SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): April 24, 1998
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Finlay Enterprises, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-25716 13-3492802
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
529 Fifth Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 808-2800
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521 Fifth Avenue, New York, New York 10175
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Former name or former address, if changed since last report
<PAGE>
Item 5. Other Events.
On April 24, 1998, Finlay Enterprises, Inc. (the "Registrant") sold $75.0
million aggregate principal amount of its 9% Senior Debentures due May 1, 2008
(the "Senior Debentures"). Concurrently with the closing of the sale of the
Senior Debentures, the Registrant and certain stockholders of the Registrant
("Selling Stockholders") sold an aggregate of 1,800,000 shares of Common Stock
of the Registrant (of which the 567,310 shares were sold by the Registrant (the
"Equity Offering") and 1,232,690 shares were sold by the Selling Stockholders),
(ii) Finlay Fine Jewelry Corporation, the Registrant's wholly-owned subsidiary
("Finlay Jewelry"), sold $150.0 million aggregate principal amount of its 8-3/8%
Senior Notes due May 1, 2008 (the "Senior Notes") and (iii) the Amended and
Restated Credit Agreement dated as of September 11, 1997, as amended, among
General Electric Capital Corporation, individually and as agent, certain other
lenders and financial institutions parties thereto, Finlay Jewelry and the
Registrant, was amended to increase the line of credit thereunder from $225.0
million to $275.0 million and to make certain other changes (the "GECC
Amendment"). In addition, Finlay Jewelry entered into an amendment to the Gold
Consignment Agreement dated as of June 15, 1995, as amended, between Finlay
Jewelry and Rhode Island Hospital Trust National Bank (the "Gold Consignment
Agreement") to (i) renew the Gold Consignment Agreement through December 31,
2001, (ii) allow Finlay Jewelry to obtain up to the lesser of (x) 85,000 fine
troy ounces or (y) $32.0 million worth of gold and (iii) make certain other
modifications (the "RIHT Amendment"). Pursuant to the terms of the RIHT
Amendment, effectiveness of certain portions thereof is conditioned upon
completion of the redemptions described below.
Pursuant to the Indenture dated as of April 24, 1998 (the "Indenture")
between the Registrant and Marine Midland Bank, as trustee (the "Trustee"), the
Senior Debentures are initially secured by a security interest in favor of the
Trustee in all of the capital stock of Finlay Jewelry, which security interest
is junior to the pre-existing pledge of such capital stock securing the
Registrant's existing 12% Senior Discount Debentures due 2005 (the "12%
Debentures"). Upon redemption of the 12% Debentures and release of the pledge of
such capital stock, the capital stock will be pledged in accordance with the
terms of the Indenture to secure the Senior Debentures.
The net proceeds to the Registrant from the sale of the Senior Debentures
and the Equity Offering, together with the proceeds from the repayment of a note
receivable (including accrued interest thereon) of $1.3 million (as of January
31, 1998) from an executive officer and the repayment of $0.9 million (as of
January 31, 1998) of an intercompany liability by Finlay Jewelry, will be used
to redeem the 12% Debentures, including associated premiums. Finlay Jewelry will
use the net proceeds from the sale of the Senior Notes to redeem Finlay
Jewelry's existing 10-5/8% Senior Notes due 2003 (the "10-5/8% Notes"),
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<PAGE>
including associated premiums, and to make the above-referenced intercompany
repayment. A formal notice of redemption specifying a May 26, 1998 redemption
date has been given by the Registrant and Finlay Jewelry with respect to the 12%
Debentures and the 10-5/8% Notes, respectively. The Registrant has also prepaid
on May 1, 1998 the original issue discount of $39,027,292 on the 12% Debentures.
The descriptions of the terms of the Senior Debentures, Senior Notes, the
GECC Amendment and RIHT Amendment are qualified in their entirety by reference
to Exhibits 4.1, 4.2, 10.1 and 10.2, respectively, attached hereto.
Item 7. Financial Statements and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits
1.1 Underwriting Agreement - Senior Debentures.
1.2 Underwriting Agreement - Senior Notes
1.3 Underwriting Agreement - Common Stock
4.1 Indenture between Finlay Enterprises, Inc.
and Marine Midland Bank, as Trustee, dated as
of April 24, 1998.
4.2 Indenture between Finlay Fine Jewelry
Corporation and Marine Midland Bank, as
Trustee, dated as of April 24, 1998.
10.1 Amendment No. 3 dated as of April 24, 1998 to
Amended and Restated Credit Agreement dated
as of September 11, 1997, as amended, by and
among General Electric Capital Corporation,
individually and as agent, certain other
lenders and financial institutions parties
thereto, Finlay Fine Jewelry Corporation and
Finlay Enterprises, Inc.
10.2 Amendment No. 6 dated as of April 24, 1998 to
Gold Consignment Agreement dated as of June
15, 1995, as amended, between Finlay Fine
Jewelry Corporation and Rhode Island Hospital
Trust National Bank.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FINLAY ENTERPRISES, INC.
Dated: May 8, 1998 By:s/s Bruce Zurlncik
__________________________
Name: Bruce Zurlnick
Title: Treasurer
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<PAGE>
EXHIBIT INDEX
1.1 Underwriting Agreement - Senior Debentures.
1.2 Underwriting Agreement - Senior Notes.
1.3 Underwriting Agreement - Common Stock.
4.1 Indenture between Finlay Enterprises, Inc. and Marine
Midland Bank, as Trustee, dated as of April 24, 1998.
4.2 Indenture between Finlay Fine Jewelry Corporation and
Marine Midland Bank, as Trustee, dated as of April 24,
1998.
10.1 Amendment No. 3 dated as of April 24, 1998 to Amended and
Restated Credit Agreement dated as of September 11, 1997,
as amended, by and among General Electric Capital
Corporation, individually and as agent, certain other
lenders and financial institutions parties thereto, Finlay
Fine Jewelry Corporation and Finlay Enterprises, Inc.
10.2 Amendment No. 6 dated as of April 24, 1998 to Gold
Consignment Agreement dated as of June 15, 1995, as
amended, between Finlay Fine Jewelry Corporation and Rhode
Island Hospital Trust National Bank.
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Finlay Enterprises, Inc.
9% Senior Debentures due 2008
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Underwriting Agreement
April 20, 1998
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette
Securities Corporation,
NationsBanc Montgomery Securities LLC
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Finlay Enterprises, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to you as
the several Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of $75,000,000 principal amount of the Company's 9% Senior Debentures
due May 1, 2008 (the "Securities").
1. Each of the Company and Finlay Fine Jewelry Corporation, a Delaware
corporation and a wholly owned subsidiary of the Company ("Finlay Jewelry"),
jointly and severally represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-48567), as amended by
Amendments Nos. 1 and 2 thereto (the "Initial Registration Statement"), in
respect of the Securities has been filed with the Securities and Exchange
Commission (the "Commission"); such Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no other
document with respect to such Initial Registration Statement or any such
document incorporated by reference therein has heretofore been filed with
the Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission to the Company or its counsel (any preliminary prospectus
included in the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the various
parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto but
excluding Form T-1 and including (i) the information contained in the form
of final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule
430A under the Act to be part of the Initial Registration Statement at the
time it was declared effective or such part of the Rule 462(b) Registration
Statement, if any, that became or hereafter becomes effective and (ii) the
documents incorporated by reference in the prospectus contained
<PAGE>
in the registration statement at the time such part of the registration
statement became effective, each as amended at the time such part of the
registration statement became effective, are hereinafter collectively
called the "Registration Statement"; such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, is hereinafter called
the "Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus
or Prospectus, as the case may be, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and incorporated by reference in
such Preliminary Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the
Registration Statement that is incorporated by reference in the
Registration Statement);
(b) No order preventing or suspending the use of any Preliminary Prospectus has
been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements
of the Act, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and the statements made therein within the
coverage of Rule 175(b) under the Act were made by the Company with a
reasonable basis and in good faith; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when they became
effective or were filed with the Commission, as the case may be, conformed
in all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and any
further documents so filed or incorporated by reference in the Prospectus
or any further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
statements made therein within the coverage of Rule 175(b) under the Act
were made by the Company with a reasonable basis and in good faith;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus
will conform, in all material respects to the requirements of the Act and
the Trust Indenture Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date as
to the Registration Statement and any amendment thereto, and as of the
applicable filing date as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the statements made therein within
the coverage of Rule 175(b) under the Act were made by the Company with a
<PAGE>
reasonable basis and in good faith; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein or by the Selling Stockholders (as defined in the
Prospectus) expressly for use in the preparation of answers therein to Item
7 of Form S-3;
(e) Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included or incorporated by
reference in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries, except for borrowings and repayments under the Revolving
Credit Agreement and the Gold Consignment Agreement (each as defined in the
Prospectus and as amended as described in the Prospectus) or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the business, operations, management, financial
position or condition, current assets, merchandise inventories,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"), otherwise than
as set forth or contemplated in the Prospectus;
(f) The Company and its subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all material
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any material real property and buildings
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(g) Each of the Company and Finlay Jewelry has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; the
Company's indirect subsidiary, Societe Nouvelle d'Achat de Bijouterie -
S.O.N.A.B. ("Sonab") is duly organized and validly existing as a societe en
nom collectif in France; each other direct or indirect subsidiary of the
Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction;
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and
non-assessable and conform to the description of such capital stock
contained in the Prospectus; and all of the issued shares of capital stock
of each subsidiary of the Company have been duly authorized and validly
<PAGE>
issued, are fully paid and non-assessable and (except for directors'
qualifying shares, if any, and except as set forth in the Prospectus) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(i) The Securities have been duly authorized by the Company and, on the Closing
Date, will have been duly executed, issued and delivered by the Company,
and when the Securities, in accordance with the provisions of the Indenture
(the "Indenture"), substantially in the form filed as an exhibit to the
Registration Statement, to be entered into by the Company and Marine
Midland Bank, as Trustee (the "Trustee"), have been authenticated by the
Trustee and delivered to and paid for by the Underwriters in accordance
with the terms of this Agreement, the Securities will be entitled to the
benefits of the Indenture and will constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles (regardless of whether enforcement is
sought in a proceeding in equity or at law); the Indenture has been duly
authorized by the Company and qualified under the Trust Indenture Act and
when duly executed and delivered by the Company and the Trustee, will
constitute a valid and legally binding instrument, enforceable against the
Company in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles (regardless of whether
enforcement is sought in a proceeding in equity or at law); the Security
and Pledge Agreement (the "Security and Pledge Agreement") to be entered
into between the Company and Marine Midland Bank, as Collateral Agent (the
"Collateral Agent"), substantially in the form filed as an exhibit to the
Registration Statement, when duly executed and delivered by the Company and
the Collateral Agent, will constitute a valid and legally binding
instrument, enforceable against the Company in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles (regardless of whether enforcement is sought in a
proceeding in equity or at law); and the Securities, the Indenture and the
Security and Pledge Agreement will conform in all material respects to the
descriptions thereof in the Prospectus;
(j) The issue and sale of the Securities and the compliance by each of the
Company and Finlay Jewelry with all of the provisions of the Securities,
the Indenture, the Security and Pledge Agreement and this Agreement
applicable to it and the consummation of the transactions herein and
therein contemplated (i) will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease,
license or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, except any such conflict, breach, violation or
default which has been consented to or waived in a valid and binding
writing duly executed and delivered to the Company by or on behalf of the
party granting such consent or waiver; (ii) will not result in any
violation of the provisions of the Company's or any of its subsidiaries'
respective certificate or restated certificate of incorporation or by-laws
or restated by-laws or comparable documents and (iii) will not result in
any violation of any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement, the Indenture and the Security and Pledge
Agreement, except such as have been obtained under the Act and the Trust
Indenture Act and such consents, approvals, authorizations, registrations
<PAGE>
or qualifications as may be required under foreign or state securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Underwriters;
(k) Neither the Company nor any of its subsidiaries is in violation of its
respective certificate or restated certificate of incorporation or by-laws
or restated by-laws or comparable documents, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease, license or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound which default
could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect;
(l) The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Senior Debentures", insofar as they purport to constitute a
summary of the terms of the Securities and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and fair in all
material respects;
(m) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, could individually or in the aggregate
reasonably be expected to have a Material Adverse Effect; and, to the
Company's and Finlay Jewelry's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(n) Each of the Company and Finlay Jewelry is not and, after giving effect to
the offering and sale of the Securities, will not be an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(o) Arthur Andersen LLP, who have certified certain consolidated financial
statements of the Company and Finlay Jewelry, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(p) The Company and its subsidiaries directly or through host store groups are
subject to consent decrees, injunctions or comparable governmental orders
or decrees regarding the discount pricing and advertising of jewelry from
"regular" or "original" prices only in the states of California, Colorado,
Georgia, Oregon and Wisconsin, and the Company and its subsidiaries are in
compliance therewith and with applicable federal and state laws with
respect to such pricing and advertising practices, except for such
noncompliance previously identified in writing by the Company to the
Underwriters which could not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect;
(q) Neither the Company nor any of its subsidiaries has received any notice
that any default by the Company or any of its subsidiaries has occurred and
is continuing under any of the license agreements with host store groups
described or identified in the Prospectus to which the Company or any of
its subsidiaries are a party and no condition exists which could
individually or in the aggregate reasonably be expected to result in the
termination or nonrenewal of any such license agreement; each such license
agreement has been duly authorized (and, in the case of written license
agreements, duly and validly executed and delivered) by and on behalf of
the Company and its subsidiaries, as the case may be, and, assuming the due
<PAGE>
authorization (and, in the case of written license agreements, the due and
valid execution and delivery) thereof by the other party or parties
thereto, is the valid and binding obligation of the Company, its
subsidiaries and such other party or parties, as the case may be,
enforceable in accordance with its respective terms against the respective
parties thereto subject to the effect of any applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium
and similar laws affecting creditors' rights generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law); and neither the Company nor any of its
subsidiaries has received any notice (whether actual or constructive) that
the licensor thereunder is considering limiting, suspending, revoking or
non-renewing any such license; except that no representation is made with
respect to the Company's license agreement with Liberty House as to the
effect on such license agreement of the filing of a voluntary petition by
Liberty House under the Bankruptcy Code (as defined in the Prospectus);
(r) Each of the Company and Finlay Jewelry has duly authorized the amendment to
the Revolving Credit Agreement that is described in the Prospectus.
Substantially contemporaneously with the Time of Delivery (as defined in
Section 4 hereof), the Company and Finlay Jewelry will duly execute and
deliver such amendment to the Revolving Credit Agreement. Finlay Jewelry
has duly authorized the amendment to the Gold Consignment Agreement that is
described in the Prospectus. Substantially contemporaneously with the Time
of Delivery, Finlay Jewelry will duly execute and deliver such amendment to
the Gold Consignment Agreement. Assuming the due authorization, execution
and delivery thereof by the other parties thereto, (a) the Revolving Credit
Agreement, as amended as described above, will constitute the legal, valid
and binding agreement of the Company and Finlay Jewelry and (b) the Gold
Consignment Agreement, as amended as described above, will constitute the
legal, valid and binding agreement of Finlay Jewelry, in each case,
enforceable against the Company and/or Finlay Jewelry, as the case may be,
subject, as to enforcement, to insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles
(regardless of whether enforcement is sought in a proceeding in equity or
at law); and
(s) Neither the Company nor Finlay Jewelry nor any of their respective
affiliates does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075, Florida
Statutes.
2. Subject to the terms and conditions herein set forth, the Company agrees
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
97.148% of the principal amount thereof, plus accrued interest, if any, from May
1, 1998 to the Time of Delivery hereunder, the principal amount of Securities
set forth opposite the name of such Underwriter in Schedule I hereto.
3. Upon the authorization by Goldman, Sachs and Co., on behalf of the
Underwriters, of the release of the Securities, the several Underwriters propose
to offer the Securities for sale upon the terms and conditions set forth in the
Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of Federal (same-day) funds to the account specified by the
Company to Goldman, Sachs & Co. at least forty-eight hours in advance, by
causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at
DTC. The Company will cause the certificates representing the Securities to be
made available to Goldman, Sachs & Co. for checking at least twenty-four hours
prior to the Time of Delivery (as defined below) at the office of DTC or its
designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on April 24, 1998
<PAGE>
or such other time and date as Goldman, Sachs & Co. and the Company may agree
upon in writing. Such time and date for delivery of the Securities is herein
called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, 37th Floor, New York, New York 10022 (the
"Closing Location"), and the Securities will be delivered at the Designated
Office, all at the Time of Delivery. A meeting will be held at the Closing
Location at 2:00 p.m., New York City time, on the New York Business Day next
preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
(5) The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the Time of Delivery which shall be disapproved by the
Underwriters promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or Prospectus, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or Prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may reasonably request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction or to take
any other action which would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
offer and sale of the Securities in each jurisdiction in which the
Securities have been qualified as provided above;
(c) Prior to 12:00 noon, New York City time, on the New York Business Day next
succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
<PAGE>
after the time of issue of the Prospectus in connection with the offering
or sale of the Securities and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus or to
file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act, the Trust Indenture Act or the
Exchange Act, to notify you and upon your request to file such document and
to prepare and furnish without charge to each Underwriter and to any dealer
in securities as many copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus which
will correct such statement or omission or effect such compliance, and in
case any Underwriter is required to deliver a prospectus in connection with
sales of any of the Securities at any time nine months or more after the
time of issue of the Prospectus, upon your request but at the expense of
such Underwriter, to prepare and deliver to such Underwriter as many copies
as you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as practicable,
but in any event not later than eighteen months after the effective date of
the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, not to (and
to cause each of its direct and indirect subsidiaries not to) register for
sale, offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder, any Securities or any securities that are substantially
similar to the Securities (other than the Senior Notes (as defined in the
Prospectus) of Finlay Jewelry in an aggregate principal amount of $150.0
million), or any securities of the Company or any such subsidiary of the
Company convertible into or exchangeable for securities of the Company or
any such subsidiary of the Company substantially similar to the Securities;
(f) Within the time limits prescribed by the Exchange Act, to furnish to the
holders of the Securities after the end of each fiscal year an annual
report (including a balance sheet and statements of operations, changes in
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, after the
end of each of the first three quarters of each fiscal year (beginning with
the fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company and
its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the Registration
Statement, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders, and to deliver to you (i)
as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company or
Finlay Jewelry is listed or quoted (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission); and (ii) such additional information
concerning the business and financial condition of the Company or Finlay
Jewelry as you may from time to time reasonably request;
(h) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) If the Company elects to rely upon Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with
<PAGE>
Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
Among Underwriters, this Agreement, the Indenture, the Security and Pledge
Agreement, any Blue Sky Memorandum, closing documents (including any reasonable
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; (iii) all expenses in connection
with the qualification of the Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the reasonable
fees and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with any Blue Sky and legal investment surveys,
if any; (iv) all fees charged by securities rating services for rating the
Securities; (v) the filing fees incident to, and the reasonable fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Securities; (vi) the cost of preparing certificates
representing the Securities; (vii) the fees and expenses of the Trustee and the
Collateral Agent and any agent of the Trustee and the Collateral Agent and the
fees and disbursements of counsel for the Trustee and the Collateral Agent in
connection with the Indenture, the Security and Pledge Agreement, and the
Securities; (viii) all other costs and expenses incident to the performance of
the Company's obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees and disbursements of their
counsel and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and Finlay Jewelry herein are, at and as of the Time
of Delivery, true and correct, the condition that each of the Company and Finlay
Jewelry shall have performed all of its obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to Rule
424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Jones, Day, Reavis & Pogue, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated the Time of Delivery, with respect
to the matters covered in paragraphs (i), (ii), (v), (vi), (vii), (x) and
(xiii) of subsection (c) below as well as such other related matters as you
may reasonably request, and such counsel shall have received such documents
and information as they may reasonably request to enable them to pass upon
such matters;
(c) Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto) (which opinion may be limited to the
<PAGE>
federal laws of the United States, the laws of the State of New York and
the General Corporation Law of the State of Delaware and in giving such
opinion such counsel may state that, insofar as any opinions involve
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company or its subsidiaries and
certificates of responsible public officials, copies of which certificates
will be provided to you upon delivery of such counsel's opinion), dated the
Time of Delivery, in form and substance as attached, to the effect that:
(i) Each of the Company and Finlay Jewelry has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly authorized and validly issued, fully paid and
non-assessable;
(iii)Each subsidiary of the Company (other than Sonab and Finlay Jewelry) has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; and all of
the issued shares of capital stock of each subsidiary of the Company (other
than Sonab) have been duly authorized and validly issued, are fully paid
and non-assessable, and (except for directors' qualifying shares, if any,
and except as otherwise set forth in the Prospectus) are owned of record
directly or indirectly by the Company, to the knowledge of such counsel,
free and clear of all liens, encumbrances and defects;
(iv) To such counsel's knowledge and other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, could individually or
in the aggregate reasonably be expected to have a Material Adverse Effect;
and, to such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(v) This Agreement has been duly authorized, executed and delivered by the
Company and Finlay Jewelry;
(vi) The Securities have been duly authorized, executed, authenticated, issued
and delivered and constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture; and the
Securities and the Indenture conform in all material respects to the
descriptions thereof in the Prospectus;
(vii)Each of the Indenture and the Security and Pledge Agreement has been duly
authorized, executed and delivered by the Company and, when duly
authorized, executed and delivered by the other parties thereto, will
constitute a valid and legally binding instrument, enforceable in
accordance with its terms; the Indenture has been qualified under the Trust
Indenture Act; after giving effect to the issuance of the Securities at the
First Time of Delivery, the Security and Pledge Agreement creates a valid
security interest in all of the issued and outstanding shares of capital
stock of Finlay Jewelry for the benefit of the Collateral Agent and to the
extent that security interests in such shares may be perfected by filing
under the Uniform Commercial Code in effect in the State of New York, the
Collateral Agent's security interest in all of the issued and outstanding
shares of capital stock of Finlay Jewelry has been perfected, and upon
release of the existing pledge of such shares and the repledge and delivery
of such shares in accordance with the Security and Pledge Agreement, and
assuming no issuance by Finlay Jewelry of any additional shares of its
capital stock and that the Collateral Agent entered into the Security and
Pledge Agreement in good faith without notice of any adverse claims on such
shares (other than the existing pledge of such shares), the Collateral
<PAGE>
Agent will have a perfected security interest in all of the issued and
outstanding shares of capital stock of Finlay Jewelry;
(viii) The issue and sale of the Securities being delivered at the Time of
Delivery by the Company and the compliance by each of the Company and
Finlay Jewelry with the applicable provisions of the Securities, the
Indenture, the Security and Pledge Agreement and this Agreement and the
consummation of the transactions herein and therein contemplated (a) will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement, real property lease, license or other material
agreement or instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor (b) will such action
result in any violation of the provisions of (i) the respective certificate
or restated certificate of incorporation, or respective by-Laws or restated
by-laws, as the case may be, of the Company or Finlay Jewelry, (ii) any
statute, rule or regulation known to such counsel of any governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or (iii) any order
applicable to the Company, any of its subsidiaries or any of their
respective properties of any court, governmental agency or body known to
such counsel based upon an officer's certificate listing any such orders
(which officer's certificate shall be delivered with such opinion);
(ix) No consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required for
the issue and sale of the Securities or the consummation by the Company of
the transactions contemplated by the Indenture, the Security and Pledge
Agreement and this Agreement, except such as have been obtained under the
Act and the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
foreign or state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters;
(x) The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Senior Debentures", insofar as they purport to constitute a
summary of the terms of the Securities, and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and fair in all
material respects;
(xi) Each of the Company and Finlay Jewelry is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are defined
in the Investment Company Act;
(xii)The documents incorporated by reference in the Prospectus or any further
amendment or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion), when they
became effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the requirements of the
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder; and
(xiii) The Registration Statement and the Prospectus and any further amendments
and supplements thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; although they do not assume any
<PAGE>
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (ix) of this Section 7(c), such
counsel may state that such counsel has participated in conferences at
which the contents of the Registration Statement and the Prospectus and
related matters were discussed, and, on the basis of such participation,
they have no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the Company
prior to the Time of Delivery (other than the financial statements and
related schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which such counsel need
express no opinion) contained or incorporated by reference an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further amendment
or supplement thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which such counsel need express no opinion) contained or
incorporated by reference an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading or
that, as of the Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to the Time of Delivery (other than the financial statements
and related schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which such counsel need
express no opinion) contains or incorporates by reference an untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required or
of any filing required to be incorporated by reference into the Prospectus
which is not so incorporated by reference therein;
(d) Tenzer Greenblatt LLP, counsel for the Company, shall have furnished to you
their written opinion (a draft of such opinion is attached as Annex II(c)
hereto) (which opinion may be limited to the federal laws of the United
States, the laws of the State of New York and the General Corporation Law
of the State of Delaware and in giving such opinion such counsel may state
that, insofar as any opinions involve factual matters, they have relied, to
the extent they deem proper, upon certificates of officers of the Company
or its subsidiaries and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of such
counsel's opinion), dated the Time of Delivery, in form and substance as
attached, to the effect that:
(i) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is in violation of its respective certificate or restated
certificate of incorporation or by-laws or restated by-laws, or comparable
documents, or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound which default, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;
(e) Bonni G. Davis, Vice President, General Counsel and Secretary of Finlay
Jewelry, shall have furnished to you her written opinion (a draft of such
opinion is attached as Annex II(d) hereto) (which opinion may be limited to
the federal laws of the United States, the laws of the State of New York
and the General Corporation Law of the State of Delaware and in giving such
opinion Ms. Davis may state that, insofar as any opinions involve factual
matters, she has relied, to the extent she deems proper, upon certificates
of officers of the Company or its subsidiaries and certificates of
responsible public officials, copies of which certificates will be provided
to you upon delivery of Ms. Davis's opinion), dated the Time of Delivery,
in form and substance as attached, with respect to the matters covered in
<PAGE>
paragraphs (iv) and (viii) of subsection (c) above and paragraph (i) of
subsection (d) above and, in addition, to the effect that:
(i) Each subsidiary of the Company (other than Sonab for which no opinion need
be given) has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification or is subject to no material
liability or disability by reason of failure to be so qualified in any such
jurisdiction; the Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of
each jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification or is subject to no material
liability or disability by reason of its failure to be so qualified in any
such jurisdiction;
(ii) The Company and its subsidiaries have good and marketable title in fee
simple to all real property owned by them in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; to such counsel's knowledge
neither the Company nor any of its subsidiaries is in default under any
lease for real property or buildings held under lease by the Company or its
subsidiaries except for such defaults that are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries; and the leases listed on
Schedule III hereto are the only real property leases to which the Company
and its subsidiaries are a party and are valid, subsisting and enforceable
as against the Company or its subsidiaries (as the case may be) with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries and except that the enforceability of such leases is subject
to the effect of any applicable , insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and similar laws affecting creditors'
rights generally and general equity principles (regardless of whether
enforcement is sought in a proceeding in equity or at law) (in giving the
opinion in this clause, such counsel may state that no examination of
record titles for the purpose of such opinion has been made, and that they
are relying upon a general review of the titles of the Company and its
subsidiaries, upon opinions of local counsel and abstracts, reports and
policies of title companies rendered or issued at or subsequent to the time
of acquisition of such property by the Company or its subsidiaries, upon
opinions of counsel to the lessors of such property and, in respect of
matters of fact, upon certificates of officers of the Company or its
subsidiaries;
(iii)To such counsel's knowledge (a) neither the Company nor any of its
subsidiaries has received any notice that any default by the Company or any
of its subsidiaries has occurred and is continuing under any of the license
agreements with host store groups described or identified in the Prospectus
to which the Company or any of its subsidiaries are a party and (b) no
condition exists which could individually or in the aggregate reasonably be
expected to result in the termination or nonrenewal of any such license
agreement, except that no opinion need be given with respect to the
Company's license agreement with Liberty House as to the effect on such
license agreement of the filing of a voluntary petition by Liberty House
under the Bankruptcy Code (as defined in the Prospectus); and
(iv) To such counsel's knowledge, no legal proceedings are pending or have been
threatened against the Company or any of its subsidiaries that are of a
nature required to be disclosed in the Prospectus which are not so
disclosed therein;
(f) Dechert Price & Rhoads, French counsel to the Company, shall have furnished
to you their written opinion (a draft of such opinion is attached as Annex
II(e) hereto) (which opinion may be limited to the laws of France and in
<PAGE>
giving such opinion French counsel may state that, insofar as any opinions
involve factual matters, it has relied, to the extent such counsel deems
proper, upon certificates of officers of the Company or its subsidiaries
and certificates of responsible public officials, copies of which
certificates will be provided to you upon delivery of such counsel's
opinion), dated the Time of Delivery, in form and substance as attached, to
the effect that:
(i) Sonab has been duly organized and is validly existing as a societe en nom
collectif in France; and
(ii) all of the issued equity interests of Sonab have been duly authorized and
validly created, are fully paid and non-assessable, and are validly held of
record directly or indirectly by the Company, to the knowledge of such
counsel, free of all liens, encumbrances and defects, other than the pledge
under Finlay Jewelry's Revolving Credit Agreement;
With respect to all opinions provided for above in paragraphs (b) through (f) of
this Section 7 as to validity, binding effect and/or enforceability, any such
counsel may state that any such opinion as to enforceability is subject to the
effect of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and other laws of general applicability
relating to or effecting creditor rights and to general equity principles
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to
the date of this Agreement and also at each Time of Delivery, Arthur
Andersen LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post- effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto);
(h) (i) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any strike, boycott or similar labor dispute
or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective
dates as of which information is given in the Prospectus there shall not
have been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries except for borrowings and repayments under the
Revolving Credit Agreement and the Gold Consignment Agreement (each as
defined in the Prospectus and as amended as described in the Prospectus),
or any change, or any development involving a prospective change, in or
affecting the business, operations, management, financial position or
condition, current assets, merchandise inventories, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a whole,
otherwise than as set forth or contemplated in the Prospectus, the effect
of which, in any such case described in clause (i) or (ii), is in the
judgment of Goldman, Sachs & Co. on behalf of the Underwriters so material
and adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and in the
manner contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have occurred in the
rating accorded the Company's or Finlay Jewelry's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's or Finlay Jewelry's debt securities;
(j) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
<PAGE>
material limitation in trading in the Company's securities on NASDAQ;
(iii) a general moratorium on commercial banking activities declared by
either federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if the effect of any such
event specified in this clause (iv) in the judgment of Goldman, Sachs & Co.
on behalf of the Underwriters makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities being
delivered at the Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(k) The Company shall have furnished or caused to be furnished to you at the
Time of Delivery certificates of officers of the Company and Finlay
Jewelry, respectively, reasonably satisfactory to you as to the accuracy of
the representations and warranties of the Company and Finlay Jewelry,
respectively, herein at and as of the Time of Delivery, as to the
performance by each of the Company and Finlay Jewelry, respectively, of all
of their respective obligations hereunder to be performed at or prior to
the Time of Delivery, and as to such other matters as you may reasonably
request, and the Company and Finlay Jewelry shall have furnished or caused
to be furnished certificates as to the matters set forth in subsections (a)
and (h) of this Section; and
(l) The Company shall have complied with the provisions of Section 5(c) hereof
with respect to the furnishing of prospectuses on the New York Business Day
next succeeding the date of this Agreement;
8. (a) The Company and Finlay Jewelry, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained or
incorporated by reference in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company and
Finlay Jewelry shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(b) Each Underwriter severally will indemnify and hold harmless the Company
and Finlay Jewelry against any losses, claims, damages or liabilities to which
the Company or Finlay Jewelry may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and Finlay Jewelry for any legal or other expenses
reasonably incurred by the Company and Finlay Jewelry in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
<PAGE>
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, which consent shall not be unreasonably withheld,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and Finlay Jewelry on the one hand and the Underwriters on the
other from the offering of the Securities. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and Finlay Jewelry on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and Finlay Jewelry on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and Finlay Jewelry on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, Finlay Jewelry and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
<PAGE>
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and Finlay Jewelry under this Section 8
shall be in addition to any liability which the Company and Finlay Jewelry may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company and Finlay Jewelry and to each person, if any, who controls the Company
and Finlay Jewelry within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Securities on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange for the purchase
of such Securities, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Securities, or the Company notify you
that they have so arranged for the purchase of such Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Securities to be purchased at the Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of shares which such Underwriter agreed to purchase hereunder at the Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Securities which such
Underwriter agreed to purchase hereunder) of the Securities of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Securities to be purchased at the Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Securities of a defaulting Underwriter or Underwriters,
then this Agreement shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or Finlay Jewelry, except for the
expenses to be borne by the Company and the Underwriters as provided in Section
6 hereof and the indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Finlay Jewelry and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
<PAGE>
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company or Finlay Jewelry or any officer or director or controlling person of
the Company or Finlay Jewelry, and shall survive delivery of and payment for the
Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof and Finlay Jewelry shall not then be under
any liability to any Underwriter except as provided in Section 8 hereof; but, if
for any other reason, any Securities are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the Underwriters through
you for all out-of-pocket expenses approved in writing by you, including fees
and disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities not so
delivered, but the Company shall then be under no further liability to any
Underwriter except as provided in Sections 6 and 8 hereof and Finlay Jewelry
shall then be under no further liability to any Underwriter except as provided
in Section 8 hereof.
12. In all dealings hereunder, Goldman, Sachs & Co. shall act on behalf of
each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of
you as the Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004, Attention: Registration Department; and
if to the Company or to Finlay Jewelry shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(d) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and Finlay Jewelry and, to the extent provided
in Sections 8 and 10 hereof, the officers, directors and controlling persons of
the Company and Finlay Jewelry and each person who controls any Underwriter, and
their respective heirs, executors, administrators, successors and assigns, and
no other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us ten counterparts hereof, and upon the acceptance hereof by the
Underwriters, this letter and such acceptance hereof shall constitute a binding
agreement among each of the Underwriters and the Company and Finlay Jewelry . It
is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement Among
Underwriters, the form of which shall be submitted to the Company for
<PAGE>
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Finlay Enterprises, Inc.
By: /s/ Barry D. Scheckner
------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Finlay Fine Jewelry Corporation
By: /s/ Barry D. Scheckner
------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
NationsBanc Montgomery Securities LLC
By: /s/ Goldman, Sachs & Co.
------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities to be
Underwriter Purchased
----------- --------------------
<S> <C>
Goldman, Sachs & Co................................. 30,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation............................ 30,000,000
NationsBanc Montgomery Securities LLC............... 15,000,000
-------------
Total................................. $75,000,000
=============
</TABLE>
<PAGE>
SCHEDULE III
New York Leases
Section 7(e)(ii)
1. Lease Agreement dated as of August 27, 1993 between F.H.E.A. Associates and
Finlay Jewelry
2. Lease Agreement dated as of August 19, 1993 between 529 Fifth Company and
Finlay Jewelry, as amended
3. Lease Agreement dated as of August 19, 1993 between 521 Fifth Avenue
Associates and Finlay Jewelry, as amended
4. Lease Agreement dated as of June 17, 1986 between 521 Fifth Avenue Associates
and S&L Acquisition Company L.P., as amended
5. Lease Agreement dated as of May 1, 1995 between Alvin Jacobson Realty and
Finlay Jewelry
6. Lease Agreement dated as of October 4, 1994 between Tanger Properties Limited
Partnership and Finlay Jewelry, as amended
7. Lease Agreement dated May 2, 1996 between Horizon/Glen Outlet Centers Limited
Partnership and Finlay Jewelry
<PAGE>
ANNEX I
DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary financial
information and schedules examined by them (and, if applicable, financial
forecasts and/or pro forma financial information, on which they have
performed more limited procedures as specified in such letter, not
constituting an examination in accordance with generally accepted auditing
standards) and included in the Prospectus or the Registration Statement
comply as to form in all material respects (or, in the case of financial
forecasts and/or pro forma financial information, on the basis of such
limited procedures, nothing came to their attention that cause them to
believe that such financial forecasts and/or pro forma financial
information do not comply as to form in all material respects) with the
applicable accounting requirements of the Act and the related published
rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute
of Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been separately furnished to the Underwriters and are attached
hereto;
(iii)If applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon, copies of which have been
separately furnished to the Underwriters and are attached hereto, and on
the basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing came
to their attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included or incorporated by reference in the Company's Annual Reports
on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
<PAGE>
attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302 (if applicable), 402 and
503(d) (if applicable), respectively, of Regulation S-K;
(vi) They have -
(a) Inquired of certain officials of the Company who have responsibility for
financial and accounting matters as to (i) whether all significant
assumptions regarding the business combinations and financing transactions
had been reflected in the pro forma adjustments, and (ii) whether the
unaudited pro forma condensed consolidated financial statements referred to
(vi)(a) comply as to form, in all material respects, with the applicable
accounting requirements of rule 11-02 of Regulation S-X; and that those
officials stated, in response to such inquiries, that all significant
assumptions regarding the business combinations and financing transactions
had been reflected in the pro forma adjustments and that the unaudited pro
forma condensed consolidated financial statements referred to in (vi)(a)
comply as to form, in all material respects, with the applicable accounting
requirements of rule 11-02 of Regulation S-X.
(b) Compared and/or recomputed the historical financial information for the
Company included on pages [ ] and [ ] in the Registration
Statement with the applicable historical financial information for the
Company on pages F-[ ] and F-[ ], respectively, and found them to be in
agreement.
(c) Proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the unaudited pro forma condensed
consolidated financial statements.
(vii)On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(a) (i) the unaudited consolidated statements of operations, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations, or (ii) any material modifications should be made to
the unaudited condensed consolidated statements of operations, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted accounting
principles;
(b) any other unaudited statement of operations data and balance sheet items
included in the Prospectus do not agree with the corresponding items in the
unaudited consolidated financial statements from which such data and items
were derived, and any such unaudited data and items were not determined on
a basis substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included in the
Prospectus;
<PAGE>
(c) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited statement of
operations data and balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial statements
included in the Prospectus;
(d) any unaudited pro forma consolidated condensed financial information
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma adjustments
have not been properly applied to the historical amounts in the compilation
of that information;
(e) as of a specified date not more than five days prior to the date of such
letter, there have been any changes in the consolidated capital stock
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding
on the date of the latest financial statements included in the Prospectus)
or any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Underwriters, or any
increases in any items specified by the Underwriters, in each case as
compared with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(f) for the period from the date of the latest financial statements included in
the Prospectus to the specified date referred to in Clause (E) there were
any decreases in consolidated net revenues or operating profit or the total
or per share amounts of consolidated net income or other items specified by
the Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length specified
by the Underwriters, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(viii) In addition to the examination referred to in their report(s) included in
the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting
an examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Underwriters, which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Underwriters, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them
to be in agreement.
Finlay Fine Jewelry Corporation
8 3/8% Senior Notes due 2008
_________________
Underwriting Agreement
April 20, 1998
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette
Securities Corporation,
NationsBanc Montgomery Securities LLC
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Finlay Fine Jewelry Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you as the several Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of $150,000,000 principal amount of the Company's
8 3/8% Senior Notes due May 1, 2008 (the "Securities").
1. Each of the Company and Finlay Enterprises, Inc., a Delaware corporation and
the parent of the Company ("Parent"), represents and warrants to, and agrees
with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-48563), as amended by
Amendments Nos. 1 and 2 thereto (the "Initial Registration Statement"), in
respect of the Securities has been filed with the Securities and Exchange
Commission (the "Commission"); such Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form;
other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which
became effective upon filing, no other document with respect to such
Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule
462(b) Registration Statement, if any, has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission to the
Company or its counsel (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act is hereinafter
called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto but excluding Form T-1 and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared effective or
such part of the Rule 462(b) Registration Statement, if any, that became or
hereafter becomes effective, each as amended at the time such part of the
registration statement became effective, are hereinafter collectively
called the
<PAGE>
"Registration Statement"; such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus";
(b) No order preventing or suspending the use of any Preliminary Prospectus has
been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements
of the Act, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and the statements made therein within the
coverage of Rule 175(b) under the Act were made by the Company with a
reasonable basis and in good faith; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus
will conform, in all material respects to the requirements of the Act and
the Trust Indenture Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date as
to the Registration Statement and any amendment thereto, and as of the
applicable filing date as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the statements made therein within
the coverage of Rule 175(b) under the Act were made by the Company with a
reasonable basis and in good faith; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(d) Neither Parent nor the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of Parent or the Company or any of its
subsidiaries, except for borrowings and repayments under the Revolving
Credit Agreement and the Gold Consignment Agreement (each as defined in the
Prospectus and as amended as described in the Prospectus) or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the business, operations, management, financial
position or condition, current assets, merchandise inventories,
stockholders' equity or results of operations of Parent and the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect"), otherwise
than as set forth or contemplated in the Prospectus;
(e) Parent and the Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
material personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by Parent and the Company and its subsidiaries; and any material
real property and buildings held under lease by Parent and the Company and
its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with
the use
<PAGE>
made and proposed to be made of such property and buildings by Parent and
the Company and its subsidiaries;
(f) Each of the Company and Parent has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; the
Company's indirect subsidiary, Societe Nouvelle d'Achat de Bijouterie -
S.O.N.A.B. ("Sonab") is duly organized and validly existing as a societe en
nom collectif in France; each other direct or indirect subsidiary of the
Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction;
(g) Parent has an authorized capitalization as set forth under the caption
"Description of Capital Stock" in the Prospectus, and all of the issued
shares of capital stock of Parent have been duly authorized and validly
issued, are fully paid and non-assessable and conform to the description of
such capital stock contained in the Prospectus; and all of the issued
shares of capital stock of the Company and each subsidiary of the Company
have been duly authorized and validly issued, are fully paid and
non-assessable and (except for directors' qualifying shares, if any, and
except as set forth in the Prospectus) are owned directly or indirectly by
Parent, free and clear of all liens, encumbrances, equities or claims;
(h) The Securities have been duly authorized by the Company and, on the Closing
Date, will have been duly executed, issued and delivered by the Company,
and when the Securities, in accordance with the provisions of the Indenture
(the "Indenture"), substantially in the form filed as an exhibit to the
Registration Statement, to be entered into by the Company and Marine
Midland Bank, as Trustee (the "Trustee"), have been authenticated by the
Trustee and delivered to and paid for by the Underwriters in accordance
with the terms of this Agreement, the Securities will be entitled to the
benefits of the Indenture and will constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles (regardless of whether enforcement is
sought in a proceeding in equity or at law); the Indenture has been duly
authorized by the Company and qualified under the Trust Indenture Act and
when duly executed and delivered by the Company and the Trustee, will
constitute a valid and legally binding instrument, enforceable against the
Company in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles (regardless of whether
enforcement is sought in a proceeding in equity or at law); and the
Securities and the Indenture will conform in all material respects to the
descriptions thereof in the Prospectus;
(i) The issue and sale of the Securities and the compliance by each of the
Company and Parent with all of the provisions of the Securities, the
Indenture and this Agreement applicable to it and the consummation of the
transactions herein and therein contemplated (i) will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, lease, license or other agreement or instrument to which Parent
or the Company or any of its subsidiaries is a party or by
<PAGE>
which Parent, the Company or any of its subsidiaries is bound or to which
and of the property or assets of Parent or the Company or any of its sub-
sidiaries is subject,except any such conflict, breach, violation or default
which has been consented to or waived in a valid and binding writing duly
executed and delivered to Parent or the Company by or on behalf of the
party granting such consent or waiver; (ii) will not result in any
violation of the provisions of Parent's or the Company's or any of its
subsidiaries' respective certificate or restated certificate of
incorporation or by-laws or restated by-laws or comparable documents and
(iii) will not result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over Parent or the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by
Parent or the Company of the transactions contemplated by this Agreement
and the Indenture, except such as have been obtained under the Act and the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under foreign or state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(j) Neither Parent nor the Company nor any of its subsidiaries is in violation
of its respective certificate or restated certificate of incorporation or
by-laws or restated by-laws or comparable documents, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease, license or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound which default
could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect;
(k) The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Senior Notes", insofar as they purport to constitute a
summary of the terms of the Securities and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and fair in all
material respects;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which Parent or the Company or any of
its subsidiaries is a party or of which any property of Parent or the
Company or any of its subsidiaries is the subject which, if determined
adversely to Parent or the Company or any of its subsidiaries, could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect; and, to the Company's and Parent's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(m) Each of the Company and Parent is not and, after giving effect to the
offering and sale of the Securities, will not be an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(n) Arthur Andersen LLP, who have certified certain consolidated financial
statements of the Company, are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(o) Parent and the Company and its subsidiaries directly or through host store
groups are subject to consent decrees, injunctions or comparable
governmental orders or decrees regarding the discount pricing and
advertising of jewelry from "regular" or "original" prices only in the
states of California, Colorado, Georgia, Oregon and Wisconsin, and Parent
and the Company and its subsidiaries are in compliance therewith and with
applicable federal and state laws with
<PAGE>
respect to such pricing and advertising practices, except for such non-
compliance previously identified in writing by the Company to the Under-
writers which could not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect;
(p) Neither Parent nor the Company nor any of its subsidiaries has received any
notice that any default by Parent or the Company or any of its subsidiaries
has occurred and is continuing under any of the license agreements with
host store groups described or identified in the Prospectus to which Parent
or the Company or any of its subsidiaries are a party and no condition
exists which could individually or in the aggregate reasonably be expected
to result in the termination or nonrenewal of any such license agreement;
each such license agreement has been duly authorized (and, in the case of
written license agreements, duly and validly executed and delivered) by and
on behalf of Parent or the Company and its subsidiaries, as the case may
be, and, assuming the due authorization (and, in the case of written
license agreements, the due and valid execution and delivery) thereof by
the other party or parties thereto, is the valid and binding obligation of
Parent and the Company, its subsidiaries and such other party or parties,
as the case may be, enforceable in accordance with its respective terms
against the respective parties thereto subject to the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium and similar laws affecting creditors' rights generally
and to general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law); and neither Parent nor the
Company nor any of its subsidiaries has received any notice (whether actual
or constructive) that the licensor thereunder is considering limiting,
suspending, revoking or non-renewing any such license; except that no
representation is made with respect to the Company's license agreement with
Liberty House as to the effect on such license agreement of the filing of a
voluntary petition by Liberty House under the Bankruptcy Code (as defined
in the Prospectus);
(q) Each of the Company and Parent has duly authorized the amendment to the
Revolving Credit Agreement that is described in the Prospectus.
Substantially contemporaneously with the Time of Delivery (as defined in
Section 4 hereof), the Company and Parent will duly execute and deliver
such amendment to the Revolving Credit Agreement. The Company has duly
authorized the amendment to the Gold Consignment Agreement that is
described in the Prospectus. Substantially contemporaneously with the Time
of Delivery, the Company will duly execute and deliver such amendment to
the Gold Consignment Agreement. Assuming the due authorization, execution
and delivery thereof by the other parties thereto, (a) the Revolving Credit
Agreement, as amended as described above, will constitute the legal, valid
and binding agreement of the Company and Parent and (b) the Gold
Consignment Agreement, as amended as described above, will constitute the
legal, valid and binding agreement of the Company, in each case,
enforceable against the Company and/or Parent, as the case may be, subject,
as to enforcement, to insolvency, reorganization, fraudulent conveyance or
transfer, moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles (regardless of
whether enforcement is sought in a proceeding in equity or at law); and
(r) Neither the Company nor Parent nor any of their respective affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes.
2. Subject to the terms and conditions herein set forth, the Company agrees
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
97.646% of the principal amount thereof, plus accrued interest, if any, from May
1, 1998 to the Time of Delivery hereunder, the principal amount of Securities
set forth opposite the name of such Underwriter in Schedule I hereto.
<PAGE>
3. Upon the authorization by Goldman, Sachs and Co., on behalf of the
Underwriters, of the release of the Securities, the several Underwriters propose
to offer the Securities for sale upon the terms and conditions set forth in the
Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of Federal (same-day) funds to the account specified by the
Company to Goldman, Sachs & Co. at least forty-eight hours in advance, by
causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at
DTC. The Company will cause the certificates representing the Securities to be
made available to Goldman, Sachs & Co. for checking at least twenty-four hours
prior to the Time of Delivery (as defined below) at the office of DTC or its
designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on April 24, 1998
or such other time and date as Goldman, Sachs & Co. and the Company may agree
upon in writing. Such time and date for delivery of the Securities is herein
called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, 37th Floor, New York, New York 10022 (the
"Closing Location"), and the Securities will be delivered at the Designated
Office, all at the Time of Delivery. A meeting will be held at the Closing
Location at 2:00 p.m., New York City time, on the New York Business Day next
preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the Time of Delivery which shall be disapproved by the
Underwriters promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or Prospectus, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or Prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
<PAGE>
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may reasonably request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction or to take
any other action which would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
offer and sale of the Securities in each jurisdiction in which the
Securities have been qualified as provided above;
(c) Prior to 12:00 noon, New York City time, on the New York Business Day next
succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Securities and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act or the Trust Indenture Act, to notify you and upon
your request to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies
as you may from time to time reasonably request of an amended Prospectus or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Securities
at any time nine months or more after the time of issue of the Prospectus,
upon your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as practicable,
but in any event not later than eighteen months after the effective date of
the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, not to (and
to cause each of its subsidiaries not to) register for sale, offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder, any
Securities or any securities that are substantially similar to the
Securities (other than the Senior Debentures (as defined in the Prospectus)
of Parent in an aggregate principal amount of $75.0 million), or any
securities of the Company or any such subsidiary of the Company convertible
into or exchangeable for securities of the Company or any such subsidiary
of the Company substantially similar to the Securities;
(f) Within the time limits prescribed by the Exchange Act, to furnish to the
holders of the Securities after the end of each fiscal year an annual
report (including a balance sheet and statements of operations, changes in
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, after the
end of each of the first three quarters of each fiscal year (beginning with
the fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company and
its subsidiaries for such quarter in reasonable detail;
<PAGE>
(g) During a period of five years from the effective date of the Registration
Statement, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders, and to deliver to you (i)
as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is
listed or quoted (such financial statements to be on a consolidated basis
to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission); and (ii) such additional information concerning the business
and financial condition of the Company or Parent as you may from time to
time reasonably request;
(h) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) If the Company elects to rely upon Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
Among Underwriters, this Agreement, the Indenture, any Blue Sky Memorandum,
closing documents (including any reasonable compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the reasonable fees and disbursements of counsel
for the Underwriters in connection with such qualification and in connection
with any Blue Sky and legal investment surveys, if any; (iv) all fees charged by
securities rating services for rating the Securities; (v) the filing fees
incident to, and the reasonable fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (vi) the cost of preparing certificates representing the Securities;
(vii) the fees and expenses of the Trustee and the Collateral Agent and any
agent of the Trustee and the Collateral Agent and the fees and disbursements of
counsel for the Trustee and the Collateral Agent in connection with the
Indenture and the Securities; (viii) all other costs and expenses incident to
the performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees
and disbursements of their counsel and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and Parent herein are, at and as of the Time of
Delivery, true and correct, the condition that each of the Company and Parent
shall have performed all of its obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m., Washington,
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or
<PAGE>
any part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) Jones, Day, Reavis & Pogue, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated the Time of Delivery, with respect to the
matters covered in paragraphs (i), (ii), (v), (vi), (vii), (x) and (xii) of
subsection (c) below as well as such other related matters as you may reasonably
request, and such counsel shall have received such documents and information as
they may reasonably request to enable them to pass upon such matters;
(c) Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Company,
shall have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto) (which opinion may be limited to the federal
laws of the United States, the laws of the State of New York and the General
Corporation Law of the State of Delaware and in giving such opinion such counsel
may state that, insofar as any opinions involve factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company or its subsidiaries and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of such
counsel's opinion), dated the Time of Delivery, in form and substance as
attached, to the effect that:
(i) Each of the Company and Parent has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) Parent has an authorized capitalization as set forth under the caption
"Description of Capital Stock" in the Prospectus, and all of the issued
shares of capital stock of Parent and the Company have been duly authorized
and validly issued, fully paid and non-assessable;
(iii)Each subsidiary of the Company (other than Sonab) has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each subsidiary of the Company (other than
Sonab) have been duly authorized and validly issued, are fully paid and
non-assessable, and (except for directors' qualifying shares, if any, and
except as otherwise set forth in the Prospectus) are owned of record
directly or indirectly by the Company, to the knowledge of such counsel,
free and clear of all liens, encumbrances and defects;
(iv) To such counsel's knowledge and other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which Parent or
the Company or any of its subsidiaries is a party or of which any property
of Parent or the Company or any of its subsidiaries is the subject which,
if determined adversely to Parent or the Company or any of its
subsidiaries, could individually or in the aggregate reasonably be expected
to have a Material Adverse Effect; and, to such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(v) This Agreement has been duly authorized, executed and delivered by the
Company and Parent;
(vi) The Securities have been duly authorized, executed, authenticated, issued
and delivered and constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture; and the
Securities and the Indenture conform in all material respects to the
descriptions thereof in the Prospectus;
<PAGE>
(vii)The Indenture has been duly authorized, executed and delivered by the
Company and, when duly authorized, executed and delivered by the other
parties thereto, will constitute a valid and legally binding instrument,
enforceable in accordance with its terms; the Indenture has been qualified
under the Trust Indenture Act;
(viii) The issue and sale of the Securities being delivered at the Time of
Delivery by the Company and the compliance by the Company and Parent with
the applicable provisions of the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, real property lease,
license or other material agreement or instrument known to such counsel to
which Parent or the Company or any of its subsidiaries is a party or by
which Parent or the Company or any of its subsidiaries is bound or to which
any of the property or assets of Parent or the Company or any of its
subsidiaries is subject, nor (b) will such action result in any violation
of the provisions of (i) the respective certificate or restated certificate
of incorporation, or respective by-laws or restated by-laws, as the case
may be, of the Company or Parent, (ii) any statute, rule or regulation
known to such counsel of any governmental agency or body having
jurisdiction over Parent or the Company or any of its subsidiaries or any
of their respective properties or (iii) any order applicable to Parent or
the Company, any of its subsidiaries or any of their respective properties
of any court, governmental agency or body known to such counsel based upon
an officer's certificate listing any such orders (which officer's
certificate shall be delivered with such opinion);
(ix) No consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required for
the issue and sale of the Securities or the consummation by the Company of
the transactions contemplated by the Indenture and this Agreement, except
such as have been obtained under the Act and the Trust Indenture Act and
such consents, approvals, authorizations, registrations or qualifications
as may be required under foreign or state securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by the
Underwriters;
(x) The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Senior Notes", insofar as they purport to constitute a
summary of the terms of the Securities, and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and fair in all
material respects;
(xi) Each of the Company and Parent is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act; and
(xii)The Registration Statement and the Prospectus and any further amendments
and supplements thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules and other
financial data included therein or omitted therefrom, as to which such
counsel need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in the opinion in
subsection (ix) of this Section 7(c), such counsel may state that such
counsel has participated in conferences at which the contents of the
Registration Statement and the Prospectus and related matters were
discussed, and, on the basis of such participation, they have no reason to
believe that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to the Time of Delivery
(other than the financial
<PAGE>
statements and related schedules and other financial data included therein
or omitted therefrom, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the Prospectus
or any further amendment or supplement thereto made by the Company prior to
the Time of Delivery (other than the financial statements and related
schedules and other financial data included therein or omitted therefrom,
as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of the Time of Delivery,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related schedules and
other financial data included therein or omitted therefrom, as to which
such counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required;
(d) Tenzer Greenblatt LLP, counsel for the Company, shall have furnished to
you their written opinion (a draft of such opinion is attached as Annex II(c)
hereto) (which opinion may be limited to the federal laws of the United States,
the laws of the State of New York and the General Corporation Law of the State
of Delaware and in giving such opinion such counsel may state that, insofar as
any opinions involve factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company or its subsidiaries and
certificates of responsible public officials, copies of which certificates will
be provided to you upon delivery of such counsel's opinion), dated the Time of
Delivery, in form and substance as attached, to the effect that:
(i) To such counsel's knowledge, neither Parent nor the Company nor any of its
subsidiaries is in violation of its respective certificate or restated
certificate of incorporation or by- laws or restated by-laws, or comparable
documents, or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound which default, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;
(e) Bonni G. Davis, Vice President, General Counsel and Secretary of the
Company, shall have furnished to you her written opinion (a draft of such
opinion is attached as Annex II(d) hereto) (which opinion may be limited to the
federal laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware and in giving such opinion Ms.
Davis may state that, insofar as any opinions involve factual matters, she has
relied, to the extent she deems proper, upon certificates of officers of the
Company or its subsidiaries and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of Ms.
