- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 2, 1997
--------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number: 33-59380
FINLAY FINE JEWELRY CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3287757
----------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
521 Fifth Avenue, New York, NY 10175
---------------------------------------- ----------
(Address of principal executive offices) (zip code)
(212) 808-2060
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X * No ___
As of September 12, 1997, there were 1,000 shares of common stock, par value
$.01 per share, of the Registrant outstanding. As of such date, all shares of
common stock were owned by the Registrant's parent, Finlay Enterprises, Inc., a
Delaware Corporation.
* The Registrant is not subject to the filing requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934 and is voluntarily filing this
Quarterly Report on Form 10-Q.
<PAGE>
FINLAY FINE JEWELRY CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED AUGUST 2, 1997
INDEX
PAGE(S)
-------
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Operations for the thirteen weeks and
twenty-six weeks ended August 3, 1996 and August 2, 1997...........1
Consolidated Balance Sheets as of February 1, 1997 and
August 2, 1997.....................................................3
Consolidated Statements of Changes in Stockholder's Equity for
the year ended February 1, 1997 and twenty-six weeks ended
August 2, 1997.....................................................4
Consolidated Statements of Cash Flows for the thirteen weeks and
twenty-six weeks ended August 3, 1996 and August 2, 1997...........5
Notes to Consolidated Financial Statements.........................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................17
SIGNATURES ..................................................................19
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
FINLAY FINE JEWELRY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-------------------------
August 3, August 2,
1996 1997
---------- ----------
<S> <C> <C>
Sales............................................ $ 137,188 $ 148,060
Cost of sales.................................... 65,845 72,112
---------- ----------
Gross margin................................... 71,343 75,948
Selling, general and administrative expenses..... 62,226 66,171
Depreciation and amortization.................... 2,746 2,939
---------- ----------
Income (loss) from operations.................. 6,371 6,838
Interest expense, net............................ 5,790 6,012
---------- ----------
Income (loss) before income taxes.............. 581 826
Provision (credit) for income taxes.............. 596 475
---------- ----------
Net income (loss).............................. $ (15) $ 351
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
FINLAY FINE JEWELRY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
-------------------------
August 3, August 2,
1996 1997
---------- ----------
<S> <C> <C>
Sales............................................ $ 267,907 $ 282,652
Cost of sales.................................... 129,883 137,834
---------- ----------
Gross margin................................... 138,024 144,818
Selling, general and administrative expenses..... 125,673 131,101
Depreciation and amortization.................... 5,384 5,692
---------- ----------
Income (loss) from operations.................. 6,967 8,025
Interest expense, net............................ 11,033 11,416
---------- ----------
Income (loss) before income taxes.............. (4,066) (3,391)
Provision (credit) for income taxes.............. (1,122) (1,143)
---------- ----------
Net income (loss).............................. $ (2,944) $ (2,248)
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
FINLAY FINE JEWELRY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
(Unaudited)
February 1, August 2,
1997 1997
---------- ---------
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents............................. $ 20,392 $ 3,236
Accounts receivable - department stores............... 15,362 29,884
Other receivables..................................... 4,338 6,963
Merchandise inventories............................... 222,445 221,393
Prepaid expenses and other............................ 1,438 2,080
---------- ---------
Total current assets................................ 263,975 263,556
---------- ---------
Fixed assets
Equipment, fixtures and leasehold improvements........ 73,223 81,235
Less - accumulated depreciation and amortization...... 21,423 25,141
---------- ---------
Fixed assets, net................................... 51,800 56,094
---------- ---------
Deferred charges and other assets....................... 5,770 5,931
Goodwill................................................ 95,263 93,646
---------- ---------
Total assets........................................ $ 416,808 $ 419,227
========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Notes payable......................................... $ - $ 111,522
Current portion of long-term debt..................... 2 4
Accounts payable - trade.............................. 133,252 48,103
Accrued liabilities:
Accrued salaries and benefits...................... 15,061 12,242
Accrued miscellaneous taxes........................ 4,147 5,109
Accrued insurance.................................. 762 941
Accrued interest................................... 3,833 4,188
Accrued management transition and consulting....... 1,787 1,377
Other.............................................. 14,665 8,329
Income taxes payable.................................. 13,970 5,580
Deferred income taxes................................. 804 489
---------- ---------
Total current liabilities.......................... 188,283 197,884
Long-term debt.......................................... 135,000 135,000
Other non-current liabilities........................... 7,115 7,709
---------- ---------
Total liabilities.................................. 330,398 340,593
---------- ---------
Stockholder's equity
Common Stock, par value $.01 per share; authorized
5,000 shares; issued and outstanding 1,000
shares............................................. - -
Additional paid-in capital............................ 69,241 69,241
Distributions to investor group in excess of
carryover basis.................................... (24,390) (24,390)
Retained earnings..................................... 44,609 41,505
Foreign currency translation adjustment............... (3,050) (7,722)
---------- ---------
86,410 78,634
---------- ---------
Total liabilities and stockholder's equity......... $ 416,808 $ 419,227
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
FINLAY FINE JEWELRY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Distribution to Foreign
----------------- Additional investor group Currency Total
Number Paid-in in excess of Retained Translation Stockholder's
of shares Amount Capital carryover basis Earnings Adjustment Equiity
--------- ------ --------- --------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 3, 1996........ 1,000 - $ 69,241 $ (24,390) $ 28,283 $ (747) 72,387
Net income (loss).............. - - - - 17,962 - 17,962
Dividends on Common Stock...... - - - - (1,636) - (1,636)
Foreign currency translation
adjustment.................. - - - - - (2,303) (2,303)
--------- ------ --------- --------------- ----------- ----------- ------------
Balance, February 1, 1997........ 1,000 - 69,241 (24,390) 44,609 (3,050) 86,410
Net income (loss).............. - - - - (2,248) - (2,248)
Dividends on Common Stock...... - - - - (856) - (856)
Foreign currency translation
adjustment.................. - - - - - (4,672) (4,672)
--------- ------ --------- --------------- ----------- ----------- ------------
Balance, August 2, 1997(Unaudited) 1,000 $ - $ 69,241 $ (24,390) $ 41,505 $ (7,722) $ 78,634
========= ====== ========= =============== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
FINLAY FINE JEWELRY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------
August 3, August 2,
1996 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss)....................................... $ (15) $ 351
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization........................... 3,002 3,196
Other, net.............................................. 652 233
Changes in operating assets and liabilities:
(Increase) decrease in accounts and other receivables (353) 1,650
(Increase) decrease in merchandise inventories....... (3,763) 23,165
Increase in prepaid expenses and other............... (726) (657)
Decrease in accounts payable and accrued liabilities. (2,720) (31,076)
--------- --------
NET CASH USED IN OPERATING ACTIVITIES............... (3,923) (3,138)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment, fixtures and leasehold
improvements......................................... (3,622) (5,102)
Other, net.............................................. (137) (1,190)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES............... (3,759) (6,292)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit facility................. 106,788 117,722
Principal payments on revolving credit facility......... (100,655) (107,410)
Payment of dividends.................................... (409) -
Other, net.............................................. (19) (5)
--------- --------
NET CASH PROVIDED FROM FINANCING ACTIVITIES......... 5,705 10,307
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............. 20 (81)
--------- --------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS..... (1,957) 796
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............ 3,214 2,440
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................. $ 1,257 $ 3,236
========= ========
Supplemental disclosure of cash flow information:
Interest paid........................................... $ 1,936 $ 2,017
Income taxes paid....................................... 1,480 3,385
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
FINLAY FINE JEWELRY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
-----------------------
August 3, August 2,
1996 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss)...................................... $ (2,944) $ (2,248)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization.......................... 5,898 6,206
Other, net............................................. 931 661
Changes in operating assets and liabilities:
Increase in accounts and other receivables.......... (15,283) (18,011)
Increase in merchandise inventories................. (12,965) (2,146)
Increase in prepaid expenses and other.............. (1,648) (675)
Decrease in accounts payable and accrued liabilities (68,334) (101,678)
--------- --------
NET CASH USED IN OPERATING ACTIVITIES............. (94,345) (117,891)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment, fixtures and leasehold
improvements........................................ (7,224) (8,477)
Other, net............................................. (220) (1,813)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES............. (7,444) (10,290)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit facility................ 260,421 297,109
Principal payments on revolving credit facility........ (182,476) (185,587)
Payment of dividends................................... (409) -
Other, net............................................. (206) 2
--------- --------
NET CASH PROVIDED FROM FINANCING ACTIVITIES....... 77,330 111,524
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH........... (21) (499)
--------- --------
DECREASE IN CASH AND CASH EQUIVALENTS............. (24,480) (17,156)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........... 25,737 20,392
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................. $ 1,257 $ 3,236
========= ========
Supplemental disclosure of cash flow information:
Interest paid.......................................... $ 10,473 $ 10,548
Income taxes paid...................................... 6,289 7,984
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
FINLAY FINE JEWELRY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Finlay Fine
Jewelry Corporation and its wholly owned subsidiaries ("Finlay Jewelry" or the
"Registrant"), a wholly owned subsidiary of Finlay Enterprises, Inc. (the
"Holding Company"), have been prepared in accordance with generally accepted
accounting principles for interim financial information. References to "Finlay"
mean collectively, the Holding Company, Finlay Jewelry and all predecessor
businesses. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments necessary to present
fairly the financial position of Finlay Jewelry as of August 2, 1997, and the
results of operations and cash flows for the thirteen weeks and twenty-six weeks
ended August 3, 1996 and August 2, 1997. Due to the seasonal nature of the
business, results for interim periods are not indicative of annual results. The
unaudited consolidated financial statements have been prepared on a basis
consistent with that of the audited consolidated financial statements as of
February 1, 1997 referred to below. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC").
These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in
Finlay Jewelry's annual report on Form 10-K for the fiscal year ended February
1, 1997 ("Form 10-K") previously filed with the SEC.
Finlay's fiscal year ends on the Saturday closest to January 31. References
to 1994, 1995, 1996 and 1997 relate to the fiscal years ended or ending January
28, 1995, February 3, 1996, February 1, 1997 and January 31, 1998, respectively.
Each of the fiscal years includes fifty-two weeks except 1995, which includes
fifty- three weeks.
NOTE 2 - DESCRIPTION OF BUSINESS
Finlay is a retailer of fine jewelry products and primarily operates leased
fine jewelry departments in department stores throughout the United States and
France. Finlay also operates leased fine jewelry departments in the United
Kingdom and Germany. A significant portion of Finlay's revenues are generated in
the fourth quarter due to the seasonality of the retail industry. Approximately
70% of Finlay's sales in 1996 were from operations in two major department store
groups of which 48% represents Finlay's sales from one department store group.
NOTE 3 - MERCHANDISE INVENTORIES
Merchandise inventories consisted of the following:
<TABLE>
<CAPTION>
(Unaudited)
February 1, August 2,
1997 1997
---------- ----------
(in thousands)
Jewelry goods - rings, watches and other fine
<S> <C> <C>
jewelry (specific identification basis)...... $ 231,298 $ 230,246
Less: Excess of specific identification cost
over LIFO inventory value.................... 8,853 8,853
----------- -----------
$ 222,445 $ 221,393
=========== ===========
</TABLE>
7
<PAGE>
FINLAY FINE JEWELRY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - MERCHANDISE INVENTORIES (continued)
The LIFO method had the effect of decreasing income (loss) before income
taxes for the thirteen weeks ended August 3, 1996 by $200,000 and increasing
income (loss) before income taxes for the thirteen weeks ended August 2, 1997 by
$191,000. The effect of applying the LIFO method for the twenty-six weeks ended
August 3, 1996 was to decrease income (loss) before income taxes by $391,000.
The LIFO method had no effect on income (loss) before income taxes for the
twenty-six weeks ended August 2, 1997. Finlay determines its LIFO inventory
value by utilizing selected producer price indices published for jewelry and
watches by the Bureau of Labor Statistics. Due to the application of APB Opinion
No. 16, inventory valued at LIFO for income tax reporting purposes is
approximately $22,000,000 lower than that for financial reporting purposes at
February 1, 1997.
Approximately $194,276,000 and $205,466,000 at February 1, 1997 and August
2, 1997, respectively, of merchandise received on consignment has been excluded
from Merchandise inventories and Accounts payable- trade in the accompanying
Consolidated Balance Sheets.
The cost to Finlay of gold merchandise sold on consignment, which typically
varies with the price of gold, is not fixed until the sale is reported to the
vendor following the sale of the merchandise. Finlay frequently enters into
futures contracts, based upon the anticipated sales of gold product, such as
options or forwards, to hedge against the risk arising from those payment
arrangements. Changes in the market value of futures contracts are accounted for
as an addition to or reduction from the inventory cost. At August 3, 1996 and
August 2, 1997, the gain/loss on open futures contracts was not material.
In August 1995, Finlay Jewelry consummated a gold consignment agreement (the
"Gold Consignment Agreement") with Rhode Island Hospital Trust National Bank
("RIHT"), which expires on February 28, 1998. The Gold Consignment Agreement
enables Finlay Jewelry to receive merchandise by providing gold, or otherwise
making payment, to certain vendors who currently supply Finlay with merchandise
on consignment. While the merchandise involved remains consigned, the consignor
and title to the gold content of the merchandise changes from the vendors to
RIHT. As a result, such vendors have reduced their working capital requirements
and associated financing costs. Consequently, Finlay has negotiated more
favorable prices and terms with the participating vendors. Finlay Jewelry can
obtain, pursuant to the Gold Consignment Agreement, up to the lesser of (i)
85,000 fine troy ounces or (ii) $25,000,000 worth of gold, subject to a formula
as prescribed by the Gold Consignment Agreement. At August 2, 1997, amounts
outstanding under the Gold Consignment Agreement totaled 38,007 fine troy
ounces, valued at approximately $12.4 million. For financial statement purposes,
the consigned gold is not included in Merchandise inventories on Finlay
Jewelry's consolidated balance sheet and therefore no related liability has been
recorded.
NOTE 4 - LEASE AGREEMENTS
Finlay conducts substantially all of its operations as leased departments in
department stores. All of these leases, as well as rentals for office space and
equipment, are accounted for as operating leases. A substantial number of such
operating leases expire on various dates through 2008. All references herein to
leased departments refer to departments operated pursuant to license agreements
or other arrangements with host department stores.
8
<PAGE>
FINLAY FINE JEWELRY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LEASE AGREEMENTS (continued)
Substantially all of the department store leases provide that the title to
certain fixed assets of Finlay transfers upon termination of the leases, and
that Finlay will receive the undepreciated value of such fixed assets from the
host store in the event such transfers occur. The values of such fixed assets
are recorded at the inception of the lease arrangement and are reflected in the
accompanying Consolidated Balance Sheets.
In many cases, Finlay is subject to limitations under its lease agreements
with host department stores which prohibit Finlay from operating departments for
other store groups within a certain geographical radius of the host store.
The store leases provide for the payment of fees based on sales, plus, in
some instances, installment payments for fixed assets. Lease expense, included
in Selling, general and administrative expenses, is as follows (unaudited):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------- ------------------------
August 3, August 2, August 3, August 2,
1996 1997 1996 1997
---------- ---------- ---------- -----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Minimum fees............ $ 1,265 $ 1,968 $ 2,437 $ 3,810
Contingent fees......... 20,808 21,814 40,442 41,705
---------- ---------- ---------- -----------
Total............... $ 22,073 $ 23,782 $ 42,879 $ 45,515
========== ========== ========== ===========
</TABLE>
NOTE 5 - LONG TERM INCENTIVE PLANS
On March 5, 1997, a senior officer of Finlay received options under the
Holding Company's Long Term Incentive Plan (the "Incentive Plan") to purchase an
aggregate of 139,719 shares of Common Stock at an exercise price of $14.00 per
share. Such options vest and become exercisable on January 2, 2001.
On March 6, 1997, the Board of Directors of the Holding Company adopted the
1997 Long Term Incentive Plan ("1997 Plan"), which was approved by the Holding
Company's stockholders in June 1997. The 1997 Plan, which is similar to the
Incentive Plan, is intended as a successor to the Incentive Plan and will
provide for the grant of the same types of awards as are currently available
under the Incentive Plan. An aggregate of 350,000 shares of the Holding
Company's Common Stock have been reserved for issuance pursuant to the 1997
Plan, of which a total of 312,815 shares are subject to options granted to
certain senior management, key employees and a director. The exercise price of
such options range from $13.875 per share to $14.875 per share.
9
<PAGE>
FINLAY FINE JEWELRY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - OTHER TRANSACTIONS
On September 11, 1997, Finlay amended its $135,000,000 Revolving Credit
Facility by (i) increasing the line of credit to $175,000,000, (ii) including
eligible international assets in the borrowing base formula, (iii) reducing
interest rates, (iv) permitting higher balances during the annual balance
reduction period and (v) extending the maturity date from May 1998 to March 2003
(the "Revolving Credit Facility").
On September 3, 1997, Finlay entered into an agreement to acquire certain
assets of the Diamond Park Fine Jewelers division of Zale Corporation ("Diamond
Park"), a leading operator of departments, for approximately $66 million. By
acquiring Diamond Park, Finlay will add 139 departments that had total sales of
approximately $93 million for the twelve months ended February 1, 1997 and will
also add new host store relationships with Mercantile Stores, Marshall Field's
and Parisian. The completion of the acquisition of Diamond Park (the "Diamond
Park Acquisition") is subject to satisfaction of certain conditions. Pursuant to
an amendment to the Revolving Credit Facility, dated September 11, 1997, and
concurrent with the completion of the Diamond Park Acquisition, the line of
credit will be further increased to $225,000,000 and permitted balances during
the annual balance reduction period will be increased. Finlay intends to finance
the Diamond Park Acquisition with borrowings under the Revolving Credit
Facility.
On September 4, 1997, the Holding Company filed a registration statement
with the SEC for a proposed public offering of 3,000,000 shares of its Common
Stock (the "Offering"), of which 2,046,971 shares are to be issued and sold by
the Holding Company. Upon the completion of the Offering, the Holding Company
expects to use the net proceeds to it therefrom for working capital, repayment
of indebtedness or other general corporate purposes.
10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth operating results as a percentage of sales for
the periods indicated:
Statement of Operations Data
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------- ------------------------
August 3, August 2, August 3, August 2,
1996 1997 1996 1997
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Sales............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales..................................... 48.0 48.7 48.5 48.8
--------- --------- --------- ----------
Gross margin................................... 52.0 51.3 51.5 51.2
Selling, general and administrative expenses 45.4 44.7 46.9 46.4
Depreciation and amortization..................... 2.0 2.0 2.0 2.0
--------- --------- --------- ----------
Income (loss) from operations................. 4.6 4.6 2.6 2.8
Interest expense, net............................. 4.2 4.1 4.1 4.0
--------- --------- --------- ----------
Income (loss) before income taxes............. 0.4 0.5 (1.5) (1.2)
Provision (credit) for income taxes............... 0.4 0.3 (0.4) (0.4)
--------- --------- --------- ----------
Net income (loss)............................. 0.0% 0.2% (1.1)% (0.8)%
========= ========= ========= ==========
</TABLE>
Thirteen Weeks Ended August 2, 1997 Compared with Thirteen Weeks Ended August 3,
1996
Sales. Sales for the thirteen weeks ended August 2, 1997 increased $10.9
million, or 7.9%, over the comparable period in 1996. Comparable department
sales (departments open for the same months during comparable periods) increased
6.9%. Management attributes this increase in comparable department sales to the
following initiatives: (i) introducing its "Key Item" and "Best Value"
merchandising programs, which provide a targeted assortment of items at
competitive prices; (ii) increasing focus on holiday and event-driven promotions
as well as host store marketing programs; (iii) positioning its departments as a
"destination location" for fine jewelry; and (iv) implementing project PRISM
(Promptly Reduce Inefficiencies and Sales Multiply), a management initiative
designed to allow Finlay's sales associates more time for customer sales and
service. Sales from the operation of net new departments (departments not
included in comparable department sales) contributed $1.4 million. During the
thirteen weeks ended August 2, 1997, Finlay opened eight departments and closed
two departments. The openings and closings were all within existing store
groups. The closings resulted from host store decisions to close the stores.
Gross margin. Gross margin for the period increased by $4.6 million but, as
a percentage of sales, gross margin decreased by 0.7% as a result of
management's efforts to increase market penetration and market share through its
competitive pricing strategy.
Selling, general and administrative expenses. Selling, general and
administrative expenses ("SG&A") increased $3.9 million, or 6.3%, due primarily
to payroll expense and lease fees associated with the increase in Finlay
Jewelry's sales as well as an increase in net advertising expenditures as
compared with the 1996 period. As a percentage of sales, SG&A decreased by 0.7%
as a result of the leveraging of these expenses.
11
<PAGE>
Depreciation and amortization. Depreciation and amortization increased by
$0.2 million, reflecting an increase in capital expenditures for the most recent
twelve months, offset by the effect of certain assets becoming fully
depreciated. This increase in fixed assets was due to the addition of new
departments and the renovation of existing departments.
Interest expense, net. Interest expense increased by $0.2 million reflecting
an increase in average borrowings ($247.2 million for the period in 1997
compared to $220.1 million for the comparable period in 1996) primarily as a
result of the timing of inventory receipts during the 1997 period. The increase
in average borrowings was partially offset by a lower weighted average interest
rate (9.4% for the 1997 period compared to 9.6% for the comparable period in
1996).
Provision (credit) for income taxes. The income tax provision for the 1997
and 1996 periods reflects an effective tax rate of 41.5%.
Net income (loss). The net income of $0.4 million for the 1997 period was
$0.4 million higher than the net loss for the comparable period in 1996 as a
result of the factors discussed above.
Twenty-Six Weeks Ended August 2, 1997 Compared with Twenty-Six Weeks Ended
August 3, 1996
Sales. Sales for the twenty-six weeks ended August 2, 1997 increased $14.7
million, or 5.5%, over the comparable period in 1996. Comparable department
sales increased 5.7%. Management attributes this increase in comparable
department sales primarily to the "Key Item" and "Best Value" merchandising
programs and to the marketing initiatives discussed above. The increase in
comparable department sales was offset by a $0.5 million decrease in sales
resulting form the net effect and timing of department openings and closings.
During the twenty-six weeks ended August 2, 1997, Finlay opened 25 departments
and closed six departments. The openings and closings were all within existing
store groups. The closings resulted from host store decisions to close the
stores, with one of the stores reopening at a new location with a Finlay
operated department.
Gross margin. Gross margin for the period increased by $6.8 million but, as
a percentage of sales, gross margin decreased by 0.3% as a result of
management's efforts to increase market penetration and market share through its
competitive pricing strategy.
Selling, general and administrative expenses. SG&A increased $5.4 million,
or 4.3%, due primarily to payroll expense and lease fees associated with the
increase in Finlay Jewelry's sales as well as an increase in net advertising
expenditures as compared with the 1996 period. As a percentage of sales, SG&A
decreased by 0.5% as a result of the leveraging of these expenses.
Depreciation and amortization. Depreciation and amortization increased by
$0.3 million, reflecting an increase in capital expenditures for the most recent
twelve months, offset by the effect of certain assets becoming fully
depreciated. This increase in fixed assets was due to the addition of new
departments and the renovation of existing departments.
Interest expense, net. Interest expense increased by $0.4 million reflecting
an increase in average borrowings ($231.4 million for the period in 1997
compared to $205.5 million for the comparable period in 1996) primarily as a
result of the timing of inventory receipts during the 1997 period. The increase
in average borrowings was partially offset by a lower weighted average interest
rate (9.5% for the 1997 period compared to 9.7% for the comparable period in
1996).
Provision (credit) for income taxes. The income tax provision for the 1997
and 1996 periods reflects an effective tax rate of 41.5%.
12
<PAGE>
Net income (loss). The net loss of $2.2 million for the 1997 period was $0.7
million lower than the net loss of $2.9 million for the comparable period in
1996 as a result of the factors discussed above.
Liquidity and Capital Resources
Finlay's primary capital requirements are for funding working capital for
new departments and for working capital growth of existing departments and, to a
lesser extent, capital expenditures for opening new departments and renovating
existing departments. For the twenty-six weeks ended August 3, 1996 and August
2, 1997, capital expenditures totaled $7.2 million and $8.5 million,
respectively. For 1996, capital expenditures totaled $17.5 million, which
included initial construction costs relating to Finlay's distribution and
warehouse facility. Capital expenditures for 1997, in total, are estimated to be
approximately $18.0 million. Although capital expenditures are limited by the
terms of the Revolving Credit Facility, to date this limitation has not
precluded Finlay Jewelry from satisfying its capital expenditure requirements.
Finlay's operations substantially preclude consumer receivables and in
recent years, on average, approximately 50% of Finlay's domestic merchandise has
been carried on consignment. Accordingly, management believes that relatively
modest levels of working capital are required in comparison to many other
retailers. Finlay Jewelry's working capital balance was $65.7 million at August
2, 1997, a decrease of $10.0 million from February 1, 1997. The decrease
resulted from capital expenditures and the impact of the interim net loss
exclusive of depreciation and amortization. Based on the seasonal nature of
Finlay's business, working capital requirements and therefore borrowings under
the Revolving Credit Facility can be expected to increase on an interim basis
during the first three quarters of any given fiscal year. See "- Seasonality."
The seasonality of Finlay's business causes working capital requirements to
reach their highest level in the months of October and November in anticipation
of the year-end holiday season. Accordingly, Finlay experiences seasonal cash
needs as inventory levels peak. The Revolving Credit Facility provides Finlay
with a line of credit of up to $175.0 million which is available to finance
seasonal cash and other working capital needs. The Revolving Credit Facility
initially bears interest at a rate equal to, at Finlay's option, (i) the Index
Rate (as defined in the Revolving Credit Facility) plus 0.5% or (ii) adjusted
LIBOR plus 1.5%. Commencing in 1998, the Revolving Credit Facility will bear
interest at a rate equal to, at Finlay's option, (i) the Index Rate plus a
margin ranging from 0.25% to 1.00% or (ii) adjusted LIBOR plus a margin ranging
from 1.25% to 2.00%, in each case depending on Finlay's financial performance.
Pursuant to the indenture (the "Debenture Indenture") relating to the Holding
Company's 12% senior Discount Debentures due 2005 (the "Debentures"), the
Holding Company has pledged all of the issued and outstanding shares of capital
stock of Finlay Jewelry for the benefit of the Debenture holders. Pursuant to
the agreement relating to Revolving Credit Facility (the "Revolving Credit
Agreement"), Finlay Jewelry has pledged or caused to be pledged all of the
issued and outstanding capital stock (or other equity securities) of each of its
direct and indirect subsidiaries (including Sonab Holdings, Inc., Sonab
International, Inc. and Sonab) for the benefit of the lenders under the
Revolving Credit Facility.
Pursuant to the Revolving Credit Agreement, Finlay is required to reduce
the balance of the Revolving Credit Facility in each year to $10.0 million or
less for a 30 consecutive day period (the "Balance Reduction Requirement"). In
addition, the Debenture Indenture and the indenture (the "Note Indenture")
relating to Finlay Jewelry's 10 5/8% Senior Notes due 2003 (the "Notes") require
Finlay to reduce the balance of the Revolving Credit Facility in each year to
$10.0 million or less for a specified 25 consecutive day period. Borrowings
under the Revolving Credit Facility at August 2, 1997 were $111.5 million,
compared to a zero balance at February 1, 1997 in accordance with the
then-applicable Balance Reduction Requirement and $77.9 million at August 3,
1996. The average amounts outstanding were $70.5 million and $96.4 million for
the twenty-six weeks ended
13
<PAGE>
August 3, 1996 and August 2, 1997, respectively. The maximum amount outstanding
for the twenty-six weeks ended August 2, 1997 was $121.0 million. After giving
effect to increased borrowings under the Revolving Credit Facility to finance
the Diamond Park Acquisition, the outstanding balance under the Revolving Credit
Facility at August 2, 1997 would have been $177.8 million.
Pursuant to an amendment to the Revolving Credit Facility, dated September
11, 1997, and concurrent with the completion of the Diamond Park Acquisition,
the line of credit will be increased to $225.0 million and permitted balances
during the annual balance reduction period will be increased. Finlay intends to
finance the Diamond Park Acquisition with borrowings under the Revolving Credit
Facility. In addition, upon the completion of the Offering, the Holding Company
expects to use the net proceeds to it therefrom for working capital, repayment
of indebtedness or other general corporate purposes. The Debenture Indenture and
Note Indenture restrict the Holding Company's ability to use the net proceeds
from the Offering to repay indebtedness under the Revolving Credit Facility.
Finlay Jewelry believes that, with the increased borrowing capacity under
the Revolving Credit Facility, it has sufficient liquidity to meet its
anticipated working capital requirements for both its domestic and foreign
operations. Finlay does not expect that significant additional working capital
will be required in the near-term with respect to the operation of the Diamond
Park departments because Finlay will purchase the inventory of those Diamond
Park departments which it is acquiring. On a going-forward basis, Finlay expects
that inventory purchases for the Diamond Park departments will be financed in
part by trade payables combined with an increased utilization of consignment
inventory compared to the amount of consignment merchandise on hand at the time
of the Diamond Park Acquisition. As such, management believes that future
working capital requirements for the Diamond Park departments may be reduced as
compared to the amount of working capital required at the time of the Diamond
Park Acquisition. Finlay expects to incur certain expenditures of approximately
$1.0 million associated with the integration of Diamond Park's operations.
Finlay's long-term needs for external financing will depend on its rate of
growth, the level of internally generated funds and the ability to continue
obtaining substantial amounts of merchandise on advantageous terms, including
consignment arrangements with its vendors. For 1996, Finlay had an average
balance of consignment merchandise of $201.8 million from over 200 vendors as
compared to an average balance of $208.5 million in 1995. As of August 2, 1997,
$205.5 million of consignment merchandise was on hand as compared to $194.3
million at February 1, 1997 and $194.7 million at August 3, 1996.
A substantial amount of Finlay's operating cash flow is or will be required
to pay, directly or indirectly, interest with respect to the Notes and the
Debentures and amounts due under the Revolving Credit Facility, including the
payments required pursuant to the Balance Reduction Requirement. As of August 2,
1997, Finlay Jewelry's outstanding borrowings were $246.5 million, which
included a $135.0 million balance under the Notes and a $111.5 million balance
under the Revolving Credit Facility. On May 1, 1998, the Holding Company will
have a one-time option, in accordance with the Debenture Indenture, to prepay
all or a portion of the $39.0 million of accreted interest on the Debentures as
of such date. It is the Holding Company's intent to prepay, subject to
satisfaction of certain covenants and conditions, all or a portion of such
accreted interest to reduce outstanding indebtedness and to take advantage of
the resulting tax benefits relating to the deductibility of such prepayment in
1998. The Holding Company intends to fund this prepayment using borrowings under
the Revolving Credit Facility or other available funds including, upon the
completion of the Offering, the net proceeds to it therefrom.
The Debentures do not pay cash interest until November 1, 1998.
In August 1995, Finlay Jewelry consummated the Gold Consignment Agreement,
which expires on February 28, 1998. The Gold Consignment Agreement enables
Finlay Jewelry to receive merchandise by providing gold, or otherwise making
payment, to certain vendors. Finlay Jewelry can obtain, pursuant to the Gold
Consignment Agreement, up to the lesser of (i) 85,000 fine troy ounces or (ii)
$25,000,000 worth of gold, subject to a formula
14
<PAGE>
as prescribed by the Gold Consignment Agreement. At August 2, 1997, amounts
outstanding under the Gold Consignment Agreement totaled 38,007 fine troy
ounces, valued at approximately $12.4 million. The average amount outstanding
under the Gold Consignment Agreement was $11.9 million in 1996.
Finlay Jewelry is currently implementing financial and distribution software
that is Year 2000 compliant. Finlay Jewelry has begun to assess the impact of
the Year 2000 issue on its remaining operations, including the development of
cost estimates for and the extent of programming changes required to address
this issue. Although final cost estimates have yet to be determined, it is
anticipated that these Year 2000 costs will result in an increase to Finlay
Jewelry's expenses during 1998 and 1999 and are not expected to have a material
impact on its ongoing results of operations.
Finlay believes that, based upon current operations, anticipated growth, and
availability under the Revolving Credit Facility, Finlay Jewelry will, for the
foreseeable future, be able to meet its debt service and anticipated working
capital obligations, and to make distributions to the Holding Company sufficient
to permit the Holding Company to meet its debt service obligations and to pay
certain other expenses as they come due. No assurances, however, can be given
that Finlay Jewelry's current level of operating results will continue or
improve or that Finlay Jewelry's income from operations will continue to be
sufficient to permit Finlay Jewelry and the Holding Company to meet their debt
service and other obligations. The Revolving Credit Facility, the Note Indenture
and the Gold Consignment Agreement restrict distributions from Finlay Jewelry to
the Holding Company to 0.25% of Finlay Jewelry's net sales for the preceding
fiscal year. The amounts required to satisfy the aggregate of Finlay Jewelry's
interest expense and required amortization payments totaled $10.7 million and
$10.6 million for the twenty-six weeks ended August 3, 1996 and August 2, 1997,
respectively.
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
restricts utilization of net operating loss carryforwards ("NOLs") after an
ownership change exceeding 50%. As a result of certain recapitalization
transactions in 1993, a change in ownership of the Holding Company exceeding 50%
occurred within the meaning of Section 382 of the Code. Similar restrictions
apply to other carryforwards. Consequently, there is a material limitation on
Finlay Jewelry's annual utilization of its NOLs and other carryforwards which
requires a deferral or loss of the utilization of such NOLs or other
carryforwards. Finlay Jewelry had, at October 31, 1996 (Finlay Jewelry's tax
year end), a NOL for tax purposes of approximately $14.0 million which is
subject to an annual limit of approximately $2.0 million per year. For financial
reporting purposes, no NOL existed as of February 1, 1997. An additional change
in ownership of the Holding Company within the meaning of Section 382 of the
Code may occur as a result of the Offering. However, management does not believe
that there would be any additional restrictions upon the Finlay's ability to
utilize its NOLs or other carryforwards as a result of such ownership change.
Seasonality
Finlay's business is highly seasonal, with a significant portion of its
sales and income from operations generated during the fourth quarter of each
year, which includes the year-end holiday season. The fourth quarter accounted
for an average of 42% of Finlay's sales and 86% of its income from operations
(excluding nonrecurring charges) for 1994, 1995 and 1996. Finlay has typically
experienced losses in the first three quarters of its fiscal year. During these
periods, working capital requirements have been funded by borrowings under the
Revolving Credit Facility. Accordingly, the results for any of the first three
quarters of any given fiscal year, taken individually or in the aggregate, are
not indicative of annual results.
Inflation
The effect of inflation on Finlay's results of operations has not been
material in the periods discussed.
15
<PAGE>
Forward - Looking Statements
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 (the "Exchange Act"). All statements
other than statements of historical information provided herein are
forward-looking statements and may contain information about financial results,
economic conditions, trends and known uncertainties. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, trends in the general economy, competition in the retail
jewelry business, the seasonality of the retail business, Finlay Jewelry's
ability to increase comparable department sales and to open new departments,
Finlay Jewelry's dependence on certain host store relationships due to the
concentration of sales generated by such host stores, the availability to Finlay
Jewelry of alternate sources of merchandise supply in the case of an abrupt loss
of any significant supplier, Finlay Jewelry's ability to continue to obtain
substantial amounts of merchandise on consignment, Finlay Jewelry's dependence
on key officers, Finlay Jewelry's ability to integrate the Diamond Park assets
(and any future acquisitions) into its existing business, Finlay Jewelry's high
degree of leverage and the availability to Finlay Jewelry of financing and
credit on favorable terms and changes in regulatory requirements which are
applicable to Finlay Jewelry's business.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis, judgment, belief or expectation
only as of the date hereof. Finlay Jewelry undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances that
arise after the date hereof. In addition to the disclosure contained herein,
readers should carefully review any disclosure of risks and uncertainties
contained in other documents Finlay Jewelry files or has filed from time to time
with the SEC pursuant to the Exchange Act.
16
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
2 Not applicable.
4 Not applicable.
10.1 Amendment No. 3 dated as of January 31, 1997 to the Amended and
Restated Credit Agreement dated as of March 28, 1995 among General
Electric Capital Corporation ("G. E. Capital"), individually and in
its capacity as agent, certain other lenders and financial
institutions, the Holding Company and Finlay Jewelry.
10.2 Amended and Restated Credit Agreement dated as of September 11, 1997
among G. E. Capital, individually and in its capacity as agent,
certain other lenders and financial institutions, the Holding
Company and Finlay Jewelry ("Amended Revolving Credit Agreement").
10.3 Amendment No. 1 dated as of September 11, 1997 to the Amended
Revolving Credit Agreement.
10.4 Amendment No. 2 and Limited Consent dated as of September 10, 1997
to the Gold Consignment Agreement dated as of June 15, 1995 , as
amended, by and between Finlay Jewelry and Rhode Island Hospital
Trust National Bank.
10.5 Amendment No. 3 and Limited Consent dated as of September 11, 1997
to the Gold Consignment Agreement dated as of June 15, 1995, as
amended, by and between Finlay Jewelry and Rhode Island Hospital
Trust National Bank.
10.6 Asset Purchase Agreement dated September 3, 1997 by and among the
Holding Company, Finlay Jewelry, Zale Corporation and Zale Delaware,
Inc.
10.7 Form of Amendment to Employment Agreement between David B. Cornstein
and Finlay Jewelry.
11 Not applicable.
15 Not applicable.
18 Not applicable.
19 Not applicable.
22 Not applicable.
23 Not applicable.
24 Not applicable.
17
<PAGE>
27 Financial Data Schedule.
99 Not applicable.
B. Reports on Form 8-K
On September 9, 1997, Finlay Jewelry filed with the Securities and
Exchange Commission a Current Report on Form 8-K regarding the Holding Company's
announcement that Finlay had entered into an agreement to acquire certain assets
of the Diamond Park Fine Jewelers division of Zale Corporation.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FINLAY FINE JEWELRY CORPORATION
Date: September 12, 1997 By: /s/ Barry D. Scheckner
------------------------------------
Barry D. Scheckner, Senior Vice
President and Chief Financial
Officer
(As both a duly authorized officer of
Registrant and as principal financial
officer of Registrant)
19
AMENDMENT No. 3
AMENDMENT AGREEMENT dated as of January 31, 1997 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.
WHEREAS, the Parent, the Company, the Lenders and Agent are parties to an
Amended and Restated Credit Agreement dated as of March 28, 1995 (as heretofore
and hereafter amended, modified or supplemented from time to time in accordance
with its terms, the "Credit Agreement");
WHEREAS, the Company desires to open and operate up to fifty-five (55) fine
jewelry departments in Monoprix and related stores; and
WHEREAS, subject to the terms and conditions hereof the parties hereto
desire to amend certain provisions of the Credit Agreement and of the Security
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. Upon the Effective Date (as defined herein),
the Credit Agreement shall be amended as follows:
(a) Section 3.1(c)(A)(iii) of the Credit Agreement is hereby amended by
deleting the amount "$12,000,000" appearing therein and substituting
"$20,000,000" therefor.
(b) Section 7 of the Credit Agreement is hereby amended by adding the
following as paragraph (e) thereof:
<PAGE>
(e) Notwithstanding anything to the contrary set forth in (b) above,
no more than $13,000,000 in the aggregate may be expended in connection
with the opening and operation of fine jewelry departments in Monoprix and
related stores to the extent the operation of such fine jewelry departments
is permitted hereunder.
(c) Section 7(b) of the Credit Agreement is hereby amended by deleting the
first parenthetical of such section in its entirety and substituting
"(including, without limitation, for the purpose of (i) opening and maintaining
not more than twenty-two factory outlet stores operated by the Company to the
extent set forth in Section 9.1 hereof, (ii) operating fine jewelry departments
in not more than ten Debenhams stores to the extent set forth in Section 9.23
hereof and (iii) operating fine jewelry departments in (x) not more than
fifty-five (55) Monoprix and related stores and (y) a store in Berlin, Germany,
each to the extent set forth in Section 9.25 hereof)" therefor.
(d) Section 9.1(iv) of the Credit Agreement is hereby amended by deleting
the parenthetical in such section in its entirety and substituting "(it being
agreed that of such amount, (A) no more than $4,000,000 may be expended for the
purpose of opening and maintaining factory outlet stores operated by the Company
and permitted to be opened under Section 9.24 hereof, (B) no more than
$2,000,000 may be expended for the purpose of opening and maintaining fine
jewelry departments in Debenhams stores permitted to be operated under Section
9.23 hereof and (C) no more than $2,000,000 may be expended for the purpose of
opening and maintaining fine jewelry departments in Monoprix and related stores
and a store in Berlin, Germany, to the extent stores are permitted to be
operated under Section 9.25 hereof)" therefor.
(e) Section 9.1(v) of the Credit Agreement is hereby amended by deleting
such section in its entirety and substituting therefor "(v) $18,500,000 for the
Fiscal Year ending in 1998, and (vi) $12,100,000 in any subsequent Fiscal Year
thereafter."
(f) Section 9.4(q) of the Credit Agreement is hereby amended in its
entirety to read as follows:
2
<PAGE>
(q) Investments by the Company in Sonab in the form of intercompany
Indebtedness for Borrowed Money existing after the Fourth Amendment
Effective Date as evidenced by an amended and restated Second Sonab
Intercompany Note; provided that the aggregate unpaid amount of the
Indebtedness for Borrowed Money evidenced by the Second Sonab Intercompany
Note shall not at any time exceed $33,000,000.
(g) Section 9 of the Credit Agreement is hereby amended by adding the
following as Section 9.25 thereof:
ss. 9.25 MONOPRIX LICENSE AGREEMENTS. Enter into License Agreements to
operate fine jewelry departments in more than (x) fifty-five (55) Monoprix
and related stores and (y) one store in Berlin, Germany.
(h) The provisions of Section 9.4 and 9.9 of the Credit Agreement are
waived to the extent necessary to permit the Company to (a) employ Joseph Melvin
as President and Chief Operating Officer on substantially the terms set forth in
Exhibit A annexed hereto and (b) in connection with such employment, provide (i)
payment of up to $200,000 of relocation expenses for Mr. Melvin and (ii) a
bridge loan to Mr. Melvin of up to $300,000 for the purchase of a residence in
the New York metropolitan area, such amounts referred to in this clause (b) not
to be applied against the Investment amounts permitted under Section 9.4(i).
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 Agreement) as of the date hereof
that:
(a) Each of the Parent, the Company and each Subsidiary thereof has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement and each other agreement, instrument or document executed in
connection herewith or therewith to which such Person is a party (collectively,
the "Amendment Documents").
(b) Each of the Amendment Documents has been duly executed and delivered
and each of the Amendment Documents constitutes the valid and legally binding
3
<PAGE>
obligation of the Parent and/or the Company, as the case may be, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equity principles.
(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 the Amendment Documents 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 Agreement and the other Amendment
Documents, 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) No event has occurred and is continuing which constitutes or would
constitute, with the giving of notice or lapse of time or both, an Event of
Default under the Credit Agreement or any of the other Loan Documents.
(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. Conditions Precedent. Notwithstanding any term or provision of this
Agreement to the contrary, the amendments contained herein shall not become
effective until the date and time on which the Agent and the Lenders shall have
determined (as evidenced by delivery of a counterpart of this Agreement executed
by the Agent and each Lender) that each of the following conditions precedent
shall have been satisfied (the "Effective Date"):
4
<PAGE>
(a) Counterparts of this Agreement shall have been duly executed and
delivered on behalf of the Company, the Parent and each of the Lenders.
(b) All required corporate action and proceedings in connection with the
execution and delivery of the Amendment Documents shall have been taken, and
each shall be satisfactory in form and substance to the Agent and the Lenders,
and the Agent and the Lenders shall have received all information and copies of
all documents, including without limitation, records of requisite corporate
action and proceedings that the Agent or any Lender may reasonably request, to
be certified by the appropriate corporate person or government authorities.
5. 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 Agreement. 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.
6. Gold Consignment Agreement. The Lenders hereby consent to the execution
and delivery by the Company of Amendment No. 2 and Limited Consent to the Gold
Consignment Agreement, such Amendment No. 2 and Limited Consent being
substantially in the form attached hereto as Exhibit B.
7. Counterparts. This Agreement 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 Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
5
<PAGE>
8. Governing Law. This Agreement 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.
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/ Richard Luck
--------------------------------
Name: Richard Luck
Its Duly Authorized Signatory
FLEET NATIONAL BANK (Assignee and successor in
interest to FLEET NATIONAL BANK OF MASSACHUSETTS
formerly known as Shawmut Bank, N.A.)
