUST 2, 1996 (UNAUDITED)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> AUG-02-1996
<CASH> 13,246
<SECURITIES> 0
<RECEIVABLES> 22,287
<ALLOWANCES> 5,137
<INVENTORY> 16,283
<CURRENT-ASSETS> 51,058
<PP&E> 20,558
<DEPRECIATION> 9,834
<TOTAL-ASSETS> 73,003
<CURRENT-LIABILITIES> 12,336
<BONDS> 3,322
0
0
<COMMON> 6
<OTHER-SE> 56,956
<TOTAL-LIABILITY-AND-EQUITY> 73,003
<SALES> 74,662
<TOTAL-REVENUES> 74,662
<CGS> 61,360
<TOTAL-COSTS> 61,360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 233
<INTEREST-EXPENSE> 1,433
<INCOME-PRETAX> (403)
<INCOME-TAX> (45)
<INCOME-CONTINUING> (358)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (358)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