Davis's opinion), dated the Time of Delivery, in form and substance as attached,
with respect to the matters covered in paragraphs (iv) and (viii) of subsection
(c) above and paragraph (i) of subsection (d) above and, in addition, to the
effect that:
(i) Each subsidiary of the Company (other than Sonab for which no opinion need
be given) has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification or is subject to no material
liability or disability by reason of failure to be so qualified in any such
jurisdiction; each of Parent and the Company has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction in which it owns or leases properties
or conducts
<PAGE>
any business so as to require such qualification or is subject to no
material liability or disability by reason of its failure to be so
qualified in any such jurisdiction;
(ii) Parent and the Company and its subsidiaries have good and marketable title
in fee simple to all real property owned by them in each case free and
clear of all liens, encumbrances and defects except such as are described
in the Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by Parent and the Company and its subsidiaries; to such
counsel's knowledge neither Parent nor the Company nor any of its
subsidiaries is in default under any lease for real property or buildings
held under lease by Parent or the Company or its subsidiaries except for
such defaults that are not material and do not interfere with the use made
and proposed to be made of such property and buildings by Parent and the
Company and its subsidiaries; and the leases listed on Schedule III hereto
are the only real property leases to which Parent and the Company and its
subsidiaries are a party and are valid, subsisting and enforceable as
against Parent and the Company and its subsidiaries (as the case may be)
with such exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by Parent and
the Company and its subsidiaries and except that the enforceability of such
leases is subject to the effect of any applicable , insolvency,
reorganization, fraudulent conveyance or transfer, moratorium and similar
laws affecting creditors' rights generally and general equity principles
(regardless of whether enforcement is sought in a proceeding in equity or
at law) (in giving the opinion in this clause, such counsel may state that
no examination of record titles for the purpose of such opinion has been
made, and that they are relying upon a general review of the titles of
Parent and the Company and its subsidiaries, upon opinions of local counsel
and abstracts, reports and policies of title companies rendered or issued
at or subsequent to the time of acquisition of such property by Parent or
the Company or its subsidiaries, upon opinions of counsel to the lessors of
such property and, in respect of matters of fact, upon certificates of
officers of Parent or the Company or its subsidiaries;
(iii)To such counsel's knowledge (a) neither Parent nor the Company nor any of
its subsidiaries has received any notice that any default by Parent or the
Company or any of its subsidiaries has occurred and is continuing under any
of the license agreements with host store groups described or identified in
the Prospectus to which Parent or the Company or any of its subsidiaries
are a party and (b) no condition exists which could individually or in the
aggregate reasonably be expected to result in the termination or nonrenewal
of any such license agreement, except that no opinion need be given with
respect to the Company's license agreement with Liberty House as to the
effect on such license agreement of the filing of a voluntary petition by
Liberty House under the Bankruptcy Code (as defined in the Prospectus); and
(iv) To such counsel's knowledge, no legal proceedings are pending or have been
threatened against Parent or the Company or any of its subsidiaries that
are of a nature required to be disclosed in the Prospectus which are not so
disclosed therein;
(f) Dechert Price & Rhoads, French counsel to the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached as
Annex II(e) hereto) (which opinion may be limited to the laws of France and in
giving such opinion French counsel may state that, insofar as any opinions
involve factual matters, it has relied, to the extent such counsel deems proper,
upon certificates of officers of the Company or its subsidiaries and
certificates of responsible public officials, copies of which certificates will
be provided to you upon delivery of such counsel's opinion), dated the Time of
Delivery, in form and substance as attached, to the effect that:
(i) Sonab has been duly organized and is validly existing as a societe en nom
collectif in France; and
<PAGE>
(ii) all of the issued equity interests of Sonab have been duly authorized and
validly created, are fully paid and non-assessable, and are validly held of
record directly or indirectly by the Company, to the knowledge of such
counsel, free of all liens, encumbrances and defects, other than the pledge
under the Company's Revolving Credit Agreement;
With respect to all opinions provided for above in paragraphs (b) through (f) of
this Section 7 as to validity, binding effect and/or enforceability, any such
counsel may state that any such opinion as to enforceability is subject to the
effect of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and other laws of general applicability
relating to or effecting creditor rights and to general equity principles
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(h) (i) Neither Parent nor the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any strike, boycott or similar labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of Parent or the Company or any of its subsidiaries except for
borrowings and repayments under the Revolving Credit Agreement and the Gold
Consignment Agreement (each as defined in the Prospectus and as amended as
described in the Prospectus), or any change, or any development involving a
prospective change, in or affecting the business, operations, management,
financial position or condition, current assets, merchandise inventories,
stockholders' equity or results of operations of Parent and the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is in the judgment of Goldman, Sachs & Co. on behalf of the Underwriters
so material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities on the terms and in
the manner contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's or Parent's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
or Parent's debt securities;
(j) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in Parent's securities on NASDAQ or in the
Company's securities if then listed or quoted; (iii) a general moratorium on
commercial banking activities declared by either federal or New York State
authorities; or (iv) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this clause (iv) in the
judgment of Goldman, Sachs & Co. on behalf of the Underwriters makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities being delivered at the Time of Delivery on the terms and in
the manner contemplated in the Prospectus;
<PAGE>
(k) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of officers of the Company and Parent,
respectively, reasonably satisfactory to you as to the accuracy of the
representations and warranties of the Company and Parent, respectively, herein
at and as of the Time of Delivery, as to the performance by each of the Company
and Parent, of all of their respective obligations hereunder to be performed at
or prior to the Time of Delivery, and as to such other matters as you may
reasonably request, and the Company and Parent shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections (a) and (h)
of this Section; and
(l) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement;
8. (a) The Company and Parent, jointly and severally, will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company and Parent shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(b) Each Underwriter severally will indemnify and hold harmless the Company
and Parent against any losses, claims, damages or liabilities to which the
Company or Parent may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through Goldman, Sachs & Co. expressly for use therein; and will reimburse the
Company and Parent for any legal or other expenses reasonably incurred by the
Company and Parent in connection with investigating or defending any such action
or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
<PAGE>
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, which consent shall not be unreasonably withheld,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and Parent on the one hand and the Underwriters on the other from
the offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and Parent on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and Parent on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and Parent on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, Parent and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company and Parent under this Section 8 shall be
in addition to any liability which the Company and Parent may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to
<PAGE>
each officer and director of the Company and Parent and to each person, if any,
who controls the Company and Parent within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Securities on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange for the purchase
of such Securities, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Securities, or the Company notify you
that they have so arranged for the purchase of such Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Securities to be purchased at the Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of shares which such Underwriter agreed to purchase hereunder at the Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Securities which such
Underwriter agreed to purchase hereunder) of the Securities of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Securities to be purchased at the Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Securities of a defaulting Underwriter or Underwriters,
then this Agreement shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or Parent, except for the expenses
to be borne by the Company and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Parent and the several Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company
or Parent or any officer or director or controlling person of the Company or
Parent, and shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof and Parent shall not then be under any
liability to any Underwriter except as provided in Section 8 hereof; but, if for
any other reason, any Securities are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the Underwriters through
you for all out-of-pocket expenses approved in writing
<PAGE>
by you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Securities not so delivered, but the Company shall then be under no further
liability to any Underwriter except as provided in Sections 6 and 8 hereof and
Parent shall then be under no further liability to any Underwriter except as
provided in Section 8 hereof.
12. In all dealings hereunder, Goldman, Sachs & Co. shall act on behalf of
each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of
you as the Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004, Attention: Registration Department; and
if to the Company or to Parent shall be delivered or sent by mail to the address
of the Company set forth in the Registration Statement, Attention: Secretary;
provided, however, that any notice to an Underwriter pursuant to Section 8(d)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and Parent and, to the extent provided in
Sections 8 and 10 hereof, the officers, directors and controlling persons of the
Company and Parent and each person who controls any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us ten counterparts hereof, and upon the acceptance hereof by the
Underwriters, this letter and such acceptance hereof shall constitute a binding
agreement among each of the Underwriters and the Company and Parent. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement Among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Finlay Fine Jewelry Corporation
By: /s/ Barry D. Scheckner
------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Finlay Enterprises, Inc.
By: /s/ Barry D. Scheckner
------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
NationsBanc Montgomery Securities LLC
By: /s/ Goldman, Sachs & Co.
------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities to be
Underwriter Purchased
----------- --------------------
<S> <C>
Goldman, Sachs & Co.................................. 60,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation............................. 60,000,000
NationsBanc Montgomery Securities LLC................ 30,000,000
-------------
Total.................................. $150,000,000
=============
</TABLE>
<PAGE>
SCHEDULE III
New York Leases
Section 7(e)(ii)
----------------
1. Lease Agreement dated as of August 27, 1993 between F.H.E.A. Associates and
the Company
2. Lease Agreement dated as of August 19, 1993 between 529 Fifth Company and the
Company, as amended
3. Lease Agreement dated as of August 19, 1993 between 521 Fifth Avenue
Associates and the Company, as amended
4. Lease Agreement dated as of June 17, 1986 between 521 Fifth Avenue Associates
and S&L Acquisition Company L.P., as amended
5. Lease Agreement dated as of May 1, 1995 between Alvin Jacobson Realty and the
Company
6. Lease Agreement dated as of October 4, 1994 between Tanger Properties Limited
Partnership and the Company, as amended
7. Lease Agreement dated May 2, 1996 between Horizon/Glen Outlet Centers Limited
Partnership and the Company
<PAGE>
ANNEX I
DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary financial
information and schedules examined by them (and, if applicable, financial
forecasts and/or pro forma financial information, on which they have
performed more limited procedures as specified in such letter, not
constituting an examination in accordance with generally accepted auditing
standards) and included in the Prospectus or the Registration Statement
comply as to form in all material respects (or, in the case of financial
forecasts and/or pro forma financial information, on the basis of such
limited procedures, nothing came to their attention that cause them to
believe that such financial forecasts and/or pro forma financial
information do not comply as to form in all material respects) with the
applicable accounting requirements of the Act and the related published
rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute
of Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been separately furnished to the Underwriters and are attached
hereto;
(iii)If applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon, copies of which have been
separately furnished to the Underwriters and are attached hereto, and on
the basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing came
to their attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included or incorporated by reference in the Company's Annual Reports
on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them
<PAGE>
to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302 (if applicable)
402 and 503(d) (if applicable), respectively, of Regulation S-K;
(vi) They have -
(a) Inquired of certain officials of the Company who have responsibility for
financial and accounting matters as to (i) whether all significant
assumptions regarding the business combinations and financing transactions
had been reflected in the pro forma adjustments, and (ii) whether the
unaudited pro forma condensed consolidated financial statements referred to
(vi)(a) comply as to form, in all material respects, with the applicable
accounting requirements of rule 11-02 of Regulation S-X; and that those
officials stated, in response to such inquiries, that all significant
assumptions regarding the business combinations and financing transactions
had been reflected in the pro forma adjustments and that the unaudited pro
forma condensed consolidated financial statements referred to in (vi)(a)
comply as to form, in all material respects, with the applicable accounting
requirements of rule 11-02 of Regulation S-X.
(b) Compared and/or recomputed the historical financial information for the
Company included on pages [ ] and [ ] in the Registration
Statement with the applicable historical financial information for the
Company on pages F-[ ] and F-[ ], respectively, and found them to be in
agreement.
(c) Proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the unaudited pro forma condensed
consolidated financial statements.
(vii)On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(a)(i) the unaudited consolidated statements of operations, consolidated balance
sheets and consolidated statements of cash flows included in the Prospectus
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations, or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of operations, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted accounting
principles;
(b) any other unaudited statement of operations data and balance sheet items
included in the Prospectus do not agree with the corresponding items in the
unaudited consolidated financial statements from which such data and items
were derived, and any such unaudited data and items were not determined on
a basis substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included in the
Prospectus;
<PAGE>
(c) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited statement of
operations data and balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial statements
included in the Prospectus;
(d) any unaudited pro forma consolidated condensed financial information
included in the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the published rules
and regulations thereunder or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of that information;
(e) as of a specified date not more than five days prior to the date of such
letter, there have been any changes in the consolidated capital stock
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding
on the date of the latest financial statements included in the Prospectus)
or any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Underwriters, or any
increases in any items specified by the Underwriters, in each case as
compared with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(f) for the period from the date of the latest financial statements included in
the Prospectus to the specified date referred to in Clause (E) there were
any decreases in consolidated net revenues or operating profit or the total
or per share amounts of consolidated net income or other items specified by
the Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length specified
by the Underwriters, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(viii) In addition to the examination referred to in their report(s) included in
the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting
an examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Underwriters, which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Underwriters, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them
to be in agreement.
Finlay Enterprises, Inc.
Common Stock, par value $.01 per share
_________________
Underwriting Agreement
April 20, 1998
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette
Securities Corporation,
SBC Warburg Dillon Read Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Finlay Enterprises, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
567,310 shares of the Company's Common Stock, par value $.01 per share (the
"Stock"), and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 1,232,690 shares of Stock.
Certain of the Selling Stockholders as indicated on Schedule II hereto are
granting an option to the Underwriters to purchase up to an additional 270,000
shares of Stock. The aggregate of 1,800,000 shares of Stock to be sold by the
Company and the Selling Stockholders is herein called the "Firm Shares" and the
aggregate of up to 270,000 additional shares to be sold by certain of the
Selling Stockholders is herein called the "Optional Shares". The Firm Shares and
the Optional Shares that the Underwriters elect to purchase pursuant to Section
2 hereof are herein collectively called the "Shares".
1. (a) Each of the Company and Finlay Fine Jewelry Corporation, a Delaware
corporation and a wholly owned subsidiary of the Company ("Finlay Jewelry"),
jointly and severally represents and warrants to, and agrees with, each of the
Underwriters and the Selling Stockholders that:
(i) A registration statement on Form S-3 (File No. 333-48567), as amended by
Amendments Nos. 1 and 2 thereto (the "Initial Registration Statement"), in
respect of the Shares has been filed with the Securities and Exchange
Commission (the "Commission"); such Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration State-
ment"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended (the "Act"), which became effective upon filing, no other doc-
ument with respect to such Initial Registration Statement or any such doc-
ument the incorporated by reference therein has heretofore been filed with
the
<PAGE>
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule
462(b) Registration Statement, if any, has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission to the
Company or its counsel (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act is hereinafter
called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto but excluding Form T-1 and including (i) the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared effective or
such part of the Rule 462(b) Registration Statement, if any, that became or
hereafter becomes effective and (ii) the documents incorporated by
reference in the pro- spectus contained in the registration statement at
the time such part of the registration statement became effective, each as
amended at the time such part of the registration statement became
effective, are herein- after collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus"; any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any reference to
any amendment or sup- plement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section 13(a) or
15(d) of the Exchange Act after the effective date of the Registration
Statement that is incorporated by re- ference in the Registration
Statement);
(ii) No order preventing or suspending the use of any Preliminary Prospectus has
been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements
of the Act and the rules and regulations of the Commission thereunder, and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and the statements made therein within the coverage
of Rule 175(b) under the Act were made by the Company with a reasonable
basis and in good faith; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein or
by the Selling Stockholders expressly for use in the preparation of the
answers therein to Item 7 of Form S- 3;
(iii)The documents incorporated by reference in the Prospectus, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed or incorporated by reference
in the Prospectus or any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the case
may be, will conform in all material respects to the requirements of the
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
statements made therein within the coverage of Rule 175(b) under the Act
were made by the Company with a reasonable basis and in good faith;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein or by the Selling
Stockholders expressly for use in the preparation of the answers therein to
item 7 of Form S- 3;
<PAGE>
(iv) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus
will conform, in all material respects to the requirements of the Act and
the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement
and any amendment thereto, and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; and the statements made therein within the coverage of Rule
175(b) under the Act were made by the Company with a reasonable basis and
in good faith; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or by
the Selling Stockholders expressly for use in the preparation of the
answers therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included or incorporated by
reference in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries, except for borrowings and repayments under the Revolving
Credit Agreement and the Gold Consignment Agreement (each as defined in the
Prospectus and as amended as described in the Prospectus) or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the business, operations, management, financial
position or condition, current assets, merchandise inventories,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"), otherwise than
as set forth or contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all material
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any material real property and buildings
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(vii)Each of the Company and Finlay Jewelry has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; the
Company's indirect subsidiary, Societe Nouvelle d'Achat de Bijouterie -
S.O.N.A.B. ("Sonab") is duly organized and validly existing as a societe en
nom collectif in France; each other direct or indirect subsidiary of the
Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction;
(viii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
<PAGE>
have been duly authorized and validly issued, are fully paid and
non-assessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued, are
fully paid and non-assessable and (except for directors' qualifying shares,
if any, and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims;
(ix) The Shares to be issued and sold by the Company to the Underwriters
hereunder were previously unissued, have been duly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued and fully paid and non-assessable and will conform
to the description of the Stock contained in the Prospectus and the
issuance of such shares will not be subject to any preemptive or similar
rights which have not been waived in a valid and binding writing duly
executed and delivered to the Company by or on behalf of the party granting
such waiver;
(x) The issue and sale of the Shares to be sold by the Company and the
compliance by each of the Company and Finlay Jewelry with all of the
provisions of this Agreement applicable to it and the consummation of the
transactions herein contemplated (i) will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement,
lease, license or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, except any such conflict,
breach, violation or default which has been consented to or waived in a
valid and binding writing duly executed and delivered to the Company by or
on behalf of the party granting such consent or waiver; (ii) will not
result in any violation of the provisions of the Company's or any of its
subsidiaries' respective certificate or restated certificate of
incorporation or by-laws or restated by-laws or comparable documents and
(iii) will not result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties; and
no consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required for
the issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under
the Act of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under foreign or state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(xi) Neither the Company nor any of its subsidiaries is in violation of its
respective certificate or restated certificate of incorporation or by-laws
or restated by-laws or comparable documents, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease, license or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound which default
could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect;
(xii)The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock and under the caption "Underwriting"s
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate and fair in all material
respects;
(xiii) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, could individually or in the aggregate
reasonably be expected to have a Material Adverse Effect; and, to the
Company's and Finlay Jewelry's knowledge, no such proceedings are
<PAGE>
threatened or contemplated by governmental authorities or threatened by
others;
(xiv)Each of the Company and Finlay Jewelry is not and, after giving effect to
the offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(xv) Arthur Andersen LLP, who have certified certain consolidated financial
statements of the Company, are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(xvi)The Company and its subsidiaries directly or through host store groups are
subject to consent decrees, injunctions or comparable governmental orders
or decrees regarding the discount pricing and advertising of jewelry from
"regular" or "original" prices only in the states of California, Colorado,
Georgia, Oregon and Wisconsin, and the Company and its subsidiaries are in
compliance therewith and with applicable federal and state laws with
respect to such pricing and advertising practices, except for such
noncompliance previously identified in writing by the Company to the
Representatives which could not individually or in the aggregate reasonably
be expected to have a Material Adverse Effect;
(xvii) Neither the Company nor any of its subsidiaries has received any notice
that any default by the Company or any of its subsidiaries has occurred and
is continuing under any of the license agreements with host store groups
described or identified in the Prospectus to which the Company or any of
its subsidiaries are a party and no condition exists which could
individually or in the aggregate reasonably be expected to result in the
termination or nonrenewal of any such license agreement; each such license
agreement has been duly authorized (and, in the case of written license
agreements, duly and validly executed and delivered) by and on behalf of
the Company and its subsidiaries, as the case may be, and, assuming the due
authorization (and, in the case of written license agreements, the due and
valid execution and delivery) thereof by the other party or parties
thereto, is the valid and binding obligation of the Company, its
subsidiaries and such other party or parties, as the case may be,
enforceable in accordance with its respective terms against the respective
parties thereto subject to the effect of any applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium
and similar laws affecting creditors' rights generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law); and neither the Company nor any of its
subsidiaries has received any notice (whether actual or constructive) that
the licensor thereunder is considering limiting, suspending, revoking or
non-renewing any such license; except that no representation is made with
respect to the Company's license agreement with Liberty House as to the
effect on such license agreement of the filing of a voluntary petition by
Liberty House under the Bankruptcy Code (as defined in the Prospectus);
(xviii) Each of the Company and Finlay Jewelry has duly authorized the amendment
to the Revolving Credit Agreement that is described in the Prospectus.
Substantially contemporaneously with the First Time of Delivery (as defined
in Section 4 hereof), the Company and Finlay Jewelry will duly execute and
deliver such amendment to the Revolving Credit Agreement. Finlay Jewelry
has duly authorized the amendment to the Gold Consignment Agreement that is
described in the Prospectus. Substantially contemporaneously with the First
Time of Delivery, Finlay Jewelry will duly execute and deliver such
amendment to the Gold Consignment Agreement. Assuming the due
authorization, execution and delivery thereof by the other parties thereto,
(a) the Revolving Credit Agreement, as amended as described above, will
constitute the legal, valid and binding agreement of the Company and Finlay
Jewelry and (b) the Gold Consignment Agreement, as amended as described
above, will constitute the legal, valid and binding agreement of Finlay
Jewelry, in each case, enforceable against the Company and/or Finlay
Jewelry, as the case may be, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium and similar laws affecting creditors' rights generally and to
<PAGE>
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law); and
(xix)Neither the Company nor Finlay Jewelry nor any of their respective
affiliates does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075, Florida
Statutes.
(b) Each of the Selling Stockholders represents and warrants to, and agrees
with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary for the
execution and delivery by such Selling Stockholder of this Agreement and
the Power of Attorney and the Custody Agreement hereinafter referred to,
and for the sale and delivery of the Shares to be sold by such Selling
Stockholder hereunder, have been obtained; and such Selling Stockholder has
full right, power and authority to enter into this Agreement, the Power of
Attorney and the Custody Agreement and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder, except
for any such consents, approvals, authorizations and orders as may be
required under the Act and state securities or Blue Sky laws in connection
with the sale and delivery of such Shares;
(ii) The sale of the Shares to be sold by such Selling Stockholder hereunder and
the compliance by such Selling Stockholder with all of the provisions of
this Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which such Selling Stockholder is a party or by which such Selling
Stockholder is bound or to which any of the property or assets of such
Selling Stockholder is subject, nor will such action result in any
violation of the provisions of any partnership agreement (or other
comparable organizational document) of such Selling Stockholder or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over such Selling Stockholder or the
property of such Selling Stockholder; provided, however, that such Selling
Stockholder makes no representation or warranty hereunder with respect to
the federal securities laws of the United States or securities or Blue Sky
laws of any state or other jurisdiction;
(iii)Such Selling Stockholder has, and immediately prior to the First Time of
Delivery (as defined in Section 4 hereof), such Selling Stockholder will
have, good and valid title to the Shares to be sold by such Selling
Stockholder hereunder, free and clear of all liens, encumbrances, equities
or claims (except, in the case of Mr. Reiner, that the Shares being sold by
him hereunder (the "Encumbered Shares") are held on behalf of the Company
as security for his repayment obligations under a promissory note in favor
of the Company); and, upon delivery of such Shares and payment therefor
pursuant hereto (including, in the case of the Encumbered Shares, payment
to the Company in satisfaction of Mr. Reiner's repayment obligations under
such promissory note, which payment will extinguish the encumbrance on the
Encumbered Shares), such Selling Stockholder will convey to the several
Underwriters who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any adverse claim
within the meaning of the Uniform Commercial Code (other than the
encumbrance on the Encumbered Shares which will have been extinguished)
good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims;
(iv) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, such Selling
Stockholder will not offer, sell, contract to sell or otherwise dispose of,
except as provided hereunder, any shares of Stock or any securities of the
Company that are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for, or
that represent the right to receive, Stock or any such substantially
similar securities (other than the Shares to be sold by such Selling
Stockholder to the Underwriters hereunder), without the prior written
consent of Goldman, Sachs & Co. on behalf of the Representatives on behalf
<PAGE>
of the Underwriters; provided, however, that such Selling Stockholder may,
without your consent, transfer stock in a private transaction to an
"affiliate" (as such term is defined in the Act) provided that such
affiliate agrees in writing to be bound by the provisions hereof to the
same extent as such Selling Stockholder is bound hereunder;
(v) Such Selling Stockholder has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto are made in reliance upon and in conformity with written
information furnished to the Company by such Selling Stockholder expressly
for use therein, such Preliminary Prospectus and the Registration Statement
did, and the Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus, when they become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading;
(vii)In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, such Selling
Stockholder will deliver to you prior to or at the First Time of Delivery
(as defined in Section 4 hereof) a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof);
(vii)Certificates in negotiable form representing all of the Shares to be sold
by such Selling Stockholder hereunder have been placed in custody under a
Custody Agreement, in the form heretofore furnished to you (the "Custody
Agreement"), duly executed and delivered by such Selling Stockholder to
Marine Midland Bank, as custodian (the "Custodian"), and such Selling
Stockholder has duly executed and delivered a Power of Attorney, in the
form heretofore furnished to you (the "Power of Attorney"), appointing the
persons indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder,
to determine the purchase price to be paid by the Underwriters to such
Selling Stockholder as provided in Section 2 hereof, to authorize the
delivery of the Shares to be sold by such Selling Stockholder hereunder and
otherwise to act on behalf of such Selling Stockholder in connection with
the transactions contemplated by this Agreement and the Custody Agreement;
and
(ix) The Shares represented by the certificates held in custody for such Selling
Stockholder under the Custody Agreement are subject to the interests of the
Underwriters hereunder; the arrangements made by such Selling Stockholder
for such custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable;
the obligations of such Selling Stockholder hereunder shall not be
terminated, except as provided in this Agreement or in the Power of
Attorney, by operation of law, whether by the death or incapacity of any
Selling Stockholder that is a natural person or, in the case of an estate
or trust, by the death or incapacity of any executor or trustee or the
termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or by
the occurrence of any other event; if any Selling Stockholder that is a
natural person or any such executor or trustee should die or become
incapacitated, or if any such estate or trust should be terminated, or if
any such partnership or corporation should be dissolved, or if any other
such event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on behalf of
such Selling Stockholder in accordance with the terms and conditions of
this Agreement and of the Custody Agreements; and actions taken by the
<PAGE>
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as
if such death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and the Selling Stockholders agree, severally and not jointly, to sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and the Selling Stockholders, at a
purchase price per share of $26.125, the number of Firm Shares (to be adjusted
by you so as to eliminate fractional shares) determined by multiplying the
aggregate number of Firm Shares to be sold by the Company and the Selling
Stockholders as set forth opposite their respective names in Schedule II hereto
by a fraction, the numerator of which is the aggregate number of Firm Shares to
be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the aggregate
number of Firm Shares to be purchased by all of the Underwriters from the
Company and the Selling Stockholders hereunder and (b) in the event and to the
extent that the Underwriters shall exercise the election to purchase Optional
Shares as provided below, each of the Selling Stockholders as designated on
Schedule II hereto agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company and each of such Selling Stockholders, at the purchase
price per share set forth in clause (a) of this Section 2, that portion of the
number of Optional Shares as to which such election shall have been exercised
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Optional Shares by a fraction the numerator of which
is the maximum number of Optional Shares which such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule I hereto
and the denominator of which is the maximum number of Optional Shares that all
of the Underwriters are entitled to purchase hereunder.
Certain of the Selling Stockholders, as and to the extent indicated in
Schedule II hereto, hereby grant, severally and not jointly, to the Underwriters
the right to purchase at their election up to an aggregate of 270,000 Optional
Shares, at the purchase price per share set forth in the paragraph above, for
the sole purpose of covering overallotments in the sale of the Firm Shares, if
any. Any such election to purchase Optional Shares shall be made in proportion
to the maximum number of Optional Shares to be sold by each Selling Stockholder
as set forth in Schedule II hereto. Any such election to purchase Optional
Shares may be exercised only by written notice from Goldman, Sachs & Co., on
behalf of the Representatives on behalf of the Underwriters, to the Company and
the Attorneys-in-Fact, given within a period of 30 calendar days after the date
of this Agreement, setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by Goldman, Sachs & Co. but in no event earlier than the First Time
of Delivery (as defined in Section 4 hereof) or, unless Goldman, Sachs & Co.,
the Company and the Attorneys-in-Fact otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by Goldman, Sachs & Co., on behalf of the
Representatives on behalf of the Underwriters, of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
4 (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
written notice to the Company and the Selling Stockholders shall be delivered by
or on behalf of the Company and the Selling Stockholders to Goldman, Sachs &
Co., for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of immediately
available (same day) funds to a bank account designated by the Company or the
Selling Stockholder, as the case may be (and, in the case of Mr. Reiner, to a
bank account of the Company designated by the Company). The Company and the
Selling Stockholders severally will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the respective Time of Delivery (as defined below) with respect
thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on April 24, 1998 or such other time and date as Goldman, Sachs & Co., the
Company and the Attorneys-in-Fact may agree upon in writing, and, with respect
to the Optional Shares, 9:30 a.m., New York time, on the date specified by
<PAGE>
Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co., and the Attorneys-in-Fact may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(n) hereof, will be delivered at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, 37th Floor, New York, New York 10022 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
2:00 p.m., New York City time, on the New York Business Day next preceding such
Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the last Time of Delivery which shall be disapproved by
you promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Shares; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of
any order preventing or suspending the use of any Preliminary Prospectus or
Prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities
laws of such jurisdictions as you may reasonably request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction or to take
any other action which would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
offer and sale of the Shares in each jurisdiction in which the Shares have
been qualified as provided above;
(c) Prior to 12:00 noon, New York City time, on the New York Business Day next
succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such
<PAGE>
quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus or to
file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act or the Exchange Act, to notify
you and upon your request to file such document and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as practicable,
but in any event not later than eighteen months after the effective date of
the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, not to
register for sale, offer, sell, contract to sell or otherwise dispose of,
except as provided hereunder, any shares of Stock or any securities that
are substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that represent
the right to receive, Stock or any such substantially similar securities
(other than pursuant to employee or director stock option plans,
arrangements or agreements existing on the date of this Agreement and the
Shares to be sold by the Company to the Underwriters hereunder), without
the prior written consent of Goldman, Sachs & Co. on behalf of the
Representatives on behalf of the Underwriters;
(f) For each of the first five fiscal years ending after the effective date of
the Registration Statement or such longer period as may be required by law
or by the rule of any stock exchange on which the Stock is listed or any
quotation system in which the Stock is included, to furnish to its
stockholders, within the time limits prescribed under the Exchange Act,
after the end of each fiscal year an annual report (including a balance
sheet and statements of operations, changes in stockholders' equity and
cash flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, within the time limits prescribed
under the Exchange Act, after the end of each of the first three quarters
of each fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), consolidated summary
financial information of the Company and its subsidiaries for such quarter
in reasonable detail;
(g) During a period of five years from the effective date of the Registration
Statement, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders, and to deliver to you (i)
as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company or
Finlay Jewelry is listed or quoted (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission); and (ii) such additional information
concerning the business and financial condition of the Company or Finlay
Jewelry as you may from time to time reasonably request;
<PAGE>
(h) To use the net proceeds received by it from the sale of the Shares pursuant
to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the Nasdaq
National Market ("NASDAQ"); and
(j) If the Company elects to rely upon Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement Among
Underwriters, this Agreement, any Blue Sky Memorandum, closing documents
(including any reasonable compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with any
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on the NASDAQ; (v) the filing fees incident to, and the reasonable fees
and disbursements of counsel for the Underwriters in connection with, securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Shares; (vi) the cost of preparing stock
certificates; (vii) the cost and charges of any transfer agent or registrar;
(viii) all costs and expenses incident to the performance of the Selling
Stockholders' obligations hereunder, including (A) any fees and expenses of
counsel for the Selling Stockholders, (B) the fees and expenses of the
Attorneys-in-Fact and the Custodian, if any, and (C) all expenses and taxes
incident to the sale and delivery of the Shares to be sold by the Selling
Stockholders to the Underwriters hereunder; and (ix) all other costs and
expenses incident to the performance of the Company's or the Selling
Stockholders' obligations hereunder which are not otherwise specifically
provided for in this Section. In connection with the preceding sentence,
Goldman, Sachs & Co. agrees to pay New York State stock transfer tax, and each
of the Company and the Selling Stockholders, severally and not jointly, agree to
reimburse Goldman, Sachs & Co. for its pro rata share of any associated carrying
costs if such tax payment is not rebated on the day of payment and for any
portion of such tax payment not rebated. It is understood, however, that the
Company shall bear, and the Selling Stockholders shall not be required to pay or
to reimburse the Company for, the cost of any matters relating to the sale and
purchase of the Shares pursuant to this Agreement, other than the underwriting
discount applicable to the Shares to be sold by it, and that, except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees and disbursements of their
counsel, stock transfer taxes on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company, Finlay Jewelry and each of the Selling Stockholders herein are, at
and as of such Time of Delivery, true and correct, the condition that the
Company, Finlay Jewelry and each of the Selling Stockholders shall have
performed all of their respective obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m., Washington,
<PAGE>
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Jones, Day, Reavis & Pogue, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect to
the matters covered in paragraphs (i), (ii), (v), (viii) and (xi) of subsection
(c) below as well as such other related matters as you may reasonably request,
and such counsel shall have received such documents and information as they may
reasonably request to enable them to pass upon such matters;
(c) Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Company,
shall have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto) (which opinion may be limited to the federal
laws of the United States, the laws of the State of New York and the General
Corporation Law of the State of Delaware and in giving such opinion such counsel
may state that, insofar as any opinions involve factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company or its subsidiaries and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of such
counsel's opinion), dated such Time of Delivery, in form and substance as
attached, to the effect that:
(i) Each of the Company and Finlay Jewelry has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
(including the Shares being delivered at such Time of Delivery) have been
duly authorized and, upon payment for the Shares in accordance with the
terms of this Agreement, will be validly issued, fully paid and
non-assessable; and the Shares conform in all material respects as to legal
matters to the description of the Stock contained in the Prospectus;
(iii)Each subsidiary of the Company (other than Sonab and Finlay Jewelry) has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; and all of
the issued shares of capital stock of each subsidiary of the Company (other
than Sonab) have been duly authorized and validly issued, are fully paid
and non-assessable, and (except for directors' qualifying shares, if any,
and except as otherwise set forth in the Prospectus) are owned of record
directly or indirectly by the Company, to the knowledge of such counsel,
free and clear of all liens, encumbrances and defects;
(iv) To such counsel's knowledge and other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, could individually or
in the aggregate reasonably be expected to have a Material Adverse Effect;
and, to such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(v) This Agreement has been duly authorized, executed and delivered by the
Company and Finlay Jewelry;
(vi) (a) The issue and sale of the Shares being delivered at such Time of
Delivery by the Company and the compliance by each of the Company and
Finlay Jewelry with the applicable provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
<PAGE>
agreement, real property lease, license or other material agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor (b) will such action result in any
violation of the provisions of (i) the respective certificate or restated
certificate of incorporation, or respective by-laws or restated by-laws, as
the case may be, of the Company or Finlay Jewelry, (ii) any statute, rule
or regulation known to such counsel of any governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or (iii) any order applicable to the Company,
any of its subsidiaries or any of their respective properties of any court,
governmental agency or body known to such counsel based upon an officer's
certificate listing any such orders (which officer's certificate shall be
delivered with such opinion);
(vii)No consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required for
the issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under
the Act of the Shares, and such consents, approvals, authorizations,
registrations or qualifications as may be required under foreign or state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(viii) The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate and fair in all material
respects;
(ix) Each of the Company and Finlay Jewelry is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are defined
in the Investment Company Act;
(x) The documents incorporated by reference in the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion), when they
became effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the requirements of the
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder; and
(xi) The Registration Statement and the Prospectus and any further amendments
and supplements thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (viii) of this Section 7(c), such
counsel may state that such counsel has participated in conferences at
which the contents of the Registration Statement and the Prospectus and
related matters were discussed, and, on the basis of such participation,
they have no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the Company
prior to such Time of Delivery (other than the financial statements and
related schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which such counsel need
express no opinion) contained or incorporated by reference an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further amendment
or supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which such counsel need express no opinion) contained or
incorporated by reference an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading or
that, as of such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
<PAGE>
Company prior to such Time of Delivery (other than the financial statements
and related schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which such counsel need
express no opinion) contains or incorporates by reference an untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required or
of any filing required to be incorporated by reference into the Prospectus
which is not so incorporated by reference therein;
(d) Tdenzer Greenblatt LLP, counsel for the Company, shall have furnished
to you their written opinion (a draft of such opinion is attached as Annex II(c)
hereto) (which opinion may be limited to the federal laws of the United States,
the laws of the State of New York and the General Corporation Law of the State
of Delaware and in giving such opinion such counsel may state that, insofar as
any opinions involve factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company or its subsidiaries and
certificates of responsible public officials, copies of which certificates will
be provided to you upon delivery of such counsel's opinion), dated such Time of
Delivery, in form and substance as attached, to the effect that:
(i) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is in violation of its respective certificate or restated
certificate of incorporation or by-laws or restated by-laws, or comparable
documents, or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound which default, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;
(e) Bonni G. Davis, Vice President, General Counsel and Secretary of Finlay
Jewelry, shall have furnished to you her written opinion (a draft of such
opinion is attached as Annex II(d) hereto) (which opinion may be limited to the
federal laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware and in giving such opinion Ms.
Davis may state that, insofar as any opinions involve factual matters, she has
relied, to the extent she deems proper, upon certificates of officers of the
Company or its subsidiaries and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of Ms.
Davis's opinion), dated such Time of Delivery, in form and substance as
attached, with respect to the matters covered in paragraphs (iv) and (vi) of
subsection (c) above and paragraph (i) of subsection (d) above and, in addition,
to the effect that:
(i) Each subsidiary of the Company (other than Sonab for which no opinion need
be given) has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification or is subject to no material
liability or disability by reason of failure to be so qualified in any such
jurisdiction; the Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of
each jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification or is subject to no material
liability or disability by reason of its failure to be so qualified in any
such jurisdiction;
(ii) The Company and its subsidiaries have good and marketable title in fee
simple to all real property owned by them in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
<PAGE>
property by the Company and its subsidiaries; to such counsel's knowledge
neither the Company nor any of its subsidiaries is in default under any
lease for real property or buildings held under lease by the Company or its
subsidiaries except for such defaults that are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries; and the leases listed on
Schedule III hereto are the only real property leases to which the Company
and its subsidiaries are a party and are valid, subsisting and enforceable
as against the Company or its subsidiaries (as the case may be) with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries and except that the enforceability of such leases is subject
to the effect of any applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium and similar laws affecting
creditors' rights generally and to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law) (in
giving the opinion in this clause, such counsel may state that no
examination of record titles for the purpose of such opinion has been made,
and that they are relying upon a general review of the titles of the
Company and its subsidiaries, upon opinions of local counsel and abstracts,
reports and policies of title companies rendered or issued at or subsequent
to the time of acquisition of such property by the Company or its
subsidiaries, upon opinions of counsel to the lessors of such property and,
in respect of matters of fact, upon certificates of officers of the Company
or its subsidiaries;
(iii)To such counsel's knowledge (a) neither the Company nor any of its
subsidiaries has received any notice that any default by the Company or any
of its subsidiaries has occurred and is continuing under any of the license
agreements with host store groups described or identified in the Prospectus
to which the Company or any of its subsidiaries are a party and (b) no
condition exists which could individually or in the aggregate reasonably be
expected to result in the termination or nonrenewal of any such license
agreement, except that no opinion need be given with respect to the
Company's license agreement with Liberty House as to the effect on such
license agreement of the filing of a voluntary petition by Liberty House
under the Bankruptcy Code (as defined in the Prospectus); and
(iv) To such counsel's knowledge, no legal proceedings are pending or have been
threatened against the Company or any of its subsidiaries that are of a
nature required to be disclosed in the Prospectus which are not so
disclosed therein;
(f) Dechert Price & Rhoads, French counsel to the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached as
Annex II(e) hereto) (which opinion may be limited to the laws of France and in
giving such opinion French counsel may state that, insofar as any opinions
involve factual matters, it has relied, to the extent such counsel deems proper,
upon certificates of officers of the Company or its subsidiaries and
certificates of responsible public officials, copies of which certificates will
be provided to you upon delivery of such counsel's opinion), dated such Time of
Delivery, in form and substance as attached, to the effect that:
(i) Sonab has been duly organized and is validly existing as a societe en nom
collectif in France; and
(ii) all of the issued equity interests of Sonab have been duly authorized and
validly created, are fully paid and non-assessable, and are validly held of
record directly or indirectly by the Company, to the knowledge of such
counsel, free of all liens, encumbrances and defects, other than the pledge
under Finlay Jewelry's Revolving Credit Agreement;
With respect to all opinions provided for above in paragraphs (b) through (f) of
this Section 7 as to validity, binding effect and/or enforceability, any such
counsel may state that any such opinion as to enforceability is subject to the
effect of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and other laws of general applicability
relating to or effecting creditor rights and to general equity principles
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) Counsel for each of the Selling Stockholders, as indicated in Schedule
II hereto, shall have furnished to you their written opinion (drafts of such
<PAGE>
opinions are attached as Annex II(f) hereto) (in giving such opinion such
counsel may state that, insofar as any opinions involve factual matters, such
counsel has relied, to the extent they deem proper, upon certificates of the
Selling Stockholder for whom they serve as counsel, and, if applicable, officers
of such Selling Stockholder and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of such
opinion), dated such Time of Delivery, in form and substance satisfactory to
you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly executed and
delivered by each Selling Stockholder and constitute valid and binding
agreements of such Selling Stockholder in accordance with their terms,
except as (a) rights to indemnity and contribution may be limited by
applicable law, (b) enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (c) the remedy of specific performance and injunctive
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought;
(ii) This Agreement has been duly executed and delivered by or on behalf of such
Selling Stockholder; and the sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder with
all of the provisions of this Agreement, the Power of Attorney and the
Custody Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any terms or provisions of, or constitute a default under, any
statute, or to the knowledge of such counsel, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound or to which any of the property or assets of such Selling Stockholder
is subject, nor will such action result in any violation of the provisions
of any partnership agreement (or comparable organizational document) of
such Selling Stockholder or, to the knowledge of such counsel, any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such holder;
(iii)No consent, approval, authorization or order of any court or governmental
agency or body is required to be obtained by such Selling Stockholder for
the consummation of the transactions contemplated by this Agreement in
connection with the Shares to be sold by such Selling Stockholder
hereunder, except for those which have been duly obtained and are in full
force and effect and such as may be required under the Act, state
securities or Blue Sky laws or under rules and regulations of the National
Association of Securities Dealers, Inc. in connection with the purchase and
distribution of such Shares by the Underwriters;
(iv) To such counsel's knowledge, immediately prior to the First Time of
Delivery, such Selling Stockholder had good and valid title to the Shares
to be sold at the First Time of Delivery by such Selling Stockholder under
this Agreement, free and clear of all liens, encumbrances, equities or
claims, and full right, power and authority to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder; and
(v) Good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims, has been conveyed by such Selling
Stockholder to each of the several Underwriters who have purchased such
Shares in good faith and without notice of any such lien, encumbrance,
equity or claim or any other adverse claim within the meaning of the
Uniform Commercial Code;
(h) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post- effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
<PAGE>
(i) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any strike, boycott or similar labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any change in
the capital stock or long-term debt of the Company or any of its subsidiaries
except for borrowings and repayments under the Revolving Credit Agreement and
the Gold Consignment Agreement (each as defined in the Prospectus and as amended
as described in the Prospectus), or any change, or any development involving a
prospective change, in or affecting the business, operations, management,
financial position or condition, current assets, merchandise inventories,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is in the judgment of the Representatives so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms and
in the manner contemplated in the Prospectus;
(j) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's or Finlay Jewelry's debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
or Finlay Jewelry's debt securities;
(k) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either federal
or New York State authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, if the effect of any such event specified in this
clause (iv) in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(l) The Shares to be sold at such Time of Delivery shall have been duly
listed for quotation on NASDAQ;
(m) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the persons or firms listed on Schedule IV hereto,
substantially to the effect set forth in Section 5(e) hereof, in form and
substance satisfactory to you;
(n) The Company and the Selling Stockholders shall have furnished or caused
to be furnished to you at such Time of Delivery certificates of officers of the
Company and Finlay Jewelry and of the Selling Stockholders, respectively,
reasonably satisfactory to you as to the accuracy of the representations and
warranties of the Company and Finlay Jewelry and of the Selling Stockholders,
respectively, herein at and as of such Time of Delivery, as to the performance
by each of the Company and Finlay Jewelry and the Selling Stockholders,
respectively, of all of their respective obligations hereunder to be performed
at or prior to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company and Finlay Jewelry shall have furnished or
caused to be furnished certificates as to the matters set forth in subsections
(a) and (i) of this Section; and
(o) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement;
8. (a)The Company and Finlay Jewelry, jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
<PAGE>
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained or
incorporated by reference in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company and
Finlay Jewelry shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(b) Each Selling Stockholder will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that such Selling
Stockholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(c) Each Underwriter severally will indemnify and hold harmless the
Company, Finlay Jewelry and each of the Selling Stockholders against any losses,
claims, damages or liabilities to which the Company, Finlay Jewelry or any
Selling Stockholder may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through Goldman, Sachs & Co. expressly for use therein; and will reimburse the
Company, Finlay Jewelry and each Selling Stockholder for any legal or other
expenses reasonably incurred by the Company, Finlay Jewelry and such Selling
Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
<PAGE>
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, which consent shall not be
unreasonably withheld, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company, Finlay Jewelry and the Selling Stockholders on the one
hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, Finlay Jewelry and the Selling Stockholders
on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company, Finlay
Jewelry and the Selling Stockholders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, Finlay Jewelry or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, Finlay Jewelry, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (e). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (e),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint. Notwithstanding the foregoing, the
liability of each Selling Stockholder under the indemnity and contribution
provisions of this Section 8 shall be limited to the aggregate offering price of
the Shares sold by each such Selling Stockholder to the Underwriters.
<PAGE>
(f) The obligations of the Company, Finlay Jewelry and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company, Finlay Jewelry and the Selling Stockholders may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company and
Finlay Jewelry and to each person, if any, who controls the Company, Finlay
Jewelry or any Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company and the Selling Stockholders shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company and the
Selling Stockholders that you have so arranged for the purchase of such Shares,
or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Stockholders to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter, the Company, Finlay Jewelry or the Selling
Stockholders, except for the expenses to be borne by the Company and the Selling
Stockholders and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Finlay Jewelry, the Selling Stockholders and
the several Underwriters, as set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, Finlay Jewelry or any Selling Stockholder or
any officer or director or controlling person of the Company, Finlay Jewelry or
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
<PAGE>
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor any Selling Stockholder shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof and
Finlay Jewelry shall not then be under any liability to any Underwriter except
as provided in Section 8 hereof; but, if for any other reason, any Shares are
not delivered by or on behalf of the Company and the Selling Stockholders as
provided herein, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Shares not so delivered,
but the Company and the Selling Stockholders shall then be under no further
liability to any Underwriter except as provided in Sections 6 and 8 hereof and
Finlay Jewelry shall then be under no further liability to any Underwriter
except as provided in Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder (in accordance with
the Power of Attorney and Custody Agreement) made or given by any or all of the
Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company or to Finlay Jewelry shall be delivered or
sent by mail to the address of the Company set forth in the Registration
Statement, Attention: Secretary; and if to a Selling Stockholder, shall be
delivered or sent by mail to its counsel at such counsel's address set forth in
Schedule II hereto; provided, however, that any notice to an Underwriter
pursuant to Section 8(d) hereof shall be delivered or sent by mail, telex or
facsimile transmission to such Underwriter at its address set forth in its
Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company and the Selling Stockholders by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, Finlay Jewelry and the Selling Stockholders
and, to the extent provided in Sections 8 and 10 hereof, the officers, directors
and controlling persons of the Company, Finlay Jewelry and each Selling
Stockholder and each person who controls any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares from any Underwriter shall be deemed a successor
or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us ten counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and the Company,
Finlay Jewelry and the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement Among Underwriters, the form of
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Finlay Enterprises, Inc.
By: /s/ Barry Scheckner
---------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Finlay Fine Jewelry Corporation
By: /s/ Barry Scheckner
---------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
On behalf of the Selling Stockholders (other
than Messrs. Reiner and Scheckner) named
on Schedule II hereto
By: /s/ Warren C. Smith, Jr.
---------------------------------
Name: Warren C. Smith, Jr.
Title: Attorney-in-Fact
On behalf of Messrs. Reiner and Scheckner as
Selling Stockholders
By: /s/ James Martin Kaplan
--------------------------------
Name: James Martin Kaplan
Title: Attorney-in-Fact
<PAGE>
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
SBC Warburg Dillon Read Inc.
By: /s/ Goldman, Sachs & Co.
----------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Total Number of Shares to be
Firm Shares Purchased if Maximum
to be Purchased Option Exercised
Underwriter -------------------- -----------------------
<S> <C> <C>
Goldman, Sachs & Co..................................... 442,334 66,350
Donaldson, Lufkin & Jenrette
Securities Corporation................................ 442,333 66,350
SBC Warburg Dillon Read Inc............................. 442,333 66,350
Bear, Stearns & Co. Inc................................. 65,000 9,750
Furman Selz LLC......................................... 65,000 9,750
NationsBanc Montgomery Securities LLC................... 65,000 9,750
Smith Barney Inc........................................ 65,000 9,750
Tucker Anthony Incorporated............................. 65,000 9,750
Cleary Gull Reiland & McDevitt Inc...................... 37,000 5,550
Janney Montgomery Scott Inc............................. 37,000 5,550
The Robinson-Humphrey Company, LLC...................... 37,000 5,550
Sutro & Co. Incorporated................................ 37,000 5,550
--------- --------
Total.......................................... 1,800,000 270,000
========= ========
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Number of Optional
Shares to be Sold if
Total Number of Firm Maximum Option
Shares to be Sold Exercised
-------------------------- ---------------------------
<S> <C>
The Company........................................... 567,310
The Selling Stockholders:
Thomas H. Lee Equity Partners, L.P............... 917,055 222,570
1989 Thomas H. Lee Nominee Trust................. 102,552 24,889
Arthur E. Reiner................................. 100,000 -
Barry D. Scheckner............................... 20,200 -
John W. Childs................................... 19,598 4,756
David V. Harkins................................. 13,061 3,170
Warren C. Smith, Jr.............................. 13,055 3,168
C. Hunter Boll................................... 9,794 2,377
Scott A. Schoen.................................. 6,490 1,575
Thomas M. Hagerty................................ 5,874 1,426
Anthony J. Dinovi................................ 5,874 1,426
Steven G. Segal.................................. 4,398 1,067
Thomas R. Shepherd............................... 3,918 951
Joseph I. Incandela.............................. 2,146 521
Glenn A. Hopkins................................. 1,955 474
SGS Family Limited Partnership................... 1,475 358
Charles W. Robins................................ 921 223
James Westra..................................... 921 223
Terrence M. Mullen............................... 881 214
Adam L. Suttin................................... 736 179
Andrew D. Flaster................................ 458 111
Wendy L. Masler.................................. 428 104
Kristina A. Watts................................ 428 104
Todd M. Abbrecht................................. 354 86
Kent R. Weldon................................... 118 28
---------- ---------
Total................................................. 1,800,000 270,000
========== =========
</TABLE>
Each of the Selling Stockholders listed above is represented by Hutchins,
Wheeler & Dittmar, a Professional Corporation, 101 Federal Street, Boston, MA
02110 and has appointed Warren C. Smith, Jr. and Todd H. Abbrecht, and each of
them, as Attorneys-in-Fact for such Selling Stockholder, except for Messrs.
Reiner and Scheckner, who are represented by Tenzer Greenblatt LLP and who have
appointed Richard DiStefano and James Martin Kaplan, and each of them, as their
Attorneys-in-Fact.
<PAGE>
SCHEDULE III
New York Leases
Section 7(e)(ii)
----------------
1. Lease Agreement dated as of August 27, 1993 between F.H.E.A. Associates and
Finlay Jewelry
2. Lease Agreement dated as of August 19, 1993 between 529 Fifth Company and
Finlay Jewelry, as amended
3. Lease Agreement dated as of August 19, 1993 between 521 Fifth Avenue
Associates and Finlay Jewelry, as amended
4. Lease Agreement dated as of June 17, 1986 between 521 Fifth Avenue Associates
and S&L Acquisition Company L.P., as amended
5. Lease Agreement dated as of May 1, 1995 between Alvin Jacobson Realty and
Finlay Jewelry
6. Lease Agreement dated as of October 4, 1994 between Tanger Properties Limited
Partnership and Finlay Jewelry, as amended
7. Lease Agreement dated May 2, 1996 between Horizon/Glen Outlet Centers Limited
Partnership and Finlay Jewelry
<PAGE>
SCHEDULE IV
Persons or entities required to
execute Lock-Up Agreements
Pursuant to Section 7(m)
------------------------
David B. Cornstein
Joseph M. Melvin
Leslie A. Philip
Edward Stein
Rohit M. Desai
James Martin Kaplan
Norman S. Matthews
Hanne M. Merriman
Bruce Zurlnick
Estate of Harold S. Geneen
<PAGE>
ANNEX I
DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(h) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules examined by them (and, if applicable,
financial forecasts and/or pro forma financial information, on which they have
performed more limited procedures as specified in such letter, not constituting
an examination in accordance with generally accepted auditing standards) and
included in the Prospectus or the Registration Statement comply as to form in
all material respects (or, in the case of financial forecasts and/or pro forma
financial information, on the basis of such limited procedures, nothing came to
their attention that cause them to believe that such financial forecasts and/or
pro forma financial information do not comply as to form in all material
respects) with the applicable accounting requirements of the Act and the related
published rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim financial
statements, selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as indicated
in their reports thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives") and are attached
hereto;
(iii) If applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
unaudited condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon, copies of which have been separately
furnished to the Representatives and are attached hereto, and on the basis of
specified procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in paragraph
(vi)(A)(i) below comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations, nothing came to their attention that cause them
to believe that the unaudited condensed consolidated financial statements do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years which were included
or incorporated by reference in the Company's Annual Reports on Form 10-K for
such fiscal years;
<PAGE>
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302 (if applicable), 402 and
503(d) (if applicable), respectively, of Regulation S-K;
(v) On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A)(i) the unaudited consolidated statements of operations, consolidated balance
sheets and consolidated statements of cash flows included in the Prospectus
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations, or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of operations, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted accounting
principles;
(B) any other unaudited statement of operations data and balance sheet items
included in the Prospectus do not agree with the corresponding items in the
unaudited consolidated financial statements from which such data and items
were derived, and any such unaudited data and items were not determined on
a basis substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included in the
Prospectus;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited statement of
operations data and balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial information
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma adjustments
have not been properly applied to the historical amounts in the compilation
of that information;
(E) as of a specified date not more than five days prior to the date of such
letter, there have been any changes in the consolidated capital stock
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding
on the date of the latest financial statements included in the Prospectus)
or any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Representatives, or
<PAGE>
any increases in any items specified by the Representatives, in each case
as compared with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(F) for the period from the date of the latest financial statements included in
the Prospectus to the specified date referred to in Clause (E) there were
any decreases in consolidated net revenues or operating profit or the total
or per share amounts of consolidated net income or other items specified by
the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length specified
by the Representatives, except in each case for decreases or increases
which the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vii)In addition to the examination referred to in their report(s) included in
the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting
an examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives, which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them
to be in agreement.
- --------------------------------------------------------------------------------
FINLAY ENTERPRISES, INC.
9% SENIOR DEBENTURES DUE MAY 1, 2008
INDENTURE
------------------------------------
Dated as of April 24, 1998
------------------------------------
Marine Midland Bank
Trustee
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310(a)(1)..................................................................7.10
(a)(2)..................................................................7.10
(a)(3)..................................................................N.A.
(a)(4)..................................................................N.A.
(a)(5)..................................................................7.l0
(b).....................................................................7.10
(c).....................................................................N.A.
311(a).....................................................................7.11
(b).....................................................................7.11
(c).....................................................................N.A.
312(a).....................................................................2.05
(b)....................................................................12.03
(c)....................................................................12.03
313(a).....................................................................7.06
(b)(1).................................................................10.04
(b)(2)............................................................7.06; 7.07
(c)..............................................................7.06; 12.02
(d).....................................................................7.06
314(a)........................................................4.03; 4.04; 12.02
(b)....................................................................10.03
(c)(1).................................................................12.04
(c)(2).................................................................12.04
(c)(3) .................................................................N.A.
(d)......................................................10.03; 10.04; 10.05
(e)....................................................................12.05
(f).....................................................................N.A.
315(a).....................................................................7.01
(b) .............................................................7.05, 12.02
(c).....................................................................7.01
(d).....................................................................7.01
(e).....................................................................6.11
316(a)(last sentence)......................................................2.09
(a)(1)(A)...............................................................6.05
(a)(1)(B)...............................................................6.04
(a)(2)..................................................................N.A.
(b).....................................................................6.07
(c).....................................................................2.13
317(a)(1)..................................................................6.08
(a)(2)..................................................................6.09
(b).....................................................................2.04
318(a)....................................................................12.01
(b).....................................................................N.A.