By: /s/ David P. Berube
-------------------------------
Name: David P. Berube
Title: Assistant Vice President
By: /s/ Anthony J. Capuano
-------------------------------
Name: Anthony J. Capuano
Title: Senior Vice President
6
<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 this 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
Attorney-in-Fact
7
U.S. $175,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 11, 1997,
Among
GENERAL ELECTRIC CAPITAL CORPORATION,
individually and in its capacity as Agent,
CERTAIN OTHER LENDERS AND
FINANCIAL INSTITUTIONS PARTIES HERETO,
FINLAY FINE JEWELRY CORPORATION
and
FINLAY ENTERPRISES, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS........................... 1
ss. 1.1. CERTAIN DEFINED TERMS...................................... 1
ss. 1.2. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE............... 33
ss. 1.3. COMPUTATION OF TIME PERIODS................................ 33
ss. 1.4. ACCOUNTING TERMS........................................... 33
ss. 1.5. OTHER PROVISIONS REGARDING DEFINITIONS..................... 33
SECTION 2. AMOUNT AND TERMS........................................... 33
ss. 2.1. REVOLVING ADVANCES; SWING LINE FACILITY.................... 33
ss. 2.2. REVOLVING CREDIT FACILITY COMMITMENT AND
BORROWING LIMIT............................................ 35
ss. 2.3. REVOLVING NOTES............................................ 36
ss. 2.4. NOTICE OF BORROWING; BORROWER'S CERTIFICATE................ 37
ss. 2.5. TERMINATION OR REDUCTION OF REVOLVING CREDIT
FACILITY COMMITMENTS; REDUCTION OF PARENT
REVOLVING CREDIT SUBLIMIT COMMITMENTS...................... 38
ss. 2.6. INTEREST................................................... 39
ss. 2.7. CONVERSION OF BORROWINGS; RENEWALS......................... 41
ss. 2.8. COMPUTATION OF INTEREST.................................... 42
ss. 2.9. INCREASED COSTS............................................ 42
ss. 2.10. CHANGE IN LAW RENDERING EURODOLLAR ADVANCES
UNLAWFUL................................................... 44
ss. 2.11. EURODOLLAR AVAILABILITY.................................... 44
ss. 2.12. INDEMNITIES................................................ 45
ss. 2.13. DISBURSEMENT............................................... 48
ss. 2.14. AGENT'S AVAILABILITY ASSUMPTION............................ 49
ss. 2.15. PRO RATA TREATMENT AND PAYMENTS............................ 50
ss. 2.16. EURODOLLAR OFFICES......................................... 50
ss. 2.17. TELEPHONIC NOTICE.......................................... 51
ss. 2.18. MAXIMUM INTEREST........................................... 51
ss. 2.19. RECEIPT OF PAYMENTS........................................ 51
ss. 2.20. APPLICATION OF PROCEEDS.................................... 52
ss. 2.21. ACCOUNTING................................................. 54
ss. 2.22. TAXES...................................................... 54
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SECTION 2A. AMOUNT AND TERMS OF LETTERS OF CREDIT
AND PARTICIPATIONS THEREIN................................. 56
ss. 2A.1. LETTERS OF CREDIT.......................................... 56
ss. 2A.2. ISSUING THE LETTERS OF CREDIT.............................. 57
ss. 2A.3. REIMBURSEMENT OBLIGATIONS.................................. 57
ss. 2A.4. REVOLVING ADVANCES......................................... 58
ss. 2A.5. SETTLEMENT BY LENDERS WITH ISSUING BANK.................... 58
ss. 2A.6. LETTER OF CREDIT FEES...................................... 60
ss. 2A.7. INDEMNIFICATION: NATURE OF THE ISSUING BANK'S
DUTIES..................................................... 60
ss. 2A.8. INCREASED COSTS............................................ 61
ss. 2A.9. UNIFORM CUSTOMS AND PRACTICE............................... 62
ss. 2A.10. FOREIGN CURRENCY........................................... 62
ss. 2A.11. REIMBURSEMENT OF CERTAIN COSTS............................. 63
SECTION 3. PAYMENTS AND PREPAYMENTS................................... 63
ss. 3.1. MANDATORY PAYMENTS......................................... 63
ss. 3.2. CERTAIN PAYMENTS........................................... 64
ss. 3.3. OPTIONAL PREPAYMENTS....................................... 65
ss. 3.4. PROCEDURES FOR PAYMENT..................................... 66
ss. 3.5. UNUSED FACILITY FEE........................................ 66
ss. 3.6. FEES....................................................... 67
SECTION 4. SECURITY AND GUARANTIES.................................... 67
ss. 4.1. PLEDGE OF CAPITAL STOCK AND NOTES.......................... 67
ss. 4.2. SECURITY AGREEMENT - TRADEMARK, PATENT AND
COPYRIGHT.................................................. 68
ss. 4.3. SECURITY AGREEMENTS........................................ 68
ss. 4.4. REAL PROPERTY; MORTGAGES; LEASEHOLD
MORTGAGES; TITLE INSURANCE................................. 69
ss. 4.5. ADDITIONAL COLLATERAL...................................... 70
ss. 4.6. FILING AND RECORDING....................................... 71
ss. 4.7. INTERPRETATION OF SECURITY DOCUMENTS....................... 71
ss. 4.8. GUARANTIES................................................. 71
ss. 4.9. ASSIGNMENTS OF INSURANCE................................... 71
ss. 4.10. CASH COLLATERAL AGREEMENT.................................. 72
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SECTION 5. CONDITIONS PRECEDENT TO INITIAL BORROWINGS
AND ISSUANCE OF LETTERS OF CREDIT.......................... 72
ss. 5.1. OPINIONS OF COUNSEL........................................ 72
ss. 5.2. FINANCIAL STATUS AND STATEMENTS............................ 73
ss. 5.3. QUALIFICATION.............................................. 73
ss. 5.4. SECURITY DOCUMENTS AND INSTRUMENTS......................... 73
ss. 5.5. EVIDENCE OF INSURANCE...................................... 74
ss. 5.6. EXAMINATION OF BOOKS....................................... 74
ss. 5.7. BORROWING BASE............................................. 74
ss. 5.8. NOTES...................................................... 74
ss. 5.9. [Intentionally Omitted.]................................... 74
ss. 5.10. [Intentionally Omitted.]................................... 74
ss. 5.11. FEES AND EXPENSES.......................................... 74
ss. 5.12. MANAGEMENT................................................. 74
ss. 5.13. DISBURSEMENT AUTHORIZATION................................. 75
ss. 5.14. LOCKBOX.................................................... 75
ss. 5.15. LITIGATION................................................. 75
ss. 5.16. TAX MATTERS................................................ 75
ss. 5.17. COMPLIANCE WITH LAW........................................ 76
ss. 5.18. PROCEEDINGS; RECEIPT OF DOCUMENTS.......................... 76
ss. 5.19. ENVIRONMENTAL MATTERS AND APPRAISALS....................... 77
ss. 5.20. [Intentionally Omitted.]................................... 77
ss. 5.21. SPECIAL COUNSEL FEES....................................... 77
ss. 5.22. CONSIGNMENT AGREEMENTS..................................... 77
ss. 5.23. [Intentionally Omitted.]................................... 77
ss. 5.24. INSURANCE POLICIES......................................... 77
ss. 5.25. [Intentionally Omitted.]................................... 77
ss. 5.26. PERFECTION OF SECURITY INTERESTS IN THE
UNITED KINGDOM............................................. 77
SECTION 5A. CONDITIONS PRECEDENT TO AMENDMENT
AND RESTATEMENT............................................ 77
ss. 5A.1. OPINIONS OF COUNSEL........................................ 78
ss. 5A.2. QUALIFICATION.............................................. 78
ss. 5A.3. AMENDMENTS TO SECURITY DOCUMENTS AND
INSTRUMENTS................................................ 78
ss. 5A.4. NOTES...................................................... 78
ss. 5A.5. FEES AND EXPENSES.......................................... 78
ss. 5A.6. LITIGATION................................................. 78
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ss. 5A.7. COMPLIANCE WITH LAW........................................ 79
ss. 5A.8. PROCEEDINGS; RECEIPT OF DOCUMENTS.......................... 79
ss. 5A.9. PURCHASE OF SHARE.......................................... 80
SECTION 5B. CONDITIONS PRECEDENT TO INITIAL BORROWINGS
TO THE PARENT.............................................. 80
SECTION 6. CONDITIONS PRECEDENT TO EACH BORROWING
AND ISSUANCE OF LETTERS OF CREDIT.......................... 80
ss. 6.1. CONDITIONS................................................. 80
ss. 6.2. WRITTEN NOTICE............................................. 81
SECTION 7. USE OF PROCEEDS............................................ 81
SECTION 8. AFFIRMATIVE COVENANTS...................................... 82
ss. 8.1. FINANCIAL STATEMENTS AND OTHER INFORMATION................. 82
ss. 8.2. TAXES AND CLAIMS........................................... 87
ss. 8.3. INSURANCE.................................................. 88
ss. 8.4. BOOKS AND RESERVES......................................... 90
ss. 8.5. PROPERTIES IN GOOD CONDITION............................... 90
ss. 8.6. MAINTENANCE OF EXISTENCE, ETC.............................. 90
ss. 8.7. INSPECTION BY THE AGENT AND THE LENDERS.................... 90
ss. 8.8. PAY INDEBTEDNESS TO LENDERS AND PERFORM
OTHER COVENANTS............................................ 91
ss. 8.9. NOTICE OF DEFAULT.......................................... 91
ss. 8.10. REPORTING OF MISREPRESENTATIONS............................ 91
ss. 8.11. COMPLIANCE WITH LAW........................................ 91
ss. 8.12. ERISA...................................................... 92
ss. 8.13. FURTHER ASSURANCES......................................... 93
ss. 8.14. CONSIGNMENT AGREEMENTS..................................... 93
ss. 8.15. AUDITS..................................................... 93
ss. 8.16. ENVIRONMENTAL MATTERS, ETC................................. 93
ss. 8.17. FINANCIAL COVENANTS........................................ 97
ss. 8.18. LEASES; NEW REAL ESTATE....................................101
ss. 8.19. LICENSE AGREEMENTS.........................................102
ss. 8.20. SUPPLEMENTAL DISCLOSURE....................................103
ss. 8.21. AGREEMENTS.................................................103
ss. 8.22. COLLECTION AND PAYMENT; LOCK BOX;
BANK ACCOUNTS..............................................103
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ss. 8.23. EMPLOYMENT AGREEMENTS......................................105
ss. 8.24. SONAB LOCK BOX AND BLOCKED ACCOUNTS........................105
ss. 8.25. SONAB SECURITY.............................................105
SECTION 9. NEGATIVE COVENANTS.........................................105
ss. 9.1. CAPITAL EXPENDITURES.......................................106
ss. 9.2. LIENS......................................................106
ss. 9.3. INDEBTEDNESS...............................................108
ss. 9.4. LOANS, INVESTMENTS AND GUARANTEES..........................109
ss. 9.5. MERGER, SALE OF ASSETS, DISSOLUTION, ETC...................113
ss. 9.6. DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS..................114
ss. 9.7. TRANSACTIONS WITH AFFILIATES...............................116
ss. 9.8. BLOCKED ACCOUNTS...........................................117
ss. 9.9. MANAGEMENT COMPENSATION AND OTHER PAYMENTS.................117
ss. 9.10. COMPROMISE OF RECEIVABLES..................................118
ss. 9.11. NONCOMPLIANCE WITH ERISA...................................118
ss. 9.12. AMENDMENT AND MODIFICATION OF CERTAIN
DOCUMENTS..................................................118
ss. 9.13. FISCAL YEAR................................................119
ss. 9.14. CHANGE OF BUSINESS.........................................119
ss. 9.15. NO NEGATIVE PLEDGES........................................119
ss. 9.16. RENTAL OBLIGATIONS.........................................120
ss. 9.17. LEASE-BACKS................................................120
ss. 9.18. CAPITAL STOCK..............................................120
ss. 9.19. DEBT INCURRENCE AND PAYMENTS TO THE PARENT.................120
ss. 9.20. THE PARENT.................................................121
ss. 9.21. INDENTURE GUARANTEES.......................................121
ss. 9.22. PRIVATE SALE OF STOCK......................................121
ss. 9.23. DEBENHAMS LICENSE AGREEMENTS...............................121
ss. 9.24. FACTORY OUTLET STORES......................................121
ss. 9.25. MONOPRIX LICENSE AGREEMENTS................................122
SECTION 10. DEFAULTS AND REMEDIES......................................122
ss. 10.1. EVENTS OF DEFAULT..........................................122
ss. 10.2. SUITS FOR ENFORCEMENT......................................127
ss. 10.3. RIGHTS AND REMEDIES CUMULATIVE.............................127
ss. 10.4. RIGHTS AND REMEDIES NOT WAIVED.............................128
ss. 10.5. APPLICATION OF PROCEEDS....................................128
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SECTION 11. REPRESENTATIONS AND WARRANTIES.............................129
ss. 11.1. CORPORATE STATUS...........................................129
ss. 11.2. POWER AND AUTHORITY........................................130
ss. 11.3. NO VIOLATION OF AGREEMENTS.................................130
ss. 11.4. NO LITIGATION..............................................131
ss. 11.5. GOOD TITLE TO PROPERTIES...................................131
ss. 11.6. FINANCIAL STATEMENTS AND CONDITION.........................133
ss. 11.7. TRADEMARKS, PATENTS, ETC...................................134
ss. 11.8. TAX LIABILITY..............................................134
ss. 11.9. GOVERNMENTAL ACTION........................................134
ss. 11.10. DISCLOSURE.................................................135
ss. 11.11. REGULATION U...............................................135
ss. 11.12. INVESTMENT COMPANY.........................................135
ss. 11.13. EMPLOYEE BENEFIT PLANS.....................................135
ss. 11.14. DEBENTURE COLLATERAL.......................................137
ss. 11.15. PERMITS, ETC...............................................137
ss. 11.16. ENVIRONMENTAL STATUS.......................................138
ss. 11.17. SOLVENCY...................................................139
ss. 11.18. PROJECTIONS................................................139
ss. 11.19. BANK ACCOUNTS..............................................139
ss. 11.20. EMPLOYMENT AGREEMENTS......................................139
ss. 11.21. LABOR MATTERS..............................................139
ss. 11.22. OTHER VENTURES.............................................140
ss. 11.23. BROKERS AND CONSULTANTS....................................140
ss. 11.24. MATERIAL CONTRACTS.........................................140
ss. 11.25. LICENSE AGREEMENTS.........................................140
ss. 11.26. UNWRITTEN AGREEMENTS.......................................140
SECTION 12. MISCELLANEOUS..............................................140
ss. 12.1. COLLECTION COSTS...........................................140
ss. 12.2. AMENDMENT, MODIFICATION AND WAIVER.........................141
ss. 12.3. NEW YORK LAW...............................................142
ss. 12.4. NOTICES....................................................142
ss. 12.5. FEES AND EXPENSES..........................................142
ss. 12.6. STAMP OR OTHER TAX.........................................143
ss. 12.7. WAIVER OF JURY TRIAL AND SET-OFF...........................143
ss. 12.8. TERMINATION OF AGREEMENT...................................144
ss. 12.9. CAPTIONS...................................................145
ss. 12.10. LIEN; SET-OFF BY LENDERS...................................145
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ss. 12.11. PAYMENT DUE ON NON-BUSINESS DAY............................145
ss. 12.12. SERVICE OF PROCESS.........................................145
ss. 12.13. GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT.............146
ss. 12.14. CONCERNING JOINT AND SEVERAL LIABILITY OF
THE BORROWERS..............................................151
ss. 12.15. BENEFIT OF AGREEMENT.......................................152
ss. 12.16. COUNTERPARTS; FACSIMILE SIGNATURE..........................154
ss. 12.17. INVALIDITY.................................................154
ss. 12.18. DISCLOSURE OF FINANCIAL INFORMATION........................154
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SCHEDULES AND EXHIBITS
Schedule 4.3(b)(B) - Jurisdictions
Schedule 4.4(a)(ii) - Excluded Leases
Schedule 8.3 - Insurance
Schedule 9.2 - Existing Liens
Schedule 9.3 - Indebtedness
Schedule 9.4 - Outstanding Investments
Schedule 9.9 - Compensation Policies
Schedule 11.1 - Subsidiaries
Schedule 11.5 - Real Property
Schedule 11.8 - Taxes
Schedule 11.13 - ERISA
Schedule 11.16 - Environmental Matters
Schedule 11.19 - Collection, Concentration and Special
Accounts
Schedule 11.20 - Employment Agreements
Schedule 11.21 - Labor Matters
Schedule 11.23 - Brokers and Consultants
Schedule 11.24 - Material Contracts
Schedule 11.25 - License Agreements
Exhibit A - Lenders, Commitments and Initial
Eurodollar Offices
Exhibit B - Form of Indemnification Agreement
Exhibit 2.1(c)(ii) - Form of Swing Line Note
Exhibit 2.3(a) - Form of Revolving Note
Exhibit 2.4 - Form of Borrower's Certificate
Exhibit 4.1(a) - Form of Pledge Agreement
Exhibit 4.2 - Form of Trademark, Patent and
Copyright Security Agreement
Exhibit 4.3(a) - Form of Security Agreement
Exhibit 4.8 - Form of Guaranty
Exhibit 4.9(a) - Assignment of Life Insurance
Exhibit 4.9 - Assignment of Business Interruption Insurance
Exhibit 5.1 - Form of Opinion of Counsel for the Credit Parties
Exhibit 5.13 - Form of Disbursement Authorization Letter
Exhibit 5.22 - Form of Consignor Letter
Exhibit 8.1(p) - Form of Borrowing Base Certificate
Exhibit 9.7 - Share Exchange Agreement
Exhibit 11.19 - Lock-Box and Receivable Collection Arrangements
viii
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AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 11, 1997,
among FINLAY FINE JEWELRY CORPORATION, a Delaware corporation (the "Company"),
FINLAY ENTERPRISES, INC., a Delaware corporation (the "Parent", each of the
Parent and the Company, a "Borrower" and, collectively, the "Borrowers"),
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation having an office at
260 Long Ridge Road, Stamford, Connecticut 06927 ("GE Capital"), individually
and as agent for each of the Lenders hereunder (GE Capital, in such capacity,
together with any successor agent under Section 12.13 hereof, being the
"Agent"), and the other banks and other financial institutions named herein and
whose signatures appear on the signature pages hereto (GE Capital, and such
other banks and other financial institutions and their respective successors and
assigns, individually, a "Lender" and collectively, the "Lenders").
WHEREAS, the Company borrowed certain sums pursuant to the Credit Agreement
dated as of May 26, 1993 among the Company, the Parent, the Lenders and GE
Capital, individually as a Lender thereunder and as agent for the Lenders
thereunder (such Credit Agreement, as amended, is referred to herein as the
"Original Credit Agreement");
WHEREAS, the Borrowers have requested that the Lenders make additional
secured revolving credit advances to the Borrowers from time to time which the
Borrowers may use for the ongoing working capital and general corporate
requirements of the Borrowers consistent with the terms of this Agreement;
WHEREAS, the Lenders are willing, subject to and upon the terms and
conditions herein set forth, to extend such financial accommodations to the
Borrowers; and
WHEREAS, the parties hereto desire to amend and restate the Original Credit
Agreement in its entirety in order to effect and/or permit the foregoing.
NOW, THEREFORE, IT IS AGREED THAT THE ORIGINAL CREDIT AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS.
ss. 1.1. CERTAIN DEFINED TERMS. For all purposes of this Agreement, unless
the context otherwise requires, the following terms shall have the meanings set
forth below (the following meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Account Debtor" shall mean any Person who is or who may become obligated
to the Company or its Subsidiaries under, with respect to, or on account of, an
Account.
<PAGE>
"Accounts" shall mean all accounts, accounts receivable, other receivables,
contract rights, chattel paper, instruments, documents and notes, whether now
owned or hereafter acquired by the Company or any Subsidiary of the Company,
other than a Foreign Subsidiary and shall include amounts payable to the Company
under License Agreements as provided in the second paragraph of the definition
of Eligible Receivables.
"Additional Indebtedness" shall mean all Lender Debt other than principal
of Revolving Advances and interest thereon.
"Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period
for a Eurodollar Advance, the rate obtained by dividing (i) the Eurodollar Rate
for such Interest Period by (ii) a percentage equal to 1 minus the stated
maximum rate (stated as a decimal) of all reserves required to be maintained
against "Eurocurrency liabilities" as specified in Regulation D (or against any
other category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Advances is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Lender to United States residents), and adding thereto the Applicable
Eurodollar Margin.
"Adverse Environmental Condition" shall mean any of the matters referred to
in clause (i), (ii) or (iii) of the definition of Environmental Claim, which
could give rise to an Environmental Claim.
"Affiliate" of any specified Person shall mean any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or which is a director, officer or partner
(limited or general) of such specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means the
possession, direct or indirect, of the power to vote five percent (5%) or more
of the securities having ordinary voting power for the election of directors or
the power to direct or cause the direction of the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" shall have the meaning set forth in the preamble to this Agreement.
"Aggregate Revolving Commitments" shall mean at any time the sum of the
Revolving Commitments of the Lenders at such time.
"Aggregate Revolving Sublimit Commitments" shall mean at any time the sum
of the Revolving Sublimit Commitments of the Lenders at such time.
"Agreement" shall mean this Amended and Restated Credit Agreement, as
amended, restated, modified or supplemented from time to time.
2
<PAGE>
"Applicable Eurodollar Margin" shall mean the per annum interest rate
margin from time to time in effect and payable in addition to the Eurodollar
Rate applicable to the Revolving Loan, as determined by reference to Section
2.6(f) of this Agreement.
"Applicable Index Margin" shall mean the per annum interest rate margin
from time to time in effect and payable in addition to the Index Rate applicable
to the Revolving Loan, as determined by reference to Section 2.6(f) of this
Agreement.
"Applicable Margins" means collectively the Applicable Index Margin and the
Applicable Eurodollar Margin.
"Approved Delegate" shall have the meaning set forth in Section 12.13(n)
hereof.
"Assignment of Life Insurance" shall have the meaning set forth in Section
4.9 hereof.
"Authorized Representative" shall mean each Person designated from time to
time, as appropriate, in a Written Notice of the Company to the Agent for the
purposes of giving notices of borrowing, requests for issuances of Letters of
Credit or guaranties thereof, or conversion or renewal of, Revolving Advances,
which designation shall continue in force and effect until terminated in a
Written Notice to the Agent.
"Base Rate" shall mean a fluctuating interest rate per annum as shall be in
effect from time to time, which rate per annum shall be equal to the Index Rate
plus the Applicable Index Margin.
"Base Rate Advance" shall mean the portion of any Revolving Advance which
is not a Eurodollar Advance.
"Blocked Accounts" shall mean the deposit accounts of the Company
designated as "Blocked Accounts" on Schedule 11.19 hereto and such other deposit
accounts as the Agent may from time to time approve in writing as "Blocked
Accounts" for purposes of this Agreement.
"Board" shall mean the Board of Governors of the Federal Reserve System or
any successor agency or entity performing substantially the same functions.
"Borrower" and "Borrowers" shall have the respective meanings set forth in
the preamble to this Agreement.
"Borrower's Certificate" shall have the meaning set forth in Section 2.4
hereof.
3
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"Borrowing Base" shall mean, at any time, the sum of (i) an amount equal to
sixty percent (60%) of the aggregate value (lower of cost (on a specific
identification or first- in-first-out basis consistent with the Company's
practices) and current market value) of Eligible Inventory and Foreign Eligible
Inventory, respectively, plus (ii) an amount equal to eighty-five percent (85%)
of the Net Amount of Eligible Receivables and Net Amount of Foreign Eligible
Receivables, respectively; in each case as indicated on the most recent weekly
Borrowing Base Certificate delivered to the Agent by the Company as of such
time, unless a more recent Borrowing Base Certificate has been requested by the
Agent and delivered by the Company to the Agent, in which case as indicated on
such more recent Borrowing Base Certificate. In no event shall the Borrowing
Base attributable to Foreign Inventory and Foreign Receivables exceed
$20,000,000.
The Agent reserves the right to adjust the Borrowing Base in its reasonable
judgment by revising standards of eligibility, establishing reserves, and/or
subject to the following sentence increasing or decreasing from time to time the
percentages set forth above, in which case "Borrowing Base" shall be defined to
include such revisions, reserves or altered percentages. Notwithstanding the
foregoing, any increase in the percentages set forth above shall require the
consent of the Majority Lenders.
"Borrowing Base Certificate" shall have the meaning set forth in Section
8.1(p) hereof.
"Borrowing Limit" shall have the meaning set forth in Section 2.2(a)
hereof.
"Business Day" shall mean:
(a) for all portions of the Revolving Advances on which interest accrues
based upon the Base Rate, any day other than a Saturday, Sunday or other day on
which banks in New York, New York are authorized or required to close, and
(b) for portions of the Revolving Advances on which interest accrues based
upon the Adjusted Eurodollar Rate, the Business Days described in the
immediately preceding subclause (a) for the definition of Business Day, but
excluding therefrom any day on which commercial banks are not open for dealings
in Dollar deposits in the London (England) interbank market.
"Capital Expenditures" shall mean, for any Person, any expenditures or
costs (excluding any Initial License Expense) made by such Person for the
acquisition, maintenance or repair of fixed or capital assets (which are
required to be capitalized into the fixed asset caption on the balance sheet of
such Person in accordance with GAAP), including, without limitation, the
incurrence or assumption of any Indebtedness in respect of such fixed or capital
asset, and, without double counting, any payment made in respect of such
incurrence or assumption.
4
<PAGE>
"Capital Lease" of any Person shall mean any lease of any property (whether
real, personal or mixed) by that Person as lessee which, in conformity with
GAAP, is, or is required to be, accounted for as a capital lease on the balance
sheet of such Person.
"Capitalized Lease Obligations" of any Person shall at any time mean all
obligations under Capital Leases of such Person in each case taken at the amount
thereof accounted for as liabilities in accordance with GAAP at such time.
"Cash Collateral Agreement" shall have the meaning set forth in Section
4.10 hereof.
"Cash Interest Expense" shall mean, for any period, the aggregate amount of
cash required to be applied by the Parent and its Subsidiaries to Interest
Expense of the Company and its Subsidiaries during such period.
"Change of Control" shall mean a "Change of Control" as such term is
defined in the Senior Note Indenture (as in effect on the Closing Date).
"Charge" shall mean all Federal, state, county, city, municipal, local,
foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) any
Collateral, (ii) any Lender Debt, (iii) any of the Parent's or any of its
Subsidiaries' employees, payroll, income or gross receipts, (iv) the Parent's or
any of its Subsidiaries' ownership or use of any of its assets, or (v) any other
aspect of the Parent's or any of its Subsidiaries' business.
"Claims" shall have the meaning set forth in Section 2.12(c) hereof.
"Clean Down Period" shall mean each period which begins on December 26 of a
calendar year and ends on February 26 of the immediately succeeding calendar
year.
"Closing Date" shall mean September 11, 1997.
"COBRA" shall have the meaning set forth in Section 11.13 hereof.
"Code" shall mean, at any date, the Internal Revenue Code of 1986, as the
same shall be in effect at such date.
"Collateral" shall mean all property and interests therein (real or
personal, tangible or intangible) in which a Lien is now or hereafter granted to
the Agent or any one or more of the Lenders by any Credit Party or any
Subsidiary thereof as security for all or any portion of the Lender Debt or any
guarantee thereof.
"Collecting Bank Agreement" shall mean, with respect to any Collecting
Bank, an agreement, in such form or with such provisions as the Agent may
require, executed by such Collecting Bank, the Agent, where applicable, and the
Company, in each case as amended, supplemented or otherwise modified from time
to time with the prior written consent of the Agent.
5
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"Collecting Banks" shall mean the banks listed on Schedule 11.19 hereto
under the heading "Blocked Accounts" and such other banks as the Agent may from
time to time approve in writing as "Collecting Banks" for purposes of this
Agreement.
"Commitment Letter" shall mean the commitment letter, dated July 8, 1997
between GE Capital and the Company, as amended from time to time.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Company's First Supplemental Indenture" shall mean the First Supplemental
Indenture to the Senior Note Indenture, dated as of October 28, 1994, between
the Company and Marine Midland Bank, as trustee.
"Company's Second Supplemental Indenture" shall mean the Second
Supplemental Indenture to the Senior Note Indenture, dated as of July 14, 1995,
between the Company and Marine Midland Bank, as trustee.
"Company's Revolving Loan" shall mean, at any time, the outstanding
principal balance of all Revolving Advances made by the Lenders to the Company.
"Consignment Agreement" shall mean (i) each written consignment agreement
existing as of the Closing Date or entered into after the Closing Date and as to
which the Company has complied with Section 8.14 hereof, in each case, as in
effect from time to time, and (ii) each consignment arrangement, which is not
evidenced by or memorialized in a writing signed by the consignor and as to
which the Company has complied with Section 8.14 hereof, in each case, under
which the Company or any Subsidiary thereof is the consignee thereunder.
"Consignment Inventory" shall mean, at any time, each item of merchandise
which (i) at such time is in possession of the Company or any Subsidiary thereof
as consignee pursuant to a Consignment Agreement which, if not in a writing
signed by the consignor, has been approved in writing by the Agent, (ii) at such
time is identified by item number in the computer records of the Company or any
Subsidiary thereof (to which the Agent has on-line access to the extent required
by Section 8.7(b) hereof) as being "memo" or "consigned" inventory, (iii) as of
such time has not been sold or deemed sold to or by the Company or any
Subsidiary thereof, (iv) to which ownership, 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, and (v) accordingly, at such time, is not an asset of the Company or
any Subsidiary thereof. Ownership of 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
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arrangement, ownership is transferred (or deemed to be transferred) to a buyer,
the Company or any Subsidiary thereof, regardless of whether any procedures have
been performed to protect the third party's title to such item of merchandise.
Additionally, "Consignment Inventory" (a) includes, at any time, any item of
merchandise (including the gold content thereof) which (i) contains gold which
is leased by or consigned or lent to the Company or any Subsidiary thereof, and
(ii) complies at such time with clauses (ii) and (iii) of the first sentence of
this definition, and (b) excludes all cash and non-cash proceeds of any item of
merchandise (and any gold content thereof) which constituted Consignment
Inventory.
"Consignor Letter" shall mean a letter agreement executed and delivered by
a consignor of "memo" or "consigned" inventory to the Company substantially in
the form of Exhibit 5.22 attached hereto.
"Contingent Obligations" of any Person shall mean any direct or indirect
liability, contingent or otherwise, of such Person:
(iwith respect to any indebtedness, lease, dividend, letter of credit
or other obligation of another if the primary purpose or intent in creating
such liability is to provide assurance to the obligee of such obligation of
another that such obligation of another will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders
of such obligation will be protected (in whole or in part) against loss in
respect thereof;
(ii) under any letter of credit issued for the account of such Person
or for which such Person is otherwise liable for reimbursement thereof;
(iii) under any Hedge Agreement; or
(iv) to advance or supply funds or otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect
thereof.
Contingent Obligations shall include, without limitation:
(a) the direct or indirect guarantee, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the
obligation of another, and
(b) any liability of such Person for the obligations of another
through any agreement (contingent or otherwise):
(i) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of
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such obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise);
(ii) to maintain the solvency or any balance sheet item, level of
income or financial condition of another; or
(iii) to make take-or-pay or similar payments if required regardless
of non-performance by any other party or parties to an agreement,
if in the case of any agreement described under subclause (i) or (ii) of this
sentence the primary purpose or intent thereof is as described in the
immediately preceding sentence. The amount of any Contingent Obligation shall be
equal to the amount of the obligation so guaranteed or otherwise supported.
"Credit Parties" shall mean and include the Parent, the Company and each
Guarantor.
"Current Liabilities" of any Person, determined at any time, shall mean all
liabilities of such Person which would, in accordance with GAAP, be classified
as current liabilities excluding Revolving Advances and excluding the current
portion of long-term Indebtedness for Borrowed Money.
"Debenture Indenture" shall mean the indenture dated as of May 26, 1993
between the Parent and Marine Midland Bank, N.A., as trustee, under which the
Debentures were issued, as such indenture is in effect on the Closing Date, as
supplemented by the Parent's First Supplemental Indenture and Parent's Second
Supplemental Indenture..
"Debentures" shall mean the Parent's 12% Senior Discount Debentures due
2005.
"Default" shall mean an event, act or condition which with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"Designated Officer" shall mean the chief financial officer, president, any
vice president having responsibility for financial affairs, treasurer or
controller of the Parent or the Company, as the case may be.
"Disbursement Account" shall mean, with respect to each Borrower, the
deposit account of such Borrower into which shall be deposited only proceeds of
Revolving Advances, which shall constitute a "Blocked Account" and which is
designated as a "Disbursement Account" on Schedule 11.19 hereto.
"Disqualified Stock" shall mean any capital stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
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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 date on
which the Debentures mature.
"Domestic Inventory" shall mean Inventory (i) owned by the Company and (ii)
located in the United States of America.
"Domestic Subsidiary" shall mean any Subsidiary of the Company which is not
a Foreign Subsidiary.
"EBITDA" shall mean, for the Parent and its Subsidiaries, on a consolidated
basis for any period, the sum of:
(i) the net income (or net loss) from operations of the Parent and its
Subsidiaries on a consolidated basis (determined in accordance with GAAP)
for such period without giving effect to any extraordinary gains or
non-cash extraordinary losses, but giving effect to cash extraordinary
losses); plus
(ii) to the extent that any of the items referred to in any of clauses
(A) through (C) below were deducted in calculating such net income:
(A) Interest Expense of the Parent and its Subsidiaries, on a
consolidated basis for such period;
(B) income tax expense of the Parent and its Subsidiaries, on a
consolidated basis with respect to operations for such period; and
(C) the amount of all depreciation and amortization of the Parent and
its Subsidiaries, on a consolidated basis for such period; plus (or minus)
(iii) without double counting items taken into account in clause (C)
above, all other non-cash charges or credits including any "LIFO" charges
or credits of the Parent and its consolidated Subsidiaries for such period
provided that such non-cash charges (or credits) cannot become cash in
accordance with GAAP.
Any calculation of EBITDA for the Parent and its Subsidiaries on a
consolidated basis for any period shall exclude any negative "EBITDA" (as
calculated solely for the Parent and not its Subsidiaries) of up to $1,000,000.
"Eligible Inventory" shall mean such of the Domestic Inventory (valued at
the lower of cost (on a specific identification basis) and current market value)
of the Company which is subject to no Lien (other than in favor of the Agent or
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<PAGE>
otherwise permitted by the Loan Documents) and which the Agent, in its sole
discretion, shall deem eligible, less such reserves as the Agent, in its sole
discretion, shall from time to time deem appropriate and shall exclude, in any
event, the categories of Inventory deemed ineligible as set forth on the
Borrowing Base Certificate delivered by the Company on the Closing Date. The
Agent does not intend to treat an item of Inventory as eligible if any warranty
or representations contained in any of the Loan Documents applicable either to
Eligible Inventory in general or to any such specific Inventory has been
breached with respect to such Inventory.
"Eligible Receivables" shall mean (A) amounts payable to the Company,
whether or not due, under the License Agreements, including, without limitation,
at any time during any calendar month (or other relevant calculation period
under a License Agreement), amounts which, based on gross sales in accordance
with the terms of the License Agreements, the Company has calculated will become
due and payable to the Company under the License Agreements as of the end of
such calendar month (or other relevant calculation period under a License
Agreement), in each case, less (B) (a) all amounts payable by the Company (by
set-off or otherwise), whether or not due, under the License Agreements,
including, without limitation, at any time during any calendar month (or other
relevant calculation period under a License Agreement), all amounts which, based
on the terms of such License Agreement or otherwise, the Company has calculated
will become due and payable (by set-off or otherwise) by the Company (including,
without limitation, by means of offset or deduction from amounts payable to the
Company under the License Agreements) as of the end of such calendar month (or
other relevant calculation period under a License Agreement), such amounts
payable by the Company to include, without limitation, the percentage of sales,
net sales or other amount which is withheld from the Company by the other party
thereto as a license fee, rental fee or otherwise, all amounts denominated as
"Other Costs" or any similar term under any License Agreement, including,
without limitation, discounts payable in respect of credit card sales, interest,
carrying or service charges collected by the other party to any License
Agreements, and charges payable by or charged to the Company in respect of
advertising or promotion, (b) the amount of all sales in respect of which goods
have been returned and (c) all other amounts or adjustments which, based on the
License Agreements or otherwise, was or as of the end of any calendar month (or
other relevant calculation period) will be deducted from amounts payable to the
Company or will be payable by the Company under the License Agreements (the
excess of (A) over (B), the "Net Amount of Eligible Receivables"), in each case,
as such amounts and deductions described in clauses (A) and (B) are set forth on
the most recent Borrowing Base Certificate delivered by the Company under
Section 8.1(p) hereof or pursuant to the request of the Agent, in each case,
except to the extent that the Agent has determined that any amount payable to
the Company under any one or more License Agreements is not an Eligible
Receivable or has determined that any amount payable by the Company should be
increased, and less such reserves as the Agent shall deem appropriate.
For the purposes of this Agreement, the term "Account" shall also include,
with respect to any License Agreement, amounts described in clause (A) of this
definition payable to the Company under such License Agreement (whether or not
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<PAGE>
due), less the amounts described in clauses (B)(a), (B)(b) and (B)(c) of this
definition which have been or will be deducted therefrom or will be payable by
the Company.
Without in any way limiting the discretion of the Agent to deem or not deem
any Account arising from any License Agreement as an Eligible Receivable, Agent
does not currently intend to treat an Account as eligible if:
(a) any warranty or representation contained in any of the Loan Documents
applicable either to Accounts in general or to any such specific Account or
related License Agreement has been breached with respect to such Account or
License Agreement;
(b) 50% or more of the outstanding Accounts from the Account Debtor which
constituted Eligible Receivables at the time they arose have become, or been
determined by the Agent to be, ineligible;
(c) such Account is owed by an Account Debtor which has commenced a
voluntary case under the bankruptcy or insolvency laws of any jurisdiction, or
made an assignment for the benefit of creditors, or against which a decree or
order for relief has been entered by a court in an involuntary case under the
bankruptcy or insolvency laws of any jurisdiction, or against which any other
petition or other application for relief under the bankruptcy or insolvency laws
of any jurisdiction has been filed, or which has suspended business or consented
to or suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs (except that
such an Account shall not be deemed ineligible under this clause (c) if the
Agent, in its discretion, deems such Account as not ineligible or to the extent
that and only so long as the Account Debtor on such Account shall have a
debtor-in-possession credit facility or other credit support, in each instance
satisfactory to the Agent, to assure timely payment of such Account and such
Account (to the extent not covered by credit insurance) shall constitute a
post-petition claim against such Account Debtor);
(d) any amount payable in respect of such Account is more than 60 days past
due;
(e) the License Agreement under which such Account arises has been
terminated (or notice of termination given) or is otherwise not in full force or
effect (or, if not in effect because such License Agreement has been approved as
an acceptable arrangement by the Agent, if the Agent's approval has been
rescinded), the Company or the licensor thereunder is in material default under
such License Agreement, the licensor under such License Agreement is entitled to
withhold amounts which may be withheld only upon default by the Company
thereunder, or the Account Debtor under such License Agreement has no place of
business in the United States;
(f) the Account Debtor is an affiliate or employee of the Parent or any of
its Subsidiaries;
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(g) such Account is denominated in other than United States dollars or is
payable outside the United States;
(h) such Account is subject to any claim or dispute by the Account Debtor,
in which event such Account will be deemed ineligible to the extent of such
claim or dispute;
(i) such Account may become subject to any setoff (not already taken into
account in clauses (B)(a), (B)(b) or (B)(c) of this definition) by the Account
Debtor, in which event such Account will be deemed ineligible to the extent of
such setoff;
(j) such Account is not subject to an enforceable and duly perfected first
priority Lien in favor of the Agent as security for the Lender Debt, or such
Account is not owned by the Company free and clear of all Liens, claims,
defenses or rights of others except the Liens granted to the Agent pursuant to
the Loan Documents or otherwise permitted hereunder;
(k) any sale taken into account in determining the amount payable to the
Company in respect of such Account by the Account Debtor was made other than in
accordance with the terms of the applicable License Agreement;
(l) such Account is not a genuine, bona fide obligation of the Account
Debtor or is not valid, binding and enforceable against the Account Debtor in
accordance with its terms; or
(m) such Account is evidenced by any note, draft, trade acceptance or other
instrument for the payment of money which has not been delivered in pledge to
the Agent (endorsed in a manner acceptable to the Agent).
"Employee Plan" shall mean an "employee benefit plan" as defined in Section
3(3) of ERISA, which is maintained for, or contributions are made on behalf of,
employees of any Credit Party, and any ERISA Affiliate, other than a
Multiemployer Plan.
"Employment Agreements" shall mean and include the written employment
agreement dated as of May 26, 1993, between the Company and David B. Cornstein,
the written employment agreement dated as of January 3, 1995 between the Company
and Arthur E. Reiner, and the letter agreement dated April 18, 1997 by the
Parent in favor of Joseph M. Melvin, and each other written employment agreement
between the Company and any other full time employee of the Company in effect at
any time, as each may be amended, modified, supplemented, restated, renewed,
replaced or extended from time to time in accordance with its terms and the
limitations set forth in Section 9.12 hereof.
"Environmental Claim" shall mean any written notice of violation, claim,
demand, abatement or other order by any governmental authority or any person for
personal injury (including sickness, disease or death), tangible or intangible
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property damage, damage to the environment, nuisance, pollution, contamination
or other adverse effects on the environment, or for fines, penalties or deed or
use restrictions, resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden, accidental or nonaccidental Releases), of, or exposure to,
any Hazardous Material or any substance, chemical, material, pollutant,
contaminant, odor or audible noise in, into or onto the environment (including,
without limitation, the air, ground, water or any surface) at, in, by or from
any of the Facilities, (ii) the environmental aspects of the transportation,
storage, treatment or disposal of materials in connection with the operation of
any of the Facilities or (iii) the violation, or alleged violation by the Parent
or any of its Subsidiaries, of any statutes, ordinances, orders, rules,
regulations, Permits or licenses of or from any governmental authority, agency
or court relating to environmental matters connected with any of the Facilities,
under any applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Oil Pollution Act of
1990 (P.L. 101-380), the Safe Drinking Water Act (42 U.S.C. ss. 300(f), et
seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances
Control Act, as amended (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. ss. 651 et seq.), as such laws have been and
hereafter may be amended or supplemented, and any analogous future federal, or
any analogous present or future, and applicable, state or local, statutes and
regulations promulgated pursuant thereto, or any other federal, state or local
statute, ordinance or regulation which regulates or creates liability with
respect to a Hazardous Material.
"Equipment" shall mean all of the equipment (as defined in the UCC) of the
Credit Parties, including, without limitation, machinery, data processing
hardware and software, furniture, fixtures, office equipment and other tangible
personal property of the Credit Parties, and all accessions, accretions, and
additions to Equipment, and all other component and auxiliary parts used or to
be used in connection with or attached to any of the same, wherever located,
whether now owned or hereafter acquired.
"Equity Interests" shall mean capital stock and all warrants, options or
other rights to acquire capital stock or that are measured by the value of
capital stock (but excluding any debt security that is convertible into, or
exchangeable for, capital stock).
"Equity Plan" shall mean the Company's Equity Participation Plan.
"ERISA" shall mean, at any date, the Employee Retirement Income Security
Act of 1974 and the regulations promulgated and rulings issued thereunder, all
as the same shall be in effect at such date.
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"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated), any individual, trust, firm, partnership or joint venture that
for purposes of Title I and Title IV of ERISA and Section 412 of the Code is a
member of any Credit Party's controlled group or is under common control with
any Credit Party within the meaning of Section 414(b), (c), (m) or (o) of the
Code, and the regulations promulgated and rulings issued thereunder.
"ERISA Event" shall mean, with respect to any Credit Party or any ERISA
Affiliate and with respect to any Pension Benefit Plan subject to Title IV of
ERISA or Section 412 of the Code, (a) a Reportable Event (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under subsection .13, .14, .15, .18, or .19 of PBGC Reg. ss. 2615), (b) the
withdrawal of any Credit Party or any ERISA Affiliate from a Pension Benefit
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the provision of a notice of intent to
terminate a Pension Benefit Plan under Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Pension Benefit Plan by the PBGC under
Section 4042 of ERISA, (e) the failure to make required contributions which
would result in the imposition of a Lien under Section 412 of the Code or
Section 302 of ERISA, or (f) any other event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension
Benefit Plan or to cause the imposition of any liability on any Credit Party or
any ERISA Affiliate under Title IV of ERISA.
"Eurodollar Advance" shall mean the portion of any Revolving Advance
designated to bear interest based upon the Adjusted Eurodollar Rate as provided
in Section 2 of this Agreement.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Advance for
any Interest Period, the average (mean) of the four rates (rounded upward, if
necessary, to the nearest 1/16 of 1%), reported from time to time by Telerate
News Service (or such other number of rates as such service may from time to
time report), at which foreign branches of major U.S. banks offer U.S. dollar
deposits to other banks for amounts and in funds comparable to the principal
amount of the Eurodollar Advance requested by the Company for which the
Eurodollar Rate is being determined with maturities comparable to the Interest
Period for which such Eurodollar Rate will apply in the London (England)
interbank market at approximately 11:00 a.m. London setting time, on the third
full Eurodollar Business Day next preceding such Interest Period, subject,
however, to the provisions of Section 2.11 hereof. If such interest rates cease
to be available from Telerate News Service, the Eurodollar Rate will be
determined from such financial reporting service or other information as would
be mutually acceptable to the Company and the Agent. The term "Eurodollar
Business Day" means a business day on which banks generally in the city of
London (England) are open for interbank or foreign exchange transactions.
"Events of Default" shall have the meaning set forth in Section 10.1
hereof.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Claims" shall have the meaning set forth in Section 2.12(c)
hereof.
"Excluded Taxes" shall mean franchise taxes and taxes upon or determined by
reference to any Lender's net income, in each case, imposed by the United States
of America or any political subdivision or taxing authority thereof or therein
or by any jurisdiction in which the Initial Eurodollar Office or other branch of
any Lender is located, is resident or in which any Lender is organized or has
its principal or registered office (including, without limitation, branch taxes
imposed by the United States or similar taxes imposed by any subdivision
thereof).
"Facilities" shall mean real property owned, operated or leased by any
Credit Party.
"Federal Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto.
"Federal Funds Rate" shall mean, for any day, a floating rate equal to the
weighted average of the rates on overnight Federal funds transactions among
members of the Federal Reserve System, as determined by the Agent.
"Fee Letter" shall mean that certain letter agreement dated July 8, 1997
between GE Capital and the Company.
"Financial Statements" shall have the meaning set forth in Section 5.2(b)
hereof.
"FIRREA" shall mean the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended from time to time.
"First Amendment" means Amendment No. 1, dated June 15, 1995, to the
Original Credit Agreement as amended and restated on March 28, 1995.
"First Sonab Intercompany Note" shall mean the demand promissory note dated
October 28, 1994 by Sonab to the order of the Company in the principal amount of
$12,000,000 together with any replacement or substitution thereof and any
amendment or modification thereof, in each case as permitted by the terms
hereof.
"First Supplemental Indentures" shall mean, collectively, the Parent's
First Supplemental Indenture and the Company's First Supplemental Indenture.
"Fiscal Year" shall mean, with respect to the Parent and its consolidated
Subsidiaries, each annual accounting period which begins on the day immediately
following the end of the preceding period and ends on the Saturday closest to
January 31 of each year.
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"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of (a)
the excess, if any, of (i) EBITDA of the Parent and its Subsidiaries for such
period over the sum of (x) the amount of cash applied by the Parent to the
payment of income taxes of the Parent and its Subsidiaries in respect of such
period, whether directly or pursuant to the Tax Allocation Agreement plus (y)
the amount of Capital Expenditures made by the Parent and its Subsidiaries
during such period to (b) the sum of (i) Cash Interest Expense for such period,
plus (ii) the amount of payments of principal on Indebtedness for Borrowed
Money, including, without limitation, Capitalized Lease Obligations, scheduled
to be made during such period excluding payments of principal on the Revolving
Loan or in respect of reimbursement of Letters of Credit (or guaranties
thereof), plus (iii) dividends paid in cash by the Parent during such period.
"Foreign Accounts" shall mean all accounts, accounts receivable, other
receivables, contract rights, chattel paper, instruments, documents and notes,
whether now owned or hereafter acquired by the Foreign Subsidiaries and shall
include amounts payable to the Foreign Subsidiaries under License Agreements as
provided in the second paragraph of the definition of Foreign Eligible
Receivables.
"Foreign Eligible Inventory" shall mean such of the Foreign Inventory
(valued at the lower of cost (on a specific identification basis) and current
market value) of the Foreign Subsidiaries which is subject to no Lien (other
than in favor of the Agent or otherwise permitted by the Loan Documents) and
which the Agent, in its sole discretion, shall deem eligible, less such reserves
as the Agent, in its sole discretion, shall from time to time deem appropriate
and shall exclude, in any event, the categories of Foreign Inventory deemed
ineligible as set forth on the Borrowing Base Certificate delivered by the
Company on the Closing Date. The Agent does not intend to treat an item of
Foreign Inventory as eligible if any warranty or representations contained in
any of the Loan Documents applicable either to Foreign Eligible Inventory in
general or to any such specific Foreign Inventory has been breached with respect
to such Foreign Inventory.
"Foreign Eligible Receivables" shall mean (A) amounts payable to the
Foreign Subsidiaries, whether or not due, under the License Agreements,
including, without limitation, at any time during any calendar month (or other
relevant calculation period under a License Agreement), amounts which, based on
gross sales in accordance with the terms of the License Agreements, the Foreign
Subsidiaries have calculated will become due and payable to the Foreign
Subsidiaries under the License Agreements as of the end of such calendar month
(or other relevant calculation period under a License Agreement), in each case,
less (B) (a) all amounts payable by the Foreign Subsidiaries (by set-off or
otherwise), whether or not due, under the License Agreements, including, without
limitation, at any time during any calendar month (or other relevant calculation
period under a License Agreement), all amounts which, based on the terms of such
License Agreement or otherwise, the Foreign Subsidiaries have calculated will
become due and payable (by set-off or otherwise) by the Foreign Subsidiaries
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(including, without limitation, by means of offset or deduction from amounts
payable to the Foreign Subsidiaries under the License Agreements) as of the end
of such calendar month (or other relevant calculation period under a License
Agreement), such amounts payable by the Foreign Subsidiaries to include, without
limitation, the percentage of sales, net sales or other amount which is withheld
from the Foreign Subsidiaries by the other party thereto as a license fee,
rental fee or otherwise, all amounts denominated as "Other Costs" or any similar
term under any License Agreement, including, without limitation, discounts
payable in respect of credit card sales, interest, carrying or service charges
collected by the other party to any License Agreements, and charges payable by
or charged to the Foreign Subsidiaries in respect of advertising or promotion,
(b) the amount of all sales in respect of which goods have been returned and (c)
all other amounts or adjustments which, based on the License Agreements or
otherwise, was or as of the end of any calendar month (or other relevant
calculation period) will be deducted from amounts payable to the Foreign
Subsidiaries or will be payable by the Foreign Subsidiaries under the License
Agreements (the excess of (A) over (B), the "Net Amount of Foreign Eligible
Receivables"), in each case, as such amounts and deductions described in clauses
(A) and (B) are set forth on the most recent Borrowing Base Certificate
delivered by the Company under Section 8.1(p) hereof or pursuant to the request
of the Agent, in each case, except to the extent that the Agent has determined
that any amount payable to the Foreign Subsidiaries under any one or more
License Agreements is not a Foreign Eligible Receivable or has determined that
any amount payable by the Foreign Subsidiaries should be increased, and less
such reserves as the Agent shall deem appropriate.
For the purposes of this Agreement, the term "Foreign Account" shall also
include, with respect to any License Agreement, amounts described in clause (A)
of this definition payable to the Foreign Subsidiaries under such License
Agreement (whether or not due), less the amounts described in clauses (B)(a),
(B)(b) and (B)(c) of this definition which have been or will be deducted
therefrom or will be payable by the Foreign Subsidiaries.
Without in any way limiting the discretion of the Agent to deem or not deem
any Foreign Account arising from any License Agreement as a Foreign Eligible
Receivable, Agent does not currently intend to treat a Foreign Account as
eligible if:
(a) any warranty or representation contained in any of the Loan Documents
applicable either to Accounts in general or to any such specific Foreign Account
or related License Agreement has been breached with respect to such Foreign
Account or License Agreement;
(b) 50% or more of the outstanding Foreign Accounts from the Foreign
Account Debtor which constituted Foreign Eligible Receivables at the time they
arose have become, or been determined by the Agent to be, ineligible;
(c) such Foreign Account is owed by an Account Debtor which has commenced a
voluntary case under the bankruptcy or insolvency laws of any jurisdiction, or
made an assignment for the benefit of creditors, or against which a decree or
order for relief has been entered by a court in an involuntary case under the
17
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bankruptcy or insolvency laws of any jurisdiction, or against which any other
petition or other application for relief under the bankruptcy or insolvency laws
of any jurisdiction has been filed, or which has suspended business or consented
to or suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs (except that
such a Foreign Account shall not be deemed ineligible under this clause (c) if
the Agent, in its discretion, deems such Foreign Account as not ineligible or to
the extent that and only so long as the Account Debtor on such Foreign Account
shall have a debtor-in-possession credit facility or other credit support, in
each instance satisfactory to the Agent, to assure timely payment of such
Foreign Account and such Foreign Account (to the extent not covered by credit
insurance) shall constitute a post-petition claim against such Account Debtor);
(d) any amount payable in respect of such Foreign Account is more than 60
days past due;
(e) the License Agreement under which such Foreign Account arises has been
terminated (or notice of termination given) or is otherwise not in full force or
effect (or, if not in effect because such License Agreement has been approved as
an acceptable arrangement by the Agent, if the Agent's approval has been
rescinded), the Foreign Subsidiaries or the licensor thereunder is in material
default under such License Agreement, or the licensor under such License
Agreement is entitled to withhold amounts which may be withheld only upon
default by the Foreign Subsidiaries thereunder;
(f) the Account Debtor is an affiliate or employee of the Parent or any of
its Subsidiaries;
(g) such Foreign Account is subject to any claim or dispute by the Account
Debtor, in which event such Foreign Account will be deemed ineligible to the
extent of such claim or dispute;
(h) such Foreign Account may become subject to any setoff (not already
taken into account in clauses (B)(a), (B)(b) or (B)(c) of this definition) by
the Account Debtor, in which event such Foreign Account will be deemed
ineligible to the extent of such setoff;
(i) such Foreign Account is not owned by the Foreign Subsidiaries free and
clear of all Liens, claims, defenses or rights of others except any Liens
granted to the Agent pursuant to the Loan Documents or otherwise permitted
hereunder;
(j) any sale taken into account in determining the amount payable to the
Foreign Subsidiaries in respect of such Foreign Account by the Account Debtor
was made other than in accordance with the terms of the applicable License
Agreement;
(k) such Foreign Account is not a genuine, bona fide obligation of the
Account Debtor or is not valid, binding and enforceable against the Account
Debtor in accordance with its terms; or
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(l) such Foreign Account is evidenced by any note, draft, trade acceptance
or other instrument for the payment of money which has not been delivered in
pledge to the Agent (endorsed in a manner acceptable to the Agent).
"Foreign Inventory" shall mean any and all now owned or hereafter acquired
inventory, goods, merchandise, and other tangible personal property intended for
sale or lease in the ordinary course of business, in the custody or possession,
actual or constructive, of the Foreign Subsidiaries, or in transit to the
Foreign Subsidiaries, including such inventory as is on consignment to third
party consignees, leased to customers of the Foreign Subsidiaries, or otherwise
temporarily out of the custody or possession of the Foreign Subsidiaries
excluding any Consignment Inventory.
"Foreign Lender" shall mean any Lender which is not a "United States
person" (as such term is defined in Section 7701(a)(30) of the Code).
"Foreign Subsidiary" shall mean a Subsidiary of the Parent organized
under the laws of a country other than the United States or any State thereof
except for the purposes of Borrowing Base calculations, Foreign Subsidiaries
shall mean those subsidiaries in existence on the Closing Date.
"Fourth Amendment Agreement" shall mean Amendment No. 4 to the Original
Credit Agreement dated as of October 28, 1994.
"Fourth Amendment Effective Date" shall have the meaning set forth in the
Fourth Amendment Agreement.
"GAAP" shall mean, for the Parent or any of its Subsidiaries, generally
accepted accounting principles in the United States of America, consistent with
those applied in the preparation of the financial statements of the Parent and
its Subsidiaries from time to time; provided, however, that for the purposes of
determining compliance with the financial covenants contained in Section 8.17
hereof (and the definitions contained herein to the extent employed in
determining such compliance) only, GAAP shall mean such accounting principles as
in effect and as applied on the Closing Date.
"GE Capital" shall have the meaning set forth in the preamble to this
Agreement.
"Gelbfarb Service Agreement" shall mean the Service Agreement dated October
28, 1994 between Sonab and Bernard Gelbfarb, as amended, modified or
supplemented from time to time in accordance with its terms and the limitations
set forth in Section 9.12 hereof.
"Gold Consignment Agreement" shall mean the Gold Consignment Agreement
dated as of June 15, 1995 between the Company and Rhode Island Hospital Trust
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National Bank, as amended, modified or supplemented from time to time in
accordance with its terms and the limitations set forth in Section 9.12 hereof.
"Gold Consignment Documents" shall mean and include the Gold Consignment
Agreement and each of the Consignment Documents (as defined therein) other than
the Intercreditor Agreement, in each case, as amended, modified or supplemented
from time to time in accordance with its terms and the limitations set forth in
Section 9.12 hereof; provided that the Gold Consignment Documents shall be
subject at all times to the terms and provisions of the Intercreditor Agreement.
"Guarantor" shall mean, at any time, the Company, each present or future
direct and indirect Subsidiary of the Company, or other Person, in any case,
which shall have executed and delivered a Guaranty as of such time.
"Guaranty" shall mean any guaranty executed and delivered pursuant to
Section 4.8 hereof, as each may be amended, supplemented or otherwise modified
from time to time in accordance with its terms.
"Guaranty Obligations" shall mean the obligations of any Guarantor under
the Loan Documents to which such Guarantor is a party.
"Hazardous Material" shall mean any pollutant, contaminant, chemical, or
industrial or hazardous or toxic waste, substance or material, as defined in or
regulated by any Environmental Law and any other toxic, reactive, or flammable
chemicals, including (without limitation) any asbestos, any petroleum (including
crude oil or any fraction), any radioactive substance and any polychlorinated
biphenyls; provided, in the event that any Environmental Law is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment; and provided, further,
to the extent that the applicable laws of any state establish a meaning for
"hazardous material," "hazardous substance," "hazardous waste," "solid waste" or
"toxic substance" which is broader than that specified in any Environmental Law,
such broader meaning shall apply.
"Hedge Agreements" shall mean and include (i) interest rate swap
agreements, currency swap agreements, interest rate cap agreements and interest
rate collar agreements, (ii) other agreements or arrangements designed to hedge
against fluctuations in interest rates or foreign exchange rates and (iii)
precious metal options and futures contracts and other precious metal hedging
obligations.
"Indebtedness" of any Person shall mean all items which, in accordance with
GAAP, would be included in determining total liabilities of such Person as shown
on the liability side of a balance sheet as at the date Indebtedness of such
Person is to be determined and, in any event, shall include (without limitation
and without duplication):
(i) all trade accounts payable of such Person;
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(ii) any liability of such Person secured by any Lien on property
owned or acquired by such Person, whether or not such liability shall have
been assumed;
(iii) all Contingent Obligations of such Person;
(iv) letters of credit issued for the account of such Person or an
Affiliate thereof, and all obligations of such Person relating thereto;
(v) all obligations (other than obligations to pay fees in connection
therewith) of such Person in respect of Hedge Agreements; and
(vi) all obligations of such Person under the Gold Consignment
Documents, whether or not due; provided that if in accordance with GAAP any
such obligations under the Gold Consignment Documents would not be included
in determining total liabilities of such Person as shown on the liability
side of a balance sheet of such Person, then for purposes of the
calculation of the financial covenants in Section 8.17 hereof, such
excluded obligations shall not constitute "Indebtedness".
"Indebtedness for Borrowed Money" of any Person shall mean all Indebtedness
for borrowed money or evidenced by notes, bonds, debentures or similar evidences
of Indebtedness of such Person (including in the event that any obligations of
such Person under the Gold Consignment Documents would, in accordance with GAAP,
be included in determining total liabilities of such Person as shown on the
liability side of a balance sheet of such Person, such obligations under the
Gold Consignment Documents), all obligations of such Person for the deferred and
unpaid purchase price of any property, service, or business (other than trade
accounts payable incurred in the ordinary course of business and constituting
Current Liabilities and other than Hedge Agreements), and all obligations of
such Person under Capitalized Lease Obligations and finance leases.
"Indemnification Agreements" shall mean, collectively, each of the
Indemnification Agreements among the Borrowers, and each of their (and their
Subsidiaries') respective directors and executive officers, substantially in the
form of Exhibit B attached hereto, as each may be amended, modified or
supplemented from time to time in accordance with its terms and the terms
hereof.
"Indemnified Party" shall have the meaning set forth in Section 2.12 (c)
hereof.
"Index Rate" shall mean, for any day, a floating rate equal to the higher
of (i) the rate publicly quoted from time to time by The Wall Street Journal as
the "base rate on corporate loans at large U.S. money center commercial banks"
(or, if The Wall Street Journal ceases quoting a base rate of the type
described, the highest per annum rate of interest published by the Federal
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Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus fifty (50) basis points per annum. Each change
in any interest rate provided for in this Agreement based upon the Index Rate
shall take effect at the time of such change in the Index Rate.
"Initial Eurodollar Office" shall mean, for any Lender, the branch or
affiliate of such Lender designated as the Initial Eurodollar Office of such
Lender in Exhibit A hereto.
"Initial License Expense" shall mean any franchise or other fee or other
expense paid in cash by the Company or a Foreign Subsidiary as consideration for
the initial granting of a license under a License Agreement.
"Intercreditor Agreement" shall mean the Intercreditor Agreement dated as
of June 15, 1995 between the Agent and Rhode Island Hospital Trust National Bank
and acknowledged by the Company, as amended, modified or supplemented from time
to time in accordance with its terms.
"Interest Expense" shall mean, with respect to any Person for any period,
the interest expense (whether cash or accretion) of such Person during such
period determined in accordance with GAAP, and shall include in any event,
without limitation, interest expense with respect to Indebtedness for Borrowed
Money (including with respect to the Company, in the event that the obligations
and liabilities of the Company under the Gold Consignment Documents would, in
accordance with GAAP, be included in determining total liabilities of the
Company as shown on the liability side of a balance sheet of the Company, "Daily
Consignment Fees" as such term is defined in the Gold Consignment Agreement as
in effect on the date of execution thereof) and payments under Hedge Agreements
that are designed to hedge against fluctuations in interest rates and shall
exclude the write off of deferred financing fees.
"Interest Payment Date" shall mean, with respect to each Eurodollar
Advance, the last day of the Interest Period for such Eurodollar Advance;
provided, however, that with respect to each Interest Period for any Eurodollar
Advance of a duration of more than three months, interest shall be payable at
three-month intervals and on the last day of such Interest Period.
"Interest Period" shall mean, with respect to each Eurodollar Advance,
initially, the period commencing on, as the case may be, the borrowing or
conversion date with respect to such Eurodollar Advance and ending one, two,
three or (if available) six months thereafter, as selected by a Borrower; and
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Advance and ending one, two, three
or (if available) six months thereafter, as selected by a Borrower; provided,
however, that no Interest Period may be selected for a Eurodollar Advance which
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expires later than the Maturity Date; provided, further, that any Interest
Period in respect of a Eurodollar Advance which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
the foregoing proviso, end on the last Business Day of a calendar month.
Notwithstanding the above, all Interest Periods shall be adjusted in accordance
with Section 12.11 hereof. "Inventory" shall mean any and all now owned or
hereafter acquired inventory, goods, merchandise, and other tangible personal
property intended for sale or lease in the ordinary course of business, in the
custody or possession, actual or constructive, of the Company, or in transit to
the Company, including such inventory as is on consignment to third party
consignees, leased to customers of the Company, or otherwise temporarily out of
the custody or possession of the Company excluding any Consignment Inventory.
"Investment" shall have the meaning set forth in Section 9.4 hereof.
"Issuing Bank" shall mean and include each Issuing Lender and each Issuing
Non-Lender Bank.
"Issuing Lender" shall mean (i) GE Capital (as to issuance of L/C Indemnity
Agreements treated as Letters of Credit under Article 2A), and (ii) any Lender
which issues a Letter of Credit pursuant to Article 2A hereof.
"Issuing Non-Lender Bank" shall mean any commercial bank (other than a
Lender) which shall be selected by the Agent and which has issued a Letter of
Credit.
"L/C Indemnity Agreement" shall mean an indemnity agreement, in form and
substance satisfactory to GE Capital, by GE Capital in favor of an Issuing
Non-Lender Bank with respect to Letters of Credit issued by such Issuing
Non-Lender Bank for the account of the Company. Unless otherwise specified
herein, the term Letter of Credit, when used in this Agreement shall include an
L/C Indemnity Agreement and GE Capital shall for such purpose be deemed to be
the Issuing Lender with respect to such Letter of Credit.
"Land" shall have the meaning set forth in the definition of Real Estate
herein.
"Landlord's Certificate" shall have the meaning set forth in Section 4.3
hereof.
"Lease" shall mean each lease or sublease of real property existing on the
date hereof under which any Credit Party is the lessee or sublessee and each
future lease or sublease of real property under which any Credit Party is the
lessee or sublessee; provided, however, that in no event shall the term "Lease"
be deemed to include any License Agreement. The exclusion of License Agreements
from the defined term "Lease" shall not be construed as an admission,
determination or opinion of the Agent or any Lender that the License Agreements
are not leases or executory contracts for the purposes of Section 365 of the
Federal Bankruptcy Code.
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"Leasehold Mortgage" shall hav the meaning set forth in Section 4.4(a)(ii)
hereof.
"Lee/Desai Group" shall mean THL Equity Holding Corp., a Massachusetts
corporation and Equity-Linked Investors, L.P. and Equity-Linked Investors-II
(together with their respective successors and assigns). "Lee/Desai Investment"
shall mean a $30,000,000 investment by the Lee/Desai Group in the Parent made in
1993.
"Lender" and "Lenders" shall have the respective meanings set forth in the
preamble to this Agreement.
"Lender Debt" shall mean and include all Revolving Advances (including
Swing Line Advances), Letter of Credit Obligations, and all other Indebtedness
(including, without limitation, Additional Indebtedness) owing at any time by
any Credit Party to the Agent or any one or more of the Lenders (including,
without limitation, all principal, interest, fees, indemnities, costs, charges
and other amounts payable under the Loan Documents) arising under or in
connection with this Agreement, the Notes, any Security Document, any of the
other Loan Documents, any Guaranty in favor of the Agent or any one or more of
the Lenders, whether absolute or contingent, secured or unsecured, due or not,
arising by operation of law or otherwise, and all interest and other charges
thereon.
"Letter of Credit" shall mean any trade or performance letter of
credit issued for the account of the Company under the terms of this Agreement
and shall include any L/C Indemnity Agreement issued by GE Capital under this
Agreement. For purposes of this Agreement and the other Loan Documents, any
bankers acceptance accepted pursuant to a Letter of Credit shall, until paid by
the applicable Issuing Bank, be deemed to constitute a trade or performance
Letter of Credit in the undrawn amount at any time equal to the amount of such
bankers acceptance at such time and any such payment by such Issuing Bank shall,
until such payment is reimbursed by the Company, constitute a drawing under a
Letter of Credit.
"Letter of Credit Agreement" shall mean an application and agreement with
respect to the issuance of a Letter of Credit, in form and substance
satisfactory to the applicable Issuing Bank, the Company and the Agent.
"Letter of Credit Cash Collateral" shall have the meaning set forth in
Section 3.1(a) hereof.
"Letter of Credit Obligations" shall mean and include at any time (i) the
undrawn and available amount of Letters of Credit at such time, (ii) the
unreimbursed amount of drawings under Letters of Credit at such time and (iii)
(without duplication) the unreimbursed amounts of payments made under L/C
Indemnity Agreements at such time.
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"Leverage Ratio" shall mean, as of the end of any period, the ratio of (a)
the aggregate principal amount of all Indebtedness for Borrowed Money of the
Parent and its Subsidiaries as of the end of such period to (b) EBITDA of the
Parent and its Subsidiaries, for such period.
"License Agreement" shall mean an agreement (or an arrangement not in
writing which has been described by the Company in writing to the Agent and
approved by the Agent in writing) between the Company or a Foreign Subsidiary
and another Person (which is not an Affiliate of the Company), whether entered
into prior to or after the Closing Date, granting to the Company or a Foreign
Subsidiary the right to operate a fine jewelry department in an establishment
owned or operated by such Person, in the form as in effect on the Closing Date
or as amended, modified, extended or supplemented in accordance with the terms
thereof and hereof. If a License Agreement which is an approved arrangement as
of the Closing Date is memorialized in a writing signed by the licensor after
the Closing Date, it shall be deemed entered into and effective as of the
Closing Date. The failure of the Company to obtain the written approval of the
Agent for an Unapproved License Agreement, shall result in such arrangement not
constituting a License Agreement hereunder (including, without limitation, for
the purpose of the definition of Eligible Receivables and Foreign Eligible
Receivables) but shall not be a Default hereunder.
The Agent reserves the right to withdraw at any time its approval
with respect to any License Agreement which is not evidenced by a written
agreement and immediately upon such withdrawal of its approval of such
arrangement, such arrangement shall cease to constitute a License Agreement for
purposes of this Agreement.
"Lien" shall mean any lien, mortgage, pledge, security interest or other
type of charge or encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained security title
of a conditional vendor and any easement, right of way or other encumbrance on
title to real property and any financing statement filed in respect of any of
the foregoing. For the purposes of this Agreement, a Credit Party shall be
deemed to be the owner of any property which it has placed in trust for the
benefit of the holder of Indebtedness of such Credit Party (or any agent or
trustee of such holder) which Indebtedness is deemed to be extinguished under
GAAP but for which such Credit Party or trust remains legally liable, and such
trust shall be deemed to be a Lien.
"Loan" shall mean the Revolving Loan.
"Loan Documents" shall mean this Agreement, each Security Document, each
Guaranty, the Notes, each Letter of Credit Agreement and each L/C Indemnity
Agreement, each Borrower's Certificate, each Borrowing Base Certificate, each
Landlord's Certificate, each Collecting Bank Agreement, the Fee Letter, and each
other document or instrument now or hereafter delivered to the Agent or any
Lender pursuant to or in connection herewith or therewith.
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"Long Term Incentive Plan" shall mean the Long Term Incentive Plan of the
Parent, as amended, modified, supplemented, restated, renewed or replaced from
time to time in accordance with its terms and the terms hereof, which shall
include the 1997 Long Term Incentive Plan of the Parent.
"Majority Lenders" shall mean, at any time, (a) in the event there are at
least two or more Lenders at such time, at least two Lenders having at least
fifty-one percent (51%) of the amount of the Aggregate Revolving Commitments of
the Lenders at such time or (b) in the event there is only one Lender at such
time, such Lender having one hundred percent (100%) of the amount of the
Aggregate Revolving Commitments at such time.
"Management Agreements" shall mean, collectively, (i) the management
agreement dated as of May 26, 1993 between the Parent, the Company and Thomas H.
Lee Capital, LLC (as assignee of Thomas H. Lee Company) and (ii) the management
agreement dated as of May 26, 1993 between the Parent, the Company and Desai
Capital Management Incorporated, as each may be amended, modified, or
supplemented from time to time in accordance with its terms and the terms
hereof.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
business, assets, prospects, operations or financial or other condition of the
Parent and its Subsidiaries, taken as a whole, (ii) the Parent's, the Company's
and their Subsidiaries' collective ability to pay the Lender Debt in accordance
with the terms thereof or (iii) the Agent's Lien on any material portion of the
Collateral or the priority of any such Lien.
"Maturity Date" shall mean March 11, 2003.
"Maximum Lawful Rate" shall have the meaning set forth in Section 2.18(a)
hereof.
"Maximum Permissible Rate" shall have the meaning set forth in Section
2.18(b) hereof.
"Mortgage" shall have the meaning set forth in Section 4.4(a)(i) hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" (as defined in
Section 4001(a)(3) in ERISA) maintained or contributed to for employees of (i)
the Parent or any of its Subsidiaries; (ii) any Credit Party; or (iii) any ERISA
Affiliate.
"Net Amount of Eligible Receivables" and "Net Amount of Foreign Eligible
Receivables" shall have the meanings set forth in the definition of "Eligible
Receivables" and "Foreign Eligible Receivables" contained herein, respectively.
"Net Cash Proceeds" shall mean, with respect to any transaction, (i) cash
(freely convertible into U.S. dollars) received by a Credit Party from such
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transaction (including cash received as consideration for the assumption or
incurrence of liabilities incurred in connection with or anticipation of such
transaction), after (a) provision for all income, title, recording or other
taxes measured by or resulting from such transaction, (b) payment of all
brokerage commissions, reasonable investment banking and legal fees and other
fees and expenses related to such transaction, (c) deduction of appropriate
amounts to be provided by such Credit Party as a reserve, in accordance with
GAAP, against any liabilities associated with the assets sold or disposed of in
such transaction and retained by such Credit Party after such transaction,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such transaction and (d) amounts paid to satisfy Indebtedness (other than any
Lender Debt) which are required to be repaid in connection with any such
transaction and (ii) promissory notes received by such Credit Party from such
transaction or such other disposition upon the liquidation or conversion of such
notes into cash.
"Notes" shall mean and include each of the Revolving Notes and the Swing
Line Note.
"Original Credit Agreement" shall have the meaning set forth in the first
"WHEREAS" clause to this Agreement.
"Other Taxes" shall hav the meaning set forth in Section 2.22(c) hereof.
"Parent" shall have the meaning set forth in the preamble to this
Agreement.
"Parent's First Supplemental Indenture" shall mean the First Supplemental
Indenture to the Debenture Indenture, dated as of October 28, 1994, between the
Parent and Marine Midland Bank, as trustee.
"Parent's Second Supplemental Indenture" shall mean the Second Supplemental
Indenture to the Debenture Indenture, dated as of July 14, 1995, between the
Parent and Marine Midland Bank, as trustee.
"Parent Revolving Credit Facility Sublimit Commitment" shall mean, at any
time, an amount equal to $25,000,000 plus any Net Cash Proceeds hereafter
received by Parent from the issuance of Equity Interests, to the extent that
such Proceeds are used to prepay the Revolving Loan pursuant to Section 3.2(f)
hereof, as such amount may from time to time be reduced pursuant to Section 2.5
hereof.
"Parent's Revolving Loan" shall mean, at any time, the outstanding
principal balance of all Revolving Advances made by the Lenders to the Parent.
"Payment Account" shall have the meaning set forth in Section 2.4(c)
hereof.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereof under ERISA.
"PCBs" shal have the meaning set forth in the definition of Contaminant
herein.
"Pension Benefit Plan" shall mean any Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA).
"Percentage Sales Increase" shall have the meaning set forth in Section
9.4(k) hereof.
"Permits" shall mean any permit, approval, authorization, license or
variance required from a governmental authority having jurisdiction under an
applicable Environmental Law.
"Person" shall mean an individual, trust, firm, partnership, limited
liability company, corporation (including business trust), unincorporated
association, joint venture, government or any political subdivision or agency
thereof or any other form of public, private or governmental entity or
authority.
"Pledge Agreement" shall have the meaning set forth in Section 4.1(a)
hereof.
"pro rata" shall mean, with respect to each Lender, a percentage equal to
the ratio that the Revolving Commitment of such Lender bears to the Aggregate
Revolving Commitments of all Lenders.
"Proceeds" shall have the meaning set forth in Section 8.22 hereof.
"Real Estate" shall mean all of those plots, pieces or parcels of land now
owned or hereafter acquired by the Company and its Domestic Subsidiaries or any
interest therein (the "Land"), including, without limitation, those listed on
Schedule 11.5 hereto and more particularly described in the Mortgages, together
with the right, title and interest of the Company and its Domestic Subsidiaries,
if any, in and to the streets, the land lying in the bed of any streets, roads
or avenues, opened or proposed, in front of, adjoining, or abutting the Land to
the center line thereof, the air space and development rights pertaining to the
Land and right to use such air space and development rights, all rights of way,
privileges, liberties, tenements, hereditaments, and appurtenances belonging or
in any way appertaining thereto, awards from any condemnation or eminent domain
proceedings and insurance proceeds resulting from any casualty or other damage
to the buildings and other improvements on the Land, all fixtures, all easements
now or hereafter benefiting the Land and all royalties and rights appertaining
to the use and enjoyment of the Land, including, without limitation, all alley,
vault, drainage, mineral, water, oil, coal, gas, timber and other similar
rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, all fixtures and all additions thereto and
substitution and replacement thereof.
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"Reference Date" shall have the meaning set forth in Section 5.2(a) hereof.
"Registration Rights Agreement" shall mean the registration rights
agreement dated as of May 26, 1993 among the Parent, certain existing holders of
the common stock of the Parent and the Lee/Desai Group, as such may be amended,
modified, supplemented, restated, renewed or replaced from time to time in
accordance with its terms and the terms hereof. "Regulation D" shall mean
Regulation D of the Board as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Reiner Employment Agreement" shall mean the Employment Agreement dated as
of January 3, 1995 (as originally in effect or as amended in accordance with its
terms and the limitations set forth in Section 9.12 hereof) among Arthur E.
Reiner, the Company and the Parent.
"Related Party" shall mean with respect to any Person (i) any controlling
stockholder, general or limited partner, 80% (or more) owned subsidiary, or
spouse or immediate family member (in the case of an individual) of such Person
or (ii) any 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 Person and/or such other persons
referred to in the immediately preceding clause (i), and with respect to the
Parent, "Related Party" shall include any full-time employee of the Thomas H.
Lee Company.
"Release" shall mean any releasing, spilling, escaping, leaking, seepage,
pumping, pouring, emitting, emptying, discharging, injecting, leaching,
disposing or dumping. The meaning of the term shall also include any threatened
Release.
"Remedial Action" shall mean all actions required by any
Environmental Law to (1) clean up, remove, treat or dispose of Hazardous
Materials in the indoor or outdoor environment; (2) prevent the Release or
minimize the further Release of Hazardous Materials so they do not migrate or
otherwise endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care in respect of actions
contemplated in the preceding clauses (1) and (2).
"Reportable Event" shall have the meaning set forth in Section 8.12 (b)(i)
hereof.
"Revolving Advance" shall have the meaning set forth in Section 2.1(a)
hereof and shall include, except where the context otherwise requires, Swing
Line Advances.
"Revolving Commitment" as to any Lender shall have the meaning set forth in
Section 2.2(b) hereof.
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"Revolving Credit Facility" shall mean, collectively, the facilities
provided by the Lenders and the Issuing Banks to the Borrowers hereunder to make
Revolving Advances (including Swing Line Advances) and to provide Letters of
Credit and L/C Indemnity Agreements.
"Revolving Credit Facility Commitment" shall mean, at any time, an amount
equal to $175,000,000 or such lesser amount after giving effect to each
reduction of the Revolving Credit Facility Commitment pursuant to Section 2.5
hereof.
"Revolving Loan" shall have the meaning set forth in Section 2.1(a) hereof.
"Revolving Note" and "Revolving Notes" shall have the respective meanings
set forth in Section 2.3(a) hereof.
"Revolving Sublimit Commitment" as to any Lender shall have the meaning set
forth in Section 2.2(b) hereof.
"Second Sonab Intercompany Note" shall mean the demand promissory note
dated October 28, 1994 by Sonab to the order of the Company in the principal
amount of $33,000,000 together with any replacement or substitution thereof and
any amendment or modification thereof, in each case as permitted by Section 9.12
hereof.
"Second Supplemental Indentures" shall mean, collectively, the Parent's
Second Supplemental Indenture and the Company's Second Supplemental Indenture.
"Security Agreement" shall have the meaning specified in Section 4.3
hereof.
"Security Documents" shall have the meaning specified in Section 4.3
hereof.
"Senior Note Indenture" shall mean the indenture dated as of May 26, 1993
between the Company and Marine Midland Bank, N.A., as trustee under which the
Senior Notes were issued, as such indenture is in effect on the Closing Date, as
supplemented by the Company's First Supplemental Indenture and the Company's
Second Supplemental Indenture.
"Senior Notes" shall mean the Company's 10-5/8% Senior Notes due 2003.
"Shareholders Agreement" shall mean the stockholders' agreement dated as of
May 26, 1993 among the Parent and certain existing holders of the common stock
of the Parent, as such may be amended, modified, supplemented, restated, renewed
or replaced from time to time in accordance with its terms and the limitations
set forth in Section 9.12 hereof.
"Solvent" and "Solvency" shall mean, with respect to any Person on a
particular date, that on such date,
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(a) the fair value of the property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent liabilities, of
such Person; and
(b) the present fair salable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; and
(c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and
(d) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's property
would constitute an unreasonably small capital.
"Sonab" shall mean Societe Nouvelle D'Achat De Bijouterie - S.O.N.A.B., a
French societe en nom collectif.
"Sonab Acquisition" shall mean the purchase by Sonab Holdings and Sonab
International of all the outstanding capital stock of Sonab and such other
related transactions effected pursuant to the Sonab Acquisition Documents.
"Sonab Acquisition Documents" shall mean the Sonab Share Purchase Agreement
and such other documents executed and delivered in connection therewith
(including, without limitation, the Sonab Intercompany Notes and the Gelbfarb
Service Agreement), in each case as in effect on the Fourth Amendment Effective
Date, as amended, modified or supplemented from time to time in accordance with
the terms thereof and the limitation set forth in Section 9.12 hereof.
"Sonab Holdings" shall mean Sonab Holdings, Inc., a Delaware corporation.
"Sonab Intercompany Notes" shall mean, collectively, the First Sonab
Intercompany Note and the Second Sonab Intercompany Note.
"Sonab International" shall mean Sonab International, Inc., a Delaware
corporation.
"Specified Default" shall mean an Event of Default under Sections 10.1(a),
including, without limitation, by virtue of any payment required under Sections
3.1 or 3.2 hereof, 10.1(b), 10.1(d), 10.1(f), 10.1(g), 10.1(h) (to the extent
such Event of Default involves a judgment of $5,000,000 or more), 10.1(j),
10.1(k) or 10.1(l) hereof or, to the extent arising from a Default under Section
8.1(c), Section 8.1(g), Section 8.1(p), Section 8.6 (to the extent such Default
involves the maintenance of existence of the Company or the Parent), Section
8.17, Section 8.22, any one or more of Sections 9.1 through 9.9 inclusive, 9.12,
9.14 or 9.20 hereof.
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"Subsidiary" of any Person shall mean any corporation or other business
entity of which more than fifty percent (50%) of the issued and outstanding
securities having ordinary voting power for the election of directors is owned
or controlled, directly or indirectly, by a Person and/or one or more of its
Subsidiaries. The use of the term Subsidiary in the phrase Parent and its
Subsidiaries on a consolidated basis, or the like, shall only include
Subsidiaries whose accounts or financial reports are consolidated with Parent in
accordance with GAAP, and in any event shall include the Company.
"Supervisory Policy" shall have the meaning set forth in Section 9.4(b)
hereof.
"Swing Line Advance" has the meaning assigned to it in Section 2.1(c)(i).
"Swing Line Availability" has the meaning assigned to it in Section
2.1(c)(i).
"Swing Line Commitment" shall mean, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Loans in the amount of up
to $15,000,000, which commitment constitutes a subfacility of the Revolving
Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean, as the context may require, at any time, the
aggregate amount of Swing Line Advances outstanding to any Borrower or to all
Borrowers.
"Swing Line Note" has the meaning assigned to it in Section 2.1(c) (ii).
"Tax Allocation Agreement" shall mean the tax allocation agreement dated as
of November 1, 1992 between the Parent and the Company, as such may be amended,
modi fied or supplemented from time to time in accordance with its terms and the
terms hereof.
"Taxes" shall have the meaning set forth in Section 2.22(a) hereof.
"Trademark, Patent and Copyright Security Agreement" shall have the meaning
set forth in Section 4.2 hereof.
"UCC" shall mean the Uniform Commercial Code (or any successor statute) of
(i) the State of New York and (ii) each other state to the extent the Uniform
Commercial Code of which is required by Section 9-103 of the UCC of New York to
be applied in connection with the perfection of a security interest in favor of
the Agent hereunder or under any Security Document.
"U.S. dollars" and "$" shall mean lawful currency of the United States of
America.
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"UCP" shall have the meaning set forth in Section 2A.9 hereof.
"Unapproved License Agreement" shall mean an unwritten arrangement (not yet
approved in writing by the Agent or as to which the approval of the Agent has
been withdrawn) between the Company or a Foreign Subsidiary and another Person,
granting to the Company or a Foreign Subsidiary the right to operate a fine
jewelry department in an establishment owned or operated by such Person.
"Written Notice" and "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
ss. 1.2. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. Each term defined in
the UCC of the State of New York and used herein shall have the meaning given
therein unless otherwise defined herein.
ss. 1.3. COMPUTATION OF TIME PERIODS. In this Agreement in the computation
of periods of time from a specified date to a later specified date, the word
"from" shall mean "from and including," the words "to" and "until" each shall
mean "to but excluding" and the word "through" shall mean "to and including."
ss. 1.4. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed, as to a specified Person, in accordance with GAAP.
ss. 1.5. OTHER PROVISIONS REGARDING DEFINITIONS. (a) The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement.
(b) The terms defined in this Section 1, unless the context requires
otherwise, will have the meanings applied to them in this Section 1, references
to an "Exhibit," "exhibit," "Schedule" or "schedule" are, unless otherwise
specified, to one of the exhibits or schedules attached to this Agreement and
references to a "section" or "Section" are, unless otherwise specified, to one
of the sections of this Agreement.
(c) The term "or" is not exclusive.
SECTION 2. AMOUNT AND TERMS.
ss. 2.1. REVOLVING ADVANCES; SWING LINE FACILITY. (a) Each of the Lenders
severally agrees to lend to the Borrowers, subject to and upon the terms and
conditions herein set forth, at any time or from time to time on or after the
Closing Date and before the Maturity Date, such Lender's pro rata share, as
determined under Section 2.4(c) hereof, of such borrowings as may be requested
or be deemed requested by the Borrowers in accordance with the terms of this
Agreement (each such borrowing, a "Revolving Advance" and the outstanding
principal balance of all Revolving Advances (including Swing Line Advances) from
time to time, the "Revolving Loan"), subject to the limitations contained in
Section 2.2 hereof.
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(b) Each Revolving Advance shall be in an amount equal to $100,000 or any
integral multiple of $100,000 and shall be made on the date specified in the
Written Notice as described in Section 2.4(a) hereof; provided, however, that if
the Company shall be deemed to request a Revolving Advance under Section 2A.4
hereof, no notice of a borrowing by the Company shall be necessary and such
Revolving Advance shall be in the amount of the reimbursement obligation of the
Company for the drawing made under the Letter of Credit for which such Revolving
Advance is deemed requested. Each Revolving Advance shall be either a Base Rate
Advance or a Eurodollar Advance, or a combination thereof, as the applicable
Borrower shall request, subject to and in accordance with the provisions of this
Agreement. Any portion of a Revolving Advance which shall be a Eurodollar
Advance shall be in an amount equal to $1,000,000 or any greater integral
multiple thereof.
(c) Swing Line Facility. (i) Agent shall notify the Swing Line Lender upon
Agent's receipt of any Written Notice requesting a Revolving Advance. Subject to
the terms and conditions hereof, the Swing Line Lender may, in its discretion,
make available from time to time until the Maturity Date advances (each, a
"Swing Line Advance") in accordance with any such notice. The aggregate amount
of Swing Line Advances outstanding shall not exceed the lesser of (A) the Swing
Line Commitment and (B) the aggregate Borrowing Base less the outstanding
balance of the Revolving Loan and Letter of Credit Obligations at such time
("Swing Line Availability"). Until the Maturity Date, Borrowers may from time to
time borrow, repay and reborrow under this Section 2.1(c). Each Swing Line
Advance shall be made pursuant to a Written Notice of Revolving Advance
delivered to Agent by a Borrower in accordance with Section 2.4(a) hereof. Those
notices must be given no later than 12:00 noon (New York time) on the Business
Day of the proposed Swing Line Advance. Notwithstanding any other provision of
this Agreement or the other Loan Documents, the Swing Line Loan shall constitute
a Base Rate Advance and a Revolving Advance. Borrowers shall repay the aggregate
outstanding principal amount of the Swing Line Loan upon demand therefor by
Agent.
(ii) Each Borrower shall execute and deliver to the Swing Line Lender a
promissory note to evidence the Swing Line Commitment. The note shall be in the
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principal amount of the Swing Line Commitment of the Swing Line Lender, dated
the Closing Date and substantially in the form of Exhibit 2.1(c)(ii) (the "Swing
Line Note"). The Swing Line Note shall represent the obligation of each Borrower
to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid
principal amount of all Swing Line Advances made to such Borrower together with
interest thereon. The entire unpaid balance of the Swing Line Loan and all other
non-contingent Lender Debt shall be immediately due and payable in full in
immediately available funds on the Maturity Date if not sooner paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender, at any time and
from time to time in its sole and absolute discretion (but no less frequently
than once per week), may on behalf of any Borrower (and each Borrower hereby
irrevocably authorizes the Swing Line Lender to so act on its behalf) request
each Lender (including the Swing Line Lender) to make a Revolving Advance to
such Borrower (which shall be a Base Rate Advance) in an amount equal to such
Lender's pro rata share of the principal amount of such Borrower's Swing Line
Loan (the "Refunded Swing Line Loan") outstanding on the date such notice is
given. Unless any of the events described in Section 10 shall have occurred (in
which event the procedures of this Section shall apply) and regardless of
whether the conditions precedent set forth in this Agreement to the making of a
Revolving Advance are then satisfied, each Lender shall disburse directly to
Agent, its pro rata share of a Revolving Advance on behalf of the Swing Line
Lender, prior to 3:00 p.m. (New York time), in immediately available funds on
the date such notice is given. The proceeds of such Revolving Advances shall be
immediately paid to the Swing Line Lender and applied to repay the Swing Line
Loan of the applicable Borrower.
(iv) Participation in Swing Line Loans. If, prior to refunding a Swing Line
Loan with a Revolving Advance pursuant to Section 2.1(c)(iii), one of the events
described in Section 10 shall have occurred, then, subject to the provisions of
Section 2.1(c)(v) below, each Lender will, on the date such Revolving Advance
was to have been made for the benefit of the applicable Borrower, purchase from
the Swing Line Lender an undivided participation interest in the Swing Line Loan
to such Borrower in an amount equal to its pro rata share of such Swing Line
Loan. Upon request, each Lender will promptly transfer to the Swing Line Lender,
in immediately available funds, the amount of its participation.