(c)....................................................................12.0l
_________________________________________________________
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.................................................1
SECTION 1.02. Other Definitions..........................................15
SECTION 1.03. Terms of TIA...............................................16
SECTION 1.04. Rules of Construction......................................16
ARTICLE 2
THE DEBENTURES
SECTION 2.01. Form and Dating............................................17
SECTION 2.02. Execution and Authentication...............................17
SECTION 2.03. Registrar and Paying Agent.................................18
SECTION 2.04. Paying Agent to Hold Money in Trust........................18
SECTION 2.05. Holder Lists...............................................19
SECTION 2.06. Transfer and Exchange......................................19
SECTION 2.07. Replacement Debentures.....................................21
SECTION 2.08. Outstanding Debentures.....................................21
SECTION 2.09. Treasury Debentures........................................22
SECTION 2.10. Temporary Debentures.......................................22
SECTION 2.11. Cancellation...............................................22
SECTION 2.12. Defaulted Interest.........................................23
SECTION 2.13. Record Date................................................23
SECTION 2.14. CUSIP Number...............................................23
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. Notices to Trustee.........................................23
SECTION 3.02. Selection of Debentures to Be Redeemed.....................24
SECTION 3.03. Notice of Redemption.......................................24
SECTION 3.04. Effect of Notice of Redemption.............................25
SECTION 3.05. Deposit of Redemption Price................................25
SECTION 3.06. Debentures Redeemed in Part................................26
SECTION 3.07. Optional Redemption........................................26
SECTION 3.08. Mandatory Redemption.......................................27
SECTION 3.09. Offer to Purchase by Application of Excess
Proceeds.................................................27
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Debentures......................................29
SECTION 4.02. Maintenance of Office or Agency............................29
SECTION 4.03. Reports....................................................29
SECTION 4.04. Compliance Certificate.....................................30
SECTION 4.05. Taxes......................................................31
SECTION 4.06. Stay, Extension and Usury Laws.............................31
SECTION 4.07. Restricted Payments........................................31
SECTION 4.08. Dividend and Other Payment Restrictions
Affecting Subsidiaries...................................34
SECTION 4.09. Incurrence of Indebtedness and Issuance
of Preferred Stock.......................................35
SECTION 4.10. Asset Sales................................................38
SECTION 4.11. Equity Interests of Wholly Owned Subsidiaries..............39
SECTION 4.12. Transactions with Affiliates...............................39
SECTION 4.13. Liens......................................................40
SECTION 4.14. Corporate Existence........................................40
SECTION 4.15. Offer to Repurchase upon Change of Control.................41
SECTION 4.16. Payments for Consent.......................................41
ARTICLE 5
SUCCESSORS
SECTION 5.01. Merger, Consolidation, or Sale of Assets...................42
SECTION 5.02. Successor Corporation Substituted.................42
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default..........................................43
SECTION 6.02. Acceleration...............................................45
SECTION 6.03. Other Remedies.............................................46
SECTION 6.04. Waiver of past Defaults....................................46
SECTION 6.05. Control by Majority........................................47
SECTION 6.06. Limitation on Suits........................................47
SECTION 6.07. Rights of Holders of Debentures to Receive
Payment..................................................47
SECTION 6.08. Collection Suit by Trustee.................................48
SECTION 6.09. Trustee May File Proofs of Claim...........................48
SECTION 6.10. Priorities.................................................48
SECTION 6.11. Undertaking for Costs......................................49
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee..........................................49
SECTION 7.02. Rights of Trustee..........................................50
<PAGE>
SECTION 7.03. Individual Rights of Trustee...............................51
SECTION 7.04. Trustee's Disclaimer.......................................51
SECTION 7.05. Notice of Defaults.........................................51
SECTION 7.06. Reports by Trustee to Holders of the Debentures............51
SECTION 7.07. Compensation and Indemnity.................................52
SECTION 7.08. Replacement of Trustee.....................................52
SECTION 7.09. Successor Trustee by Merger, Etc...........................53
SECTION 7.10. Eligibility; Disqualification..............................54
SECTION 7.11. Preferential Collection of Claims Against Company..........54
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance...............................................54
SECTION 8.02. Legal Defeasance and Discharge.............................54
SECTION 8.03. Covenant Defeasance........................................55
SECTION 8.04. Conditions to Legal or Covenant Defeasance.................55
SECTION 8.05. Deposited Money and Government Securities to Be Held in
Trust; Other Miscellaneous Provisions......................57
SECTION 8.06. Repayment to Company.......................................57
SECTION 8.07. Reinstatement..............................................57
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Debentures...................58
SECTION 9.02. With Consent of Holders of Debentures......................59
SECTION 9.03. Compliance with Trust Indenture Act........................60
SECTION 9.04. Revocation and Effect of Consents..........................60
SECTION 9.05. Notation on or Exchange of Debentures......................60
SECTION 9.06. Trustee to Sign Amendments, Etc............................61
ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.01 Security and Pledge Agreement..............................61
SECTION 10.02 Transfers of Intellectual Property and Similar
Assets.................................62
SECTION 10.03 Recording and Opinions.....................................62
SECTION 10.04 Release of Collateral......................................63
SECTION 10.05 Certificates of the Company................................63
SECTION 10.06 Certificates of the Trustee................................64
SECTION 10.07 Authorization of Actions to Be Taken by the Trustee
under the Security and Pledge Agreement..................64
SECTION 10.08 Authorization of Receipt of Funds by the Trustee under
the Security and Pledge Agreement........................64
SECTION 10.09 Termination of Security Interests..........................64
<PAGE>
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01 Application................................................65
SECTION 11.02 Guarantee..................................................65
SECTION 11.03 Limitation on Guarantor Liability..........................66
SECTION 11.04 Execution and Delivery of Subsidiary Guarantee.............67
SECTION 11.05 Guarantors May Consolidate, Etc., on Certain Terms.........67
SECTION 11.06 Releases Following Sale of Assets..........................67
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Trust Indenture Act Controls...............................68
SECTION 12.02 Notices....................................................68
SECTION 12.03 Communication by Holders of Debentures with Other
Holders of Debentures....................................69
SECTION 12.04 Certificate and Opinion as to Conditions
Precedent................................................69
SECTION 12.05 Statements Required in Certificate or Opinion..............70
SECTION 12.06 Rules by Trustee and Agents................................70
SECTION 12.07 No Personal Liability of Directors, Officers, Employees
and Stockholders.........................................70
SECTION 12.08 Governing Law..............................................70
SECTION 12.09 No Adverse Interpretation of Other Agreements..............71
SECTION 12.10 Successors.................................................71
SECTION 12.11 Severability...............................................71
SECTION 12.12 Counterpart Originals......................................71
SECTION 12.13 Table of Contents, Headings, Etc...........................71
EXHIBIT A Form of Debenture
EXHIBIT B Form of Security and Pledge Agreement
EXHIBIT C Form of License Agreement
EXHIBIT D Form of Subsidiary Guarantee
EXHIBIT E Form of Supplemental Indenture
EXHIBIT F Form of Subsidiary Intercompany Note
<PAGE>
INDENTURE dated as of April 24, 1998 between Finlay Enterprises, Inc., a
Delaware corporation (the "Company"), and Marine Midland Bank, as trustee (the
"Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 9% Senior Debentures
due May 1, 2008 (the "Debentures").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person; (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person; and (iii) Indebtedness
incurred by such Person in connection with the acquisition of assets from
another Person, including Indebtedness incurred by such other Person in
connection with, or in contemplation of, such specified Person acquiring such
assets.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Paying Agent, Registrar or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Debenture, the rules and procedures of
the Depositary, that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than sales of inventory or accounts receivable in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of Section 4.15 hereof or the provisions of Article 5 hereof and not by the
provisions of Section 4.10 hereof); and (ii) the issue or sale by the Company or
any of its Subsidiaries of Equity Interests of any of the Company's
<PAGE>
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $2.0 million or (b) for net proceeds in excess of $2.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary of the Company or by a Wholly Owned Subsidiary of
the Company to the Company or to another Wholly Owned Subsidiary of the Company;
(ii) an issuance of Equity Interests by a Wholly Owned Subsidiary of the Company
to the Company or to another Wholly Owned Subsidiary of the Company; (iii) a
Restricted Payment that is permitted by the provisions of Section 4.07 hereof;
(iv) any disposition of assets of the Company or any Subsidiary of the Company
in connection with the Security and Pledge Agreement; (v) any sale of any item
pursuant to the Gold Consignment Agreement or any item deemed to be Consignment
Inventory immediately prior to such sale; (vi) any sale and leaseback of any
assets within 60 calendar days after the acquisition of such assets; (vii) any
sale, conveyance or other disposition, without recourse, of Receivables to a
Receivables Subsidiary, provided that cash or Cash Equivalents in an amount at
least equal to the fair market value thereof is received in consideration
thereof and, provided further, that any such transfer to an entity that is not a
Receivables Subsidiary or that ceases to be a Receivables Subsidiary shall not
be exempted from the definition of "Asset Sale" by reason of this clause (vii);
and (viii) sales of surplus and other property or equipment that has become
worn-out, obsolete, damaged or otherwise unsuitable for use in connection with
the business of the Company or any Subsidiary of the Company, as the case may
be, will not be deemed to be Asset Sales. Any Asset Sale that occurs by reason
of an entity ceasing to be a Receivables Subsidiary as contemplated in clause
(vii) above shall be deemed to have been made as of the date of such cessation.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than a day on which banking institutions in The City of New York or at a
place of payment are authorized by law, legislation or executive order to remain
closed. If a payment date is a day other than a Business Day at a place of
payment, payment may be made at that place on the next succeeding Business Day,
and no interest shall accrue on such payment for the intervening period.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership, partnership interests
(whether general or limited); and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
<PAGE>
"Cash Equivalents" means (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition; (iii) certificates of deposit and Eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating
of "B" or better; (iv) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above; and (v) commercial paper having one of the two
highest ratings obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties (as defined below); (ii)
the adoption of a plan relating to the liquidation or dissolution of the Company
or Finlay Enterprises; (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50%
of the voting power of the Company; (iv) the first day on which a majority of
the members of the Board of Directors of the Company or Finlay Enterprises are
not Continuing Directors; or (v) the first day on which Finlay Enterprises
ceases to own 100% of the outstanding Equity Interests of the Company. For
purposes of this definition, any transfer of an Equity Interest of an entity
that was formed for the purpose of acquiring voting stock of the Company shall
be deemed to be a transfer of such portion of such voting stock as corresponds
to the portion of the equity of such entity that has been so transferred.
"Company" means Finlay Enterprises, Inc., and any and all successors
thereto.
"Consignment Inventory" means, at any time, each item of merchandise
(including any gold content thereof) which (i) at such time is in possession of
the Company, Finlay Jewelry or any of their respective Subsidiaries as consignee
pursuant to a written consignment agreement or other consignment arrangement
including, without limitation, a consignment order or consignment invoice, (ii)
at such time is identified in computer records of the Company, Finlay Jewelry or
any of their respective Subsidiaries as being "memo" or "consigned inventory",
(iii) as of such time has not been sold, and (iv) to which title, at such time,
is retained by a consignor under such consignment agreement or other consignment
arrangement until such item of merchandise is sold or deemed sold by the
consignor to the consignee. Title to an item of merchandise described in the
foregoing sentence is deemed to be retained by such consignor until, in
accordance with the applicable consignment agreement or other consignment
arrangement, title is transferred (or deemed to be transferred) to a buyer, the
Company, Finlay Jewelry or any of their respective Subsidiaries, regardless of
whether any procedures have been performed to protect the consignor's title with
respect to such item of merchandise.
<PAGE>
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income); plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income;
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income; plus (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income; plus (v)
without duplication, the nonrecurring expenses of such Person and its
Subsidiaries relating to the Equity Offering and the Refinancing to the extent
that any such expense was deducted (and not capitalized) in computing such
Person's Consolidated Net Income; minus (vi) non-cash items increasing
consolidated revenues in determining such Consolidated Net Income for such
period, in each case on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization of a Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof; (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders; (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded; and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
<PAGE>
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all Investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company or Finlay Enterprises who (i) was a
member of such Board of Directors on the date of this Indenture or (ii) was
nominated for election or elected to such Board of Directors with the approval
of two-thirds of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means the Trustee, as custodian with respect to the Debentures
in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Depositary" means, with respect to the Debentures issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Debentures and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provisions of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Debentures mature; provided that any
Capital Stock issued to employees, consultants or directors of the Company or
any of its Subsidiaries pursuant to a stock option or other compensation plan of
the Company or any of its Subsidiaries shall not be deemed to be Disqualified
Stock solely because of any mandatory repurchase features contained in such
plan, except to the extent that the repurchase obligations of the Company and
its Subsidiaries in respect thereof exceed $5.0 million in the aggregate since
the date of this Indenture.
<PAGE>
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock). "Equity Offering" means
the sale by Finlay Enterprises and certain selling stockholders of an aggregate
of 1,800,000 shares of the of Finlay Enterprises' Common Stock on the date of
this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Revolving Debt) in
existence on the date of this Indenture, until such amounts are repaid.
"Finlay Jewelry" means Finlay Fine Jewelry Corporation, a Delaware
corporation and a Wholly Owned Subsidiary of Finlay Enterprises, Inc., a
Delaware Corporation.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income and shall
reflect any pro forma expense and cost reductions attributable to such
acquisitions (to the extent such expense and cost reduction would be permitted
under Regulation S-X promulgated pursuant to the Securities Act to be reflected
in pro forma financial statements included in a registration statement filed
with the Commission) and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded; and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
<PAGE>
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount and deferred financing costs, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations); and (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period; and (iii) to the extent
not included in clause (i), any interest expense on Indebtedness of another
Person for such period that is Guaranteed by such Person or one of its
Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such Guarantee or Lien is called upon); (iv) to the
extent not included in clause (i), any costs, commissions, discounts, other fees
or charges relating to or in respect of any Receivables Subsidiary; and (v) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Subsidiary) for such period on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person for such period, expressed as
a decimal, in each case, on a consolidated basis and in accordance with GAAP;
provided, however, that in no event shall any amortization of deferred financing
costs incurred in connection with the Equity Offering or the Refinancing be
included in Fixed Charges.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture, provided,
however, that all reports and other financial information provided by the
Company to the Holders, the Trustee and/or Commission shall be prepared in
connection with GAAP, as in effect on the day of such report or other financial
information.
"Gold Consignment Agreement" means the Gold Consignment Agreement, dated as
of June 15, 1995, by and between Finlay Jewelry and Rhode Island Hospital Trust
National Bank, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, restated, renewed, supplemented, refunded, replaced or
refinanced from time to time.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each direct and indirect Subsidiary of the Company that
executes a Subsidiary Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
<PAGE>
"Hedging Obligation" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, currency swap agreements,
interest rate cap agreements and interest rate collar agreements, (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates and foreign exchange rates and (iii) precious metal options
and futures contracts and other precious metal hedging obligations.
"Holder" means a Person in whose name a Debenture is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as, to the extent not otherwise
included, all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. Notwithstanding the foregoing, the term "Indebtedness"
shall not include up to $3.0 million at any one time outstanding of deferred
compensation arrangements that are not evidenced by bonds, notes, debentures or
similar instruments. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest, (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due
in the case of any other Indebtedness and (iii) for purposes of calculating the
amount of Indebtedness of any Receivables Subsidiaries, the Receivables
Financing Amount relating thereto.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities of such other Persons, together with all items of
such other Persons that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interest of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
<PAGE>
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided, however, that licenses of intellectual property or similar assets
granted pursuant to and in compliance with the provisions of Section 10.02
hereof shall not be deemed to be Liens.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sales (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Revolving Credit Agreement) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Subsidiaries (other than a Receivables Subsidiary with respect to
its own Indebtedness) (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness) or (b)
is directly or indirectly liable (as a guarantor or otherwise); and (ii) no
default with respect to which would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company or any of its Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its Stated Maturity; and (iii) as to which
the lenders have been notified in writing that they will not have any recourse
to the stock or assets of the Company or any of its Subsidiaries (other than a
Receivables Subsidiary with respect to its own Indebtedness); provided that,
notwithstanding the foregoing, the Company and any of its Subsidiaries that sell
Receivables to the Person incurring such Indebtedness shall be allowed to
provide such representations, warranties, covenants and indemnities as are
customarily required in such transactions so long as no such representations,
warranties, covenants or indemnities constitute a Guarantee of payment or
recourse against credit losses.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
<PAGE>
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 11.05
hereof.
"Old Debentures" means Finlay Enterprises' 12% Senior Discount Debentures
due 2005.
"Old Notes" means the Company's 105/8% Senior Notes due 2003.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company that is evidenced by Capital Stock or
Subsidiary Intercompany Notes; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person that is
evidenced by Capital Stock or Subsidiary Intercompany Notes if as a result of
such Investment (i) such Person becomes a Wholly Owned Subsidiary of the Company
and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is
a Guarantor; (d) any capital contribution (including any transaction deemed to
be a capital contribution in accordance with GAAP) by the Company to any of its
Wholly Owned Subsidiaries; (e) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the provisions of Section 4.10 hereof; (f) advances to
vendors in the ordinary course of business consistent with past practices; (g)
any Investment existing on the date of this Indenture; (h) loans and relocation,
travel and similar advances to employees and officers of the Company or its
Subsidiaries in the ordinary course of business for bona-fide purposes
reasonably related to the business of the Company and its Subsidiaries, not in
excess of $5.0 million at any one time outstanding; (i) any acquisition,
redemption or repurchase of Debentures or the Senior Notes; (j) any Investments
relating to a Receivables Subsidiary, provided that any Investment in an entity
that ceases to be a Receivables Subsidiary shall cease to be a Permitted
Investment by virtue of this clause and shall be deemed to constitute a new
Investment as of the date of such cessation; and (k) other Investments in any
Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (k),
not to exceed $10.0 million at any time outstanding.
"Permitted Liens" means (i) Liens securing the Senior Revolving Debt that
were permitted by the terms of this Indenture to be incurred; (ii) Liens in
favor of the Company; (iii) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were in existence prior to the
<PAGE>
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds, landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens incurred in the ordinary course of business;
(vi) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by Section 4.09(b)(vi) hereof covering only the assets acquired with
such Indebtedness); (vii) Liens on Consignment Inventory; (viii) Liens under the
Gold Consignment Agreement; (ix) Liens existing on the date of this Indenture;
(x) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (xi) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Subsidiary; (xii) Liens securing Capital Lease
Obligations and purchase money Indebtedness incurred in accordance with clauses
(vi) and (vii), respectively, of the definition of Permitted Debt; provided,
however that in the case of purchase money Indebtedness (a) the Indebtedness
shall not exceed the cost of such property or assets being acquired or
constructed and shall not be secured by any property or assets of the Company or
any Subsidiary of the Company other than the property and assets being acquired
or constructed and (b) the Lien securing such Indebtedness shall be created
within 30 days of such acquisition or construction; (xiii) Liens granted to
lessors or licensors in the ordinary course of business consistent with past
practice with respect to fixtures and equipment at store locations leased or
licensed from such lessors or licensors; (xiv) Liens securing any Permitted
Refinancing Indebtedness to the extent the Indebtedness being exchanged,
extended, renewed, replaced or refunded (and such Permitted Refinancing
Indebtedness) was permitted to be so secured; (xv) Liens incurred pursuant to
the pledge of any assets (including intercompany notes in respect of monies
loaned or advanced by the Company or to the Company) under the Security and
Pledge Agreement; (xvi) Liens for judgments, attachments, seizures or levies not
to exceed $500,000 in the aggregate outstanding at any time; (xvii) Liens on
Receivables transferred to a Receivables Subsidiary or on assets of a
Receivables Subsidiary; and (xviii) zoning restrictions, easements, rights of
way, licenses and restrictions on the use of real property or minor
irregularities in title thereto, which do not materially impair the use of such
property in the normal operation of the business of the Company or any of its
Subsidiaries or the value of such property for the purpose of such business.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used within 60 days after the incurrence thereof to extend, refinance,
renew, replace, defease or refund, other Indebtedness of the Company or any of
its Subsidiaries that was permitted by this Indenture to be incurred; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
<PAGE>
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses,
premiums, penalties, consent fees and interest incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Debentures, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Debentures on terms at least as favorable to the Holders of Debentures
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iv) such
Indebtedness is incurred either by the Company or by the Subsidiary of the
Company which is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (v) such Permitted Refinancing
Indebtedness shall be secured (if secured) in a manner no more adverse
(including, without limitation, by way of any increase in the amount of
Indebtedness secured) to the holders of the Debentures than the terms of the
Liens (if any) securing such refinanced Indebtedness.
"Person" means a natural person, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Principals" means David B. Cornstein, Arthur E. Reiner, Thomas H. Lee,
Thomas H. Lee Capital LLC, employees of Thomas H. Lee Capital LLC and
Equity-Linked Investors-II.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Stock) of Finlay Enterprises registered under the
Securities Act (other than a public offering registered on Form S-8 under the
Securities Act) after the date of this Indenture that results in net proceeds of
at least $10.0 million to Finlay Enterprises.
"Qualified Proceeds" means any of the following or any combination of the
following: (i) assets (other than cash or Cash Equivalents) or inventory that
are used or useable in the business engaged in by the Company or any of its
Subsidiaries on the date of this Indenture (or in a business reasonably related
thereto) or (ii) the Equity Interests of any Person engaged primarily in a
business similar to that of the Company or any of its Subsidiaries as of the
date of this Indenture, if, in connection with the receipt by the Company or any
Subsidiary of the Company of such Equity Interests, (a) such Person becomes a
Wholly Owned Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or any Wholly Owned
Subsidiary of the Company.
"Receivables" means, collectively, (a) the Indebtedness and other
obligations owed to the Company or any of its Subsidiaries (before giving effect
to any sale or transfer thereof pursuant to a Receivables Facility), whether
constituting an account, chattel paper, an instrument, a document or general
intangible, arising in connection with the sale of goods and/or services by the
Company or such Subsidiary, including the obligation to pay any late fees,
interest or other finance charges with respect thereto (each of the foregoing,
collectively, an "Account Receivable"), (b) all of the Company's or such
Subsidiary's interest in the goods (including returned goods), if any, the sale
<PAGE>
of which gave rise to any Account Receivable, and all insurance contracts with
respect thereto, (c) all other security interests or Liens and property subject
thereto from time to time, if any, purporting to secure payment of any Account
Receivable, together with all financing statements and security agreements
describing any collateral securing such Account Receivable, (d) all Guarantees,
insurance and other agreements or arrangements of whatever character from time
to time supporting or securing payment of any Account Receivable, (e) all
contracts, invoices, books and records of any kind related to any Account
Receivable, (f) all cash collections in respect of, and cash proceeds of, any of
the foregoing and any and all lockboxes, lockbox accounts, collection accounts,
concentration accounts and similar accounts in or into which such collections
and cash proceeds are now or hereafter deposited, collected or concentrated, and
(g) all proceeds of any of the foregoing.
"Receivables Facility" means, with respect to any Person, any Receivables
securitization or factoring program pursuant to which such Person receives
proceeds pursuant to a sale, pledge or other encumbrance of its Receivables.
"Receivables Financing Amount" means at any date, with respect to any
Receivables Facility of any Person, the sum on such date of (a) the aggregate
uncollected balances of Accounts Receivable (as defined in the definition of
"Receivables") transferred ("Transferred Receivables") in such Receivables
Facility plus (b) the aggregate amount of all collections of Transferred
Receivables theretofore received by such Person but not yet remitted to the
purchaser, net of all reserves and holdbacks retained by or for the benefit of
the purchaser and net of any interest retained by such Person and reasonable
costs and expenses (including fees and commissions and taxes other than income
taxes) incurred by such Person in connection therewith and not payable to any
Affiliate of such Person.
"Receivables Subsidiary" means any Wholly Owned Subsidiary created
primarily to purchase or finance the Receivables of the Company and/or its
Subsidiaries pursuant to a Receivables Facility, so long as it: (a) has no
Indebtedness other than Non-Recourse Debt and (b) is a Person with respect to
which neither the Company nor any of its other Subsidiaries has any direct
obligation to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results other than to
act as servicer of Receivables. If, at any time, such Receivables Subsidiary
would fail to meet the foregoing requirements as a Receivables Subsidiary, it
shall thereafter cease to be a Receivables Subsidiary for purposes of this
Indenture and any Indebtedness of such Receivables Subsidiary shall be deemed to
be incurred by a Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under provisions of
Section 4.09 hereof, the Company shall be in default of such covenant).
"Refinancing" means (i) the offering by Finlay Enterprises of the
Debentures, (ii) the offering by Finlay Jewelry of the Senior Notes, (iii) the
repurchase or redemption of the Old Debentures by Finlay Enterprises , (iv) the
repurchase or redemption of the Old Notes by Finlay Jewelry, (v) the repayment
of the original issue discount on the Old Debentures, and (vi) the proposed
amendment of the Revolving Credit Agreement to increase the line of credit
thereunder to $275.0 million and to make certain other changes.
"Related Parties" with respect to any Principal means any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or a trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest of which
<PAGE>
consist of such Principal and/or such other Persons referred to in the
immediately preceding clause.
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of September 11, 1997, among Finlay Jewelry and Finlay
Enterprises, as Borrowers (as defined therein), and General Electric Capital
Corporation, as Agent (as defined therein) and Lender (as defined therein), and
the other Lenders named therein, providing for revolving credit borrowings,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, restated, renewed, supplemented, refunded, replaced or refinanced from
time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Note Indenture" means the indenture, dated the date hereof, by and
between Finlay Jewelry and Marine Midland Bank, as trustee, relating to the
Senior Notes.
"Senior Notes" means Finlay Jewelry's 83/8% Senior Notes due May 1, 2008.
"Senior Revolving Debt" means revolving credit borrowings under the
Revolving Credit Agreement and revolving consignments under the Gold Consignment
Agreement and, if any, a substantially similar gold consignment agreement
pursuant to Section 4.09(b)(iv)(y)(b) hereof.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of share of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
<PAGE>
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Intercompany Notes" means the intercompany notes, subordinate
(in accordance with the terms of this Indenture) in right of payment to all
existing Indebtedness of the issuer (other than Indebtedness which by its terms
is subordinate in right of payment to other Indebtedness of such issuer), issued
by the Company or a Subsidiary of the Company in favor of the Company or a
Subsidiary of the Company to evidence advances by the Company or a Subsidiary of
the Company, in each case, in the form attached as Exhibit F to this Indenture.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated as of
November 1, 1992, between the Company and Finlay Jewelry.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS 77aaa-77bbbb), as
in effect on the date on which this Indenture is qualified under the TIA.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction" ................................4.12
"Asset Sale Offer"......................................3.09
"Authentication Order" .................................2.02
"Change of Control Offer" ..............................4.15
"Change of Control Payment" ............................4.15
"Change of Control Payment Date" .......................4.15
"Commission" ...........................................4.03
"Covenant Defeasance" ..................................8.03
"Definitive Debenture" .................................2.01
<PAGE>
"Event of Default" .....................................6.01
"Excess Proceeds" ......................................4.10
"Global Debenture" .....................................2.01
"incur" ................................................4.09
"Legal Defeasance" .....................................8.02
"Offer Amount"..........................................3.09
"Offer Period" .........................................3.09
"Paying Agent" .........................................2.03
"Payment Default" ......................................6.01
"Permitted Debt"........................................4.09
"Purchase Date" ........................................3.09
"Registrar" ............................................2.03
"Restricted Payments"...................................4.07
"Security and Pledge Agreement"........................10.01
SECTION 1.03. TERMS OF TIA.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Debentures;
"indenture security Holder" means a Holder of a Debenture;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Debentures and the Subsidiary Guarantees, if any, means
the Company and the Guarantors, respectively, and any successor obligor upon the
Debentures and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
<PAGE>
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions;
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or
rules adopted by the Commission from time to time; and
(7) words implying the feminine or masculine gender shall be deemed to
include all genders.
ARTICLE 2
THE DEBENTURES
SECTION 2.01. FORM AND DATING.
(a) General. The Debentures and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Debentures may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Debenture shall be dated the date of its authentication. The
Debentures shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Debentures shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, and each Guarantor
(if any), by its execution and delivery of its Subsidiary Guarantee, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Debenture conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Debentures. Debentures issued in global form (each a "Global
Debenture") shall be substantially in the form of Exhibit A attached hereto
(including the "Schedule of Exchanges of Interests in the Global Debenture"
attached thereto). Debentures issued in definitive form (each a "Definitive
Debenture") shall be substantially in the form, if any, of Exhibit A attached
hereto (but without the "Schedule of Exchanges of Interests in Global Debenture"
attached thereto). Each Global Debenture shall represent such of the outstanding
Debentures as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Debentures from time to
time endorsed thereon and that the aggregate principal amount of outstanding
Debentures represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Debenture to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Debentures represented thereby shall be made by
the Trustee or the Custodian, at the direction of the Trustee, in accordance
<PAGE>
with instructions given by the Holder thereof as required by Section 2.06
hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer shall sign the Debentures for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Debentures and may be
in facsimile form.
If an Officer whose signature is on a Debenture no longer holds that office
at the time a Debenture is authenticated, the Debenture shall nevertheless be
valid.
A Debenture shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Debenture
has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an Officer
(an "Authentication Order"), authenticate Debentures for original issue up to
the aggregate principal amount stated in paragraph 4 of the Debentures. The
aggregate principal amount of Debentures outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Debentures. An authenticating agent may authenticate Debentures
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Debentures may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Debentures may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Debentures and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and the
term "Paying Agent" includes any additional paying agent. The Company may change
any Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with Section 7.07 hereof. The Company
or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints the Depository Trust Company to act as
Depositary with respect to the Global Debentures.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Debentures.
<PAGE>
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium, if any, or interest on the Debentures, and will notify the Trustee of
any default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Debentures.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA S 312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee at least seven Business
Days before each interest payment date and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of the Holders of Debentures
and the Company shall otherwise comply with TIA S 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Debentures. A Global Debenture may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Debentures will be exchanged by the Company for Definitive Debentures if (i) the
Company delivers to the Trustee notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary, (ii) the Company in its sole discretion
determines that the Global Debentures (in whole but not in part) should be
exchanged for Definitive Debentures and delivers a written notice to such effect
to the Trustee, or (iii) there shall have occurred and be continuing an Event of
Default. Upon the occurrence of any of the preceding events in (i), (ii) or
(iii) above, Definitive Debentures shall be issued in such names as the
Depositary shall instruct the Trustee. Global Debentures also may be exchanged
or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Except as set forth in the second sentence of this Section 2.06(a), every
Debenture authenticated and delivered in exchange for, or in lieu of, a Global
Debenture or any portion thereof, pursuant to this Section 2.06 or Section 2.07
or 2.10 hereof, shall be authenticated and delivered in the form of, and shall
be, a Global Debenture. A Global Debenture may not be exchanged for another
Debenture other than as provided in this Section 2.06(a), however, beneficial
<PAGE>
interests in a Global Debenture may be transferred and exchanged as provided in
Section 2.06(b) hereof.
(b) Transfer and Exchange of Beneficial Interests in Global Debentures. The
transfer and exchange of beneficial interests in Global Debentures shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. No written orders or instructions shall
be required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b).
(c) Transfer or Exchange of Beneficial Interests for Definitive Debentures.
Any contrary provision hereof notwithstanding, no Definitive Debentures shall be
issued or exchanged for beneficial interests in any Global Debenture except upon
the satisfaction of the conditions set forth in Section 2.06(a)(i), (ii) or
(iii) hereof.
(d) Transfer and Exchange of Definitive Debentures for Definitive
Debentures. Upon request by a Holder of Definitive Debentures and such Holder's
compliance with the provisions of this Section 2.06(d), the Registrar shall
register the transfer or exchange of Definitive Debentures. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Debentures duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his or her attorney, duly
authorized in writing. Upon receipt of a request to register such a transfer,
the Registrar shall register the Debentures pursuant to the instructions from
the Holder thereof.
(e) Cancellation and/or Adjustment of Global Debentures. At such time as
all beneficial interests in a particular Global Debenture have been exchanged
for Definitive Debentures or a particular Global Debenture has been redeemed,
repurchased or cancelled in whole and not in part, each such Global Debenture
shall be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Debenture is exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Debenture or for Definitive Debentures, the principal amount of
Debentures represented by such Global Debenture shall be reduced accordingly and
an endorsement shall be made on such Global Debenture by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction.
(f) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Debentures and Definitive
Debentures upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to an owner of a beneficial interest
in a Global Debenture or to a Holder of a Definitive Debenture for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections 2.10,
3.06 and 9.05 hereof).
<PAGE>
(iii) The Registrar shall not be required to register the transfer of or
exchange any Debenture selected for redemption in whole or in part, except the
unredeemed portion of any Debenture being redeemed in part.
(iv) All Global Debentures and Definitive Debentures issued upon any
registration of transfer or exchange of Global Debentures or Definitive
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Global
Debentures or Definitive Debentures surrendered upon such registration of
transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Debentures during a period beginning at the
opening of business 15 days before the day of any selection of Debentures for
redemption under Section 3.02 hereof and ending at the close of business on the
day of selection, (B) to register the transfer of or to exchange any Debenture
so selected for redemption in whole or in part, except the unredeemed portion of
any Debenture being redeemed in part or (C) to register the transfer of or to
exchange a Debenture between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Debenture, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Debenture is registered as the absolute owner of such
Debenture for the purpose of receiving payment of principal of and interest on
such Debentures and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Debentures and Definitive
Debentures in accordance with the provisions of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT DEBENTURES.
If any mutilated Debenture is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Debenture, the Company shall issue and the Trustee, upon receipt
of an Authentication Order, shall authenticate a replacement Debenture if the
Trustee's requirements are met. If required by the Trustee or the Company, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and the Company to protect the Company, the Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a
Debenture is replaced. The Company may charge for its expenses in replacing a
Debenture.
Every replacement Debenture is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Debentures duly issued hereunder.
SECTION 2.08. OUTSTANDING DEBENTURES.
The Debentures outstanding at any time are all the Debentures authenticated
by the Trustee except for those cancelled by it, those delivered to it for
<PAGE>
cancellation, those reductions in the interest in a Global Debenture effected by
the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Debenture does not cease to be outstanding because the Company or an Affiliate
of the Company holds the Debenture; however, Debentures held by the Company or a
Subsidiary of the Company shall not be deemed to be outstanding for purposes of
Section 3.07(b) hereof.
If a Debenture is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.
If the principal amount of any Debenture is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Debentures payable on that date, then on and after that date such
Debentures shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY DEBENTURES.
In determining whether the Holders of the required principal amount of
Debentures have concurred in any direction, waiver or consent, Debentures owned
by the Company, or by any Affiliate of the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Debentures that the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Debentures that are to be acquired by the
Company, any Subsidiary of the Company or an Affiliate of the Company pursuant
to an exchange offer, tender offer or other agreement shall not be deemed to be
owned by the Company, such Subsidiary of the Company or an Affiliate of the
Company until legal title to such Debentures passes to the Company or such
Subsidiary or Affiliate, as the case may be.
SECTION 2.10. TEMPORARY DEBENTURES.
Until certificates representing Debentures are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Debentures. Temporary Debentures shall be
substantially in the form of certificated Debentures but may have variations
that the Company considers appropriate for temporary Debentures and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Debentures in
exchange for temporary Debentures.
Holders of temporary Debentures shall be entitled to all of the benefits of
this Indenture.
<PAGE>
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Debentures surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Debentures surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Debentures (subject to the record retention requirement
of the Exchange Act). Certification of the destruction of all cancelled
Debentures shall be delivered to the Company. The Company may not issue new
Debentures to replace Debentures that it has paid or that have been delivered to
the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Debentures, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Debentures and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Debenture and the date of the proposed payment. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of the
Debentures entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA S316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Debentures may use a "CUSIP" number and, if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders, provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Debentures and that reliance may be
placed only on the other identification numbers printed on the Debentures. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
<PAGE>
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Debentures pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Debentures to be redeemed, and (iv) the redemption price. In addition,
in the case of a redemption pursuant to the provisions of Section 3.07(a)
hereof, if the obligations of the Company in respect of such redemption are
subject to the provisions of Section 3.04(b) hereof, such Officer's Certificate
shall so state.
SECTION 3.02. SELECTION OF DEBENTURES TO BE REDEEMED.
If less than all of the Debentures are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Debentures to be
redeemed or purchased among the Holders of the Debentures in compliance with the
requirements of the principal national securities exchange, if any, on which the
Debentures are listed or, if the Debentures are not so listed, on a pro rata
basis, by lot or in accordance with any other method the Trustee considers fair
and appropriate. In the event of partial redemption by lot, the particular
Debentures to be redeemed shall be selected, unless otherwise provided herein,
not less than 30 nor more than 60 days prior to the redemption date by the
Trustee from the outstanding Debentures not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Debentures
selected for redemption and, in the case of any Debenture selected for partial
redemption, the principal amount thereof to be redeemed. Debentures and portions
of Debentures selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Debentures of a Holder are to be redeemed, the
entire outstanding amount of Debentures held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail to its registered address, a notice of redemption
to each Holder whose Debentures are to be redeemed.
The notice shall identify the Debentures to be redeemed and shall state:
(d) the redemption date;
<PAGE>
(e) the redemption price;
(f)if any Debenture is being redeemed in part, the portion of the principal
amount of such Debenture to be redeemed and that, after the redemption date upon
surrender of such Debenture, a new Debenture or Debentures in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Debenture;
(g) the name and address of the Paying Agent;
(h) that Debentures called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(i) that, unless the Company defaults in making such redemption payment,
interest on Debentures called for redemption ceases to accrue on and after the
redemption date;
(j)the paragraph of the Debentures and/or Section of this Indenture
pursuant to which the Debentures called for redemption are being redeemed;
(k) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Debentures; and
(l) in the case of a notice of redemption pursuant to the provisions of
Section 3.07(a) hereof subject to revocation in accordance with the provisions
of such Section, that the Company reserves the right to revoke such notice of
redemption at any time not later than the date which is ten days prior to the
date of redemption specified in such notice.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice pursuant to this
Section 3.03.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
(n) Subject to the provisions of Section 3.04(b) hereof, (i) once notice of
redemption is mailed in accordance with Section 3.03 hereof, Debentures called
for redemption become irrevocably due and payable on the redemption date at the
redemption price, and (ii) a notice of redemption may not be conditional.
(o) In the case of a notice of redemption pursuant to the provisions of
Section 3.07(a) hereof which is revoked in accordance with the provisions of
such Section, (i) the Debentures shall not become due on the redemption date
specified in such revocable notice of redemption, (ii) the Company shall not be
required to pay the redemption price or, unless the proposed redemption date was
also a semi-annual interest payment date, any accrued interest in respect of the
Debentures, on such date and (iii) the principal of the Debentures shall remain
due and payable as if such revocable notice of redemption had not been given.
<PAGE>
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Debentures to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of and accrued interest on all
Debentures to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Debentures
or the portions of Debentures called for redemption. If a Debenture is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Debenture was registered at the close of business on such
record date. If any Debenture called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the rate
provided in the Debentures and in Section 4.01 hereof.
SECTION 3.06. DEBENTURES REDEEMED IN PART.
Upon surrender of a Debenture that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Debenture equal in principal
amount to the unredeemed portion of the Debenture surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Debentures pursuant to this Section 3.07
prior to May 1, 2003. Thereafter, the Debentures will be subject to redemption
at any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003..........................................104.500%
2004..........................................103.000%
2005..........................................101.500%
2006 and thereafter ..........................100.000%
provided, however, that if the Company, at its option, specifies in the notice
of redemption provided for in this Section 3.07(a) that such notice is
<PAGE>
revocable, then the Company may revoke such notice at its further option at any
time on or prior to the date which is 10 days prior to the redemption date
specified in such notice (provided such notice so specifies) by providing a
notice of revocation to the Trustee on or prior to the date on which the
Company's revocation right expires (and the Trustee shall promptly mail such
notice to the Holders by first class mail).
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
until May 1, 2001, the Company may on any one or more occasions redeem up to
$25.0 million in aggregate principal amount of Debentures at a redemption price
of 109% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date, with the net cash proceeds of Public
Equity Offerings by the Company; provided that at least $50.0 million in
aggregate principal amount of Debentures remains outstanding immediately after
the occurrence of such redemption (excluding Debentures held by the Company and
its Subsidiaries); and provided, further, that such redemption shall occur
within 120 days of the date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth in Sections 4.10 and 4.15 hereof, the Company shall not
be required to make mandatory redemption payments with respect to the
Debentures. There are no sinking fund payments with respect to the Debentures.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Debentures (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Debentures required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Debentures tendered in response to the
Asset Sale Offer. Payment for any Debentures so purchased shall be made in the
same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Debenture is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Debentures pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
<PAGE>
necessary to enable such Holders to tender Debentures pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Debenture not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Debenture accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) that Holders electing to have a Debenture purchased pursuant to an
Asset Sale Offer may only elect to have all of such Debenture purchased and may
not elect to have only a portion of such Debenture purchased;
(f) that Holders electing to have a Debenture purchased pursuant to any
Asset Sale Offer shall be required to surrender the Debenture, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Debenture
completed, or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Debenture the Holder delivered for purchase and a statement that
such Holder is withdrawing his or her election to have such Debenture purchased;
(h) that, if the aggregate principal amount of Debentures surrendered by
Holders exceeds the Offer Amount, the Trustee shall select the Debentures to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Debentures in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Debentures were purchased only in part shall be
issued new Debentures equal in principal amount to the unpurchased portion of
the Debentures surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Debentures or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Debentures
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Debentures or portions thereof were accepted for payment by the Company in
<PAGE>
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Debentures tendered by such Holder
and accepted by the Company for purchase, and the Company shall promptly issue a
new Debenture, and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Debenture to such Holder, in a
principal amount equal to any unpurchased portion of the Debenture surrendered.
Any Debenture not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof. Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF DEBENTURES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Debentures on the dates and in the manner provided in
the Debentures. Principal, premium, if any, and interest shall be considered
paid on the date due if the Paying Agent, if other than the Company or a
Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money
deposited by the Company in immediately available funds and designated for and
sufficient to pay all principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
at the rate equal to 1% per annum in excess of the then applicable interest rate
on the Debentures to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Debentures may be surrendered
for registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Debentures and this Indenture may be served.
The Company shall give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
<PAGE>
The Company may also from time to time designate one or more other offices
or agencies where the Debentures may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Debentures are
outstanding, the Company shall furnish to the Trustee and, upon receipt thereof,
the Trustee shall mail to the Holders of Debentures all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, in each case
within the time periods specified in the Commission's rules and regulations. In
addition, whether or not required by rules and regulations of the Commission,
the Company shall file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. Any materials required to be furnished to
Holders of Debentures by this Section 4.03 shall discuss, in reasonable detail,
either on the face of the financial statements included therein or in the
footnotes thereto and in any Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and the Guarantors, if any, separate from the
financial condition and results of operations of the other Subsidiaries of the
Company. The Company and each Guarantor, if any, shall also comply with the
provisions of TIA S 314(a).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and the Security and Pledge Agreement, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and the Security
and Pledge Agreement and is not in default in the performance or observance of
any of the terms, provisions and conditions of this Indenture or the Security
and Pledge Agreement (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to take with respect
<PAGE>
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Debentures are prohibited or, if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe (i) that the Company has
violated any provisions of Article 4 (other than Sections 4.02, 4.03 (except as
set forth below), 4.04 and 4.06, as to which no belief need be expressed) or
Article 5 hereof or, if any such violation has occurred, specifying the nature
and period of existence thereof or (ii) that the information contained in the
Company's filings on Forms 10-Q and 10-K failed to comply in any material
respect with the requirements of Regulations S-K and S-X under the Securities
Act insofar as they relate to accounting matters or, if any such filing has
failed to comply in any material respect with such Regulations, specifying the
nature of such violations; it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Debentures are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Debentures.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company hereby, and each of the Guarantors by execution and delivery of
its Subsidiary Guarantee, covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company and each of the
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
<PAGE>
SECTION 4.07. RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of the
Company's Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable solely to the Company or any Wholly Owned Subsidiary of
the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests in the Company or any Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company);
(iii) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is subordinated
to the Debentures or any Guarantee thereof, other than a payment of interest or
principal at the Stated Maturity for such payment; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(x) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(y) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the provisions of
Section 4.09(a) hereof; and
(z) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date of
this Indenture (excluding Restricted Payments permitted by the provisions of
Section 4.07(b)(ii)(iii) and (vi) to the extent that payments to Finlay
Enterprises pursuant to the Tax Allocation Agreement are less than or equal to
the total tax liabilities of the Company and its Subsidiaries that would be
payable if the Company and its Subsidiaries were to file a separate consolidated
return hereof), is less than the sum of (1) 50% of the Consolidated Net Income
of the Company (which Consolidated Net Income shall first be reduced by the
amount of any payments to Finlay Enterprises of the type described in Section
<PAGE>
4.07(b)(viii) hereof) for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of this
Indenture to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (2) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale since the date of this Indenture of, or
capital contributions with respect to, Equity Interests of the Company, or of
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities) sold to
a Subsidiary of the Company and other than Disqualified Stock or debt securities
that have been converted into Disqualified Stock), plus (3) to the extent that
any Restricted Investment that was made after the date of this Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (4) 100% of any dividends, distributions or other interest actually
received in cash by the Company after the date of this Indenture from a
Subsidiary of the Company, the Net Income of which Subsidiary has been excluded
from the computation of Consolidated Net Income; plus (5) $7.5 million.
(b) The provisions of Section 4.07(a) hereof will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that, the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement or other acquisition shall be
excluded for purposes of Section 4.07(a)(z)(2) hereof;
(iii) the defeasance, redemption or repurchase of subordinated Indebtedness
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness or the substantially concurrent sale (other than to a Subsidiary of
the Company) of Equity Interests of the Company (other than Disqualified Stock);
provided that, the amount of any such net cash proceeds that are utilized for
any such defeasance, redemption or repurchase shall be excluded for purposes of
Section 4.07(a)(z)(2) hereof;
(iv) payments to Finlay Enterprises to permit the substantially concurrent
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Finlay Enterprises held by any officer, employee, consultant
or director of Finlay Enterprises or any of its Subsidiaries, or by the estate
of any such Person, pursuant to any equity subscription, stock option,
employment or similar agreement upon the death, retirement or termination, as
the case may be, of such Person; provided that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $3.0 million during any twelve-month period (which amount shall not be
cumulative), plus (A) the aggregate cash proceeds received by Finlay Enterprises
during such twelve-month period from any reissuance of Equity Interests by
Finlay Enterprises to any officer, employee, consultant or director of Finlay
Enterprises or any of its Subsidiaries, plus (B) the aggregate amount, if any,
<PAGE>
paid during such twelve-month period in connection with the repurchase,
redemption, retirement or acquisition of Equity Interests of Finlay Enterprises
pursuant to any one or more agreements between Finlay Enterprises and Arthur E.
Reiner as in effect on the date of this Indenture, and, provided further, no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction;
(v) purchases of Equity Interests upon cashless exercise of options, to the
extent cashless exercise is permitted under the terms of the relevant stock
option agreement and of the incentive plan pursuant to which such options were
issued; and
(vi) required purchases of subordinated Indebtedness upon a Change of
Control or similar event constituting a "change in control" for purposes of the
agreement or agreements governing such subordinated Indebtedness, provided that,
prior to making any such purchases of such Subordinated Indebtedness, the
Company makes a Change of Control Offer and makes the Change of Control Payments
on the Change of Control Payment Date (in each case, whether or not otherwise
required to do so by this Indenture) that would be required if a Change in
Control had occurred.
(c) In determining whether any Restricted Payment is permitted by this
Section 4.07, the Company may allocate or reallocate any portion or all of such
Restricted Payment among the clauses (i) through (vi) of Section 4.07(b) hereof
or among such clauses and Section 4.07(a) hereof, including clauses (x), (y) and
(z), provided that, after giving effect to such allocation or reallocation, all
such Restricted Payments, or allocated portions thereof, would be permitted
under the various provisions of such Sections.
(d) The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may be,
pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined by the Board of Directors, whose
resolutions with respect thereto shall be set forth in Officers' Certificate
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accountant, appraisal or investment banking firm of
national standing if such fair market value exceeds $10.0 million. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, which calculations shall be based upon the
Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of the
Company to (i)(a) pay dividends or make any other distributions to the Company
or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
<PAGE>
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries; (ii) make loans or
advances to the Company or any of its Subsidiaries; or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date hereof, (b) the Revolving Credit Agreement
and the Gold Consignment Agreement as in effect as of the date hereof, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Agreement and the Gold Consignment Agreement as in effect on the date,
(c) this Indenture and the Debentures, and the Senior Note Indenture and the
Senior Notes, (d) applicable law, (e) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms hereof to be incurred, (f) customary non-assignment
provisions in leases and other contracts entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in the beginning of this clause (iii) on the property so
acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, (i) Permitted Liens, (j) any instrument binding
upon a Receivables Subsidiary, provided that such instrument does not bind the
Company or any other Subsidiary of the Company or any of their respective
properties or assets or (k) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company
(i) shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guaranty or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and
(ii) shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and its Subsidiaries may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
<PAGE>
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
(b) The provisions of Section 4.09(a) hereof shall not apply to any of the
following (collectively, "Permitted Debt"):
(i) the incurrence by the Company or any of its Subsidiaries of revolving
credit Indebtedness and letter of credit obligations pursuant to the Revolving
Credit Agreement in an aggregate principal amount not to exceed at the time of
incurrence thereof the greater of (x) $275.0 million or (y) 70% of inventory
plus 85% of accounts receivable (each as determined in accordance with GAAP, but
excluding accounts receivable that are past due by more than 60 days, other than
by reason of any Bankruptcy Law) at any one time outstanding, provided that such
$275.0 million specified in clause (i)(x) above shall be permanently reduced by
the aggregate amount of Indebtedness of all Receivables Subsidiaries of the
Company and its Subsidiaries;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Debentures and by Finlay Jewelry of Indebtedness represented by the Senior
Notes;
(iv) the incurrence by Finlay Jewelry of Indebtedness or other obligations
in an aggregate principal amount of up to the greater of (x) $37.0 million and
(y) 90% of the fair market value of the fine gold content of specified
Consignment Inventory eligible to be consigned under (a) the Gold Consignment
Agreement or (b) a substantially similar gold consignment agreement that Finlay
Jewelry may enter into subsequent to the date of this Indenture which provides
for the transfer of title to the gold content of Consignment Inventory from the
relevant vendor to a gold consignor; provided that such $37.0 million specified
in clause (x) above shall be permanently reduced by the aggregate amount of all
Net Proceeds of Asset Sales applied to repay such Indebtedness pursuant to
Section 4.10(b)(i) hereof;
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations in aggregate principal
amount not to exceed $4.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by mortgage financings or purchase money obligations,
in each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $4.0 million at any time outstanding;
(vii) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness;
<PAGE>
(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries; provided, however, that (x) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinate (in accordance
with the terms of this Indenture) to the payment in full of all Obligations with
respect to the Debentures and (y)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a Person
other than the Company or a Wholly Owned Subsidiary of the Company and (B) any
sale or other transfer of any such Indebtedness to a Person that is not either
the Company or a Wholly Owned Subsidiary of the Company shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate Indebtedness that is permitted by the
terms of this Indenture to be outstanding;
(x) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging commodity
price risk, entered into in the ordinary course of business and not for
speculative purposes, to protect against fluctuations in the prices of raw
materials used in the Company's or such Subsidiary's business in amounts
reasonably related to such business;
(xi) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging foreign
exchange rate risk, entered into in the ordinary course of business and not for
speculative purposes and in amounts reasonably related to the businesses of the
Company and its Subsidiaries;
(xii) the incurrence by the Company or any of its Subsidiaries of Acquired
Debt of a Person incurred prior to the date upon which such Person was (or such
Person's assets were) acquired by the Company or any of its Subsidiaries
(excluding Indebtedness incurred by such Person in connection with, or in
contemplation of, such acquisition) in an aggregate principal amount not to
exceed $10.0 million at any one time outstanding;
(xiii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of worker's compensation claims, self-insurance
obligations, performance, surety and similar bonds and completion guarantees
provided by the Company or any of its Subsidiaries in the ordinary course of
business;
(xiv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from any agreement entered into by the Company or any of
its Subsidiaries providing for indemnification, purchase price adjustment or
similar obligations, in each case incurred or assumed in connection with any
asset sale;
(xv) the incurrence of Indebtedness by the Company or any of its
Subsidiaries in connection with a Guarantee of any Indebtedness of the Company
or any of its Subsidiaries that was permitted to be incurred by another
provision of this Section 4.09;
<PAGE>
(xvi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is extinguished within five
Business Days of incurrence; and
(xvii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of this
Section 4.09(b) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $40.0 million.
(c) For purposes of determining compliance with the provisions of Section
4.09(b), in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Permitted Debt described in Sections 4.09(b)(i)
through (xvii) above or is entitled to be incurred pursuant to Section 4.09(a)
hereof, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with the provisions of this Section
4.09 and such item of Indebtedness will be treated as having been incurred
pursuant to only one of such clauses or pursuant to Section 4.09(a) hereof.
Indebtedness permitted to be incurred pursuant to Sections 4.09(b)(i) through
(xvii) above may be incurred pursuant to one agreement or several agreements
with one lender or several lenders.
SECTION 4.10. ASSET SALES.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
engage in an Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Subsidiary is in
the form of (a) cash or Cash Equivalents or (b) Qualified Proceeds, provided,
that the aggregate fair market value of Qualified Proceeds that may be received
pursuant to this clause (ii)(b) shall not exceed an aggregate of $10.0 million
after the date of this Indenture; provided further, that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary of the Company (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Debentures or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are promptly (and in any event, in not more than 30 days) converted by the
Company or such Subsidiary into cash or Cash Equivalents (to the extent of the
cash or Cash Equivalents received), shall be deemed to be cash for purposes of
this provision.
(b) Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds at its option to (i) repay
revolving indebtedness or other obligations either under the Revolving Credit
Agreement or the Gold Consignment Agreement (or a substantially similar gold
<PAGE>
consignment agreement pursuant to Section 4.09(b)(iv)(y)(b) hereof) or a
combination thereof (and to correspondingly permanently reduce revolving
borrowing commitments or revolving consignment commitments or a combination
thereof with respect thereto) or (ii) the acquisition of a controlling interest
in another business, the making of capital expenditures or the acquisition of
other assets used or useable, in each such case, in the business engaged in by
the Company or any of its Subsidiaries on the date hereof or in a business
reasonably related thereto. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Senior Revolving Debt or otherwise
make an Investment of such Net Proceeds in any manner that is not prohibited by
the terms of this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this Section 4.10(b)
will be deemed to constitute "Excess Proceeds". When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company shall make an offer to all
Holders of Debentures (an "Asset Sale Offer") in accordance with the provisions
of Section 3.09 hereof to purchase the maximum principal amount of Debentures
that may be purchased out of such Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase. To the extent that the
aggregate amount of Debentures tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company or any of its Subsidiaries may use any
remaining Excess Proceeds for general corporate purposes or otherwise make an
Investment of such remaining amounts in any manner that is not prohibited by
this Indenture. If the aggregate principal amount of Debentures surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Debentures to be purchased on a pro rata basis. Notwithstanding the
foregoing, the Company shall not be required to make an Asset Sale Offer if (i)
the Company's obligation to make such Asset Sale Offer is due to an Asset Sale
by one or more of the Company's Subsidiaries, (ii) as a result of such Asset
Sale (or Asset Sales), Finlay Jewelry is required to make and does make an offer
similar to an Asset Sale Offer to the holders of the Senior Notes in accordance
with the terms of the Senior Note Indenture and (iii) to the extent that the
aggregate amount of Senior Notes tendered pursuant to such offer is less than
the Excess Proceeds, Finlay Jewelry makes an Asset Sale Offer to all Holders of
Debentures with such remaining Excess Proceeds.
SECTION 4.11. EQUITY INTERESTS OF WHOLLY OWNED SUBSIDIARIES.
The Company (a) shall not, and shall not permit any Wholly Owned Subsidiary
of the Company to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of the Company to any Person (other
than to the Company or to a Wholly Owned Subsidiary of the Company), unless (i)
such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Subsidiary and (ii) the Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the provisions of Section 4.10 and, if applicable pursuant to
the provisions of Section 4.10 hereof, Section 3.09 hereof and (b) shall not
permit any Wholly Owned Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or to a
Wholly Owned Subsidiary of the Company.
<PAGE>
SECTION 4.12. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to or Investment in, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution approved by a majority of
the disinterested members of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, an opinion issued by an accounting, appraisal or investment banking
firm of national standing as to the fairness of such Affiliate Transaction, from
a financial point of view, to the Holders; provided that (a) any employment,
deferred compensation, stock option, noncompetition, consulting, indemnification
or similar agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (b) transactions between or among the Company and/or
its Wholly Owned Subsidiaries, (c) Restricted Payments and Permitted Investments
that are permitted by the provisions of Section 4.07 hereof, (d) any payments
due to the Thomas H. Lee Capital LLC or Desai Capital Management Incorporated
under the Lee Management Agreement or the Desai Management Agreement, each as
amended as of the date hereof, (e) the performance by the Company of its
obligations under the Stockholders' Agreement and the Registration Rights
Agreement, each as amended as of the date hereof, (f) any payments by or to the
Company or any Wholly Owned Subsidiary of the Company pursuant to the terms of
the Tax Allocation Agreement, as amended as of the date hereof, (g) transfers,
conveyances, sales, leases or other dispositions of Receivables to a Receivables
Subsidiary, and (h) contracts, agreements and understandings in existence in
writing on the date hereof and as in effect on such date, in each case, shall
not be deemed Affiliate Transactions.
SECTION 4.13. LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or otherwise cause or suffer to
exist or become effective any Lien of any kind, other than Permitted Liens, upon
any of their property or assets, now owned or hereafter acquired, or any income
or profits therefrom or assign or convey any right to receive income therefrom,
securing Indebtedness or trade payables, unless all payments due hereunder and
under the Debentures are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
<PAGE>
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the
Debentures.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Debentures
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Debentures pursuant
to the offer described below (the "Change of Control Offer") at an offer price
in cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase (the "Change of Control
Payment").
(b) Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Debentures pursuant
to the procedures required by this Section 4.15, which procedures shall be
described in such notice. The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Debentures as a result of a Change of Control.