(v) Revolving Lenders' Obligations Unconditional. Each Lender's obligation
to make Revolving Advances in accordance with Section 2.1(c)(iii) and to
purchase participating interests in accordance with Section 2.1(c)(iv) shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right which
such Revolving Lender may have against the Swing Line Lender, any Borrower or
any other Person for any reason whatsoever; (B) the occurrence or continuance of
any Default or Event of Default; (C) any inability of any Borrower to satisfy
the conditions precedent to borrowing set forth in this Agreement on the date
upon which such participating interest is to be purchased; or (D) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. If any Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Section 2.1(c)(iii) or
2.1(c)(iv), as the case may be, the Swing Line Lender shall be entitled to
recover such amount on demand from such Lender, together with interest thereon
for each day from the date of non-payment until such amount is paid in full at
the Federal Funds Rate for the first two Business Days and at the Base Rate
thereafter.
ss. 2.2. REVOLVING CREDIT FACILITY COMMITMENT AND BORROWING LIMIT. (a) The
aggregate unpaid principal amount of the Revolving Loan (including the Swing
Line Loan) at any time, when added to the aggregate amount of Letter of Credit
Obligations at such time, shall not exceed an amount (the "Borrowing Limit")
equal to the lesser of (i) the Revolving Credit Facility Commitment at such time
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and (ii) except in the case of Revolving Advances to be made under Section 2A.4
hereof as to which this clause (ii) shall not apply to prevent such Revolving
Advances (but this exception shall not limit the application of Section 3.1(a)
hereof), an amount equal to the Borrowing Base at such time. Notwithstanding the
foregoing: (i) except for Revolving Advances to be made under Section 2A.4
hereof, no Revolving Advance shall be made if, after giving effect to the making
of such Revolving Advance, a prepayment would be required under Section 3.1(a)
hereof, and (ii) no Revolving Advance shall be made to the Parent if such
Revolving Advance, when added to the sum of the aggregate amount of the Parent's
Revolving Loan plus the aggregate amount theretofore paid by the Company to
redeem Senior Notes, would exceed the Parent Revolving Credit Facility Sublimit
Commitment.
(b) Subject to the limitations of Sections 2 and 3 hereof, the Company may
borrow, repay and reborrow the Revolving Loan. The portion of the Revolving Loan
to be funded by each Lender shall not exceed in aggregate principal amount at
any one time outstanding, and no Lender shall have any obligation to fund its
pro rata share of any Revolving Advance if, after giving effect thereto, the
outstanding portions of Revolving Advances made by such Lender shall be in the
aggregate in excess of, the revolving commitment amount set forth opposite such
Lender's name on Exhibit A hereto for the Revolving Credit Facility Commitment,
as reduced from time to time (for each Lender, its "Revolving Commitment"). The
portion of the Revolving Loan to be funded by each Lender to the Parent shall
not exceed in aggregate principal amount at any one time outstanding, and no
Lender shall have any obligation to fund its pro rata share of any Revolving
Advance to be made to the Parent if, after giving effect thereto, the
outstanding portions of Revolving Advances made by such Lender to the Parent
shall be in the aggregate in excess of, the revolving commitment set forth
opposite such Lender's name on Exhibit A hereto for the Parent Revolving Credit
Facility Sublimit Commitment, as reduced from time to time (for each Lender, its
"Revolving Sublimit Commitment").
ss. 2.3. REVOLVING NOTES. (a) The pro rata portion of the Revolving
Advances made by each Lender shall be evidenced by, and be repayable with
interest in accordance with the terms of, a promissory note issued by the
Borrowers payable to the order of such Lender, in the maximum principal amount
of such Lender's Revolving Commitment and in the form of Exhibit 2.3(a) hereto
(together with any replacement, modification, renewal or substitution thereof,
individually, a "Revolving Note" and collectively, the "Revolving Notes").
(b) Each Revolving Note shall be dated the Closing Date and be duly
completed, executed and delivered by the Borrowers and such Revolving Notes
shall replace the Revolving Notes previously delivered by the Company to the
Lenders in connection with the Original Credit Agreement.
(c) Each Lender shall endorse that portion of the amount of each Revolving
Advance which it has made to a Borrower and the amount of each payment or
prepayment of principal thereon in the appropriate space on the grid sheet
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attached to the applicable Revolving Note (or so note same in its records);
provided, however, that the failure of any Lender to make any such endorsement
or recordation shall not in any manner affect the obligation of the applicable
Borrower to repay to such Lender the portion of the Revolving Advance advanced
by such Lender under the applicable Revolving Note held by such Lender. Any such
endorsement or recordation shall represent conclusive evidence of the date and
amount of such Lender's pro rata share of any Revolving Advance or payment or
prepayment of principal thereon, absent manifest error.
(d) Each of the Revolving Notes shall mature on the Maturity Date (or
earlier as hereinafter provided), and shall be subject to payment and prepayment
as provided in Sections 2 and 3 hereof.
ss. 2.4. NOTICE OF BORROWING; BORROWER'S CERTIFICATE. (a) Subject to
Section 3.2(e) hereof, whenever a Borrower desires to make a borrowing of a
Revolving Advance (other than the initial Revolving Advance), it shall give the
Agent, at its address set forth in Section 12.4 hereof, not later than 12:00
noon (New York time), at least three (3) Business Days' prior Written Notice (or
same day prior Written Notice in the case of a Revolving Advance which shall be
a Base Rate Advance) from an Authorized Representative (which notice shall be
irrevocable) of its desire to make a borrowing of a Revolving Advance. Each
notice of borrowing under this Section 2.4(a) shall be substantially in the form
of Exhibit 2.4 hereto (each a "Borrower's Certificate") and specify the date on
which the applicable Borrower desires to make a borrowing of a Revolving Advance
(which in each instance shall be a Business Day), the amount of such borrowing,
whether such borrowing shall be a Base Rate Advance or a Eurodollar Advance or a
combination thereof, and, in the case of the selection of a Eurodollar Advance,
the proposed Interest Period therefor, and shall refer to the most recent
Borrowing Base Certificate delivered by the Company to the Agent pursuant to
Section 8.1(p) hereof or at the request of the Agent and set forth the
applicable Borrowing Base provided therein. If such notice shall be with respect
to a borrowing of a Eurodollar Advance but fails to state an applicable Interest
Period therefor, then such notice shall be deemed to be a request for a
one-month Interest Period. If (x) the applicable Borrower shall fail to state in
any such notice whether such Revolving Advance shall be a Base Rate Advance or a
Eurodollar Advance or (y) the Company shall be deemed to make a borrowing of a
Revolving Advance pursuant to Section 2A.4 hereof, then the applicable Borrower
shall be deemed to have selected a Base Rate Advance. Subject to the other
provisions of this Agreement, Revolving Advances of more than one type may be
outstanding at the same time; provided, however, that no more than six (6)
Eurodollar Advances in the aggregate may be outstanding at any one time.
(b) Neither Borrower shall be permitted to select a borrowing of a
Eurodollar Advance in any Borrower's Certificate (x) to the extent such
selection would be prohibited by Section 2.10 or Section 2.11 hereof or (y) if a
Default or an Event of Default shall be in existence as of the date of selection
or commencement of the applicable Interest Period.
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(c) Each Lender shall make available to the Agent such Lender's pro rata
portion of the Revolving Advance to be made on the date specified in the
aforementioned notice (which for purposes of Revolving Advances made pursuant to
Section 2A.4 hereof shall be deemed to be the Business Day after receipt of the
written or telephonic notice by the Agent to each such Lender of such borrowing)
not later than 2:00 p.m. (New York time) on such specified date in U.S. dollars
in immediately available funds, at the account of the Agent located at Bankers
Trust Company, New York, New York, ABA Number: 021-001-
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033, Account Title: GECC/CAF Depository, Account Number: 50-232-854, Reference:
Finlay Fine Jewelry or such other account as the Agent may from time to time
direct (the "Payment Account"). The portion of each Revolving Advance to be
funded by each Lender shall be an amount equal to (x) the dollar amount of the
Revolving Advance requested or deemed requested by the applicable Borrower under
Section 2.1(a) or 2A.4 hereof, multiplied by (y) the percentage set forth
opposite such Lender's name on Exhibit A hereto for the Revolving Credit
Facility Commitment.
(d) Except for Revolving Advances made pursuant to Section 2A.4 hereof
(which Revolving Advances shall be applied to the reimbursement of drawings
under the Letter of Credit for which such Revolving Advance was made in
accordance with such Section 2A.4 hereof), proceeds of each Revolving Advance
received by the Agent shall be made available to the applicable Borrower by the
Agent at such Borrower's Disbursement Account upon satisfaction of all
applicable conditions.
ss. 2.5. TERMINATION OR REDUCTION OF REVOLVING CREDIT FACILITY COMMITMENTS;
REDUCTION OF PARENT REVOLVING CREDIT SUBLIMIT COMMITMENTS. (a) The Borrowers
shall have the right, upon not less than three (3) Business Days' prior Written
Notice to the Agent (and the Agent shall promptly notify each Lender thereof in
writing or by telephone confirmed promptly in writing), to terminate the
Revolving Credit Facility Commitment or, from time to time, to reduce ratably
(as among the Lenders) in part the amount of the Revolving Credit Facility
Commitment; provided, however, that:
(i) any such partial reduction of the Revolving Credit Facility
Commitment shall be in the aggregate amount of at least $25,000,000 (or an
integral multiple of $5,000,000 in excess thereof) or following the first
partial reduction under this Section 2.5(a)(i), an amount equal to
$50,000,000 minus the amount of such first partial reduction of the
Revolving Credit Facility Commitment of $25,000,000 in excess thereof and
shall be accompanied by prepayment of the Revolving Loan, together with the
payment of any fees, premiums, costs and charges required to be paid by the
Borrowers pursuant to Section 2.12 hereof, and accrued interest on the
amount so prepaid to the date of such prepayment, to the extent, if any,
that the aggregate principal amount of the sum of the Revolving Loan and
the Letter of Credit Obligations then outstanding exceeds the Borrowing
Limit at such time (after giving effect to such reduction in the Revolving
Credit Facility Commitment); provided, however, that notwithstanding the
foregoing, the Company shall not (x) reduce (except in connection with a
termination) the Revolving Credit Facility Commitment by more than
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$50,000,000 in the aggregate during the term of this Agreement or (y)
reduce the Revolving Credit Facility Commitment to an amount which is less
than the sum of the aggregate unpaid principal balance of the then
outstanding Letter of Credit Obligations;
(ii) any termination of the Revolving Credit Facility Commitment shall
be accompanied by prepayment in full of the Revolving Loan (together with
all other Lender Debt) then outstanding hereunder, together with the
payment of any unpaid fees owing with respect to the Revolving Credit
Facility Commitment, any fees, premiums, costs and charges required to be
paid by the Borrowers pursuant to Section 2.12 hereof, and accrued interest
on the amount so prepaid to the date of such prepayment, together with the
cancellation or termination of any outstanding Letters of Credit (or the
providing of Letter of Credit Cash Collateral equal to the undrawn amount
under all outstanding Letters of Credit) and the reimbursement of any
unreimbursed Letters of Credit; and
(iii) any termination of the Revolving Credit Facility Commitment
while Eurodollar Advances are outstanding thereunder and any reduction
thereof that reduces the amount of the Revolving Credit Facility Commitment
below the principal amount of such Eurodollar Advances then outstanding
thereunder may be made only on the last day of the respective Interest
Periods for such Eurodollar Advances.
(b) Upon the giving of Written Notice of termination or reduction of the
Revolving Credit Facility Commitment, the amount of Revolving Advances required
to be prepaid in subsection (a) above shall be due and payable on the date
therein specified for such reduction or termination, together with all accrued
interest thereon to such date plus any fees, premiums, charges or costs provided
for hereunder, and the Revolving Credit Facility Commitment shall be permanently
reduced pro rata among Lenders by the amount of such reduction on the date
specified in such Written Notice for such reduction or termination.
(c) Upon the sale of all or substantially all of the assets or any of the
capital stock of Sonab, the Revolving Credit Facility Commitment shall be
permanently reduced by $20,000,000 or such greater amount as may be agreed upon
by the Majority Lenders and the Borrowers, and such reduction in the Revolving
Credit Facility Commitment shall be accompanied by prepayment of the Revolving
Loan, together with the payment of any fees, premiums, costs and charges
required to be paid by the Borrowers pursuant to Section 2.12 hereof, and
accrued interest on the amount so prepaid to the date of such prepayment, to the
extent, if any, that the aggregate principal amount of the sum of the Revolving
Loan and the Letter of Credit Obligations then outstanding exceeds the Borrowing
Limit at such time (after giving effect to such reduction in the Revolving
Credit Facility Commitment). Notwithstanding the foregoing, any sale of any
assets of Sonab (whether or not constituting all or substantially all of the
assets thereof) or any capital stock of Sonab shall be subject to the
requirements and restrictions contained in Section 9.5 hereof.
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(d) The Parent Revolving Credit Facility Sublimit Commitment shall be
permanently reduced by the amount of any prepayment or repayment in respect of
the Parent's Revolving Loan.
ss. 2.6. INTEREST. (a) Interest on Eurodollar Advances. Except as provided
in Section 2.6(c) hereof, the Borrowers shall pay interest on the unpaid
principal amount of each Eurodollar Advance made to it hereunder which is
outstanding from time to time, on each Interest Payment Date with respect to
such Eurodollar Advance, at the date of conversion of such Eurodollar Advance
(or portion thereof) to a Base Rate Advance and at maturity of such Eurodollar
Advance at an interest rate per annum equal during the Interest Period for such
Eurodollar Advance to the Adjusted Eurodollar Rate for the Interest Period in
effect for such Eurodollar Advance, and after maturity of such Eurodollar
Advance (whether by acceleration or otherwise) upon demand. Interest not paid
when due shall be payable on demand.
(b) Interest on Base Rate Advances. Except as provided in Section 2.6(c)
hereof, the Borrowers shall pay interest on the unpaid principal amount of each
Base Rate Advance and, to the extent due and payable, Additional Indebtedness
incurred by it, in each case, which is outstanding from time to time at an
interest rate per annum equal to the Base Rate in effect from time to time.
Interest on Base Rate Advances shall be payable monthly in arrears on the last
day of each month, upon conversion thereof to a Eurodollar Advance and at
maturity (whether by acceleration or otherwise) and thereafter on demand.
Interest on Additional Indebtedness shall be payable upon demand.
(c) Default Interest. During the continuation of any Event of Default,
interest on the Eurodollar Advances, Base Rate Advances and, to the extent due
and payable, Additional Indebtedness, and Letter of Credit fees pursuant to
Section 2A.6(a) hereof shall accrue and be payable at a rate two percentage
points (2%) in excess of the rate of interest or fee otherwise applicable to
such Eurodollar Advances, Base Rate Advances, Additional Indebtedness, or
Letters of Credit, as the case may be, and interest on any interest in default
shall accrue and shall be payable upon demand at a rate equal to two percentage
points (2%) in excess of the rate then applicable to Base Rate Advances.
(d) Eurodollar Rate Determination. The Agent, upon determining the
Eurodollar Rate and the Adjusted Eurodollar Rate for any Interest Period, shall
promptly notify by telephone (confirmed promptly in writing) or in writing the
Borrowers and the Lenders thereof. Such determination shall, in the absence of
manifest error, be conclusive and binding upon the Borrowers, the Agent and the
Lenders.
(e) Changes in Index Rate. After each change in the Index Rate, the Agent
shall promptly notify the Borrowers and each Lender of the date of such change
and the new Index Rate; provided, however, that the failure of the Agent to so
notify the Borrowers or any Lender shall not affect the effectiveness of such
change.
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(f) The Applicable Index Margin and Applicable Eurodollar Margin, will be
0.50% and 1.50% per annum, respectively, as of the Closing Date. The Applicable
Margins will then be adjusted (up or down) prospectively on a quarterly basis as
determined by Parent's consolidated financial performance for the trailing four
quarters most recently then ended, commencing (such date being the "Initial
Adjustment Date") on the fifth Business Day after delivery of the Parent's
financial statements to Lenders for the fiscal quarter ending October 31, 1998.
Adjustments in Applicable Margins will be determined by reference to the
following grids:
If Leverage Applicable Applicable
Ratio is Index Margin Eurodollar Margin
- --------------------- --------------------- ----------------------
> 5.00 1.00% 2.00%
< 5.00 but > 4.25 .75% 1.75%
< 4.25 but > 3.25 .50% 1.50%
< 3.25 but > 2.50 .25% 1.25%
< 2.50 .00% 1.00%
All adjustments in the Applicable Margins after the Initial Adjustment Date
will be implemented quarterly on a prospective basis, for each calendar month
commencing after the date of delivery to Lenders of the quarterly unaudited or
annual audited (as applicable) financial statements of the Parent evidencing the
need for an adjustment. Concurrently with the delivery of those financial
statements, the Company shall deliver to the Agent and Lenders a certificate,
signed by its chief financial officer, setting forth in reasonable detail the
basis for the continuance of, or any change in, the Applicable Margins. Failure
to timely deliver such financial statements in accordance with Section 8.1
shall, in addition to any other remedy provided for in this Agreement, result in
an increase in the Applicable Margins to the highest level set forth in the
foregoing grid, until the first day of the first calendar month following the
delivery of those financial statements demonstrating that such an increase is
not required. If an Event of Default shall have occurred and be continuing at
the time any reduction in the Applicable Margins is to be implemented, that
reduction shall be deferred until the first day of the first calendar month
following the date on which such Event of Default is waived or cured.
ss. 2.7. CONVERSION OF BORROWINGS; RENEWALS. (a) Each Borrower may, from
time to time prior to the Maturity Date convert (i) all or a portion of
outstanding Base Rate Advances to one or more Eurodollar Advances, except as
provided in the last sentence of Section 2.4(a) or in Section 2.10 or 2.11
hereof, and only in amounts of $1,000,000 or more, or (ii) all or a portion of
outstanding Eurodollar Advances to a Base Rate Advance so long as the aggregate
principal balance of the portion of the Eurodollar Advances not being converted,
if any, is $1,000,000 or any greater integral multiple thereof; provided,
however, that no Borrower shall be entitled to convert any Base Rate Advance, or
portion thereof, to a Eurodollar Advance unless all accrued interest on the Base
Rate Advance, or portion thereof, to be converted through the date of such
conversion shall have been paid in full. Each conversion by a Borrower of any
Revolving Advance or portion thereof (other than a conversion pursuant to
Section 2.10 or 2.11 hereof) shall be made not later than 12:00 noon (New York
time) on a Business Day on at least three (3) Business Days' prior Written
Notice from an Authorized Representative to the Agent (and the Agent shall
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promptly notify each Lender thereof in writing or by telephone confirmed
promptly in writing). Each such notice (which notice shall be irrevocable) shall
specify (i) the date of the conversion and the amount to be converted, (ii) the
particular Base Rate Advance, or portion thereof, to be converted, and (iii) in
the case of conversion of any Base Rate Advance, or portion thereof, to a
Eurodollar Advance, the duration of the Interest Period for such Eurodollar
Advance. Notwithstanding the above, no Borrower shall be entitled to convert any
Base Rate Advance, or portion thereof, to a Eurodollar Advance if a Default or
Event of Default shall have occurred and be continuing. Except as provided in
Section 2.10 hereof, any conversion of a Eurodollar Advance, or portion thereof,
to a Base Rate Advance shall be made only on the last day of the Interest Period
with respect to such Eurodollar Advance.
(b) Each renewal by a Borrower of an outstanding Eurodollar Advance
or portion thereof shall be made on Written Notice to the Agent (and the Agent
shall promptly notify each Lender thereof in writing or by telephone confirmed
promptly in writing) given not later than 12:00 noon (New York time) on the
third Business Day prior to the last day of the Interest Period just ending for
such Eurodollar Advance. Each notice (which notice shall be irrevocable) by a
Borrower of the renewal of a Eurodollar Advance or portion thereof, shall be in
writing from an Authorized Representative and shall specify (i) the amount of
such renewal of the Eurodollar Advance or portion thereof and (ii) the duration
of the Interest Period for such renewal; provided, however, that if such
Borrower fails to select the duration of any Interest Period for the renewal of
such Eurodollar Advance or portion thereof, the duration of such Interest Period
shall be one month. Notwithstanding the above, no Borrower shall be entitled to
renew a Eurodollar Advance or a portion thereof, (i) if at the time of the
selection of such renewal there shall exist a Default or an Event of Default, or
(ii) to the extent such renewal would be prohibited by the last sentence of
Section 2.4(a) or by Section 2.10 or 2.11 hereof.
(c) Any Eurodollar Advance or portion thereof as to which the Agent
shall not have received a proper notice of conversion or renewal as provided in
Section 2.7(a) or 2.7(b) hereof or notice of payment or prepayment by 12:00 noon
(New York time) at least three (3) Business Days prior to the last day of the
Interest Period just ending for such Eurodollar Advance shall (whether or not
any Default or Event of Default has occurred) automatically be converted to a
Base Rate Advance on the last day of the Interest Period for such Eurodollar
Advance.
ss. 2.8. COMPUTATION OF INTEREST. Interest on Base Rate Advances and
Eurodollar Advances and fees and other amounts calculated on the basis of a rate
per annum shall be computed on the basis of actual days elapsed over a 360-day
year. Any rate of interest on the Loan or Additional Indebtedness or on interest
which is computed on the basis of the Base Rate shall change when and as the
Index Rate changes.
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ss. 2.9. INCREASED COSTS. In the case of the pro rata share of any
Lender in any Eurodollar Advance, in the event any law, treaty, order,
directive, rule or regulation shall be adopted, issued or become effective after
the Closing Date or in the event of any change in any law, treaty, order,
directive, rule or regulation from that in effect on the Closing Date or in the
interpretation thereof by any governmental or other regulatory authority charged
with the administration thereof (including, without limitation, in any case
Regulation D), in any case, which:
(i) subjects such Lender or any branch or Affiliate of such Lender to
any tax, duty or other charge with respect to such share of such Eurodollar
Advance (other than Excluded Taxes); or
(ii) changes the basis of taxation (including, without limitation, an
increase in any applicable tax rate of payments to any Lender or any branch
or Affiliate of such Lender of principal of and/or interest on such share
of such Eurodollar Advance and/or other fees and amounts payable hereunder
with respect thereto (other than Excluded Taxes); or
(iii) imposes, modifies or deems applicable any reserve, deposit or
similar requirement against any assets held by, deposits with or for the
account of, or loans or commitments by, an office of any Lender or any
branch or Affiliate of such Lender; or
(iv) imposes upon such Lender or any branch or affiliate of such
Lender any other condition with respect to such share of such Eurodollar
Advance or this Agreement;
and the result of any of the foregoing is to increase the actual cost by an
amount such Lender reasonably deems to be material to such Lender or any branch
or Affiliate of such Lender of making, funding or maintaining such share of such
Eurodollar Advance hereunder, or to reduce the amount of any payment (whether of
principal, interest, or otherwise) received or receivable by such Lender or any
branch or Affiliate of such Lender, or to require such Lender or any branch or
Affiliate of such Lender to make any payment, in each case by or in an amount
which such Lender in its sole judgment deems material, then and in any such
case:
(1) such Lender shall promptly notify the Borrowers, the Agent
and the other Lenders in writing of the happening of such event;
(2) such Lender shall promptly deliver to the Borrowers, the
Agent and the other Lenders a certificate stating the change which has
occurred, or the reserve requirements or other conditions which have been
imposed on such Lender or branch or Affiliate of such Lender, or the
request, directive or requirement with which it has complied, together
with the date thereof, the amount of such increased cost, reduction or
payment and the way in which such amount has been calculated; and
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(3) the Borrowers hereby agree to pay to the Agent for the
benefit of such Lender on demand by such Lender (with a notice of such
demand to be sent by such Lender to the Agent) such an amount or amounts
as will compensate such Lender or its branch or Affiliate for such
additional cost, reduction or payment.
The certificate of such Lender as to the additional amounts payable pursuant to
this Section 2.09 delivered to the Borrowers and the Agent shall in the absence
of manifest error be conclusive of the amount thereof. The protection of this
Section 2.09 shall be available to such Lender regardless of any possible
contention of invalidity or inapplicability of the law, regulation, treaty,
order, directive, interpretation or condition which has been imposed.
ss. 2.10. CHANGE IN LAW RENDERING EURODOLLAR ADVANCES UNLAWFUL. (a)
Notwithstanding anything to the contrary herein contained, in the event that any
law, treaty, order, directive, rule or regulation adopted, issued or becoming
effective after the Closing Date or any change in any law, treaty, order,
directive, rule or regulation from that in effect on the Closing Date or in the
interpretation thereof by any governmental or other regulatory authority charged
with the administration thereof (in any case, whether or not having the force of
law), should make it unlawful for any Lender to fund any portion of a Eurodollar
Advance or to give effect to its obligations as contemplated hereby with respect
to Eurodollar Advances, such Lender shall, upon the happening of such event,
notify the Agent, the other Lenders and the Borrowers thereof in writing stating
the reason therefor, and the obligation of such Lender to allow conversion to or
selection or renewal with respect to its pro rata share of any Eurodollar
Advance by the Borrowers shall, upon the happening of such event, forthwith be
suspended for the duration of such illegality and during such illegality such
Lender shall fund its share of all Revolving Advances as Base Rate Advances and
there shall be no renewal of, or conversion to, any share of such Lender in any
Eurodollar Advance. If and when such illegality ceases to exist, such suspension
shall cease and such affected Lender shall similarly notify the Agent, the other
Lenders and the Borrowers.
(b) Notwithstanding anything to the contrary contained herein, in
the event that any law, treaty, order, directive, rule or regulation adopted,
issued or becoming effective after the Closing Date or any change in any law,
treaty, order, directive, rule or regulation from that in effect on the Closing
Date or in the interpretation thereof by any governmental or other regulatory
authority charged with the administration thereof (in any case, whether or not
having the force of law) shall make it commercially impracticable or unlawful
for any Lender to continue in effect the funding of any portion of a Eurodollar
Advance previously made by it hereunder and then outstanding, such Lender shall,
upon the happening of such event, notify the Agent, the other Lenders and the
Borrowers thereof in writing stating the reasons therefor, and such Lender's pro
rata share of such Eurodollar Advance shall automatically be converted to a Base
Rate Advance. The applicable Borrower shall pay to the Agent for the benefit of
such Lender accrued interest owing on such converted portion of such Eurodollar
Advance made to such Borrower through the date of such conversion, together with
any amounts payable under Section 2.12 hereof with respect to such prepayment.
After such notice shall have been given and until the circumstances giving rise
to such notice no longer exist, each request for such Lender's pro rata share of
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a Eurodollar Advance or for conversion to or renewal of such Lender's pro rata
share of a Eurodollar Advance shall be deemed a request by a Borrower for a Base
Rate Advance. If and when such impracticability or illegality ceases to exist,
such suspension shall cease and such affected Lender shall similarly notify the
Agent, the other Lenders and the Borrowers.
ss. 2.11. EURODOLLAR AVAILABILITY. (a) In the event, and on each occasion,
that on the day two (2) Business Days prior to the commencement of any Interest
Period for a Eurodollar Advance, the Agent shall have determined in good faith
that dollar deposits in the amount of the principal amount of such Eurodollar
Advance are not generally available in the London (England) interbank market, or
that the rate at which such dollar deposits are being offered will not
accurately reflect the cost to one or more Lenders of making or funding the
principal amount of their portions of such Eurodollar Advance during such
Interest Period, or that reasonable means do not exist for ascertaining the
Eurodollar Rate, the Agent shall, as soon as practicable thereafter, give
written or telephonic notice of such determination to the Lenders and the
Borrowers, and any request by a Borrower for a Eurodollar Advance pursuant to
Section 2.4 hereof or for conversion to or renewal of a Eurodollar Advance
pursuant to Section 2.7 hereof shall thereupon, and until the circumstances
giving rise to such notice no longer exist (as notified by the Agent to the
Borrowers and the Lenders), be deemed a request by such Borrower for the making
of or conversion to a Base Rate Advance.
(b) If, at any time, the Agent shall have determined that any
contingency has occurred which adversely affects the London (England) interbank
market or that any law, treaty, order, directive, rule or regulation adopted,
issued or becoming effective after the Closing Date or any change in any
existing law, treaty, order, directive, rule or regulation from that in effect
on the Closing Date or in the interpretation thereof (in any case, whether or
not having the force of law) or other circumstance affecting one or more Lenders
or the London (England) interbank market makes the funding of any portion of a
Eurodollar Advance impracticable, the Agent shall, as soon as practicable
thereafter, give written or telephonic notice of such determination to the
Lenders and the Borrowers and any request by a Borrower for a Eurodollar Advance
pursuant to Section 2.4 hereof or for conversion to or renewal of a Eurodollar
Advance pursuant to Section 2.7 hereof shall thereupon, and until the
circumstances giving rise to such notice no longer exist (as notified by the
Agent to the Borrowers and the Lenders), be deemed a request by such Borrower
for the making of or conversion to a Base Rate Advance.
ss. 2.12. INDEMNITIES. (a) The Borrowers hereby indemnify each Lender on
demand against any loss or reasonable expense which such Lender or its branch or
affiliate may sustain or incur as a consequence of:
(i) any default in payment or prepayment of the principal amount of
any Eurodollar Advance made to it or any portion of any thereof or interest
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accrued thereon, as and when due and payable (at the due date thereof, by
irrevocable notice of payment or prepayment, or otherwise),
(ii) the effect of the occurrence of any Event of Default upon any
Eurodollar Advance made to it, including, but not limited to, any loss or
reasonable expense sustained or incurred in liquidating or employing
deposits from third parties acquired to effect or maintain such Eurodollar
Advance or any portion thereof,
(iii) the payment or prepayment of the principal amount of any
Eurodollar Advance made to it or any portion thereof, pursuant to Section 2
or 3 hereof, or otherwise, on any day other than the last day of an
Interest Period or the payment of any interest on any Eurodollar Advance
made to it, or portion thereof, on a day other than an Interest Payment
Date for such Eurodollar Advance, or (iv) the failure by any Borrower to
accept or make a borrowing of a Eurodollar Advance or a conversion to or
renewal of a Eurodollar Advance after it has given notice of such
borrowing, conversion or renewal.
Each Lender shall provide to the Borrowers, the Agent and the other Lenders a
statement, supported where applicable by documentary evidence, explaining the
amount and calculation of any such loss or expense it incurs, which statement
shall be conclusive absent manifest error.
(b) If any law, treaty, order, directive, rule or regulation shall
be adopted, issued or becoming effective after the Closing Date or if any change
in any law, treaty, order, directive, rule or regulation from that in effect on
the Closing Date or in the interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof (and including in
any event all risk based capital guidelines heretofore adopted by the
Comptroller of the Currency, the Board or any other banking regulatory agency,
domestic or foreign, to the extent that any provision contained therein does not
have to be complied with as of the date hereof) shall, or if the compliance by
any Lender with any guideline or request from any central bank or other
governmental authority, shall:
(i) impose upon, modify, require, make or deem applicable to any one
or more Lenders, or any of their Affiliates or branches, any reserve
requirement, special deposit requirement, insurance assessment or similar
requirement against or affecting the Revolving Commitment or the Revolving
Sublimit Commitment of such Lender or Lenders or such Affiliates or
branches, or
(ii) impose any condition upon or cause in any manner the addition of,
any supplement to or any increase of any kind to the capital or cost base
of such Lender or Lenders, or such Affiliates or branches thereof, for
extending or maintaining the Revolving Commitment or the Revolving Sublimit
Commitment of such Lender, which results in an increase in the capital
requirement supporting the Revolving Commitment or the Revolving Sublimit
Commitment, or
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(iii) impose upon, modify, require, make or deem applicable to such
Lender or Lenders or any such Affiliates or branches any capital
requirement, increased capital requirement or similar requirement,
and the result of any events referred to in clause (i), (ii) or (iii) above
shall be to (A) increase the amount of capital required or expected to be
required to be maintained by such Lender or any such Affiliate or branch and
such Lender determines that the amount of such capital requirement is incurred
by or based on the Revolving Commitment or the Revolving Sublimit Commitment of
such Lender or other commitments of this type or (B) increase the costs or
decrease the benefit in any way to such Lender or Lenders, or any such Affiliate
or branch, of extending or maintaining the Revolving Commitment or the Revolving
Sublimit Commitment or extending or maintaining such Lender's or Lenders'
portion of the Loan or holding any Collateral; then and in such event the
Borrowers shall, on or prior to the tenth (10th) Business Day after the giving
of Written Notice of such increased costs and/or decreased benefits to the
Company and the Agent by such Lender or Lenders (or any such Affiliate or
branch), pay to the Agent for the benefit of such Lender or Lenders all such
additional amounts which in the good faith calculation of such Lender or Lenders
are properly allocable to the Revolving Commitment or the Revolving Sublimit
Commitment of such Lender, such Lender's or Lenders' portion of the Loan and/or
the Collateral, as the case may be, and which:
(1) in the case of events referred to in clause (i) above,
shall be suffi cient to compensate it for all such increased costs and/or
decreased benefits, and/or
(2) in the case of events referred to in clauses (ii) and
(iii) above, shall be an amount equal to the reduction, as reasonably
determined by such Lender, in the after-tax rate of return on such
Lender's capital resulting from any such capital or increased capital or
similar requirement (including, without limitation, any such Lender's or
Lender's Affiliates' or branches' cost of taking action in anticipation of
the effectiveness of any event described in clause (ii) or (iii) in order
to enable such Lender, Lenders, Affiliate or branch to be in compliance
therewith upon such effectiveness), all as certified by such Lender or
Lenders in said Written Notice to the Borrowers. Such certification shall
be conclusive and binding on the Company absent manifest error.
(c) The Borrowers hereby indemnify and hold harmless the Agent and
each Lender and their respective Affiliates, directors, officers, agents,
representatives, counsel and employees and each other Person, if any,
controlling them or any of their Affiliates within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20(a) of the Securities
Exchange Act of 1934 (each an "Indemnified Party"), from and against any and all
losses, claims, damages, costs, expenses (including reasonable counsel fees and
disbursements) and liabilities which may be incurred by or asserted against such
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Indemnified Party with respect to or arising out of the financing contemplated
by this Agreement, the commitments hereunder to make, or the making of the
Revolving Advances or the financings contemplated hereby, the other Loan
Documents, the Collateral (including, without limitation, the use thereof by any
of such Persons or any other Person, the exercise by the Agent or any Lender of
rights and remedies or any power of attorney with respect thereto, and any
action or inaction of the Agent or any Lender under any Security Document), the
use of proceeds of any financial accommodations provided hereunder, any
investigation, litigation or other proceeding brought or threatened relating
thereto, or the role of any such Person or Persons in connection with the
foregoing whether or not they or any other Indemnified Party is named as a party
to any legal action or proceeding ("Claims"). The Borrowers will not, however,
be responsible to any Indemnified Party hereunder for any Claims to the extent
that any such Claim shall have arisen out of or resulted from actions taken or
omitted to be taken by such Indemnified Party which constitute the gross
negligence or willful misconduct of such Indemnified Party ("Excluded Claims").
Further, should any of the Agent's or any of the Lender's employees be involved
in any legal action or
proceeding in connection with the transactions contemplated hereby (other than
relating to an Excluded Claim), the Borrowers hereby agree to pay to the Agent
and each Lender an amount equal to the actual per diem compensation for each
employee for each day or portion thereof that such employee is involved in
preparation and testimony pertaining to any such legal action or proceeding. The
Indemnified Party shall give the Borrowers prompt written notice of any Claim
setting forth a description of those elements of the Claim of which such
Indemnified Party has knowledge. The Borrowers shall have the right at any time
during which a Claim is pending to select counsel to defend and settle any
Claims so long as in any such event the Borrowers shall have stated in a writing
delivered to the applicable Indemnified Party that, as between the Borrowers and
such Indemnified Party, the Borrowers are responsible to such Indemnified Party
with respect to such Claim; provided, however, that the Borrowers shall not be
entitled to control the defense of any Claim in the event that there are
defenses available to the Indemnified Party which are not available to the
Borrowers. In any other case, the Indemnified Party shall have the right to
select counsel and control the defense of any Claims; provided, however, that no
Indemnified Party shall settle any Claim as to which it is controlling the
defense without the consent of the Borrowers, which consent shall not be
unreasonably withheld or delayed. With respect to any Claim for which the
Borrowers are entitled to select counsel, each Indemnified Party shall have the
right, at its expense, to participate in the defense of such Claim. In the event
that, with respect to any Claim, more than one Indemnified Party shall be
permitted hereunder to select counsel to defend such Claim at the expense of the
Borrowers and shall decide to do so, then all such Indemnified Parties shall
select the same counsel to defend such Indemnified Parties with respect to such
Claim; provided, however, that if any such Indemnified Party shall in its
reasonable opinion (or in the reasonable opinion of its counsel) consider that
the retention of one joint counsel as aforesaid shall result in a conflict of
interest to it, such Indemnified Party may, at the reasonable expense of the
Borrowers, select its own counsel to defend such Indemnified Party with respect
to such Claim. The Indemnified Parties and the Borrowers and their respective
counsel shall cooperate with each other in all reasonable respects in any
investigation, trial and defense of any such Claim and any appeal arising
therefrom.
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(d) If for any reason the foregoing indemnity is unavailable to any
Indemnified Party or insufficient to hold it free and harmless as contemplated
by the preceding paragraph (c), then the Borrowers shall contribute to the
amount paid or payable by the Indemnified Party as a result of any Claim in such
proportion as is appropriate to reflect, not only the relative benefits received
by the Borrowers on the one hand and such Indemnified Party on the other hand,
but also the relative fault of the Borrowers and such Indemnified Party, as well
as any other relevant equitable considerations.
ss. 2.13. DISBURSEMENT. Each Revolving Advance shall be disbursed by
the Agent from the Payment Account to the applicable Disbursement Account as
provided in Section 2.4(d) hereof, shall be charged, together with interest,
fees and other amounts payable by any Borrower hereunder, to the account of such
Borrower on the books of the Agent from time to time, and shall be payable to
the Payment Account or to such other account or office as the Agent may specify
in writing to the Borrowers.
ss. 2.14. AGENT'S AVAILABILITY ASSUMPTION. (a) Unless the Agent
shall have been notified by any Lender by Written Notice prior to a borrowing
date that such Lender does not intend to make available to the Agent such
Lender's pro rata portion of any Revolving Advance which it shall be obligated
to make on such date, the Agent may assume that such Lender has made such amount
available to the Agent on the date for such borrowing and the Agent may, in
reliance upon such assumption, make available to the applicable Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Agent by such Lender on such date of borrowing, the Agent shall be
entitled to recover such corresponding amount on demand from such Lender, which
demand shall be made in a reasonably prompt manner. If such Lender does not pay
such corresponding amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the Lenders and the applicable Borrower and such Borrower
shall pay such corre sponding amount to the Agent on demand.
(b) The Agent shall also be entitled to recover from such Lender or
such Borrower interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Agent to such
Borrower to the date such corresponding amount is recovered by the Agent, at a
rate per annum equal to (x) if paid by such Lender, the cost to the Agent of
funding such amount as notified in writing by the Agent to such Lender, or (y)
if paid by a Borrower, the applicable rate for Base Rate Advances or Eurodollar
Advances, as the case may be.
(c) In the event that any Lender shall fail to fund its pro rata
share of any Revolving Advance made pursuant to Section 2A.4 hereof or its
letter of credit participation under Section 2A.5 hereof, the Agent on behalf of
the Issuing Lender shall be entitled to recover such amount on demand from such
Lender, which demand shall be made in a reasonably prompt manner. If such Lender
does not pay such amount forthwith upon the Agent's demand therefor, the Agent
shall notify promptly the Lenders and the Company thereof and the Company shall
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pay such amount to the Agent. The Agent on behalf of the Issuing Lender shall
also be entitled to recover from such Lender or the Company, as the case may be,
interest on such corresponding amount in respect of each day from the date such
Revolving Advance was made, or the date such purchase was to have been made or
funded, to the date such amount is recovered by the Agent, at a rate per annum
equal to (x) if paid by such Lender, the cost to the Issuing Lender of funding
the payment of the drawing under the Letter of Credit for which the Revolving
Advance was made in the case of a Revolving Advance made pursuant to Section
2A.4 or a participation under Section 2A.5 hereof, or (y) if paid by the
Company, the applicable rate for Base Rate Advances in the case of a Revolving
Advance made pursuant to Section 2A.5 hereof or a participation purchased under
Section 2A.5 hereof.
(d) Nothing herein shall be deemed to relieve any Lender from its
obligation to fund or purchase its pro rata share of any Revolving Advance or
purchase any participation as required hereunder, or to prejudice any rights
which any Borrower may have against any Lender as a result of any default by
such Lender hereunder. No Lender shall be
responsible for any default of any other Lender in respect of any other Lender's
obligation to make its pro rata share of any Revolving Advances hereunder nor
shall the Revolving Commitment of any Lender hereunder be increased as a result
of such default of any other Lender. Each Lender shall be obligated to the
extent provided herein regardless of the failure of any other Lender to fulfill
its obligations hereunder.
(e) Notwithstanding anything contained herein to the contrary, so
long as any Lender shall be in default in its obligation to fund its pro rata
share of any Revolving Advance (as notified to such Lender by the Agent; the
Agent agreeing to use good faith efforts to give such notification promptly
following the occurrence of such default) or shall have rejected any such
commitment, then such Lender shall not be entitled to receive any payments of
principal of or interest on its pro rata share of the Revolving Loan or its
share of any commitment or other fees payable hereunder unless and until (x) the
Loan and all interest thereon has been paid in full, (y) such failure to fulfill
its obligation to fund is cured and such Lender shall have paid, as and to the
extent provided in this Section 2.14, to the applicable party, if any, interest
on the amount of funds that such Lender failed to timely fund or (z) the Lender
Debt under this Agreement shall have been declared or shall have become
immediately due and payable, and until the earlier to occur of (x) or (y) above,
for purposes of voting or consenting to matters with respect to the Loan
Documents, such Lender shall be deemed not to be a "Lender" hereunder and such
Lender's Revolving Commitment or Revolving Sublimit Commitment shall be deemed
to be zero (0). No Revolving Commitment or Revolving Sublimit Commitment of any
Lender shall be increased or otherwise affected by any such failure or rejection
by any Lender. Any payments of principal of or interest on Lender Debt which
would, but for this paragraph (e), be paid to any Lender, shall be paid to the
Lenders who shall not be in default under their respective Revolving Commitments
and who shall not have rejected any Revolving Commitment or any Revolving
Sublimit Commitment, for application to Lender Debt or to provide Letter of
Credit Cash Collateral in such manner and order (pro rata among such Lenders) as
shall be determined by the Agent.
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ss. 2.15. PRO RATA TREATMENT AND PAYMENTS. Except as contem plated by this
Agreement, including, without limitation, Sections 2.1(c), 2.9, 2.10, 2.12,
2.13, 2.14, 2.18, 12.1, 12.5 and 12.13(h) hereof, each Revolving Advance and
each payment (including each prepayment) on account of the principal of and
interest on the Loan and fees described in this Agreement shall be made pro rata
to each Lender according to the respective percentages of each Lender set forth
opposite its name on Exhibit A hereto. The Agent will distribute each payment to
the Lenders in accordance with Section 2.19 hereof.
ss. 2.16. EURODOLLAR OFFICES. Each Lender intends to initially fulfill its
commitment with respect to such Lender's pro rata share of any Eurodollar
Advance by causing the Initial Eurodollar Office of such Lender to make such
Lender's proportionate share of such Eurodollar Advance; provided, however, that
each Lender may at its option fulfill such commitment by causing another branch
or an Affiliate of such Lender to make such Lender's pro rata share of such
Eurodollar Advance; and provided, further, that the selection by such Lender of
the Initial Eurodollar Office of such Lender or any other such branch or
Affiliate shall not affect the obligations of the Borrowers to repay such
Lender's pro rata share of the Eurodollar Advances in accordance with the terms
of this Agreement.
ss. 2.17. TELEPHONIC NOTICE. Without in any way limiting any Borrower's
obligation to confirm in writing any telephonic notice of a borrowing,
conversion or renewal, the Agent may act without liability upon the basis of
telephonic notice believed by the Agent in good faith to be from an Authorized
Representative of any Borrower prior to receipt of written confirmation.
ss. 2.18. MAXIMUM INTEREST. (a) No provision of this Agreement or any
Revolving Note shall require the payment to any Lender or permit the collection
by any Lender of interest in excess of the maximum rate permitted by applicable
law (the "Maximum Lawful Rate").
(b) If the amount of interest computed without giving effect to this
Sect ion 2.18 and payable on any interest payment date in respect of the
preceding interest computation period would exceed the amount of interest
computed in respect of such period at the maximum rate of interest from time to
time permitted (after taking into account all consideration which constitutes
interest) by laws applicable to any Lender (such maximum rate being such
Lender's "Maximum Permissible Rate"), the amount of interest payable to such
Lender on such date in respect of such period shall be computed at such Lender's
Maximum Permissible Rate.
(c) If at any time and from time to time (i) the amount of interest
payable to any Lender on any interest payment date shall be computed at such
Lender's Maximum Permissible Rate pursuant to the preceding paragraph (b) and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at such Lender's Maximum Permissible
Rate, then the amount of interest payable to such Lender in respect of such
subsequent interest computation period shall continue to be computed at such
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Lender's Maximum Permissible Rate until the amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to the preceding paragraph (b).
ss. 2.19. RECEIPT OF PAYMENTS. (a) Each payment by any Borrower
under this Agreement shall be made without deduction, set-off, defense,
recoupment, claim or counterclaim, all of which are waived, not later than 12:00
noon (New York time) on the day when due in lawful money of the United States of
America in immediately available funds to the Agent's Payment Account. The Agent
will, upon any such payment to its Payment Account, promptly thereafter (and in
any event on the same Business Day as the date when received if such payment is
received at or prior to 12:00 noon (New York time) (or, if sent by wire transfer
in immediately available funds, if such wire is initiated by such time)), cause
to be distributed like funds relating to the payment of principal or interest
ratably to the Lenders or as otherwise provided above, and like funds relating
to the payment of any other amount payable to any Lender to such Lender, in each
case to be applied in accordance with the terms of this Agreement.
(b) Pursuant and subject to Section 8.22 hereof, the Company has
agreed to cause all Proceeds to be deposited into Blocked Accounts, and to cause
all such Proceeds to be transferred to the Payment Account in accordance with
the Collecting Bank Agreements. Subject to Section 2.20(a) hereof, on each
Business Day, the Agent shall apply to Lender Debt (or invest as hereinafter
provided) effective as of such Business Day, all Proceeds credited in
immediately available funds to the Payment Account on such Business Day (and
which shall not have theretofore been credited to Lender Debt) as follows: (i)
first, to the Revolving Loan, until the Revolving Loan shall have been paid in
full and (ii) second, invested in accordance with and subject to the
requirements of Section 2.20(b) hereof.
In the event the Company (or any Affiliate of the Company or any
Person acting for or in concert with the Company) shall, notwithstanding the
existence of any lock-box or collection arrangement referred to in this
Agreement, receive any monies, checks, drafts or other similar negotiable items
of payment made with respect to Accounts (other than (x) Accounts of Foreign
Subsidiaries not subject to a cash management arrangement with the Agent and (y)
payments in respect of accommodation sales and other miscellaneous transactions
which are not store settlements so long as such monies, checks, drafts or
similar items are deposited as required by this sentence no less frequently than
monthly (it being agreed that the Company shall use its reasonable efforts to
cause such deposits to be made no less frequently than once every two weeks
within one year following the Closing Date) and in any event when the
undeposited amount of such monies, checks, drafts or similar items equals or
exceeds $750,000 in the aggregate during November, December or January or
$450,000 in the aggregate at any other time), the Company shall no later than
the first Business Day following receipt thereof deposit or cause the same to be
deposited, in kind, in a Blocked Account or as otherwise directed by the Agent.
Notwithstanding anything to the contrary herein, all such items of payment
shall, solely for purposes of determining the occurrence of an Event of Default,
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be deemed received upon actual deposit to the Payment Account, unless the same
shall be subsequently dishonored for any reason whatsoever in which case such
payment will not be deemed so received.
(c) Subject to the provisions of Section 10.5 hereof, any payments,
prepayments or other amounts applied or required to be applied by the provisions
of this Agreement to principal outstanding under the Revolving Loan shall,
unless otherwise directed by the Company in a Written Notice to the Agent, be
applied as follows: (i) first, to principal outstanding under the Company's
Revolving Loan until paid in full and (ii) second, to principal outstanding
under the Parent's Revolving Loan until paid in full.
ss. 2.20. APPLICATION OF PROCEEDS. (a) On and after an Event of Default and
while such Event of Default continues, the Borrowers irrevocably (x) waive the
right to direct the application of any and all payments received at any time or
times during such period by the Agent or any Lender from or on behalf of the
Borrowers pursuant to the terms of this Agreement, and (y) agree that the Agent
and Lenders shall have the continuing exclusive right to apply any and all such
payments against any Lender Debt as the Agent may deem advisable or as otherwise
provided herein. Unless otherwise provided herein (including, without
limitation, under Section 2.19(b) hereof) or in the absence of a specific
determination by the Agent with respect thereto, the same shall, when in the
form of immediately available funds, be applied in the following order: (i) then
due and payable fees and expenses owing under the Loan Documents; (ii) then due
and payable interest and the principal outstanding on the Swing Line Loan; (iii)
then due and payable interest payments on the Lender Debt; (iv) principal
outstanding under the Revolving Loan until paid in full; and (v) other Lender
Debt then due and payable (including being held as Letter of Credit Cash
Collateral). Any amounts remaining after application of all items in clauses (i)
through (v) above shall be deposited in the account of the Agent as provided in
paragraph (b) below.
(b) Subject to paragraph (a) above, all amounts remaining after
application as provided in the last sentence of paragraph (a) above shall be
deposited into an account maintained by the Agent. So long as no Event of
Default or Default shall be continuing the Borrowers may direct in writing that
the Agent release any and all amounts (and earnings thereon) from such account.
Any amounts on deposit in such account may be, unless and until withdrawn by a
Borrower, applied by the Agent to the payment of Lender Debt under the Loan
Documents as provided in paragraph (a) above. Any monies remaining in such
account shall be invested and reinvested (so long as in such account) by and in
the name of the Agent in investments of the type permitted under Section 9.4(b)
hereof with the type and maturity of such investments to be mutually agreed to
by the Agent and the Borrowers (until an Event of Default shall occur and be
continuing, at which time the Agent shall have the sole right to choose such
investments). All interest and other income on such investments shall be for the
account and risk of the Borrowers. As collateral security for the Lender Debt,
the Company hereby grants to the Agent a security interest in (x) all monies in
such account and all investments thereof, including, without limitation, any
certificates or instruments evidencing such investments, and all claims and
choses in action in respect of the foregoing, (y) any interest or other payment
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made in respect of such investments and (z) any and all proceeds of any of the
above and all claims and choses in action in respect of the foregoing (all of
the foregoing constituting part of the Collateral). To the extent the Agent
makes any such investments, the Company hereby authorizes the Agent to hold any
certificate or instrument evidencing such investments.
(c) The Agent is authorized to, and at its option may, make advances
on behalf of the Borrowers for payment of all fees, expenses, charges, costs,
principal and interest incurred by the Borrowers hereunder. Such advances shall
be made when and as the Borrowers fail to promptly pay such fees, expenses,
charges, costs, principal and interest and, at the Agent's option and to the
extent permitted by law and within the Revolving Commitments of the Lenders,
shall be deemed Revolving Advances constituting part of the Revolving Loan
hereunder. Promptly following any advance made by the Agent under this paragraph
(c), the Agent shall deliver a notice of such advance to the Borrowers;
provided, however, that the Agent shall have no liability to the Borrowers as a
result of the failure of the Agent to deliver such notice to the Borrowers.
ss. 2.21. ACCOUNTING. The Agent will provide a monthly accounting of
transactions under the Revolving Loan to the Borrowers. Each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon the Borrowers in all respects as to all matters reflected therein, unless
the Borrower, within 30 days after the date any such accounting is rendered,
shall notify the Agent in writing of any objection which the Borrowers may have
to any such accounting, describing the basis for such objection with
specificity. In that event, only those items expressly objected to in such
notice shall be deemed to be disputed by the Borrowers. The Agent's
determination, based upon the facts available, of any item objected to by the
Borrowers in such notice shall (absent manifest error) be final, binding and
conclusive on the Borrowers, unless a Borrower shall commence a judicial
proceeding to resolve such objection within 90 days following the Agent's
notifying the Borrowers in writing of such determination.
ss. 2.22. TAXES. (a) Subject to subparagraph (b)(iii) of this
Section 2.22, each payment or prepayment hereunder and under the Revolving Notes
shall be made without set-off or counterclaim and free and clear of, and without
deduction for, any present or future withholding or other taxes, duties or
charges and all liabilities with respect thereto, of any nature imposed on such
payments or prepayments by or on behalf of any government or any political
subdivision or agency thereof or therein, except for Excluded Taxes (all such
taxes, levies, duties, imposts, deductions, charges and liabilities, except
Excluded Taxes, being hereinafter referred to as "Taxes"). If any such Taxes are
so levied or imposed on any payment or prepayment to any Lender or the Agent or
paid by such Lender or the Agent, the Borrowers will make additional payments to
the Agent in such amounts as may be necessary so that the net amount received by
such Lender or the Agent after withholding or deduction for or on account of
such Taxes, including deductions applicable to additional sums payable under
this Section 2.22(a) (other than Excluded Taxes), will be equal to the amount
provided for herein or in such Lender's Note or Notes. Whenever any Taxes are
payable by any of the Borrowers with respect to any payments or prepayments
hereunder or under any of the Notes, such Borrower shall furnish promptly to the
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Agent for the account of the applicable Lender official receipts (to the extent
that the relevant governmental authority delivers such receipts) evidencing
payment of any such Taxes so withheld or deducted. If a Borrower fails to pay
any such Taxes when due to the appropriate taxing authority or fails to remit to
the Agent for the account of the applicable Lender or the Agent, as applicable,
the required receipts evidencing payment of any such Taxes so withheld or
deducted, such Borrower shall indemnify the affected Lender or the Agent, as
applicable, for any incremental Taxes and any incremental Excluded Taxes or
interest or penalties that may become payable by such Lender or the Agent, as
applicable, as a result of any such failure.
(b) (i) Each Lender (which, for purposes of Section 2.22 of this
Agreement, shall include any Affiliate of a Lender that makes any
Eurodollar Advance pursuant to Section 2.16 of this Agreement) that is not
a "United States person" (as such term is defined in Section 7701(a)(30) of
the Code) shall submit to the Company and the Agent on or before the
Closing Date (or, in the case of a Person that became a Lender after the
Closing Date by assignment, promptly upon such assignment), two duly
completed and signed copies of either (1) Form 1001 of the United States
Internal Revenue Service entitling such Lender to a complete exemption from
withholding on all amounts to be received by such Lender pursuant to this
Agreement and/or the Revolving Notes or (2) Form 4224 of the United States
Internal Revenue Service relating to all amounts to be received by such
Lender pursuant to this Agreement and/or the Revolving Notes. Each such
Lender shall, from time to time after submitting either such form, submit
to the Borrowers and the Agent such additional duly completed and signed
copies of one or the other such forms (or such successor forms or other
documents as shall be adopted from time to time by the relevant United
States taxing authorities) as may be (1) reasonably requested in writing by
the Borrowers or the Agent and (2) appropriate under then current United
States law or regulations to avoid United States withholding taxes on
payments in respect of any amounts to be received by such Lender pursuant
to this Agreement and/or the Notes. Upon the reasonable request of a
Borrower or the Agent, each Lender that has not provided the forms or other
documents, as provided above, on the basis of being a United States person
shall submit to such Borrower and the Agent a certificate to the effect
that it is such a "United States person."
(ii) If any Lender which is not a "United States person" determines
that it is unable to submit to the Borrowers or the Agent any form or
certificate that such Lender is requested to submit pursuant to the
preceding paragraph, or that it is required to withdraw or cancel any such
form or certificate, or that any such form or certificate previously
submitted has otherwise become ineffective or inaccurate, such Lender shall
promptly notify the Borrowers and the Agent of such fact.
(iii) Except as provided in Section 2.22(c) and Section 12.6 hereof,
no Borrower shall be required to pay any additional amount in respect of
Taxes to any Lender if and only to the extent that (A) such Lender is
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subject to such Taxes (in such case, only to the extent of the tax rate
then in effect) on the date this Agreement is executed by such Lender (or
in the case of a Person that became a Lender after the Closing Date by
assignment, on the date of such assignment) or would be subject to such
Taxes on such date if a payment hereunder or on the Notes had been received
by it on such date; (B) such Lender becomes subject to such Taxes
subsequent to the date referred to in clause (A) above (or in the case of a
Lender which is not a "United States person," the first date on which it
delivers the appropriate form or certificate to the Borrowers and the Agent
as referred to in paragraph (b) of this Section) as a result of a change in
the circumstances of such Lender, other than a change in applicable law
(including without limitation an increase in any applicable tax rate),
including without limitation a change in the residence, place of
incorporation or principal place of business of the Lender, a change in the
branch or lending office of the Lender participating in the transactions
set forth herein or as a result of the sale by the Lender of participating
interests in such Lender's creditor position(s) hereunder; provided,
however, that the Borrowers will be required to pay any additional amount
in respect of Taxes to any Lender to the extent that after a change in the
circumstances (as described above) of such Lender a subsequent change in
any applicable law results in an additional amount that such Lender is
subject to with respect to Taxes; or (C) such Taxes would not have been
incurred but for the failure of such Lender to file with the appropriate
tax authorities and/or provide to the Borrowers or the Agent any form or
certificate that it was required so to do pursuant to paragraph (b) of this
Section and entitled so to do under applicable law.
(iv) Within thirty (30) days after the written reasonable
request of a Borrower, each Lender shall execute and deliver to such
Borrower such certificates, forms or other documents which can be
furnished consistent with the facts and which are reasonably necessary to
assist such Borrower in applying for refunds of Taxes paid by such
Borrower hereunder or making payment of Taxes hereunder; provided,
however, that no Lender shall be required to furnish to a Borrower any
financial information with respect to itself or other information which it
in its sole discretion considers confidential.
(c) In addition, the Borrowers agree to pay any present or future
stamp or documentary taxes, any intangibles tax or any other sales, excise
or property taxes, charges or similar levies now or hereafter assessed
that arise from and are attributable to the execution, delivery of, or
otherwise with respect to, this Agreement, the Notes, the Mortgages,
Leasehold Mortgages or other Security Documents and any and all recording
fees relating to any Loan Documents securing any Lender Debt (hereinafter
referred to as "Other Taxes").
(d) The Borrowers shall indemnify and pay to each Lender and the
Agent the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.22) duly paid or payable by such
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Lender or the Agent and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. Indemnification
payments shall be made within 30 days from the date such Lender or the
Agent makes written demand therefor.
(e) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this Sec tion 2.22 shall survive the payment in full of
principal and interest hereunder and under the Notes indefinitely.
SECTION 2A. AMOUNT AND TERMS OF LETTERS OF
CREDIT AND PARTICIPATIONS THEREIN.
ss. 2A.1. LETTERS OF CREDIT. Upon the request of the Company not less than
three (3) Business Days in advance, each Issuing Lender agrees, on the terms and
conditions hereinafter set forth, to issue (or in the case of GE Capital, cause,
through the issuance of one or more L/C Indemnity Agreements, an Issuing
Non-Lender Bank to issue) for the account of the Company one or more Letters of
Credit from time to time during the period from the Closing Date until the
Maturity Date in an aggregate amount for all Letters of Credit not to exceed at
any time $30,000,000, each such Letter of Credit upon its issuance to expire on
or before the earlier of (i) the date which occurs one year (or in the case of a
Letter of Credit in favor of the State of Missouri to secure sales tax payments,
one year which, in addition to drawings permitted upon the non-payment of taxes
and like events, may be drawn on any date prior to its expiration date if it is
not renewed for the upcoming year within a specified period prior to its
expiration date, such provision to be included in the original of such Letter of
Credit and the first three renewals thereof) from the date of its issuance and
(ii) the Maturity Date; provided, however, that the Issuing Bank shall not be
obligated to issue any Letter of Credit if:
(a) after giving effect to such issuance of such Letter of Credit,
(i) the then outstanding aggregate amount of all Letter of Credit
Obligations and Revolving Advances (including Swing Line Advances) shall
exceed the Borrowing Limit, (ii) the then outstanding aggregate amount of
all Letter of Credit Obligations shall exceed $30,000,000, or (iii) there
shall be a prepayment required under Section 3.1(a) hereof; or
(b) the Company shall have failed to satisfy any condition precedent
contained in Section 6 hereof.
ss. 2A.2. ISSUING THE LETTERS OF CREDIT. Each Letter of Credit shall
be issued on Written Notice by the Company to the Agent at least three (3)
Business Days (or such other period as the Agent and the Company may agree from
time to time) in advance, which Written Notice shall specify the date, amount,
expiry, beneficiary and issuer thereof, and shall be accompanied by the Letter
of Credit Agreements required by the Issuing Bank and acceptable to the Agent
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(which shall include the form of Letter of Credit requested by the Company as
agreed to by the Issuing Bank), each in form and substance satisfactory to the
Agent and the Issuing Bank. On the date specified by the Company in such notice
and upon fulfillment of the applicable conditions set forth in Section 2A.1, the
Issuing Bank will issue such Letter of Credit in the form specified in such
notice and such Letter of Credit Agreements. In the event that a Letter of
Credit is to be issued by an Issuing Non-Lender Bank, then the Written Notice
issued by the Company hereunder shall refer to an L/C Indemnity Agreement to be
issued by GE Capital (and shall also describe the Letter of Credit to be issued
by such Issuing Non-Lender Bank) which L/C Indemnity Agreement shall be deemed
to be a Letter of Credit under this Agreement as to which GE Capital shall be
deemed to be the Issuing Lender. The form of each Letter of Credit and the
identity of each Issuing Non-Lender Bank shall be reasonably satisfactory to the
Agent.
ss. 2A.3. REIMBURSEMENT OBLIGATIONS. Notwithstanding any
provisions to the contrary in any Letter of Credit Agreement with respect to any
Letter of Credit, the Company shall:
(a) pay to the Agent for the account of the Issuing Bank an amount
equal to, and in reimbursement for, each amount which the Issuing Bank
pays under any Letter
of Credit on or before the earlier of (i) the time specified therefor in
the applicable Letter of Credit Agreement, and (ii) the date on which
payment of such amount is made by the Issuing Bank under such Letter of
Credit; and
(b) pay to the Agent for the account of the Issuing Lender interest
on any amount remaining unpaid by the Company to the Issuing Lender under
subsection (a) above from the date on which the Issuing Lender pays such
amount under any Letter of Credit until such amount is reimbursed in full
to the Issuing Lender pursuant to subsection (a) above, payable on demand,
at a fluctuating rate per annum equal to the sum of the Base Rate in
effect from time to time plus two percentage points (2%).
ss. 2A.4. REVOLVING ADVANCES. (a) Subject to availability under
Section 2.2 hereof, and so long as the Lender Debt under the Loan Documents
shall not have been accelerated (except an acceleration which has been
rescinded) and there shall be no Event of Default under Section 10.1(f) or
Section 10.1(g) hereof, the Company shall make each payment required under
Section 2A.3 hereof with the proceeds of a Revolving Advance. Each such
Revolving Advance shall be deemed to be requested by the Company, whether or not
the Company actually requests such Revolving Advance in accordance with Section
2.4 hereof, and subject to availability under the Revolving Credit Facility
Commitment, the Lenders shall make such Revolving Advance unless the Lender Debt
shall have been accelerated (and not rescinded), an Event of Default under
Section 10.1(f) or Section 10.1(g) has occurred or such Letter of Credit was not
properly issuable under Section 2A.1 hereof.
(b) The Company hereby irrevocably requests each such Revolving
Advance and irrevocably authorizes and directs the Agent to apply the proceeds
thereof directly to the Issuing Bank in satisfaction of the Company's
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obligations under Section 2A.3 hereof in respect of such Letter of Credit. The
Letter of Credit in respect of which a Revolving Advance is to be made under
this Section 2A.4 shall be deemed to be not outstanding for the purposes of
determining availability under the Revolving Credit Facility Commitment in
making such Revolving Advance.
(c) No Revolving Advance shall be required to be made by the Lenders
under this Section 2A.4 to the extent prevented by applicable law, following any
acceleration of the Lender Debt under the Loan Documents (which has not been
rescinded) or while any Event of Default under Section 10.1(f) or Section
10.1(g) hereof.
ss. 2A.5. SETTLEMENT BY LENDERS WITH ISSUING BANK. (a) With
respect to any Letter of Credit issued by an Issuing Lender in accordance with
the provisions of Section 2A.1 hereof, the Issuing Lender shall be deemed
irrevocably and unconditionally to have sold and transferred to each other
Lender without recourse or warranty, and each such other Lender shall be deemed
to have irrevocably and unconditionally purchased and received from the Issuing
Lender, an undivided interest and participation, to the extent of such Lender's
pro rata share of the Revolving Credit Facility Commitment in effect from time
to time, in such Letter of Credit and all Letter of Credit Obligations relating
to such
Letter of Credit and all Letter of Credit Agreements and Loan Documents
securing, guaranteeing, supporting or otherwise benefiting the payment of such
Letter of Credit Obligations.
(b) As to each Letter of Credit issued or to be issued by the
Issuing Lender in which the Lenders have purchased or shall purchase
participations, the Agent shall promptly notify each other Lender of such Letter
of Credit and its date of issue, amount, expiry and reference number.
(c) With respect to any Letter of Credit in which Lenders have
purchased participations, if any reimbursement or other obligation under Section
2A.3 hereof is not paid when due to the Issuing Lender with respect to any such
Letter of Credit, the Issuing Lender shall promptly notify the Agent to that
effect, and the Agent shall promptly notify the Lenders of the amount of such
obligation and each Lender shall immediately pay to the Agent for the benefit of
the Issuing Lender in respect of the purchase price for such participation in
such Letter of Credit, in lawful money of the United States and in same day
funds, an amount equal to such Lender's pro rata share (based on its share of
the Revolving Credit Facility Commitment at such time) of the amount of such
unpaid obligation, it being understood that the Issuing Lender shall not be paid
its pro rata share (based on its share of the Revolving Credit Facility
Commitment then in effect) of such reimbursement or other obligation. Promptly
after the Issuing Lender receives a payment on account of such an obligation
with respect to any such Letter of Credit (other than under this paragraph (c)),
the Issuing Lender shall promptly pay to the Agent, and the Agent shall promptly
pay to each other Lender which funded its participation therein, in lawful money
of the United States and in the kind of funds so received, an amount equal to
such Lender's ratable share thereof.
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(d) Upon the request of any Lender having purchased a participation in a
Letter of Credit, the Agent shall furnish to such Lender copies of such Letter
of Credit and any Letter of Credit Agreements related thereto as may be
reasonably requested by such Lender.
(e) The obligation of each Lender to make payments under paragraph (c)
above shall be unconditional and irrevocable and shall be made under all
circumstances (except as otherwise expressly provided in paragraph (a) above),
including, without limitation, any of the circumstances referred to in Section
2A.7(b) hereof.
(f) If any payment received on account of any reimbursement or other
obligation with respect to a Letter of Credit and distributed to a Lender as a
participant under Section 2A.5(c) or (g) is thereafter recovered from the
Issuing Lender in connection with any bankruptcy or insolvency proceeding
relating to the Company, any other Credit Party or otherwise, each Lender which
received such distribution shall, upon demand by the Agent, repay to the Issuing
Lender such Lender's ratable share of the amount so recovered together with an
amount equal to such Lender's ratable share (according to the proportion of (i)
the amount of such Lender's required repayment to (ii) the total amount so
recovered) of any interest or other amount paid or payable by the Issuing Lender
in respect of the total amount so recovered. (g) Upon the expiration of any
Letter of Credit or receipt by the Issuing Lender of payment on account of any
reimbursement or other obligation with respect to any Letter of Credit, the
Issuing Lender, in its capacity as Lender, shall unconditionally settle with the
Lenders and, with respect to the receipt of a reimbursement obligation, pay to
the Agent, by paying to the Payment Account in same day funds, for reimbursement
to the Lenders, such amount as may be necessary to adjust the aggregate of the
Revolving Loan and Letter of Credit Obligations of each Lender so that all
Lenders are, with respect to the Revolving Loan and Letter of Credit
Obligations, pro rata.
ss. 2A.6. LETTER OF CREDIT FEES. (a) The Company shall pay to the Agent for
the pro rata benefit of the Lenders (after the deduction of a portion of such
fee payable to the Issuing Non-Lender Banks on a pro rata basis) on the last day
of each calendar month of each year and on the date of the full drawing,
cancellation, expiration or termination of any Letter of Credit, a fee in
respect of such Letter of Credit for such calendar month or shorter period, at a
rate, with respect to Letters of Credit, equal to the Applicable Eurodollar
Margin (calculated on the average daily undrawn amount of such Letter of Credit
for such calendar month or shorter period and computed on the basis of the
actual number of days elapsed over a year of 360 days), subject to the
provisions of Section 2.6(c) hereof.
(b) In addition to the amounts payable under paragraph (a) of this
Section 2A.6, the Company shall pay (i) to the Issuing Bank on demand, sums
equal to standard fees, charges and expenses (other than in respect of the
extension of credit) which the Issuing Bank may impose, pay or incur in
connection with the issuance, amendment, administration, transfer or
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cancellation of any or all Letters of Credit or in connection with any payment
by the Issuing Bank thereunder and (ii) any costs and expenses incurred by the
Agent in arranging for the issuance or guaranty of the Letters of Credit.
ss. 2A.7. INDEMNIFICATION: NATURE OF THE ISSUING BANK'S DUTIES. (a)
The Company agrees to indemnify and save harmless the Agent, the Issuing Bank
and each Lender from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys'
fees) which the Agent, the Issuing Bank or such Lender may incur or be subject
to as a consequence, direct or indirect, of (i) the issuance of any Letter of
Credit or any action taken or omitted to be taken in connection therewith by the
Issuing Bank or (ii) any action or proceeding arising from or in connection with
the Letter of Credit, including, without limitation, any action or proceeding
relating to a court order, injunction, or other process or decree restraining or
seeking to restrain the Issuing Bank from paying any amount under any Letter of
Credit. The indemnities contained in this Section 2A.7 shall survive the
expiration or termination of the Letters of Credit and this Agreement and shall
be payable upon demand.
(b) In furtherance and not in limitation of the foregoing, the
obligations of the Company hereunder shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms hereof under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any renewal, extension or modification of any Letter of
Credit (but not any increase in the outstanding amount thereof) so long as
the terms of such Letter of Credit after giving effect to such extension,
renewal or modification would be permitted hereunder, or any lack of
validity or enforceability of or any change in the terms of any Letter of
Credit or any agreement or instrument relating thereto;
(ii) the existence of any claim, setoff, defense or other
right which the Company may have at any time against the beneficiary, or
any transferee, of any Letter of Credit, or the Issuing Bank, the Agent,
any Lender or any other Person;
(iii) any draft, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) any lack of validity, effectiveness or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part;
(v) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or
of the proceeds thereof;
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(vi) any failure of the beneficiary of a Letter of Credit to
strictly comply with the conditions required in order to draw upon any
Letter of Credit;
(vii) any misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any other circumstance or happening whatsoever, whether
or not similar to the foregoing;
provided that the Agent, the Issuing Bank and each Lender shall not be relieved
of any liability it may otherwise have as a result of its gross negligence or
willful misconduct.
ss. 2A.8. INCREASED COSTS. (a) Change in Law Generally. If any law, treaty,
order, directive, rule or regulation adopted, issued or becoming effective after
the Closing Date or any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority charged with
the administration thereof or compliance by any Issuing Lender or Lender with
respect thereto from that in effect as of the Closing Date shall either (i)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against letters of credit issued by the Issuing Lender or any Lender
or participations therein or (ii) impose on the Issuing Lender or such Lender
any other condition regarding letters of credit or participations therein, and
the result of any event referred to in the preceding clause (i) or (ii) shall be
to increase the cost to the Issuing Lender of issuing or maintaining, or, in the
case of such Lender, having a participation in, Letters of Credit then, upon
demand by the Issuing Lender or such Lender (with a copy to the Agent), the
Company shall promptly pay to the Agent for the benefit of the Issuing Lender or
such Lender from time to time as specified by the Issuing Lender or such Lender
(with a copy to the Agent), additional amounts which shall be sufficient to
compensate the Issuing Lender or such Lender for such increased cost. A
certificate as to such increased cost, and amount and computation thereof,
incurred by the Issuing Lender or such Lender as a result of any event mentioned
in clause (i) or (ii) above, submitted by the Issuing Lender or such Lender to
the Company and the Agent, shall be conclusive and binding for all purposes,
absent manifest error.
(b) Capital. If any law, treaty, order, directive, rule or
regulation shall be adopted, issued or become effective after the Closing Date
or if any change in any law, treaty, order, directive, rule or regulation from
that in effect on the Closing Date or in the interpretation thereof by any
governmental or other regulatory authority charged with the administration
thereof (and including in any event all risk based capital guidelines heretofore
adopted by the Comptroller of the Currency, the Board or any other banking
regulatory agency, domestic or foreign, to the extent that any provision
contained therein does not have to be complied with as of the date hereof),
shall, or if the compliance by any Issuing Lender or any Lender with any
guideline or request from any central bank or other governmental authority,
shall affect or would affect the amount of capital required or expected to be
maintained by the Issuing Lender or such Lender or any Affiliate of such Issuing
Lender or Lender, and the Issuing Lender or such Lender determines that the
amount of such capital is increased by or based upon the existence of letters of
credit or participations therein (or similar contingent obligations), then, upon
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demand by the Issuing Lender or such Lender, as the case may be (with a copy to
the Agent), the Company shall pay to the Agent for the benefit of the Issuing
Lender or such Lender from time to time such additional amounts as may be
specified by the Issuing Lender or such Lender as sufficient to compensate it in
light of such circumstances, to the extent that the Issuing Lender or such
Lender determines such increase in capital to be allocable to the issuance or
maintenance of the Letters of Credit, or, in the case of such Lender, to its
participation in the Letters of Credit. A certificate as to such amounts
submitted to the Company by the Issuing Lender or such Lender shall be
conclusive and binding for all purposes, absent manifest error.
ss. 2A.9. UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice
for Documentary Credits as most recently published by the International Chamber
of Commerce and as revised from time to time ("UCP") shall in all respects be
deemed a part of this Article 2A as if incorporated herein with respect to the
Letters of Credit.
ss. 2A.10. FOREIGN CURRENCY. Any payments by the Issuing Bank of drawings
under any Letter of Credit in foreign currency shall be reimbursed by the
Company (or, under Section 2A.5, the Lenders) in U.S. dollars at the rate of
exchange for cable transfers in effect on the date of payment by the Issuing
Bank of the drawing under such Letter of Credit.
ss. 2A.11. REIMBURSEMENT OF CERTAIN COSTS. Unless at the time prohibited by
an order of a court of competent jurisdiction, the obligations of the Company
hereunder with regard to Letters of Credit are absolute and unconditional under
any and all circumstances and irrespective of any set off, counterclaim or
defense to payment which the Company may have against any Person, including,
without limitation, the Agent, the Lenders, the beneficiary of such Letter of
Credit and any Issuing Bank and all sums payable by the Company hereunder with
respect to any such Letter of Credit, whether of principal, interest, fees,
expenses or otherwise, shall be paid in full, without any deduction or
withholding whatsoever. In the event that the Company is compelled by applicable
law to make any such deduction or withholding, then, unless prohibited by
applicable law and except as provided in Section 2.22(b)(iii) hereof, it shall
pay to each Issuing Bank such additional amount as will result in the receipt by
such Issuing Bank of a net sum equal to the sum it would have received if no
such deduction or withholding had been required to be made.
SECTION 3. PAYMENTS AND PREPAYMENTS.
ss. 3.1. MANDATORY PAYMENTS. (a) If at any time the sum of (i) the then
outstanding principal amount of the Revolving Loan (including the Swing Line
Loan) plus (ii) the outstanding amount of Letter of Credit Obligations exceeds
the Borrowing Limit at such time, the Borrowers shall immediately eliminate such
excess by prepaying the Revolving Loan. In the event that reducing the Revolving
Loan to zero will not eliminate such excess, then the Company shall provide to
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the Agent, cash collateral, on terms and pursuant to documents and agreements
(each of which shall constitute a Security Document) satisfactory in all
respects to the Agent, for all outstanding Letter of Credit Obligations
(hereinafter, "Letter of Credit Cash Collateral") in an amount sufficient to
eliminate such excess, the Letter of Credit Obligations being deemed reduced by
the amount of Letter of Credit Cash Collateral so provided.
(b) In the event that for any reason the Letter of Credit
Obligations exceed $30,000,000 at any time, the Company shall immediately
provide Letter of Credit Cash Collateral in an amount sufficient to eliminate
such excess, the Letter of Credit Obligations being deemed reduced by the amount
of Letter of Credit Cash Collateral so provided.
(c) The Borrowers shall cause for a period of at least 30
consecutive days during each Clean Down Period (i) the aggregate outstanding
principal balance of the Revolving Loan to be reduced to an amount equal to
$10,000,000 or less and (ii) the Letter of Credit Obligations to be reduced to
an amount equal to $20,000,000 or less; provided, however, that in the event the
Letter of Credit Obligations exceed $20,000,000 at any time, the Company may
provide Letter of Credit Cash Collateral in an amount sufficient to eliminate
such excess and the Letter of Credit Obligations shall be deemed reduced by the
amount of Letter of Credit Cash Collateral so provided.
(d) In the event that (i) a Change of Control occurs, (ii) all or
substantially all
of the assets of the Company shall be sold, transferred or conveyed, whether in
a single transaction or in a series of related transactions or (iii) the Company
or the Parent shall consummate a transaction otherwise prohibited under Section
9.5 hereof, the Revolving Loan shall become immediately due and payable, the
Revolving Credit Facility Commitment shall be automatically terminated and the
Borrowers shall immediately pay all Lender Debt (including, without limitation,
Letter of Credit Obligations, for which Letter of Credit Cash Collateral shall
be immediately provided), unless, in the case of (i), (ii) or (iii) above, the
Borrowers have obtained the prior written consent of the Majority Lenders.
(e) Any prepayment of principal of the Revolving Loan pursuant to
this Section 3.1 shall be made, except as provided in Section 3.7 hereof,
without premium or penalty but shall be subject to payment of any applicable
indemnity obligations pursuant to Section 2.12 hereof. Each prepayment of
principal of the Revolving Loan required under Section 3.1 or Section 3.2 hereof
shall be accompanied by the payment of interest and fees accrued and unpaid on
the amount of such prepayment through the date of prepayment.
ss. 3.2. CERTAIN PAYMENTS. (a) Upon receipt by either Borrower or any of
their respective Subsidiaries or by the Agent of any proceeds of any insurance
on any tangible property of the Company or any of its Subsidiaries, there shall
become immediately due and payable a prepayment in respect of principal of the
Revolving Loan in the amount of such proceeds.
(b) Upon the receipt by the Company or any of its Domestic
Subsidiaries of any Net Cash Proceeds from the sale by the Company or any of its
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Domestic Subsidiaries of any property, other than sales of Inventory in the
ordinary course of business, there shall become immediately due and payable a
prepayment in respect of principal of the Revolving Loan in the amount of such
Net Cash Proceeds.
(c) (i) Upon receipt by the Parent, the Company or any of its
Domestic Subsidiaries of any Net Cash Proceeds from any source not referred to
in paragraphs (a), (b) or (f) of this Section 3.2 (other than sales of Inventory
in the ordinary course of business and other than proceeds of Accounts), there
shall become immediately due and payable a prepayment in respect of principal of
the Revolving Loan in the amount of such Net Cash Proceeds. (ii) In the event
that the Parent, the Company or any of its Domestic Subsidiaries is holding any
cash or cash equivalents the receipt of which did not create the requirement
under this Agreement for a prepayment of principal of the Revolving Loan or is
not otherwise under this Agreement (including, without limitation, under Section
8.22 hereof), required to be applied to the Revolving Loan, the Parent, the
Company or its Domestic Subsidiary, as the case may be, shall apply such cash or
cash equivalent to the prepayment of the Revolving Loan under this Section 3.2.
(d) In the event that (i) the amount of proceeds or Net Cash
Proceeds in respect of which a prepayment is required to be paid under paragraph
(a), (b), (c) or (f) of this Section 3.2 exceeds the amount of outstanding
principal of the Revolving Loan, then such excess shall be immediately paid to
the Agent to be held as Letter of Credit Cash
Collateral and (ii) the excess referred to in clause (i) of this paragraph (d)
exceeds the amount of Letter of Credit Obligations, then the amount of such
excess (whether such excess is created at the time of establishment of the
Letter of Credit Cash Collateral or occurs by virtue of the reduction of Letter
of Credit Obligations or otherwise) shall be held by the Agent as cash
collateral pursuant to the Cash Collateral Agreement and released from time to
time in accordance with paragraph (e) of this Section 3.2. Interest earned and
paid on such cash collateral shall be for the account of the Company or its
Domestic Subsidiary as provided in the Cash Collateral Agreement and until
release as provided in paragraph (e) of this Section 3.2 shall be added to such
cash collateral.
(e) In the event that the Agent is holding cash collateral under
clause (ii) of Section 3.2(d) hereof or Letter of Credit Cash Collateral under
clause (i) of Section 3.2(d) hereof, the Agent shall release all or any portion
of same to the Company to the extent requested by the Company upon Written
Notice to the Agent, so long as, at the time of such Written Notice by the
Company, the Company is in compliance with clauses (i) and (ii) of Section 6.1
hereof and so certifies in its Written Notice and so long as there is no
requirement under any other provision of this Agreement that the Letter of
Credit Cash Collateral be maintained. Notwithstanding the foregoing, the Company
shall request release of and exhaust cash collateral held under clause (ii) of
Section 3.2(d) hereof prior to making any request for release of Letter of
Credit Cash Collateral and, notwithstanding anything to the contrary contained
in Section 2 hereof, shall give no notice of borrowing under Section 2.4 hereof
while the Agent is holding any Letter of Credit Cash Collateral or cash
collateral under Section 3.2(d) hereof; provided, however, that the Company may
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give a notice of borrowing in the event that Letter of Credit Cash Collateral is
being held other than as required under Section 3.2(d) hereof.
(f) Upon receipt by the Parent of any Net Cash Proceeds from the
issuance of Equity Interests, there shall become due and payable on the date of
such receipt a prepayment in respect of principal of the Revolving Loan in the
amount of such Net Cash Proceeds if, and to the extent permitted by the
Debenture Indenture.
(g) None of the prepayments required under this Section 3.2 shall
result in a permanent reduction in the Revolving Credit Facility Commitment. Any
prepayment required under this Section 3.2 shall be deemed paid to the extent
that Proceeds from the transaction in respect of which the requirement for such
prepayment arose shall have been paid into the Payment Account pursuant to
Section 8.22 hereof.
ss. 3.3. OPTIONAL PREPAYMENTS. (a) Upon not less than three (3) Business
Days' prior Written Notice to the Agent with respect to Revolving Advances
constituting Eurodollar Advances and Written Notice to the Agent on the Business
Day of prepayment in the case of Base Rate Advances, the Borrowers shall have
the right from time to time to prepay in whole or in part, without premium, fee
or charge (except as provided in Section 2.12 and Section 2.5(a)(iii) hereof),
the Revolving Loan, so long as each such prepayment in part is in the amount of
$50,000 or an integral multiple of $50,000 in excess thereof, and so long as,
concurrently with the making of any such prepayment, the Borrowers pay any fees,
premiums, charges or costs provided for under Section 2.12 or Section 3.7
hereof. The provisions of this Section 3.3 shall not apply to mandatory payments
made with respect to the Revolving Loan pursuant to Section 8.22 of this
Agreement.
(b) Upon the giving of notice of prepayment, the amount therein
specified to be prepaid shall be due and payable on the date therein specified
for such prepayment, together with all accrued interest thereon to such date
plus any fees, premiums, charges or costs provided for under Section 2.12 or
Section 2.5(a)(iii) hereof or in the Fee Letter. The Agent shall, promptly after
receipt of any notice of prepayment of any Loan as provided in this Section 3.3,
notify each Lender in writing or by telephone confirmed promptly in writing of
the Borrowers' intention so to prepay all or part of such Loan.
ss. 3.4. PROCEDURES FOR PAYMENT. Notwithstanding anything contained in
Section 3.2 hereof, the Agent shall not, to the extent requested in writing by a
Borrower, apply any mandatory prepayment under such section to any portion of
the Revolving Loan which constitutes a Eurodollar Advance until the last day of
the respective Interest Period therefor or the earlier maturity of such portion
of such Revolving Loan by acceleration or otherwise, such mandatory prepayment,
until it can be so applied, to be applied to the prepayment of such portion of
the Revolving Loan comprising Base Rate Advances. If there shall remain any
portion of such mandatory prepayment after payment in full of such portion of
the Revolving Loan constituting Base Rate Advances, then until such remaining
portion of the mandatory prepayment can be applied to the Eurodollar Advances as
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aforesaid, such remaining portion of such mandatory prepayment shall be invested
and reinvested by and in the name of the Agent in investments of the type
permitted under Section 9.4(b) hereof with the type and maturity of such
investments to be mutually agreed to by the Agent and the Borrowers. All
interest earned on such investments shall be for the account and risk of the
Borrowers. Interest earned on any portion of principal applied to the Eurodollar
Advance shall be, so long as no Default or Event of Default shall have occurred
and be continuing, and to the extent received by the Agent, turned over to the
Borrowers promptly following application of such principal to such Eurodollar
Advance, as the Agent shall determine. As additional collateral security for the
Lender Debt, the Company hereby grants to the Agent a security interest in (x)
any such mandatory prepayments and any investments thereof, including, without
limitation, any certificates or instruments evidencing any such investments, and
all claims and choses in action in respect of the foregoing, (y) any interest or
other payment made in respect of such investments and (z) any and all proceeds
of any of the above and all claims and choses in action in respect of the
foregoing (all of the foregoing constituting part of the Collateral). To the
extent the Agent makes any such investments, the Company hereby authorizes the
Agent to hold any certificate or instrument evidencing such investments.
ss. 3.5. UNUSED FACILITY FEE. The Borrowers shall pay to the Agent for the
account of each Lender on the last day of each month of each calendar year, in
arrears, until the date of the expiration, termination or cancellation of the
Revolving Credit Facility Commitment and on such date, an unused facility fee
for the calendar month or shorter period just ended of thirty-seven and one-half
basis points (37.5 b.p.) per annum on the amount equal to the excess of (i) the
daily average of the maximum dollar amount of the Revolving Credit Facility
Commitment (in any case determined without reference to the limitations imposed
by the Borrowing Base) during such calendar month or longer period over (ii) the
sum of (A) the average daily outstanding principal balance of the Revolving Loan
during such calendar month or longer period and (B) the average daily Letter of
Credit Obligations during such calendar month or longer period.
ss. 3.6. FEES. The Company shall pay to GE Capital, individually, the fees
specified in the Fee Letter at the times specified for payment therein including
all such fees that were payable on or prior to the Closing Date.
SECTION 4. SECURITY AND GUARANTIES.
As security for the full and timely payment and performance of the Lender
Debt, whether now existing or hereafter arising:
ss. 4.1. PLEDGE OF CAPITAL STOCK AND NOTES. Each of the Company and its
Subsidiaries shall (to the extent of its interest therein) duly execute and
deliver to the Agent one or more pledge agreements, substantially in the form of
Exhib it 4.1(a) hereto (each as amended, supplemented or otherwise modified from
time to time in accordance with its terms, a "Pledge Agreement"), covering, to
the extent of such Person's interest therein, (i) all capital stock of all
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present and future Subsidiaries (direct and indirect) of the Company, now or
hereafter issued and (ii) all proceeds thereof, pursuant to which the Credit
Parties (other than the Parent) shall grant to the Agent for the benefit of the
Agent and the Lenders a valid, perfected and enforceable first priority Lien on
all of the foregoing, together with certificates representing the equity
interests or capital stock referred to therein (to the extent, with respect to
any Foreign Subsidiaries, that certificates exist or certificates representing
stock or equity interests are customarily issued by corporations incorporated or
formed in the jurisdiction in which such Foreign Subsidiary is incorporated or
formed), accompanied by undated stock powers or assignments thereof executed in
blank. To the extent that the Pledge Agreement may not be appropriate to create
a Lien in favor of the Agent on any capital stock of any Foreign Subsidiary as
determined by the Agent or that certain actions as determined by the Agent which
are not contemplated by this Section 4.1 or by the Pledge Agreement shall be
required to perfect a Lien in favor of the Agent in the stock of a Foreign
Subsidiary, the relevant Credit Party which has an interest in such stock shall
as soon as reasonably practical (and if not reasonably practical by the Closing
Date, in any event by not later than 30 days after the Closing Date), in
addition to executing the Pledge Agreement as provided in this Section 4.1,
execute and deliver to the Agent and cause to be executed and delivered to the
Agent such documents and instruments, in form and substance satisfactory to the
Agent, and shall take such actions as reasonably requested by the Agent, in each
instance, in order to grant to the Agent for the benefit of the Agent and the
Lenders a valid, perfected and enforceable first priority Lien on the capital
stock of such Foreign Subsidiary to be pledged to the Agent as provided in this
Section 4.1.
ss. 4.2. SECURITY AGREEMENT - TRADEMARK, PATENT AND
COPYRIGHT. Each of the Company and its Domestic Subsidiaries shall duly execute
and deliver to the Agent one or more security agreements, substantially in the
form of Exhibit 4.2 hereto, covering the trademarks, patents and copyrights of
such Credit Party (each as amended, supplemented or otherwise modified from time
to time in accordance with its terms, a "Trademark, Patent and Copyright
Security Agreement"), now owned and hereafter acquired, together with notices of
trademarks, patents and copyrights and other similar documents in form suitable
for filing with the United States Patent and Trademark Office, the United States
Copyright Office or any other applicable governmental office or agency, as the
case may be, and one or more special powers of attorney and all other
supplementary notices and instruments requested by the Agent in connection
therewith.
ss. 4.3. SECURITY AGREEMENTS. (a) Each of the Company and its
Domestic Subsidiaries shall duly execute and deliver to the Agent one or more
security agreements, substantially in the form of Exhibit 4.3(a) hereto (each,
as amended, supplemented or modified from time to time in accordance with its
terms, a "Security Agreement", and, together with the Pledge Agreements,
Mortgages, Leasehold Mortgages, the Trademark, Patent and Copyright Security
Agreements, each Assignment of Life Insurance, each Assignment of Business
Interruption Insurance, the Cash Collateral Agreement, the Collecting Bank
Agreements, and any other agreement, now existing or hereafter created providing
collateral security for the payment or performance of any Lender Debt (including
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any such documents executed and delivered pursuant to Section 8.25 hereof), in
each case, as amended, modified or supplemented from time to time, collectively
referred to as the "Security Documents"), and to the extent requested in writing
by the Agent on or prior to the Closing Date (except as provided in Section
8.19(a) hereof), all consents of third parties necessary to permit the effective
granting of the Liens created in such security agreements (including, without
limitation, a landlord's waiver and certificate (each a "Landlord's
Certificate") in respect of each property subject to a Lease), in each case, in
form and substance satisfactory to the Agent, together with:
(A) evidence of the completion of all recordings and filings
of or with respect to the Security Documents that the Agent may deem
necessary or desirable in order to perfect and protect the Liens created
thereby,
(B) evidence of the insurance required by the terms of any
Security Document or this Agreement,
(C) to the extent requested in writing by the Agent on or
prior to the Closing Date, copies of each assigned agreement referred to
in any Security Document, together with a consent to such assignment in
form and substance reasonably satisfactory to the Agent, duly executed by
each party to such assigned agreements other than the Company, and
(D) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens created
by the Security Documents (and the priority of such Liens required
hereunder) has been taken.