(c) On a date that is at least 30 but no more than 60 days from the date on
which the Company mails notice of the Change of Control (the "Change of Control
Payment Date"), the Company shall, to the extent lawful, (1) accept for payment
all Debentures or portions thereof properly tendered pursuant to the Change of
Control Offer, (2) deposit with the Paying Agent an amount equal to the Change
of Control Payment in respect of all Debentures or portions thereof so tendered
and (3) deliver or cause to be delivered to the Trustee the Debentures so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Debentures or portions thereof being purchased by the Company. The
Paying Agent will promptly mail to each Holder of Debentures so tendered the
Change of Control Payment for such Debentures, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
tendering Holder a new Debenture equal in principal amount to any unpurchased
portion of the Debentures surrendered, if any; provided that each such new
Debenture will be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above shall apply whether or not
any other provision hereof is applicable.
(d) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
<PAGE>
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and purchases all Debentures validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Debentures for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Debentures unless such consideration is offered to be
paid or is paid to all Holders of the Debentures that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Debentures and
hereunder pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) shall have Consolidated Net Worth
immediately after the transaction equal to or greater than 90% of the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
Section 4.09(a) hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
<PAGE>
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Debentures except in the case of a sale of all
of the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) default for 30 days in the payment when due of interest on the
Debentures;
(b) default in payment when due of the principal of or premium, if any, on
the Debentures;
(c) failure by the Company to comply with the provisions of Sections 3.09,
4.10 or 4.15 or Article 5 hereof;
(d) failure by the Company for 45 days after notice to comply with any of
its other covenants hereunder or under the Debentures;
(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (including any
Indebtedness the payment of which is guaranteed by the Company or any of its
Subsidiaries) other than a Receivables Subsidiary whether such Indebtedness or
guarantee now exists, or is created after the date hereof, which default:
(i) is caused by a failure to pay principal or a premium, if any, on such
Indebtedness at the Stated Maturity for such payment of principal or premium, if
any, or such later date as has been agreed in a writing (provided such writing
is entered into prior to such Stated Maturity) by the parties to the
documentation relating to such Indebtedness (a "Payment Default") or
(ii) results in the acceleration of such Indebtedness prior to its express
maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$12.5 million or more;
<PAGE>
(f) failure by the Company or any of its Subsidiaries other than a
Receivables Subsidiary to pay final judgments aggregating in excess of $12.5
million, which judgments are not paid, discharged or stayed for a period of 60
days (or 90 days if prior to such sixtieth day the Company has delivered to the
Trustee an Officers' Certificate attesting that a financially responsible
insurance company of recognized national standing has acknowledged in writing
complete liability for such judgment and attached a copy of such acknowledgment
thereto);
(g) the failure of any material representation or warranty of the Company
set forth in the Security and Pledge Agreement to be true and correct or the
failure by the Company to perform any of its material covenants under the
Security and Pledge Agreement which, in either case,
(i) continues for five days after the earlier of the Company's management
becoming aware thereof or the receipt of written notice thereof from the
Trustee, the Pledgee or the Holders of 25% or more in principal amount of the
then outstanding Debentures and
(ii) materially impairs or diminishes the Trustee's Lien on or the value of
the Collateral (as defined in the Security and Pledge Agreement);
(h) repudiation by the Company of its obligations under the Security and
Pledge Agreement or the unenforceability of the Security and Pledge Agreement
against the Company for any reason;
(i) repudiation by any Subsidiary of its obligations under any Subsidiary
Guarantee or, except as permitted hereunder, any Subsidiary Guarantee shall be
held in a judicial proceeding to be unenforceable or invalid in any material
respect or shall cease to be in full force and effect;
(j) the Company or any of its Subsidiaries (other than a Receivables
Subsidiary) within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(k) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Subsidiaries (other
than a Receivables Subsidiary);
<PAGE>
(ii) appoints a custodian of the Company or any of its Subsidiaries or for
all or substantially all of the property of the Company or any of its
Subsidiaries (other than a Receivables Subsidiary); or
(iii) orders the liquidation of the Company or any of its Subsidiaries
(other than a Receivables Subsidiary);
and the order or decree remains unstayed and in effect for 60 consecutive
days.
<PAGE>
(l) except as permitted by this Indenture, any Subsidiary Guarantee is held
in any judicial proceeding to be unenforceable or invailid in any material
respect or shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee.
SECTION 6.02. ACCELERATION.
(a) If any Event of Default occurs and is continuing (other than as
specified in Sections 6.01(j) or (k)), the Trustee or the Holders of at least
25% in principal amount of the then outstanding Debentures by written notice to
the Trustee and the Company may declare all the Debentures to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from Sections 6.01(j) or (k) hereof, with respect to the Company, any
Significant Subsidiary of the Company or any group of its Subsidiaries that,
taken together, would constitute a Significant Subsidiary of the Company, all
outstanding Debentures will become due and payable without further action or
notice. Holders of the Debentures may not enforce this Indenture or the
Debentures except as provided in this Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Debentures may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Debentures notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the payment
of principal or interest) if it determines that withholding notice is in their
interest.
(b) If an Event of Default occurs on or after May 1, 2003 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Debentures
pursuant to Section 3.07 hereof, then, upon acceleration of the Debentures, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law, anything in this Indenture or in the Debentures to the
contrary notwithstanding. If an Event of Default occurs prior to May 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the Debentures prior to such date, then, upon acceleration of the Debentures, an
additional premium shall also become and be immediately due and payable in an
amount, for each of the years beginning on May 1 of the years set forth below,
as set forth below (expressed as a percentage of the principal amount to the
date of payment that would otherwise be due but for the provisions of this
sentence):
Year Percentage
---- ----------
1998 ............................................109.000%
1999 ............................................108.100%
2000 ............................................107.200%
2001 ............................................106.300%
2002 ............................................105.400%
2003 ............................................104.500%
<PAGE>
(c) In the event of a declaration of acceleration of the Debentures because
an Event of Default has occurred and is continuing as a result of a Payment
Default or the acceleration of any Indebtedness described in Section 6.01(e)
hereof, the declaration of acceleration of the Debentures shall be automatically
annulled if
(i) any Payment Default described in clause (i) of such Section has been
cured or waived and
(ii) the holders of any accelerated Indebtedness described in clause (ii)
of such Section have rescinded the declaration of acceleration in respect of
such Indebtedness provided in each such case that (a) such cure, waiver or
rescission of such declaration of acceleration shall have been made in writing
within 30 days of the date of such Payment Default or declaration, as the case
may be, and (b) the annulment of the acceleration of such Debentures would not
conflict with any judgment or decree of a court of competent jurisdiction and
(c) all existing Events of Default, except nonpayment of principal or interest
on the Debentures that became due solely because of the acceleration of the
Debentures, have been cured or waived.
(d) A Default under Section 6.01(d) hereof is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Debentures give written notice to the Company of the default and the
Company does not cure the Default within the period provided therein. The notice
must specify in reasonable detail the Default, demand that it be remedied and
state that the notice is a "Notice of Default". If the Holders of 25% or more in
principal amount of the then outstanding Debentures request the Trustee to give
such notice on their behalf, the Trustee shall do so.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Debentures or to enforce the performance of any provision of the
Debentures or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Debenture in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of the
Debentures then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Debentures waive any existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the
Debentures (including in connection with an offer to purchase); provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Debentures may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration. Upon
such waiver, such Default shall cease to exist, and any Event of Default arising
<PAGE>
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Debentures may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. The Trustee may, however, refuse to follow any direction
that conflicts with law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Debentures or that may
involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Debenture may pursue a remedy with respect to this Indenture
or the Debentures only if:
(a) the Holder of a Debenture gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25 % in principal amount of the then
outstanding Debentures make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Debenture or Holders of Debentures offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Debentures do not give the Trustee a direction
inconsistent with the request.
A Holder of a Debenture may not use this Indenture to prejudice the rights
of another Holder of a Debenture or to obtain a preference or priority over
another Holder of a Debenture.
SECTION 6.07. RIGHTS OF HOLDERS OF DEBENTURES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Debenture to receive payment of principal, premium, if any, and
interest on the Debenture, on or after the respective due dates expressed in the
Debenture (including in connection with an offer to purchase), or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
<PAGE>
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Debentures
and interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Debentures allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Debentures), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder, or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Debentures for amounts due and unpaid on the
Debentures for principal, premium, if any, and interest, ratably, without
<PAGE>
preference or priority of any kind, according to the amounts due and payable on
the Debentures for principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Debentures pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Debenture pursuant
to Section 6.07 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Debentures.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. The Trustee shall examine the
certificates and opinions, however, to determine whether or not they conform to
the requirements of this Indenture.
(c)The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
<PAGE>
(i) this clause does not limit the effect of clause (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to clauses (a), (b),
and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
<PAGE>
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Debentures and may otherwise deal with the Company or any Affiliate
of the Company with the same rights it would have if it were not Trustee. In the
event that the Trustee acquires any conflicting interest, however, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Debentures, it shall not be
accountable for the Company's use of the proceeds from the Debentures or any
money paid to the Company or upon the Company's direction under any provision of
this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the
Debentures or any other document in connection with the sale of the Debentures
or pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
actually known to a Responsible Officer of the Trustee, the Trustee shall mail
to Holders of Debentures a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default
relating to the payment of principal or interest on any Debenture, the Trustee
may withhold the notice if it determines that withholding the notice is in the
interests of the Holders of the Debentures.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE DEBENTURES.
Within 60 days after each April 24 beginning with the April 24 following
the date of this Indenture, and for so long as Debentures remain outstanding,
the Trustee shall mail to the Holders of the Debentures a brief report dated as
of such reporting date that complies with TIA S 313(a) (but if no event
described in TIA S 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA S 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA S 313(c).
A copy of each report at the time of its mailing to the Holders of
Debentures shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Debentures are listed in accordance with TIA S
313(d). The Company shall promptly notify the Trustee when the Debentures are
listed on any stock exchange.
<PAGE>
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Debentures on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Debentures. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(j) or (k) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA S 313(b)(2) to the
extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Debentures of a
<PAGE>
majority in principal amount of the then outstanding Debentures may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Debentures may appoint
a successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Debentures of at least 10% in principal amount of the then
outstanding Debentures may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Debenture who has
been a Holder of a Debenture for at least six months, fails to comply with
Section 7.10, such Holder of a Debenture may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to the
Holders of the Debentures. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
<PAGE>
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA S 310(a)(1), (2) and (5). The Trustee is subject to TIA S 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA S 311(a), excluding any creditor relationship
listed in TIA S 311(b). A Trustee who has resigned or been removed shall be
subject to TIA S 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.10. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Debentures upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02 and subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, the Company shall be deemed to have
been discharged from its obligations with respect to all outstanding Debentures
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance") and the obligations of the Guarantors under the Subsidiary
Guarantees, if any, then existing shall concurrently terminate. For this
purpose, Legal Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding
Debentures, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Debentures and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Debentures to receive, solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Debentures
when such payments are due, (b) the Company's obligations with respect to such
Debentures under Articles 2 and 7 and Section 4.02 hereof, (c) the rights,
<PAGE>
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13 and 4.15 hereof with respect to the outstanding Debentures on
and after the date the conditions set forth in Section 8.04 are satisfied
(hereinafter, "Covenant Defeasance"), and the Debentures shall thereafter be
deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Debentures shall
not be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Debentures, the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Debentures shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, the Company's failure to perform
its obligations pursuant to Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13
and 4.15 hereof shall not result in an Event of Default pursuant to Section
6.01(d) hereof, nor shall Sections 6.01(e) or 6.01(f) hereof constitute Events
of Default. In connection with any Covenant Defeasance, the Company may, at its
option, by written notice given to the Trustee prior to the delivery to the
Trustee of the Opinion of Counsel referred to in Section 8.04(c) hereof, elect
that any or all of the Subsidiary Guarantees, if any, then existing will be
terminated on the date the obligations set forth in Section 8.04 hereof are
satisfied. If no such notice is given to the Trustee with respect to a
Subsidiary Guarantee, such Subsidiary Guarantee shall remain in full force and
effect following such Covenant Defeasance.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Debentures:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Debentures, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Debentures on the Stated Maturity or on the
applicable redemption date, as the case may be, and the Company must specify
<PAGE>
whether the Debentures are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or, insofar as
Sections 6.01(j) or 6.01(k) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is bound including, without limitation, the Revolving Credit
Agreement and the Gold Consignment Agreement;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Debentures over any other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
<PAGE>
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding
Debentures shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Debentures and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of such Debentures of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Debentures.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non- callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Debenture and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Debenture shall thereafter,
as a secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non- callable Government Securities in accordance with Section 8.02 or
<PAGE>
Section 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or Section 8.03 hereof until such
time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or Section 8.03 hereof, as the case may be;
provided, however, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Debenture following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Debentures to receive such payment from the money held by the Trustee or
Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF DEBENTURES.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Debentures without the consent of
any Holder of a Debenture:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Debentures in addition to or in place of
certificated Debentures or to alter the provisions of Article 2 hereof
(including the related definitions) in a manner that does not materially
adversely affect any Holder;
(c) to provide for the assumption of the Company's (and Guarantors')
obligations to the Holders of the Debentures in the case of a merger or
consolidation or sale of all or substantially all of the Company's (and
Guarantors') assets pursuant to Article 5 or Article 11 hereof;
(d) to release Liens on any Collateral as permitted by Section 10.04
hereof;
(e) to make any change that would provide any additional rights or benefits
to the Holders of the Debentures or that does not adversely affect the legal
rights hereunder of any Holder of the Debenture; and
(f) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA;
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02(b) hereof, the Trustee shall join with the Company and the Guarantors, if
any, in the execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
<PAGE>
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF DEBENTURES.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture and the Debentures and any Subsidiary
Guarantees may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Debentures then outstanding
(including consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Debentures), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Debentures, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the
Debentures may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Debentures (including consents obtained
in connection with a purchase of, tender offer or exchange offer for,
Debentures). The determination as to which Debentures are considered to be
"outstanding" for purposes of this Section 9.02 shall be made in accordance with
the provisions of Section 2.08 hereof.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Debentures as aforesaid, and upon
receipt by the Trustee of the documents described in Section 7.02 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Debentures
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Debentures affected thereby
a notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Debentures then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Debentures. However, without the consent of each Holder
affected, an amendment or waiver under this Section 9.02 may not (with respect
to any Debentures held by a non-consenting Holder):
(a) reduce the principal amount of Debentures whose Holders must consent to
an amendment, supplement or waiver;
<PAGE>
(b) reduce the principal of or change the fixed maturity of any Debenture
or alter the provisions with respect to the redemption of the Debentures;
(c) reduce the rate of or change the time for payment of interest on any
Debenture;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Debentures (except a rescission of
acceleration of the Debentures by the Holders of at least a majority in
aggregate principal amount of the Debentures and a waiver of the payment default
that resulted from such acceleration);
(e) make any Debenture payable in money other than that stated in the
Debentures;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Debentures to receive payments of
principal of or premium, if any, or interest on the Debentures;
(g) release the Lien of the Collateral Agent in any of the Collateral other
than pursuant to the terms of this Indenture of the Security and Pledge
Agreement; and
(h) waive a redemption payment with respect to any Debenture or make any
change in Sections 4.10, 4.15, 6.04 or 6.07 hereof or in the foregoing amendment
and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Debentures shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Debenture is a continuing consent by the Holder of a Debenture
and every subsequent Holder of a Debenture or portion of a Debenture that
evidences the same debt as the consenting Holder's Debenture, even if notation
of the consent is not made on any Debenture. Any such Holder of a Debenture or
subsequent Holder of a Debenture, however, may revoke the consent as to its
Debenture if the Trustee receives written notice of revocation before the date
the waiver, supplement or amendment becomes effective. An amendment, supplement
or waiver becomes effective in accordance with its terms and thereafter binds
every Holder of a Debenture.
SECTION 9.05. NOTATION ON OR EXCHANGE OF DEBENTURES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Debenture thereafter authenticated. The Company in
exchange for all Debentures may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Debentures that reflect the amendment,
supplement or waiver.
<PAGE>
Failure to make the appropriate notation or issue a new Debenture shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.01. SECURITY AND PLEDGE AGREEMENT.
The due and punctual payment of the principal of and interest on the
Debentures when and as the same shall be due and payable, whether on an interest
payment date, at maturity, by acceleration, repurchase, redemption or otherwise,
and interest on the overdue principal of and interest (to the extent permitted
by law), if any, on the Debentures and performance of all other obligations of
the Company to the Holders of Debentures or the Trustee under this Indenture and
the Debentures, according to the terms hereunder or thereunder, shall be secured
as provided in the Security and Pledge Agreement, a copy of which is attached
hereto as Exhibit B, which the Company has entered into simultaneously with the
execution of this Indenture (the "Security and Pledge Agreement"). Each Holder
of Debentures, by its acceptance thereof, consents and agrees to the terms of
the Security and Pledge Agreement (including, without limitation, the provisions
providing for foreclosure and release of Collateral) as the same may be in
effect or may be amended from time to time in accordance with its terms and
authorizes and directs the Collateral Agent to enter into the Security and
Pledge Agreement and to perform its obligations and exercise its rights
thereunder in accordance therewith. The Company shall deliver to the Trustee
copies of all documents delivered to the Collateral Agent pursuant to the
Security and Pledge Agreement, and shall do or cause to be done all such acts
and things as may be necessary or proper, or as may be required by the
provisions of the Security and Pledge Agreement, to assure and confirm to the
Trustee and the Collateral Agent the security interest in the Collateral
contemplated hereby and by the Security and Pledge Agreement or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and of the Debentures secured
hereby, according to the intent and purposes herein expressed. The Company shall
take, or shall cause its Subsidiaries to take, upon request of the Trustee, any
and all actions reasonably required to cause the Security and Pledge Agreement,
in accordance with the terms and conditions thereof, to create and maintain, as
security for the Obligations of the Company hereunder, a valid and enforceable
perfected first priority Lien in and on all the Collateral, in favor of the
Collateral Agent for the benefit of the Holders of Debentures, superior to and
<PAGE>
prior to the rights of all third Persons and subject to no other Liens than
Permitted Liens; provided, however, that so long as any of the Old Debentures
shall remain outstanding, such Lien created by the Security and Pledge Agreement
shall be permitted to be a second priority Lien.
SECTION 10.02. TRANSFERS OF INTELLECTUAL PROPERTY AND SIMILAR ASSETS.
If the Company or any Wholly Owned Subsidiary of the Company proposes to
convey, transfer, contribute, sell, lease or assign or otherwise distribute
(collectively, "transfer") any intellectual property or similar assets to any
other Subsidiary of the Company after the date of this Indenture, (i) such
transfer shall be made only to another Wholly Owned Subsidiary of the Company
and (ii) prior to or concurrently with such transfer, the Company or such Wholly
Owned Subsidiary effecting such transfer shall enter into a license agreement
with such other Wholly Owned Subsidiary in the form attached hereto as Exhibit C
(with such modifications as may be agreed to by the Trustee and the Company (or
the Trustee and such Wholly Owned Subsidiary of the Company, as the case may
be)), pursuant to which the Company or such Wholly Owned Subsidiary effecting
such transfer shall be permitted to utilize such property or assets in the same
manner and to the same extent as such property or assets were used by such
entity prior to the transfer thereof.
SECTION 10.03. RECORDING AND OPINIONS.
(a) The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Security and Pledge Agreement, and reciting with respect to
the security interests in the Collateral, the details of such action, or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
make such Lien effective.
(b) The Company shall furnish to the Collateral Agent and the Trustee on
May 1 in each year beginning with May 1, 1999, an Opinion of Counsel, dated as
of such date, either (i) (A) stating that, in the opinion of such counsel,
action has been taken with respect to the recording, registering, filing,
re-recording, re-registering and refiling of all supplemental indentures,
financing statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien pursuant to the Security and
Pledge Agreement and reciting with respect to the security interests in the
Collateral the details of such action or referring to prior Opinions of Counsel
in which such details are given and (B) stating that, based on relevant laws as
in effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
such date fully to preserve and protect, to the extent such protection and
preservation are possible by filing, the rights of the Holders of Debentures and
the Collateral Agent and the Trustee hereunder and under the Security and Pledge
Agreement with respect to the security interests in the Collateral, or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
maintain such Lien and assignment.
<PAGE>
SECTION 10.04 RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this Section 10.04,
Collateral may be released from the Lien and security interest created by the
Security and Pledge Agreement at any time or from time to time in accordance
with the provisions of the Security and Pledge Agreement or as provided hereby.
In addition, upon the request of the Company pursuant to an Officers'
Certificate certifying that all conditions precedent hereunder have been met and
stating whether or not such release is in connection with an Asset Sale and (at
the sole cost and expense of the Company) the Collateral Agent shall release (i)
Collateral which is sold, conveyed or disposed of in compliance with the
provisions of this Indenture; provided, that if such sale, conveyance or
disposition constitutes an Asset Sale, the Company shall apply the Net Proceeds
in accordance with Section 4.10 hereof. Upon receipt of such Officers'
Certificate the Collateral Agent shall execute, deliver or acknowledge any
necessary or proper instruments of termination, satisfaction or release to
evidence the release of any Collateral permitted to be released pursuant to this
Indenture or the Security and Pledge Agreement.
(b) No Collateral shall be released from the Lien and security interest
created by the Security and Pledge Agreement pursuant to the provisions of the
Security and Pledge Agreement unless there shall have been delivered to the
Collateral Agent the certificate required by this Section 10.04.
(c) At any time when a Default or Event of Default shall have occurred and
be continuing and the maturity of the Debentures shall have been accelerated
(whether by declaration or otherwise) and the Trustee shall have delivered a
notice of acceleration to the Collateral Agent, no release of Collateral
pursuant to the provisions of the Security and Pledge Agreement shall be
effective as against the Holders of Debentures.
(d) The release of any Collateral from the terms of this Indenture and the
pledge thereof pursuant to the terms of the Security and Pledge Agreement shall
not be deemed to impair the security under this Indenture in contravention of
the provisions hereof if and to the extent the Collateral is released pursuant
to the terms hereof. To the extent applicable, the Company shall cause TIA S
314(d) relating to the release of property or securities from the Lien and
security interest of the Security and Pledge Agreement and relating to the
substitution therefor of any property or securities to be subjected to the Lien
and security interest of the Security and Pledge Agreement to be complied with.
Any certificate or opinion required by TIA S 314(d) may be made by an Officer of
the Company except in cases where TIA S 314(d) requires that such certificate or
opinion be made by an independent Person, which Person shall be an independent
appraiser or other expert selected or approved by the Trustee and the Collateral
Agent in the exercise of reasonable care.
SECTION 10.05 CERTIFICATES OF THE COMPANY.
The Company shall furnish to the Trustee and the Collateral Agent, prior to
each proposed release of Collateral pursuant to the Security and Pledge
Agreement, (a) all documents required by Section 314(d) of the TIA and (b) an
Opinion of Counsel to the effect that such accompanying documents constitute all
<PAGE>
documents required by Section 314(d) of the TIA. The Trustee may, to the extent
permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of
compliance with the foregoing provisions the appropriate statements contained in
such documents and such Opinion of Counsel.
SECTION 10.06 CERTIFICATES OF THE TRUSTEE.
In the event that the Company wishes to release Collateral in accordance
with the Security and Pledge Agreement and has delivered the certificates and
documents required by the Security and Pledge Agreement and Sections 10.04 and
10.05 hereof, the Trustee shall determine whether it has received all
documentation required by Section 314(d) of the TIA in connection with such
release and, based on such determination and the Opinion of Counsel delivered
pursuant to Section 10.05(b) hereof, shall deliver a certificate to the
Collateral Agent setting forth such determination.
SECTION 10.07 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE
SECURITY AND PLEDGE AGREEMENT.
Subject to the provisions of Section 7.01 and 7.02 hereof, the Trustee may,
in its sole discretion and without the consent of the Holders of Debentures,
direct, on behalf of the Holders of Debentures, the Collateral Agent to take all
actions it deems necessary or appropriate in order to (a) enforce any of the
terms of the Security and Pledge Agreement and (b) collect and receive any and
all amounts payable in respect of the Obligations of the Company hereunder. The
Trustee shall have power to institute and maintain such suits and proceedings as
it may deem expedient to prevent any impairment of the Collateral by any acts
that may be unlawful or in violation of the Security and Pledge Agreement or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interests and the interests of the Holders of
Debentures in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or under the Security
and Pledge Agreement or be prejudicial to the interests of the Holders of
Debentures or of the Trustee).
SECTION 10.08. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
SECURITY AND PLEDGE AGREEMENT.
The Trustee is authorized to receive any funds for the benefit of the
Holders of Debentures distributed under the Security and Pledge Agreement, and
to make further distributions of such funds to the Holders of Debentures
according to the provisions of this Indenture.
SECTION 10.09. TERMINATION OF SECURITY INTERESTS.
Upon the payment in full of all Obligations of the Company under this
Indenture and the Debentures, the Trustee shall, at the request of the Company,
<PAGE>
deliver a certificate to the Collateral Agent stating that such Obligations have
been paid in full, and instruct the Collateral Agent to release the Liens
pursuant to this Indenture and the Security and Pledge Agreement.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01.) APPLICATION.
The provisions of Sections 11.02 through 11.06 hereof shall apply in
respect of (a) each Subsidiary of the Company (other than a Subsidiary organized
under the laws of a jurisdiction other than the United States of America, its
territories and possessions, any State thereof or the District of Colombia) to
which the Company conveys, transfers, contributes, sells, leases or assigns or
otherwise distributes any tangible property or assets after the date of this
Indenture and (b) each Subsidiary of the Company which is acquired or created by
the Company after the date of this Indenture, in either case, in any transaction
or series of transactions involving aggregate value or consideration in excess
of $10.0 million; provided, however, that for the purposes of determining the
applicability of this Article 11, the value of property or assets (other than
cash) transferred to any such Subsidiary of the Company in exchange for cash in
an amount equal to the fair market value of such property or assets, as
determined by the Board of Directors of the Company and evidenced by a
resolution set forth in an Officers' Certificate and delivered to the Trustee,
shall be excluded.
SECTION 11.02. GUARANTEE.
Subject to this Article 11, the Company shall cause each of the Guarantors,
jointly and severally, unconditionally to guarantee to each Holder of a
Debenture authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Debentures or the obligations of the Company hereunder or
thereunder, that: (a) the principal of and interest on the Debentures will be
promptly paid in full when due, whether at maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of and interest on the
Debentures, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Debentures or any of such
other obligations, that same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The Company shall cause each Guarantor,
failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, to be jointly and severally obligated to pay the
same immediately. The Company shall cause each Guarantor further to agree that
such guarantee is a guarantee of payment and not a guarantee of collection.
The Company shall further cause each Guarantor (i) to agree that its
obligations under its Subsidiary Guarantee shall be unconditional, irrespective
of the validity, regularity or enforceability of the Debentures or this
Indenture, the absence of any action to enforce the same, any waiver or consent
<PAGE>
by any Holder of the Debentures with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to enforce
the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor; (ii) to waive diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever; and (iii) to
covenant that its Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Debentures and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or any
Guarantor, any amount paid by the Company or any Guarantor either to the Trustee
or to such Holder, each Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
The Company shall further cause each Guarantor to agree that (i) it shall
not be entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby, and (ii) as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed by the Subsidiary Guarantees may be accelerated as
provided in Article 6 hereof for the purposes of the Subsidiary Guarantees
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed by the Subsidiary
Guarantees, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article 6 hereof, such obligations (whether or not
due and payable) shall forthwith become due and payable by the Guarantors for
the purpose of the Subsidiary Guarantees. The Guarantors shall have the right to
seek contribution from any non- paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY.
By its execution of its Subsidiary Guarantee, each Guarantor, and by its
acceptance of Debentures, each Holder, confirms that it is the intention of all
such parties that the Subsidiary Guarantee of such Guarantor not constitute a
fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law to the extent applicable to any Subsidiary
Guarantee. To effectuate the foregoing intention, the Trustee and the Holders
hereby irrevocably agree, and by its execution of its Subsidiary Guarantee each
Guarantor shall irrevocably agree, that the obligations of such Guarantor under
its Subsidiary Guarantee and this Article 11 shall be limited to such maximum
amount as will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 11, result
in the obligations of such Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
<PAGE>
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee, the Company shall cause each
Guarantor to agree that a notation of such Subsidiary Guarantee substantially in
the form included in Exhibit D hereto shall be endorsed by an Officer of such
Guarantor on each Debenture authenticated and delivered by the Trustee on or
after the date of such Guarantee. Further, the Company shall cause each
Guarantor promptly to execute a supplemental indenture substantially in the form
of Exhibit E hereto.
The Company shall further cause each Guarantor to agree that its Subsidiary
Guarantee shall remain in full force and effect notwithstanding any failure to
endorse on each Debenture a notation of such Subsidiary Guarantee.
If an Officer whose signature is on any Subsidiary Guarantee no longer
holds that office at the time the Trustee authenticates the Debenture on which
such Subsidiary Guarantee is endorsed, such Subsidiary Guarantee shall be valid
nevertheless.
The delivery of any Debenture by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of each Subsidiary Guarantee
theretofore or thereafter executed and delivered by or on behalf of the
Guarantors or any of them.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, the Company shall cause such
Subsidiaries to execute supplemental indentures to this Indenture and Subsidiary
Guarantees in accordance with this Article 11.
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person) another corporation, Person or other
entity whether or not affiliated with such Guarantor unless (i) subject to the
provisions of Section 11.06 hereof, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor under its Subsidiary Guarantee, the Debentures and
the Indenture pursuant to a supplemental indenture, in form and substance
reasonably satisfactory to the Trustee; (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists; and (iii) the Company
would be permitted immediately after giving effect to such transaction to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.09(a) hereof.
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of any
Guarantor (other than to the Company or another Guarantor), by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of any Guarantor (other than to the Company or another Guarantor), then
<PAGE>
such Guarantor (in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the Capital Stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee and any such
acquiring corporation will not be required to assume any obligations of such
Guarantor under the applicable Subsidiary Guarantee; provided that such sale or
other disposition complies with all applicable provisions of this Indenture
including, without limitation, Section 4.10 hereof.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Debentures and for the other obligations of such Guarantor under this
Indenture as provided in this Article 11.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA S 318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Company and/or any Guarantor:
Finlay Enterprises, Inc.
529 Fifth Avenue, New York, New York 10175
Telecopier No.: (212) 557-3848
Attention: Secretary and Corporate Counsel
With a copy to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Telecopier No.: (212) 885-5001
Attention: James Martin Kaplan
<PAGE>
If to the Trustee:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Telecopier No. (212) 658-6425
Attention: Corporate Trust Administration
The Company, any Guarantor or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA S 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF DEBENTURES WITH OTHER HOLDERS OF
DEBENTURES.
Holders may communicate pursuant to TIA S 312(b) with other Holders with
respect to their rights under this Indenture or the Debentures. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA
S 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
<PAGE>
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA S 314(a)(4)) shall comply with the provisions of TIA S 314(e)
and shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Debentures, this Indenture or the Security
and Pledge Agreement or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Debenture waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Debentures.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE DEBENTURES AND THE SUBSIDIARY GUARANTEES, IF ANY,
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
<PAGE>
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Debentures shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together constitute the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of April 24, 1998 FINLAY ENTERPRISES, INC.
By: /s/Barry D. Scheckner
----------------------------------
Name: Barry D. Schekcner
Title: Senior Vice President and
Chief Financial Officer
Attest: /s/Bruce E. Zurlnick
Name: Bruce E. Zurlnick
Title: Vice President and Treasurer
Dated as of April 24, 1998 MARINE MIDLAND BANK, as Trustee
By: /s/Frank Godino
----------------------------------
Name: Frank Godino
Title: Vice President
<PAGE>
EXHIBIT A
(Face of Debenture)
- --------------------------------------------------------------------------------
CUSIP/CINS 317884AC8
9% Senior Debenture due May 1, 2008
No. $____________
Finlay Enterprises, Inc. promises to pay to _________________ or registered
assigns, the principal sum of _______________ Dollars on May 1, 2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Debenture set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
FINLAY ENTERPRISES, INC.
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
This is one of the [Global]
Debentures referred to in the
within-mentioned Indenture:
MARINE MIDLAND BANK, as Trustee
By: ______________________
Name:
Title:
Dated: ___________, 1998
- --------------------------------------------------------------------------------
<PAGE>
(Back of Debenture)
9% Senior Debenture due May 1, 2008
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Finlay Enterprises, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Debenture
at 9% per annum from April 24, 1998 until maturity. The Company shall pay
interest semiannually in arrears on May 1 and November 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Debentures will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from April 24, 1998; provided that if there is no existing Default in the
payment of interest, and if this Debenture (other than Debenture No. 1) is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1998. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Debentures
(except defaulted interest) to the Persons who are registered Holders of
Debentures at the close of business on the April 15 or October 15 next preceding
the Interest Payment Date, even if such Debentures are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. Principal,
premium, if any, and interest on the Debentures will be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest may be made by
check mailed to the Holders of the Debentures at their respective addresses set
forth in the register of Holders of Debentures; provided that all payments of
principal, premium and interest with respect to Debentures the Holders of which
have given wire transfer instructions to the Company prior to the relevant
record date will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
<PAGE>
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Debentures under an Indenture dated as
of April 24, 1998 ("Indenture") between the Company and the Trustee. The terms
of the Debentures include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code SS 77aaa-77bbbb), as in effect on the date on which the Indenture is
qualified thereunder. The Debentures are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Debenture conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be controlling.
The Debentures are obligations of the Company limited to $75.0 million in
aggregate principal amount, subject to the provisions of Sections 2.07 and 2.08
of the Indenture.
5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Debentures are not redeemable at the Company's option prior to
May 1, 2003. Thereafter, the Debentures will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve- month period beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003........................................ 104.500%
2004........................................ 103.000%
2005........................................ 101.500%
2006 and thereafter......................... 100.000%
provided, however, that if the Company, at its option, specifies in the notice
of redemption provided for in this paragraph 5(a) that such notice is revocable,
then the Company may revoke such notice at its further option at any time on or
prior to the date which is 10 days prior to the redemption date specified in
such notice (provided such notice so specifies) by providing a notice of
revocation to the Trustee on or prior to the date on which the Company's
revocation right expires (and the Trustee shall promptly mail such notice to the
Holders by first class mail).
(b) Notwithstanding the foregoing, until May 1, 2001, the Company may on
any one or more occasions redeem up to $25.0 million in aggregate principal
amount of Debentures at a redemption price of 109% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date, with the net cash proceeds of Public Equity Offerings by the Company;
provided that at least $50.0 million in aggregate principal amount of Debentures
remains outstanding immediately after the occurrence of each such redemption
(excluding Debentures held by the Company and its Subsidiaries); and provided
further, that such redemption shall occur within 120 days of the date of the
closing of such Public Equity Offering.
<PAGE>
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Debentures. There are no sinking fund payments with respect to the
Debentures.
7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control,
each Holder of Debentures will have the right to require the Company to make an
offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Debentures at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Debentures on the date specified in such notice, which date shall be no earlier
than 30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Debentures as a result of a
Change of Control.
(b) If the Company or any Subsidiary of the Company consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall be required to make an offer to all Holders of Debentures (an
"Asset Sale Offer") to purchase the maximum principal amount of Debentures that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for general corporate purposes or otherwise make an investment
of such remaining amounts in any manner that is not prohibited by the Indenture.
If the aggregate principal amount of Debentures tendered in connection with such
Asset Sale Offer and surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Debentures to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero. Notwithstanding the foregoing, the Company shall not be
required to make an Asset Sale Offer if (i) the Company's obligation to make
such Asset Sale Offer is due to an Asset Sale by one or more of the Company's
Subsidiaries, (ii) as a result of such Asset Sale (or Asset Sales), Finlay
Jewelry is required to make and does make an offer similar to an Asset Sale
Offer to the holders of the Senior Notes in accordance with the terms of the
Senior Note Indenture and (iii) to the extent that the aggregate amount of
Senior Notes tendered pursuant to such offer is less than the Excess Proceeds,
Finlay Jewelry makes an Asset Sale Offer to all Holders of Debentures with such
remaining Excess Proceeds.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder of Debentures to be redeemed at its registered address. Subject to
the Company's right of revocation under the Indenture in connection with any
redemption pursuant to Paragraph 5(a) hereof, notices of redemption may not be
<PAGE>
conditional. Debentures and portions of Debentures selected for redemption shall
be in amounts of $1,000 or whole multiples of $1,000, except that if all of the
Debentures of a Holder are to be redeemed, the entire outstanding amount of
Debentures held by such Holder, even if not a multiple of $1,000, shall be
redeemed. If any Debenture is to be redeemed in part only, the notice of
redemption that relates to such Debenture shall state the portion of the
principal amount thereof to be redeemed. A new Debenture in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Debenture. On and after the redemption
date, interest ceases to accrue on Debentures or portions thereof called for
redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Debentures are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Debentures may be registered and Debentures may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company is not required (a) to issue, to
register the transfer of or to exchange any Debentures during a period beginning
at the opening of business 15 days before the day of any selection of Debentures
for redemption and ending at the close of business on the day of selection, (b)
to register the transfer of or to exchange any Debenture so selected for
redemption in whole or in part, except the unredeemed portion of any Debenture
being redeemed in part or (c) to register the transfer of or to exchange a
Debenture between a record date and the next succeeding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Debenture may be
treated as its owner for all purposes, subject to the provisions of the
Indenture with respect to record dates for the payment of interest.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Debentures may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Debentures then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Debentures) and, subject
to the provisions of Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Debentures,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of the Indenture or the Debentures may be
waived with the consent of the Holders of a majority in principal amount of the
Debentures then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
Debentures). Without the consent of any Holder of Debentures, the Company and
the Trustee may amend or supplement the Indenture or the Debentures to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Debentures in
addition to or in place of certificated Debentures, to provide for the
assumption of the Company's obligations to Holders of the Debentures in case of
a merger or consolidation, or sale of all or substantially all of the Company's
assets, to execute and deliver any document necessary or appropriate to release
Liens on any Collateral in accordance with the terms of the Indenture, to make
any change that would provide any additional rights or benefits to the Holders
of the Debentures or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with the requirements of the
<PAGE>
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on the Debentures; (ii) default in
payment when due of the principal of or premium, if any, on the Debentures;
(iii) failure by the Company to comply with the provisions of Sections 3.09,
4.10, 4.15 or Article 5 of the Indenture; (iv) failure by the Company for 45
days after notice to comply with any of its other agreements in the Indenture or
the Debentures; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries
(including any Indebtedness the payment of which is guaranteed by the Company or
any of its Subsidiaries) other than a Receivables Subsidiary whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal or a
premium, if any, on such Indebtedness at the Stated Maturity for such payment of
principal or premium, if any, or such later date as has been agreed in a writing
(provided such writing is entered into prior to such Stated Maturity) by the
parties to the documentation relating to such Indebtedness (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $12.5 million or more; (vi) failure by the Company or
any of its Subsidiaries other than a Receivables Subsidiary to pay final
judgments aggregating in excess of $12.5 million, which judgments are not paid,
discharged or stayed for a period of 60 days (or 90 days if prior to such
sixtieth day the Company has delivered to the Trustee an Officers' Certificate
attesting that a financially responsible insurance company of recognized
national standing has acknowledged in writing complete liability for such
judgment and attached a copy of such acknowledgment thereto); (vii) the failure
of any material representation or warranty of the Company set forth in the
Security and Pledge Agreement to be true and correct or the failure by the
Company to perform any of its material covenants under the Security and Pledge
Agreement which, in either case, (a) continues for five days after the earlier
of the Company's management becoming aware thereof or the receipt of written
notice thereof from the Trustee, the Collateral Agent or the Holders of 25% or
more in principal amount of the then outstanding Debentures and (b) materially
impairs or diminishes the Trustee's Lien on or the value of the Collateral (as
defined in the Security and Pledge Agreement); (viii) repudiation by the Company
of its obligations under the Security and Pledge Agreement or the
unenforceability of the Security and Pledge Agreement against the Company for
any reason; (ix) repudiation by any Subsidiary of its obligations under any
Subsidiary Guarantee or, except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in a judicial proceeding to be unenforceable or invalid
in any material respect or shall cease to be in full force and effect; (x) the
Company or any of its Subsidiaries (other than a Receivables Subsidiary) within
the meaning of any Bankruptcy Law (a) commences a voluntary case, (b) consents
to the entry of an order for relief against it in an involuntary case, (c)
consents to the appointment of a custodian of it or for all or substantially all
of its property, (d) makes a general assignment for the benefit of its
creditors, or (e) generally is not paying its debts as they become due; and (xi)
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (a) is for relief against the Company or any of its Subsidiaries (other
<PAGE>
than a Receivables Subsidiary), (b) appoints a custodian of the Company or any
of its Subsidiaries or for all or substantially all of the property of the
Company or any of its Subsidiaries (other than a Receivables Subsidiary) or (c)
orders the liquidation of the Company or any of its Subsidiaries (other than a
Receivables Subsidiary) and any such order or decree described in this clause
(xi) remains unstayed and in effect for 60 consecutive days.
In the event of a declaration of acceleration of the Debentures because an
Event of Default has occurred and is continuing as a result of a Payment Default
or the acceleration of any Indebtedness described in clause (v) of the preceding
paragraph, the declaration of acceleration of the Debentures shall be
automatically annulled if (i) any Payment Default described in clause (v)(a) of
the preceding paragraph has been cured or waived and (ii) the holders of any
accelerated Indebtedness described in clause (v)(b) of the preceding paragraph
have rescinded the declaration of acceleration in respect of such Indebtedness,
provided in each such case that (a) such cure, waiver or rescission of such
declaration of acceleration shall have been made in writing within 30 days of
the date of such Payment Default or declaration, as the case may be, and (b) the
annulment of the acceleration of such Debentures would not conflict with any
judgment or decree of a court of competent jurisdiction and (c) all existing
Events of Default, except nonpayment of principal or interest on the Debentures
that became due solely because of the acceleration of the Debentures, have been
cured or waived.
A Default under clause (iv) the first paragraph of this Paragraph 12 is not
an Event of Default until the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Debentures give written notice to the
Company of the default and the Company does not cure the Default within the
period provided in such clause. The notice must specify in reasonable detail the
Default, demand that it be remedied and state that the notice is a "Notice of
Default". If the Holders of 25% or more in principal amount of the then
outstanding Debentures request the Trustee to give such notice on their behalf,
the Trustee shall do so.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Debentures
by written notice to the Trustee and the Company may declare all the Debentures
to be due and payable immediately. Notwithstanding the foregoing, in the case of
an Event of Default arising under clause (x) or (xi) of the first paragraph of
this Paragraph 12, with respect to the Company, any Significant Subsidiary or
any group of Subsidiaries, that taken together would constitute a Significant
Subsidiary, all outstanding Debentures will become due and payable without
further action or notice. Holders of the Debentures may not enforce the
Indenture or the Debentures except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Debentures may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Debentures notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Debentures then outstanding by notice to the Trustee may
on behalf of the Holders of all of the Debentures waive any existing Default or
Event of Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the Debentures. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
<PAGE>
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Debentures pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Debentures. If an Event of Default occurs prior to
May 1, 2003 by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Debentures prior to May 1, 2003, then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Debentures.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
14. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Debentures or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Debenture waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Debentures. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
15. AUTHENTICATION. This Debenture shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (-- joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Debentures and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Debentures
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
<PAGE>
18. ADDITIONAL INFORMATION. The Company shall furnish to any Holder upon
written request and without charge a copy of the Indenture and/or the Security
and Pledge Agreement. Requests may be made to:
Finlay Enterprises, Inc.
529 Fifth Avenue
New York, New York 10017
Attention: Secretary and Corporate Counsel
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to
______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________ to transfer this Debenture on the
books of the Company. The agent may substitute another to act for him or her.
Date:____________
Your Signature:
(Sign exactly as your name appears on the
face of this Debenture)
Signature Guarantee.*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_|Section 4.15
If you want to elect to have only part of the Debenture purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased (if all, write "ALL"): $
Date:___________ Your Signature:_______________________________________
(Sign exactly as your name appears
on the Debenture)
Tax Identification No:________________________________
Signature Guarantee.*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL DEBENTURE
The following exchanges of a part of this Global Debenture for an interest
in another Global Debenture or for a Definitive Debenture, or exchanges of a
part of another Global Debenture or Definitive Debenture for an interest in this
Global Debenture, have been made:
Principal
Amount
Amount of Amount of of this
decrease in increase in Global Signature of
Principal Principal Debenture authorized
Amount of Amount of following such officer
Date of this Global this Global decrease (or of Trustee or
Exchange Debenture Debenture increase) Custodian
-------- --------- --------- --------- ---------
______________________________
* This should be included only if the Debenture is issued in global form.
<PAGE>
EXHIBIT B
SECURITY AND PLEDGE AGREEMENT
THIS SECURITY AND PLEDGE AGREEMENT (together with the Annexes hereto, the
"Agreement") is made and entered into as of April 24, 1998 by FINLAY
ENTERPRISES, INC., a Delaware corporation (the "Pledgor"), having its principal
office at 529 Fifth Avenue, New York, New York 10175, in favor of Marine Midland
Bank, having an office at 140 Broadway, New York, New York 10015, as Collateral
Agent (the "Collateral Agent") for the trustee (the "Trustee") under the Senior
Debenture Indenture (as defined herein) and each Person (as defined in the
Senior Debenture Indenture) in whose name any of the Pledgor's 9% Senior
Debentures due May 1, 2008 are registered (each a "Holder").
WITNESSETH:
WHEREAS, the Pledgor is the legal and beneficial owner of (i) all of the
issued and outstanding shares of capital stock set forth on Schedule I hereto
(the "Pledged Shares") of Finlay Fine Jewelry Corporation, a Delaware
corporation (together with any successor thereto, the "Issuer"), and (ii) those
certain intercompany promissory notes (if any) set forth on Schedule I hereto
issued by the Issuer in favor of the Pledgor to evidence monies loaned or
advanced by the Pledgor to the Issuer (collectively, the "Pledged Notes"); and
WHEREAS, the Pledgor and Marine Midland Bank, N.A., as trustee (the "Old
Trustee") have entered into that certain indenture dated as of May 26, 1993 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Old Indenture"), pursuant to which the Pledgor issued $98 million in
aggregate principal amount of its 12% Senior Discount Debentures due 2005
(together with any debentures issued in replacement thereof or in exchange or
substitution therefor, the "Old Debentures"), and the Pledgor and Marine Midland
Bank, N.A., as collateral agent (the "Old Collateral Agent") have entered into
that certain Pledge Agreement dated as of May 26, 1993 (as amended, amended and
restated, supplemented or otherwise modified, from time to time, the "Old Pledge
Agreement"), pursuant to which the Pledgor pledged to the Old Collateral Agent
and granted to the Old Collateral Agent a continuing first priority security
interest (the "Permitted Security Interest") in the Pledged Collateral (as
defined in the Old Pledge Agreement); and
WHEREAS, the Pledgor and Marine Midland Bank, as trustee (the "Trustee"),
have entered into that certain indenture dated as of April 24, 1998 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Senior Debenture Indenture"), pursuant to which the Pledgor is issuing $75
million in aggregate principal amount of its 9% Senior Debentures due May 1,
2008 (together with any debentures issued in replacement thereof or in exchange
or substitution therefor, the "Senior Debentures"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in the Senior Debenture Indenture; and
WHEREAS, the terms of the Senior Debenture Indenture require that the
Pledgor (i) pledge to the Collateral Agent for its benefit and the ratable
<PAGE>
benefit of the Trustee and the Holders, and grant to the Collateral Agent for
its benefit and the ratable benefit of the Trustee and the Holders a security
interest in, the Pledged Collateral (as defined herein) and (ii) execute and
deliver this Agreement in order to secure the payment and performance by the
Pledgor of all of the obligations of the Pledgor under this Agreement, the
Senior Debenture Indenture and the Senior Debentures, whether for principal,
interest, fees, indemnities, expenses, premiums or otherwise (including, without
limitation, any such amounts that constitute part of the obligations secured
hereby and would be owed by the Pledgor under any of the foregoing documents but
for the fact that such obligations are unenforceable or not allowed due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Pledgor (collectively, the "Secured Obligations").
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and in order to induce
the Holders to purchase the Senior Debentures, the Pledgor hereby agrees with
the Collateral Agent for its benefit and the ratable benefit of the Trustee and
the Holders as follows:
S1 Pledge. The Pledgor hereby pledges to the Collateral Agent for its
benefit and for the ratable benefit of the Trustee and the Holders, and hereby
grants to the Collateral Agent for its benefit and the ratable benefit of the
Trustee and the Holders a present and continuing security interest in, all of
its right, title and interest in, to and under the following, whether now owned
or at any time hereafter acquired (the "Pledged Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged Shares,
and all products and proceeds of any of the Pledged Shares, including,
without limitation, all dividends, cash, options, warrants, rights,
instruments, subscriptions and other property or proceeds from time to time
received, receivable or otherwise distributed or distributable in respect
of or in substitution of or exchange for any or all of the Pledged Shares;
and
(b) all additional shares of, and all securities convertible into and all
warrants, options or other rights to purchase, capital stock of, or other
equity interests in, the Issuer from time to time acquired by the Pledgor
in any manner, and the certificates representing such additional shares or
other interests (any such additional shares and other securities, rights
and interests shall constitute part of the Pledged Shares under and as
defined in this Agreement), and all products and proceeds of any of such
additional Pledged Shares, including, without limitation, all dividends,
cash, options, warrants, rights, instruments, subscriptions, and other
property or proceeds from time to time received, receivable or otherwise
distributed or distributable in respect of or in substitution of or
exchange for any or all of such additional Pledged Shares; and
(c) the Indebtedness evidenced by the Pledged Notes and the instruments
representing the Pledged Notes, and all products and proceeds of the
Pledged Notes, including, without limitation, all interest and principal
payments, instruments, and other property from time to time received,
<PAGE>
receivable or otherwise distributed in respect of or in substitution of or
exchange for any or all of the Pledged Notes; and
(d) all additional Indebtedness from time to time owing to the Pledgor by the
Issuer (whether or not evidenced by instruments) and all additional
promissory notes or other instruments made by the Issuer from time to time
in favor of and/or held by the Pledgor in any manner other than those
promissory notes issued in violation of that certain Amended and Restated
Credit Agreement, dated as of September 11, 1997, by and among the Issuer,
the Pledgor and General Electric Capital Corporation, individually and as
agent, and the other lenders parties thereto from time to time, as amended
as of the date hereof (any such additional Indebtedness and promissory
notes shall constitute part of the Pledged Notes under and as defined in
this Agreement), and all products and proceeds of any of such additional
Pledged Notes including, without limitation, all interest and principal
payments, instruments, and other amounts and property from time to time
received, receivable or otherwise distributed or distributable in respect
of or in substitution of or exchange for any or all of such additional
Pledged Notes; and
(e) all proceeds of any and all of the foregoing Pledged Collateral;
and, concurrently with the execution and delivery hereof, the Pledgor shall
cause the Issuer to execute and deliver to the Collateral Agent its
acknowledgment of the pledge and grant of a security interest contemplated
hereby in the form attached hereto as Annex A.
S2. Security for Secured Obligations. This Agreement secures the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all Secured Obligations.
S3. Delivery of Pledged Collateral. Upon the payment in full by the Pledgor
of the Pledgor's Obligations (as defined in the Old Indenture) under the Old
Debentures and the Old Indenture in accordance with the provisions of the Old
Indenture, the Pledgor shall immediately (i) deliver to the Old Trustee and the
Old Collateral Agent an Officers' Certificate (as defined in the Old Indenture)
in substantially the form attached hereto as Annex B certifying that all of such
Obligations have been paid in full and satisfied and instructing the Old Trustee
to deliver to the Old Collateral Agent a certificate (x) stating that such
Obligations have been paid in full and (y) instructing the Collateral Agent to
release the liens pursuant to the Old Indenture and the Old Pledge Agreement,
(ii) cause the Old Collateral Agent to execute, deliver, acknowledge and file
all such instruments of termination, satisfaction or release (including, without
limitation, any termination statements) to evidence the release of the Liens on
all Pledged Collateral under and as defined in the Old Pledge Agreement as the
Collateral Agent may reasonably request and to deliver or cause to be delivered
to the Collateral Agent all certificates or instruments representing or
evidencing the Pledged Collateral to be held by it pursuant hereto, accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent, and (iii) obtain from the Old
Collateral Agent its confirmation, in substantially the form attached hereto as
Annex C, of the payment of all fees and expenses owing by the Pledgor to the Old
Collateral Agent. Immediately upon receipt of the certificates representing the
Pledged Shares and instruments comprising the Pledged Notes, if any, in each
case accompanied by the duly executed instruments of transfer or assignment in
<PAGE>
blank, the Collateral Agent shall execute and deliver its acknowledgment of
receipt thereof in substantially the form attached hereto as Annex D to each of
the addressees thereof.
S4. Representations and Warranties. The Pledgor hereby makes all
representations and warranties, and agrees to comply with all of the
obligations, requirements and restrictions in the covenants and agreements,
applicable to the Pledgor contained in the Senior Debenture Indenture. The
Pledgor further represents and warrants that:
(a) The execution, delivery and performance by the Pledgor of this Agreement
are within the Pledgor's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the certificate
of incorporation or bylaws of the Pledgor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Pledgor or
result in or require the creation or imposition of any Lien on any assets
of the Pledgor, other than the Lien contemplated hereby.
(b) The Pledged Shares have been duly authorized and validly issued and are
fully paid and non-assessable. Each Pledged Note, if any, has been duly
authorized and executed by the Issuer and constitutes a legal, valid and
binding obligation of such Issuer, enforceable against the Issuer in
accordance with its terms.
(c) The Pledgor is the legal, record and beneficial owner of the Pledged
Collateral, free and clear of any Lien or claims of any Person except for
the security interest created by this Agreement and the Permitted Security
Interest.
(d) The Pledgor has full power and authority to enter into this Agreement and
has the right to vote, pledge and grant a security interest in the Pledged
Collateral as provided by this Agreement.
(e) This Agreement has been duly executed and delivered by the Pledgor and
constitutes a legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms.
(f) Upon the issuance, authentication and delivery of the Debentures, filing of
Uniform Commercial Code ("U.C.C.") financing statements and delivery to the
Old Collateral Agent of the notification of the Collateral Agent's security
interest in, to and under the Indebtedness evidenced by the Pledged Notes
in accordance with Section 9-305 of the U.C.C., the pledge of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected
continuing first priority security interest in the Pledged Collateral
securing the payment of the Secured Obligations for the benefit of the
Collateral Agent and the ratable benefit of the Trustee and the Holders,
subject only to the Permitted Security Interest.
(g) No consent of any other Person (other than the requisite consent under the
Revolving Credit Agreement (as defined in the Senior Debenture Indenture),
<PAGE>
which has been obtained) and no consent, authorization, approval, or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (i) for the pledge by the Pledgor of the
Pledged Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by the Pledgor or (ii) for the
exercise by the Collateral Agent of the voting or other rights provided for
in this Agreement or the remedies in respect of the Pledged Collateral
pursuant to this Agreement (except as may be required in connection with
any disposition of Pledged Collateral by laws affecting the offering and
sale of securities).
(h) Nolitigation, investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the knowledge of the Pledgor,
threatened by or against the Pledgor or against any of its properties or
revenues with respect to this Agreement or any of the transactions
contemplated hereby.
(i) The Pledged Shares constitute all of the authorized, issued and outstanding
capital stock of the Issuer and constitute all of the shares of capital
stock and voting securities of the Issuer beneficially owned by the
Pledgor.
(j) The Pledged Notes, if any, constitute all of the promissory notes of the
Issuer in favor of the Pledgor, there are no other instruments,
certificates, securities or other writings or chattel paper evidencing or
representing any Indebtedness of the Issuer owing to the Pledgor and as of
the date hereof there is no Indebtedness owing by the Issuer to the Pledgor
other than the Indebtedness evidenced by the instruments comprising the
Pledged Notes, if any, delivered on the date hereof to the Trustee.
(k) The pledge of the Pledged Collateral pursuant to this Agreement is not
prohibited by or in violation of any applicable law or governmental
regulation, release, interpretation or opinion of the Board of Governors of
the Federal Reserve System or other regulatory agency (including, without
limitation, Regulations T, U and X of the Board of Governors of the Federal
Reserve System).
(l) All information set forth herein relating to the Pledged Collateral is
accurate and complete in all respects.
S5. Further Assurance. The Pledgor will, promptly upon request by the
Collateral Agent, execute, deliver and file, or cause to be executed, delivered
and filed, all stock powers, allonges, proxies, assignments, other instruments
of assignment and transfer, instruments and other documents (including, without
limitation, all financing statements and continuation statements and amendments
thereto), all in form and substance satisfactory to the Collateral Agent,
deliver any instruments constituting Pledged Collateral to the Collateral Agent
and take any other actions that are necessary or, in the reasonable opinion of
the Collateral Agent, desirable to perfect, continue the perfection of, or
protect the first priority (subject solely to the Permitted Security Interest)
of the Collateral Agent's security interest in the Pledged Collateral, to
protect the Pledged Collateral against the rights, claims, or interests of third
persons and to permit the Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to the Pledged Collateral. The Pledgor also
hereby authorizes the Collateral Agent to file any financing or continuation
<PAGE>
statements with respect to the Pledged Collateral without the signature of the
Pledgor to the extent permitted by applicable law. The Pledgor will pay all
costs incurred in connection with any of the foregoing.
S6. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default shall have occurred and be continuing, the
Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Shares or any part thereof for
any purpose not inconsistent with the terms of this Agreement or the Senior
Debenture Indenture; provided, however, that the Pledgor shall not exercise
or shall refrain from exercising any such right if, in the Collateral
Agent's judgment, such action would have a material adverse effect on the
value of the Pledged Collateral or any part thereof or be inconsistent with
or violate any provisions of this Agreement or the Senior Debenture
Indenture.
(b) So long as no Event of Default shall have occurred and be continuing, the
Pledgor shall be entitled to receive, and to utilize free and clear of the
Lien of this Agreement, all cash payments of interest and principal paid
from time to time with respect to any Pledged Note.
(c) So long as no Event of Default shall have occurred and be continuing, and
subject to the other terms and conditions of the Senior Debenture
Indenture, the Pledgor shall be entitled to receive, and to utilize free
and clear of the Lien of this Agreement, all cash dividends paid from time
to time in respect of the Pledged Shares as permitted by the Senior
Debenture Indenture.
(d) Any and all (i) dividends or other distributions and interest and principal
payments paid or payable in the form of instruments and other property
(other than cash interest and principal payments permitted under Section
6(b) hereof and cash dividends permitted under Section 6(c) hereof)
received, receivable or otherwise distributed in respect of, or in
substitution of or exchange for, any Pledged Collateral, (ii) dividends and
other distributions paid or payable in cash in respect of any Pledged
Shares in connection with a partial or total liquidation or dissolution or
in connection with a reduction of capital, capital surplus or
paid-in-surplus, and (iii) cash paid, payable or otherwise distributed in
redemption of, or in substitution of or exchange for, any Pledged
Collateral, shall in each case be forthwith delivered to the Collateral
Agent to hold as Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Collateral Agent, the Trustee
and the Holders, be segregated from the other property and funds of the
Pledgor and be forthwith delivered to the Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsements).
(e) The Collateral Agent shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights that it is entitled to exercise
pursuant to Sections 6(a) through (c) above.
<PAGE>
(f) Upon the occurrence and during the continuance of an Event of Default,
(i) all rights of the Pledgor to exercise the voting and other consensual
rights that it would otherwise be entitled to exercise pursuant to Section
6(a) shall be suspended, and all such rights shall thereupon become vested
in the Collateral Agent, which, to the extent permitted by law, shall
thereupon have the sole right to exercise such voting and other consensual
rights, and (ii) all cash interest and principal payments and dividends or
other distributions payable in respect of the Pledged Collateral shall be
paid to the Collateral Agent and the Pledgor's right to receive such cash
payments pursuant to Sections 6(b) and 6(c) hereof shall immediately cease.
(g) Upon the occurrence and during the continuance of an Event of Default, the
Pledgor shall execute and deliver (or cause to be executed and delivered)
to the Collateral Agent all such proxies and other instruments as the
Collateral Agent may reasonably request for the purpose of enabling the
Collateral Agent to exercise the voting and other rights that it is
entitled to exercise pursuant to Section 6(f) above.
(h) All interest and principal payments and all dividends or other
distributions that are received by the Pledgor contrary to the provisions
of this Section 6 shall be received in trust for the benefit of the
Collateral Agent, the Trustee and the Holders, be segregated from the other
property or funds of the Pledgor and be forthwith delivered to the
Collateral Agent as Pledged Collateral in the same form as so received
(with any necessary endorsements).
S7. Covenants. The Pledgor covenants and agrees with the Collateral Agent
and the Holders that from and after the date of this Agreement and until the
Secured Obligations have been paid in full:
(a) The Pledgor agrees that it will not (i) sell or otherwise dispose of, or
grant any option or warrant with respect to, any of the Pledged Collateral
without the prior written consent of the Collateral Agent, (ii) create or
permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the Permitted Security Interest, the security
interest granted under this Agreement and any Lien permitted by the Senior
Debenture Indenture, and at all times will be the sole beneficial owner of
the Pledged Collateral, (iii) enter into any agreement or understanding
that purports to or that may restrict or inhibit the Collateral Agent's
rights or remedies hereunder, including, without limitation, the Collateral
Agent's right to sell or otherwise dispose of the Pledged Collateral, (iv)
take or fail to take any action with respect to a Pledged Note the taking
of which or the failure to take which would result in a material impairment
of the economic value of the Pledged Note as Pledged Collateral or a
violation of the Senior Debenture Indenture or this Agreement, (v) without
the prior written consent of the Collateral Agent, enter into any agreement
amending, modifying or supplementing the interest, principal or maturity
terms of the Pledged Notes in a manner adverse to the interests of the
Collateral Agent and the Holders, (vi) fail to give prompt notice to the
Collateral Agent of any notice of default given by or to the Pledgor under
or with respect to any Pledged Note together with a complete copy of such
notice, (vii) permit the Issuer to merge or consolidate with or into
another person or entity or sell or transfer all or substantially all of
its assets to another person or entity, unless (x) the Pledgor shall have
delivered to the Collateral Agent an Opinion of Counsel substantially in
the form of Annex E hereto and a certificate executed by the President and
<PAGE>
Chief Financial Officer of Pledgor substantially in the form of Annex F
hereto and (y) all outstanding capital stock of the surviving entity in
such merger or consolidation or of the entity to which such sale or
transfer was made, together with any promissory notes issued by such entity
in favor of Pledgor are, upon such merger or consolidation, pledged
hereunder to and deposited with the Collateral Agent and all actions
required under Section 5 with respect thereto have been taken, and (viii)
fail to pay or discharge any tax, assessment or levy of any nature not
later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment with regard to the Pledged
Collateral.
(b) The Pledgor agrees that immediately upon becoming the beneficial owner of
any additional shares of capital stock, notes or other securities or
instruments of the Issuer (including as a result of the merger or
consolidation of the Issuer) it will pledge and deliver to the Collateral
Agent for its benefit and the ratable benefit of the Trustee and the
Holders and, to the extent a security interest therein has not already been
granted pursuant hereto, grant to the Collateral Agent for its benefit and
the ratable benefit of the Trustee and the Holders, a continuing first
priority security interest, subject solely to the Permitted Security
Interest, in such shares, notes or other securities (in each case,
accompanied by all such duly executed instruments of transfer or assignment
in blank as the Collateral Agent may request, all in form and substance
satisfactory to the Collateral Agent). The Pledgor further agrees that it
will promptly (i) cause the Issuer, upon becoming indebted to the Pledgor
in respect of monies loaned or advanced to the Issuer by the Pledgor, to
execute a promissory note substantially in the form attached to the
Indenture as Exhibit F thereto evidencing such debt in order that such
promissory note may be promptly pledged as a Pledged Note pursuant hereto
and (ii) deliver to the Collateral Agent such Pledged Note (in each case,
accompanied by all such duly executed instruments of transfer or assignment
in blank as the Collateral Agent may request, all in form and substance
satisfactory to the Collateral Agent). Upon any delivery of securities or
instruments pursuant to this paragraph (b), the Pledgor will deliver to the
Collateral Agent a certificate executed by a principal executive officer of
the Pledgor describing such additional securities or instruments and
certifying that the same have been duly pledged and delivered to the
Collateral Agent hereunder.
(c) The Pledgor represents and warrants and that its chief executive office and
chief place of business are located at 529 Fifth Avenue, New York, New York
10175, and agrees that it will not change the location of its chief
executive office and chief place of business unless it shall have given the
Collateral Agent at least 30 days' prior written notice of such change and
taken all actions requested by the Collateral Agent pursuant to Section 5
hereof in connection therewith. Additionally, the Pledgor agrees that it
will not change its name, identity or corporate structure in any manner
that might cause any financing statement filed in connection herewith to
become seriously misleading within the meaning of any applicable U.C.C.
unless it shall have given the Collateral Agent at least 30 days' prior
written notice of such change and taken all actions requested by the
Collateral Agent pursuant to Section 5 hereof in connection therewith.
<PAGE>
S8. Power of Attorney. In addition to all of the powers granted to the
Collateral Agent pursuant to Section 10.07 of the Senior Debenture Indenture,
the Pledgor hereby appoints and constitutes the Collateral Agent as the
Pledgor's attorney-in-fact to exercise all of the following powers upon and at
any time after the occurrence of an Event of Default and so long as an Event of
Default is continuing: (i) collection of proceeds of any Pledged Collateral;
(ii) conveyance of any item of Pledged Collateral to any purchaser thereof;
(iii) giving of any notices or recording of any Liens under Section 5 hereof;
(iv) making of any payments or taking of any acts under Section 9 hereof and (v)
paying or discharging taxes or Liens levied or placed upon or threatened against
the Pledged Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by the Collateral Agent in its
sole discretion, and such payments made by the Collateral Agent shall be
obligations of the Pledgor to the Collateral Agent, due and payable immediately
without demand and shall constitute Secured Obligations hereunder. The
Collateral Agent's authority hereunder shall include, without limitation, while
any Event of Default is continuing, the authority to endorse and negotiate, for
the Collateral Agent's own account, any checks or instruments in the name of the
Pledgor constituting or relating to the Pledged Collateral, execute and give
receipt for any certificate of ownership or any document, transfer title to any
item of Pledged Collateral, sign the Pledgor's name on all financing statements
or any other documents deemed necessary or appropriate to preserve, protect and
perfect the security interest in the Pledged Collateral and to file the same,
prepare, file and sign the Pledgor's name on any notice of Lien, and prepare,
file and sign the Pledgor's name on a proof of claim in bankruptcy or similar
document against any customer of the Pledgor, and to take any other actions
arising from or incident to the powers granted to the Collateral Agent in this
Agreement. This power of attorney is coupled with an interest and is irrevocable
by the Pledgor.
S9. Collateral Agent May Perform. If the Pledgor fails to perform any
agreement contained herein, the Collateral Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Collateral
Agent incurred in connection therewith shall be payable by the Pledgor under
Section 14 hereof and shall constitute Secured Obligations hereunder.
S10. No Assumption of Duties; Reasonable Care. The rights and powers
granted to the Collateral Agent hereunder are being granted in order to preserve
and protect the Collateral Agent's and the Holders' security interest in and to
the Pledged Collateral granted hereby and shall not be interpreted to, and shall
not, impose any duties on the Collateral Agent in connection therewith. The
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being understood that the
Collateral Agent shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether or not the
Collateral Agent has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Pledged Collateral.
S11. Subsequent Changes Affecting Collateral. The Pledgor represents to the
Collateral Agent and the Holders that the Pledgor has made its own arrangements
<PAGE>
for keeping informed of changes or potential changes affecting the Pledged
Collateral (including, but not limited to, rights to convert, rights to
subscribe, payment of dividends, payments of interest and/or principal,
reorganization or other exchanges, tender offers and voting rights), and the
Pledgor agrees that the Collateral Agent and the Holders shall have no
responsibility or liability for informing or not informing the Pledgor of any
such changes or potential changes or for taking any action or omitting to take
any action with respect thereto. The Pledgor covenants that it will not, without
the prior written consent of the Collateral Agent, vote to enable, or take any
other action to permit, the Issuer to issue any capital stock or other
securities or to sell or otherwise dispose of, or grant any option with respect
to, any of the Pledged Collateral or create or permit to exist any Lien upon or
with respect to any of the Pledged Collateral, except for the security interests
granted under this Agreement and the Permitted Security Interest. The Pledgor
will defend the right, title and interest of the Collateral Agent and the
Holders in and to the Pledged Collateral against the claims and demands of all
Persons, except the claims and demands of the Old Collateral Agent.
S12. Remedies Upon Default.
(a) If any Event of Default shall have occurred and be continuing, the
Collateral Agent and the Holders shall have, in addition to all other
rights given by law or by this Agreement or the Senior Debenture Indenture,
and subject to the rights and claims of the holders of the Old Debentures,
all of the rights and remedies with respect to the Pledged Collateral of a
secured party under the U.C.C. in effect in the State of New York at that
time. Subject to the rights of the holders of the Old Debentures, the
Collateral Agent may, without notice and at its option, transfer or
register, and the Pledgor shall register or cause to be registered upon
request therefor by the Collateral Agent, the Pledged Collateral or any
part thereof on the books of the Issuer thereof into the name of the
Collateral Agent or the Collateral Agent's nominee(s), with or without any
indication that such Pledged Collateral is subject to the security interest
hereunder. In addition, with respect to any Pledged Collateral that shall
then be in or shall thereafter come into the possession or custody of the
Collateral Agent, the Collateral Agent may sell or cause the same to be
sold at public or private sale, in one or more sales or lots, at such price
or prices as the Collateral Agent may deem commercially reasonable, for
cash or on credit or for future delivery, without assumption of any credit
risk. The purchaser of any or all Pledged Collateral so sold shall
thereafter hold the same absolutely, free from any claim, encumbrance or
right of any kind whatsoever subject only, for so long as any of the Old
Debentures remain outstanding, to the Permitted Security Interest. Unless
any of the Pledged Collateral threatens to decline speedily in value or is
or becomes of a type sold on a recognized market or to the extent notice of
sale is not otherwise required by law, the Collateral Agent will give
Pledgor reasonable notice of the time and place of any public sale thereof,
or of the time after which any private sale or other intended disposition
is to be made. Any sale of the Pledged Collateral conducted in conformity
with reasonable commercial practices of banks, insurance companies,
commercial finance companies, or other financial institutions disposing of
property similar to the Pledged Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met
if such notice is given to the Pledgor as provided in Section 18.1 hereof,
at least ten days before the time of any public sale or the time after
which any private sale or other intended disposition is to be made. Any
other requirement of notice, demand or advertisement for sale is, to the
<PAGE>
extent permitted by law, waived. The Collateral Agent or any Holder may, in
its own name or in the name of a designee or nominee, buy any of the
Pledged Collateral at any public sale and, if permitted by applicable law,
at any private sale. All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Pledged Collateral.
(b) If the Collateral Agent shall determine to exercise its right to sell any
or all of the Pledged Shares pursuant to Section 12(a) above, and, if in
the opinion of counsel for the Collateral Agent it is necessary, or, if in
the opinion of the Collateral Agent it is advisable, to have the Pledged
Shares or that portion thereof to be sold, registered under the provisions
of the Securities Act of 1933, as amended (the "Securities Act"), Pledgor
will cause the Issuer to (i) execute and deliver and cause its directors
and officers to execute and deliver, all at the Issuer's expense, all such
instruments and documents, and do or cause to be done all such other acts
and things as may be necessary or, in the opinion of the Collateral Agent,
advisable to register such Pledged Shares under the provisions of the
Securities Act, (ii) cause the registration statement relating thereto to
become effective and to remain effective for a period of 180 days from the
date of the first public offering of such Pledged Shares, or that portion
thereof to be sold and (iii) make all amendments thereto and/or to the
related prospectus that, in the opinion of the Collateral Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Pledgor agrees to cause such Issuer to
comply with the provisions of the securities or "Blue Sky" laws of any
jurisdiction that the Collateral Agent shall designate for the sale of the
Pledged Shares and to make available to the Issuer's securityholders, as
soon as practicable, an earnings statement (which need not be audited) that
will satisfy the provisions of Section 11(a) of the Securities Act. The
Pledgor will cause such Issuer to furnish to the Collateral Agent such
number of copies as the Collateral Agent may reasonably request of each
preliminary prospectus and prospectus, to notify promptly the Collateral
Agent of the happening of any event as a result of which any then effective
prospectus includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of then existing
circumstances and cause the Collateral Agent to be furnished with such
number of copies as the Collateral Agent may request of such supplement to
or amendment of such prospectus as is necessary to eliminate such untrue
statement or supply such omission. The Pledgor will cause such Issuer, to
the extent permitted by law, to indemnify, defend and hold harmless the
Collateral Agent and the Holders from and against all losses, liabilities,
expenses or claims (including reasonable legal expenses and the reasonable
costs of investigation) that the Collateral Agent or the Holders may incur
under the Securities Act or otherwise, insofar as such losses, liabilities,
expenses or claims arise out of or are based upon any alleged untrue
statement of a material fact contained in such registration statement (or
any amendment thereto) or in any preliminary prospectus or prospectus (or
any amendment or supplement thereto), or arise out of or are based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the
<PAGE>
extent that any such losses, liabilities, expenses or claims arise solely
out of or are based upon any such alleged untrue statement made or such
alleged omission to state a material fact included or excluded on the
written direction of the Collateral Agent. The Pledgor will cause such
Issuer to bear all costs and expense of carrying out its obligations
hereunder.
(c) In view of the fact that federal and state securities laws may impose
certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after an Event of Default, Pledgor agrees that
upon the occurrence or existence of any Event of Default, the Collateral
Agent may, from time to time, in each case in compliance with or pursuant
to an exemption from all applicable securities laws, attempt to sell all or
any part of the Pledged Collateral by means of a private placement,
restricting the prospective purchasers to those who will represent and
agree that they are purchasing for investment only and not for
distribution. In so doing, the Collateral Agent may solicit offers to buy
the Pledged Collateral, or any part of it, for cash, from a limited number
of investors who might be interested in purchasing the Pledged Collateral.
The Pledgor acknowledges and agrees that any such private sale may result
in prices and terms less favorable then if such sale were a public sale
and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Collateral Agent shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the Issuer to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if the Issuer would agree to do so.
(d) The Pledgor further agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Collateral pursuant to this Section 12
valid and binding and in compliance with any and all other applicable
requirements of law. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 12 will cause irreparable injury to the
Collateral Agent and the Holders, that the Collateral Agent and the Holders
have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 12
shall be specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no Event
of Default has occurred under the Senior Debenture Indenture.
S13. Irrevocable Authorization and Instruction to the Issuer. The Pledgor
hereby authorizes and instructs the Issuer to comply with any instruction
received by such Issuer from the Collateral Agent that (i) states that an Event
of Default has occurred and (ii) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from the Pledgor, and
the Pledgor agrees that the Issuer shall be fully protected in so complying.
S14. Fees and Expenses. The Pledgor will upon demand pay to the Collateral
Agent the amount of any and all fees and expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel, of
any investment banking firm, business broker or other selling agent and of any
<PAGE>
other experts and agents retained by the Collateral Agent, that the Collateral
Agent may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights or remedies of the Collateral Agent and the
Holders hereunder or (iv) the failure by the Pledgor to perform or observe any
of the provisions hereof. All such fees and expenses shall constitute Secured
Obligations hereunder.
S15. Senior Debenture Interest Absolute. All rights of the Collateral Agent and
the Holders and security interests hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Senior Debenture Indenture or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Secured Obligations, or any other amendment or waiver
of or any consent to any departure from the Senior Debenture Indenture;
(c) any exchange, surrender, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guarantee, for all or any of the Secured Obligations; or
(d) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, the Pledgor in respect of the Secured Obligations or
of this Agreement.
S16. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Pledged Collateral and any cash held by
the Collateral Agent as Pledged Collateral shall be applied by the Collateral
Agent, subject to the existing obligations under the Old Pledge Agreement, in
the following order of priorities:
first, to payment of the expenses of such sale or other realization,
including, without limitation, reasonable compensation to agents and counsel for
the Collateral Agent, and all expenses, liabilities and advances incurred or
made by the Collateral Agent in connection therewith, and any other unreimbursed
fees and expenses for which the Collateral Agent is to be reimbursed pursuant to
Section 14 hereof;
second, to the ratable payment (based on the principal amount of the
Secured Obligations outstanding at the time of distribution) of accrued but
unpaid interest on the Secured Obligations;
third, to the ratable payment (based on the principal amount of the Secured
Obligations outstanding at the time of distribution) of unpaid principal of the
Secured Obligations;
<PAGE>
fourth, to the ratable payment (based on the principal amount of the
Secured Obligations outstanding at the time of distribution) of all other
Secured Obligations, until all Secured Obligations shall have been paid in full;
and
finally, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
S17. Uncertificated Securities. Notwithstanding anything to the contrary
contained herein, if any Pledged Shares (whether now owned or hereafter
acquired) are uncertificated Pledged Shares, the Pledgor shall promptly notify
the Collateral Agent, and shall promptly take all actions required to perfect
the security interest of the Collateral Agent under applicable law. The Pledgor
further agrees to take such actions as the Collateral Agent deems necessary or
desirable to effect the foregoing and to permit the Collateral Agent to exercise
any of its rights and remedies hereunder, and agrees to provide an Opinion of
Counsel satisfactory to the Collateral Agent with respect to any such pledge of
uncertificated Pledged Shares promptly upon request of the Collateral Agent.
S18. Miscellaneous Provisions.
S18.1 Notices. All notices, approvals, consents or other communications
required or desired to be given hereunder shall be in the form and manner as set
forth in Section 12.02 of the Senior Debenture Indenture, and delivered to the
addresses set forth in such Section, or, in the case of the Collateral Agent,
to: Marine Midland Bank, 140 Broadway, New York, New York, 10005, Attention:
Corporate Trust Administration, Telecopy No. (212) 658-6425.
S18.2 Certificate and Opinion as to Conditions Precedent. Upon any request
or application by the Pledgor to the Collateral Agent to take any action or omit
to take any action under this Agreement, the Pledgor shall deliver to the
Collateral Agent an Officer's Certificate or an Opinion of Counsel in accordance
with the requirements of Section 12.04 of the Senior Debenture Indenture.
S18.3 No Adverse Interpretation of Other Agreements. This Agreement may not
be used to interpret another pledge, security or debt agreement of the Pledgor,
the Issuer or any subsidiary thereof. No such pledge, security or debt agreement
may be used to interpret this Agreement.
S18.4 Severability. The provisions of this Agreement are severable, and, if
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
in that jurisdiction only such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or
any other clause or provision of this Agreement in any jurisdiction.
S18.5 No Recourse Against Others. No director, officer, employee,
stockholder or affiliate, as such, of the Pledgor, of the Issuer or any
subsidiary thereof that subsequent to the date of the Agreement guarantees the
<PAGE>
obligations of the Pledgor in respect of the Senior Debentures shall have any
liability for any obligations of the Pledgor under this Agreement or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder, by accepting a Senior Debenture, waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Senior Debentures.
S18.6 Headings. The headings of the Articles and Sections of this Agreement
have been inserted for convenience of reference only are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
S18.7 Counterpart Originals. This Agreement may be signed in two or more
counterparts. Each signed copy shall be an original, but all of them together
represent one and the same agreement.
S18.8 Benefits of Agreement. Nothing in this Agreement, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Agreement.
S18.9 Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Pledgor from
any provision of this Agreement shall be effective only if made or given in
compliance with all of the applicable terms and provisions of the Senior
Debenture Indenture necessary for amendments or waivers of, or consents to any
departure by the Pledgor from, any provision of the Senior Debenture Indenture,
as applicable, and neither the Collateral Agent nor any Holder shall be deemed,
by any act, delay, indulgence, omission or otherwise, to have waived any right
or remedy hereunder or to have acquiesced in any Default or Event of Default or
in any breach of any of the terms and conditions hereof. Failure of the
Collateral Agent or any Holder to exercise, or delay in exercising, any right,
power or privilege hereunder shall not operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Collateral Agent or any Holder of any right or remedy
hereunder on any one occasion shall not be construed as a waiver of or a bar to
the exercise of any right or remedy that the Collateral Agent or such Holder
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
S18.10 Interpretation of Agreement. Time is of the essence in each
provision of this Agreement of which time is an element. All terms not defined
herein or in the Senior Debenture Indenture shall have the meaning set forth in
the applicable U.C.C., except where the context otherwise requires. To the
extent a term or provision of this Agreement conflicts with the Senior Debenture
Indenture and is not dealt with herein with more specificity, the Senior
Debenture Indenture shall control with respect to the subject matter of such
term or provision. Acceptance of or acquiescence in a course of performance
rendered under this Agreement shall not be relevant to determine the meaning of
this Agreement even though the accepting or acquiescing party had knowledge of
the nature of the performance and opportunity for objection.
<PAGE>
S18.11 Continuing Security Interest; Transfer of Notes. This Agreement
creates a present and continuing security interest in the Pledged Collateral and
shall (i) remain in full force and effect until the payment in full of all of
the Secured Obligations, including all the fees and expenses owing to the
Collateral Agent, (ii) be binding upon the Pledgor, its successors and assigns,
and (iii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and the ratable benefit of the
Trustee and the Holders and their respective successors, transferees and
assigns.
S18.12 Reinstatement. This Agreement shall continue to be effective or be
reinstated if at any time any amount received by the Collateral Agent or any
Holder in respect of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any Holder upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Pledgor or upon
the appointment of any receiver, intervenor, conservator, Collateral Agent or
similar official for the Pledgor or any substantial part of its assets, or
otherwise, all as though such payments had not been made.
S18.13 Survival of Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Pledgor of the Secured Obligations.
S18.14 Waivers. The Pledgor waives presentment and demand for payment of
any of the Secured Obligations, protest and notice of dishonor or default with
respect to any of the Secured Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Senior Debenture Indenture.
S18.15 Authority of the Collateral Agent.
(a) The Collateral Agent shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Collateral Agent by the
terms hereof, together with such powers as are reasonably incident thereto.
The Collateral Agent may perform any of its duties hereunder or in
connection with the Pledged Collateral by or through agents or employees
and shall be entitled to retain counsel and to act in reliance upon the
advice of counsel concerning all such matters. None of the Collateral
Agent, any director, officer, employee, attorney or agent of the Collateral
Agent or the Holders shall be liable to the Pledgor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own
gross negligence or willful misconduct, nor shall the Collateral Agent be
responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Collateral Agent and
its directors, officers, employees, attorneys and agents shall be entitled
to rely on any communication, instrument or document believed by it or them
to be genuine and correct and to have been signed or sent by the proper
person or persons. The Pledgor agrees to indemnify and hold harmless the
Collateral Agent, the Holders and any other Person from and against any and
all costs, expenses (including reasonable fees, expenses and disbursements
of attorneys and paralegals (including the allocated costs of inside
counsel)), claims and liabilities incurred by the Collateral Agent, the
Holders or such Person hereunder, unless such claim or liability shall be
<PAGE>
due to willful misconduct or gross negligence on the part of the Person
seeking indemnification.
(b) The Pledgor acknowledges that the rights and responsibilities of the
Collateral Agent under this Agreement with respect to any action taken by
the Collateral Agent or the exercise or non-exercise by the Collateral
Agent of any option, right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Collateral Agent and the Holders, be governed by the Senior
Debenture Indenture and by such other agreements with respect thereto as
may exist from time to time among them, but, as between the Collateral
Agent and the Pledgor, the Collateral Agent shall be conclusively presumed
to be acting as agent for the Holders with full and valid authority so to
act or refrain from acting, and the Pledgor shall not be obligated or
entitled to make any inquiry respecting such authority.
S18.16 Resignation or Removal of the Collateral Agent. Until such time as
the Secured Obligations shall have been paid in full, the Collateral Agent may
at any time, by giving written notice to the Pledgor and the Holders, resign and
be discharged of the responsibilities hereby created, such resignation to become
effective upon (i) the appointment of a successor Collateral Agent and (ii) the
acceptance of such appointment by such successor Collateral Agent. As promptly
as practicable after the giving of any such notice, the Holder or Holders of at
least 25% in principal amount of the Senior Debentures then outstanding shall
appoint a successor Collateral Agent, which successor Collateral Agent shall be
reasonably acceptable to the Pledgor. If no successor Collateral Agent shall be
appointed and shall have accepted such appointment within 90 days after the
Collateral Agent gives the aforesaid notice of resignation, the Collateral Agent
may apply to any court of competent jurisdiction to appoint a successor
Collateral Agent to act until such time, if any, as a successor shall have been
appointed as provided in this Section 18.16. Any successor so appointed by such
court shall immediately and without further act be superseded by any successor
Collateral Agent appointed by the Holders, as provided in this Section 18.16.
Simultaneously with its replacement as Collateral Agent hereunder, the
Collateral Agent so replaced shall deliver to its successor all documents,
instruments, certificates and other items of whatever kind (including, without
limitation, the certificates and instruments evidencing the Pledged Collateral
and all instruments of transfer or assignment) held by it pursuant to the terms
hereof. The Collateral Agent that has resigned shall be entitled to fees, costs
and expenses to the extent incurred or arising, or relating to events occurring,
before its resignation or removal.
S18.17 Release; Termination of Agreement. Subject to the provisions of
Section 18.12 hereof, this Agreement shall terminate (i) upon full and final
payment and performance of the Secured Obligations (and upon receipt by the
Collateral Agent of the Trustee's written certification that all such
Obligations have been satisfied) and payment in full of all fees and expenses
owing by the Pledgor to the Collateral Agent or (ii) upon Legal Defeasance of
all of the Secured Obligations pursuant to Section 8.02 of the Senior Debenture
Indenture (other than those surviving Obligations specified therein). At such
time, the Collateral Agent shall, at the request of the Pledgor, reassign and
redeliver to the Pledgor all of the Pledged Collateral hereunder that has not
been sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms hereof. Such reassignment and redelivery shall be
<PAGE>
without warranty by or recourse to the Collateral Agent, except as to the
absence of any prior assignments by the Collateral Agent of its interest in the
Pledged Collateral, and shall be at the expense of the Pledgor.
S18.18 Final Expression. This Agreement, together with any other agreement
executed in connection herewith, is intended by the parties as a final
expression of this Agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
S18.19 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
WAIVER OF DAMAGES.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF
THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE
COLLATERAL AGENT AND THE HOLDERS IN CONNECTION WITH THIS AGREEMENT, AND WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) AND
DECISIONS OF THE STATE OF NEW YORK.
(ii) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH AND IN PARAGRAPH (vi) BELOW,
THE PLEDGOR, THE COLLATERAL AGENT AND THE HOLDERS AGREE THAT ALL DISPUTES
BETWEEN OR AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
ONLY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE PLEDGOR,
THE COLLATERAL AGENT AND THE HOLDERS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK.
THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(iii) THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN NAME
OR IN THE NAME AND ON BEHALF OF ANY HOLDER, HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A
COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE THE COLLATERAL
AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGEMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE PLEDGOR AGREES THAT IT WILL
NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE
COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER
<PAGE>
COURT ORDER IN FAVOR OF THE COLLATERAL AGENT. THE PLEDGOR WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS.
(iv) THE PLEDGOR, THE COLLATERAL AGENT AND THE HOLDERS EACH WAIVE ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
(v) THE PLEDGOR HEREBY IRREVOCABLY DESIGNATES ITS SECRETARY AS THE
DESIGNEE, APPOINTEE AND AGENT OF THE PLEDGOR TO RECEIVE, FOR AND ON BEHALF OF
THE PLEDGOR, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT. IT IS UNDERSTOOD THAT
NOTICE AND A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE FORWARDED
PROMPTLY TO THE PLEDGOR, BUT THE FAILURE OF THE PLEDGOR TO RECEIVE SUCH NOTICE
AND COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. THE PLEDGOR
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET
FORTH IN SECTION 12.02 OF THE SENIOR DEBENTURE INDENTURE, SUCH SERVICE TO BECOME
EFFECTIVE FIVE (5) BUSINESS DAYS AFTER SUCH MAILING.
(vi) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT, ANY
HOLDER OR ANY HOLDER OF ANY OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE PLEDGOR IN ANY OTHER JURISDICTION.
(vii) THE PLEDGOR AGREES THAT NEITHER THE COLLATERAL AGENT NOR ANY HOLDER
SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT OR SUCH HOLDER, AS
THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE
<PAGE>
PART OF THE COLLATERAL AGENT OR SUCH HOLDER, AS THE CASE MAY BE, CONSTITUTING
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(viii) THE PLEDGOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT OR ANY HOLDER OF ITS RIGHTS DURING
THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE PLEDGED COLLATERAL WITH
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE PLEDGED COLLATERAL OR
OTHER SECURITY FOR THE SECURED OBLIGATIONS. THE PLEDGOR WAIVES THE POSTING OF
ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT OR ANY HOLDER IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH
OR LEVY UPON COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS, TO
ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL
AGENT OR ANY HOLDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY
OTHER AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR, THE COLLATERAL AGENT AND THE
HOLDERS.
S18.20 Acknowledgments. The Pledgor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement;
(b) neither the Collateral Agent nor any Holder has any fiduciary
relationship to the Pledgor, and the relationship between the Collateral Agent
and the Holders, on the one hand, and the Pledgor, on the other hand, is solely
that of a secured party and a debtor; and
(c) no joint venture exists among the Holders or among the Pledgor and the
Holders.
[Signature Page Follows]
<PAGE>
[Security and Pledge Agreement Signature Page]
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have each caused
this Agreement to be duly executed and delivered as of the date first above
written.
PLEDGOR:
Finlay Enterprises, Inc.
By:__________________________
Name:
Title:
COLLATERAL AGENT:
Marine Midland Bank
By:__________________________
Name:
Title:
<PAGE>
SCHEDULE I
----------
PLEDGED SHARES
--------------
Issuer Number of Pledged Share Certificate Percentage of
- ------ ----------------- ----------------- -------------
Shares Number Outstanding
------ ------ -----------
Finlay Fine Jewelry 1000 1 100.000%
Corporation
PLEDGED NOTES
-------------
Maker of Note Payee of Note Final Maturity Original Principal
- ------------- ------------- -------------- ------------------
Amount
------
None.
<PAGE>
ANNEX A
-------
[Form of Issuer's Acknowledgment]
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Telecopier No. (212) 658-6425
Attention: Corporate Trust Department
April 24, 1998
Re: Finlay Enterprises, Inc.
9% Senior Debentures due May 1, 2008
Security and Pledge Agreement dated as of April 24, 1998
Ladies and Gentlemen:
We refer to the Security and Pledge Agreement, dated the date hereof (the
"Security and Pledge Agreement"), by and between Finlay Enterprises, Inc. (the
"Pledgor"), and Marine Midland Bank, as collateral agent (the "Collateral
Agent"), a copy of which is attached hereto as Exhibit 1. Capitalized terms used
but not defined herein shall have the meaning ascribed thereto in the Security
and Pledge Agreement.
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Finlay Fine Jewelry Corporation (the "Company") hereby
irrevocably consents to the terms and conditions of the Security and Pledge
Agreement and covenants and agrees that it shall perform all acts and discharge
all obligations which the Pledgor is required pursuant to the terms thereof to
cause to be performed or discharged by it. Without limiting the generality of
the foregoing, the Company irrevocably agrees that (i) it shall upon receipt
from the Collateral Agent of certificates representing the Pledged Shares,
together with duly executed instruments of transfer or assignment, immediately
cause such Pledged Shares to be registered in the name of the Collateral Agent
and (ii) it shall, upon receipt from the Collateral Agent of notice of an Event
of Default, execute all such documents and take all such actions as may be
convenient or necessary in order to give effect to the provisions of Section
6(f) of the Security and Pledge Agreement.
By:______________________
[name]
[title]
<PAGE>
Exhibit 1
[Form of Security and Pledge Agreement]
<PAGE>
ANNEX B
-------
[Form of Officers' Certificate]
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Telecopier No. (212) 658-6425
Attention: Corporate Trust Department
April 24, 1998
Re: Finlay Enterprises, Inc.
12% Senior Discount Debentures Due 2005
Indenture dated as of May 26, 1993, as Supplemented
---------------------------------------------------
Ladies and Gentlemen:
This Officers' Certificate is issued (i) to you in your capacity as trustee (the
"Old Trustee") under the indenture, dated as of May 26, 1993, by and between you
and ourselves (as supplemented by the First Supplemental Indenture, dated as of
October 28, 1994, by and among Finlay Enterprises, Inc., a Delaware corporation
("Finlay Enterprises"), Sonab Holdings, Inc., a Delaware corporation
("Holdings"), Sonab International, Inc., a Delaware Corporation
("International"), Societe Nouvelle D'Achat De Bijouterie, a French societe en
nom collectif ("Sonab"), and the Trustee, and the Second Supplemental Indenture,
dated as of July 14, 1995, by and among Finlay Enterprises, Holdings,
International, Sonab and the Trustee (the "Old Indenture"), pursuant to Sections
10.08 and 11.04 thereof and (ii) to you in your capacity as collateral agent
(the "Old Collateral Agent") under the Pledge Agreement, dated as of May 26,
1993, by and between you and ourselves (as amended as of the date hereof, the
"Old Pledge Agreement"), in accordance with Section 18.17 thereof. Capitalized
terms used but not defined herein shall have the meaning ascribed thereto in the
Security and Pledge Agreement (the "Security and Pledge Agreement"), dated the
date hereof, by and between you, as collateral agent (the "Collateral Agent"),
and ourselves.
We confirm that (i) we have read Sections 4.10 and 10.08 of the Old Indenture
and Section 18.17 of the Old Pledge Agreement, (ii) we have examined the other
provisions of the Old Indenture and the Old Pledge Agreement applicable to or in
connection with the release of the Liens (as defined in the Old Indenture) upon
the Pledged Collateral (as defined in the Old Pledge Agreement), (iii) in our
opinion, we have made such examination or investigation as is necessary to
enable us to express an informed opinion as to whether the conditions to the
release of such Liens have been satisfied and (iv) in our opinion, the
Obligations (as defined in the Old Indenture) of the Pledgor under the Old
Indenture and the Old Debentures have been paid in full and satisfied and all
conditions to the release of such Liens have been satisfied.
<PAGE>
Accordingly, you are hereby irrevocably instructed in your capacity as Old
Trustee to deliver to the Old Collateral Agent a certificate stating that such
Obligations have been paid in full and instructing the Old Collateral Agent to
execute, deliver, acknowledge and file such instruments of termination,
satisfaction or release (including, without limitation, any termination
statements) as the Collateral Agent may direct in order to evidence the release
of all Pledged Collateral permitted to be released pursuant to the Old
Indenture, and to deliver or cause to be delivered to the Collateral Agent all
certificates or instruments representing, evidencing or comprising the Pledged
Collateral to be held by it pursuant to the Security and Pledge Agreement,
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Collateral Agent.
These instructions may not be countermanded or varied without the prior written
consent of Marine Midland Bank, in its capacity as Trustee under the Senior
Debenture Indenture.
By:_____________________________
[name]
[title]
By:_____________________________
[name]
[title]
<PAGE>
ANNEX C
-------
[Form of Old Collateral Agent's Confirmation]
Finlay Enterprises, Inc.
529 Fifth Avenue
New York, New York 10017
Attn: Secretary and Corporate Counsel
April 24, 1998
Ladies and Gentlemen:
Reference is made to your Officers' Certificate, dated the date hereof.
Capitalized terms used but not defined herein shall have the meaning ascribed
thereto therein.
We hereby confirm that all fees and expenses owing to us in our capacity as Old
Collateral Agent have been paid.
By: MARINE MIDLAND BANK
By:_____________________________
[name]
[title]
<PAGE>
ANNEX D
-------
[Form of Collateral Agent's Acknowledgment]
Finlay Enterprises, Inc.
529 Fifth Avenue
New York, New York 10017
Attn: Secretary and Corporate Counsel
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette Securities Corporation
NationsBanc Montgomery Securities LLC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
April 24, 1998
Ladies and Gentlemen:
We refer to the Security and Pledge Agreement, dated the date hereof, by and
between Finlay Enterprises, Inc. and ourselves (the "Security and Pledge
Agreement"). Capitalized terms used but not defined herein shall have the
meaning ascribed thereto in the Security and Pledge Agreement. We hereby confirm
that the certificates and instruments set forth on Schedule I hereto evidencing,
representing or comprising the Pledged Collateral, accompanied, in each case, by
duly executed instruments of transfer or assignment in blank, have been
delivered to us, in our capacity as Collateral Agent, by Marine Midland Bank, in
its capacity as Old Collateral Agent.
By: MARINE MIDLAND BANK
By:_____________________________
[name]
[title]
<PAGE>
SCHEDULE I
----------
PLEDGED SHARES
--------------
Issuer Number of Pledged Share Certificate Percentage of
- ------ ----------------- ----------------- -------------
Shares Number Outstanding
------ ------ -----------
Finlay Fine Jewelry 1000 1 100.000%
Corporation
PLEDGED NOTES
-------------
Maker of Note Payee of Note Final Maturity Original Principal
- ------------- ------------- -------------- ------------------
Amount
------
None.
<PAGE>
ANNEX E
-------
[Form of Opinion of Counsel]
i. [New Entity] is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to own and to operate its properties and
to carry on its business;
ii. all of the outstanding capital stock of [New Entity] has been validly
authorized and issued, is fully paid and nonassessable and is owned by the
Pledgor, directly or indirectly, free and clear of any security interest, claim,
lien or encumbrance, other than the security interests created by the Security
and Pledge Agreement, and, to our knowledge, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in [New Entity];
iii. Pledgor has the requisite corporate power and authority to create,
deliver and cause the perfection of the security interests created under the
Security and Pledge Agreement and the Security and Pledge Agreement creates a
valid security interest in all of the issued and outstanding shares of capital
stock of [New Entity] and the proceeds from those shares (collectively, the
"Pledged Shares") for the benefit of the Collateral Agent and the ratable
benefit of the Trustee and the Holders of Debentures and such security interest
has been perfected under the Uniform Commercial Code in effect in the State of
New York by the filing of the UCC-1 Financing Statement which was filed with the
New York Secretary of State on [date] and upon the pledge and delivery of the
certificates evidencing the Pledged Shares (together with stock powers related
thereto which have been duly executed in blank by the Pledgor), and the
continuous possession of such certificates and stock powers in the State of New
York, all in accordance with the Security and Pledge Agreement, and assuming
that [New Entity] does not issue any additional shares of its capital stock, the
Collateral Agent's security interest in the Pledged Shares will continue to be
perfected; and
iv. the pledge of all of the shares of capital stock of [New Entity]
pursuant to the Security and Pledge Agreement, and the consummation of the
transactions contemplated thereby and the [merger] [consolidation] [sale or
transfer of all or substantially all assets] do not (A) result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Pledgor, the Issuer or [New
Entity] is a party or by which the Pledgor, the Issuer or [New Entity] is bound
or to which any of the property or assets of the Pledgor, the Issuer or [New
Entity] is subject except for such conflicts, breaches, violations or defaults
as would not have a material adverse effect on the business, condition
(financial or other), results of operations or properties of the Pledgor, Issuer
or [New Entity] and its subsidiaries taken as a whole, nor will such action
result in any violation of the provisions of the respective charter or by-laws
of the Pledgor, the Issuer or [New Entity], nor will such action result in any
violation of any applicable law or statute or any applicable order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Pledgor, Issuer or [New Entity] or any of their respective subsidiaries or
properties, or (B) result in the creation of any Lien upon any of the properties
or assets of the Pledgor, the Issuer or [New Entity] (other than pursuant to the
Security and Pledge Agreement).
________________________
* Subject to such modifications, and such assumptions, qualifications and
exceptions, as may be agreed upon by the Pledgor and the Trustee.
<PAGE>
ANNEX F
-------
[Form of Officers' Certificate]
The undersigned, _______________ and ________________, respectively the
President and Chief Financial Officer of Finlay Enterprises, Inc., a Delaware
corporation ("Pledgor"), certify that they are authorized to execute this
Certificate in the name and on behalf of Pledgor, and further certify as follows
(capitalized terms used but not defined herein have the respective meanings
assigned to them in the Security and Pledge Agreement, dated April 24, 1998 (the
"Pledge Agreement"), between Pledgor and Marine Midland Bank, as Collateral
Agent (the "Collateral Agent")):
a. We are familiar with the historical and current financial condition of
Pledgor and the Issuer after giving effect to the [merger] [consolidation]
[sale or transfer of all or substantially all assets] contemplated by
Section 7(a)(vii) of the Security and Pledge Agreement (the Pledgor, Issuer
and [New Entity] are collectively referred to as the "Company").
b. For the purposes of this Certificate, we have reviewed other financial
information and forecasts relating to the Company prepared by the Company's
management, which we believe (as to historical financial information)
fairly present the historical financial position and results of operations
of the Company as of the dates and for the periods presented and (in the
case of the forecasts) were based upon reasonable assumptions and provide
reasonable estimations of future performance, although any forecasts are
necessarily uncertain of fulfillment. We know of no facts or circumstances
arising subsequent to the dates as of which such information and
projections were prepared which would materially alter such conclusions. We
have assumed that the fair saleable value of the Company's assets is the
amount for which all the businesses of the Company could be sold on the
date hereof either as an entirety or separately (including in any such sale
all property and assets used in the business or businesses sold) and, in
either case, on a going concern basis, without potential tax liabilities
arising on sale.
c. In addition to such review, we are familiar with and have considered
information, including the opinions of independent advisors, as to the fair
market values of the Pledgor's assets and the probable liabilities,
contingent or otherwise, of the Company to its creditors. We have estimated
such values as reliably and as practicably as possible under the
circumstances.
Based upon the foregoing, we have reached the conclusions that, after
giving effect to the transactions contemplated by Section 7(a)(vii) of the
Security and Pledge Agreement:
1. Neither the Pledgor nor the Company intends to or believes that it has
incurred or will incur debts that will be beyond its and their ability to
pay as they mature.
2. The present fair saleable value of the assets of the Pledgor and the
Company exceeds the amount that will be required to pay the probable
<PAGE>
liability on its and their existing debts, respectively (whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent), as
they become absolute and matured. In determining "present fair saleable
value," we utilized as a guideline amounts we believe would be reached by a
willing seller and a willing buyer under no compulsion to make the sale.
3. The Pledgor and the Company do not have unreasonably small capital for it
or them, respectively, to carry on its and their respective businesses as
currently conducted or as proposed to be conducted. "Unreasonably small
capital" is dependent upon the nature of the particular business or
businesses conducted or to be conducted, and the statement made in the
preceding sentence is correct based upon anticipated future conduct of the
business of the Pledgor and the Company.
4. Pledgor is not incurring obligations or making transfers under any evidence
of indebtedness with the intent to hinder, delay or defraud any entity to
which it is or will become indebted.
WITNESS the signatures of the undersigned, this ___ day of _______, ____.
______________________________
President
______________________________
Chief Financial Officer
<PAGE>
EXHIBIT C
[FORM OF TRADE NAME LICENSE AGREEMENT]
Trade Name License Agreement (this "Agreement"), dated as of ____________,
________, between [_____________], a corporation organized and existing under
the laws of [state] (the "Licensor"), and [____________], a corporation
organized and existing under the laws of [state] (the "Licensee").
Whereas, the Licensee is the owner of certain trade names and service marks
shown on Schedule A hereto and has utilized such trade names and services marks
in the operation of jewelry departments or stores and related activities; and
Whereas, on the date hereof Licensee has sold, transferred, conveyed and
assigned its right, title and interest to use such trade names and service marks
and goodwill associated therewith in the United States (but not elsewhere) to
Licensor; and
Whereas, pursuant to the Indenture dated as of April __, 1998 between
Finlay Enterprises, Inc. and Marine Midland Bank, as trustee (the "Indenture"),
relating to Finlay Enterprises, Inc.'s __% Senior Debentures due 2008 (the
"Senior Debentures"), in connection with such sale, transfer, conveyance and
assignment, Licensee and Licensor are required to enter into this Agreement; and
Whereas, the Licensee desires to obtain, and the Licensor desires to grant
to the Licensee, an exclusive right to use the Licensed Trade Names (as defined
in Section 1) in the Territory (as defined in Section 1) on or in connection
with the operation of jewelry departments or stores and related purchasing,
consigning, merchandising, selling, marketing, promoting, advertising,
distributing, manufacturing, importing of or other activities relating to
jewelry upon the terms and conditions set forth below;
Now therefore, to effect the foregoing, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
"Affiliate" as used herein means, with respect to either party, any entity
controlling, controlled by or under common control with such party. For purposes
of the foregoing definition, the term "control" (and correlative terms) means
the power, whether by contract, equity ownership or otherwise, to direct the
policies or management of an entity.
"Governmental Authority" as used herein means any federal, state, county,
local or other governmental department, regulatory body, commission, board,
bureau, agency or instrumentality.
<PAGE>
"Licensed Products" as used herein means jewelry products which are sold in
jewelry departments or stores operated by the Licensee or any other products
sold in any other venue with the prior approval of the Licensor.
"Licensed Trade Names" as used herein means the trade names and service
marks shown on Schedule A attached hereto.
"Licensee" as used herein means the Licensee, its Affiliates (other than
the Licensor), sublicensees and successors to the Licensee's business.
"Parties" as used herein means the Licensor and the Licensee.
"Quality" as used herein means products marketed and promoted as quality
items which meet or exceed the quality standards set forth in Section 4 below.
"Revenues" as used herein means gross revenues generated by sales of the
Licensed Products in the Territory less sales taxes, shipping, freight, or
transport charges if separately stated on an invoice; actual discounts or
allowances to customers; and returns in the normal course of business.
"Territory" as used herein means the United States of America, any
political subdivisions thereof and its territories, commonwealths and
possessions.
SECTION 2. GRANT TO THE LICENSEE AND RELATED MATTERS.
(a) Exclusivity. The Licensor hereby grants to the Licensee, except as
otherwise provided herein, an exclusive right in the Territory to use the
Licensed Trade Names in connection with the operation of jewelry departments and
stores whether now existing or hereafter established and the related purchasing,
consigning, merchandising, selling, marketing, promoting, advertising,
distributing, manufacturing, importing of or other activities relating to the
Licensed Products.
(b) Reserved Rights. All rights in the Licensed Trade Names other than
those specifically granted herein are reserved to the Licensor for its own use
and benefit.
(c) Ownership. The parties acknowledge and agree that the Licensed Trade
Names are the sole and exclusive property of the Licensor. The Licensee
acknowledges and agrees that the Licensee shall not acquire any right, title or
interest in or to the Licensed Trade Names as a result of this License
Agreement, or the Licensee's use thereof, or as a result of any other act or
thing, that the Licensee shall not attack the Licensor's title to or ownership
of the Licensed Trade Names, and that all use of the Licensed Trade Names by the
Licensee and all goodwill generated thereby shall inure to the benefit of the
Licensor. The Licensee shall not use or register or claim rights in any trade
name, trade dress or other indicia confusingly similar, in whole or in part, to
the Licensed Trade Names.
<PAGE>
(d) Sublicenses. The Licensee shall not grant any sublicense to use the
Licensed Trade Names, other than to Licensee's Affiliates without the express
prior written approval of the Licensor.
(e) Royalty Provisions. Upon receipt of an invoice from the Licensor,
Licensee agrees to pay the Licensor a royalty equal to [___ percent (__%) of
Revenues generated from sales of the Licensed Products by the Licensee in the
Territory.]
(f) Statements and Payments.
(i) Licensor has the option to request payment of such royalties at the end
of each six-month period by sending an invoice to Licensee. Within thirty (30)
days after receipt of such invoice, Licensee shall furnish a statement,
certified as accurate by an officer of Licensee, showing in reasonable detail
Licensee's sales of the Licensed Products, applicable allowances or credits,
uncollectible amounts, invoiced free or sample items distributed and a
calculation of Revenues for the Licensed Products, as well as the amount of
royalties payable with respect to such prior six month period.
(ii) Acceptance by the Licensor of any statement furnished or royalty paid
shall not preclude the Licensor from questioning its correctness and, if any
inconsistencies or mistakes are discovered, they shall immediately be rectified.
(iii) All payments made by Licensee hereunder will be paid to Licensor or
its designee in United States Dollars.
(iv) The Licensee shall pay interest on any overdue royalty payment at the
prime rate in effect on the date on which such payment was due, and such
interest shall accrue from the date on which such payment was due.
(v) If the Licensee does not receive an invoice from the Licensor, all
royalties due and payable shall be paid within thirty (30) days after receiving
the next invoice, together with interest on such royalties at the prime rate in
effect on the date such payment was initially due, and such interest shall
accrue from the date on which such payment was due.
(g) Audit.
(i) The Licensee shall keep complete and accurate records and books of
account at its principal place of business covering all transactions relating to
this Agreement, and the Licensor and/or its duly authorized representative shall
have the right, during regular business hours and upon ten (10) days reasonable
notice, at least once quarterly, to examine such books and all other documents
and materials in Licensee's possession or control with respect to this
Agreement. Neither Licensor nor any of its representatives shall disclose to any
other person, firm or corporation any information acquired as a result of such
examination, provided, however, that nothing herein contained shall be construed
to prevent Licensor and/or Licensee or their duly authorized representatives
from testifying in any court of competent jurisdiction with respect to the
information obtained as a result of any such examination in any action
instituted to enforce the rights of Licensor under the terms of this Agreement.
If such an audit reveals an underpayment by the Licensee, the Licensee shall
<PAGE>
immediately remit payment to the Licensor in the amount of the underpayment plus
interest calculated at the prime rate then in effect from the date such
payment(s) were actually due. If such underpayment is greater than __% of the
royalties payable for the audited period, the Licensee shall reimburse the
Licensor for the costs and expenses of such audit.
(ii) All books of account and records of the Licensee relating to this
Agreement shall be retained for at least two (2) years after termination of this
Agreement.
SECTION 3. METHOD OF USE OF THE LICENSED TRADE NAMES.
(a) Use. The Licensee acknowledges that the Licensed Trade Names have
acquired a valuable secondary meaning and goodwill to department stores and
vendors in the retail jewelry market place. Accordingly, the Licensee undertakes
and agrees not to use the Licensed Trade Names in any manner whatsoever which,
directly or indirectly, would derogate or detract from its repute or which would
dilute, demean, ridicule or reflect adversely upon the Licensed Trade Names or
the Licensor, it being mutually agreed that use by the Licensee of the Licensed
Trade Names in the manner being used on the date hereof shall meet Licensor's
standards. The Licensee acknowledges that the Licensed Trade Names have become
associated generally with products and services that possess a positive and
quality image, and the Licensee agrees not to use the Licensed Trade Names in
any manner inconsistent with such image. The Licensee agrees to utilize the
Licensed Trade Names in a Quality manner in connection with the operation of
jewelry departments or stores and the purchasing, consigning, merchandising,
selling, marketing, promoting, advertising, distributing, manufacturing,
importing of or other activities relating to the Licensed Products.
(b) Form and Manner. Except as may be otherwise specifically provided in
this Agreement, the Licensee may not (i) make any change in the form of the
Licensed Trade Names, (ii) use any partial version of the Licensed Trade Names
at any time for any purpose, or (iii) use the Licensed Trade Names in
combination, juxtaposition or conjunction with, or as part of, any other
trademarks, service marks or trade names without the express prior written
approval of the Licensor, which approval may not be unreasonably withheld, it
being mutually agreed that use by the Licensee of the Licensed Trade Names in
the manner being used on the date hereof shall meet Licensor's standards. Any
mark approved pursuant to this paragraph shall be owned solely and exclusively
by the Licensor and after approval shall be deemed a Licensed Trade Name
pursuant to this Agreement.
(c) Marking. The Licensee shall apply such trade name notices, copyright
notices or other markings in connection with the Licensed Trade Names as may be
necessary or reasonably deemed desirable by the Licensor under the laws or
regulations of each jurisdiction of the Territory where such Licensed Trade
Names are used.
<PAGE>
SECTION 4. QUALITY STANDARDS.
(a) Quality. The Licensee shall not sell any Licensed Products or operate
any jewelry departments or stores or conduct related activities in connection
with the Licensed Trade Names that shall fail to meet the quality standards and
specifications employed in connection with use of the Licensed Trade Names as of
the date hereof or such additional standards or specifications as may be
reasonably specified by the Licensor from time to time, it being mutually agreed
that use by the Licensee of the Licensed Trade Names in the manner being used on
the date hereof shall meet Licensor's standards. The Licensee shall operate
jewelry departments or stores or conduct related activities in connection with
the Licensed Trade Names only in a manner that will protect the reputation of
the Licensed Trade Names.
(b) On Site Inspections. Upon reasonable notice, the Licensor or its
representatives shall have access for inspection purposes to the jewelry
departments or stores operated by Licensee during regular business hours at such
time or times as to not unduly interfere with the operations of the Licensee to
determine compliance with quality control standards. If any inspection of any
premises reveals that the Licensee has failed to comply with the quality
standards or other requirements of this Section 4, the Licensor shall be
entitled to reinspect such premises until receipt of notice of cure by the
Licensee. All expenses of conducting such inspections shall be borne by the
Licensor.
(c) Governmental Inquiries. The Licensee shall immediately notify the
Licensor in writing of any investigation, inquiry, claim or sanction by any
Governmental Authority regarding any quality, labeling, advertising or other
regulatory matter relating to the Licensed Products and shall keep the Licensor
advised of the progress and findings of such investigation or inquiry.
(d) Compliance; Fitness for Use. The Licensee shall be solely responsible
for and shall comply with all laws, rules and regulations, if any, of
Governmental Authorities in connection with the operation of jewelry departments
or stores in connection with the Licensed Trade Names and the related
purchasing, consigning, merchandising, selling, marketing, promoting,
advertising, distributing, manufacturing, importing of or other activities
relating to any goods or services.
SECTION 5. TERM.