(b) The Agent shall have received (unless otherwise consented to in
writing by the Agent):
(A) acknowledgment copies or stamped receipt copies of proper
financing statements, duly filed on or before the day of the initial
borrowing hereunder under the UCC of all jurisdictions that the Agent may
deem necessary or desirable in order to perfect and protect the Liens
created by the Security Documents, covering the collateral described in
the Security Documents, and
(B) completed requests for information, dated on or before the
date of the initial borrowing hereunder, listing the financing statements
referred to in clause (A) above and all other effective financing
statements, tax liens and judgments filed or recorded in the jurisdictions
listed on Schedule 4.3(b)(B) hereto, that name any Credit Party as debtor,
taxpayer or judgment debtor, together with copies of such other financing
statements.
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ss. 4.4. REAL PROPERTY; MORTGAGES; LEASEHOLD MORTGAGES;
TITLE INSURANCE. (a) To the extent requested by the Agent:
(i) each of the Company and its Domestic Subsidiaries shall duly
execute and deliver to the Agent mortgages or deeds of trust (each such
mortgage or deed of trust, as it may be amended, modified or supplemented
from time to time in accordance with its terms, a "Mortgage") in respect of
real property owned by such Credit Party so as to create in the Agent's
favor, for the benefit of the Agent and the Lenders, upon recordation
thereof, a valid, perfected and enforceable first priority Lien on the real
property and improvements described therein (subject only to Liens
specifically permitted under Section 9.2 hereof), such Mortgages to be in
form and substance reasonably satisfactory to the Agent (with such changes
thereto as may be necessary to provide that such Mortgages secure Lender
Debt not covered by such exhibit);
(ii) except with respect to the Leases listed on Schedule 4.4(a)(ii)
hereto, each of the Company and its Domestic Subsidiaries shall duly
execute and deliver to the Agent leasehold mortgages or deeds of trust
(each such leasehold mortgage or deed of trust, as it may be amended,
modified or supplemented from time to time in accordance with its terms, a
"Leasehold Mortgage") in respect of real property leased under a Lease by
such Credit Party so as to create in the Agent's favor, for the benefit of
the Agent and the Lenders, upon recordation thereof, a valid, perfected and
enforceable first priority Lien on such Lease and the real property and
improvements thereon leased by such Credit Party (subject only to Liens
specifically permitted under Section 9.2 hereof), such Leasehold Mortgages
to be in form and substance reasonably satisfactory to the Agent (with such
changes thereto as may be necessary to provide that such Leasehold
Mortgages secure Lender Debt not covered by such exhibit); and
(iii) each of the Company and its Domestic Subsidiaries shall cause
the Mortgages and the Leasehold Mortgages executed and delivered by it to
be duly recorded in the appropriate recording office or offices and shall
pay all fees and taxes payable in connection therewith.
(b) Each of the Company and its Domestic Subsidiaries shall cause to
be executed and delivered to the Agent such amendments to each of the Leases,
such consents of third parties to the Mortgages and the Leasehold Mortgages
executed and delivered by it, and such non-disturbance agreements, estoppel
certificates and waivers as the Agent shall request (in each case in form and
substance satisfactory to the Agent).
(c) Each of the Company and its Domestic Subsidiaries shall furnish
to the Agent, in sufficient copies for each Lender, for the benefit of the Agent
and the Lenders, at the expense of the Company or a Domestic Subsidiary, as
applicable, one or more policies of mortgagee title insurance, in form,
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substance and amount satisfactory to the Agent, insuring that each of the
Mortgages and Leasehold Mortgages executed and delivered by it pursuant to
Section 4.4(a) hereof is a valid and perfected first priority Lien in favor of
the Agent on the fee or leasehold interest, as applicable, of such Credit Party
(subject only to Liens specifically permitted under Section 9.2 hereof), in real
property and improvements described therein, and that such Credit Party has good
and marketable title thereto, issued by a title insurance company reasonably
satisfactory to the Agent, together with satisfactory evidence that all title
insurance premiums have been fully paid. Each Credit Party shall furnish to the
Agent, in sufficient copies for each Lender, certified surveys of real property
to be subject to any Mortgage or Leasehold Mortgage to be executed and delivered
by it on or prior to the Closing Date and such other certificates and documents
as the Agent may reasonably request. Each of the Company and its Domestic
Subsidiaries shall additionally provide to each Lender with respect to any real
property or leasehold interest to be subject to a Mortgage or Leasehold Mortgage
on or prior to the taking of such Mortgage or Leasehold Mortgage such appraisals
of such real property or leasehold interest as shall be required under
applicable law, including, without limitation, FIRREA.
ss. 4.5. ADDITIONAL COLLATERAL. Other than as set forth in any Security
Document, each of the Company and its Domestic Subsidiaries acknowledges that it
is its intention to provide the Agent with a Lien on all its property (personal,
real and mixed), whether now owned or hereafter acquired, subject only to Liens
specifically permitted under Section 9.2 hereof. Without limitation of Section
4.4 hereof, each of the Company and its Domestic Subsidiaries shall from time to
time promptly notify the Agent of the acquisition by it of any material property
in which the Agent does not then hold a perfected Lien, or the creation or
existence of any such property (including, without limitation, the entering into
by the Company or any Domestic Subsidiary of a Lease), and such Person shall,
upon request by the Agent, promptly execute and deliver to the Agent or cause to
be executed and delivered to the Agent pledge agreements, security agreements,
mortgages or other like agreements with respect to such property, together with
such other documents, certificates, title insurance, surveys, consents of third
parties, opinions of counsel and the like as the Agent shall reasonably request
in connection therewith, in form and substance satisfactory to the Agent, such
that the Agent shall receive valid and perfected first priority Liens (subject
only to Liens specifically permitted under Section 9.2 hereof) on all such
property.
ss. 4.6. FILING AND RECORDING. (a) Each of the Company and its Domestic
Subsidiaries shall, at their cost and expense, cause all instruments and
documents given as security pursuant to this Agreement to be duly recorded
and/or filed or otherwise perfected in all places necessary, in the opinion of
the Agent, to perfect and protect the Lien of the Agent in the property covered
thereby.
(b) Each of the Company and its Domestic Subsidiaries hereby
authorizes the Agent to file one or more financing statements or continuation
statements or amendments thereto or assignments thereof in respect of any Lien
created pursuant to this Agreement and the Security Documents which may at any
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time be required or which, in the opinion of the Agent, may at any time be
desirable without the signature of such Credit Party where permitted by law.
(c) In the event that any re-recording or refiling of any financing
statement (or the filing of any statements of continuation or amendment or
assignment of any financing statement) is required to protect and preserve such
Lien, each of the Company and its Domestic Subsidiaries shall, at their cost and
expense, cause the same to be recorded and/or refiled at the time and in the
manner requested by the Agent.
ss. 4.7. INTERPRETATION OF SECURITY DOCUMENTS. In the case of any conflict
between the terms and provisions of a Security Document and this Agreement, the
terms and provisions of this Agreement shall control, unless the terms of such
Security Document expressly provide otherwise.
ss. 4.8. GUARANTIES. (a) On or prior to the Closing Date, all Subsidiaries
of the Company shall execute and deliver to the Agent a guaranty, substantially
in the form of Exhibit 4.8 hereto, of all present and future Lender Debt
incurred by the Company.
(b) Upon the formation, after the Closing Date, of any Subsidiary of the
Company, such Subsidiary shall execute and deliver to the Agent a guaranty,
substantially in the form of Exhibit 4.8 hereto (modified in form and substance
satisfactory to the Agent), of all then existing or thereafter incurred Lender
Debt and such other Security Documents and related documents, instruments and
certificates, in form and substance satisfactory to the Agent, as the Agent
shall request in order to grant to the Agent for the benefit of the Agent and
the Lenders a valid, perfected and enforceable first priority Lien on all assets
of such Subsidiary. Nothing contained in this Section 4.8 shall permit the
Company or any Subsidiary of any thereof to form any Subsidiary which is
otherwise prohibited by this Agreement.
ss. 4.9. ASSIGNMENTS OF INSURANCE. (a) The Company shall duly execute and
deliver to the Agent one or more assignments, substantially in the form of
Exhibit 4.9(a) hereto (each, as amended, supplemented or otherwise modified from
time to time in accordance with its terms, an "Assignment of Life Insurance"),
and such other instruments and documents, in each case, as may be required by
the Agent to grant to the Agent for the benefit of the Agent and the Lenders a
valid, perfected and enforceable first Lien, to the extent of the Company's
interest therein, on any key person life insurance policy required pursuant to
Section 8.3(g) hereof, and the issuer of such policy shall have acknowledged
such assignment.
(b) The Company shall duly execute and deliver to the Agent one or more
assignments, substantially in the form of Exhibit 4.9 hereto (each, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms, an "Assignment of Business Interruption Insurance"), and such other
instruments and documents, in each case, as may be required by the Agent to
grant to the Agent for the benefit of the Agent and the Lenders a valid,
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perfected and enforceable first Lien on any business interruption insurance
policy required pursuant to Section 8.3(e) hereof, and the issuer of such policy
shall have acknowledged such assignment.
ss. 4.10. CASH COLLATERAL AGREEMENT. The Company shall duly execute
and deliver to the Agent a cash collateral agreement, substantially in form and
substance satisfactory to the Agent (as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the "Cash Collateral
Agreement"), and such other instruments and documents, in each case, as may be
required by the Agent to grant to the Agent for the benefit of the Agent and the
Lenders a valid, perfected and enforceable first Lien on the cash covered
thereby, all investments thereof, income thereon, claims, demands, choses in
action in respect thereof and all other proceeds thereof.
SECTION 5. CONDITIONS PRECEDENT TO INITIAL BORROWINGS
AND ISSUANCE OF LETTERS OF CREDIT.
The obligation of each Lender to lend its pro rata portion of any
Revolving Advance or to provide any other financial accommodations to the
Company on the Closing Date is subject to the following conditions precedent
being fulfilled to the satisfaction of the Agent in each instance (or waived in
writing by the Majority Lenders):
ss. 5.1. OPINIONS OF COUNSEL. The Agent shall have received
favorable opinions of Zimet, Haines, Friedman & Kaplan, counsel to the Credit
Parties, substantially in the form attached hereto as Exhibit 5.1 (and such
other opinions of counsel, including, without limitation, of local counsel, each
in form and substance satisfactory to the Agent, as the Agent may request); it
being understood that to the extent that such opinions of counsel
shall rely upon any other opinion of counsel, each such other opinion shall be
in form and substance satisfactory to Agent and shall provide that the Agent and
Lenders may rely thereon.
ss. 5.2. FINANCIAL STATUS AND STATEMENTS. (a) The Agent shall have
received the Parent's and the Company's audited consolidated financial
statements for the Parent's and the Company's fiscal year ended February 1, 1997
(the "Reference Date") prepared by the Parent or the Company, as the case may be
and certified by Arthur Andersen & Company and such financial statements shall
be otherwise in all respects satisfactory to the Agent. The Agent shall have
received such projections as the Agent shall have requested, in each case, based
on reasonable estimates of the Company and in form and substance satisfactory to
the Agent.
(b) As of the time immediately prior to the Closing Date, in the
Agent's judgment, (i) no material adverse change shall have occurred in the
business, operations, liabilities, assets, properties, prospects or condition,
financial or otherwise, of the Parent and its Subsidiaries, since the Reference
Date as reflected in the audited consolidated financial statements (the
"Financial Statements") of the Parent and its Subsidiaries as at and for the
period ending on the Reference Date, (ii) there shall have been since the
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Reference Date no material increase in liabilities of the Parent or the Company,
liquidated or contingent, whether or not reflected on any balance sheet, and no
material decrease in the Parent's or the Company's assets, other than in the
ordinary course of business, (iii) nothing shall have occurred since the
Reference Date which shall have materially changed the ability of the Company to
meet the targets set forth in the projections dated July 23, 1997 previously
delivered by the Company to the Agent, as such may be amended and supplemented
as required by, and with the approval of, the Agent, (iv) since the Reference
Date there shall have been no litigation commenced or threatened, which if
adversely determined would have a Material Adverse Effect and (v) since the
Reference Date there shall have been no dividends or distributions by the Parent
or the Company to their respective stockholders (other than as permitted by
Section 9.6(a)(ii) hereof). The Agent shall not have become aware of theretofore
previously undisclosed materially adverse information with respect to the Parent
and its Subsidiaries.
ss. 5.3. QUALIFICATION. Each Credit Party shall be duly qualified and in
good standing in each jurisdiction in which it owns or leases property or in
which the conduct of its business requires it to so qualify, except where the
failure to so qualify would not have a material adverse effect on its business,
operations, liabilities, assets, properties, prospects or condition (financial
or otherwise).
ss. 5.4. SECURITY DOCUMENTS AND INSTRUMENTS. The Agent shall have received,
in sufficient copies for each Lender, (a) all the instruments and documents then
required to be delivered pursuant to Section 4 hereof or any other provision of
this Agreement or pursuant to the instruments and documents referred to in
Section 4 hereof and the same shall be in full force and effect and shall grant
or create the Liens, rights, powers, priorities, remedies and benefits
contemplated herein or therein, as the case may be, (b) all necessary consents
relating thereto from third parties so that the same shall be valid and not
result in any violation of any material agreement running in favor of such third
party and (c) all satisfactions of mortgages, termination statements under the
UCC and other instruments releasing Liens as may be necessary or desirable in
connection with the foregoing.
ss. 5.5. EVIDENCE OF INSURANCE. The Agent shall have received, in
sufficient copies for each Lender, evidence, in form, scope and substance and
with such insurance carriers reasonably satisfactory to the Agent, of all
insurance policies required pursuant to Section 8.3 hereof. Such insurance
coverage shall have been issued by responsible carriers acceptable to the Agent
and shall include, without limitation, loss payee and additional insurance
endorsements in form and substance satisfactory to the Agent and in any event
which require that at least thirty (30) days' prior written notice be provided
to the Agent in the event of cancellation, nonrenewal or material change
thereof.
ss. 5.6. EXAMINATION OF BOOKS. The Agent shall have been afforded the
opportunity prior to the Closing Date to review the books, records (including,
without limitation, computer records), contracts (including, without limitation,
all License Agreements and Consignment Agreements), pension plans, insurance
coverage and properties of the Parent and its Subsidiaries, to investigate the
operating management of the Parent and its Subsidiaries and the business,
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affairs, properties and prospects of the Parent and its Subsidiaries generally,
and to perform such other due diligence regarding the Parent and its
Subsidiaries as the Agent shall have required, the results of which review and
due diligence shall be satisfactory to the Agent.
ss. 5.7. BORROWING BASE. The Agent shall have received a Borrowing Base
Certificate dated the Closing Date from the Company. The Agent shall be
satisfied that on the Closing Date, the amount by which the Borrowing Limit
exceeds the outstanding Revolving Loan is at least $10,000,000 or such lesser
amount which is otherwise acceptable to the Agent in its sole discretion.
ss. 5.8. NOTES. Each Lender shall have received its Note, each duly
completed, executed and delivered in accordance with Section 2.3 hereof.
ss. 5.9. [Intentionally Omitted.]
ss. 5.10. [Intentionally Omitted.]
ss. 5.11. FEES AND EXPENSES. All fees payable to the Agent and the Lenders
with respect to the financing hereunder (including, without limitation, those
under the Commitment Letter and the Fee Letter) on or prior to the Closing Date
shall have been paid in full to the persons entitled thereto in immediately
available funds.
ss. 5.12. MANAGEMENT. (a) The Agent shall be satisfied with all agreements
by and among any two or more of the Lee/Desai Group, Desai Capital Management
Incorporated, the Parent, the Company and any other investors in the Parent or
the Company, relating to the Parent or the Company (including, without
limitation, the Management Agreements, the Shareholders Agreement and the
Registration Rights Agreement). The Agent shall be satisfied with the corporate
structure and management of the Company and the Parent and the composition and
committee structure of the boards of directors of the Company and the Parent.
(b) The Agent shall have reviewed and approved all executive employment
agreements and compensation arrangements (including without limitation bonus and
stock options), employee or management incentive plans and consulting or
management arrangements (including without limitation the fees payable in
connection therewith) and confidentiality agreements and non-compete agreements
to which the Parent or any of its Subsidiaries is a party.
ss. 5.13. DISBURSEMENT AUTHORIZATION. The Agent shall have received a
disbursement authorization letter, substantially in the form of Exhibit 5.13
hereto, duly executed and delivered by the Company as to the disbursement on the
Closing Date of the proceeds of the initial Revolving Advance.
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ss. 5.14. LOCKBOX. On or prior to the Closing Date, the Company and its
Domestic Subsidiaries selected by the Agent shall have established a lock box
pursuant to a lock box agreement as required by Section 8.22 hereof, and which
in any event provides to the Agent a perfected first priority security interest
in all Proceeds, now existing or hereafter acquired, of the Company and such
Subsidiaries. All deposit accounts of the Company and its Domestic Subsidiaries
shall be covered by Collecting Bank Agreements, which shall have been executed
and delivered to the Agent and shall constitute Blocked Accounts.
ss. 5.15. LITIGATION. There shall be no litigation involving any Credit
Party or (relating to this transaction) any Lender, which in the judgment of the
Agent has a reasonable likelihood of being determined adversely to any such
Person, and if so adversely determined, would have a materially adverse effect
on the business, operations, liabilities, assets, properties, prospects or
condition, financial or otherwise, of the Parent and its Sub sidiaries taken as
a whole or such Lender, or the ability of the Parent, the Company or any
Guarantor to perform its obligations under the Loan Documents.
ss. 5.16. TAX MATTERS. (a) The Agent, in its sole discretion, shall be
satisfied that each Credit Party shall have made all appropriate tax filings
required under, and shall have complied with all provisions of, all applicable
tax laws in connection with the issuance of the credit facilities.
(b) The Tax Allocation Agreement shall have been executed and delivered by
the Parent and the Company, shall be in full force and effect and shall have
been approved as to form, scope and substance by the Agent.
ss. 5.17. COMPLIANCE WITH LAW. The Agent shall be satisfied that (a) each
Credit Party is in compliance with in all material respects, and shall have
obtained appropriate approvals pertaining to, all applicable governmental,
environmental, labor, ERISA and other requirements, regulations and laws; and
(b) the credit facilities herein provided, and all other transactions
contemplated herein shall be in compliance in all material respects with all
applicable laws and regulations and shall not contravene any term or condition
of any charter, bylaw, debt instrument or other agreement of any Credit Party.
ss. 5.18. PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite corporate action
and proceedings in connection with the borrowings, the issuance of Letters of
Credit and the execution and delivery of the Loan Documents, shall be
satisfactory in form and substance to the Agent and the Agent shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings, which the
Agent may have requested in connection therewith, such documents where requested
by the Agent to be certified by appropriate corporate Persons or governmental
authorities. Without limiting the generality of the foregoing, the Agent shall
have received on or before the Closing Date the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the Agent
(unless otherwise specified) and in sufficient copies for each Lender:
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(i) A copy of the certificate of incorporation of each Credit Party,
and all amendments thereto, certified (as of a date reasonably near the
date of the initial financial accommodation to be made hereunder) by the
Secretary of State or other applicable official of each of their respective
states or countries as being a true and correct copy thereof.
(ii) Certified copies of the resolutions of the Board of Directors of
each Credit Party approving this Agreement, the Notes, and each other Loan
Document to which it is a party or by which it is bound, and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement, the Notes and each other
Loan Document.
(iii) A copy of a certificate of the Secretary of State of each State
where each Credit Party is doing business dated a date reasonably near the
date of the initial financial accommodations to be made hereunder, stating
that each Credit Party, as the case may be, is duly qualified and in good
standing as a foreign entity in such State.
(iv) A certificate of each Credit Party signed on behalf of such
Person by its chairman, president, any vice-president, treasurer, secretary
or assistant secretary, certifying as to (A) the absence of any amendments
to the charter of such Person since the date of the Secretary of State's
(or other official's) certificate for such Person referred to above and (B)
a true and correct copy of the by-laws of such Person as in effect on the
date of the initial financial accommodations to be made hereunder.
(v) A certificate of the Secretary or an Assistant Secretary of each
Credit Party certifying the names and true signatures of the officers of
such Person authorized to sign, on behalf of such Person, this Agreement,
the Revolving Notes and each other Loan Document to which such Person is a
party or by which it is bound.
ss. 5.19. ENVIRONMENTAL MATTERS AND APPRAISALS. (a) The Agent shall have
received such studies or reports from an independent third party acceptable to
the Agent, as to environmental matters relating to the Company and its
Subsidiaries and their respective properties, as the Agent shall have requested
in writing on or prior to the Closing Date, the substance and results of which
shall be satisfactory to the Agent.
(b) The Agent shall have received such appraisals of (i) real property to
be covered by a Mortgage or Leasehold Mortgage as shall be required, in the
opinion of special counsel to the Agent, under FIRREA for Lenders which are
subject to regulation thereunder and (ii) the Company's receivables, inventory,
equipment and intangible assets as shall be requested by the Agent and the
results of such appraisals shall be satisfactory to the Agent.
ss. 5.20. [Intentionally Omitted.]
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ss. 5.21. SPECIAL COUNSEL FEES. Weil, Gotshal & Manges LLP, special counsel
to the Agent, shall have received payment in full of all fees, costs and
expenses billed on or prior to the Closing Date.
ss. 5.22. CONSIGNMENT AGREEMENTS. To the extent requested by the Agent, the
Agent shall have received from each Person which is a consignor of Consigned
Inventory (pursuant to any Consignment Agreement or otherwise), a Consignor
Letter.
ss. 5.23. [Intentionally Omitted.]
ss. 5.24. INSURANCE POLICIES. The Company shall have obtained (i) key
person life insurance policies required to be maintained pursuant to Section
8.3(g) hereof and (ii) a business interruption insurance policy or policies
required to be maintained pursuant to Section 8.3(e) hereof, which policies
shall be satisfactory to the Agent and shall be assigned to the Agent (for the
ratable benefit of the Lenders).
SECTION 5A. CONDITIONS PRECEDENT TO AMENDMENT AND
RESTATEMENT.
The effectiveness of this Agreement is subject to the following conditions
precedent being fulfilled to the satisfaction of the Agent in each instance (or
waived in writing by the Majority Lenders):
ss. 5A.1. OPINIONS OF COUNSEL. The Agent shall have received favorable
opinions of Zimet, Haines, Friedman & Kaplan, counsel to the Credit Parties,
substantially in the form attached hereto as Exhibit 5A.1 (and such other
opinions of counsel, including, without limitation, of local counsel, each in
form and substance satisfactory to the Agent, as the Agent may request); it
being understood that to the extent that such opinions of counsel shall rely
upon any other opinion of counsel, each such other opinion shall be in form and
substance satisfactory to Agent and shall provide that the Agent and Lenders may
rely thereon.
ss. 5A.2. QUALIFICATION. Each Credit Party shall be duly qualified and in
good standing in each jurisdiction in which it owns or leases property or in
which the conduct of its business requires it to so qualify, except when the
failure to so qualify would not have a material adverse effect on its business,
operations, liabilities, assets, properties, prospects or condition (financial
or otherwise).
ss. 5A.3. AMENDMENTS TO SECURITY DOCUMENTS AND INSTRUMENTS. The Agent shall
have received, in sufficient copies for each Lender, (a) all appropriate
amendments to the instruments and documents previously delivered pursuant to
Section 4 hereof or any other provision of this Agreement or pursuant to the
instruments and documents referred to in Section 4 hereof and the same shall be
in full force and effect and shall grant or create the Liens, rights, powers,
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priorities, remedies and benefits contemplated herein or therein, as the case
may be, and (b) all necessary consents relating thereto from third parties so
that the same shall be valid and not result in any violation of any material
agreement running in favor of such third party.
ss. 5A.4. NOTES. Each Lender shall have received its Note, each duly
completed, executed and delivered in accordance with Section 2.3 hereof.
ss. 5A.5. FEES AND EXPENSES. All fees payable to the Agent and the Lenders
with respect to the financing hereunder shall have been paid in full to the
persons entitled thereto in immediately available funds, including, but not
limited to, all fees to be paid by the Borrower pursuant to the Original Credit
Agreement.
ss. 5A.6. LITIGATION. There shall be no litigation involving any Credit
Party or (relating to this transaction) any Lender, which in the judgment of the
Agent has a reasonable likelihood of being determined adversely to any such
Person, and if so adversely determined, would have a materially adverse effect
on the business, operations, liabilities, assets, properties, prospects or
condition, financial or otherwise, of the Parent and its Sub sidiaries taken as
a whole or such Lender, or the ability of the Parent, the Company or any
Guarantor to perform its obligations under the Loan Documents and no judgment,
order, injunction or other similar restraint prohibiting any of the other
transactions contemplated under this Agreement.
ss. 5A.7. COMPLIANCE WITH LAW. The Agent shall be satisfied that (a) each
Credit Party is in compliance with in all material respects, and shall have
obtained appropriate approvals pertaining to, all applicable governmental,
environmental, labor, ERISA and other requirements, regulations and laws; and
(b) the credit facilities herein provided and all other transactions
contemplated herein shall be in compliance in all material respects with all
applicable laws and regulations and shall not contravene any term or condition
of any charter, bylaw, debt instrument or other agreement of any Credit Party.
ss. 5A.8. PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite corporate action
and proceedings in connection with the borrowings, the issuance of Letters of
Credit and the execution and delivery of the Loan Documents shall be
satisfactory in form and substance to the Agent and the Agent shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings, which the
Agent may have requested in connection therewith, such documents where requested
by the Agent to be certified by appropriate corporate Persons or governmental
authorities. Without limiting the generality of the foregoing, the Agent shall
have received on or before the Closing Date the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the Agent
(unless otherwise specified) and in sufficient copies for each Lender:
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(i) A copy of the certificate of incorporation of each Borrower,
and all amendments thereto, certified (as of a date reasonably near the
Closing Date) by the Secretary of State or other applicable official of
each of their respective states or countries as being a true and correct
copy thereof.
(ii) Certified copies of the resolutions of the Board of Directors
of each Borrower approving this Agreement, the Notes, each other Loan
Document to which it is a party or by which it is bound, and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement, the Notes and each
other Loan Document.
(iii) A copy of a certificate of the Secretary of State of each
State where each Borrower is doing business dated a date reasonably near
the Closing Date, stating that each Credit Party, as the case may be, is
duly qualified and in good standing as a foreign entity in such State.
(iv) A certificate of each Borrower signed on behalf of such
Person by its chairman, president, any vice-president, treasurer,
secretary or assistant secretary, certifying as to (A) the absence of any
amendments to the charter of such Person since the date of the Secretary
of State's (or other official's) certificate for such Person referred to
above and (B) a true and correct copy of the bylaws of such Person as in
effect on the Closing Date.
(v) A certificate of the Secretary or an Assistant Secretary of
each Borrower certifying the names and true signatures of the officers of
such Person authorized to sign, on behalf of such Person, this Agreement,
the Revolving Notes and each other Loan Document to which such Person is a
party or by which it is bound.
ss. 5A.9. PURCHASE OF SHARE. On the Closing Date, each Lender who
was not a Lender immediately prior to the Closing Date shall wire transfer
immediately available funds to the Agent in an amount required to purchase such
Lender's pro rata share of the then outstanding amount of the Revolving Loan.
Such Funds will be paid by the Agent to each Lender who was a Lender immediately
prior to the Closing Date so as to reduce such Lender's pro rata share of the
Revolving Loan immediately prior to the Closing Date to its pro rata share of
the Revolving Loan on the Closing Date.
SECTION 5B. CONDITIONS PRECEDENT TO INITIAL
BORROWINGS TO THE PARENT.
The obligation of each Lender to lend its pro rata portion of any
Revolving Advance or to provide any other financial accommodations to the Parent
is subject to the Agent having received such approvals of governmental
authorities or documents or opinions as the Agent may have reasonably requested.
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SECTION 6. CONDITIONS PRECEDENT TO EACH BORROWING
AND ISSUANCE OF LETTERS OF CREDIT.
The obligation of the Lenders to make any Revolving Advance
(including on the Closing Date) (other than any Revolving Advances under
Sections 2.1(c) and 2A.4 hereof) or of any Issuing Lender to cause the issuance
of any Letter of Credit (including any L/C Indemnity Agreement) is subject to
the following conditions precedent:
ss. 6.1. CONDITIONS. No Lender shall have any obligation to make any
Revolving Advance to a Borrower (other than any Revolving Advances under Section
2A.4 hereof) and no Issuing Lender shall issue, or cause the issuance of, a
Letter of Credit unless, in each instance, (x) with respect to a Revolving
Advance (other than a Revolving Advance under Section 2.1(c) and 2A.4 hereof),
such Borrower delivers to the Agent a Borrower's Certificate dated the date of
such Revolving Advance and (y) the following conditions precedent are fulfilled
to the satisfaction of the Agent (or waived in writing by the Majority Lenders):
(i) all representations and warranties made by each of the Credit
Parties contained herein or otherwise made in any Loan Document
(including, without limitation, each Borrower's Certificate), officer's
certificate or any agreement, instrument, certificate, document or other
writing delivered to the Agent or any Lender in connection herewith or
therewith, shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on
and as of the date of such borrowing or issuance of a Letter of Credit
(unless any such representation or warranty speaks as of a particular
date, in which case it shall be deemed repeated as of such date);
(ii) on the date of such borrowing or issuance of a Letter of
Credit there shall exist no Default or Event of Default (either
immediately before or after giving effect thereto);
(iii) if the Company shall be requesting a Letter of Credit, the
Agent on behalf of the Issuing Bank shall have (to the extent requested by
any such Issuing Bank) received a duly executed and delivered Letter of
Credit Agreement with respect thereto;
(iv) such Borrower shall have complied with all procedures and
given all certificates, notices and other documents required hereunder for
such advance or issuance; and
(v) the Agent shall have received such other approvals of
governmental authorities or documents as the Agent may have reasonably
requested.
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ss. 6.2. WRITTEN NOTICE. Prior to the time of each Revolving Advance
or the renewal or conversion of any Revolving Advance, or portion thereof, or of
the issuance of a Letter of Credit, the Agent shall have received Written Notice
of such Revolving Advance or the renewal or conversion of such Revolving
Advance, or portion thereof, or of the issuance of such Letter of Credit, as the
case may be, in accordance with and to the extent required by Section 2 or 2A
hereof, as appropriate.
SECTION 7. USE OF PROCEEDS.
(a) [Intentionally Omitted.]
(b) From and after the Closing Date, proceeds of Revolving Advances
to the Company shall be used for the working capital and general corporate
purposes (including, without limitation, for the purpose of (i) opening and
maintaining not more than twenty-two factory outlet stores operated by the
Company to the extent set forth in Sections 9.1 and 9.24 hereof, (ii) operating
fine jewelry departments in not more than ten Debenhams stores to the extent set
forth in Section 9.23 hereof and (iii) operating fine jewelry departments in (x)
not more than fifty-five Monoprix and related stores and (y) a store in Berlin,
Germany, each to the extent set forth in Section 9.25 hereof) of the Company and
its Subsidiaries to the extent such purposes are permitted hereunder (including,
without limitation, for any intercompany loans by the Company to Sonab for
working capital and general corporate purposes as evidenced by the Second Sonab
Intercompany Note) and to repurchase Senior Notes to the extent such purchases
are permitted hereunder.
(c) Notwithstanding anything to the contrary set forth in paragraph
(b) above, from and after the Closing Date, Revolving Advances to the Parent
shall be used only to repurchase Debentures and/or to pay the original issue
discount thereon to the extent such purchases and payments are permitted
hereunder.
(d) Notwithstanding anything to the contrary set forth in paragraph
(b) above, no more than $7,000,000 in the aggregate may be expended in
connection with the operation of fine jewelry departments in Debenhams stores to
the extent the operation of such fine jewelry departments is permitted
hereunder.
(e) Notwithstanding anything to the contrary set forth in paragraph
(b) above, no more than $13,000,000 in the aggregate may be expended in
connection with the opening and operation of fine jewelry departments in
Monoprix and related stores to the extent the operation of such fine jewelry
departments is permitted hereunder.
SECTION 8. AFFIRMATIVE COVENANTS.
Each of the Borrowers covenants and agrees that, so long as any
Revolving Advance or Letter of Credit is outstanding or any Lender has any
Revolving Commitment hereunder, unless specifically waived by the Majority
Lenders in writing:
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ss. 8.1. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company
or, where applicable, the Parent shall furnish or cause to be furnished to the
Agent and each Lender:
(a) Within 30 days after the end of each fiscal month of the Parent,
(i) a copy of the internally prepared unaudited consolidated balance sheet of
the Parent and its Subsidiaries as of the end of such month and the related
consolidated statement of income for that portion of the Fiscal Year ending as
of the end of such month, and (ii) a copy of the unaudited consolidated
statement of income of the Parent and its Subsidiaries for such month, setting
forth in comparative form in each case referred to in clauses (i) and (ii)
above, actual figures for such period as against budgeted figures (including
variances in dollars and percent) for such period in the current Fiscal Year and
actual figures as against actual figures (including variances in dollars and
percent) for the comparable period during the prior Fiscal Year and accompanied
by (A) management letters prepared by the Designated Officer of the Parent or
the Company explaining any material variances from the corresponding budgets and
prior Fiscal Years' figures related to the foregoing, (B) a schedule which
shows, by License Agreement, each Account which is past due and, to the extent
not available to the Agent by computer on-line (as required by Section 8.7(b)),
a schedule detailing write-offs and returns, and (C) upon Agent's request,
copies of any reports generated from the Company's investigation into
discrepancies noted in any of the internal inventory control reporting.
(b) Within 45 days after the end of each fiscal month of the Parent,
(i) a copy of the unaudited consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such month and the related consolidated statement
of income and cash flow for that portion of the Fiscal Year as of the end of
such month, each prepared in accordance with GAAP (subject to normal year end
adjustments and without footnotes) and (ii) a copy of the unaudited consolidated
statement of income and cash flow of the Parent and its Subsidiaries for such
month prepared in accordance with GAAP (subject to normal year-end adjustments
and without footnotes) setting forth in comparative form in each case referred
to in clauses (i) and (ii) above, actual figures as against actual figures for
the comparable period during the prior Fiscal Year.
(c) Within 45 days after each fiscal quarter of the Parent, (i) a
copy of the unaudited consolidated and consolidating balance sheets of the
Parent and its Subsidiaries as of the end of such quarter, the related
consolidated and consolidating statements of income and the related consolidated
statement of cash flows for that portion of the Fiscal Year ending as of such
quarter, each prepared in accordance with GAAP (subject to normal year end
adjustments and without footnotes) and (ii) a copy of the unaudited consolidated
and consolidating statements of income and the related consolidated statement of
cash flows of the Parent and its Subsidiaries for such quarter prepared in
accordance with GAAP (subject to normal year end adjustments and without
footnotes) setting forth in comparative form in each case referred to in clauses
(i) and (ii) above for consolidated information only, actual figures for such
period as against actual figures for the comparable period during the prior
Fiscal Year.
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(d) For each of (b) and (c) above, the certification of the Designated
Officer of the Parent or Company, as applicable, shall accompany such statements
and shall certify that (i) all such statements are complete and correct in all
material respects and are presented fairly in accordance with GAAP (subject to
normal year end adjustments and without footnotes) and (ii) to the best
knowledge of such Designated Officer, no Default or Event of Default exists as
of such time or, if any Default or Event of Default then exists, specifying the
details and anticipated effect thereof.
(e) Within 45 days after the end of each month for which a quarterly
reporting period ends for the Parent, a schedule showing in reasonable detail
the calculations used in determining compliance (for the fiscal quarter ending
on the last day of each such month) with the covenants contained in Section 9.1
and Section 8.17 hereof.
(f) Not later than March 30 in each year, a report detailing the highest
target shortage locations of the Company and its Subsidiaries.
(g) Within 90 days after the close of each Fiscal Year, a copy of the
annual audited consolidated financial statements of each of the Parent and its
Subsidiaries and the Company and its Subsidiaries, consisting of the annual
consolidated balance sheet, statement of income, cash flow and changes in
stockholders' equity, setting forth in comparative form, in each case,
consolidated figures for the prior Fiscal Year, which financial statements shall
be prepared in accordance with GAAP, certified without qualification (other than
a qualification approved by the Agent) by independent certified public
accountants of recognized national standing selected by the Parent and the
Company respectively, and acceptable to the Agent (Arthur Andersen & Company
being acceptable to the Agent), and accompanied by (i) unaudited consolidating
financial statements of the Parent and its Subsidiaries and the Company and its
Subsidiaries, consisting of the annual consolidating balance sheets and
statements of income, setting forth in comparative form, in each case,
consolidating figures for the prior Fiscal Year (which financial statements
shall be prepared in accordance with GAAP), (ii) a schedule prepared by the
Company and certified by such independent accountants, showing in reasonable
detail the calculations used in determining compliance with the financial
covenants under Section 8.17 hereof, (iii) a report from such accountants to the
effect that in connection with their audit examination, nothing has come to
their attention to cause them to believe that a Default or Event of Default had
occurred or, if they believe a Default or Event of Default has occurred,
specifying the details thereof, and (iv) a certification of the Designated
Officer of the Parent and the Company certifying that (A) all such financial
statements are complete and correct in all material respects and present fairly
in accordance with GAAP the consolidated and consolidating financial position
and the consolidated and consolidating results of operations and cash flows of
each of the Parent and its Subsidiaries and the Company and its Subsidiaries as
at the end of such Fiscal Year and (B) to the best knowledge of such Designated
Officer, no Default or Event of Default exists as of such time or, if any
Default or Event of Default then exists, specifying the details and anticipated
effect thereof.
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(h) As soon as practicable, but in any event not later than two (2)
Business Days after the Parent and/or the Company becomes aware of the existence
of any Default or Event of Default, or any development or other information
which might reasonably be expected to have a Material Adverse Effect, telephonic
or telegraphic notice specifying the nature of such Default or Event of Default
or development or information, including the anticipated effect thereof, which
notice shall be promptly confirmed in writing within five days.
(i) Not later than February 15 in each year, an annual operating plan for
the Parent and its Subsidiaries for such Fiscal Year (approved by the board of
directors of each of the Parent and the Company), in form, scope and substance
reasonably satisfactory to the Agent, setting forth:
(i) projected consolidated balance sheets of the Parent and its
Subsidiaries for such Fiscal Year, on a monthly basis;
(ii) projected consolidated statements of income of the Parent and its
Subsidiaries for such Fiscal Year, on a monthly and quarterly basis;
(iii) projected consolidated statements of cash flow of the Parent and
its Subsidiaries, including summary details of cash disbursements,
including Capital Expenditures, and projected operating profit of the
Parent and its Subsidiaries for such Fiscal Year, on a monthly basis; and
(iv) projected Borrowing Base for such Fiscal Year, on a monthly
basis;
together with (x) projections of the nature requested in clauses (i)
through (iv) above, computed on an annual basis for each Fiscal Year remaining
until the Maturity Date and (y) appropriate supporting details as reasonably
requested by any Lender (including, without limitation, same store growth
assumptions). The projections of the nature requested in clauses (i) through
(iii) above shall also set forth such information with respect to each of the
outlet stores and Sonab. The annual operating plan delivered in connection with
this Section 8.1(i) shall be accompanied by evidence satisfactory to the Agent
that such plan shall have been approved by the boards of directors of each of
the Parent and the Company.
(j) If requested by the Agent, copies of all federal, state, local and
foreign tax returns and reports in respect of income, franchise or other taxes
on or measured by income (excluding sales, use or like taxes) filed by the
Parent or any of its Subsidiaries.
(k) Concurrently with the delivery of the statements referred to in Section
8.1(a) hereof, supplements or amendments to Schedules, if any, as described in
Section 8.20 hereof.
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(l) As soon as available, but in any event not later than thirty (30) days
after the end of each Fiscal Year of the Parent, a report, in form and substance
satisfactory to the Agent, (i) updating the list of contracts, agreements and
documents of the Parent and its Subsidiaries in existence at the end of such
Fiscal Year which are required to be set forth on Schedule 11.24 hereto so that
the representation and warranty made in Section 11.24 hereto shall be true and
correct as of such date and (ii) specifying which contracts, agreements and
documents included on such schedule at any time during the Fiscal Year just
ended have been terminated, entered into or materially modified during such
Fiscal Year, and, promptly after requested by the Agent, copies of any such new
contracts, agreements or other documents and material modifications.
(m) Promptly upon the filing thereof, copies of all reports, if any, to or
other documents filed by the Parent or any of its Subsidiaries with the
Securities and Exchange Commission under the Securities Act of 1933 or the
Securities Exchange Act of 1934 (other than on Form S-8 or 8-A or similar
forms), and all reports, notices or statements sent or received by the Parent or
any of its Subsidiaries to or from the holders of any equity interests of the
Parent or any such Subsidiary or of any Indebtedness for Borrowed Money of the
Parent or any such Subsidiary registered under the Securities Act of 1933 or to
or from the trustee under any indenture under which the same is issued.
(n) Promptly upon the commencement thereof, written notice of any
litigation, including arbitrations, and of any proceedings before any
governmental agency, affecting the Parent or any of its Subsidiaries (other than
any described in paragraph (r) below), which would, if successful, materially
affect the Parent or any of its Subsidiaries or where the amount involved in
excess of available insurance, if successful, would reasonably be expected to
exceed $250,000.
(o) With reasonable promptness, such other information respecting the
business, operations and financial condition of the Parent or any of its
Subsidiaries as any Lender may from time to time reasonably request.
(p) (x) On the Closing Date, (y) not later than Monday, 12:00 noon (New
York time) of each week, and (z) within three (3) days following the written
request of the Agent, a certificate dated Friday of the previous week just ended
(or with respect to a request made under clause (z) above, an estimated
certificate dated the date of delivery) from the Company, in each case
substantially in the form of Exhibit 8.1(p) hereto, each such certificate to be
signed by the Designated Officer of the Company (each such certificate, a
"Borrowing Base Certificate"). The delivery of the Borrowing Base Certificate
pursuant to clause (y) of this Section 8.1(p) shall be accompanied by the
following, each of which shall be in form, scope and substance satisfactory to
the Agent, (i) a copy of the receivables aging trial balances of the Company and
each of its Subsidiaries as of the end of the prior month, together with an
accounts receivable reconciliation to the Borrowing Base Certificate date, and
(ii) a schedule of Eligible Inventory and Foreign Eligible Inventory, valued at
the lesser of cost (on a specific identification basis) or current market value
and setting forth the locations of all such Eligible Inventory and Foreign
Eligible Inventory (which may be done by reference to the computer information
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to which the Agent has on-line access to the extent required by Section 8.7(b)
hereof), including, without limitation, Domestic Inventory and Foreign Inventory
in transit and Domestic Inventory and Foreign Inventory not in the possession of
the Company and the name of the Person in possession thereof. In addition to the
foregoing, each Borrowing Base Certificate shall set forth (or shall be
accompanied by a certificate of a Designated Officer of the Company setting
forth) the aggregate unpaid principal balance of all loans or advances from the
Company to Sonab at such time.
(q) Within 15 days after receipt thereof but in no event later than
June 30 of each year, a copy of all management reports and management letters,
if issued, prepared for each of the Parent and its Subsidiaries and the Company
and its Subsidiaries by independent certified public accountants of recognized
national standing selected by the Parent or the Company, as applicable and
acceptable to the Agent together with any response by any of the Parent or any
of its Subsidiaries or the Company or any of its Subsidiaries, as applicable, to
such management reports or management letters; it being understood that the
Parent and the Company shall request from such independent certified public
accountants such management reports and/or management letters with the delivery
of any annual audited financial statements required to be delivered to the Agent
hereunder.
(r) Promptly, and in any event within ten (10) business days
thereof, notice:
(i) of any Environmental Claim or Adverse Environmental
Condition of which any Credit Party has knowledge or any written notice of
an allegation which may reasonably give rise to an Environmental Claim or
Adverse Environmental Condition, where such Environmental Claim or Adverse
Environmental Condition may reasonably be expected to result in a
liability to any
Credit Party in excess of $50,000;
(ii) of the occurrence of a Release of a Hazardous Material
upon, under or affecting any Facilities, of which any Credit Party has
knowledge or Hazardous Materials at levels or in amounts that may have to
be reported, remedied or responded to under any Environmental Law, of
which any Credit Party has knowledge, or that have been detected on or in
the soil or groundwater, of which any
Credit Party has knowledge, provided the cost to the Parent or its
Subsidiaries of investigating, remedying, or responding to such Release
may reasonably be expected to exceed $50,000;
(iii) that a Credit Party is reasonably likely to be liable
for any costs of cleaning up or otherwise responding to a Release of
Hazardous Materials, provided the cost of cleanup or response may
reasonably be expected to exceed $50,000;
(iv) that written notice has been received that any part of the
Facilities is or may be subject to a Lien under any Environmental Law; and
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(v) that a Credit Party will undertake or has undertaken any
Remedial Action with respect to any Hazardous Material, provided the cost
of cleanup or response may reasonably be expected to exceed $50,000.
(s) Within 30 days after the end of each Fiscal Year and at such
other times as the Agent may request, a list, in detail reasonably satisfactory
to the Agent, of all bank accounts maintained by the Parent, the Company and
each of their respective Subsidiaries.
(t) On February 15, May 15, August 15 and November 15 of each year,
a report of the Company and its Subsidiaries detailing the amount of "consigned"
or "memo" inventory and owned inventory of the Company and its Subsidiaries in
each of the following categories: (i) inventory under two years old, (ii)
inventory between two and three years old, (iii) inventory between three and
four years old and (iv) inventory more than four years old.