The term of this License Agreement shall commence as of the date hereof and
continue until the earlier of (a) the date on which none of the Senior
Debentures is outstanding and all obligations of Finlay Enterprises, Inc. under
the Indenture have been satisfied in full, (b) the date on which Licensee
permanently ceases operating jewelry departments and stores and the related
purchasing, consigning, merchandising, selling, marketing, promoting,
advertising, distributing, manufacturing, importing of or other activities
relating to the Licensed Products, or (c) the date on which the Licensor sells,
transfers, conveys and assigns to the Licensee all of the Licensor's right,
title and interest in and to the Licensed Trade Names. Upon the termination of
this Agreement, all the rights of the Licensee hereunder shall automatically
revert to the Licensor, the parties shall perform all other acts which may be
necessary or useful to render effective the termination of the interest of the
Licensee in the Licensed Trade Names, and the Licensee shall execute any
<PAGE>
assignment, conveyance, acknowledgment or other document that the Licensor may
require, relinquishing or conveying to the Licensor any and all rights to or
interest in use of the Licensed Trade Names that the Licensee has and any
goodwill associated therewith. Without any limitation of the foregoing, the
Licensee hereby consents to any application which the Licensor may make, upon
termination of this Agreement, to limit or terminate the Licensee's status as a
registered user and hereby irrevocably agrees not to contest, oppose or dispute
such application.
SECTION 6. REMEDIES.
(a) In the event of a breach of this Agreement, the aggrieved party's sole
and exclusive remedy shall be specific performance of this Agreement, including
any injunctive relief necessary to effect such specific performance. In
particular and without any limitation of the foregoing, the Licensor shall not
institute litigation against any person or entity for infringement of any
Licensed Trade Name based in whole or in part on any activities or rights
covered or protected by this Agreement, and Licensee shall not commence any
action seeking a declaration of invalidity, unenforceability or noninfringement
of any registrations or applications covering the Licensed Trade Names or
asserting any rights to the Licensed Trade Names or any mark or name confusingly
similar thereto.
(b) The parties further agree that this Agreement and the license granted
herein may under no circumstances be rescinded and may be terminated only as
expressly provided in Section 5 above.
SECTION 7. PROTECTION OF THE LICENSED TRADE NAMES.
(a) Maintenance. The Licensor shall maintain at its expense each of the
registrations for the Licensed Trade Names shown on Schedule A, if any, in full
force and effect as long as this Agreement continues in effect, and the Licensee
agrees to provide such assistance and documentation as is required for such
maintenance. The Licensor shall file such additional applications as Licensee
shall reasonably request to protect the Licensed Trade Names, and Licensor shall
diligently prosecute such applications and maintain any registrations issuing
thereon.
(b) Infringement. The Licensee shall notify the Licensor of any suspected,
actual or threatened infringement of or act of unfair competition or other
harmful or wrongful activities of third parties with respect to the Licensed
Trade Names as to which it has notice. The Licensee shall cooperate with the
Licensor with respect to any action to be taken with respect thereto. The
Licensor will have the obligation to take whatever steps are reasonably
necessary or desirable to protect the Licensed Trade Names from any such
infringement or other harmful or wrongful activities of third parties and shall
have the right to control any litigation or other proceeding undertaken by it
for any such purpose. Such steps may include the filing and prosecution of
(i) litigation against infringement or unfair competition by third parties,
(ii) opposition proceedings to oppose applications for trade name or service
mark registration for marks that are confusingly similar to any one or more of
the Licensed Trade Names, and (iii) cancellation proceedings to cancel
<PAGE>
registration of trade names or service marks that are confusingly similar to any
one or more of the Licensed Trade Names.
(c) Claims Against the Licensee. The Licensee shall promptly notify the
Licensor of any claim of infringement or any complaint based upon the Licensee's
use of the Licensed Trade Names and of any suit, action or proceeding brought
against the Licensee based upon said claim or complaint, and the provisions of
Section 10 shall apply.
SECTION 8. RECORDATION OF AGREEMENT.
The parties shall cooperate to determine and comply with applicable laws or
regulations throughout the Territory with respect to the recordation of,
validation of, or otherwise to render effective this Agreement. In countries
having registered user or license recordation requirements, the parties shall
execute all documents which may be necessary to record the Licensee as a
registered user or licensee for the Licensed Trade Names, and all costs of
preparing and recording any necessary documents or other costs in connection
therewith shall be borne by the Licensee.
SECTION 9. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of the Licensor. The Licensor represents
and warrants as follows:
(i) Due Organization and Power of the Licensor. The Licensor is a corporation
duly organized, validly existing and in good standing under the laws of
[state] and has all requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
(ii) Authorization and Validity of the Agreement. The execution, delivery and
performance by the Licensor of this Agreement and the consummation by it of
the transactions contemplated hereby has been duly authorized by its Board
of Directors and, if necessary, its shareholders, and no other corporate
action on the part of the Licensor is necessary for the execution, delivery
and performance by the Licensor of this Agreement and the consummation by
the Licensor of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Licensor, and this License
Agreement is the legal, valid and binding obligation of the Licensor,
enforceable against the Licensor in accordance with and subject to its
terms except as may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium, or other similar laws and
equitable principles relating to or limiting creditor's rights generally.
(iii)No Conflict. The execution, delivery and performance by the Licensor of
this Agreement and the consummation by the Licensor of the transactions
contemplated hereby does not and will not (A) violate any provision of any
federal, state, local or foreign law, rule or regulation or any order,
injunction, judgment or decree applicable to the Licensor; (B) require any
<PAGE>
consent or approval of, or filing with or notice to, any Governmental
Authority under any provision of law applicable to the Licensor other than
filings under applicable trade name laws or except as may be contemplated
under any provision of this Agreement; (C) violate any provision of the
Certificate of Incorporation or By- Laws or other constituent documents of
the Licensor; or (D) require any consent, approval or notice under,
conflict with, or result in the breach, lapse, cancellation or termination
of, or result in the acceleration (whether after the filing of notice or
the lapse of time or both) of any right or obligation of or the performance
by the Licensor under, or result in a loss of any benefit to which the
Licensor is entitled under, or constitute a default under any indenture,
mortgage, deed of trust, lease, license, franchise, contract, agreement,
concession or other instrument to which the Licensor is a party or by which
it, or any of its assets, are bound or encumbered, where the failure to
obtain such consent, approval or notice or the occurrence of any of the
matters referred to in this subsection (D) would materially adversely
affect the Licensee's rights hereunder.
Except as expressly provided above in this Section 9(a) or elsewhere in this
Agreement, the Licensor makes no other representations or warranties regarding
this Agreement or the rights Licensed hereunder.
(b) Representations and of Warranties of the Licensee. The Licensee
represents and warrants as follows:
(i) Due Organization and Power of the Licensee. The Licensee is a corporation
duly organized, validly existing and in good standing under the laws of
[state] and has all requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
(ii) Authorization and Validity of the Agreement. The execution, delivery and
performance by the Licensee of this Agreement and the consummation by it of
the transactions contemplated hereby have been duly authorized by its Board
of Directors, and no other corporate action on the part of the Licensee is
necessary for the execution, delivery and performance by the Licensee of
this Agreement and the consummation by the Licensee of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Licensee, and this Agreement is the legal, valid and binding obligation
of the Licensee, enforceable against the Licensee in accordance with and
subject to its terms except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or other
similar laws and equitable principles relating to or limiting creditors'
rights generally.
(iii)No Conflict. The execution, delivery and performance by the Licensee of
this Agreement and the consummation by the Licensee of the transactions
contemplated hereby does not and will not (A) violate any provision of any
federal, state, local or foreign law, rule or regulation or any order,
injunction, judgment or decree applicable to the Licensee; (B) require any
<PAGE>
consent or approval of, or filing with or notice to, any Governmental
Authority under any provision of law applicable to the Licensee;
(C) violate any provision of the Certificate of Incorporation or By-Laws or
other constituent documents of the Licensee; or (D) require any consent,
approval or notice under, conflict with, or result in the breach, lapse,
cancellation or termination of, or result in the acceleration (whether
after the filing of notice or the lapse of time or both) of any right or
obligation of or the performance by the Licensee under, or result in a loss
of any benefit to which the Licensee is entitled under, or constitute a
default under any indenture, mortgage, deed of trust, lease, license,
franchise, contract, agreement, concession or other instrument to which the
Licensee is a party or by which it or any of its assets are bound or
encumbered, where the failure to obtain such consent, approval or notice or
the occurrence of any of the matters referred to in this subsection
(D) would materially adversely affect the Licensee's rights hereunder..
SECTION 10. INDEMNIFICATION.
(a) By the Licensor. The Licensor shall indemnify, defend and hold harmless
the Licensee from and against and in respect of any and all claims, losses,
damages, expenses, obligations, penalties, demands, suits, procedures,
assessments, judgments, costs and liabilities (including costs of collection,
investigation, reasonable attorneys' fees and other costs of defense) ("Losses")
incurred by it, arising out of or resulting from any breach of any
representation, warranty, covenant or agreement made by the Licensor herein.
(b) By the Licensee. The Licensee shall indemnify, defend and hold harmless
the Licensor and its Affiliates from and against and in respect of any and all
Losses incurred by them arising out of or resulting from any breach of any
representation, warranty, covenant or agreement made by the Licensee herein.
(c) Procedure. If a claim by a third party is made against an indemnified
party, the indemnified party shall promptly notify the indemnifying party of
such claim. Failure to so notify the indemnifying party shall not relieve the
indemnifying party of any liability which the indemnifying party might have,
except to the extent that such failure materially prejudices the indemnifying
party's legal rights. The indemnifying party shall have thirty days after
receipt of such notice to undertake, conduct and control, through counsel of its
own choosing (subject to the consent of the indemnified party, such consent not
to be unreasonably withheld) and at its expense, the settlement or defense of
such claim, and the indemnified party shall cooperate with the indemnifying
party in connection therewith; provided, however, that (i) the indemnifying
party shall permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, provided that the fees
and expenses of such counsel shall be borne by the indemnified party and
(ii) the indemnifying party shall reimburse the indemnified party for the full
amount of any Loss resulting from such claim and all related expenses incurred
by the indemnified party within the limits of this Section 10 as such are
incurred. Notwithstanding anything contained herein, the indemnifying party
shall not enter into any settlement without the consent of the indemnified
party, unless the settlement involves the payment of money only and the
indemnified party is solely liable for payment of said money. So long as the
indemnifying party is reasonably contesting any such claim in good faith, the
indemnified party shall not pay or settle any such claim. Notwithstanding the
<PAGE>
foregoing, the indemnified party shall have the right to pay or settle any such
contested claim (provided that such settlement does not adversely affect any
rights of the indemnifying party with respect to the Licensed Trade Names), but
in such event it shall automatically waive any right to indemnity therefor by
the indemnifying party. If the indemnifying party does not notify the
indemnified party within thirty days after receipt of the indemnified party's
notice of a claim of indemnity hereunder that it elects to undertake the defense
thereof, or so notifies the indemnified party but fails to undertake or maintain
such defense promptly and in good faith, the indemnified party shall have the
right to contest, settle or compromise the claim in the exercise of its
reasonable judgment and without prejudice to the rights of the indemnified party
to indemnification hereunder.
(d) Survival. The provisions of this Section 10 shall survive the
termination or expiration of this Agreement.
SECTION 11. MISCELLANEOUS.
(e) Notices. Except as otherwise provided herein, all notices, requests,
demands, waivers and other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or by overnight courier with delivery charges
prepaid, or mailed by certified or registered mail, postage prepaid, receipt
requested, or sent by telecopy, as follows:
If to the Licensor, to it at:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
<PAGE>
with a copy to:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
If to the Licensee, to it at:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
with a copy to:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
or to such other person or address as either party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery.
(f) Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
<PAGE>
to confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
(g) Entire Agreement. This Agreement (including the Schedule hereto)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
(h) Assignability. This Agreement shall be freely assignable by the
Licensee to any successor of the Licensee's business which is a wholly owned
subsidiary of the Licensee with respect to the operation of jewelry departments
and the related purchasing, consigning, merchandising, selling, marketing,
promoting, advertising, distributing, manufacturing, importing of or other
activities relating to jewelry products. This Agreement shall not be assignable
by the Licensor.
(i) Relationship of the Parties. This Agreement shall in no way constitute
or give rise to a partnership, joint venture or agency between the parties, it
being acknowledged and agreed that the relationship created hereby is strictly
that of licensor and licensee. Except as may be expressly provided to the
contrary herein, nothing in this Agreement shall constitute or be deemed to
constitute either party as the legal representative or agent of the other, nor
shall either party have the right or authority to assume, create or incur any
liability or any obligation of any kind, express or implied, in the name of or
on behalf of the other party.
(j) Amendment and Modification; Waiver. Subject to applicable law, this
Agreement (including Schedule A hereto) may only be amended, modified and
supplemented by written instrument expressly identified as an amendment hereto
authorized and executed by the Licensor and the Licensee at any time prior to
the termination hereof with respect to any of the terms contained herein. No
waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach. No
failure on the part of either party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof.
(k) Further Assurances. From time to time, pursuant to the request of the
Licensee delivered to the Licensor, the Licensor, at the Licensee's expense,
shall execute and deliver such instruments and documents and take such actions
as the Licensee may reasonably request in order to allow the Licensee the use of
the Licensed Trade Names contemplated hereby or otherwise to carry out the
purposes and intent of this Agreement. From time to time, pursuant to the
request of the Licensor delivered to the Licensee, the Licensee, at the
Licensor's expense, shall execute and deliver such instruments and documents and
take such actions as the Licensor may reasonably request to carry out the
purposes and intent of this Agreement.
(l) Section Headings. The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
<PAGE>
(m) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, and all of which shall be deemed to be one
and the same agreement.
(n) Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to choice of laws or principles thereof.
(o) Severability of Provisions. 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 enforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this License Agreement
as of the date first above written.
[NAME OF LICENSOR]
By:___________________________
Name:
Title:
[NAME OF LICENSEE]
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE A
Licensed Trade Names
<PAGE>
EXHIBIT D
FORM OF SUBSIDIARY GUARANTEE
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned Guarantor (which term includes any
successor Person under the Indenture) jointly and severally, hereby
unconditionally guarantees, subject to the provisions in the Indenture dated as
of April 24, 1998 (the "Indenture") among Finlay Enterprises, Inc., and Marine
Midland Bank, as trustee (the "Trustee"), but irrespective of the validity and
enforceability of the Indenture, the Debentures and the obligations of the
Company thereunder, (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Debentures (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of the Indenture and (b) in case of any extension of time of
payment or renewal of any Debentures or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. The obligations of the Guarantors to the Holders of Debentures and
to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly set forth in Article 11 of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder
of a Debenture, by accepting the same, agrees to and shall be bound by such
provisions.
[Name of Guarantor]
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSIDIARY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among ___________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Finlay Enterprises, Inc. (or its permitted successor), a Delaware
corporation (the "Company"), the other Guarantors (as defined in the Indenture
referred to herein) and Marine Midland Bank, as trustee under the Indenture
referred to below (the "Trustee").
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of April 24, 1998 providing for the
issuance of an aggregate principal amount of up to $75.0 million of 9%
Debentures due May 1, 2008 (the "Debentures");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Debentures and the
Indenture on the terms and conditions set forth herein and in the Indenture (the
"Subsidiary Guarantee"); and
WHEREAS, pursuant to Sections 9.01 and 9.06 of the Indenture, the Trustee
is authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary, the Company and the Trustee mutually covenant and agree
for the equal and ratable benefit of the Holders of the Debentures as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
unconditionally guarantees all of the Company's Obligations as set forth in
Article 11 of the Indenture in the same manner and to the same extent as if it
had executed the Indenture on the date thereof as Guarantor thereunder.
3. Continuing Agreement. Except as herein amended, all terms, provisions
and conditions of the Indenture, all Exhibits thereto and all instruments
executed in connection therewith shall continue in full force and effect and
shall remain enforceable and binding in accordance with their respective terms.
4. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING
<PAGE>
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together constitute the same agreement.
6. Effect of Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
7. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ______________, ____
[GUARANTEEING SUBSIDIARY]
By: ________________________________
Name:
Title:
FINLAY ENTERPRISES, INC.
By: ________________________________
Name:
Title:
MARINE MIDLAND BANK, as Trustee
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT F
[FORM OF SUBSIDIARY INTERCOMPANY NOTE]
PROMISSORY NOTE
$[ ] New York, New York
[date]
FOR VALUE RECEIVED, [_____________], a [_______] corporation ("Borrower"),
promises to pay to the order of [____________], a [__________] corporation
("Payee"), [upon demand by the Payee] [on [ ]], at its office at
[__________________], or at such other place as Payee may, from time to time,
designate in writing, in lawful money of the United States of America, in
immediately available funds, the principal sum of [_________] Dollars
($[______]) [together with interest thereon at a rate of [__]% per annum from
[______] until maturity].
PAYEE AND ANY HOLDER HEREOF, BY ITS ACCEPTANCE OF THIS PROMISSORY NOTE,
AGREES THAT THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON, IF ANY, THIS
PROMISSORY NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL
IN CASH OF ALL INDEBTEDNESS OF THE BORROWER OTHER THAN INDEBTEDNESS WHICH BY ITS
TERMS IS SUBORDINATE IN RIGHT OF PAYMENT TO OTHER INDEBTEDNESS OF THE BORROWER
("SENIOR DEBT"), WHETHER OUTSTANDING ON THE DATE HEREOF OR HEREAFTER CREATED,
INCURRED, ASSUMED OR GUARANTEED, AND THAT THE SUBORDINATION IS FOR THE BENEFIT
OF THE HOLDERS OF THE SENIOR DEBENTURES.
[Borrower will pay interest [semi-annually] in arrears on [_____________]
and [____________] of each year, or if any such day is not a Business Day, on
<PAGE>
the next succeeding Business Day (each an "Interest Payment Date"). Interest on
this Promissory Note will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of issuance; provided
that the first Interest Payment Date shall be [____________]. [Borrower shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal from time to time on demand at a rate that
is [__]% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.]
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.]
Upon any distribution to creditors of Borrower in an insolvency or in
connection with any proceeding under Bankruptcy Law relating to Borrower or its
property, (i) holders of Senior Debt shall be entitled to receive payment in
full in cash of all Obligations due in respect of such Senior Debt (including
post-petition interest in any proceeding under Bankruptcy Law) before the holder
hereof shall be entitled to receive any payment of the principal hereof or
interest, if any, hereon and (ii) until all Obligations with respect to Senior
Debt are paid in full in cash, any distribution to which the holder hereof would
otherwise be entitled shall be made to the holders of such Senior Debt on a pro
rata basis.
Any contrary provision hereof notwithstanding, Borrower may not make any
payment of the principal hereof or interest, if any, hereon if a default occurs
and is continuing with respect to any Senior Debt.
Upon the failure of the Borrower to pay principal [or accrued interest]
when due and at any time thereafter [(but prior to the payment in full of all
<PAGE>
such accrued and unpaid interest)] the holder of this Promissory Note may
declare the unpaid principal balance and all accrued and unpaid interest hereon
to be immediately due and payable.
In the event that any action shall be brought for the enforcement hereof,
the undersigned hereby promises to pay all costs and expenses hereof, including,
but not limited to, reasonable attorneys' fees and disbursements.
Borrower's obligations hereunder shall be unconditional and shall not be
subject to any defense (other than prior payment), set-off, deduction,
counterclaim or recoupment whatsoever by Borrower.
Any amounts due under this Promissory Note may be prepaid at any time or
times in whole or in part without premium or penalty.
Presentation, notice of protest, and demand are hereby expressly waived by
the undersigned.
Capitalized terms used but not defined herein have the meanings ascribed to
such terms in the Indenture, dated as of April 24, 1998, between Finlay
Enterprises, Inc. and Marine Midland Bank, as trustee.
THE TERMS OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
BORROWER
By:______________________________
Name:
Title:
- --------------------------------------------------------------------------------
FINLAY FINE JEWELRY CORPORATION
8 3/8% SENIOR NOTES DUE MAY 1, 2008
INDENTURE
------------------------------------
Dated as of April 24, 1998
------------------------------------
Marine Midland Bank
Trustee
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310(a)(1).................................................................7.10
(a)(2).................................................................7.10
(a)(3).................................................................N.A.
(a)(4).................................................................N.A.
(a)(5).................................................................7.l0
(b)....................................................................7.10
(c)....................................................................N.A.
311(a)....................................................................7.11
(b)....................................................................7.11
(c)....................................................................N.A.
312(a)....................................................................2.05
(b)...................................................................11.03
(c)...................................................................11.03
313(a)....................................................................7.06
(b)(1).................................................................N.A.
(b)(2)...........................................................7.06; 7.07
(c).............................................................7.06; 11.02
(d)....................................................................7.06
314(a).......................................................4.03; 4.04; 11.02
(b)....................................................................N.A.
(c)(1)................................................................11.04
(c)(2)................................................................11.04
(c)(3) ................................................................N.A.
(d)....................................................................N.A.
(e)...................................................................11.05
(f)....................................................................N.A.
315(a)....................................................................7.01
(b) ............................................................7.05, 11.02
(c)....................................................................7.01
(d)....................................................................7.01
(e)....................................................................6.11
316(a)(last sentence).....................................................2.09
(a)(1)(A)..............................................................6.05
(a)(1)(B)..............................................................6.04
(a)(2).................................................................N.A.
(b)....................................................................6.07
(c)....................................................................2.13
317(a)(1).................................................................6.08
(a)(2).................................................................6.09
(b)....................................................................2.04
318(a)...................................................................11.01
(b)....................................................................N.A.
(c)...................................................................11.01
_____________________________________________________
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.................................................1
SECTION 1.02. Other Definitions..........................................15
SECTION 1.03. Terms of TIA...............................................16
SECTION 1.04. Rules of Construction......................................16
ARTICLE 2
THE DEBENTURES
SECTION 2.01. Form and Dating............................................17
SECTION 2.02. Execution and Authentication...............................17
SECTION 2.03. Registrar and Paying Agent.................................18
SECTION 2.04. Paying Agent to Hold Money in Trust........................18
SECTION 2.05. Holder Lists...............................................19
SECTION 2.06. Transfer and Exchange......................................19
SECTION 2.07. Replacement Debentures.....................................21
SECTION 2.08. Outstanding Debentures.....................................21
SECTION 2.09. Treasury Debentures........................................22
SECTION 2.10. Temporary Debentures.......................................22
SECTION 2.11. Cancellation...............................................22
SECTION 2.12. Defaulted Interest.........................................23
SECTION 2.13. Record Date................................................23
SECTION 2.14. CUSIP Number...............................................23
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. Notices to Trustee.........................................23
SECTION 3.02. Selection of Debentures to Be Redeemed.....................24
SECTION 3.03. Notice of Redemption.......................................24
SECTION 3.04. Effect of Notice of Redemption.............................25
SECTION 3.05. Deposit of Redemption Price................................25
SECTION 3.06. Debentures Redeemed in Part................................26
SECTION 3.07. Optional Redemption........................................26
SECTION 3.08. Mandatory Redemption.......................................27
SECTION 3.09. Offer to Purchase by Application of Excess
Proceeds.................................................27
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Debentures......................................29
SECTION 4.02. Maintenance of Office or Agency............................29
SECTION 4.03. Reports....................................................29
SECTION 4.04. Compliance Certificate.....................................30
SECTION 4.05. Taxes......................................................31
SECTION 4.06. Stay, Extension and Usury Laws.............................31
SECTION 4.07. Restricted Payments........................................31
SECTION 4.08. Dividend and Other Payment Restrictions
Affecting Subsidiaries...................................34
SECTION 4.09. Incurrence of Indebtedness and Issuance
of Preferred Stock.......................................35
SECTION 4.10. Asset Sales................................................38
SECTION 4.11. Equity Interests of Wholly Owned Subsidiaries..............39
SECTION 4.12. Transactions with Affiliates...............................39
SECTION 4.13. Liens......................................................40
SECTION 4.14. Corporate Existence........................................40
SECTION 4.15. Offer to Repurchase upon Change of Control.................41
SECTION 4.16. Payments for Consent.......................................41
ARTICLE 5
SUCCESSORS
SECTION 5.01. Merger, Consolidation, or Sale of Assets...................42
SECTION 5.02. Successor Corporation Substituted.................42
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default..........................................43
SECTION 6.02. Acceleration...............................................45
SECTION 6.03. Other Remedies.............................................46
SECTION 6.04. Waiver of past Defaults....................................46
SECTION 6.05. Control by Majority........................................47
SECTION 6.06. Limitation on Suits........................................47
SECTION 6.07. Rights of Holders of Debentures to Receive
Payment..................................................47
SECTION 6.08. Collection Suit by Trustee.................................48
SECTION 6.09. Trustee May File Proofs of Claim...........................48
SECTION 6.10. Priorities.................................................48
SECTION 6.11. Undertaking for Costs......................................49
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee..........................................49
SECTION 7.02. Rights of Trustee..........................................50
<PAGE>
SECTION 7.03. Individual Rights of Trustee...............................50
SECTION 7.04. Trustee's Disclaimer.......................................50
SECTION 7.05. Notice of Defaults.........................................51
SECTION 7.06. Reports by Trustee to Holders of the Notes.................51
SECTION 7.07. Compensation and Indemnity.................................51
SECTION 7.08. Replacement of Trustee.....................................52
SECTION 7.09. Successor Trustee by Merger, Etc...........................53
SECTION 7.10. Eligibility; Disqualification..............................53
SECTION 7.11. Preferential Collection of Claims Against Company..........53
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...54
SECTION 8.02. Legal Defeasance and Discharge.............................54
SECTION 8.03. Covenant Defeasance........................................54
SECTION 8.04. Conditions to Legal or Covenant Defeasance.................55
SECTION 8.05. Deposited Money and Government Securities to Be Held in
Trust; Other Miscellaneous Provisions....................56
SECTION 8.06. Repayment to Company.......................................57
SECTION 8.07. Reinstatement..............................................57
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Notes........................57
SECTION 9.02. With Consent of Holders of Notes...........................58
SECTION 9.03. Compliance with Trust Indenture Act........................59
SECTION 9.04. Revocation and Effect of Consents..........................60
SECTION 9.05. Notation on or Exchange of Notes...........................60
SECTION 9.06. Trustee to Sign Amendments, Etc............................60
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01. Application................................................60
SECTION 10.02. Guarantee..................................................61
SECTION 10.03. Limitation on Guarantor Liability..........................62
SECTION 10.04. Execution and Delivery of Subsidiary Guarantee.............62
SECTION 10.05. Guarantors May Consolidate, Etc., on Certain Terms.........63
SECTION 10.06. Releases Following Sale of Assets..........................63
SECTION 10.07. Transfers of Intangible Assets.............................63
<PAGE>
ARTICLE 11
MSCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls...............................64
SECTION 11.02. Notices....................................................64
SECTION 11.03. Communication by Holders of Notes with Other
Holders of Notes.........................................65
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.........65
SECTION 11.05. Statements Required in Certificate or Opinion..............66
SECTION 11.06. Rules by Trustee and Agents................................66
SECTION 11.07. No Personal Liability of Directors, Officers, Employees
and Stockholders...........................................66
SECTION 11.08. Governing Law..............................................66
SECTION 11.09. No Adverse Interpretation of Other Agreements..............67
SECTION 11.10. Successors.................................................67
SECTION 11.11. Severability...............................................67
SECTION 11.12. Counterpart Originals......................................67
SECTION 11.13. Table of Contents, Headings, Etc...........................67
EXHIBIT A Form of Note
EXHIBIT B Form of License Agreement
EXHIBIT C Form of Subsidiary Guarantee
EXHIBIT D Form of Supplemental Indenture
EXHIBIT E Form of Subsidiary Intercompany Note
<PAGE>
INDENTURE dated as of April 24, 1998 between Finlay Fine Jewelry
Corporation, a Delaware corporation (the "Company" or "Finlay Jewelry"), and
Marine Midland Bank, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 83/8% Senior Notes
due May 1, 2008 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person; (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person; and (iii) Indebtedness
incurred by such Person in connection with the acquisition of assets from
another Person, including Indebtedness incurred by such other Person in
connection with, or in contemplation of, such specified Person acquiring such
assets.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Paying Agent, Registrar or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than sales of inventory or accounts receivable in the ordinary course of
business consistent with past practices) provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of Section 4.15 hereof or the provisions of Article 5 hereof and not by the
provisions of Section 4.10 hereof); and (ii) the issue or sale by the Company or
any of its Subsidiaries of Equity Interests of any of the Company's
<PAGE>
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $2.0 million or (b) for net proceeds in excess of $2.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary of the Company or by a Wholly Owned Subsidiary of
the Company to the Company or to another Wholly Owned Subsidiary of the Company;
(ii) an issuance of Equity Interests by a Wholly Owned Subsidiary of the Company
to the Company or to another Wholly Owned Subsidiary of the Company; (iii) a
Restricted Payment that is permitted by the provisions of Section 4.07 hereof;
(iv) any sale of any item pursuant to the Gold Consignment Agreement or any item
deemed to be Consignment Inventory immediately prior to such sale; (v) any sale
and leaseback of any assets within 60 calendar days after the acquisition of
such assets; (vi) any sale, conveyance or other disposition, without recourse,
of Receivables to a Receivables Subsidiary, provided that cash or Cash
Equivalents in an amount at least equal to the fair market value thereof is
received in consideration thereof and, provided further, that any such transfer
to an entity that is not a Receivables Subsidiary or that ceases to be a
Receivables Subsidiary shall not be exempted from the definition of "Asset Sale"
by reason of this clause (vi); and (vii) sales of surplus and other property or
equipment that has become worn-out, obsolete, damaged or otherwise unsuitable
for use in connection with the business of the Company or any Subsidiary of the
Company, as the case may be, will not be deemed to be Asset Sales. Any Asset
Sale that occurs by reason of an entity ceasing to be a Receivables Subsidiary
as contemplated in clause (vi) above shall be deemed to have been made as of the
date of such cessation.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than a day on which banking institutions in The City of New York or at a
place of payment are authorized by law, legislation or executive order to remain
closed. If a payment date is a day other than a Business Day at a place of
payment, payment may be made at that place on the next succeeding Business Day,
and no interest shall accrue on such payment for the intervening period.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership, partnership interests
(whether general or limited); and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
<PAGE>
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition; (iii) certificates of deposit and Eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating
of "B" or better; (iv) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above; and (v) commercial paper having one of the two
highest ratings obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties (as defined below); (ii)
the adoption of a plan relating to the liquidation or dissolution of the Company
or Finlay Enterprises; (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50%
of the voting power of the Company; (iv) the first day on which a majority of
the members of the Board of Directors of the Company or Finlay Enterprises are
not Continuing Directors; or (v) the first day on which Finlay Enterprises
ceases to own 100% of the outstanding Equity Interests of the Company. For
purposes of this definition, any transfer of an Equity Interest of an entity
that was formed for the purpose of acquiring voting stock of the Company shall
be deemed to be a transfer of such portion of such voting stock as corresponds
to the portion of the equity of such entity that has been so transferred.
"Company" means Finlay Fine Jewelry Corporation, and any and all successors
thereto.
"Consignment Inventory" means, at any time, each item of merchandise
(including any gold content thereof) which (i) at such time is in possession of
the Company, Finlay Enterprises or any of their respective Subsidiaries as
consignee pursuant to a written consignment agreement or other consignment
arrangement including, without limitation, a consignment order or consignment
invoice, (ii) at such time is identified in computer records of the Company,
Finlay Enterprises or any of their respective Subsidiaries as being "memo" or
"consigned inventory", (iii) as of such time has not been sold, and (iv) to
which title, at such time, is retained by a consignor under such consignment
agreement or other consignment arrangement until such item of merchandise is
sold or deemed sold by the consignor to the consignee. Title to an item of
merchandise described in the foregoing sentence is deemed to be retained by such
consignor until, in accordance with the applicable consignment agreement or
other consignment arrangement, title is transferred (or deemed to be
transferred) to a buyer, the Company, Finlay Enterprises or any of their
respective Subsidiaries, regardless of whether any procedures have been
performed to protect the consignor's title with respect to such item of
merchandise.
<PAGE>
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income); plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income;
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income; plus (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income; plus (v)
without duplication, the nonrecurring expenses of such Person and its
Subsidiaries relating to the Equity Offering and the Refinancing to the extent
that any such expense was deducted (and not capitalized) in computing such
Person's Consolidated Net Income; minus (vi) non-cash items increasing
consolidated revenues in determining such Consolidated Net Income for such
period, in each case on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization of a Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof; (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders; (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded; and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
<PAGE>
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all Investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company or Finlay Enterprises who (i) was a
member of such Board of Directors on the date of this Indenture or (ii) was
nominated for election or elected to such Board of Directors with the approval
of two-thirds of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provisions of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature; provided that any
Capital Stock issued to employees, consultants or directors of the Company or
any of its Subsidiaries pursuant to a stock option or other compensation plan of
the Company or any of its Subsidiaries shall not be deemed to be Disqualified
Stock solely because of any mandatory repurchase features contained in such
plan, except to the extent that the repurchase obligations of the Company and
its Subsidiaries in respect thereof exceed $5.0 million in the aggregate since
the date of this Indenture.
<PAGE>
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock). "Equity Offering" means
the sale by Finlay Enterprises and certain selling stockholders of an aggregate
of 1,800,000 shares of the Common Stock of Finlay Enterprises on the date of
this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Revolving Debt) in
existence on the date of this Indenture, until such amounts are repaid.
"Finlay Enterprises" means Finlay Enterprises, Inc., a Delaware corporation
and the sole stockholder of the Company.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income and shall
reflect any pro forma expense and cost reductions attributable to such
acquisitions (to the extent such expense and cost reduction would be permitted
under Regulation S-X promulgated pursuant to the Securities Act to be reflected
in pro forma financial statements included in a registration statement filed
with the Commission) and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded; and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
<PAGE>
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount and deferred financing costs, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations); and (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period; and (iii) to the extent
not included in clause (i), any interest expense on Indebtedness of another
Person for such period that is Guaranteed by such Person or one of its
Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such Guarantee or Lien is called upon); (iv) to the
extent not included in clause (i), any costs, commissions, discounts, other fees
or charges relating to or in respect of any Receivables Subsidiary; and (v) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Subsidiary) for such period on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person for such period, expressed as
a decimal, in each case, on a consolidated basis and in accordance with GAAP;
provided, however, that in no event shall any amortization of deferred financing
costs incurred in connection with the Equity Offering or the Refinancing be
included in Fixed Charges.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture, provided,
however, that all reports and other financial information provided by the
Company to the Holders, the Trustee and/or Commission shall be prepared in
connection with GAAP, as in effect on the day of such report or other financial
information.
"Gold Consignment Agreement" means the Gold Consignment Agreement, dated as
of June 15, 1995, by and between Finlay Jewelry and Rhode Island Hospital Trust
National Bank, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, restated, renewed, supplemented, refunded, replaced or
refinanced from time to time.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each direct and indirect Subsidiary of the Company that
executes a Subsidiary Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
<PAGE>
"Hedging Obligation" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, currency swap agreements,
interest rate cap agreements and interest rate collar agreements, (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates and foreign exchange rates and (iii) precious metal options
and futures contracts and other precious metal hedging obligations.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as, to the extent not otherwise
included, all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. Notwithstanding the foregoing, the term "Indebtedness"
shall not include up to $3.0 million at any one time outstanding of deferred
compensation arrangements that are not evidenced by bonds, notes, debentures or
similar instruments. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest, (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due
in the case of any other Indebtedness and (iii) for purposes of calculating the
amount of Indebtedness of any Receivables Subsidiaries, the Receivables
Financing Amount relating thereto.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities of such other Persons, together with all items of
such other Persons that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interest of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided, however, that licenses of intellectual property or similar assets
<PAGE>
granted pursuant to and in compliance with (i) the provisions of Section 10.07
hereof or (ii) the applicable provisions of the Senior Debenture Indenture shall
not be deemed to be Liens.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sales (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Revolving Credit Agreement) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Subsidiaries (other than a Receivables Subsidiary with respect to
its own Indebtedness) (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness) or (b)
is directly or indirectly liable (as a guarantor or otherwise); and (ii) no
default with respect to which would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company or any of its Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its Stated Maturity; and (iii) as to which
the lenders have been notified in writing that they will not have any recourse
to the stock or assets of the Company or any of its Subsidiaries (other than a
Receivables Subsidiary with respect to its own Indebtedness); provided that,
notwithstanding the foregoing, the Company and any of its Subsidiaries that sell
Receivables to the Person incurring such Indebtedness shall be allowed to
provide such representations, warranties, covenants and indemnities as are
customarily required in such transactions so long as no such representations,
warranties, covenants or indemnities constitute a Guarantee of payment or
recourse against credit losses.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
<PAGE>
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 11.05
hereof.
"Old Debentures" means Finlay Enterprises' 12% Senior Discount Debentures
due 2005.
"Old Notes" means the Company's 105/8% Senior Notes due 2003.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company that is evidenced by Capital Stock or
Subsidiary Intercompany Notes; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person that is
evidenced by Capital Stock or Subsidiary Intercompany Notes if as a result of
such Investment (i) such Person becomes a Wholly Owned Subsidiary of the Company
and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is
a Guarantor; (d) any capital contribution (including any transaction deemed to
be a capital contribution in accordance with GAAP) by the Company to any of its
Wholly Owned Subsidiaries; (e) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the provisions of Section 4.10 hereof; (f) advances to
vendors in the ordinary course of business consistent with past practices; (g)
any Investment existing on the date of this Indenture; (h) loans and relocation,
travel and similar advances to employees and officers of the Company or its
Subsidiaries in the ordinary course of business for bona-fide purposes
reasonably related to the business of the Company and its Subsidiaries, not in
excess of $5.0 million at any one time outstanding; (i) any acquisition,
redemption or repurchase of Senior Debentures or the Notes; (j) any Investments
relating to a Receivables Subsidiary, provided that any Investment in an entity
that ceases to be a Receivables Subsidiary shall cease to be a Permitted
Investment by virtue of this clause and shall be deemed to constitute a new
Investment as of the date of such cessation; and (k) other Investments in any
Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (k),
not to exceed $10.0 million at any time outstanding.
"Permitted Liens" means (i) Liens securing the Senior Revolving Debt that
were permitted by the terms of this Indenture to be incurred; (ii) Liens in
favor of the Company; (iii) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were in existence prior to the
<PAGE>
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds, landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens incurred in the ordinary course of business;
(vi) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by Section 4.09(b)(vi) hereof covering only the assets acquired with
such Indebtedness); (vii) Liens on Consignment Inventory; (viii) Liens under the
Gold Consignment Agreement; (ix) Liens existing on the date of this Indenture;
(x) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (xi) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Subsidiary; (xii) Liens securing Capital Lease
Obligations and purchase money Indebtedness incurred in accordance with clauses
(vi) and (vii), respectively, of the definition of Permitted Debt; provided,
however that in the case of purchase money Indebtedness (a) the Indebtedness
shall not exceed the cost of such property or assets being acquired or
constructed and shall not be secured by any property or assets of the Company or
any Subsidiary of the Company other than the property and assets being acquired
or constructed and (b) the Lien securing such Indebtedness shall be created
within 30 days of such acquisition or construction; (xiii) Liens granted to
lessors or licensors in the ordinary course of business consistent with past
practice with respect to fixtures and equipment at store locations leased or
licensed from such lessors or licensors; (xiv) Liens securing any Permitted
Refinancing Indebtedness to the extent the Indebtedness being exchanged,
extended, renewed, replaced or refunded (and such Permitted Refinancing
Indebtedness) was permitted to be so secured; (xv) zoning restrictions,
easements, rights of way, licenses and restrictions on the use of real property
or minor irregularities in title thereto, which do not materially impair the use
of such property in the normal operation of the business of the Company or any
of its Subsidiaries or the value of such property for the purpose of such
business; (xvi) Liens for judgments, attachments, seizures or levies not to
exceed $500,000 in the aggregate outstanding at any time; and (xvii) Liens on
Receivables transferred to a Receivables Subsidiary or on assets of a
Receivables Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used within 60 days after the incurrence thereof to extend, refinance,
renew, replace, defease or refund, other Indebtedness of the Company or any of
its Subsidiaries that was permitted by this Indenture to be incurred; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses,
premiums, penalties, consent fees and interest incurred in connection
<PAGE>
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary of the Company which is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (v) such Permitted Refinancing Indebtedness shall be secured (if
secured) in a manner no more adverse (including, without limitation, by way of
any increase in the amount of Indebtedness secured) to the holders of the Notes
than the terms of the Liens (if any) securing such refinanced Indebtedness.
"Person" means a natural person, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Principals" means David B. Cornstein, Arthur E. Reiner, Thomas H. Lee,
Thomas H. Lee Capital LLC, employees of Thomas H. Lee Capital LLC and
Equity-Linked Investors-II.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Stock) of Finlay Enterprises registered under the
Securities Act (other than a public offering registered on Form S-8 under the
Securities Act) after the date of this Indenture that results in net proceeds of
at least $10.0 million to Finlay Enterprises.
"Qualified Proceeds" means any of the following or any combination of the
following: (i) assets (other than cash or Cash Equivalents) or inventory that
are used or useable in the business engaged in by the Company or any of its
Subsidiaries on the date of this Indenture (or in a business reasonably related
thereto) or (ii) the Equity Interests of any Person engaged primarily in a
business similar to that of the Company or any of its Subsidiaries as of the
date of this Indenture, if, in connection with the receipt by the Company or any
Subsidiary of the Company of such Equity Interests, (a) such Person becomes a
Wholly Owned Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or any Wholly Owned
Subsidiary of the Company.
"Receivables" means, collectively, (a) the Indebtedness and other
obligations owed to the Company or any of its Subsidiaries (before giving effect
to any sale or transfer thereof pursuant to a Receivables Facility), whether
constituting an account, chattel paper, an instrument, a document or general
intangible, arising in connection with the sale of goods and/or services by the
Company or such Subsidiary, including the obligation to pay any late fees,
interest or other finance charges with respect thereto (each of the foregoing,
collectively, an "Account Receivable"), (b) all of the Company's or such
Subsidiary's interest in the goods (including returned goods), if any, the sale
of which gave rise to any Account Receivable, and all insurance contracts with
respect thereto, (c) all other security interests or Liens and property subject
thereto from time to time, if any, purporting to secure payment of any Account
Receivable, together with all financing statements and security agreements
describing any collateral securing such Account Receivable, (d) all Guarantees,
insurance and other agreements or arrangements of whatever character from time
to time supporting or securing payment of any Account Receivable, (e) all
contracts, invoices, books and records of any kind related to any Account
Receivable, (f) all cash collections in respect of, and cash proceeds of, any of
the foregoing and any and all lockboxes, lockbox accounts, collection accounts,
<PAGE>
concentration accounts and similar accounts in or into which such collections
and cash proceeds are now or hereafter deposited, collected or concentrated, and
(g) all proceeds of any of the foregoing. "Receivables Facility" means, with
respect to any Person, any Receivables securitization or factoring program
pursuant to which such Person receives proceeds pursuant to a sale, pledge or
other encumbrance of its Receivables.
"Receivables Financing Amount" means at any date, with respect to any
Receivables Facility of any Person, the sum on such date of (a) the aggregate
uncollected balances of Accounts Receivable (as defined in the definition of
"Receivables") transferred ("Transferred Receivables") in such Receivables
Facility plus (b) the aggregate amount of all collections of Transferred
Receivables theretofore received by such Person but not yet remitted to the
purchaser, net of all reserves and holdbacks retained by or for the benefit of
the purchaser and net of any interest retained by such Person and reasonable
costs and expenses (including fees and commissions and taxes other than income
taxes) incurred by such Person in connection therewith and not payable to any
Affiliate of such Person.
"Receivables Subsidiary" means any Wholly Owned Subsidiary created
primarily to purchase or finance the Receivables of the Company and/or its
Subsidiaries pursuant to a Receivables Facility, so long as it: (a) has no
Indebtedness other than Non-Recourse Debt and (b) is a Person with respect to
which neither the Company nor any of its other Subsidiaries has any direct
obligation to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results other than to
act as servicer of Receivables. If, at any time, such Receivables Subsidiary
would fail to meet the foregoing requirements as a Receivables Subsidiary, it
shall thereafter cease to be a Receivables Subsidiary for purposes of this
Indenture and any Indebtedness of such Receivables Subsidiary shall be deemed to
be incurred by a Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under provisions of
Section 4.09 hereof, the Company shall be in default of such covenant).
"Refinancing" means (i) the offering by Finlay Enterprises of the Senior
Debentures, (ii) the offering by Finlay Jewelry of the Notes, (iii) the
repurchase or redemption of the Old Debentures by Finlay Enterprises; (iv) the
repurchase or redemption of the Old Notes by Finlay Jewelry, (v) the repayment
of the original issue discount on the Old Debentures, and (vi) the proposed
amendment of the Revolving Credit Agreement to increase the line of credit
thereunder to $275.0 million and to make certain other changes.
"Related Parties" with respect to any Principal means any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or a trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest of which
consist of such Principal and/or such other Persons referred to in the
immediately preceding clause.
<PAGE>
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of September 11, 1997, among Finlay Jewelry and Finlay
Enterprises, as Borrowers (as defined therein), and General Electric Capital
Corporation, as Agent (as defined therein) and Lender (as defined therein), and
the other Lenders named therein, providing for revolving credit borrowings,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, restated, renewed, supplemented, refunded, replaced or refinanced from
time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Security and Pledge Agreement" means the Security and Pledge Agreement,
dated the date hereof, by and between Finlay Enterprises and Marine Midland
Bank, as Collateral Agent.
"Senior Debentures" means Finlay Enterprises' 9% Senior Debentures due
May 1, 2008.
"Senior Debenture Indenture" means the indenture, dated the date hereof, by
and between Finlay Enterprises and Marine Midland Bank, as trustee, relating to
the Senior Debentures.
"Senior Revolving Debt" means revolving credit borrowings under the
Revolving Credit Agreement and revolving consignments under the Gold Consignment
Agreement and, if any, a substantially similar gold consignment agreement
pursuant to Section 4.09(b)(iv)(y)(b) hereof.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of share of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
<PAGE>
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Intercompany Notes" means the intercompany notes, subordinate
(in accordance with the terms of this Indenture) in right of payment to all
existing Indebtedness of the issuer (other than Indebtedness which by its terms
is subordinate in right of payment to other Indebtedness of such issuer), issued
by the Company or a Subsidiary of the Company in favor of the Company or a
Subsidiary of the Company to evidence advances by the Company or a Subsidiary of
the Company, in each case, in the form attached as Exhibit E to this Indenture.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated as of
November 1, 1992, between the Company and Finlay Enterprises.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS 77aaa-77bbbb), as
in effect on the date on which this Indenture is qualified under the TIA.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction" ..........................................4.12
"Asset Sale Offer"................................................3.09
"Authentication Order" ...........................................2.02
"Change of Control Offer" ........................................4.15
"Change of Control Payment" ......................................4.15
"Change of Control Payment Date" .................................4.15
"Commission" .....................................................4.03
"Covenant Defeasance" ............................................8.03
"Definitive Note" ................................................2.01
<PAGE>
"Event of Default" ...............................................6.01
"Excess Proceeds" ................................................4.10
"Global Note" ....................................................2.01
"incur" ..........................................................4.09
"Legal Defeasance" ...............................................8.02
"Offer Amount"....................................................3.09
"Offer Period" ...................................................3.09
"Paying Agent" ...................................................2.03
"Payment Default" ................................................6.01
"Permitted Debt"..................................................4.09
"Purchase Date" ..................................................3.09
"Registrar" ......................................................2.03
"Restricted Payments".............................................4.07
SECTION 1.03. TERMS OF TIA.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees, if any, means the
Company and the Guarantors, respectively, and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
<PAGE>
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions;
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or
rules adopted by the Commission from time to time; and
(7) words implying the feminine or masculine gender shall be deemed to
include all genders.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, and each Guarantor (if any),
by its execution and delivery of its Subsidiary Guarantee, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form (each a "Global Note") shall
be substantially in the form of Exhibit A attached hereto (including the
"Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes
issued in definitive form (each a "Definitive Note") shall be substantially in
the form, if any, of Exhibit A attached hereto (but without the "Schedule of
Exchanges of Interests in Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and each
shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
<PAGE>
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an Officer
(an "Authentication Order"), authenticate Notes for original issue up to the
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with Section 7.7 hereof. The Company
or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints the Depository Trust Company to act as
Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
<PAGE>
or the Trustee all money held by the Paying Agent for the payment of principal,
premium, if any, or interest on the Notes, and will notify the Trustee of any
default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA S 312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee at least seven Business
Days before each interest payment date and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of the Holders of Notes and
the Company shall otherwise comply with TIA S 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary, (ii)
the Company in its sole discretion determines that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee, or (iii) there shall have occurred and be
continuing an Event of Default. Upon the occurrence of any of the preceding
events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Except as set forth in the second sentence of this Section 2.06(a),
every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b) hereof.
(b) Transfer and Exchange of Beneficial Interests in Global Notes. The
transfer and exchange of beneficial interests in Global Notes shall be effected
through the Depositary, in accordance with the provisions of this Indenture and
<PAGE>
the Applicable Procedures. No written orders or instructions shall be required
to be delivered to the Registrar to effect the transfers described in this
Section 2.06(b).
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes. Any
contrary provision hereof notwithstanding, no Definitive Notes shall be issued
or exchanged for beneficial interests in any Global Note except upon the
satisfaction of the conditions set forth in Section 2.06(a)(i), (ii) or (iii)
hereof.
(d) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(d), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his or her attorney, duly authorized in writing. Upon receipt of a request to
register such a transfer, the Registrar shall register the Notes pursuant to the
instructions from the Holder thereof.
(e) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction.
(f) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to an owner of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06 and 9.05
hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
<PAGE>
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption under
Section 3.02 hereof and ending at the close of business on the day of selection,
(B) to register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part or (C) to register the transfer of or to exchange a Note
between a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and for
all other purposes, and none of the Trustee, any Agent or the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
<PAGE>
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Affiliate of the Company, shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Notes that are to be acquired by the Company, any
Subsidiary of the Company or an Affiliate of the Company pursuant to an exchange
offer, tender offer or other agreement shall not be deemed to be owned by the
Company, such Subsidiary of the Company or an Affiliate of the Company until
legal title to such Notes passes to the Company or such Subsidiary or Affiliate,
as the case may be.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
<PAGE>
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of the
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA
S316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number and, if it does
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed, and (iv) the redemption price. In addition, in the case of
a redemption pursuant to the provisions of Section 3.07(a) hereof, if the
obligations of the Company in respect of such redemption are subject to the
provisions of Section 3.04(b) hereof, such Officer's Certificate shall so state.
<PAGE>
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail to its registered address, a notice of redemption
to each Holder whose Notes are to be redeemed .
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed;
<PAGE>
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes; and
(i) in the case of a notice of redemption pursuant to the provisions of
Section 3.07(a) hereof subject to revocation in accordance with the provisions
of such Section, that the Company reserves the right to revoke such notice of
redemption at any time not later than the date which is ten days prior to the
date of redemption specified in such notice.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice pursuant to this
Section 3.03.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
(a) Subject to the provisions of Section 3.04(b) hereof, (i) once notice of
redemption is mailed in accordance with Section 3.03 hereof, Notes called for
redemption become irrevocably due and payable on the redemption date at the
redemption price, and (ii) a notice of redemption may not be conditional.
(b) In the case of a notice of redemption pursuant to the provisions of
Section 3.07(a) hereof which is revoked in accordance with the provisions of
such Section, (i) the Notes shall not become due on the redemption date
specified in such revocable notice of redemption, (ii) the Company shall not be
required to pay the redemption price or, unless the proposed redemption date was
also a semi-annual interest payment date, any accrued interest in respect of the
Notes, on such date and (iii) the principal of the Notes shall remain due and
payable as if such revocable notice of redemption had not been given.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of and accrued interest on all
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
<PAGE>
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered. SECTION OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to May 1, 2003. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003.....................................................104.188%
2004.....................................................102.792%
2005.....................................................101.396%
2006 and thereafter .....................................100.000%
provided, however, that if the Company, at its option, specifies in the notice
of redemption provided for in this Section 3.07(a) that such notice is
revocable, then the Company may revoke such notice at its further option at any
time on or prior to the date which is 10 days prior to the redemption date
specified in such notice (provided such notice so specifies) by providing a
notice of revocation to the Trustee on or prior to the date on which the
Company's revocation right expires (and the Trustee shall promptly mail such
notice to the Holders by first class mail).
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
until May 1, 2001, the Company may on any one or more occasions redeem up to
$50.0 million in aggregate principal amount of Notes at a redemption price of
108.375% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date, with the net cash proceeds of Public
Equity Offerings by the Company; provided that at least $100.0 million in
aggregate principal amount of Notes remains outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided, further, that such redemption shall occur within
120 days of the date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth in Sections 4.10 and 4.15 hereof, the Company shall not
be required to make mandatory redemption payments with respect to the Notes.
There are no sinking fund payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(c) the Offer Amount, the purchase price and the Purchase Date;
(d) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(e) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(f) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
<PAGE>
(g) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(h) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his or her election to have such Note purchased;
(i) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(j) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof. Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
at the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the Securities
and Exchange Commission (the "Commission"), so long as any Notes are
<PAGE>
outstanding, the Company shall furnish to the Trustee and, upon receipt thereof,
the Trustee shall mail to the Holders of Notes, all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, in each case
within the time periods specified in the Commission's rules and regulations. In
addition, whether or not required by rules and regulations of the Commission,
the Company shall file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. Any materials required to be furnished to
Holders of Notes by this Section 4.03 shall discuss, in reasonable detail,
either on the face of the financial statements included therein or in the
footnotes thereto and in any Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and the Guarantors, if any, separate from the
financial condition and results of operations of the other Subsidiaries of the
Company. The Company and each Guarantor, if any, shall also comply with the
provisions of TIA S314(a).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes are
prohibited or, if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe (i) that the Company has
violated any provisions of Article 4 (other than Sections 4.02, 4.03 (except as
set forth below), 4.04 and 4.06, as to which no belief need be expressed) or
Article 5 hereof or, if any such violation has occurred, specifying the nature
and period of existence thereof or (ii) that the information contained in the
Company's filings on Forms 10-Q and 10-K failed to comply in any material
respect with the requirements of Regulations S-K and S-X under the Securities
Act insofar as they relate to accounting matters or, if any such filing has
<PAGE>
failed to comply in any material respect with such Regulations, specifying the
nature of such violations; it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company hereby, and each of the Guarantors by execution and delivery of
its Subsidiary Guarantee, covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company and each of the
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of the
Company's Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable solely to the Company or any Wholly Owned Subsidiary of
the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests in the Company or any Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company);
<PAGE>
(iii) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is subordinated
to the Notes or any Guarantee thereof, other than a payment of interest or
principal at the Stated Maturity for such payment; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(x) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(y) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the provisions of
Section 4.09(a) hereof; and
(z) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date of
this Indenture (excluding Restricted Payments permitted by the provisions of
Sections 4.07(b)(ii), (iii) and (vi) (to the extent that payments to Finlay
Enterprises pursuant to the Tax Allocation Agreement are less than or equal to
the total tax liabilities of the Company and its Subsidiaries that would be
payable if the Company and its Subsidiaries were to file a separate consolidated
return) hereof), is less than the sum of (1) 50% of the Consolidated Net Income
of the Company (which Consolidated Net Income shall first be reduced by the
amount of any payments to Finlay Enterprises of the type described in Section
4.07(b)(viii) hereof) for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of this
Indenture to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (2) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale since the date of this Indenture of, or
capital contributions with respect to, Equity Interests of the Company, or of
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities) sold to
a Subsidiary of the Company and other than Disqualified Stock or debt securities
that have been converted into Disqualified Stock), plus (3) to the extent that
any Restricted Investment that was made after the date of this Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (4) 100% of any dividends, distributions or other interest actually
received in cash by the Company after the date of this Indenture from a
Subsidiary of the Company, the Net Income of which Subsidiary has been excluded
from the computation of Consolidated Net Income; plus (5) $7.5 million.
<PAGE>
(b) The provisions of Section 4.07(a) hereof will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
for purposes of Section 4.07(a)(z)(2) hereof;
(iii) the defeasance, redemption or repurchase of subordinated Indebtedness
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness or the substantially concurrent sale (other than to a Subsidiary of
the Company) of Equity Interests of the Company (other than Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such defeasance, redemption or repurchase shall be excluded for purposes of
Section 4.07(a)(z)(2) hereof;
(iv) payments to Finlay Enterprises to permit the substantially concurrent
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Finlay Enterprises held by any officer, employee, consultant
or director of Finlay Enterprises or any of its Subsidiaries, or by the estate
of any such Person, pursuant to any equity subscription, stock option,
employment or similar agreement upon the death, retirement or termination, as
the case may be, of such Person; provided that, the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $3.0 million during any twelve-month period (which amount shall not be
cumulative), plus (A) the aggregate cash proceeds received by Finlay Enterprises
during such twelve-month period from any reissuance of Equity Interests by
Finlay Enterprises to any officer, employee, consultant or director of Finlay
Enterprises or any of its Subsidiaries, plus (B) the aggregate amount, if any,
paid during such twelve-month period in connection with the repurchase,
redemption, retirement or acquisition of Equity Interests of Finlay Enterprises
pursuant to any one or more agreements between Finlay Enterprises and Arthur E.
Reiner as in effect on the date of this Indenture, and, provided further, no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction;
(v) purchases of Equity Interests upon cashless exercise of options, to the
extent cashless exercise is permitted under the terms of the relevant stock
option agreement and of the incentive plan pursuant to which such options were
issued;
(vi) payments to Finlay Enterprises pursuant to the Tax Allocation
Agreement, as it may be amended from time to time in a manner that is not
materially adverse to the Company;
(vii) payments to Finlay Enterprises in an amount not to exceed in any
fiscal year the greater of $1.0 million and an amount equal to 0.25% of net
<PAGE>
sales for the immediately preceding fiscal year (without cumulation) in order to
pay expenses incurred by Finlay Enterprises in the ordinary course of business;
(viii) payments to Finlay Enterprises to enable Finlay Enterprises to pay
when due accrued but unpaid interest on the Senior Debentures, provided no
Default or Event of Default then exists and provided further that such amounts
are promptly used by Finlay Enterprises to pay such interest; and
(ix) required purchases of subordinated Indebtedness upon a Change of
Control or similar event constituting a "change in control" for purposes of the
agreement or agreements governing such subordinated Indebtedness, provided that,
prior to making any such purchases of such Subordinated Indebtedness, the
Company makes a Change of Control Offer and makes the Change of Control Payments
on the Change of Control Payment Date (in each case, whether or not otherwise
required to do so by this Indenture) that would be required if a Change in
Control had occurred.
(c) In determining whether any Restricted Payment is permitted by this
Section 4.07, the Company may allocate or reallocate any portion or all of such
Restricted Payment among the clauses (i) through (ix) of Section 4.07(b) hereof
or among such clauses and Section 4.07(a) hereof, including clauses (x), (y) and
(z), provided that, after giving effect to such allocation or reallocation, all
such Restricted Payments, or allocated portions thereof, would be permitted
under the various provisions of such Sections.
(d) The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may be,
pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined by the Board of Directors, whose
resolutions with respect thereto shall be set forth in Officers' Certificate
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accountant, appraisal or investment banking firm of
national standing if such fair market value exceeds $10.0 million. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, which calculations shall be based upon the
Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of the
Company to (i)(a) pay dividends or make any other distributions to the Company
or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries; (ii) make loans or
advances to the Company or any of its Subsidiaries; or (iii) transfer any of its
<PAGE>
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date hereof, (b) the Revolving Credit Agreement
and the Gold Consignment Agreement as in effect as of the date hereof, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Agreement and the Gold Consignment Agreement as in effect on the date,
(c) this Indenture and the Notes, and the Senior Debenture Indenture and the
Senior Debentures, (d) applicable law, (e) any instrument governing Indebtedness
or Capital Stock of a Person acquired by the Company or any of its Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms hereof to be incurred, (f) customary non-assignment
provisions in leases and other contracts entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in the beginning of this clause (iii) on the property so
acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, (i) Permitted Liens, (j) any instrument binding
upon a Receivables Subsidiary, provided that such instrument does not bind the
Company or any other Subsidiary of the Company or any of their respective
properties or assets or (k) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company
(i) shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guaranty or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and
(ii) shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and its Subsidiaries may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
<PAGE>
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
(b) The provisions of Section 4.09(a) hereof shall not apply to any of the
following (collectively, "Permitted Debt"):
(i) the incurrence by the Company or any of its Subsidiaries of revolving
credit Indebtedness and letter of credit obligations pursuant to the Revolving
Credit Agreement in an aggregate principal amount not to exceed at the time of
incurrence thereof the greater of (x) $275.0 million or (y) 70% of inventory
plus 85% of accounts receivable (each as determined in accordance with GAAP, but
excluding accounts receivable that are past due by more than 60 days, other than
by reason of any Bankruptcy Law) at any one time outstanding, provided that such
$275.0 million specified in clause (i)(x) above shall be permanently reduced by
the aggregate amount of Indebtedness of all Receivables Subsidiaries of the
Company and its Subsidiaries;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iv) the incurrence by Finlay Jewelry of Indebtedness or other obligations
in an aggregate principal amount of up to the greater of (x) $37.0 million and
(y) 90% of the fair market value of the fine gold content of specified
Consignment Inventory eligible to be consigned under (a) the Gold Consignment
Agreement or (b) a substantially similar gold consignment agreement that Finlay
Jewelry may enter into subsequent to the date of this Indenture which provides
for the transfer of title to the gold content of Consignment Inventory from the
relevant vendor to a gold consignor; provided that such $37.0 million specified
in clause (x) above shall be permanently reduced by the aggregate amount of all
Net Proceeds of Asset Sales applied to repay such Indebtedness pursuant to
Section 4.10(b)(i) hereof;
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations in aggregate principal
amount not to exceed $4.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by mortgage financings or purchase money obligations,
in each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $4.0 million at any time outstanding;
(vii) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness;
(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among Finlay Enterprises, the Company and
any of its Wholly Owned Subsidiaries; provided, however, that (x) if the Company
<PAGE>
is the obligor on such Indebtedness, such Indebtedness is expressly subordinate
(in accordance with the terms of this Indenture) to the payment in full of all
Obligations with respect to the Notes and (y)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held by
a Person other than Finlay Enterprises, the Company or a Wholly Owned Subsidiary
of the Company and (B) any sale or other transfer of any such Indebtedness to a
Person that is not Finlay Enterprises, the Company or a Wholly Owned Subsidiary
of the Company shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate Indebtedness that is permitted by the
terms of this Indenture to be outstanding;
(x) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging commodity
price risk, entered into in the ordinary course of business and not for
speculative purposes, to protect against fluctuations in the prices of raw
materials used in the Company's or such Subsidiary's business in amounts
reasonably related to such business;
(xi) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging foreign
exchange rate risk, entered into in the ordinary course of business and not for
speculative purposes and in amounts reasonably related to the businesses of the
Company and its Subsidiaries;
(xii) the incurrence by the Company or any of its Subsidiaries of Acquired
Debt of a Person incurred prior to the date upon which such Person was (or such
Person's assets were) acquired by the Company or any of its Subsidiaries
(excluding Indebtedness incurred by such Person in connection with, or in
contemplation of, such acquisition) in an aggregate principal amount not to
exceed $10.0 million at any one time outstanding;
(xiii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of worker's compensation claims, self-insurance
obligations, performance, surety and similar bonds and completion guarantees
provided by the Company or any of its Subsidiaries in the ordinary course of
business;
(xiv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from any agreement entered into by the Company or any of
its Subsidiaries providing for indemnification, purchase price adjustment or
similar obligations, in each case incurred or assumed in connection with any
asset sale;
(xv) the incurrence of Indebtedness by the Company or any of its
Subsidiaries in connection with a Guarantee of any Indebtedness of the Company
or any of its Subsidiaries that was permitted to be incurred by another
provision of this Section 4.09;
(xvi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from the honoring by a bank or other financial institution
<PAGE>
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is extinguished within five
Business Days of incurrence; and
(xvii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of this
Section 4.09(b) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $40.0 million.
(c) For purposes of determining compliance with the provisions of Section
4.09(b), in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Permitted Debt described in Sections 4.09(b)(i)
through (xvii) above or is entitled to be incurred pursuant to Section 4.09(a)
hereof, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with the provisions of this Section
4.09 and such item of Indebtedness will be treated as having been incurred
pursuant to only one of such clauses or pursuant to Section 4.09(a) hereof.
Indebtedness permitted to be incurred pursuant to Sections 4.09(b)(i) through
(xvii) above may be incurred pursuant to one agreement or several agreements
with one lender or several lenders.
SECTION 4.10 ASSET SALES.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
engage in an Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Subsidiary is in
the form of (a) cash or Cash Equivalents or (b) Qualified Proceeds, provided,
that the aggregate fair market value of Qualified Proceeds that may be received
pursuant to this clause (ii)(b) shall not exceed an aggregate of $10.0 million
after the date of this Indenture; provided further, that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary of the Company (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are promptly (and in any event, in not more than 30 days) converted by the
Company or such Subsidiary into cash or Cash Equivalents (to the extent of the
cash or Cash Equivalents received), shall be deemed to be cash for purposes of
this provision.
(b) Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds at its option to (i) repay
revolving indebtedness or other obligations either under the Revolving Credit
Agreement or the Gold Consignment Agreement (or a substantially similar gold
consignment agreement pursuant to Section 4.09(b)(iv)(y)(b) hereof) or a
combination thereof (and to correspondingly permanently reduce revolving
borrowing commitments or revolving consignment commitments or a combination
<PAGE>
thereof with respect thereto) or (ii) the acquisition of a controlling interest
in another business, the making of capital expenditures or the acquisition of
other assets used or useable, in each such case, in the business engaged in by
the Company or any of its Subsidiaries on the date hereof or in a business
reasonably related thereto. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Senior Revolving Debt or otherwise
make an Investment of such Net Proceeds in any manner that is not prohibited by
the terms of this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this Section 4.10(b)
will be deemed to constitute "Excess Proceeds". When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company shall make an offer to all
Holders of Notes (an "Asset Sale Offer") in accordance with the provisions of
Section 3.09 hereof to purchase the maximum principal amount of Notes that may
be purchased out of such Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company shall make an offer to all holders of Senior Debentures in
accordance with the provisions of Section 3.09 hereof and on the same terms and
conditions offered to Holders of Notes to purchase the maximum principal amount
of Senior Debentures that may be purchased out of the remaining Excess Proceeds.
To the extent that the aggregate amount of Senior Debentures tendered pursuant
to any such offer is less than the remaining Excess Proceeds, the Company or any
of its Subsidiaries may use any remaining Excess Proceeds for general corporate
purposes or otherwise make an Investment of such remaining amounts in any manner
that is not prohibited by this Indenture. If the aggregate principal amount of
Notes (or Debentures, as the case may be) surrendered by Holders (or holders)
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes (or Debentures) to be purchased on a pro rata basis.
SECTION 4.11. EQUITY INTERESTS OF WHOLLY OWNED SUBSIDIARIES.
The Company (a) shall not, and shall not permit any Wholly Owned Subsidiary
of the Company to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of the Company to any Person (other
than to the Company or to a Wholly Owned Subsidiary of the Company), unless (i)
such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Subsidiary and (ii) the Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the provisions of Section 4.10 and, if applicable pursuant to
the provisions of Section 4.10 hereof, Section 3.09 hereof and (b) shall not
permit any Wholly Owned Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or to a
Wholly Owned Subsidiary of the Company.
SECTION 4.12 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to or Investment in, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
<PAGE>
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution approved by a majority of
the disinterested members of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, an opinion issued by an accounting, appraisal or investment banking
firm of national standing as to the fairness of such Affiliate Transaction, from
a financial point of view, to the Holders; provided that (a) any employment,
deferred compensation, stock option, noncompetition, consulting, indemnification
or similar agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (b) transactions between or among the Company and/or
its Wholly Owned Subsidiaries, (c) Restricted Payments and Permitted Investments
that are permitted by the provisions of Section 4.07 hereof, (d) any payments
due to the Thomas H. Lee Capital LLC or Desai Capital Management Incorporated
under the Lee Management Agreement or the Desai Management Agreement, each as
amended as of the date hereof, (e) the performance by the Company of its
obligations under the Stockholders' Agreement and the Registration Rights
Agreement, each as amended as of the date hereof, (f) any payments by or to the
Company or any Wholly Owned Subsidiary of the Company pursuant to the terms of
the Tax Allocation Agreement, as amended as of the date hereof, (g) transfers,
conveyances, sales, leases or other dispositions of Receivables to a Receivables
Subsidiary, and (h) contracts, agreements and understandings in existence in
writing on the date hereof and as in effect on such date, in each case, shall
not be deemed Affiliate Transactions.
SECTION 4.13 LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or otherwise cause or suffer to
exist or become effective any Lien of any kind, other than Permitted Liens, upon
any of their property or assets, now owned or hereafter acquired, or any income
or profits therefrom or assign or convey any right to receive income therefrom,
securing Indebtedness or trade payables, unless all payments due hereunder and
under the Notes are secured on an equal and ratable basis with the obligations
so secured until such time as such obligations are no longer secured by a Lien.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
<PAGE>
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(cc) Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Change of Control
Payment").
(dd) Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by this Section 4.15, which procedures shall be
described in such notice. The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
(ee) On a date that is at least 30 but no more than 60 days from the date
on which the Company mails notice of the Change of Control (the "Change of
Control Payment Date"), the Company shall, to the extent lawful, (1) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (2) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Notes or portions thereof so
tendered and (3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to each Holder of Notes so tendered the Change of
Control Payment for such Notes, and the Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each tendering Holder a new
Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above shall apply whether or not
any other provision hereof is applicable.
(ff) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and purchases all Notes validly tendered
and not withdrawn under such Change of Control Offer.
<PAGE>
SECTION 4.16. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and hereunder
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) shall have Consolidated Net Worth
immediately after the transaction equal to or greater than 90% of the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
Section 4.09(a) hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
<PAGE>
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) default for 30 days in the payment when due of interest on the Notes;
(b) default in payment when due of the principal of or premium, if any, on
the Notes;
(c) failure by the Company to comply with the provisions of Sections 3.09,
4.10 or 4.15 or Article 5 hereof;
(d) failure by the Company for 45 days after notice to comply with any of
its other covenants hereunder or under the Notes;
(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (including any
Indebtedness the payment of which is guaranteed by the Company or any of its
Subsidiaries) other than a Receivables Subsidiary whether such Indebtedness or
guarantee now exists, or is created after the date hereof, which default:
(i) is caused by a failure to pay principal or a premium, if any, on such
Indebtedness at the Stated Maturity for such payment of principal or premium, if
any, or such later date as has been agreed in a writing (provided such writing
is entered into prior to such Stated Maturity) by the parties to the
documentation relating to such Indebtedness (a "Payment Default") or
(ii) results in the acceleration of such Indebtedness prior to its express
maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$12.5 million or more;
(f) failure by the Company or any of its Subsidiaries other than a
Receivables Subsidiary to pay final judgments aggregating in excess of $12.5
million, which judgments are not paid, discharged or stayed for a period of 60
days (or 90 days if prior to such sixtieth day the Company has delivered to the
Trustee an Officers' Certificate attesting that a financially responsible
insurance company of recognized national standing has acknowledged in writing
complete liability for such judgment and attached a copy of such acknowledgment
thereto);
<PAGE>
(g) repudiation by any Subsidiary of its obligations under any Subsidiary
Guarantee or, except as permitted hereunder, any Subsidiary Guarantee shall be
held in a judicial proceeding to be unenforceable or invalid in any material
respect or shall cease to be in full force and effect;
(h) the Company or any of its Subsidiaries (other than a Receivables
Subsidiary) within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Subsidiaries (other
than a Receivables Subsidiary);
(ii) appoints a custodian of the Company or any of its Subsidiaries or for
all or substantially all of the property of the Company or any of its
Subsidiaries (other than a Receivables Subsidiary); or
(iii) orders the liquidation of the Company or any of its Subsidiaries
(other than a Receivables Subsidiary);
and the order or decree remains unstayed and in effect for 60 consecutive days.
SECTION 6.02. ACCELERATION.
(a) If any Event of Default occurs and is continuing (other than as
specified in Sections 6.01(h) or (i)), the Trustee or the Holders of at least
25% in principal amount of the then outstanding Notes by written notice to the
Trustee and the Company may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
<PAGE>
arising from Sections 6.01(h) or (i) hereof, with respect to the Company, any
Significant Subsidiary of the Company or any group of its Subsidiaries that,
taken together, would constitute a Significant Subsidiary of the Company, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce this Indenture or the Notes except as
provided in this Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
(b) If an Event of Default occurs on or after May 1, 2003 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law, anything in this Indenture or in the Notes to the contrary notwithstanding.
If an Event of Default occurs prior to May 1, 2003 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable in an amount, for each of the
years beginning on May 1 of the years set forth below, as set forth below
(expressed as a percentage of the principal amount to the date of payment that
would otherwise be due but for the provisions of this sentence):
Year Percentage
---- ----------
1998 ..............................................108.375%
1999 ..............................................107.538%
2000 ..............................................106.700%
2001 ..............................................105.863%
2002 ..............................................105.025%
2003 ..............................................104.188%
(c) In the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of a Payment Default
or the acceleration of any Indebtedness described in Section 6.01(e) hereof, the
declaration of acceleration of the Notes shall be automatically annulled if
(i) any Payment Default described in clause (i) of such Section has been
cured or waived and
(ii) the holders of any accelerated Indebtedness described in clause (ii)
of such Section have rescinded the declaration of acceleration in respect of
such Indebtedness provided in each such case that (a) such cure, waiver or
rescission of such declaration of acceleration shall have been made in writing
within 30 days of the date of such Payment Default or declaration, as the case
may be, and (b) the annulment of the acceleration of such Notes would not
conflict with any judgment or decree of a court of competent jurisdiction and
(c) all existing Events of Default, except nonpayment of principal or interest
<PAGE>
on the Notes that became due solely because of the acceleration of the Notes,
have been cured or waived.
(d) A Default under Section 6.01(d) hereof is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes give written notice to the Company of the default and the
Company does not cure the Default within the period provided therein. The notice
must specify in reasonable detail the Default, demand that it be remedied and
state that the notice is a "Notice of Default". If the Holders of 25% or more in
principal amount of the then outstanding Notes request the Trustee to give such
notice on their behalf, the Trustee shall do so.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes
(including in connection with an offer to purchase); provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration. Upon such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. The Trustee may, however, refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.
<PAGE>
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25 % in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
<PAGE>
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
<PAGE>
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to
Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. The Trustee shall examine the
certificates and opinions, however, to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this clause does not limit the effect of clause (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
<PAGE>
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to clauses (a), (b),
and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. In the event
that the Trustee acquires any conflicting interest, however, it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
<PAGE>
as trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
actually known to a Responsible Officer of the Trustee, the Trustee shall mail
to Holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default relating to
the payment of principal or interest on any Note, the Trustee may withhold the
notice if it determines that withholding the notice is in the interests of the
Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each April 24 beginning with the April 24 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA S 313(a) (but if no event described in TIA
S 313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA S 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA S 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the Commission and each stock
exchange on which the Notes are listed in accordance with TIA S 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
<PAGE>
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA S 313(b)(2) to the
extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
<PAGE>
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to the
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA S 310(a)(1), (2) and (5). The Trustee is subject to TIA S 310(b).
<PAGE>
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA S 311(a), excluding any creditor relationship
listed in TIA S 311(b). A Trustee who has resigned or been removed shall be
subject to TIA S 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02 and subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, the Company shall be deemed to have
been discharged from its obligations with respect to all outstanding Notes on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance") and the obligations of the Guarantors under the Subsidiary
Guarantees, if any, then existing shall concurrently terminate. For this
purpose, Legal Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Notes,
which shall thereafter be deemed to be "outstanding" only for the purposes of
Section 8.05 hereof and the other Sections of this Indenture referred to in (a)
and (b) below, and to have satisfied all its other obligations under such Notes
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive,
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Articles 2 and 7 and Section 4.02
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article 8. Subject to compliance with this Article 8, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
<PAGE>
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13 and 4.15 hereof with respect to the outstanding Notes on and
after the date the conditions set forth in Section 8.04 are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, the Company's failure to perform
its obligations pursuant to Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13
and 4.15 hereof shall not result in an Event of Default pursuant to Section
6.01(d) hereof, nor shall Sections 6.01(e) or 6.01(f) hereof constitute Events
of Default. In connection with any Covenant Defeasance, the Company may, at its
option, by written notice given to the Trustee prior to the delivery to the
Trustee of the Opinion of Counsel referred to in Section 8.04(c) hereof, elect
that any or all of the Subsidiary Guarantees, if any, then existing will be
terminated on the date the obligations set forth in Section 8.04 hereof are
satisfied. If no such notice is given to the Trustee with respect to a
Subsidiary Guarantee, such Subsidiary Guarantee shall remain in full force and
effect following such Covenant Defeasance.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the Stated Maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
<PAGE>
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or, insofar as
Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is bound including, without limitation, the Revolving Credit
Agreement and the Gold Consignment Agreement;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over any other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding any other creditors
of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
<PAGE>
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non- callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non- callable Government Securities in accordance with Section 8.02 or
Section 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or Section 8.03 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 or Section 8.03 hereof, as the case may be; provided, however,
that, if the Company makes any payment of principal of, premium, if any, or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
<PAGE>
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's (and Guarantors')
obligations to the Holders of the Notes in the case of a merger or consolidation
or sale of all or substantially all of the Company's (and Guarantors') assets
pursuant to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Note; and
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA;
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02(b) hereof, the Trustee shall join with the Company and the Guarantors, if
any, in the execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture and the Notes and any Subsidiary
Guarantees may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes, except a
<PAGE>
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a purchase of,
tender offer or exchange offer for, Notes). The determination as to which Notes
are considered to be "outstanding" for purposes of this Section 9.02 shall be
made in accordance with the provisions of Section 2.08 hereof.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver under this Section 9.02 may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes;
(c) reduce the rate of or change the time for payment of interest on any
Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, or interest on the Notes;
<PAGE>
(g) waive a redemption payment with respect to any Note or make any change
in Sections 4.10, 4.15, 6.04 or 6.07 hereof or in the foregoing amendment and
waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Any such Holder of a Note or subsequent Holder of a Note, however, may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder of a Note.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
<PAGE>
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01 APPLICATION.
The provisions of Sections 10.02 through 10.06 hereof shall apply in
respect of (a) each Subsidiary of the Company (other than a Subsidiary organized
under the laws of a jurisdiction other than the United States of America, its
territories and possessions, any State thereof or the District of Colombia) to
which the Company conveys, transfers, contributes, sells, leases or assigns or
otherwise distributes any tangible property or assets after the date of this
Indenture and (b) each Subsidiary of the Company which is acquired or created by
the Company after the date of this Indenture, in either case, in any transaction
or series of transactions involving aggregate value or consideration in excess
of $10.0 million; provided, however, that for the purposes of determining the
applicability of this Article 10, the value of property or assets (other than
cash) transferred to any such Subsidiary of the Company in exchange for cash in
an amount equal to the fair market value of such property or assets, as
determined by the Board of Directors of the Company and evidenced by a
resolution set forth in an Officers' Certificate and delivered to the Trustee,
shall be excluded.
SECTION 10.02 GUARANTEE.
Subject to this Article 10, the Company shall cause each of the Guarantors,
jointly and severally, unconditionally to guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that: (a)
the principal of and interest on the Notes will be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Notes, if any, if lawful, and
all other obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The Company shall cause each Guarantor, failing payment when due of
any amount so guaranteed or any performance so guaranteed for whatever reason,
to be jointly and severally obligated to pay the same immediately. The Company
shall cause each Guarantor further to agree that such guarantee is a guarantee
of payment and not a guarantee of collection.
The Company shall further cause each Guarantor (i) to agree that its
obligations under its Subsidiary Guarantee shall be unconditional, irrespective
of the validity, regularity or enforceability of the Notes or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor; (ii) to waive diligence, presentment,
<PAGE>
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever; and (iii) to covenant that
its Subsidiary Guarantee shall not be discharged except by complete performance
of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or any
Guarantor, any amount paid by the Company or any Guarantor either to the Trustee
or to such Holder, each Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
The Company shall further cause each Guarantor to agree that (i) it shall
not be entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby, and (ii) as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed by the Subsidiary Guarantees may be accelerated as
provided in Article 6 hereof for the purposes of the Subsidiary Guarantees
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed by the Subsidiary
Guarantees, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article 6 hereof, such obligations (whether or not
due and payable) shall forthwith become due and payable by the Guarantors for
the purpose of the Subsidiary Guarantees. The Guarantors shall have the right to
seek contribution from any non- paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 10.03 LIMITATION ON GUARANTOR LIABILITY.
By its execution of its Subsidiary Guarantee, each Guarantor, and by its
acceptance of Notes, each Holder, confirms that it is the intention of all such
parties that the Subsidiary Guarantee of such Guarantor not constitute a
fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law to the extent applicable to any Subsidiary
Guarantee. To effectuate the foregoing intention, the Trustee and the Holders
hereby irrevocably agree, and by its execution of its Subsidiary Guarantee each
Guarantor shall irrevocably agree, that the obligations of such Guarantor under
its Subsidiary Guarantee and this Article 10 shall be limited to such maximum
amount as will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 10, result
in the obligations of such Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
<PAGE>
SECTION 10.04 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee, the Company shall cause each
Guarantor to agree that a notation of such Subsidiary Guarantee substantially in
the form included in Exhibit D hereto shall be endorsed by an Officer of such
Guarantor on each Note authenticated and delivered by the Trustee on or after
the date of such Guarantee. Further, the Company shall cause each Guarantor
promptly to execute a supplemental indenture substantially in the form of
Exhibit E hereto.
The Company shall further cause each Guarantor to agree that its Subsidiary
Guarantee shall remain in full force and effect notwithstanding any failure
to
endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on any Subsidiary Guarantee no longer
holds that office at the time the Trustee authenticates the Note on which such
Subsidiary Guarantee is endorsed, such Subsidiary Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of each Subsidiary Guarantee
theretofore or thereafter executed and delivered by or on behalf of the
Guarantors or any of them.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, the Company shall cause such
Subsidiaries to execute supplemental indentures to this Indenture and Subsidiary
Guarantees in accordance with this Article 10.
SECTION 10.05 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person) another corporation, Person or other
entity whether or not affiliated with such Guarantor unless (i) subject to the
provisions of Section 10.06 hereof, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor under its Subsidiary Guarantee, the Notes and the
Indenture pursuant to a supplemental indenture, in form and substance reasonably
satisfactory to the Trustee; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted immediately after giving effect to such transaction to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.09(a) hereof.
SECTION 10.06 RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of any
Guarantor (other than to the Company or another Guarantor), by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of any Guarantor (other than to the Company or another Guarantor), then
such Guarantor (in the event of a sale or other disposition, by way of such a
<PAGE>
merger, consolidation or otherwise, of all of the Capital Stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee and any such
acquiring corporation will not be required to assume any obligations of such
Guarantor under the applicable Subsidiary Guarantee; provided that such sale or
other disposition complies with all applicable provisions of this Indenture
including, without limitation, Section 4.10 hereof.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of such Guarantor under this
Indenture as provided in this Article 10.
SECTION 10.07 TRANSFERS OF INTANGIBLE ASSETS.
If the Company or any Wholly Owned Subsidiary of the Company proposes to
convey, transfer, contribute, sell, lease or assign or otherwise distribute
(collectively, "transfer") any intellectual property or similar assets to any
other Subsidiary of the Company after the date of this Indenture, (i) such
transfer shall be made only to another Wholly Owned Subsidiary of the Company
and (ii) prior to or concurrently with such transfer, the Company or such Wholly
Owned Subsidiary effecting such transfer shall enter into a license agreement
with such other Wholly Owned Subsidiary in the form attached hereto as Exhibit B
(with such modifications as may be agreed to by the Trustee and the Company (or
the Trustee and such Wholly Owned Subsidiary of the Company, as the case may
be)), pursuant to which the Company or such Wholly Owned Subsidiary effecting
such transfer, as the case may be, shall be permitted to utilize such property
or assets in the same manner and to the same extent as such property or assets
were used by such entity prior to the transfer thereof.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA S 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
<PAGE>
If to the Company and/or any Guarantor:
Finlay Fine Jewelry Corporation
529 Fifth Avenue, New York, New York 10175
Telecopier No.: (212) 808-2800
Attention: Secretary and Corporate Counsel
With a copy to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: James Martin Kaplan
If to the Trustee:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Telecopier No. (212) 658-6425
Attention: Corporate Trust Administration
The Company, any Guarantor or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA S 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
<PAGE>
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA S 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA
S 312(c).
SECTION 1.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA S 314(a)(4)) shall comply with the provisions of TIA S 314(e)
and shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
<PAGE>
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, IF ANY,
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together constitute the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of April 24, 1998 FINLAY FINE JEWELRY CORPORATION
By: /s/Barry D. Scheckner
----------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Attest:/s/Bruce E. Zurlnick
Name: Bruce E. Zurlnick
Title: Treasurer
Dated as of April 24, 1998 MARINE MIDLAND BANK, as Trustee
By: Frank Godino
-----------------------------------
Name: Frank Godino
Title: Vice President
<PAGE>
EXHIBIT A
(Face of Note)
- --------------------------------------------------------------------------------
CUSIP/CINS 317887AB3
8 3/8% Senior Note due May 1, 2008
No. $_____________
Finlay Fine Jewelry Corporation promises to pay to _______________ or
registered assigns, the principal sum of _______________ Dollars on May 1, 2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
FINLAY FINE JEWELRY CORPORATION
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
MARINE MIDLAND BANK, as Trustee
By:_________________________
Name:
Title:
Dated:______________, 1998
- --------------------------------------------------------------------------------
<PAGE>
(Back of Note)
8 3/8% Senior Note due May 1, 2008
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Finlay Fine Jewelry Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 8
3/8% per annum from April 24, 1998 until maturity. The Company shall pay
interest semiannually in arrears on May 1 and November 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
April 24, 1998; provided that if there is no existing Default in the payment of
interest, and if this Note (other than Note No. 1) is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be November
1, 1998. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the April 15 or October 15 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. Principal, premium, if any, and
interest on the Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments of principal, premium and interest
with respect to Notes the Holders of which have given wire transfer instructions
to the Company prior to the relevant record date will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
<PAGE>
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
April 24, 1998 ("Indenture") between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code SS 77aaa-77bbbb), as in effect on the date on which the Indenture is
qualified thereunder. The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $150.0 million in aggregate
principal amount, subject to the provisions of Sections 2.07 and 2.08 of the
Indenture.
5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Notes are not redeemable at the Company's option prior to May
1, 2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve- month period
beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003.........................................104.188%
2004.........................................102.792%
2005.........................................101.396%
2006 and thereafter..........................100.000%
provided, however, that if the Company, at its option, specifies in the notice
of redemption provided for in this paragraph 5(a) that such notice is revocable,
then the Company may revoke such notice at its further option at any time on or
prior to the date which is 10 days prior to the redemption date specified in
such notice (provided such notice so specifies) by providing a notice of
revocation to the Trustee on or prior to the date on which the Company's
revocation right expires (and the Trustee shall promptly mail such notice to the
Holders by first class mail).
(b) Notwithstanding the foregoing, until May 1, 2001, the Company may on
any one or more occasions redeem up to $50.0 million in aggregate principal
amount of Notes at a redemption price of 108.375% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date, with the net cash proceeds of Public Equity Offerings by the Company;
provided that at least $100.0 million in aggregate principal amount of Notes
remains outstanding immediately after the occurrence of each such redemption
(excluding Notes held by the Company and its Subsidiaries); and provided
further, that such redemption shall occur within 120 days of the date of the
closing of such Public Equity Offering.
<PAGE>
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes. There are no sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control,
each Holder of Notes will have the right to require the Company to make an offer
(a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes as a result of a Change of Control.
(b) If the Company or any Subsidiary of the Company consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company shall make an offer to all holders of Senior Debentures in accordance
with the provisions of Section 3.09 of the Indenture and on the same terms and
conditions offered to Holders of Notes to purchase the maximum principal amount
of Senior Debentures that may be purchased out of the remaining Excess Proceeds.
To the extent that the aggregate amount of Senior Debentures tendered pursuant
to any such offer is less than the remaining Excess Proceeds, the Company or any
of its Subsidiaries may use any remaining Excess Proceeds for general corporate
purposes or otherwise make an investment of such remaining amounts in any manner
that is not prohibited by the Indenture. If the aggregate principal amount of
Notes tendered in connection with such Asset Sale Offer and surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Subject to the
Company's right of revocation under the Indenture in connection with any
redemption pursuant to Paragraph 5(a) hereof, notices of redemption may not be
conditional. Notes and portions of Notes selected for redemption shall be in
amounts of $1,000 or whole multiples of $1,000, except that if all of the Notes
<PAGE>
of a Holder are to be redeemed, the entire outstanding amount of Notes held by
such Holder, even if not a multiple of $1,000, shall be redeemed. If any Note is
to be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest ceases to accrue on Notes or portions
thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required (a) to issue, to
register the transfer of or to exchange any Notes during a period beginning at
the opening of business 15 days before the day of any selection of Notes for
redemption and ending at the close of business on the day of selection, (b) to
register the transfer of or to exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a record
date and the next succeeding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes, subject to the provisions of the Indenture with
respect to record dates for the payment of interest.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes) and, subject to the provisions
of Sections 6.04 and 6.07 of the Indenture, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes). Without the consent of any
Holder of Notes, the Company and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
the Notes in case of a merger or consolidation, or sale of all or substantially
all of the Company's assets, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
<PAGE>
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company to comply with the provisions of Sections 3.09, 4.10, 4.15 or
Article 5 of the Indenture; (iv) failure by the Company for 45 days after notice
to comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (including any Indebtedness
the payment of which is guaranteed by the Company or any of its Subsidiaries)
other than a Receivables Subsidiary whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal or a premium, if any, on such Indebtedness
at the Stated Maturity for such payment of principal or premium, if any, or such
later date as has been agreed in a writing (provided such writing is entered
into prior to such Stated Maturity) by the parties to the documentation relating
to such Indebtedness (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $12.5 million or more; (vi) failure
by the Company or any of its Subsidiaries other than a Receivables Subsidiary to
pay final judgments aggregating in excess of $12.5 million, which judgments are
not paid, discharged or stayed for a period of 60 days (or 90 days if prior to
such sixtieth day the Company has delivered to the Trustee an Officers'
Certificate attesting that a financially responsible insurance company of
recognized national standing has acknowledged in writing complete liability for
such judgment and attached a copy of such acknowledgment thereto); (vii)
repudiation by any Subsidiary of its obligations under any Subsidiary Guarantee
or, except as permitted by the Indenture, any Subsidiary Guarantee shall be held
in a judicial proceeding to be unenforceable or invalid in any material respect
or shall cease to be in full force and effect; (viii) the Company or any of its
Subsidiaries (other than a Receivables Subsidiary) within the meaning of any
Bankruptcy Law (a) commences a voluntary case, (b) consents to the entry of an
order for relief against it in an involuntary case, (c) consents to the
appointment of a custodian of it or for all or substantially all of its
property, (d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; and (ix) a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that
(a) is for relief against the Company or any of its Subsidiaries (other than a
Receivables Subsidiary), (b) appoints a custodian of the Company or any of its
Subsidiaries or for all or substantially all of the property of the Company or
any of its Subsidiaries (other than a Receivables Subsidiary) or (c) orders the
liquidation of the Company or any of its Subsidiaries (other than a Receivables
Subsidiary) and any such order or decree described in this clause (ix) remains
unstayed and in effect for 60 consecutive days.
In the event of a declaration of acceleration of the Notes because an Event
of Default has occurred and is continuing as a result of a Payment Default or
the acceleration of any Indebtedness described in clause (v) of the preceding
paragraph, the declaration of acceleration of the Notes shall be automatically
annulled if (i) any Payment Default described in clause (v)(a) of the preceding
paragraph has been cured or waived and (ii) the holders of any accelerated
Indebtedness described in clause (v)(b) of the preceding paragraph have
<PAGE>
rescinded the declaration of acceleration in respect of such Indebtedness,
provided in each such case that (a) such cure, waiver or rescission of such
declaration of acceleration shall have been made in writing within 30 days of
the date of such Payment Default or declaration, as the case may be, and (b) the
annulment of the acceleration of such Notes would not conflict with any judgment
or decree of a court of competent jurisdiction and (c) all existing Events of
Default, except nonpayment of principal or interest on the Notes that became due
solely because of the acceleration of the Notes, have been cured or waived.
A Default under clause (iv) the first paragraph of this Paragraph 12 is not
an Event of Default until the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes give written notice to the
Company of the default and the Company does not cure the Default within the
period provided in such clause. The notice must specify in reasonable detail the
Default, demand that it be remedied and state that the notice is a "Notice of
Default". If the Holders of 25% or more in principal amount of the then
outstanding Notes request the Trustee to give such notice on their behalf, the
Trustee shall do so.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes by
written notice to the Trustee and the Company may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising under clause (viii) or (ix) of the first paragraph of
this Paragraph 12, with respect to the Company, any Significant Subsidiary or
any group of Subsidiaries, that taken together would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to May
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to May 1, 2003, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
<PAGE>
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
14. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
15. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (-- joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
18. ADDITIONAL INFORMATION. The Company shall furnish to any Holder upon
written request and without charge a copy of the Indenture and/or the Security
and Pledge Agreement. Requests may be made to:
Finlay Fine Jewelry Corporation
529 Fifth Avenue
New York, New York 10017
Attention: Secretary and Corporate Counsel
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________ to transfer this Note on
the books of the Company. The agent may substitute another to act for him or
her.
Date:____________
Your Signature:______________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee.*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_|Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased (if all, write "ALL"): $_________
Date:__________ Your Signature:________________________________________
(Sign exactly as your name appears
on the Note)
Tax Identification No:_________________________________
Signature Guarantee.*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
Principal
Amount
Amount of Amount of of this
decrease in increase in Global Signature of
Principal Principal Debenture authorized
Amount of Amount of following such officer
Date of this Global this Global decrease (or of Trustee or
Exchange Debenture Debenture increase) Custodian
-------- --------- --------- --------- ---------
___________________________
1/ This should be included only if the Note is issued in global form.
<PAGE>
EXHIBIT B
[FORM OF TRADE NAME LICENSE AGREEMENT]
Trade Name License Agreement (this "Agreement"), dated as of ____________,
________, between [_____________], a corporation organized and existing under
the laws of [state] (the "Licensor"), and [____________], a corporation
organized and existing under the laws of [state] (the "Licensee").
Whereas, the Licensee is the owner of certain trade names and service marks
shown on Schedule A hereto and has utilized such trade names and services marks
in the operation of jewelry departments or stores and related activities; and
Whereas, on the date hereof Licensee has sold, transferred, conveyed and
assigned its right, title and interest to use such trade names and service marks
and goodwill associated therewith in the United States (but not elsewhere) to
Licensor; and
Whereas, pursuant to the Indenture dated as of April __, 1998 between
Finlay Fine Jewelry Corporation and Marine Midland Bank, as trustee (the
"Indenture"), relating to Finlay Fine Jewelry Corporation's __% Senior Notes due
2008 (the "Senior Notes"), in connection with such sale, transfer, conveyance
and assignment, Licensee and Licensor are required to enter into this Agreement;
and
Whereas, the Licensee desires to obtain, and the Licensor desires to grant
to the Licensee, an exclusive right to use the Licensed Trade Names (as defined
in Section 1) in the Territory (as defined in Section 1) on or in connection
with the operation of jewelry departments or stores and related purchasing,
consigning, merchandising, selling, marketing, promoting, advertising,
distributing, manufacturing, importing of or other activities relating to
jewelry upon the terms and conditions set forth below;
Now therefore, to effect the foregoing, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
"Affiliate" as used herein means, with respect to either party, any entity
controlling, controlled by or under common control with such party. For purposes
of the foregoing definition, the term "control" (and correlative terms) means
the power, whether by contract, equity ownership or otherwise, to direct the
policies or management of an entity.
"Governmental Authority" as used herein means any federal, state, county,
local or other governmental department, regulatory body, commission, board,
bureau, agency or instrumentality.
<PAGE>
"Licensed Products" as used herein means jewelry products which are sold in
jewelry departments or stores operated by the Licensee or any other products
sold in any other venue with the prior approval of the Licensor.
"Licensed Trade Names" as used herein means the trade names and service
marks shown on Schedule A attached hereto.
"Licensee" as used herein means the Licensee, its Affiliates (other than
the Licensor), sublicensees and successors to the Licensee's business.
"Parties" as used herein means the Licensor and the Licensee.
"Quality" as used herein means products marketed and promoted as quality
items which meet or exceed the quality standards set forth in Section 4 below.
"Revenues" as used herein means gross revenues generated by sales of the
Licensed Products in the Territory less sales taxes, shipping, freight, or
transport charges if separately stated on an invoice; actual discounts or
allowances to customers; and returns in the normal course of business.
"Territory" as used herein means the United States of America, any
political subdivisions thereof and its territories, commonwealths and
possessions.
SECTION 2. GRANT TO THE LICENSEE AND RELATED MATTERS.
(a) Exclusivity. The Licensor hereby grants to the Licensee, except as
otherwise provided herein, an exclusive right in the Territory to use the
Licensed Trade Names in connection with the operation of jewelry departments and
stores whether now existing or hereafter established and the related purchasing,
consigning, merchandising, selling, marketing, promoting, advertising,
distributing, manufacturing, importing of or other activities relating to the
Licensed Products.
(b) Reserved Rights. All rights in the Licensed Trade Names other than
those specifically granted herein are reserved to the Licensor for its own use
and benefit.
(c) Ownership. The parties acknowledge and agree that the Licensed Trade
Names are the sole and exclusive property of the Licensor. The Licensee
acknowledges and agrees that the Licensee shall not acquire any right, title or
interest in or to the Licensed Trade Names as a result of this License
Agreement, or the Licensee's use thereof, or as a result of any other act or
thing, that the Licensee shall not attack the Licensor's title to or ownership
of the Licensed Trade Names, and that all use of the Licensed Trade Names by the
Licensee and all goodwill generated thereby shall inure to the benefit of the
Licensor. The Licensee shall not use or register or claim rights in any trade
name, trade dress or other indicia confusingly similar, in whole or in part, to
the Licensed Trade Names.
<PAGE>
(d) Sublicenses. The Licensee shall not grant any sublicense to use the
Licensed Trade Names, other than to Licensee's Affiliates without the express
prior written approval of the Licensor.
(e) Royalty Provisions. Upon receipt of an invoice from the Licensor,
Licensee agrees to pay the Licensor a royalty equal to [___ percent (__%) of
Revenues generated from sales of the Licensed Products by the Licensee in the
Territory.]
(f) Statements and Payments.
(i) Licensor has the option to request payment of such royalties at the end
of each six-month period by sending an invoice to Licensee. Within thirty (30)
days after receipt of such invoice, Licensee shall furnish a statement,
certified as accurate by an officer of Licensee, showing in reasonable detail
Licensee's sales of the Licensed Products, applicable allowances or credits,
uncollectible amounts, invoiced free or sample items distributed and a
calculation of Revenues for the Licensed Products, as well as the amount of
royalties payable with respect to such prior six month period.
(ii) Acceptance by the Licensor of any statement furnished or royalty paid
shall not preclude the Licensor from questioning its correctness and, if any
inconsistencies or mistakes are discovered, they shall immediately be rectified.
(iii) All payments made by Licensee hereunder will be paid to Licensor or
its designee in United States Dollars.
(iv) The Licensee shall pay interest on any overdue royalty payment at the
prime rate in effect on the date on which such payment was due, and such
interest shall accrue from the date on which such payment was due.
(v) If the Licensee does not receive an invoice from the Licensor, all
royalties due and payable shall be paid within thirty (30) days after receiving
the next invoice, together with interest on such royalties at the prime rate in
effect on the date such payment was initially due, and such interest shall
accrue from the date on which such payment was due.
(g) Audit.
(i) The Licensee shall keep complete and accurate records and books of
account at its principal place of business covering all transactions relating to
this Agreement, and the Licensor and/or its duly authorized representative shall
have the right, during regular business hours and upon ten (10) days reasonable
notice, at least once quarterly, to examine such books and all other documents
and materials in Licensee's possession or control with respect to this
Agreement. Neither Licensor nor any of its representatives shall disclose to any
other person, firm or corporation any information acquired as a result of such
examination, provided, however, that nothing herein contained shall be construed
to prevent Licensor and/or Licensee or their duly authorized representatives
from testifying in any court of competent jurisdiction with respect to the
information obtained as a result of any such examination in any action
instituted to enforce the rights of Licensor under the terms of this Agreement.
If such an audit reveals an underpayment by the Licensee, the Licensee shall
<PAGE>
immediately remit payment to the Licensor in the amount of the underpayment plus
interest calculated at the prime rate then in effect from the date such
payment(s) were actually due. If such underpayment is greater than __% of the
royalties payable for the audited period, the Licensee shall reimburse the
Licensor for the costs and expenses of such audit.
(ii) All books of account and records of the Licensee relating to this
Agreement shall be retained for at least two (2) years after termination of this
Agreement.
SECTION 3. METHOD OF USE OF THE LICENSED TRADE NAMES.
(a) Use. The Licensee acknowledges that the Licensed Trade Names have
acquired a valuable secondary meaning and goodwill to department stores and
vendors in the retail jewelry market place. Accordingly, the Licensee undertakes
and agrees not to use the Licensed Trade Names in any manner whatsoever which,
directly or indirectly, would derogate or detract from its repute or which would
dilute, demean, ridicule or reflect adversely upon the Licensed Trade Names or
the Licensor, it being mutually agreed that use by the Licensee of the Licensed
Trade Names in the manner being used on the date hereof shall meet Licensor's
standards. The Licensee acknowledges that the Licensed Trade Names have become
associated generally with products and services that possess a positive and
quality image, and the Licensee agrees not to use the Licensed Trade Names in
any manner inconsistent with such image. The Licensee agrees to utilize the
Licensed Trade Names in a Quality manner in connection with the operation of
jewelry departments or stores and the purchasing, consigning, merchandising,
selling, marketing, promoting, advertising, distributing, manufacturing,
importing of or other activities relating to the Licensed Products.
(b) Form and Manner. Except as may be otherwise specifically provided in
this Agreement, the Licensee may not (i) make any change in the form of the
Licensed Trade Names, (ii) use any partial version of the Licensed Trade Names
at any time for any purpose, or (iii) use the Licensed Trade Names in
combination, juxtaposition or conjunction with, or as part of, any other
trademarks, service marks or trade names without the express prior written
approval of the Licensor, which approval may not be unreasonably withheld, it
being mutually agreed that use by the Licensee of the Licensed Trade Names in
the manner being used on the date hereof shall meet Licensor's standards. Any
mark approved pursuant to this paragraph shall be owned solely and exclusively
by the Licensor and after approval shall be deemed a Licensed Trade Name
pursuant to this Agreement.
(c) Marking. The Licensee shall apply such trade name notices, copyright
notices or other markings in connection with the Licensed Trade Names as may be
necessary or reasonably deemed desirable by the Licensor under the laws or
regulations of each jurisdiction of the Territory where such Licensed Trade
Names are used.
<PAGE>
SECTION 4. QUALITY STANDARDS.
(a) Quality. The Licensee shall not sell any Licensed Products or operate
any jewelry departments or stores or conduct related activities in connection
with the Licensed Trade Names that shall fail to meet the quality standards and
specifications employed in connection with use of the Licensed Trade Names as of
the date hereof or such additional standards or specifications as may be
reasonably specified by the Licensor from time to time, it being mutually agreed
that use by the Licensee of the Licensed Trade Names in the manner being used on
the date hereof shall meet Licensor's standards. The Licensee shall operate
jewelry departments or stores or conduct related activities in connection with
the Licensed Trade Names only in a manner that will protect the reputation of
the Licensed Trade Names.
(b) On Site Inspections. Upon reasonable notice, the Licensor or its
representatives shall have access for inspection purposes to the jewelry
departments or stores operated by Licensee during regular business hours at such
time or times as to not unduly interfere with the operations of the Licensee to
determine compliance with quality control standards. If any inspection of any
premises reveals that the Licensee has failed to comply with the quality
standards or other requirements of this Section 4, the Licensor shall be
entitled to reinspect such premises until receipt of notice of cure by the
Licensee. All expenses of conducting such inspections shall be borne by the
Licensor.
(c) Governmental Inquiries. The Licensee shall immediately notify the
Licensor in writing of any investigation, inquiry, claim or sanction by any
Governmental Authority regarding any quality, labeling, advertising or other
regulatory matter relating to the Licensed Products and shall keep the Licensor
advised of the progress and findings of such investigation or inquiry.
(d) Compliance; Fitness for Use. The Licensee shall be solely responsible
for and shall comply with all laws, rules and regulations, if any, of
Governmental Authorities in connection with the operation of jewelry departments
or stores in connection with the Licensed Trade Names and the related
purchasing, consigning, merchandising, selling, marketing, promoting,
advertising, distributing, manufacturing, importing of or other activities
relating to any goods or services.
SECTION 5. TERM.
The term of this License Agreement shall commence as of the date hereof and
continue until the earlier of (a) the date on which none of the Senior Notes is
outstanding and all obligations of Finlay Fine Jewelry Corporation under the
Indenture have been satisfied in full, (b) the date on which Licensee
permanently ceases operating jewelry departments and stores and the related
purchasing, consigning, merchandising, selling, marketing, promoting,
advertising, distributing, manufacturing, importing of or other activities
relating to the Licensed Products, or (c) the date on which the Licensor sells,
transfers, conveys and assigns to the Licensee all of the Licensor's right,
title and interest in and to the Licensed Trade Names. Upon the termination of
this Agreement, all the rights of the Licensee hereunder shall automatically
revert to the Licensor, the parties shall perform all other acts which may be
necessary or useful to render effective the termination of the interest of the
Licensee in the Licensed Trade Names, and the Licensee shall execute any
<PAGE>
assignment, conveyance, acknowledgment or other document that the Licensor may
require, relinquishing or conveying to the Licensor any and all rights to or
interest in use of the Licensed Trade Names that the Licensee has and any
goodwill associated therewith. Without any limitation of the foregoing, the
Licensee hereby consents to any application which the Licensor may make, upon
termination of this Agreement, to limit or terminate the Licensee's status as a
registered user and hereby irrevocably agrees not to contest, oppose or dispute
such application.
SECTION 6. REMEDIES.
(a) In the event of a breach of this Agreement, the aggrieved party's sole
and exclusive remedy shall be specific performance of this Agreement, including
any injunctive relief necessary to effect such specific performance. In
particular and without any limitation of the foregoing, the Licensor shall not
institute litigation against any person or entity for infringement of any
Licensed Trade Name based in whole or in part on any activities or rights
covered or protected by this Agreement, and Licensee shall not commence any
action seeking a declaration of invalidity, unenforceability or noninfringement
of any registrations or applications covering the Licensed Trade Names or
asserting any rights to the Licensed Trade Names or any mark or name confusingly
similar thereto.
(b) The parties further agree that this Agreement and the license granted
herein may under no circumstances be rescinded and may be terminated only as
expressly provided in Section 5 above.
SECTION 7. PROTECTION OF THE LICENSED TRADE NAMES.
(a) Maintenance. The Licensor shall maintain at its expense each of the
registrations for the Licensed Trade Names shown on Schedule A, if any, in full
force and effect as long as this Agreement continues in effect, and the Licensee
agrees to provide such assistance and documentation as is required for such
maintenance. The Licensor shall file such additional applications as Licensee
shall reasonably request to protect the Licensed Trade Names, and Licensor shall
diligently prosecute such applications and maintain any registrations issuing
thereon.
(b) Infringement. The Licensee shall notify the Licensor of any suspected,
actual or threatened infringement of or act of unfair competition or other
harmful or wrongful activities of third parties with respect to the Licensed
Trade Names as to which it has notice. The Licensee shall cooperate with the
Licensor with respect to any action to be taken with respect thereto. The
Licensor will have the obligation to take whatever steps are reasonably
necessary or desirable to protect the Licensed Trade Names from any such
infringement or other harmful or wrongful activities of third parties and shall
have the right to control any litigation or other proceeding undertaken by it
for any such purpose. Such steps may include the filing and prosecution of
(i) litigation against infringement or unfair competition by third parties,
(ii) opposition proceedings to oppose applications for trade name or service
mark registration for marks that are confusingly similar to any one or more of
the Licensed Trade Names, and (iii) cancellation proceedings to cancel
<PAGE>
registration of trade names or service marks that are confusingly similar to any
one or more of the Licensed Trade Names.
(c) Claims Against the Licensee. The Licensee shall promptly notify the
Licensor of any claim of infringement or any complaint based upon the Licensee's
use of the Licensed Trade Names and of any suit, action or proceeding brought
against the Licensee based upon said claim or complaint, and the provisions of
Section 10 shall apply.
SECTION 8. RECORDATION OF AGREEMENT.
The parties shall cooperate to determine and comply with applicable laws or
regulations throughout the Territory with respect to the recordation of,
validation of, or otherwise to render effective this Agreement. In countries
having registered user or license recordation requirements, the parties shall
execute all documents which may be necessary to record the Licensee as a
registered user or licensee for the Licensed Trade Names, and all costs of
preparing and recording any necessary documents or other costs in connection
therewith shall be borne by the Licensee.
SECTION 9. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of the Licensor. The Licensor represents
and warrants as follows:
(i) Due Organization and Power of the Licensor. The Licensor is a corporation
duly organized, validly existing and in good standing under the laws of
[state] and has all requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
(ii) Authorization and Validity of the Agreement. The execution, delivery and
performance by the Licensor of this Agreement and the consummation by it of
the transactions contemplated hereby has been duly authorized by its Board
of Directors and, if necessary, its shareholders, and no other corporate
action on the part of the Licensor is necessary for the execution, delivery
and performance by the Licensor of this Agreement and the consummation by
the Licensor of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Licensor, and this License
Agreement is the legal, valid and binding obligation of the Licensor,
enforceable against the Licensor in accordance with and subject to its
terms except as may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium, or other similar laws and
equitable principles relating to or limiting creditor's rights generally.
(iii)No Conflict. The execution, delivery and performance by the Licensor of
this Agreement and the consummation by the Licensor of the transactions
contemplated hereby does not and will not (A) violate any provision of any
federal, state, local or foreign law, rule or regulation or any order,
injunction, judgment or decree applicable to the Licensor; (B) require any
<PAGE>
consent or approval of, or filing with or notice to, any Governmental
Authority under any provision of law applicable to the Licensor other than
filings under applicable trade name laws or except as may be contemplated
under any provision of this Agreement; (C) violate any provision of the
Certificate of Incorporation or By- Laws or other constituent documents of
the Licensor; or (D) require any consent, approval or notice under,
conflict with, or result in the breach, lapse, cancellation or termination
of, or result in the acceleration (whether after the filing of notice or
the lapse of time or both) of any right or obligation of or the performance
by the Licensor under, or result in a loss of any benefit to which the
Licensor is entitled under, or constitute a default under any indenture,
mortgage, deed of trust, lease, license, franchise, contract, agreement,
concession or other instrument to which the Licensor is a party or by which
it, or any of its assets, are bound or encumbered, where the failure to
obtain such consent, approval or notice or the occurrence of any of the
matters referred to in this subsection (D) would materially adversely
affect the Licensee's rights hereunder.
Except as expressly provided above in this Section 9(a) or elsewhere in this
Agreement, the Licensor makes no other representations or warranties regarding
this Agreement or the rights Licensed hereunder.
(b) Representations and of Warranties of the Licensee. The Licensee
represents and warrants as follows:
(i) Due Organization and Power of the Licensee. The Licensee is a corporation
duly organized, validly existing and in good standing under the laws of
[state] and has all requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
(ii) Authorization and Validity of the Agreement. The execution, delivery and
performance by the Licensee of this Agreement and the consummation by it of
the transactions contemplated hereby have been duly authorized by its Board
of Directors, and no other corporate action on the part of the Licensee is
necessary for the execution, delivery and performance by the Licensee of
this Agreement and the consummation by the Licensee of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Licensee, and this Agreement is the legal, valid and binding obligation
of the Licensee, enforceable against the Licensee in accordance with and
subject to its terms except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or other
similar laws and equitable principles relating to or limiting creditors'
rights generally.
(iii)No Conflict. The execution, delivery and performance by the Licensee of
this Agreement and the consummation by the Licensee of the transactions
contemplated hereby does not and will not (A) violate any provision of any
federal, state, local or foreign law, rule or regulation or any order,
injunction, judgment or decree applicable to the Licensee; (B) require any
<PAGE>
consent or approval of, or filing with or notice to, any Governmental
Authority under any provision of law applicable to the Licensee;
(C) violate any provision of the Certificate of Incorporation or By-Laws or
other constituent documents of the Licensee; or (D) require any consent,
approval or notice under, conflict with, or result in the breach, lapse,
cancellation or termination of, or result in the acceleration (whether
after the filing of notice or the lapse of time or both) of any right or
obligation of or the performance by the Licensee under, or result in a loss
of any benefit to which the Licensee is entitled under, or constitute a
default under any indenture, mortgage, deed of trust, lease, license,
franchise, contract, agreement, concession or other instrument to which the
Licensee is a party or by which it or any of its assets are bound or
encumbered, where the failure to obtain such consent, approval or notice or
the occurrence of any of the matters referred to in this subsection
(D) would materially adversely affect the Licensee's rights hereunder..
SECTION 10. INDEMNIFICATION.
(a) By the Licensor. The Licensor shall indemnify, defend and hold harmless
the Licensee from and against and in respect of any and all claims, losses,
damages, expenses, obligations, penalties, demands, suits, procedures,
assessments, judgments, costs and liabilities (including costs of collection,
investigation, reasonable attorneys' fees and other costs of defense) ("Losses")
incurred by it, arising out of or resulting from any breach of any
representation, warranty, covenant or agreement made by the Licensor herein.
(b) By the Licensee. The Licensee shall indemnify, defend and hold harmless
the Licensor and its Affiliates from and against and in respect of any and all
Losses incurred by them arising out of or resulting from any breach of any
representation, warranty, covenant or agreement made by the Licensee herein.