(u) Contemporaneously with the delivery thereof to Rhode Island
Hospital Trust National Bank, copies of all Consignment Limit Reports (as such
term is defined in the Gold Consignment Agreement) provided by the Company to
Rhode Island Hospital Trust National Bank under or pursuant to the Gold
Consignment Agreement.
ss. 8.2. TAXES AND CLAIMS. (a) Each of the Borrowers shall and shall
cause their respective Subsidiaries to pay and discharge when due (a) all taxes,
assessments and governmental charges upon or against it or its properties or
assets prior to the date on which penalties attach thereto and (b) all lawful
claims, whether for labor, materials, supplies, services or anything else, which
might or could, if unpaid, become a Lien or charge upon its properties or
assets, unless, in each case, the validity or amount thereof is being contested
in good faith by appropriate proceedings, the Parent or any such Subsidiary has
established adequate reserves in accordance with GAAP with respect thereto,
Liens (other than Liens which, in the aggregate, are permitted under Section
9.2(i) hereof) arising from the non-payment thereof when due have not attached
to any of the property or assets of the Parent or any of its Subsidiaries in a
manner which could have priority over the Lien of the Agent thereon and there is
no imminent risk of the sale of or foreclosure on any property or assets of the
Parent or any of its Subsidiaries by the holder of any Liens arising from the
non-payment thereof when due.
(b) The Borrowers and GE Capital agree that all fees payable to the
Agent for the benefit of GE Capital as provided in Section 3.6 hereof, shall be
reported for all tax purposes in accordance with Treasury Regulation Section
1.1273-2(j)(2). Such amount that is properly treated as a reduction in issue
price will be treated by the parties as original issue discount and reported as
interest income and interest expense to the extent permitted under the
applicable provisions of the Code and the regulations promulgated thereunder.
ss. 8.3. INSURANCE. (a) Schedule 8.3 lists all insurance of any
nature maintained by the Parent and its Subsidiaries, as well as a summary of
the terms of such insurance. The Company or the Parent shall, at its sole cost
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and expense, maintain "All Risk" physical damage insurance on all real and
personal property of the Parent and its Subsidiaries including, but not limited
to, fire and extended coverage, boiler and machinery coverage, flood,
earthquake, theft, explosion, collapse, and all other hazards and risks
ordinarily insured against by owners or users of such properties in similar
businesses. All policies of insurance on such real and personal property shall
contain an endorsement, in form and substance acceptable to the Agent, showing
loss payable to the Agent as its interest appears. Such endorsement, or an
independent instrument furnished to the Agent, shall provide that the insurance
companies add the Agent as an additional insured and give the Agent at least 30
days' prior written notice before any significant change in coverage provided by
or cancellation of such policy or policies of insurance and that no act,
omission or default of the Parent or any of its Subsidiaries or any other Person
shall affect the right of the Agent or any Lender to recover under such policy
or policies of insurance in case of loss or damages.
(b) The Company or the Parent shall, at its sole cost and expense,
maintain commercial general liability insurance covering itself and its
Subsidiaries on an "occurrence basis" (unless such insurance cannot be
reasonably obtained at commercially reasonable rates, in which case such
insurance shall be on a "claims made" basis) against claims for personal injury,
bodily injury and property damage with a minimum limit of $1,000,000 per
occurrence and $1,000,000 in the aggregate. Such coverage shall include but not
be limited to premises/operations, broad form contractual liability,
underground, explosion and collapse hazard, independent contractors, broad form
property coverage, products and completed operations liability.
(c) The Company or the Parent shall, at its sole cost and expense,
maintain workers' compensation insurance covering itself and its Subsidiaries
including employer's liability in the minimum amount of $1,000,000 for each
accident, $1,000,000 disease-policy limit, and $1,000,000 disease-each employee
with excess coverage under umbrella liability insurance policies with a minimum
limit of $20,000,000 per occurrence and $20,000,000 in the aggregate.
(d) The Company or the Parent shall, at its sole cost and expense,
maintain automobile liability insurance covering itself and its Subsidiaries for
all owned, non-owned or hired automobiles against claims for personal injury,
bodily injury and property damage with
a minimum combined single limit of $1,000,000 per occurrence with excess
coverage under umbrella liability insurance policies with a minimum limit of
$20,000,000 per occurrence and $20,000,000 in the aggregate.
(e) The Company or the Parent shall, at its sole cost and expense,
maintain business interruption insurance covering itself and its Subsidiaries
with the policy limits not less than those as in effect immediately prior to the
Closing Date.
(f) All policies of liability insurance required to be maintained
under this Agreement shall name the Agent and each Lender as an additional
insured, contain at least a 30-day notice of significant change in coverage or
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cancellation and be in form and with insurers recognized as adequate by the
Agent and, except as required hereby, all such policies shall be in such amounts
as may be satisfactory to the Agent. Upon the request of the Agent, the Parent
and each of its Subsidiaries shall deliver to the Agent the original (or
certified copy) of each policy of insurance and evidence of payment of all
premiums therefor and of compliance with all provisions of this Agreement. In
addition, the Parent and each of its Subsidiaries shall notify the Agent
promptly of any occurrence causing a material loss or decline in value of any
real or personal property and the estimated (or actual, if available) amount of
such loss or decline. The Parent and each of its Subsidiaries each irrevocably
make, constitute and appoint the Agent (and all officers, employees or agents
designated by the Agent) as the Parent's and each such Subsidiary's true and
lawful attorney (and agent-in-fact), acting at any time after the occurrence and
during the continuance of an Event of Default, for the purpose of making,
settling and adjusting claims under such policies of insurance (provided that
the Agent shall consult with the Parent prior to finally making, settling or
adjusting claims under such policies of insurance), endorsing the name of the
Parent or any such Subsidiary on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance, and for making all
determinations and decisions with respect to such policies of insurance. In the
event the Parent or any Subsidiary at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, the Agent, without waiving or
releasing any obligations or default by the Parent or any of its Subsidiaries
hereunder, may at any time or times thereafter (but shall not be obligated to)
obtain and maintain such policies of insurance and pay such premium and take any
other action with respect thereto which the Agent deems advisable. All sums so
disbursed by the Agent, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable, on demand, by the
Parent or any of its Subsidiaries to the Agent and shall be Additional
Indebtedness hereunder secured by the Collateral.
(g) The Company shall maintain a key person life insurance policy
with responsible insurance carriers and pursuant to insurance policies
reasonably acceptable to the Agent, covering David B. Cornstein and Arthur E.
Reiner in an amount of not less than $5,000,000 each.
(h) The Agent reserves the right at any time, upon a change of the
Parent's or
any of its Subsidiaries' risk profile or upon the occurrence of an external
event, to require additional forms and limits of insurance which, in the Agent's
sole opinion, will adequately protect any Lender's investment.
ss. 8.4. BOOKS AND RESERVES. Each of the Borrowers shall and shall
cause each of their respective Subsidiaries to:
(a) maintain, at all times, true and complete books, records and
accounts in which true and correct entries shall be made of its transactions in
accordance with GAAP; and
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(b) by means of appropriate entries, reflect in its accounts and in
all financial statements furnished pursuant to Section 8.1 hereof proper
liabilities and reserves for all taxes and proper provision for depreciation and
amortization of its properties and bad debts, all in accordance with GAAP.
ss. 8.5. PROPERTIES IN GOOD CONDITION. Except as permitted in
Section 9.5 hereof, each of the Borrowers shall keep, and shall cause each of
their respective Subsidiaries to keep, its material properties in good repair,
working order and condition, ordinary wear and tear excepted, and, from time to
time, make all necessary and proper repairs, renewals, replacements, additions
and improvements thereto, so that the business carried on may be properly and
advantageously conducted at all times in accordance with prudent business
management.
ss. 8.6. MAINTENANCE OF EXISTENCE, ETC. Except as otherwise provided
in Section 9.5(e) hereof, each of the Borrowers shall preserve and maintain, and
cause each of their respective Subsidiaries to preserve and maintain, its
statutory existence, rights and franchises.
ss. 8.7. INSPECTION BY THE AGENT AND THE LENDERS. (a) Each of the
Borrowers shall allow, and shall cause each of their respective Subsidiaries to
allow, any representative of any Lender or of the Agent, at the Company's
expense, to visit and visually inspect any of its properties, to examine its
books of account and other records and files (including, without limitation,
computer records and files), to make copies thereof and to discuss its affairs,
business, finances and accounts with its officers and employees and independent
accountants (and each of the Borrowers hereby irrevocably authorizes its
independent accountants to discuss with the Agent and the Lenders the financial
affairs of the Parent and its Subsidiaries), all at such reasonable times and as
often as any Lender or the Agent may reasonably request and without any
unnecessary interference with the business of the Borrowers or any of their
respective Subsidiaries.
(b) At all times, the Parent shall allow, and cause each of its
Subsidiaries to allow, the Agent or any representative of the Agent direct
continuous access (including, without limitation, by modem or any other direct
computer linkage means), without any ability to alter any such records or change
or enter any data to all computer records or files
concerning the business or properties of the Company or any of its Subsidiaries
for the purpose of monitoring, among other things, the Accounts, Inventory and
Consigned Inventory of the Company and its Subsidiaries.
ss. 8.8. PAY INDEBTEDNESS TO LENDERS AND PERFORM OTHER COVENANTS.
The Borrowers shall (a) make full and timely payment of all payments required to
be made by the Company in respect of the Lender Debt, including without
limitation, the Loan, whether now existing or hereafter arising, (b) strictly
comply, and cause each of the other Credit Parties to strictly comply, with all
the terms and covenants contained in each Loan Document to which each such
Credit Party is a party, all at the times and places and in the manner set forth
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therein and (c) except for the filing of continuation statements and the making
of other filings by the Agent as secured party or assignee, at all times take
all action necessary to maintain the Liens provided for under or pursuant to
this Agreement or any Security Document as valid and perfected Liens on the
property intended to be covered thereby (subject to no other Liens except those
liens expressly permitted under Section 9.2 hereof) and supply all information
to the Agent or the Lenders necessary for such maintenance.
ss. 8.9. NOTICE OF DEFAULT. Each of the Borrowers shall promptly, and shall
cause each of their respective Subsidiaries to promptly (and in any event within
five (5) days), notify the Agent in writing of any Default or Event of Default
or a default under any other agreement in respect of Indebtedness for Borrowed
Money to which a Borrower or any of its Subsidiaries is a party, in each case
describing the nature thereof and the action such party proposes to take with
respect thereto.
ss. 8.10. REPORTING OF MISREPRESENTATIONS. In the event that a Borrower, or
any of its respective Subsidiaries discovers that any representation or warranty
made in any Loan Document by any Credit Party was incorrect in any material
respect when made, such party shall promptly report, or shall cause such
Subsidiary promptly to report, the same to the Agent and take, or cause to be
taken, all available steps to correct such misrepresentation or breach of
warranty.
ss. 8.11. COMPLIANCE WITH LAW. Each of the Borrowers shall, and shall cause
each of their respective Subsidiaries to, comply with and duly observe in all
material respects all laws and regulations and all rules and orders, in each
case, applicable to it and all legal requirements imposed by any governmental
authorities, including, without limitation, ERISA, those regarding the
collection, payment and deposit of employees' income, unemployment and social
security taxes, those relating to public and employee health and safety, and
those relating to environmental matters, except a non-compliance or failure to
observe which would not have a Material Adverse Effect.
ss. 8.12. ERISA. (a) Each of the Borrowers shall pay and discharge, and
shall cause each other Credit Party and each ERISA Affiliate to pay and
discharge, when due (including any permissible extensions) any liability imposed
upon it pursuant to the provisions of Title IV of ERISA.
(b) Each of the Borrowers shall deliver to the Agent promptly, and in any
event within ten (10) days, after
(i) such party knows, or has reason to know, of the occurrence of any
Reportable Event (as defined in Section 4043(b) of ERISA) with respect to
any Pension Benefit Plan subject to Title IV of ERISA ("Reportable Event"),
a copy of the materials that are filed by the applicable plan administrator
with the PBGC, or the materials that would have been filed if the PBGC had
not waived the notice requirements;
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(ii) the receipt of notice by a Credit Party or any ERISA Affiliate or
any administrator of any Pension Benefit Plan who is an employee of a
Credit Party or any ERISA Affiliate from the PBGC of the PBGC's intention
to terminate any such Pension Benefit Plan or to appoint a trustee to
administer any such Pension Benefit Plan, a copy of such notice;
(iii) the filing thereof with the Internal Revenue Service, copies of
each annual report that is filed on Treasury Form 5500 with respect to any
Pension Benefit Plan subject to Title IV, together with any actuarial
statements on Schedule B to such Form 5500;
(iv) a Credit Party or any ERISA Affiliate or any administrator of any
Pension Benefit Plan who is an employee of any Credit Party, or any ERISA
Affiliate files with participants, beneficiaries or the PBGC a notice of
intent to terminate any Pension Benefit Plan, a copy of any such notice;
(v) a Credit Party or any ERISA Affiliate knows or has reason to know
of any event or condition which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Benefit Plan, an
explanation of such event or condition;
(vi) an application has been made to the Secretary of the Treasury for
a waiver of the minimum funding standard under the provisions of Section
412 of the Code with respect to any Pension Benefit Plan, a copy of such
application; and
(vii) the receipt by any Credit Party or any ERISA Affiliate of an
assessment of withdrawal liability under Section 4201 of ERISA from a
Multiemployer Plan, a copy of such assessment;
in each case described above, together with a statement signed by an appropriate
officer of such Credit Party or ERISA Affiliate setting forth details as to such
Reportable Event, filing, notice, event or condition, assessment or application
and the action that will be taken with respect thereto.
ss. 8.13. FURTHER ASSURANCES. Each of the Borrowers shall, and shall
cause each of their respective Subsidiaries to, at its cost and expense, upon
request of the Agent, duly execute and deliver, or cause to be duly executed and
delivered, to the Agent such further instruments and do and cause to be done
such further acts as may be necessary or proper in the reasonable opinion of the
Agent to carry out more effectually the provisions and purposes of this
Agreement or any other Loan Document.
ss. 8.14. CONSIGNMENT AGREEMENTS. The Company shall deliver to the
Agent Consignor Letters duly executed by consignors of "consigned" or "memo"
inventory (pursuant to any written consignment agreement or otherwise)
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representing at least ninety percent (90%) of the "memo" or "consigned"
inventory (based on book value) of the Company and at no time following the
Closing Date shall the Company suffer or permit more than ten percent (10%) of
its "memo" or "consigned" inventory (based on book value) to be on consignment
from consignors who have not executed and delivered to the Agent Consignor
Letters. The Company further agrees to use its best efforts to deliver to the
Agent Consignor Letters from each of its consignors of "memo" or "consigned"
inventory and the Company further agrees that it shall not from and after the
Closing Date enter into any consignment agreement or arrangement with any
consignor who has not delivered to the Agent a Consignor Letter. Notwithstanding
the foregoing, no Consignor Letter shall be required to be executed and
delivered by Rhode Island Hospital Trust National Bank in connection with the
Gold Consignment Documents so long as the Intercreditor Agreement is in full
force and effect.
ss. 8.15. AUDITS. Each of the Borrowers shall allow, and shall cause
each of their respective Subsidiaries to allow, the Agent or its designee to
perform such audits of the Parent and its Subsidiaries, at the Company's expense
as to reasonable out-of-pocket expenses of the Agent or its designee, as the
Agent may request.
ss. 8.16. ENVIRONMENTAL MATTERS, ETC. (a) Each of the Borrowers
shall, and shall cause each of their respective Subsidiaries to, (i) comply in
all material respects with the Environmental Laws applicable to it, and (ii)
promptly forward to the Agent a copy of any order, notice, Permit, or any other
written communication or report received by the Parent or any of its
Subsidiaries in connection with any Adverse Environmental Condition or
Environmental Claim or any written allegation which may reasonably be expected
to give rise to an Adverse Environmental Condition or Environmental Claim.
(b) The Company shall fully and promptly pay, perform, discharge, if
requested, defend, indemnify and hold harmless each Indemnified Party from and
against any action, claim, loss, liability, damage, cost, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorneys' fees,
disbursements, investigation, removal, cleanup and remedial costs and reasonable
equipment modification costs incurred to permit continued or resumed normal
operation of the Facilities) suffered or incurred by such Indemnified Party,
whether as mortgagee pursuant to any Mortgage or Leasehold Mortgage, as
mortgagee in possession, or as successor in interest to the Company or any of
its Subsidiaries as owner, operator or lessee of any Facilities by virtue of
foreclosure or acceptance in lieu of foreclosure or otherwise: (i) under or on
account of the Environmental Laws as they may apply to the Parent, any of its
Subsidiaries or the Facilities, including the assertion of any Lien thereunder;
(ii) with respect to any Environmental Claim, Release or Hazardous Material
affecting such Facilities, whether or not the same originates or emanates from
such Facilities or any contiguous real estate, including any loss of value of
such Facilities as a result of a Release or Hazardous Material; and (iii) with
respect to any other matter affecting such Facilities within the jurisdiction of
any federal, state, or municipal authority administering the Environmental Laws.
The foregoing indemnity shall survive the expiration or earlier termination of
this Agreement and the satisfaction of the Lender Debt under the Loan Documents.
Further, the foregoing indemnity shall not be available with respect to matters
arising solely out of the gross negligence or willful misconduct of an
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Indemnified Party or such Person's employees, successors or assigns. The
indemnification rights provided by this Section 8.16(b) shall constitute the
sole indemnity available to Indemnified Parties with respect to the matters
addressed under this Section.
(c) The Agent and each Lender agree that in the event any investigation,
litigation or proceeding is asserted or threatened in writing or instituted
against it or any Indemnified Party, or any Remedial Action is requested of it
or any Indemnified Party, for which indemnity is available under Section 8.16(b)
and the Agent or any Lender may desire indemnity or defense hereunder, the Agent
or such Lender shall promptly notify the Company in writing, setting forth a
description of those elements of which it has knowledge, but any failure to so
notify the Company shall not relieve the Company of any of its obligations
hereunder, except to the extent such failure materially interferes with the
Company's ability to defend the investigation, litigation, proceeding or
requested Remedial Action. The Company at the request of the Agent or any Lender
shall have the obligation to defend against such investigation, litigation or
proceeding or requested Remedial Action, and the Company in any event may
participate in the defense or settlement thereof with legal counsel of its
choice; provided, however, that the Company shall not be entitled to control the
defense described above in the event that the Company shall not have admitted in
writing to the Agent and the Lenders that as between the Company, on the one
hand, and the Agent and the Lenders on the other hand, the Company is liable to
the Agent and Lenders as to such investigation, litigation, proceeding or
Remedial Action or there are defenses available to the Indemnified Party which
are not available to the Company. In the event that the Agent or any Lender
requests the Company to defend against such investigation, litigation or
proceeding or requested Remedial Action, such party shall promptly do so and the
Agent or the affected Lender shall have the right to participate in such
defense, at such party's expense, with legal counsel of its choice, and shall
cooperate with the Company in the conduct of such defense. No Indemnified Party
shall settle any such investigation, litigation or proceeding or requested
Remedial Action as to which it is controlling the defense without the consent of
the Company, which consent shall not be unreasonably withheld or delayed. In the
event that the Company controls such defense, the Company and the Indemnified
Party or Parties shall cooperate in the conduct of such defense, and the Company
shall not settle any such investigation, litigation or proceeding or requested
Remedial Action without the consent of the Indemnified Party or Parties, which
consent shall not be unreasonably withheld. No action taken by legal counsel
chosen by the Agent, the Agent or any Lender in defending against any such
investigation, litigation or proceeding or requested Remedial Action shall
vitiate or impair the Company's obligation and duty hereunder to indemnify and
hold harmless the Indemnified Parties. Any and all amounts payable by the
Company as indemnification under this Section 8.16(c) shall be due and payable
within thirty days of receipt of written notice to the Company and, after such
thirty day period, shall be added, together with interest thereon at the rate
set forth in Section 2.6(c) hereof, to the Lender Debt.
(d) In the event of any Adverse Environmental Condition affecting any
Facilities, whether or not the same originates or emanates from such
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Facilities or any contiguous real estate, and if the Parent or any Subsidiary
shall fail to comply in all respects with any of the requirements of the
applicable Environmental Laws, or, in the case of a leasehold, if required to do
so under the applicable lease, the Agent (at its option or at the direction of
the Majority Lenders) may, but shall not be obligated to, cause such work to be
performed or take actions reasonably necessary to remedy such Adverse
Environmental Condition or cure such failure to comply after providing written
notice to the Company of an intent to do so, allowing a reasonable time after
receipt of such notice for the Company to cure such failure. Any amounts paid by
the Agent as a result thereof, together with interest thereon at the rate set
forth in Section 2.6(c) hereof, shall be due and payable by the Company within
thirty days of receipt of an invoice and supporting documentation and, after
such thirty day period, shall be added to the Lender Debt. Nothing in this
Agreement shall be construed as limiting or impeding the Parent's or any of its
Subsidiary's rights or obligations to take any and all actions necessary or
desirable to remedy any Adverse Environmental Condition. Any partial exercise by
the Agent of the remedies hereinabove set forth or any partial undertaking on
the part of the Agent to cure the Parent's failure or the failure of any
Subsidiary thereof to comply with the Environmental Laws, shall not obligate the
Agent to complete the actions taken or require the Agent to expend further sums
to cure the Parent's or any such Subsidiary's noncompliance; neither shall the
exercise of any such remedy operate to place upon the Agent or any Lender any
additional responsibility for the operation, control, care, management or repair
of the Real Estate or make the Agent or any Lender the "owner" or "operator" of
the Real Estate or "owner" or "generator" of Hazardous Materials within the
meaning of the Environmental Laws.
(e) If an Event of Default occurs, or if an Adverse Environmental Condition
should arise which would reasonably be expected to result in a Material Adverse
Effect, the Agent (at its option or at the direction of the Majority Lenders) in
the reasonable exercise of its discretion and with reasonable notice under the
circumstances, may at any time, and at the Company's sole cost and expense
(which shall be added to the Lender Debt), take any action to incur any
reasonable expense, including without limitation, to cause one or more
environmental assessments of the Real Estate to be undertaken. Environmental
assessments may include a detailed visual inspection of the Real Estate,
including, without limiting the generality of the foregoing, all storage areas,
storage tanks, drains, dry wells, and leaching areas, as well as the taking of
soil samples, surface water samples, and ground water samples, and such other
investigation or analysis as is reasonably necessary or appropriate for a
complete assessment of the compliance of the Real Estate and the use and
operation thereof with all Environmental Laws; provided, however, any such
inspection and sampling shall be performed by a qualified, and if necessary
licensed, environmental consultant, retained by Agent and provided, further,
that no such inspection and sampling shall take place on any real property
leased to the Parent or any of its Subsidiaries that requires the consent of the
landlord for such inspection and sampling without first obtaining such consent
(the Company agreeing to use its best efforts to obtain such consent). The
Company shall be given the opportunity to review and comment upon the scope of
work and work plan developed by the consultant for the environmental assessment
prior to such assessment; provided that such review and comments shall not be
unreasonably withheld or delayed. The Agent shall give the Company three (3)
Business Days' advance notice that the consultant intends to enter the Real
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Estate for the purpose of conducting an environmental assessment. A
representative of the Company shall have the right to accompany the consultant
as the consultant performs any portion of the environmental assessment, provided
such representative is reasonably available, and the consultant shall provide
split samples to the Company's representative upon request. The consultant shall
take all reasonable measures to restore the property to the condition in which
the property was found prior to the environmental assessment.
The Agent promptly shall provide the Company with a copy of any
reports (including draft reports) and analytical data prepared or gathered by
the consultant relating to the environmental assessment of the Real Estate.
(f) The Company shall, and shall cause each of its Domestic
Subsidiaries to, without regard to whether any Credit Party is in default, and
at such party's sole cost and expense, cause one or more "phase I" environmental
assessments to be undertaken by an environmental consultant satisfactory to the
Agent (and in any event, in form and substance sufficient to entitle the Agent
and the Lenders to an exemption under any applicable state or federal law for
lenders or financial institutions holding a lien or security interest) before
any such party shall (i) enter into a contract for the purchase of any real
property or (ii) enter into any lease with a term in excess of six months;
provided, however, that no such "phase I" environmental assessments shall be
required prior to entry into a lease of real property to be used solely for
retail or office purposes. If any such "phase I" environmental assessment shall
identify any Adverse Environmental Condition or Environmental Claim with respect
to such real property, such party shall refrain from entering into such contract
or lease, as the case may be, unless such party shall ensure to the satisfaction
of the Agent that such further Remedial Action as any Lender may reasonably
request is undertaken at the sole expense of such party or a third party.
ss. 8.17. FINANCIAL COVENANTS. (a) Leverage Ratio. The Parent shall
maintain, or cause to be maintained, a Leverage Ratio, as of the end of each
period of four consecutive quarters of the Parent ending on or about the dates
set forth below, of not more than the ratio set forth below opposite such date:
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Four Fiscal Quarters
Ending On or About Ratio
October 31, 1997 5.75
January 31, 1998 3.90
April 30, 1998 5.50
July 31, 1998 5.50
October 31, 1998 5.25
January 31, 1999 3.60
April 30, 1999 5.25
July 31, 1999 5.25
October 31, 1999 5.25
January 31, 2000 3.50
April 30, 2000 4.75
July 31, 2000 4.75
October 31, 2000 4.75
January 31, 2001 3.30
April 30, 2001 4.25
July 31, 2001 4.25
October 31, 2001 4.25
January 31, 2002 3.00
April 30, 2002 4.25
July 31, 2002 4.25
October 31, 2002 4.25
January 31, 2003 3.00
April 30, 2003 and each Fiscal 4.25
Quarter thereafter
(b) Fixed Charge Coverage Ratio. The Parent shall maintain, or cause
to be maintained, as of the end of each period of four consecutive fiscal
quarters of the Parent ending on or about the dates set forth below, a Fixed
Charge Coverage Ratio of not less than:
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Four Fiscal Quarters
Ending On or About Ratio
October 31, 1997 1.2
January 31, 1998 1.3
April 30, 1998 1.3
July 31, 1998 1.3
October 31, 1998 1.3
January 31, 1999 and each Fiscal 1.5
Quarter thereafter
(c) EBITDA. The Parent shall maintain, or cause to be maintained,
EBITDA for each period of four consecutive fiscal quarters of the Parent ending
on or about the dates set forth below of not less than the amount set forth
below opposite such date:
Four Fiscal Quarters
Ending On or About Amount
October 31, 1997 $55,000,000
January 31, 1998 $57,000,000
April 30, 1998 $59,000,000
July 31, 1998 $59,000,000
October 31, 1998 $60,000,000
January 31, 1999 $60,000,000
April 30, 1999 $60,000,000
July 31, 1999 $60,000,000
October 31, 1999 $60,000,000
January 31, 2000 $64,000,000
April 30, 2000 $64,000,000
July 31, 2000 $65,000,000
October 31, 2000 $66,000,000
January 31, 2001 $69,000,000
April 30, 2001 $70,000,000
July 31, 2001 $71,000,000
October 31, 2001 $72,000,000
January 31, 2002 and each Fisc $74,000,000
Quarter thereafter
(d) Sonab EBITDA. Sonab shall maintain, or cause to be maintained
EBITDA for each period of four consecutive fiscal quarters of Sonab ending on or
about the dates set forth below of not less than the amount set forth below
opposite such dates.
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Four Fiscal Quarters
Ending On or About Amount
October 31, 1997 $2,700,000
January 31, 1998 $2,700,000
April 30, 1998 $2,700,000
July 31, 1998 $2,700,000
October 31, 1998 $2,700,000
January 31, 1999 $2,800,000
April 30, 1999 $2,800,000
July 31, 1999 $2,800,000
October 31, 1999 $2,800,000
January 31, 2000 $3,000,000
April 30, 2000 $3,000,000
July 31, 2000 $3,000,000
October 31, 2000 $3,000,000
January 31, 2001 $3,200,000
April 30, 2001 $3,200,000
July 31, 2001 $3,200,000
October 31, 2001 $3,200,000
January 31, 2002 and each Fiscal $3,400,000
Quarter thereafter
ss. 8.18. LEASES; NEW REAL ESTATE. Within five Business Days after becoming
a party thereto, the Company shall provide, or shall cause the applicable
Subsidiary to provide, the Agent with copies of all Leases of real property or
similar agreements (and all amendments thereto) entered into by the Company or
any Domestic Subsidiary of the Company after the Closing Date, whether as lessor
or lessee. The Company shall comply and shall cause each of its Domestic
Subsidiaries to comply in all material respects with all of its and their
material obligations under all Leases now existing or hereafter entered into by
it or them with respect to real property including, without limitation, all
Leases listed on Schedule 11.5 hereto. The Company shall, or shall cause the
appropriate Subsidiary to, (i) provide the Agent with a copy of each notice of
default received by the Company or such Subsidiary under any such lease
immediately upon receipt of any such notice and deliver to the Agent a copy of
each notice of default sent by the Company or such Subsidiary under any such
lease simultaneously with its delivery of such notice under such lease; (ii)
notify the Agent at least 14 days prior to the date the Company or such
Subsidiary takes possession of any new leased premises or becomes liable under
any Lease having a term of greater than six months, whichever is earlier; and
(iii) if requested by the Agent, obtain and deliver to the Agent a Landlord's
Certificate, and with respect to any leasehold in which the Agent has obtained
or expects to obtain a Leasehold Mortgage, such consents and other agreements
from landlords relating to, among other things, mortgageability and such
non-disturbance agreements from mortgagees of the landlord, as the Agent may
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request, each in form and substance satisfactory to the Agent, prior to entering
into any new lease.
ss. 8.19. LICENSE AGREEMENTS. (a) If a Specified Default occurs, the
Company shall, upon the request of the Agent, use its best efforts to grant to
the Agent for the benefit of the Agent and the Lenders pursuant to security
agreements and/or collateral assignments each in form and substance satisfactory
to the Agent, a valid, perfected and enforceable first priority Lien on all
right, title and interest of the Company in, to and under all Unapproved License
Agreements and License Agreements as to which the Agent shall have not
heretofore received such a valid, perfected and enforceable first priority Lien
(together with any legal opinions reasonably requested by the Agent as to the
validity, enforceability and perfection of such Liens). In connection therewith,
the Company shall use its best efforts to obtain all consents of third parties
(including, without limitation, any licensor consents) necessary to permit the
effective granting of such Liens. In the event such security agreements or
collateral assignments (together any legal opinions requested by the Agent and
third party consents deemed necessary by the Agent to permit the granting of
such Liens) are not delivered to the Agent within 45 days after the Agent's
request therefor and the Agent has not otherwise received a valid, perfected and
enforceable first priority security interest in such Unapproved License
Agreements and License Agreements, such failure on the part of any Credit Party
shall constitute an Event of Default hereunder in addition to any other Default
or Event of Default existing at such time.
(b) The Company shall promptly (i) upon entering into any Unapproved
License Agreement or License Agreement provide the Agent with copies of same (or
if such Unapproved License Agreement or License Agreement is not in writing a
written description thereof), (ii) upon entering into any amendment to any
Unapproved License Agreement or License Agreement provide the Agent with a copy
of same, it being understood that the Company shall not need the approval of the
Agent or any Lender to enter into or terminate any Unapproved License Agreement
or License Agreement, (iii) promptly upon entering into any Unapproved License
Agreement or License Agreement after the Closing Date, provide to the Agent an
internally generated projection of gross revenues for any such Unapproved
License Agreement or License Agreement for the twelve month period following the
first date of operation under such Unapproved License Agreement or License
Agreement, (iv) comply in all material respects with all Unapproved License
Agreements or License Agreements now existing or hereafter entered into by it
(including, without limitation, those License Agreements listed on Schedule
11.25 hereof), and (v) provide the Agent with Written Notice of any default
under any Unapproved License Agreement or License Agreement immediately upon
becoming aware of any default thereunder and of any termination of an Unapproved
License Agreement or License Agreement.
ss. 8.20. SUPPLEMENTAL DISCLOSURE. From time to time as may be necessary
(in the event that such information is not otherwise delivered by the Parent or
the Company to the Lenders pursuant to this Agreement), the Borrowers will
promptly supplement or amend each Schedule or representation herein with respect
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to any matter hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
Schedule or as an exception to such representation or which is necessary to
correct any information in such Schedule or representation which has been
rendered inaccurate thereby in any material respect. No such supplement shall
cure any Default arising from any misrepresentation being corrected, unless such
supplement has been approved by the Majority Lenders.
ss. 8.21. AGREEMENTS. Each of the Borrowers shall, and shall cause each of
their respective Subsidiaries to, perform, within all required time periods
(after giving effect to any applicable grace periods), all of its obligations
and enforce all of its rights under each agreement to which it is a party,
including, without limitation, any leases to which any such company is a party,
where the failure to so perform and enforce is reasonably likely to have a
Material Adverse Effect. The Parent shall not, and shall not suffer or permit
any of its Subsidiaries to, terminate or modify in any manner adverse to any
such party any provision of any agreement to which it is a party which
termination or modi fication is reasonably likely to have a Material Adverse
Effect.
ss. 8.22. COLLECTION AND PAYMENT; LOCK BOX; BANK ACCOUNTS. (a) The Company
shall enter into, and cause its Domestic Subsidiaries to enter into, a lock box
agreement, in form, scope and substance satisfactory to the Agent, with each
Collecting Bank. Pursuant to each such lock box agreement, on each Business Day,
all items deposited in the applicable lock box shall be credited to the Blocked
Account (other than a Disbursement Account) maintained by such Collecting Bank.
On each Business Day, each Collecting Bank shall transfer to the Payment Account
all amounts collected in good funds on such Business Day in the Blocked Account
maintained by such Collecting Bank. The Company shall not nor shall the Company
suffer or permit any Domestic Subsidiary to terminate, alter or suffer or permit
to be terminated or to lapse any such lock box agreement.
(b) Subject to the provisions of Section 2.19(b) hereof, the Company
shall, and shall cause its Domestic Subsidiaries to, deposit, on the Business
Day immediately following the Business Day of receipt, in such lock box all
payments and proceeds received or derived from or in connection with the
operations and business of the Company and its Domestic Subsidiaries, together
with all other payments constituting proceeds of any assets, including real or
personal property now owned or hereafter acquired by the Company or any of its
Domestic Subsidiaries, and all other proceeds, payments and other amounts
received by the Company or any of its Domestic Subsidiaries from any source
whatsoever including, without limitation, all payments under License Agreements
("Proceeds"), in the identical form received, whether in cash or by check or
otherwise. Subject to the provisions of Section 2.19(b) hereof, upon the request
of the Agent, the Company shall, and shall cause its Domestic Subsidiaries to,
cause all proceeds to be directly deposited in such lockbox by each of the
account debtors of the Company and its Domestic Subsidiaries (including, without
limitation, each licensor or lessor of a store location to the Company or any of
its Domestic Subsidiaries).
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(c) All items and all cash in the lock box and all funds, deposits,
earnings and claims in respect thereof in the Blocked Accounts shall be the sole
and exclusive property of the Agent, subject to the sole dominion and control of
the Agent, in accordance with the provisions of Section 2.19(b) hereof and of
the lock box agreement and Collecting Bank Agreements.
(d) The Company shall cause each Collecting Bank to execute and
deliver to the Agent a Collecting Bank Agreement and shall instruct each
Collecting Bank to transfer, prior to the close of business on any Business Day
on which Proceeds are received by such Collecting Bank, such Proceeds (to the
extent collected in good funds) in accordance with the terms of the Collecting
Bank Agreement.
(e) The Company shall pay to the Agent all fees, costs and expenses
which the Agent pays or incurs in connection with maintaining or opening the
Blocked Accounts, collecting and depositing for collection all checks and items
of payment received or delivered to any Collecting Bank for deposit in the
Blocked Accounts and shall reimburse the Agent for all amounts which the Agent
may pay to any Collecting Bank arising from obligations undertaken by the Agent
under the Collecting Bank Agreement.
Notwithstanding clauses (a) through (e) above, so long as the Gold
Consignment Documents and Intercreditor Agreement are in full force and effect,
the deposit account established and maintained by the Company with Rhode Island
Hospital Trust National Bank (referred to as the "Cash Collateral Account" in
the Cash Collateral Agreement, as such term is defined in the Gold Consignment
Agreement) holding the Cash Deposits (as defined in the Gold Consignment
Agreement) and the investments of funds in such account in Time Deposits (as
such term is defined in the Cash Collateral Agreement), in each instance,
pursuant to the Cash Collateral Agreement shall not be subject to the
collection, payment and lockbox arrangements required by this Section 8.22.
ss. 8.23. EMPLOYMENT AGREEMENTS. After the Closing Date, the
Borrowers shall obtain the written approval of the Agent prior to entering into
any Employment Agreement with an Affiliate of the Parent, the Company or any of
their respective Subsidiaries. The Company shall cause Sonab to obtain the
written approval of the Agent prior to entering into any employment agreement
with an Affiliate of the Parent, the Company or any of their respective
Subsidiaries.
ss. 8.24. SONAB LOCK BOX AND BLOCKED ACCOUNTS. Each of the Parent
and the Company shall cause Sonab to enter into and maintain lock box and/or
cash management arrangements with the Agent and such other financial
institutions that are acceptable to the Agent with respect to the receivables
and other cash of Sonab, such arrangements to be substantially similar to the
lock box and/or cash management arrangements of the Company as in existence on
the Fourth Amendment Effective Date or otherwise in form and substance
satisfactory to the Agent.
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ss. 8.25. SONAB SECURITY. Upon the request of the Agent, within 45
days following the Closing Date, each of the Parent and the Company shall, at
their sole cost and expense, cause Sonab to duly execute and deliver, or cause
to be duly executed and delivered, to the Agent such further instruments and do
and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Agent to grant to the Agent a valid and perfected Lien
(which may be on a first priority basis) on all other personal property and
assets of Sonab (including, without limitation, all inventory of Sonab) if such
security is deemed necessary or advisable in the reasonable discretion of the
Agent, it being understood that the granting of such Lien and the documentation
prepared in connection therewith shall conform with, and may be limited by, the
requirements of French and other applicable law. In addition to the foregoing,
upon the request of the Agent, each of the Parent and the Company shall, at
their sole cost and expense, cause Sonab to duly execute and deliver, or cause
to be duly executed and delivered, to the Agent (or any Affiliate thereof
designated by the Agent) such further instruments and do and cause to be done
such further acts as may be necessary or proper in the reasonable opinion of the
Agent to grant to any Affiliate of the Agent a valid and perfected Lien (on a
first priority basis) in the accounts receivable of Sonab in substitution of the
Lien granted to the Agent in the accounts receivable of Sonab pursuant to the
Sonab Security Agreement (as defined in the Fourth Amendment Agreement) if such
actions are deemed necessary or advisable in the reasonable discretion of the
Agent, it being understood that the granting of such Lien and the documentation
prepared in connection therewith shall conform with, and may be limited by, the
requirements of French and other applicable law.
SECTION 8.26 NEW STORES. The Company shall deliver written notice to
the Agent at least five business days (or such shorter period as the Agent may
agree) prior to the Company or any of its Subsidiaries (i) opening or operating
any new fine jewelry department or (ii) opening of any new factory outlet store
provided however, that the Company shall provide the Agent with a list of
projected fine jewelry department and outlet store openings on a biweekly basis.
SECTION 9. NEGATIVE COVENANTS.
Each of the Borrowers covenants and agrees that, so long as any
Revolving Loan or Letter of Credit Obligation is outstanding or any Lender has
any Revolving Commitment or any Revolving Sublimit Commitment hereunder, the
Borrowers shall not, and shall not suffer or permit any of their respective
Subsidiaries (and with respect to Section 9.11, shall not suffer or permit any
ERISA Affiliate) to, without the prior written consent of the Majority Lenders:
ss. 9.1. CAPITAL EXPENDITURES. Make Capital Expenditures in any Fiscal Year
of the Parent in an amount exceeding (i) $17,600,000 for the Fiscal Year ending
in 1997 (it being agreed that of such amount, (A) no more than $4,000,000 may be
expended for the purpose of opening and maintaining factory outlet stores
operated by the Company and permitted to be opened under Section 9.24 hereof,
(B) no more than $2,000,000 may be expended for the purpose of opening and
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maintaining fine jewelry departments in Debenhams stores permitted to be
operated under Section 9.23 hereof and (C) no more than $2,000,000 may be
expended for the purpose of opening and maintaining fine jewelry departments in
Monoprix and related stores and a store in Berlin, Germany, to the extent stores
are permitted to be operated under Section 9.25 hereof), (ii) $18,500,000 for
the Fiscal Year ending in 1998, or (iii) $15,000,000 in any subsequent Fiscal
Year.
ss. 9.2. LIENS. Create, incur, assume or suffer to exist any Lien
upon or defect in title to or restriction upon the use of any of its properties
or assets of any character, whether owned at the date hereof or hereafter
acquired, or hold or acquire any property or assets of any character under
conditional sales, finance lease or other title retention agreements, other
than:
(a) Liens in favor of the Agent or the Lenders pursuant to this
Agreement or the Security Documents;
(b) (iLiens for taxes, assessments or governmental charges or levies,
provided payment thereof shall not at the time be required in accordance
with the provisions of Section 8.2 hereof;
(ii) deposits, Liens or pledges to secure payments of workmen's
compensation and other payments, unemployment and other insurance, old-age
pensions or other social security obligations, or the performance of bids,
tenders, leases, contracts (other than contracts for the payment of money),
public or statutory obligations, surety, stay or appeal bonds, or other
similar obligations arising in the ordinary course of business;
(iii) mechanics', workmen's, repairmen's, warehousemen's, vendors',
suppliers', materialmen's or carriers' Liens, or other similar Liens
arising in the ordinary course of business and securing sums which are not
past due or which are being contested in good faith (and there shall be no
material risk of forfeiture of the property subject to such Lien or
foreclosure of such Lien), or deposits or pledges to obtain the release of
any such Liens;
(iv) 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 Parent or any of its Subsidiaries
or the value of such property for the purpose of such business;
(c) existing Liens set forth in Schedule 9.2 hereof and any renewals
thereof, but not any increase in amount thereof and not any extension
thereof to other property;
(d) purchase money mortgages or other purchase money Liens (including,
without limitation, Capital Leases), or any refinancing of any thereof, in
favor of non-Affiliates of the Parent and its Subsidiaries upon any fixed
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or capital assets hereafter acquired by the Company or any Subsidiary
thereof constituting real property interests or related machinery and
equipment, or purchase money mortgages (including, without limitation,
Capital Leases) on any such assets hereafter acquired or existing at the
time of acquisition of such assets by the Company or any Subsidiary
thereof, whether or not assumed, so long as (i) any such Lien does not
extend to or cover any other asset of the Company or any of its
Subsidiaries, (ii) such Lien secures the obligation to pay the purchase
price of such asset (or the obligation under such Capital Leases), interest
thereon and other customary incidental obligations relating thereto only,
and (iii) the original principal amount (or in the case of Capital Leases,
notional principal amount) of the aggregate Indebtedness secured by all
such purchase money Liens (and Capital Leases) shall not exceed $3,000,000
at any time;
(e) Liens in favor of Marine Midland Bank, N.A. pursuant to the
"Pledge Agreement" (as defined in the Debenture Indenture) covering the
capital stock of the Company;
(f) Liens on Consignment Inventory in favor of any Person who
retains title to such Consignment Inventory;
(g) Liens granted to lessors or licensors of store locations with
respect to fixtures and equipment at store locations leased or licensed
from such lessors or licensors not to exceed $2,000,000 in the aggregate
at any time;
(h) Liens for judgments, attachments, seizures or levies not to
exceed $500,000 in the aggregate outstanding at any time;
(i) Liens on property other than Inventory, Accounts or Proceeds of
either, not exceeding $100,000 in the aggregate outstanding at any time;
and
(j) Liens in favor of Rhode Island Hospital Trust National Bank (or
any successor or assignee thereof) pursuant to the Gold Consignment
Documents, subject to the provisions of the Intercreditor Agreement and
subject to there being no filings of financing statements under the
Uniform Commercial Code with respect thereto other than financing
statements containing collateral descriptions in the form of Exhibits 1A
and 1B to the First Amendment.
ss. 9.3. INDEBTEDNESS. Create, incur, assume or suffer to exist
contingently or otherwise, any Indebtedness (including, without limitation, any
intercompany Indebtedness), other than:
(a) Indebtedness under the Loan Documents;
(b) unsecured Current Liabilities incurred in the ordinary course of
business other than unsecured Current Liabilities for Indebtedness for
Borrowed Money;
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(c) Indebtedness of the Company or any Subsidiary thereof secured by
Liens permitted by Sections 9.2(b), (c) and (d) hereof;
(d) Indebtedness to the extent expressly permitted by Sections 9.4
and 9.16 hereof;
(e) Indebtedness of Sonab (i) to the Company as evidenced by the
Sonab Intercompany Notes and (ii) to other Persons in an amount not to
exceed in the aggregate for all such Persons at any time the lesser of (A)
$10,000,000 and (B) an amount equal to the sum at such time of (1) 60% of
the book value of Sonab's inventory and (2) 85% of the book value of
Sonab's accounts receivable, but only so long as recourse in respect of
such Indebtedness under this clause (ii) is limited exclusively to Sonab;
(f) existing Indebtedness of the Borrowers and their respective
Subsidiaries listed on Schedule 9.3 hereof (but not any increase thereof
or any refinancings, renewals, extensions, replacements or exchanges of
any thereof except refinancings, renewals, extensions, replacements or
exchanges on terms no less favorable to the Company or any Subsidiary
thereof than that being refinanced, renewed, extended, replaced or
exchanged);
(g) Indebtedness of the Borrowers arising under the Tax Allocation
Agreement;
(h) Indebtedness of the Company evidenced by the Senior Notes;
(i) Indebtedness of the Parent evidenced by the Debentures;
(j) Indebtedness of the Company under (i) any Hedge Agreement of the
Company which is not speculative in nature, which is designed to hedge
against fluctuations in the price of gold, and which is in the ordinary
course of business in keeping with the Company's past practices and (ii)
any Hedge Agreement which is designed to hedge against fluctuations in
interest rates; provided, however, that in the case of any Hedge Agreement
constituting an interest rate swap for which a Credit Party has swapped
away exposure on a fixed rate in exchange for taking on exposure on a
floating rate, such Hedge Agreement covers a notional principal amount of
not more than $50,000,000;
(k) Indebtedness of the Company or any Subsidiary thereof to lessors
or licensors of store locations with respect to fixtures and equipment
located at such store location not to exceed $2,000,000 in the aggregate
outstanding at any time;
(l) Indebtedness of the Company or any Subsidiary thereof to lessors
or licensors of store location with respect to Inventory purchased from
such lessors or licensors not to exceed $2,000,000 in the aggregate
outstanding at any time;
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(m) Indebtedness of the Company or any Subsidiary thereof for
judgments, attachments, seizures or levies not to exceed $500,000 in the
aggregate outstanding at any time;
(n) to the extent such expenses have not been paid by the Company
through a dividend to the Parent permitted under Section 9.6 hereof,
Indebtedness of the Company to the Parent for expenses of the Parent
incurred in the ordinary course of business not to exceed in the aggregate
in any Fiscal Year of the Parent 0.25% of the Company's net sales as
indicated in the Company's audited annual financial statements for the
immediately preceding Fiscal Year (it being understood that such
Indebtedness shall not be evidenced by a promissory note, bond, debenture
or other instrument);
(o) Indebtedness of the Company and its Subsidiaries not to exceed
$1,000,000 in the aggregate outstanding at any time;
(p) subject to Section 9.6(a)(ii) hereof, Indebtedness of the Parent
under the Shareholders Agreement and the Reiner Employment Agreement (or
under any option agreement executed pursuant to the Long Term Incentive
Plan);
(q) Indebtedness of Sonab, Sonab Holdings and Sonab International
pursuant to the terms of the First Supplemental Indentures; and
(r) Indebtedness of the Company under the Gold Consignment Documents
not to exceed $25,000,000 at any time in respect of the aggregate
outstanding amount of Consigned Precious Metal (as such term is defined in
the Gold Consignment Agreement).