(c) Procedure. If a claim by a third party is made against an indemnified
party, the indemnified party shall promptly notify the indemnifying party of
such claim. Failure to so notify the indemnifying party shall not relieve the
indemnifying party of any liability which the indemnifying party might have,
except to the extent that such failure materially prejudices the indemnifying
party's legal rights. The indemnifying party shall have thirty days after
receipt of such notice to undertake, conduct and control, through counsel of its
own choosing (subject to the consent of the indemnified party, such consent not
to be unreasonably withheld) and at its expense, the settlement or defense of
such claim, and the indemnified party shall cooperate with the indemnifying
party in connection therewith; provided, however, that (i) the indemnifying
party shall permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, provided that the fees
and expenses of such counsel shall be borne by the indemnified party and
(ii) the indemnifying party shall reimburse the indemnified party for the full
amount of any Loss resulting from such claim and all related expenses incurred
by the indemnified party within the limits of this Section 10 as such are
incurred. Notwithstanding anything contained herein, the indemnifying party
shall not enter into any settlement without the consent of the indemnified
party, unless the settlement involves the payment of money only and the
indemnified party is solely liable for payment of said money. So long as the
indemnifying party is reasonably contesting any such claim in good faith, the
indemnified party shall not pay or settle any such claim. Notwithstanding the
<PAGE>
foregoing, the indemnified party shall have the right to pay or settle any such
contested claim (provided that such settlement does not adversely affect any
rights of the indemnifying party with respect to the Licensed Trade Names), but
in such event it shall automatically waive any right to indemnity therefor by
the indemnifying party. If the indemnifying party does not notify the
indemnified party within thirty days after receipt of the indemnified party's
notice of a claim of indemnity hereunder that it elects to undertake the defense
thereof, or so notifies the indemnified party but fails to undertake or maintain
such defense promptly and in good faith, the indemnified party shall have the
right to contest, settle or compromise the claim in the exercise of its
reasonable judgment and without prejudice to the rights of the indemnified party
to indemnification hereunder.
(d) Survival. The provisions of this Section 10 shall survive the
termination or expiration of this Agreement.
SECTION 11. MISCELLANEOUS.
(e) Notices. Except as otherwise provided herein, all notices, requests,
demands, waivers and other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or by overnight courier with delivery charges
prepaid, or mailed by certified or registered mail, postage prepaid, receipt
requested, or sent by telecopy, as follows:
If to the Licensor, to it at:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
<PAGE>
with a copy to:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
If to the Licensee, to it at:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
with a copy to:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
or to such other person or address as either party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery.
(f) Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
<PAGE>
to confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
(g) Entire Agreement. This Agreement (including the Schedule hereto)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
(h) Assignability. This Agreement shall be freely assignable by the
Licensee to any successor of the Licensee's business which is a wholly owned
subsidiary of the Licensee with respect to the operation of jewelry departments
and the related purchasing, consigning, merchandising, selling, marketing,
promoting, advertising, distributing, manufacturing, importing of or other
activities relating to jewelry products. This Agreement shall not be assignable
by the Licensor.
(i) Relationship of the Parties. This Agreement shall in no way constitute
or give rise to a partnership, joint venture or agency between the parties, it
being acknowledged and agreed that the relationship created hereby is strictly
that of licensor and licensee. Except as may be expressly provided to the
contrary herein, nothing in this Agreement shall constitute or be deemed to
constitute either party as the legal representative or agent of the other, nor
shall either party have the right or authority to assume, create or incur any
liability or any obligation of any kind, express or implied, in the name of or
on behalf of the other party.
(j) Amendment and Modification; Waiver. Subject to applicable law, this
Agreement (including Schedule A hereto) may only be amended, modified and
supplemented by written instrument expressly identified as an amendment hereto
authorized and executed by the Licensor and the Licensee at any time prior to
the termination hereof with respect to any of the terms contained herein. No
waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach. No
failure on the part of either party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof.
(k) Further Assurances. From time to time, pursuant to the request of the
Licensee delivered to the Licensor, the Licensor, at the Licensee's expense,
shall execute and deliver such instruments and documents and take such actions
as the Licensee may reasonably request in order to allow the Licensee the use of
the Licensed Trade Names contemplated hereby or otherwise to carry out the
purposes and intent of this Agreement. From time to time, pursuant to the
request of the Licensor delivered to the Licensee, the Licensee, at the
Licensor's expense, shall execute and deliver such instruments and documents and
take such actions as the Licensor may reasonably request to carry out the
purposes and intent of this Agreement.
(l) Section Headings. The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
<PAGE>
(m) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, and all of which shall be deemed to be one
and the same agreement.
(n) Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to choice of laws or principles thereof.
(o) Severability of Provisions. 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 enforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this License Agreement
as of the date first above written.
[NAME OF LICENSOR]
By:___________________________
Name:
Title:
[NAME OF LICENSEE]
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE A
Licensed Trade Names
<PAGE>
EXHIBIT C
FORM OF SUBSIDIARY GUARANTEE
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned Guarantor (which term includes any
successor Person under the Indenture) jointly and severally, hereby
unconditionally guarantees, subject to the provisions in the Indenture dated as
of April 24, 1998 (the "Indenture") among Finlay Fine Jewelry Corporation and
Marine Midland Bank, as trustee (the "Trustee"), but irrespective of the
validity and enforceability of the Indenture, the Notes and the obligations of
the Company thereunder, (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Notes (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of the Indenture and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set
forth in Article 10 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a
Note, by accepting the same, agrees to and shall be bound by such provisions.
[Name of Guarantor]
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSIDIARY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among ___________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Finlay Fine Jewelry Corporation (or its permitted successor), a
Delaware corporation (the "Company"), the other Guarantors (as defined in the
Indenture referred to herein) and Marine Midland Bank, as trustee under the
Indenture referred to below (the "Trustee").
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of April 24, 1998 providing for the
issuance of an aggregate principal amount of up to $150.0 million of 83/8% Notes
due May 1, 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein and in the Indenture (the "Subsidiary
Guarantee"); and
WHEREAS, pursuant to Sections 9.01 and 9.06 of the Indenture, the Trustee
is authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary, the Company and the Trustee mutually covenant and agree
for the equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
unconditionally guarantees all of the Company's Obligations as set forth in
Article 10 of the Indenture in the same manner and to the same extent as if it
had executed the Indenture on the date thereof as Guarantor thereunder.
3. Continuing Agreement. Except as herein amended, all terms, provisions
and conditions of the Indenture, all Exhibits thereto and all instruments
executed in connection therewith shall continue in full force and effect and
shall remain enforceable and binding in accordance with their respective terms.
4. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING
<PAGE>
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together constitute the same agreement.
6. Effect of Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
7. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ______________, ____
[GUARANTEEING SUBSIDIARY]
By: ________________________________
Name:
Title:
FINLAY FINE JEWELRY CORPORATION
By: ________________________________
Name:
Title:
MARINE MIDLAND BANK, as Trustee
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT E
[FORM OF SUBSIDIARY INTERCOMPANY NOTE]
PROMISSORY NOTE
$[____________________] New York, New York
[date]
FOR VALUE RECEIVED, [_________________], a [____________] corporation
("Borrower"), promises to pay to the order of [__________________], a
[_____________] corporation ("Payee"), [upon demand by the Payee] [on
[________________]], at its office at [____________________], or at such other
place as Payee may, from time to time, designate in writing, in lawful money of
the United States of America, in immediately available funds, the principal sum
of [___________] Dollars ($[_______]) [together with interest thereon at a rate
of [___]% per annum from [___________] until maturity].
PAYEE AND ANY HOLDER HEREOF, BY ITS ACCEPTANCE OF THIS PROMISSORY NOTE,
AGREES THAT THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON, IF ANY, THIS
PROMISSORY NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL
IN CASH OF ALL INDEBTEDNESS OF THE BORROWER OTHER THAN INDEBTEDNESS WHICH BY ITS
TERMS IS SUBORDINATE IN RIGHT OF PAYMENT TO OTHER INDEBTEDNESS OF THE BORROWER
("SENIOR DEBT"), WHETHER OUTSTANDING ON THE DATE HEREOF OR HEREAFTER CREATED,
INCURRED, ASSUMED OR GUARANTEED, AND THAT THE SUBORDINATION IS FOR THE BENEFIT
OF THE HOLDERS OF THE SENIOR NOTES.
[Borrower will pay interest [semi-annually] in arrears on [ ] and [ ] of
each year, or if any such day is not a Business Day, on the next succeeding
<PAGE>
Business Day (each an "Interest Payment Date"). Interest on this Promissory Note
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided that the first
Interest Payment Date shall be [ ]. [Borrower shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal from time to time on demand at a rate that is [ ]% per annum in excess
of the rate then in effect; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful.] Interest will be computed on the
basis of a 360-day year of twelve 30-day months.]
Upon any distribution to creditors of Borrower in an insolvency or in
connection with any proceeding under Bankruptcy Law relating to Borrower or its
property, (i) holders of Senior Debt shall be entitled to receive payment in
full in cash of all Obligations due in respect of such Senior Debt (including
post-petition interest in any proceeding under Bankruptcy Law) before the holder
hereof shall be entitled to receive any payment of the principal hereof or
interest, if any, hereon and (ii) until all Obligations with respect to Senior
Debt are paid in full in cash, any distribution to which the holder hereof would
otherwise be entitled shall be made to the holders of such Senior Debt on a pro
rata basis.
Any contrary provision hereof notwithstanding, Borrower may not make any
payment of the principal hereof or interest, if any, hereon if a default occurs
and is continuing with respect to any Senior Debt.
Upon the failure of the Borrower to pay principal [or accrued interest]
when due and at any time thereafter [(but prior to the payment in full of all
<PAGE>
such accrued and unpaid interest)] the holder of this Promissory Note may
declare the unpaid principal balance and all accrued and unpaid interest hereon
to be immediately due and payable.
In the event that any action shall be brought for the enforcement hereof,
the undersigned hereby promises to pay all costs and expenses hereof, including,
but not limited to, reasonable attorneys' fees and disbursements.
Borrower's obligations hereunder shall be unconditional and shall not be
subject to any defense (other than prior payment), set-off, deduction,
counterclaim or recoupment whatsoever by Borrower.
Any amounts due under this Promissory Note may be prepaid at any time or
times in whole or in part without premium or penalty.
Presentation, notice of protest, and demand are hereby expressly waived by
the undersigned.
Capitalized terms used but not defined herein have the meanings ascribed to
such terms in the Indenture, dated as of April 24, 1998, between Finlay Fine
Jewelry Corporation and Marine Midland Bank, as trustee.
THE TERMS OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
BORROWER
By: ______________________________
Name:
Title:
AMENDMENT No. 3
AMENDMENT AGREEMENT No. 3 dated as of April 24, 1998 among FINLAY
ENTERPRISES, INC. a Delaware corporation (the "Parent"), FINLAY FINE JEWELRY
CORPORATION, a Delaware corporation (the "Company"), the lenders named herein
and signatory hereto (the "Lenders") and GENERAL ELECTRIC CAPITAL CORPORATION,
as agent (the "Agent") for the Lenders.
W I T N E S S E T H :
WHEREAS, the Parent, the Company, the Lenders and the Agent are parties to
an Amended and Restated Credit Agreement dated as of September 11, 1997 (as
heretofore and hereafter amended, modified or supplemented from time to time in
accordance with its terms, the "Credit Agreement") and;
WHEREAS, subject to the terms and conditions contained herein, the parties
hereto desire to amend certain provisions of the Credit Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and subject to the fulfillment of the conditions set forth
below, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise specifically defined herein, all
capitalized terms used herein shall have the respective meanings ascribed to
such terms in the Credit Agreement.
2. Amendments to Credit Agreement. The Credit Agreement shall be amended as
follows upon the Effective Date (as defined herein):
(a) Section 1.1 of the Credit Agreement is hereby amended to add the
following definitions in their proper alphabetical sequence:
"Acquisition Facility Advance" shall mean any Revolving Advance which also
constitutes an Acquisition Facility Advance in accordance with Section 2.1.A
hereof.
<PAGE>
"Additional Unused Facility Fee" shall mean, as applicable, a nonrefundable
fee, due and payable on the first day of each month, if no Acquisition Facility
Advance is outstanding, equal to (i) twenty-five basis points (.25%) per annum
on the difference between $275,000,000 and the sum of (A) the average daily
outstanding principal balance of the Revolving Loan during the preceding
calendar month or longer period and (B) the average daily Letter of Credit
Obligations during the preceding calendar month or longer period, on such day
(provided that in no event shall such .25% be charged on more than $50,000,000),
or, if any Acquisition Facility Advance is outstanding, equal to (ii)
thirty-seven and one-half basis points (.375%) per annum on the difference
between $275,000,000 and the sum of (A) the average daily outstanding principal
balance of the Revolving Loan during the preceding calendar month or longer
period and (B) the average daily Letter of Credit Obligations during such
preceding calendar month or longer period, on such day.
"New Debenture Indenture" shall mean the indenture dated as of April 24,
1998 between the Parent and Marine Midland Bank, as trustee, under which the New
Senior Debentures were issued, as such indenture is in effect on the Effective
Date of Amendment No. 3. to this Credit Agreement.
"New Senior Debentures" shall mean the Parent's 9% New Senior Debentures
due 2008 in the original principal amount of $75,000,000.
"New Senior Note Indenture" shall mean the indenture dated as of April 24,
1998 between the Company and Marine Midland Bank, as trustee under which the New
Senior Notes were issued, as such indenture is in effect on the Effective Date
of Amendment No. 3 to this Credit Agreement.
"New Senior Notes" shall mean the Company's 8 3/8% Senior Notes due 2008 in
the original principal amount of $150,000,000.
"Offering Expenses" means Non-recurring charges, costs and expenses
(including transaction expenses, any write-off of deferred financing costs, debt
discount costs and redemption premiums, and including interest expense incurred
solely in respect of the Senior Notes and the Debentures and solely during the
period prior to the redemption thereof during which the New Senior Notes and the
New Senior Debentures shall also be outstanding) incurred
2
<PAGE>
by the Parent and the Company in connection with (a) the Parent's offering of
its common stock on or about the Effective Date of this Amendment No 3., (b) the
Parent's offering of the New Senior Debentures, (c) the Company's offering of
the New Senior Notes and (d) the related redemption of the Debentures and the
Senior Notes.
"Permitted Acquisition" means any acquisition by the Company to which the
Majority Lenders have delivered their prior written consent, which consent may
be withheld in their sole discretion.
"Permitted Acquisition Request" means the notice, substantially in the form
of Exhibit D hereto, delivered by the Company to the Agent requesting that the
Lenders make an Acquisition Facility Advance available to the Company.
"Security and Pledge Agreement" shall mean that certain Security and Pledge
Agreement dated as of April 24, 1998 between the Parent and Marine Midland Bank.
"Supplemental Equity Offering" shall mean that certain public offering by
the Parent of an aggregate of 1,800,000 shares of its common stock (together
with any overallotment shares) (567,310, together with any overallotment shares,
of which are being offered for sale by the Parent, and the balance of which are
being offered for sale by shareholders of the Parent), of which the Net Cash
Proceeds to Parent shall be used by the Parent to redeem the Debentures.
"Third Party Interactives" shall mean all Persons with whom Borrowers and
their Subsidiaries exchange data electronically in the ordinary course of
business, including, without limitation, customers, suppliers, third-party
vendors, subcontractors, processors-converters, shippers and warehousemen.
"Tranche 1 Advance" shall mean any Acquisition Facility Advance made based
upon a Borrowing Base comprised of 60.01% to 65.00% of Eligible Inventory and
Foreign Eligible Inventory and 85% of Eligible Receivables and Foreign Eligible
Receivables as provided herein.
"Tranche 2 Advance" shall mean any Acquisition Facility Advance made based
upon a Borrowing Base comprised of 65.01% to 70.00% of Eligible Inventory and
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<PAGE>
Foreign Eligible Inventory and 85% of Eligible Receivables and Foreign Eligible
Receivables as provided herein.
"Year 2000 Assessment" shall mean a comprehensive written assessment of the
nature and extent of Borrowers' and their Subsidiaries' Year 2000 Problems and
Year 2000 Date- Sensitive Systems/Components, including, without limitation,
Year 2000 Problems regarding data exchanges with Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to Borrowers and their
Subsidiaries, all actions necessary to eliminate such Persons' Year 2000
Problems, including, without limitation, computer code enhancements and
revisions, upgrades and replacements of Year 2000 Date-Sensitive
Systems/Components, and coordination of such enhancements, revisions, upgrades
and replacements with Third Party Interactives.
"Year 2000 Corrective Plan" shall mean, with respect to Borrowers and their
Subsidiaries, a comprehensive plan to eliminate all of their respective Year
2000 Problems on or before December 31, 1998, including without limitation (i)
computer code enhancements or revisions, (ii) upgrades or replacements of Year
2000 Date-Sensitive Systems/Components, (iii) test and validation procedures,
(iv) an implementation time line and budget and (v) designation of specific
employees who will be responsible for planning, coordinating and implementing
each phase or subpart of the Year 2000 Corrective Plan.
"Year 2000 Date-Sensitive System/Component shall mean, as to any Person,
any system, software, network software applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar related
data accurately; such systems and components shall include, without limitation,
mainframe computers, fileserver/client systems, computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC Systems.
"Year 2000 Implementation Testing" shall mean, as to any Person, (i) the
performance of test and validation procedures regarding Year 2000 Corrective
Actions on a unit basis and on a systemwide basis; (ii) the performance of test
and validation procedures regarding data exchanges among Borrowers and
Borrowers' and their Subsidiaries' Year 2000 Date- Sensitive Systems/Components
and data exchanges with Third Party Interactives, and (iii) the design and
implementation of additional Year 2000 Corrective Actions the need for which has
been demonstrated by test and validation procedures.
"Year 2000 Problems" shall mean, with respect to Borrowers' and their
Subsidiaries', limitations on the capacity or readiness of any such Person's
Year 2000 Date- Sensitive Systems/Components to accurately accept, create,
manipulate, sort, sequence, calculate, compare, control or output calendar date
information with respect to calendar year 1999 or any subsequent calendar year
beginning on or after January 1, 2000 (including leap year computations)
including, without limitation, exchanges of information among Year 2000 Date-
Sensitive Systems/Components of Borrowers' and their Subsidiaries' and exchanges
of information among Borrowers and their Subsidiaries and Year 2000
Date-Sensitive systems/Components of Third Party Interactives and functionality
of peripheral interfaces, firmware and embedded microchips.
(b) the definition of "Borrowing Base" contained in Section 1.1 of the
Credit Agreement shall be amended by adding the following immediately after the
penultimate sentence in the first full paragraph of such definition
"Notwithstanding the foregoing, for the purposes of making any Tranche 1
Advance, the reference to sixty percent contained in clause (i) hereof shall be
replaced with an amount from sixty and one one-hundredth percent (60.01%) up to
and including sixty-five percent (65.00%), and for the purposes of making any
Tranche 2 Advance, the reference to sixty percent contained in clause (i) hereof
shall be replaced with an amount from sixty-five and one one-hundredth percent
(65.01%) up to and including seventy percent (70.00%)."
(c) the definition of "Revolving Credit Facility Commitment" contained in
Section 1.1 of the Credit Agreement shall be amended by deleting the amount
"$225,000,000" contained therein and substituting "$275,000,000" therefor;
(d) the following Section 2.1.A shall be added immediately following the
last full sentence of Section 2.1(v) of the Credit Agreement:
4
<PAGE>
"S 2.1.A ACQUISITION FACILITY.
(a) At the request of the Company, Revolving Advances may be designated by
the Agent as "Acquisition Facility Advances", provided that such amounts shall
only be available to the Company to fund Permitted Acquisitions and cannot be so
designated until receipt by the Agent of the written consent of the Majority
Lenders to a Permitted Acquisition Request.
(b) After receipt of a Permitted Acquisition Request, the Agent shall
designate such Acquisition Facility Advance as either a Tranche 1 Advance or a
Tranche 2 Advance based upon the Borrowing Base at the time such Permitted
Acquisition Request is approved. The Company, by written notice to the Agent,
may terminate the designation of Acquisition Facility Advances at any time
provided, that, the Company may not deliver such notice unless the Revolving
Loan can be supported by the Borrowing Base at the time such termination is
requested. Upon Agent's receipt and acceptance of such written notice of
termination (i) any designation of outstanding Acquisition Facility Advances
then existing shall immediately terminate, and from the date of receipt of such
written notice of termination for all purposes hereunder be treated as Revolving
Advances which are not Acquisition Facility Advances, and (ii) the Company shall
no longer be able to request that the Agent designate Revolving Advances as
Acquisition Facility Advances.
(c) No Revolving Advance that constitutes a Tranche 1 Advance may remain
outstanding for more than an aggregate of eighteen months from the date any
Tranche 1 Advance is made, and all Tranche 1 Advances and Tranche 2 Advances
must be repaid in full on or prior to the eighteen month anniversary of the
first funding of any Tranche 1 Advance (the "Tranche 1 Availability Period"). No
Revolving Advance that constitutes a Tranche 2 Advance may remain outstanding
for longer than the nine month anniversary of the first funding of any Tranche 2
Advance (the "Tranche 2 Availability Period"), but in any event must be repaid
by the earlier of the end of the Tranche 1 Availability Period and the Tranche 2
Availability Period. The Company may prepay Acquisition Facility Advances, in
full or in part, and without premium or penalty, subject to Section 3.3 hereof.
(d) Each Permitted Acquisition Request shall be executed and delivered by
the Company and shall constitute, unless otherwise disclosed in writing to the
Agent and the Lenders, a representation and warranty by the Company that (1) the
representations and
5
<PAGE>
warranties contained in this Agreement are true and correct in all material
respects on and as of such date as though made on and as of such date, (2) after
giving effect to the Acquisition Facility Advance, no Default or Event of
Default has occurred and (3) such requested Acquisition Facility Advance, when
added to the aggregate Revolving Loans, Letters of Credit and unpaid
reimbursement obligations related to drawings under such Letters of Credit which
are then outstanding and Revolving Loans and Letters of Credit for which
requests have been delivered to the Agent by the Borrowers do not exceed the
Revolving Credit Facility Commitments. Acquisition Facility Advances shall
constitute Revolving Advances and Revolving Loans for all purposes of this
Agreement and the other Loan Documents.
(e) The following Section 3.5.A shall be added immediately following the
last full sentence of Section 3.5 of the Credit Agreement:
"S3.5.A Additional Unused Facility Fee.
From and after the Effective Date of Amendment No. 3 to this Credit
Agreement, the Borrowers shall pay to the Agent for the ratable benefit of the
Lenders, the Additional Unused Facility Fee."
(f) Section 2.6(f) of the Credit Agreement shall be amended to add the
following immediately after the last full sentence immediately following the
Applicable Margin Grid: "Notwithstanding the foregoing, if any Tranche 1 Advance
shall be outstanding, the interest rate during such period shall be the sum of
(i) the Index Rate or Eurodollar Rate (as the case may be) plus the Applicable
Margin plus 0.375% per annum on $50,000,000 of the outstanding Revolving Loan
and (ii) the Index Rate or Eurodollar Rate (as the case may be) plus the
Applicable Margin multiplied by any outstanding amounts in excess of such
$50,000,000; if any Tranche 2 Advance shall be outstanding, the interest rate
during such period shall be the sum of (i) the Index Rate or Eurodollar Rate (as
the case may be) plus the Applicable Margin plus 0.750% per annum on $50,000,000
of the outstanding Revolving Loan and (ii) the Index Rate or Eurodollar Rate (as
the case may be) plus the Applicable Margin multiplied by any outstanding
amounts in excess of such $50,000,000."
(g) Section 8.17 of the Credit Agreement shall be amended to add the
following new paragraph immediately after the word "thereafter" appearing at the
end of the Sonab EBITDA covenants:
6
<PAGE>
"Notwithstanding the foregoing provisions of this Section 8.17, for the
purposes of calculating the financial covenants set forth in Sections 8.17(a),
8.17(b) and 8.17(c) hereof for the fiscal quarters ending April 30, 1998, July
31, 1998, October 31, 1998 and January 31, 1999, all Offering Expenses shall be
excluded from such calculations."
(h) the following Section 8.27 shall be added immediately following the
last full sentence of Section 8.26 of the Credit Agreement:
"S 8.27 YEAR 2000.
On or prior to October 31, 1998, Borrowers and their Subsidiaries shall
complete and deliver to Agent a Year 2000 Assessment, and on or prior to January
31, 1999 Borrowers and their Subsidiaries shall complete and deliver to Agent a
Year 2000 Corrective Plan. On or prior to March 31, 1999, Borrowers and their
Subsidiaries shall implement Year 2000 Corrective Actions. On or before May 31,
1999 Borrowers and their Subsidiaries shall complete Year 2000 Corrective
Actions and Year 2000 Implementation Testing. On or before July 31, 1999,
Borrowers and their Subsidiaries shall eliminate all Year 2000 Problems, except
where failure to correct the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate."
(i) Section 9.2(e) of the Credit Agreement shall be deleted in its entirety
and replaced by the following:
"(e) Liens in favor of Marine Midland Bank pursuant to the "Pledge
Agreement" (as defined in the Debenture Indenture) covering the capital stock of
the Company, and Liens in favor of Marine Midland Bank pursuant to the Security
and Pledge Agreement."
(j) Section 9.3 of the Credit Agreement shall be amended to delete the
"and" immediately following 9.3(q), to delete the reference to "$25,000,000"
contained in Section 9.3(r) and substitute "$32,000,000" therefor, and to delete
the period at the end of 9.3(r) and to insert a semi-colon immediately
thereafter and to add the following immediately thereafter;
"(s) Indebtedness of the Company evidenced by the New Senior Notes,
provided, that all Net Cash Proceeds received by the Company in respect of such
New Senior Notes shall be used to pay in full or otherwise retire the Senior
Notes; and
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<PAGE>
(t) Indebtedness of the Parent evidenced by the New Senior Debentures,
provided, that all Net Cash Proceeds received by the Parent in respect of such
New Senior Debentures shall be used to pay in full or otherwise retire the
Debentures."
(k) Section 9.6 of the Credit Agreement shall be amended as follows:
(i) Section 9.6(b) of the Credit Agreement shall be amended to add the words
"and the New Senior Notes" immediately following the reference to "Senior
Notes" contained therein.
(ii) Section 9.6(b)(ii) of the Credit Agreement shall be amended by deleting
references to "Senior Notes" contained therein and inserting "New Senior
Notes" in lieu thereof;
(iii)Section 9.6(b)(iii) of the Credit Agreement shall be amended by deleting
references to "Debentures" contained therein and in lieu thereof inserting
"New Senior Debentures";
(iv) by deleting the "and" immediately following Section 9.6(b)(iv) thereof,
deleting the period immediately following the word "Documents" in the last
sentence of Section 9.6(b)(v), and inserting ";" in lieu thereof and then
adding the following:
"(vi)The Company may use proceeds from the issuance of the New Senior Notes to
redeem the Senior Notes, including any premiums associated therewith;
(vii)The Parent shall use the aggregate proceeds from the issuance of the New
Senior Debentures to redeem the Debentures, including any costs and
premiums associated therewith;
(viii) The Company may make payments to the Parent in such amounts as necessary
(a) to permit the Parent to make interest payments on the New Senior
Debentures; and
(ix) The Parent shall (a) make an initial capital contribution to the Company in
the aggregate principal amount of $33,000,000 within five (5) Business Days
of the final and irrevocable redemption of the Debentures and Senior Notes
8
<PAGE>
and (b) make an additional capital contribution to the Company consisting
of any funds received by the Parent which were not used by the Parent for
the final and irrevocable redemption of the Debentures, including payment
of costs and premiums associated therewith, within sixty-five (65) Business
Days of the final and irrevocable redemption of the Debentures and Senior
Notes."
(l) Section 9.15 of the Credit Agreement shall be amended by deleting the
period immediately following the last sentence thereof and adding the phrase
"except that the Parent may enter into the New Debenture Indenture and the New
Senior Note Indenture".
(m) Section 9.16 of the Credit Agreement is hereby amended to add the words
"and shall not include rental obligations incurred by the Company pursuant to or
as a result of the Diamond Park Acquisition" immediately following the word
"hereof" at the end of the proviso to Section 9.16(i) hereof.
(n) The Credit Agreement shall be amended to attach a revised Schedule 9.21
thereof in the form attached hereto as Exhibit E.
(o) Exhibit A to the Credit Agreement is hereby amended in its entirety to
read as set forth on Exhibit A hereto and Exhibit D hereto is added to the
Credit Agreement as Exhibit D thereto.
3. Representations and Warranties. Each of the Parent and the Company
represents and warrants as follows (which representations and warranties shall
survive the execution and delivery of this Amendment):
(a) Each of the Parent and the Company has taken all necessary action to
authorize the execution, delivery and performance of this Amendment.
(b) This Amendment has been duly executed and delivered by the Parent and
the Company and the acknowledgement attached hereto has been duly executed and
delivered by each Subsidiary. This Amendment and the Credit Agreement as amended
hereby constitute the legal, valid and binding obligation of the Parent and the
Company, enforceable against them in accordance with their respective terms,
subject to applicable bankruptcy, reorganization, insolvency, fraudulent
conveyance or transfer, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equity principles.
9
<PAGE>
(c) No consent or approval of any person, firm, corporation or entity, and
no consent, license, approval or authorization of any governmental authority is
or will be required in connection with the execution, delivery, performance,
validity or enforcement of this Amendment other than any such consent, approval,
license or authorization which has been obtained and remains in full force and
effect or where the failure to obtain such consent, approval, license or
authorization would not result in a Material Adverse Effect.
(d) After giving effect to this Amendment, each of the Company and the
Parent is in compliance with all of the various covenants and agreements set
forth in the Credit Agreement and each of the other Loan Documents.
(e) After giving effect to this Amendment, no event has occurred and is
continuing which constitutes a Default or an Event of Default.
(f) All representations and warranties contained in the Credit Agreement
and each of the other Loan Documents are true and correct in all material
respects as of the date hereof, except to the extent that any representation or
warranty relates to a specified date, in which case such are true and correct in
all material respects as of the specific date to which such representations and
warranties relate.
4. Effective Date. The amendments to the Credit Agreement contained herein
shall not become effective (the "Effective Date") until (i) this Amendment has
been duly executed and delivered by the Company, the Parent and each of the
Lenders; (ii) the acknowledgement attached hereto shall have been executed and
delivered by each of the Subsidiaries; (iii) the Parent and the Company shall
have delivered to the Agent for each of the Lenders new Revolving Notes
reflecting their new Revolving Commitments; (iv) solely with respect to
paragraphs 2(b), 2(c), 2(d), 2(e) and 2(f) hereof, such paragraphs shall be of
no force or effect until the Supplemental Equity Offering shall have been
consummated, or, if the Supplemental Equity Offering is not consummated or if
the Parent shall fail to receive gross proceeds from the Supplemental Equity
Offering equal to or excess of $15,000,000, Borrowers shall have increased the
New Senior Debentures and/or New Senior Notes offerings by an amount, such that
the gross proceeds of such increase in offering amounts, when added to the gross
proceeds from the Supplemental Equity Offering will equal or exceed $15,000,000;
and (v) Borrowers shall have paid to Agent for the benefit of the Lenders all
fees set forth in that certain commitment letter dated March 24, 1998 between
the Agent and the Borrowers.
10
<PAGE>
5. Expenses. The Company agrees to pay on demand all costs and expenses,
including reasonable attorneys' fees, of the Agent incurred in connection with
this Amendment.
6. Continued Effectiveness. The term "Agreement", "hereof", "herein" and
similar terms as used in the Credit Agreement, and references in the other Loan
Documents to the Credit Agreement, shall mean and refer to, from and after the
Effective Date, the Credit Agreement as amended by this Amendment. Each of the
Company and the Parent hereby agrees that all of the covenants and agreements
contained in the Credit Agreement and the Loan Documents are hereby ratified and
confirmed in all respects.
7. Gold Consignment Agreement. The Lenders hereby consent to the execution
and delivery by the Company of Amendment No. 6 and Limited Consent to the Gold
Consignment Agreement, such Amendment No. 6 and Limited Consent being
substantially in the form attached hereto as Exhibit C.
8. Supplemental Equity Offering. The Lenders hereby consent to the
Supplemental Equity Offering provided that the Parent shall have received gross
proceeds from the Supplemental Equity Offering in an amount not less than
$15,000,000, provided, that if the Parent shall fail to receive gross proceeds
in excess of $15,000,000 from such offering, Borrowers shall increase the amount
of New Senior Debentures and/or New Senior Notes offered by an amount, such that
the gross proceeds of such increased offering, when added to the gross proceeds
received from the Supplemental Equity Offering will equal or exceed $15,000,000.
9. Counterparts. This Amendment may be executed in counterparts, each of
which shall be an original, and all of which, taken together, shall constitute a
single instrument. Delivery of an executed counterpart of a signature page to
this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.
10. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to the
conflict of laws provisions thereof.
11
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly
executed by their respective officers as of the date first written above.
FINLAY ENTERPRISES, INC.
By: /s/Barry D. Scheckner
------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
FINLAY FINE JEWELRY CORPORATION
By: /s/Barry D. Scheckner
------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
GENERAL ELECTRIC CAPITAL CORPORATION,
Individually and as Agent
By: /s/Rick Luck
------------------------------------
Name: Rick Luck
Title: Duly Authorized Signatory
FLEET PRECIOUS METALS INC.
By: /s/David P. Berube
------------------------------------
Name: David P. Berube
Title: AVP
By: /s/Anthony J. Capuano
------------------------------------
Name: Anthony J. Capuano
Title: SVP
12
<PAGE>
THE CHASE MANHATTAN BANK
By: /s/Dolores A. Walsh
----------------------------------
Name: Dolores A. Walsh
Title: Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/E.C. Forst
----------------------------------
Name: E.C. Forst
Title: Authorized Signatory
BANK LEUMI USA
By: /s/David Selove
----------------------------------
Name: David Selove
Title: Vice President
By: /s/Jeffrey E. Pfeffer
----------------------------------
Name: Jeffrey E. Pfeffer
Title: Senior Vice President
ABN AMRO BANK, N.V.
By: /s/Jeffrey Sarfaty
-----------------------------------
Name: Jeffrey Sarfaty
Title: VP
By: /s/Ned Koppelson
-----------------------------------
Name: Ned Koppelson
Title: VP
13
<PAGE>
Each of the Guarantors, by signing below, confirms in favor of the Agent and the
Lenders that it consents to the terms and conditions of the foregoing Amendment
No. 3 to the Amended and Restated Credit Agreement and agrees that it has no
defense, offset, claim, counterclaim or recoupment with respect to any of its
obligations or liabilities under its respective Guaranty and that all terms of
such Guaranty shall continue in full force and effect, subject to the terms
thereof.
FINLAY JEWELRY, INC.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President
and Chief Financial Officer
SONAB HOLDINGS, INC.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President
and Chief Financial Officer
SONAB INTERNATIONAL, INC.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President
and Chief Financial Officer
SOCIETE NOUVELLE D'ACHAT DE BIJOUTERIE - S.O.N.A.B.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Attorney-in-Fact
14
<PAGE>
EXHIBIT A
---------
LENDERS, COMMITMENTS AND INITIAL EURODOLLAR OFFICES
Revolving
Lender and Initial Commitment
Eurodollar Office Amount %
- ----------------- ------ -
General Electric $91,666,667 33.333%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals, Inc. $61,111,111 22.222%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners, L.P. $48,888,889 17.778%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $30,555,556 11.111%
111 West 40th Street, 10th Floor
New York, New York 10018
Bank Leumi USA $12,222,222 4.444%
562 Fifth Avenue
New York, New York 10036
ABN AMRO Bank, N.V. $30,555,556 11.111%
(New York Branch)
500 Park Avenue
New York, New York 10022
<PAGE>
Revolving
Sublimit
Commitment1 %
----------- -
General Electric $8,333,333 33.333%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals Inc. $5,555,556 22.222%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners L.P. $4,444,444 17.778%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $2,777,778 11.111%
111 West 40th Street
Bank Leumi USA $1,111,111 4.444%
562 Fifth Avenue
New York, New York 10036
ABN AMRO Bank, N.V. $2,777,778 11.111%
(New York Branch)
500 Park Avenue
New York, New York 10022
_________________________________
1As such amount may vary pursuant to the definition of Parent Revolving Credit
Facility Sublimit Commitment.
AMENDMENT NO. 6
THIS AMENDMENT NO. 6 (this "Amendment") is made as of April_24, 1998, by
and between FINLAY FINE JEWELRY CORPORATION, a Delaware corporation with its
principal office at 521 Fifth Avenue, New York, New York 10175 (the "Consignee")
and RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, a national banking association
with its principal office at One Hospital Trust Plaza, Providence, Rhode Island
02903 (the "Consignor") amending certain provisions of the Gold Consignment
Agreement dated as of June 15, 1995 (as amended, modified or supplemented and in
effect, the "Consignment Agreement"), by and between the Consignee and the
Consignor. Capitalized terms used herein which are defined in the Consignment
Agreement and not defined herein shall have the same meaning herein as therein.
WHEREAS, the Consignee has requested that the Consignor agree to amend the
terms of the Consignment Agreement in certain respects as hereinafter more fully
set forth;
WHEREAS, the Consignor is willing to amend the terms of the Consignment
Agreement in such respects upon the terms and subject to the conditions
contained herein;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Consignment Agreement, herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
S1. Amendments of S1 of the Consignment Agreement.__Section 1 of the
Consignment Agreement is hereby amended by:
(a) deleting the text "two and one quarter percent (2-1/4%)" from clause (b) of
the definition of "Consignment Fixed Rate" and substituting in lieu thereof
the text "one and three-quarters percent (1-3/4%)".
(b) deleting the dollar amount "$25,000,000" contained in clause (b) of the
definition of "Consignment Limit" and substituting in lieu thereof the
dollar amount "$32,000,000".
(c) inserting in the place required by alphabetical order the following new
definitions:
"Existing Senior Discount Debentures: The Parent's 12% Senior Discount
Debentures due 2005, issued pursuant to an Indenture dated as of May 26, 1993,
as supplemented by the First Supplemental Indenture thereto dated as of October
28, 1994 and by the Second
<PAGE>
Supplemental Indenture thereto dated as of July 14, 1995, in the form
provided to the Consignor."
"Existing Senior Notes: The Consignee's 10-5/8% Senior Notes due 2003, issued
pursuant to an Indenture dated as of May 26, 1993 as supplemented by the
First Supplemental Indenture thereto dated as of October 28, 1994 and by
the Second Supplemental Indenture thereto dated as of July 14, 1995, in the
form provided to the Consignor."
"1998Offering Expenses: Non-recurring charges, costs and expenses (including
transaction expenses, any write-off of deferred financing costs, debt
discount costs and redemption premiums and including interest expense
incurred solely in respect of the Existing Senior Notes and the Existing
Senior Discount Debentures and solely during the period prior to the
redemption thereof during which the Senior Debentures and the Senior Notes
shall also be outstanding), incurred by the Parent and its Subsidiaries in
connection with (a) the Parent's offering of its common stock on or about
the Sixth Amendment Effective Date pursuant to a registration statement
filed by the Parent with the Securities Exchange Commission on March 24,
1998, as such registration statement may be amended from time to ime, (b)
the Parent's offering of the Senior Debentures, (c) the Consignee's
offering of the Senior Notes and (d) the related redemption of the Existing
Senior Discount Debentures and the Existing Senior Notes."
(d) deleting the definition of "Maturity Date", in its entirety and
substituting in lieu thereof the following new definition:
"Maturity Date: The earliest of (a) December 31, 2001, (b) the maturity date
from time to time in effect under the Dollar Facility, or (c) such other
date on which all Obligations may become due and payable pursuant to the
terms hereof."
(e) deleting definitions of "Senior Discount Debentures" and "Senior Notes" in
their entirety and substituting in lieu thereof the following new
definitions:
"Senior Debentures. The Parent's Senior Debentures due 2008 in the original
principal amount of $75,000,000, as in effect on the Sixth Amendment
Effective Date, which Senior Debentures are being issued pursuant to a
registration statement filed by the Parent with the Securities Exchange
Commission on March 24, 1998, as such registration statement may be amended
from time to time."
<PAGE>
"Senior Notes: The Consignee's Senior Notes due 2008 in the original principal
amount of $150,000,000, as in effect on the Sixth Amendment Effective Date,
which Senior Notes are being issued pursuant to a registration statement
filed by the Consignee with the Securities Exchange Commission on March 24,
1998, as such registration statement may be amended from time to time."
"Sixth Amendment: Amendment No. 6 dated as of April 24, 1998 between the
Consignor and the Consignee, amending certain provisions of this
Agreement."
"Sixth Amendment Effective Date: The date upon which the conditions to the
effectiveness of the Sixth Amendment set forth in Section 10 thereof, other
than the condition set forth in subparagaph (j) of such Section 10, shall
have been satisfied or waived in accordance with the terms of the Sixth
Amendment."
S2. Amendment of S5 of the Consignment Agreement.__Section 5 of the
Consignment Agreement is hereby amended by deleting the first paragraph thereof
in its entirety and substituting in lieu thereof the following new paragraph:
"On or prior to the Sixth Amendment Effective Date, the Consignee shall pay
to the Consignor a closing fee in the amount of $120,000. The Consignee shall
also pay to the Consignor, on the first day of each calendar month following the
Sixth Amendment Effective Date and upon the earlier to occur of the Maturity
Date or the date upon which the Commitment is no longer in effect, a commitment
fee calculated at a rate per annum which is equal to one half of one percent
(1/2%) of the average daily difference by which the Commitment amount (in
Dollars) exceeds the aggregate of the Fair Market Value of all Consigned
Precious Metal outstanding during the preceding calendar month or portion
thereof; provided, however, that no such commitment fee shall accrue or be
payable with respect to any calendar month or portion thereof during which the
average Fair Market Value of all Consigned Precious Metal outstanding during
such calendar month or portion thereof during which the Fair Market Value of all
Consigned Precious Metal outstanding during such calendar month or portion
thereof shall exceed $12,000,000. The Consignee shall also pay to the Consignor,
on or prior to the Sixth Amendment Effective Date and on each anniversary of the
date hereof, a collateral administration fee in the amount of $25,000 per
annum."
S3. Amendment of S6 of the Consignment Agreement.__Section 6 of the
Consignment Agreement is hereby amended by (a) replacing the period at the end
of subparagraph (p) thereof with a semicolon followed by the word "and", and (b)
adding the following new subparagraph (q) thereto immediately following
subparagraph (p):
<PAGE>
"(q)__ttthe Consignee and its Subsidiaries have reviewed or are reviewing
the areas within their businesses and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (i.e. the risk that computer applications
used by any of the Consignee and its Subsidiaries may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999). Based upon such review, the Consignee
reasonably believes that the "Year 2000 Problem" will not have any materially
adverse effect on the business or financial condition of any of the Consignee or
its Subsidiaries."
S4. Amendment of S8.1 of the Consignment Agreement.__Section 8.1 of the
Consignment Agreement is hereby amended by (a) replacing the period at the end
of subparagraph (j) thereof with a semicolon followed by the word "and", and (b)
adding the following new subparagraphs (k) and (l) thereto immediately following
subparagraph (j):
"(k)__comply in all respects with Section 8.27 of the Amended and Restated
Credit Agreement dated as of September 11, 1997 entered into in connection with
the Dollar Facility, as such agreement is in effect on the Sixth Amendment
Effective Date (such Section 8.27 and the defined terms used therein being
incorporated by reference herein with the same effect as if set forth in their
entirety herein), and deliver to the Consignor copies of all information, plans,
assessments, reports or other documents delivered to the Dollar Agent or the
lenders under the Dollar Facility pursuant to such Section 8.27; and
(l)__the Parent shall (i) make an initial capital contribution to the
Consignee in the aggregate principal amount of $33,000,000 within five (5)
Business Days of the final and irrevocable redemption of the Existing Senior
Discount Debentures and (ii) make an additional capital contribution to the
Consignee consisting of any funds received by the Parent from the aggregate
proceeds of the issuance of the Senior Debentures which were not used by the
Parent for the payment of costs and premiums associated with the final and
irrevocable redemption of the Existing Senior Discount Debentures, including any
premiums associated therewith."
S5. Amendment of S8.2 of the Consignment Agreement.__Section 8.2 of the
Consignment Agreement is hereby amended by:
(a) deleting subparagraph (vi) of clause (a) thereof in its entirety and
substituting in lieu thereof the following new subparagraph (vi):
<PAGE>
"(vi)__Indebtedness of the Consignee (A) evidenced by the Senior Notes in an
aggregate principal amount not to exceed $150,000,000, and (B) evidenced by
the Existing Senior Notes in an aggregate principal amount not to exceed
$135,000,000, provided that such Indebtedness described in this clause (B)
shall be permitted solely until the earlier of (1) redemption of such
Existing Senior Notes with the proceeds from the issuance of the Senior
Notes and other available cash and (2) June 24, 1998;"
(b) replacing the period at the end of subparagraph (d)(ii)(F) thereof with a
semicolon followed by the word "and"
(c) adding the following new subparagraph (d)(ii)(G) thereto immediately
following existing subparagraph (d)(ii)(F) thereof:
"(G) so long as no Default or Event of Default has occurred and is continuing or
would occur after giving effect thereto, the Consignee may make payments to
the Parent in such amounts as are necessary to enable the Parent to make
interest payments on the Senior Debentures;"
(d) adding the following new clause (D) to the proviso contained in
subparagraph (h) thereof immediately prior to the semicolon at the end of
clause (C) of such proviso:
",and (D) the Consignee shall redeem or repurchase all of the Existing
Senior Notes with the proceeds from the issuance of the Senior Notes
and other available cash".
S6. Amendment of S8.3 of the Consignment Agreement. Section 8.3 of the
Consignment Agreement is hereby amended by:
(a) (i) deleting the ratio "1.15 to 1; or" in su paragraph (a) thereof and
substituting in lieu thereof the phrase "the ratio set forth opposite the
date set forth in the table below upon which such period shall have ended"
and (ii) inserting the following new table at the end of subparagraph (a)
thereof:
"Period Ending: Ratio:
1/31/98 1.17:1
4/30/98 1.17:1
7/31/98 1.17:1
10/31/98 1.17:1
1/31/99 1.26:1
<PAGE>
4/30/99 1.26:1
7/31/99 1.26:1
10/31/99 1.31:1
1/31/00 and 1.35:1"
thereafter
(b) deleting subparagraph (b) thereof in its entirety and substituting in lieu
thereof the following new subparagraph (b):
"(b) __permit the ratio of (i) the aggregate principal amount of all
Indebtedness for Borrowed Money of the Parent and its Subsidiaries on
a consolidated basis as of any fiscal quarter ending date set forth in
the table below to (ii) Consolidated EBITDA of the Parent and its
Subsidiaries for the period of four consecutive fiscal quarters ending
on such fiscal quarter ending date in such table, to exceed the ratio
set forth opposite such date in such table:
Fiscal Quarter
Ending Date: Ratio:
1/31/98 4.73:1
4/30/98 6.55:1
7/31/98 6.55:1
10/31/98 6.33:1
1/31/99 4.29:1
4/30/99 6.16:1
7/31/99 6.16:1
10/31/99 5.94:1
1/31/00 4.24:1
4/30/00 5.50:1
7/31/00 5.50:1
10/31/00 5.28:1
1/31/01 3.85:1
4/30/01 4.95:1
7/31/01 4.95:1
10/31/01 4.73:1
1/31/02 3.52:1
;provided, however, that solely for the purposes of calculating the
above ratio as of, and for the fiscal period ended on, October 31,
<PAGE>
1997 only, there shall be excluded from such calculation any effect
upon Indebtedness for Borrowed Money of the Parent and its
Subsidiaries and on Consolidated EBITDA of the Parent and its
Subsidiaries resulting from the acquisition by the Consignee of the
assets and business acquired from the Diamond Park Fine Jewelry
Division (the "Diamond Park Division") of Zale Delaware, Inc. (the
"Seller") pursuant to the terms of a certain Asset Purchase Agreement
dated September 3, 1997 among the Parent, the Consignee, the Seller
and Zale Corporation, as in effect on the date of Amendment No. 4
hereto (the "Acquisition"), or from the related financing of such
Acquisition under the Dollar Facility; and provided, further, that
solely for the purposes of calculating the above ratio as of, and for
the fiscal periods ending on, January 31, 1998, April 30, 1998 and
July 31, 1998, the Consignee may utilize the actual historical
earnings information (provided to the Consignee by Zale Corporation
pursuant to the Acquisition) in respect of the operation of the
Diamond Park Division by the Seller prior to the Consignee's
acquisition of the Diamond Park Division to calculate Consolidated
EBITDA for such fiscal periods."
(c) inserting the following new subparagraph (c) therein immediately
following subparagraph (b) thereof:
"(c) permit Consolidated EBITDA of the Parent and its Subsidiaries for
any period of four consecutive fiscal quarters ending on any date
set forth in the table below to be less than the amount set forth
opposite such date in such table:
Date: Amount:
1/31/98 $55,800,000
4/30/98 $58,500,000
7/31/98 $58,500,000
10/31/98 $60,300,000
1/31/99 $63,000,000
4/30/99 $63,000,000
7/31/99 $63,000,000
10/31/99 $63,000,000
1/31/00 $67,500,000
4/30/00 $67,500,000
7/31/00 $67,500,000
10/31/00 $67,500,000
1/31/01 $72,000,000
4/30/01 $73,800,000
7/31/01 $73,800,000
<PAGE>
10/31/01 $73,800,000
1/31/02 $78,300,000
;provided, however, that solely for the purposes of calculating
Consolidated EBITDA for the fiscal periods ending on October 31, 1997,
January 31, 1998, April 30, 1998 and July 31, 1998, the Consignee may
utilize the actual historical earnings information (provided to the
Consignee by Zale Corporation pursuant to the Acquisition) in respect
of the operation of the Diamond Park Division by the Seller prior to
the Consignee's acquisition of the Diamond Park Division to calculate
Consolidated EBITDA for such fiscal periods."
(d) inserting the following new text therein immediately following
subparagraph (c) thereof:
"Notwithstanding the foregoing provisions of this Section 8.3, for
purposes of calculating the financial covenants set forth in
Sections 8.3(a), (b) and (c) above, there shall be excluded from
such calculations the effect of any 1998 Offering Expenses."
S7. References to "Senior Discount Debentures". The Consignment Agreement
is hereby amended to delete each reference to "Senior Discount Debentures" in
its entirety and to substitute in lieu thereof the text "Senior Debentures".
S8. Limited Consent. Subject to the satisfaction of the conditions
precedent set forth in S10 hereof, the Consignor hereby consents to the
execution and delivery by the Consignee of Amendment No. 3 to the Amended and
Restated Credit Agreement dated as of September 11, 1997, among the Consignee,
the Parent, the Dollar Agent and the lenders party thereto, such Amendment No. 3
being in substantially the form attached hereto as Exhibit A.
S9. Representations and Warranties.__The Consignee hereby represents and
warrants to the Consignor as follows:
(a) Representations and Warranties in Consignment Agreement. The
representations and warranties of the Consignee contained in the
Consignment Agreement were true and correct in all material respects when
made and continue to be true and correct in all material respects on the
date hereof, except to the extent of changes resulting from transactions
contemplated or permitted by the Consignment Documents and this Amendment
and changes occurring in the ordinary course of business that do not result
in a Materially Adverse Effect, and to the extent that such representations
and warranties relate expressly to an earlier date.
<PAGE>
(b) Authority, No Conflicts, Etc. The execution, delivery and performance by
the Consignee of this Amendment and the consummation of the transactions
contemplated hereby (i)__are within the corporate power of the Consignee
and have been duly authorized by all necessary corporate action on the part
of the Consignee, (ii)__do not require any approval or consent of, or
filing with, any governmental agency or authority, or any other person,
association or entity (except for the consent of the Dollar Agent and each
of the lenders under the Dollar Facility, which consent is being obtained
concurrently herewith as required by Section 10 hereof), which bears on the
validity of this Amendment or the Consignment Documents and which is
required by law or the regulation or rule of any agency or authority, or
other person, association or entity, (iii)__do not violate any provisions
of any law, rule or regulation or any provision of any order, writ,
judgment, injunction, decree, determination or award presently in effect in
which the Consignee is named in a manner which has or could reasonably be
expected to have a Materially Adverse Effect, (iv)__do not violate any
provision of the Charter Documents of the Consignee, (v)__do not result in
any breach of or constitute a default under any agreement or instrument to
which the Consignee is a party or by which it or any of its properties is
bound, including without limitation any indenture, loan or credit
agreement, lease, debt instrument or mortgage, in a manner which has or
could reasonably be expected to have a Materially Adverse Effect, and
(vi)__do not result in or require the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon any of the assets or properties of the
Consignee except in favor of the Consignor pursuant to the Security
Documents.
(c) Enforceability of Obligations. This Amendment has been duly executed
and delivered by the Consignee and constitutes the legal, valid and binding
obligation of the Consignee, enforceable against the Consignee in accordance
with its terms, provided that (a)__enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws of general application affecting the rights and
remedies of creditors, and (b)__enforcement may be subject to general principles
of equity, and the availability of the remedies of specific performance and
injunctive relief may be subject to the discretion of the court before which any
proceedings for such remedies may be brought.
S10. Condition to Effectiveness.__The effectiveness of this Amendment shall
be subject to satisfaction of the following conditions precedent, in each case
<PAGE>
in form and substance satisfactory to the Consignor; provided that the
effectiveness of the amendments described in Section 5(a) of this Amendment (and
the associated amendments to the definitions of "Senior Notes" and "Existing
Senior Notes", in each case solely for purposes of using such amended
definitions in such Section 5(a) hereof) shall not be subject to satisfaction of
the condition precedent set forth in subparagraph (j) of this Section 10:
(a) this Amendment duly executed by each of the Consignee and the Consignor;
(b) a Certificate of the Secretary or Assistant Secretary of the Consignee
certifying as to the Consignee's charter documents (as certified by the
Secretary of State of the State of Delaware), by-laws, incumbency and
authorizing resolutions of the Consignee's board of directors authorizing
the transactions contemplated by the Amendment;
(c) a good standing certificate from the Secretary of State of the State of
Delaware regarding the Consignee's good standing;
(d) foreign qualification certificates for the Consignee from each jurisdiction
in which the Consignee has qualified to do business as a foreign
corporation;
(e) a legal opinion of Tenzer Greenblatt LLP, counsel to the Consignee;
(f) a cash amount equal to $145,000, comprised of (i) the closing fee in the
amount of $120,000 contemplated by S5 of the Consignment Agreement (as
amended by this Amendment) and (ii) the annual collateral administration
fee in the amount of $25,000 contemplated by S5 of the Consignment
Agreement (as amended by this Amendment);
(g) evidence of the issuance by the Parent of its Senior Debentures due 2008 in
the maximum aggregate principal amount of $75,000,000 (the "New Senior
Debentures"), the net cash proceeds of which shall be used to redeem the
Senior Discount Debentures (as defined in the Consignment Agreement prior
to the amendments contemplated by this Amendment);
(h) evidence of the issuance by the Consignee of its Senior Notes due 2008 in
the maximum aggregate principal amount of $150,000,000 (the "New Senior
Notes"), the net cash proceeds of which shall be used to redeem the Senior
Notes (as defined in the Consignment Agreement prior to the amendments
contemplated by this Amendment);
<PAGE>
(i) evidence of the issuance by the Parent of up to $19,200,000 (and in any
event yielding net cash proceeds to the Parent of not less than
$12,700,000) of its common stock, provided that if the Parent shall be
unable to complete such issuance of common stock for any reason, the Parent
shall have instead issued additional New Senior Debentures or other
Indebtedness of the Parent in an aggregate principal amount not less than
$12,700,000 on terms and conditions satisfactory to the Consignor in its
sole discretion; and provided further that the net cash proceeds of such
issuance shall be used to redeem the Senior Discount Debentures (as defined
in the Consignment Agreement prior to the amendments contemplated by this
Amendment);
(j) evidence of the repayment in full of the existing Senior Discount
Debentures (as defined in the Consignment Agreement prior to the amendments
contemplated by this Amendment) of the Parent and the existing Senior Notes
(as defined in the Consignment Agreement prior to the amendments
contemplated by this Amendment) of the Consignee with the proceeds of the
New Senior Debentures and the New Senior Notes and other available cash,
including the retirement in full of all such Senior Discount Debentures and
Senior Notes and all fees and expenses in connection therewith;
(k) evidence of the amendment of the Dollar Facility to provide for, among
other things, an increase in the maximum principal amount of credit to be
extended thereunder from $225,000,000 to $275,000,000; and
(l) evidence of the Consignee's receipt of all necessary or appropriate third
party consents or approvals to the transactions contemplated hereby,
including, without limitation, consents or approvals from the Dollar Agent
and each of the lenders under the Dollar Facility.
S11. Ratifications, etc.__Except as expressly provided in this Amendment,
all of the terms and conditions of the Consignment Agreement and the other
Consignment Documents shall remain in full force and effect. All references in
the Consignment Agreement or any related agreement or instrument to the
Consignment Agreement shall hereafter refer to the Consignment Agreement as
amended hereby. The Consignee confirms and agrees that the Obligations of the
Consignee to the Consignor under the Consignment Documents, as amended and
supplemented hereby, are secured by and are entitled to the benefits of the
Security Documents.
S12.__No Implied Waiver. Except as expressly provided herein, nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligations of the Consignee or any right of the
Consignor consequent thereon.
<PAGE>
S13. Governing Law.__This Amendment is intended to take effect as an
instrument under seal and shall be construed according to and governed by the
internal laws of the State of Rhode Island.
S14. Execution in Counterparts.__This Amendment may be executed in any
number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart signed
by the party against whom enforcement is sought.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
FINLAY FINE JEWELRY
CORPORATION
By: /s/Barry D. Secheckner
--------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK
By:/s/ Albert L. Brown
---------------------------------
Name: Albert L. Brown
Title: Sr. Vice President