Nothing contained in this Section 9.3 shall be deemed to permit the Company or
any of its Subsidiaries to incur, create or suffer or permit to be outstanding
any Indebtedness for Borrowed Money owing by the Company to the Parent.
ss. 9.4. LOANS, INVESTMENTS AND GUARANTEES. Lend or advance
money or credit to any Person, or invest in (by capital contribution, creation
of Subsidiaries or otherwise), or purchase or repurchase the stock or
Indebtedness, or all or a substantial part of the assets or properties, of any
Person, or enter into any exchange of securities with any Person, or guarantee,
assume, endorse or otherwise become responsible for (directly or indirectly or
by any instrument having the effect of assuring any Person's payment or
performance or capability) the Indebtedness, performance, obligations, stock or
dividends of any Person (each of the foregoing, an "Investment"), or agree to do
any of the foregoing, other than:
(a) endorsement of negotiable instruments for deposit or collection
in the ordinary course of business;
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(b) (i) Investments in securities issued, or that are directly and
fully guaranteed or insured, by the United States Government or any agency
or instrumentality thereof having maturities of not more than twelve
months from the date of acquisition, (ii) time deposits and certificates
of deposit having maturities of not more than twelve months from the date
of acquisition of (x) any Lender or (y) any other domestic commercial bank
having capital and surplus in excess of $500,000,000, the holding company
of which has outstanding commercial paper meeting the requirements
specified in clause (iv) below, (iii) repurchase agreements with a term of
not more than thirty-one (31) days for underlying securities of the types
described in clauses (i) and (ii) above (provided that the underlying
securities of the type described in clause (i) may not have maturities of
more than six months from the date of acquisition) entered into with any
Lender or any other bank meeting the qualifications specified in clause
(ii) above or with securities dealers of recognized national standing,
provided that the terms of such agreements comply with the guidelines set
forth in the Federal Financial Institutions Examination Council Super
visory Policy Repurchase Agreements of Depositary Institutions With
Securities Dealers and Others as adopted by the Comptroller of the
Currency on October 31, 1985 (the "Supervisory Policy"), and provided,
further, that possession or control of the underlying securities is
established as provided in the Supervisory Policy, and (iv) commercial
paper rated (as of the date of acquisition thereof) at least A-1 or the
equivalent thereof by Standard & Poor's Corporation and P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in either case
maturing within six (6) months after the date of its acquisition;
(c) Investments representing stock or obligations issued to the
Parent or any of its Subsidiaries in settlement of claims against any
other Person by reason of a composition or readjustment of debt or a
reorganization of any debtor of the Parent or such Subsidiary;
(d) Investments representing the Indebtedness of any Person owing as
a result of the sale by the Company or any of its Subsidiaries in the
ordinary course of business of products or services (on customary trade
terms);
(e) Investments in the stock of (i) any Subsidiary existing on the
Closing Date, (ii) Sonab, Sonab Holdings or Sonab International existing
on the Fourth Amendment Effective Date up to an aggregate amount of
$500,000 or (iii) any other Subsidiary created with the prior written
consent of the Majority Lenders, but for each of the foregoing, not any
additional investments therein other than additional Investments approved
in writing by the Majority Lenders and increases in Investments solely by
reason of increases in the retained earnings of such Subsidiary;
(f) the Guaranties;
(g) Investments outstanding on the date hereof and described on
Schedule 9.4 hereto, but not any additional investments therein;
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(h) Investments represented by the Blocked Accounts and the other
bank accounts, if any, permitted hereunder;
(i) Investments by the Company with respect to its officers,
directors or employees not to exceed at any time $20,000 in the aggregate
to any one individual or $150,000 in the aggregate outstanding at any
time, plus (i) advances to employees for travel and entertainment in the
ordinary course of business, (ii) advances to employees for relocation
expenses not to exceed at any time $50,000 in the aggregate to any one
individual or $200,000 in the aggregate at any one time outstanding, and
(iii) advances to employees in respect of bonuses actually earned by such
employees so long as a Designated Officer has certified in writing to the
Agent that such bonuses were actually earned by such employees and that at
the time of each such advance or advances no Default or Event of Default
was continuing;
(j) payments required pursuant to the Tax Allocation Agreement;
(k) advances to consignment vendors in the ordinary course of
business consistent with past practices (which are secured by a perfected
security interest in the inventory and proceeds thereof of such
consignment vendors in a manner acceptable to the Agent; provided,
however, that the Company shall have no obligation to obtain a perfected
security interest in the inventory and proceeds of any consignment vendor
until the aggregate outstanding amount of advances by the Company to such
consignment vendor exceeds $2,000,000) not to exceed $12,000,000
outstanding at any one time plus, as of the end of any Fiscal Year (after
the Fiscal Year ending in January 1993), a percentage (not to exceed 15%)
of the foregoing amount in effect under this clause as of the beginning of
such Fiscal Year equal to the percentage increase in sales for such Fiscal
Year over that of the immediately preceding Fiscal Year, as reflected in
the Company's audited year end financial statements (the "Percentage Sales
Increase"), provided that (i) the amount of such advances made to any one
Person and its Affiliates does not exceed (x) $5,000,000 at any one time
outstanding plus, as of the end of any Fiscal Year (after the Fiscal Year
ending in January 1993), a percentage (not to exceed 15%) of the amount in
effect under this clause (i) as of the beginning of such Fiscal Year equal
to the Percentage Sales Increase or (y) an amount outstanding at any time
which exceeds 50% of the book value at such time of such Person's (or
Affiliate's) "memo" or "consigned" inventory as shown on the Company's
books or computer records, (ii) the amount of such advances shall be
reduced to zero for at least thirty (30) consecutive days during each
Fiscal Year of the Company, (iii) within thirty (30) days following the
end of each month, the Company shall deliver to the Agent a detailed
Schedule showing all outstanding advances under this Section 9.4(k) in
form and content satisfactory to the Agent and (iv) the Company shall put
in place a system satisfactory to the Agent to set appropriate credit
limits, track its credit experience and obtain financial information from
Persons to whom advances are made under this Section 9.4(k);
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(l) Investments constituting Initial License Expense not exceeding
$1,500,000 in the aggregate in any Fiscal Year of the Parent;
(m) Investments as a result of any transaction permitted pursuant to
Section 9.6 hereof;
(n) Investments of the Company as a result of any Hedge Agreement
which is not speculative in nature, which is designed to hedge against
fluctuations in the price of gold and which is in the ordinary course of
business in keeping with the Company's past practices;
(o) Investments of the Company as a result of any other Hedge
Agreement which is not prohibited under the terms of this Agreement;
(p) Investments up to $12,000,000 in the aggregate by the Company in
Sonab (i) in the form of intercompany Indebtedness for Borrowed Money
existing on the Closing Date as evidenced by the First Sonab Intercompany
Note or (ii) in the form of common equity resulting from the
conversion/exchange of the First Sonab Intercompany Note into/for common
equity of Sonab;
(q) Investments by the Company in Sonab in the form of intercompany
Indebtedness for Borrowed Money existing after the Closing Date as
evidenced by the Second Sonab Intercompany Note; provided that the
aggregate unpaid amount of the Indebtedness for Borrowed Money evidenced
by the Second Sonab Intercompany Note shall not at any time exceed
$33,000,000.
(r) Investments by Sonab represented by the bank accounts of SONAB
listed on Schedule 11.19 annexed hereto; provided, however, that at any
time prior to the completion of the lockbox and cash management
arrangements with respect to Sonab as contemplated by Section 8.24 hereof,
the balance of any one such bank account shall not exceed $1,500,000 and
the aggregate balance of all such bank accounts of Sonab shall not exceed
$2,000,000; and
(s) the First Supplemental Indentures and the Second Supplemental
Indentures.
ss. 9.5. MERGER, SALE OF ASSETS, DISSOLUTION, ETC. Enter into any
transaction of merger or consolidation, change its name, acquire all or a
substantial portion of the assets of any Person, or transfer, sell, assign,
lease, or otherwise dispose of (other than sales by the Company or any of its
Subsidiaries of Inventory of the Company or such Subsidiary in the ordinary
course of business or sales by the Company or any of its Subsidiaries of
Inventory or fixtures of the Company or such Subsidiary at any location in
connection with the termination of any License Agreement or lease covering such
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location) all or any part of its properties or assets, or any of its notes or
Accounts (including, without limitation, Eligible Receivables), or any stock or
Indebtedness of the Company or any of its Subsidiaries, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except:
(a) sales in the ordinary course of business of assets and
properties of the Company and its Subsidiaries no longer necessary for the
proper conduct of their respective businesses having a value, together
with the value of all other such property of the Company and its
Subsidiaries so sold in the same Fiscal Year of the Parent, of not greater
than $250,000;
(b) sales by the Company and its Subsidiaries of worn out or
obsolete personal property of the Company or such Subsidiary having a
value, together with the value of all other such property of the Company
and its Subsidiaries so sold in the same Fiscal Year of the Parent, of not
greater than $250,000 plus sales of obsolete jewelry, watches or other
merchandise which the Company believes cannot be advantageously sold in
the ordinary course of business;
(c) sales of equipment and fixtures in connection with the
termination of License Agreements (or similar agreements or arrangements
regarding the operation of jewelry departments or stores by Sonab or the
Company) as to any one or more locations, to the extent such equipment and
fixtures were used or retained at such locations in the ordinary course of
business;
(d) the abandonment of any assets and properties of the Company or
any of its Subsidiaries which are no longer useful in its business and
cannot be sold;
(e) the merger of a wholly-owned Domestic Subsidiary of the Company
with the Company (so long as the Company is the sole survivor of such
merger) or with another wholly owned Domestic Subsidiary of the Company or
the transfer or sale of any assets from any Subsidiary of the Company to
the Company;
(f) upon thirty days prior written notice to the Agent, the Company
and any of its Subsidiaries may change its name provided that such entity
executes all documentation reasonably requested by the Agent (including,
without limitation, UCC financing statements) in order to protect the
Agent's interest in the Collateral or any other interest of the Agent
under the Loan Documents; and
(g) the sale, transfer or assignment of collateral subject to the
"Pledge Agreement" referred to in Section 9.2(e) hereof by virtue of the
exercise of remedies by the pledgee thereunder.
ss. 9.6. DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS.
(a) Declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any of its
capital stock, or purchase, redeem, retire, defease or otherwise acquire for
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value any capital stock of the Parent, the Company or such Subsidiaries or any
other equity securities or any warrants, rights or options to acquire any such
capital stock or other securities, whether now or hereafter outstanding, except
that:
(i) any wholly-owned Subsidiary of the Company may declare or pay
cash dividends to the Company or to any other wholly-owned Subsidiary of
the Company which is its shareholder;
(ii) so long as no Default or Event of Default shall have occurred
and be continuing or would result therefrom, (A) the Company may declare
or pay dividends to the Parent on an annual basis to pay expenses of the
Parent incurred in the ordinary course of business of the Parent not to
exceed in the aggregate in any Fiscal Year of the Parent 0.25% of the
Company's net sales as indicated in the Company's audited annual financial
statements for the immediately preceding Fiscal Year and (B) the Company
and/or the Parent may purchase, repurchase, redeem, retire or acquire
Equity Interests from former employees, officers and directors pursuant to
the Long Term Incentive Plan, the Equity Plan, Employment Agreements, the
Shareholders Agreement or other written agreements permitted hereby and
may make payments in respect of promissory notes or other Indebtedness or
evidence thereof issued or incurred in connection with any such purchase,
repurchase, redemption, retirement or acquisition, and the Company may pay
dividends to the Parent in an amount sufficient to make such purchases,
repurchases, redemptions, retirements and acquisitions so long as the
amount of such purchases, repurchases, redemptions, retirements and
acquisitions (including, without limitation, amounts paid in respect of
promissory notes or other Indebtedness or evidence thereof issued or
incurred in connection with any such purchase, repurchase, redemption,
retirement or acquisition) does not exceed in the aggregate in any Fiscal
Year the sum of $1,000,000 plus the amount of cash received by the Parent
from employees, officers and directors in respect of purchases of stock
during such Fiscal Year; provided, however, that the portion, if any, of
such sum which is not applied to such purchases, repurchases, redemptions,
retirements or acquisitions (or to the payment of dividends by the Company
to the Parent therefor) in any Fiscal Year may be applied to purchases,
repurchases, redemptions, retirements or acquisitions of Equity Interests
from former employees of the Company whose employment was terminated in
such Fiscal Year (and for the payment of dividends by the Company to
Parent therefor) so long as such application (and payment) is made during
the first three months of the immediately succeeding Fiscal Year, and any
such portion so paid during such first three months as permitted by this
proviso shall not be included in calculating the sum for such succeeding
Fiscal Year;
(iii) the Parent may redeem, repurchase, retire or otherwise acquire
any Equity Interest of the Parent in exchange for, or out of net proceeds
of the substantially concurrent sale (other than to a Subsidiary of the
Parent) of, other Equity Interests (other than Disqualified Stock) of the
Parent; and
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(iv) so long as no Default or Event of Default is continuing, on any
tax payment date, the Company may make payments to the Parent of amounts
required to be paid on such tax payment date under sections 4(c) and 5 of
the Tax Allocation Agreement; provided, however, that (x) no payment on any
tax payment date made by the Company to the Parent shall exceed the amount
payable by the Parent to any taxing authority on such tax payment date, and
(y) in any taxable year (or portion thereof), the aggregate amount payable
by the Company to the Parent under this Section 9.6(a)(iv) in respect of
federal, state and local income taxes shall not exceed the lesser of (A)
the federal, state and local income tax liability that would have been
payable by the Company for such taxable year (or portion thereof)
determined as if the Company had filed separate federal, state and local
income tax returns for such taxable year (or portion thereof) and for all
previous taxable years beginning after October 31, 1992, computed in
accordance with actual elections, conventions and other determinations with
respect to the Company reflected in the consolidated or combined returns of
the Parent and including any carryforwards of tax attributes from all prior
taxable years (as limited under the Code) and (B) the consolidated or
combined federal, state and local income tax liability of the consolidated
or combined group that includes the Company and the Parent. For purposes of
subsection (y) above the provisions relating to state and local income
taxes shall only apply if and to the extent the Company and the Parent file
consolidated or combined income tax returns in such jurisdictions.
(b) Make any payment or prepayment of principal or interest on
account of, or purchase, defease, acquire or redeem, any Indebtedness for
Borrowed Money (or give any notice thereof or establish a sinking fund, reserve
or like set aside of funds or other property therefor) other than (i) the Lender
Debt, (ii) regular, scheduled payments by the Company of interest on, and
required payments of principal of (in each case to the extent due and payable),
the Senior Notes, and (iii) payments of Indebtedness of the Company permitted
under paragraphs (b), (c), (d), (f), and (g) of Section 9.3, in each case, to
the extent due and payable and except that:
(i) so long as no Default or Event of Default shall have occurred and
be continuing or would result therefrom the Parent may pay up to
$40,000,000 of the original issue discount of the Debentures pursuant to
the terms of the Debenture Indenture; provided, however, that (x) the
Company shall not make any payments or distributions to the Parent for such
purpose (provided further that this shall not prohibit Revolving Advances
to the Parent otherwise permitted hereunder) and nothing contained herein
or elsewhere in this Agreement shall be deemed to constitute an approval on
the part of the Agent or any Lender to any such payments or distributions
by the Company to the Parent for such purpose; (y) the Parent shall have
received after the Closing Date at least $27,000,000 of Net Cash Proceeds
from the issuance of Equity Interests which are applied to prepay the
Revolving Credit Loan if, and to the extent permitted by the Debenture
Indenture; and (z) the Parent timely files all necessary tax returns with
respect thereto and applies any tax refund proceeds, if and to the extent
permitted by the Debenture Indenture, to the repayment of the Revolving
Credit Loan;
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(ii) the Company may, from time to time, repurchase Senior Notes with
the proceeds of Revolving Advances made to it provided, that such Senior
Notes are repurchased at prices deemed favorable by the Company's board of
directors; provided, however, that no Senior Notes shall be permitted to be
repurchased under this clause (ii) if the amount to be paid in respect of
their repurchase, when added together to the sum of the aggregate amount of
the Parent's Revolving Loan plus the aggregate amount theretofore paid by
the Company to repurchase Senior Notes, would exceed the Aggregate
Revolving Sublimit Commitment;
(iii) the Parent may, from time to time, repurchase Debentures with
the proceeds of Revolving Advances made to it and the Net Cash Proceeds
hereafter received by it from the issuance of Equity Interests to the
extent such Proceeds are not required to be used to prepay the Revolving
Loan, provided, that such Debentures can be repurchased at prices deemed
favorable by the Parent's board of directors; provided, however, that no
Debentures shall be permitted to be repurchased under this clause (iii) if
the amount to be paid in respect of their repurchase, when added together
to the sum of the aggregate amount of the Parent's Revolving Loan plus the
aggregate amount theretofore paid by the Company to repurchase Senior Notes
would exceed the Aggregate Revolving Sublimit Commitment;
(iv) Sonab may at any time and from time to time make payments and
prepayments in whole or in part to the Company in cash without discount
under the two promissory notes issued by Sonab to the Company in the
respective principal amounts of $12,000,000 and $33,000,000; and
(v) the Company may at any time and from time to time make payments
and prepayments under the Gold Consignment Documents.
ss. 9.7. TRANSACTIONS WITH AFFILIATES. Except for transactions
specifically required or permitted by the terms of this Agreement (including,
without limitation, the transactions contemplated pursuant to the Tax Allocation
Agreement, the Management Agreements, the Shareholders Agreement, the
Registration Rights Agreement and the Stock Purchase Agreement, in each case, as
in effect on the Closing Date or as amended in accordance with Section 9.12
hereof, the Parent's Restated Certificate of Incorporation in effect on the
Closing Date or as amended in accordance with Section 9.12 hereof and the
Indemnification Agreements or as amended in accordance with Section 9.12
hereof); enter into or perform any transaction, including, without limitation,
the purchase, leasing, sale or exchange of property or assets or the rendering
of any service, with any Affiliate of the Lee/Desai Group or the Parent, except
(i) for any transaction which is in the ordinary course of business of the
Company and any Subsidiary thereof, and which transaction is upon fair and
reasonable terms no less favorable to the Company and such Subsidiary than each
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party to such transaction could obtain in a comparable arm's length transaction
with a Person not an Affiliate of such Person, or (ii) with respect to any
transaction between the Company and any of its Subsidiaries which is on terms
more favorable to the Company than the Company could obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company.
ss. 9.8. BLOCKED ACCOUNTS. Suffer or permit (i) without the prior written
consent of the Agent, any Blocked Account to be closed or terminated, or the
Collecting Bank Agreement relating thereto to be terminated or no longer in full
force and effect, or (ii) any deposit, checking or other account to be
maintained at any bank, savings and loan association or other financial
institution which accepts deposits, other than Blocked Accounts.
ss. 9.9. MANAGEMENT COMPENSATION AND OTHER PAYMENTS. Except as specifically
permitted under Section 9.6 and 9.7 hereof, pay, directly or indirectly, any
management, consulting or similar fees, make any other payments of any kind in
respect of employment, management, consulting, servicing or similar services or
in respect of any non-competition or similar agreement or make any other kind of
payment of any nature to, any Affiliate of the Parent, the Lee/Desai Group or to
any officer, director, member of management, stockholder or partner of the
Parent or any Subsidiary of the Parent or any Affiliate of any thereof, other
than (i) payments of salary and ordinary course of business compensation
(excluding bonuses and incentive compensation other than sales commission) to
full time employees of the Company in the ordinary course of business and
consistent with past practices and severance payments which have accrued and
become payable in the ordinary course of business of the Borrowers, (ii)
payments of bonuses and incentive compensation to full time employees of the
Company and its Domestic Subsidiaries so long as such bonuses and incentive
compensation (x) are consistent with the Company's historical practices, and (y)
are paid in accordance with Employment Agreements or the Long Term Incentive
Plan or, if not paid under an Employment Agreement or the Long Term Incentive
Plan, are paid in accordance with other policies a description of which is
attached as Schedule 9.9 hereto, as such policies may be amended, supplemented
or replaced from time to time with the approval of the Board of Directors of the
Company or Parent so long as no such amendment, supplement or replacement
represents a material increase in bonus levels or calculations, (iii) so long as
there shall be continuing no Default or Event of Default in the payment of
principal of any Revolving Advance or any interest thereon, (x) fees payable to
Thomas H. Lee Capital, LLC and Desai Capital Management Incorporated (or any
Affiliate thereof) by the Company pursuant to the terms of the Management
Agreements, not exceeding $240,000 plus reasonable expenses in the aggregate in
any Fiscal Year and (y) amounts payable by the Parent or the Company under the
Registration Rights Agreement and to the extent permitted by Section 9.6 hereof,
under the Shareholders Agreement in each case, as such payments are required
pursuant to such documents as in effect on the Closing Date, (iv) payments of
fees, expense reimbursements or other amounts to independent directors or
consultants (which are not Affiliates of the Parent or the Company) in the
ordinary course of business and (v) amounts payable by the Borrowers under the
Indemnification Agreements. Notwithstanding anything to the contrary set forth
herein, Sonab shall be permitted to make payments of salary and other
compensation (including bonuses) to (i) Bernard Gelbfarb pursuant to the terms
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of the Gelbfarb Service Agreement and (ii) other full time employees of Sonab so
long as such payments are paid in the ordinary course of Sonab's business and
are consistent with Sonab's past practices. In addition to the foregoing, the
Company shall be permitted to pay Bernard Gelbfarb and other full time employees
of Sonab bonuses and other compensation pursuant to the terms of the Long Term
Incentive Plan so long as such bonuses and other compensation are paid in the
ordinary course of the Company's business and are consistent with the Company's
past practices.
ss. 9.10. COMPROMISE OF RECEIVABLES. Compromise or adjust any of the
Receivables or other accounts (or extend the time for payment thereof) or grant
any discounts, allowances or credits thereon other than, so long as there exists
no Default or Event of Default, discounts, adjustments, allowances and credits
granted with respect to accounts in the ordinary course of business.
ss. 9.11. NONCOMPLIANCE WITH ERISA. (a) Engage in any transaction in
connection with which a Credit Party or any ERISA Affiliate could be reasonably
expected to be subject to either a material civil penalty assessed pursuant to
the provisions of Section 502(i) of ERISA or a material tax imposed under the
provisions of Section 4975 of the Code;
(b) adopt an amendment to any Pension Benefit Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code;
(c) terminate any Pension Benefit Plan under Section 4041(c) of
ERISA without the prior consent of the Agent;
(d) fail in any material respect to make payment when due (including
permissible extensions) of all amounts which, under the provisions of any
Employee Plan or Multiemployer Plan, it is required to pay as contributions
thereto or as premiums to the PBGC, or, with respect to any Pension Benefit
Plan, permit to exist any "accumulated funding deficiency" (within the meaning
of Section 302 of ERISA and Section 412 of the Code); or
(e) enter into a new agreement or agreements that would obligate a
Credit Party or any ERISA Affiliate to make contributions to a Multiemployer
Plan subject to subtitle (e) of Title IV of ERISA in excess of $50,000 per year
or $250,000 in the aggregate during the term of this Agreement, or to create,
extend or increase an obligation to provide health or medical benefits for
retirees (other than at retiree's sole expense) of a Credit Party or an ERISA
Affiliate.
ss. 9.12. AMENDMENT AND MODIFICATION OF CERTAIN DOCUMENTS. (a) Directly or
indirectly, amend, modify, supplement, waive compliance with, seek a waiver
under, or assent to noncompliance with, any term, provision or condition of the
Senior Note Indenture or any Senior Note, the Debenture Indenture, the pledge
agreement thereunder or any Debenture, the Tax Allocation Agreement, the
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articles or certificate of incorporation or by-laws (other than to increase the
number of authorized shares of common stock of the Parent) of the Parent, the
Company or any Subsidiary thereof or any certificate of designation of preferred
stock of any thereof or, in a manner adverse to the Agent or any Lender any
material term or provision of (i) any Employment Agreement with any Person who
is, without regard to such Employment Agreement or duties or roles thereunder,
an Affiliate of the Parent, the Company or any of their respective Subsidiaries,
(ii) the Shareholders Agreement, (iii) the Registration Rights Agreement, (iv)
the Management Agreements, (v) the Indemnification Agreements, or (vi) any one
or more of the Gold Consignment Documents (other than modifying the advance rate
percentages set forth in the definition of "Consignment Limit" and modifying the
percentage in clause (b) of the definition of "Consignment Fixed Rate" to a
percentage not exceeding three percent (3%)).
(b) Directly or indirectly, amend, modify, supplement, waive
compliance with, seek a waiver under, or assent to noncompliance with, any
material term or provision of any other agreement, instrument or document to
which the Parent or any of its Subsidiaries is a party (including, without
limitation, the Long Term Incentive Plan and the Equity Plan) in a manner that
will have a Material Adverse Effect.
(c) Directly or indirectly, amend, modify, supplement, waive
compliance with, seek a waiver under, or assent to noncompliance with, any term
or provision of any of the Sonab Acquisition Documents (other than the Gelbfarb
Service Agreement) or directly or indirectly, amend, modify, supplement, waive
compliance with, seek a waiver under, or assent to noncompliance with, any
material term or provision of the Gelbfarb Service Agreement in a manner adverse
to the Agent or any Lender.
ss. 9.13. FISCAL YEAR. Change its Fiscal Year.
ss. 9.14. CHANGE OF BUSINESS. Alter the nature of its business in
any material respect or except as provided in Section 9.5(a) and 9.5 (b) hereof,
sell any Inventory other than (i) Inventory sold under a License Agreement or
(ii) Inventory which is sold by the Company from any factory outlet store
operated by the Company in a premises which is owned by the Company or leased by
the Company and in which only Inventory of the Company and/or Consignment
Inventory is sold (in any case, subject to the provisions of 9.1 hereof). The
foregoing provisions shall not apply to Sonab; provided, however, that Sonab
shall not alter the nature of its business as conducted on the Fourth Amendment
Effective Date in any material respect.
ss. 9.15. NO NEGATIVE PLEDGES. Enter into or become subject to,
directly or indirectly, including, without limitation, as a non-party Subsidiary
of a party to any agreement, any agreement other than agreements entered into on
or before the Closing Date (including, without limitation, the Restated
Certificate of Incorporation of the Parent and the Gold Consignment Documents)
(a) prohibiting or restricting, in any manner (including, without limitation, by
way of covenant, representation or event of default), (i) the incurrence,
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creation or assumption of any Indebtedness, or any Lien upon any property of any
Credit Party, except restrictions in a Capital Lease or other purchase money
financing agreement permitted hereunder relating to the asset financed
thereunder, (ii) the sale, disposition or pledge of any asset of any Credit
Party, except restrictions in a Capital Lease or other purchase money financing
agreement permitted hereunder relating to the asset financed thereunder, (iii)
any investments of any Credit Party, (iv) any Capital Expenditures by any Credit
Party, (v) any acquisition, merger or consolidation involving any Credit Party,
(vi) any change in control of any Credit Party, or (vii) any amendment or
supplement to or
waiver under this Agreement or any other Loan Document or other document
relating to the Lender Debt, or (b) which provides that any default by any
Credit Party which is not a party to such agreement of any obligation not
arising under such agreement is a default under such agreement.
ss. 9.16. RENTAL OBLIGATIONS. Incur, create, assume or permit to
exist, in respect of leases of real or personal property, (a) obligations in any
amount in respect of percentage rentals, except under the License Agreements, or
(b) rental obligations or other commitments thereunder (other than Capitalized
Lease Obligations) to make any direct or indirect payment, whether as rent or
otherwise, for fixed or minimum rentals (including minimum payments (and
excluding all other payments) under the License Agreements) in excess of (i)
$15,000,000 for the Parent and its Subsidiaries for any Fiscal Year; provided,
however, that the amount set forth in this clause (i) shall not include rental
obligations incurred by the Company with respect to factory outlet stores
permitted to be opened by the Company pursuant to Section 9.24 hereof; and (ii)
$2,000,000 for the Company for any Fiscal Year with respect to rental
obligations for factory outlet stores permitted to be opened by the Company
pursuant to Section 9.24 hereof.
ss. 9.17. LEASE-BACKS. Enter into any arrangements, directly or
indirectly, with any Person, whereby the Parent or any Subsidiary thereof shall
sell or transfer any property, whether now owned or hereafter acquired, used or
useful in its business, in connection with the rental or lease of the property
so sold or transferred or of other property which the Parent or any Subsidiary
thereof intends to use for substantially the same purpose or purposes as the
property so sold or transferred.
ss. 9.18. CAPITAL STOCK. Issue or sell, or permit any of its
Subsidiaries to issue or sell, any of its capital stock or any rights, warrants
or options to acquire any of its capital stock, or sell or otherwise dispose of,
or permit any of its Subsidiaries to sell or otherwise dispose of, any capital
stock of any of its Subsidiaries other than, subject to Sections 9.22 and
10.1(j) hereof, issuances or sales by the Parent of common stock or warrants or
other rights to purchase common stock of the Parent.
ss. 9.19. DEBT INCURRENCE AND PAYMENTS TO THE PARENT.
Incur, agree to incur or suffer to exist the incurrence of any obligation to or
for the account of the Parent or any Subsidiary thereof or make, agree to make
or suffer to exist the making of any (i) payment, (ii) distribution or (iii)
transfer or other disposition of assets or property, in each instance of any
kind (whether in cash, assets, stock or otherwise), to or for the account of the
Parent or any Subsidiary thereof (whether in the form of a dividend, loan,
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return of capital, management or consulting fee or otherwise), other than as
expressly permitted under this Agreement.
ss. 9.20. THE PARENT. Except as permitted under Section 9.6 hereof, the
Parent shall engage in no business other than ownership of stock of the Company,
and shall not own, acquire or lease any property, other than such stock.
ss. 9.21. INDENTURE GUARANTEES. Other than as set forth in Schedule 9.21
hereto, engage in any transaction (or series of related transactions) which
would cause any Subsidiary of the Parent to be obligated to guarantee the
obligations of the Parent or the Company under the Debentures or the Senior
Notes, as the case may be.
ss. 9.22. PRIVATE SALE OF STOCK. Suffer or permit to occur any private sale
by any Person of common stock of the Parent if such sale shall (i) not have been
approved in writing by the Majority Lenders, which approval shall not be
unreasonably withheld and (ii) result in a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
or any Related Party of such person or group other than any person or group
which is a holder of common stock of the Parent as of the Closing Date (or any
Related Party of such person or group) having the largest fully diluted
beneficial ownership interest in the common stock of the Parent (x) if such
fully diluted beneficial ownership interest represents 10% or more of common
stock having ordinary voting power for the election of directors of the Parent
or (y) if such person or group or Related Party immediately after such sale has
the power to direct or cause the direction of the management and policies of the
Parent, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise. For the purposes of this Section 9.22 (i) a person or
group shall be deemed to have beneficial ownership of common stock if such
person or group, directly or indirectly, has the power to vote, or direct the
voting of, such common stock and (ii) in determining whether a person or group
has the largest fully beneficial ownership interest in common stock of the
Parent, the beneficial ownership interest in common stock of the Parent held by
persons or groups who are Affiliates of each other shall be aggregated.
ss. 9.23. DEBENHAMS LICENSE AGREEMENTS. Enter into License Agreements to
operate fine jewelry departments in more than ten (10) Debenhams stores.
ss. 9.24. FACTORY OUTLET STORES. Notwithstanding anything to the contrary
contained elsewhere in this Agreement (including, without limitation, Sections
7(b) and 9.1 hereof) or in any other Loan Document, open or enter into
commitments to open more than twenty-two (22) factory outlet stores to be
operated by the Company provided that any store to be opened after the Fiscal
Year ending in 1997 shall require the prior written consent of the Agent.
ss. 9.25. MONOPRIX LICENSE AGREEMENTS. Enter into License Agreements to
operate fine jewelry departments in more than (x) fifty-five (55) Monoprix and
related stores and (y) one store in Berlin, Germany.
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SECTION 10. DEFAULTS AND REMEDIES.
ss. 10.1. EVENTS OF DEFAULT. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default shall be made in the due and punctual payment of the
principal of the Revolving Loan or in the due and punctual reimbursement
of any payments made by any Issuing Bank under any Letter of Credit
(including any L/C Indemnity Agreement) or of any payments made by any
Lender to such Issuing Bank in respect of indemnity obligations of such
Lender to such Issuing Bank with respect to a Letter of Credit, when and
as the same shall become due and payable whether pursuant to Section 2 or
2A, at maturity, by acceleration or otherwise; or
(b) default shall be made in the due and punctual payment of any
amount of interest on the Loan or of any fee or other amount owing to any
Lender, any Issuing Bank, or the Agent pursuant to any of the Loan
Documents, when and as such amount of interest, fee or other amount shall
become due and payable and such de fault shall continue unremedied for
three (3) days; or
(c) default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision (other than as
described in clause (a) or (b) above) contained in this Agreement or any
other Loan Document or in any instrument or document evidencing or
creating any obligation, guaranty or Lien in favor of the Agent or
delivered to the Lenders, any Issuing Bank or the Agent in connection with
or pursuant to this Agreement or any Lender Debt, and, except in the case
of the agreements and covenants contained in Sections 8.1, 8.2, 8.3, 8.6
through and including 8.14, 8.16, 8.17 and 8.19 through and including 8.22
and Section 9 (as to each of which Sections no notice or grace period
shall apply), continuance of such default for a period of thirty (30) days
following Written Notice to the Company, or if this Agreement or any other
Loan Document or any such other instrument or document shall terminate or
be terminated or become void or unenforceable for any reason whatsoever or
any Lien created under any Security Document shall cease to be a valid and
perfected first priority Lien (except as otherwise permitted by this
Agreement) in any of the Collateral purported to be covered thereby; or
(d) (i) one or more defaults shall occur in the payment of any
principal, interest or premium with respect to any Indebtedness for
Borrowed Money or any obligation which is the substantive equivalent of
Indebtedness for Borrowed Money (including, without limitation, obligations
under conditional sales contracts, Capital Leases and the like) of which
any Credit Party is principal, guarantor or other surety, and such default
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shall continue for more than the period of grace, if any, specified
therefor in the documents governing same, or (ii) one or more defaults
shall occur under any agreement or instrument under or pursuant to which
any such Indebtedness for Borrowed Money or obligation may have been
issued, created, assumed, guaranteed or secured by any Credit Party and, in
the case of clause (ii) of this Subsection 10.1(d), such default shall
continue for more than the period of grace, if any, therein specified, or
(iii) any such Indebtedness for Borrowed Money or obligation shall be
declared due and payable prior to the stated maturity thereof; and the
aggregate principal amount of all such Indebtedness for Borrowed Money and
obligations as to which any such matters under clauses (i), (ii) or (iii)
occur shall exceed $500,000; or
(e) any representation, warranty or other statement of fact
given herein or in any writing, certificate, report or statement at any
time furnished to any Lender, any Issuing Bank or the Agent pursuant to or
in connection with this Agreement (including, without limitation, any
Borrower's Certificate and any Borrowing Base Certificate), any other Loan
Document, or any other document or instrument furnished to any Lender, any
Issuing Bank or the Agent relating to the transactions contemplated by
this Agreement or the Sonab Acquisition, shall be false in any material
respect when given or deemed given; or
(f) any Credit Party shall (i) be unable to pay its debts
generally as they become due or admit in writing its inability to pay its
debts generally; (ii) file a petition to take advantage of any insolvency
act; (iii) make an assignment for the benefit of its creditors; (iv)
commence a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of the whole or any substantial
part of its property; (v) file a petition or answer seeking reorganization
or arrangement or similar relief under the Federal Bankruptcy Code or any
other applicable law or statute of the United States of America, any state
or commonwealth thereof or otherwise; or (vi) by appropriate proceedings
of the board of directors of any Credit Party or other governing body,
authorize the filing of any such petition, making of such assignment or
commencement of such a proceeding; or
(g) a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator
or conservator of any Credit Party or of the whole or any substantial part
of its properties, or approve a petition filed against any Credit Party
seeking reorganization or arrangement or similar relief under the Federal
Bankruptcy Code or any other applicable law or statute of the United
States of America, any state or commonwealth thereof or otherwise; or if,
under the provisions of any other law for the relief or aid of debtors, a
court of competent jurisdiction shall assume custody or control of any
Credit Party or of the whole or any substantial part of its properties; or
if there is commenced against any Credit Party any proceeding for any of
the foregoing relief and such proceeding or petition remains undismissed
for a period of thirty (30) days; or if any Credit Party by any act
indicates its consent to or approval of any such proceeding or petition;
or
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(h) (i) a final judgment shall be rendered against a Credit Party
which, by itself or with other outstanding final judgments against such
Credit Party, exceeds in the aggregate $500,000 and if, within thirty (30)
days after entry thereof, such judgment shall not have been discharged or
execution thereof stayed pending appeal, or if, within thirty (30) days
after the expiration of any such stay, such judgment shall not have been
discharged; or (ii) any of the assets of a Credit Party shall be attached,
seized, levied upon or subject to an injunction, execution, writ or
distress warrant and shall remain unstayed or undismissed for a period of
thirty (30) days, which by itself or together with all other attachments,
seizures, levies, injunctions, executions, writs or distress warrants
against properties of such Credit Party remaining unstayed or undismissed
for a period of thirty (30) days, is for an amount in excess of $500,000;
or (iii) any final non-monetary judgment or order shall be rendered against
a Credit Party that might reasonably be expected to have a Material Adverse
Effect and if, within thirty (30) days after entry thereof, such
non-monetary judgment or order shall not have been discharged or execution
thereof stayed pending appeal, or if, within thirty (30) days after the
expiration of any such stay, such judgment or order shall not have been
discharged; or
(i) (i) a Reportable Event shall have occurred with respect to a
Pension Benefit Plan other than a Reportable Event as to which the
provision of 30 days notice to the PBGC is waived under applicable
provisions;
(ii) any Credit Party or any ERISA Affiliate or an administrator of
any Pension Benefit Plan shall have filed a notice of intent to terminate a
Pension Benefit Plan in a "distress termination" under the provisions of
Section 4041(c) of ERISA;
(iii) any Credit Party or any ERISA Affiliate or an administrator of a
Pension Benefit Plan shall have received a notice that the PBGC has
instituted pro ceedings to terminate (or appoint a trustee to administer) a
Pension Benefit Plan;
(iv) any other event or condition exists which might reasonably be
expected, in the reasonable opinion of the Majority Lenders, to constitute
grounds under the provisions of Section 4042(a)(1) or (2) of ERISA for the
termination of (or the appointment of a trustee to administer) any Pension
Benefit Plan by the PBGC;
(v) any Credit Party or any ERISA Affiliate has incurred or is likely
to incur a liability under the provisions of Section 4063, 4064 or 4201 of
ERISA;
(vi) any Person shall engage in any transaction in connection with
which any Credit Party or any ERISA Affiliate could be subject to either a
civil penalty assessed pursuant to the provisions of Section 502(i) of
ERISA or a tax imposed under the provisions of Section 4975 of the Code;
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(vii) any Credit Party or any ERISA Affiliate fails to pay the full amount
of any installment due under Section 412(m) of the Code or any "accumulated
funding deficiency" (within the meaning of Section 302 of ERISA and Section 412
of the Code) shall exist with respect to any Pension Benefit Plan; and in each
case in clauses (i) through (vii) above, in the opinion of the Majority Lenders,
such event or condition, together with all other such events or conditions,
could reasonably be expected to subject a Credit Party or any ERISA Affiliate to
any tax, penalty or other liabilities which in the aggregate would be material
in relation to the business, operations, liabilities, assets, properties,
prospects or condition (financial or otherwise) of such Credit Party or such
ERISA Affiliate; or
(j) a Change of Control shall occur; or
(k) either Borrower shall suspend the operation of a material
portion of its business as presently conducted or there shall occur the
loss, theft, substantial damage to, condemnation of, exercise of right of
eminent domain with respect to or destruction of, any Collateral not fully
covered by insurance (except for deductibles), which by itself or with
other such losses, thefts, damage, condemnation or destruction of, or
exercise of right of eminent domain with respect to, Collateral, shall
constitute a Material Adverse Effect; or
(l) (A) (i) any Unapproved License Agreement or License
Agreement shall be cancelled, terminated (other than termination at the
end of the originally scheduled or renewed or extended term of an
Unapproved License Agreement or License Agreement) or no longer in full
force or effect (excluding any License Agreement which continues to be an
arrangement approved in writing by the Agent, whether or not such approval
has been rescinded) or the licensor or licensors under such Unapproved
License Agreement or License Agreement shall be debtors under any Chapter
of the Federal Bankruptcy Code (any of the foregoing events, a "License
Termination Event"), (ii) as of the date three months following such
License Termination Event, the excess of (x) the amount of the gross
revenues of the Company arising from such Unapproved License Agreement or
License Agreement plus the gross revenues arising from Unapproved License
Agreements and License Agreements as to which previous License Termination
Events shall have occurred during the period beginning on the Closing Date
and ending on the date of determination (gross revenues being calculated
by the Agent, in the case of any Unapproved License Agreement or License
Agreement which had been in effect for at least twelve calendar months as
of the end of such period, for such period of twelve calendar months, and,
in the case of any Unapproved License Agreement or License Agreement which
had been in effect for less than twelve calendar months as of the end of
such period, on a seasonally adjusted twelve month pro forma basis based
upon results for the number of full calendar months during which such
Unapproved License Agreement or License Agreement was in effect), over (y)
the amount of gross revenues of the Company arising from any Unapproved
License Agreements and License Agreements entered into within the period
beginning on the Closing Date and ending on such date of determination,
and remaining in full force and effect as of such date of determination
(gross revenues being calculated by the Agent, in the case of any
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Unapproved License Agreements or License Agreements which have been in
effect for at least twelve months, on a seasonally adjusted twelve month
pro forma basis based upon results for the number of full calendar months
during which such Unapproved License Agreement or License Agreement was in
effect, and, in the case of any Unapproved License Agreement or License
Agreement which has been in effect for less than twelve months, based upon
the Company's internally generated projection of gross revenues for such
Unapproved License Agreement or License Agreement for the twelve month
period following the first date of operation under such Unapproved License
Agreement or License Agreement as delivered to the Agent under Section
8.19(b) hereof) shall equal or exceed 10% of the gross revenues of the
Company for the period of twelve consecutive full calendar months
(treating the month ending on the last Saturday of January as a full
calendar month) ending on or nearest preceding such date of determination
and (iii) such License Termination Event shall represent a Material
Adverse Effect or (B) there shall occur a License Termination Event with
respect to an Unapproved License Agreement or License Agreement that
accounted for, in any fiscal period of twelve consecutive full calendar
months (treating the month ending on the last Saturday of January as a
full calendar month), more than 20% of the gross revenues of the Company;
or
(m) any "Event of Default" under and as defined in the Gold
Consignment Agreement shall occur;
then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing:
(A) either or both of the following actions may be taken: (i)
the Agent may, at its option, or, the Agent shall, upon the direction of
the Majority Lenders, declare any obligation to lend or issue or cause the
issuance of Letters of Credit hereunder terminated, whereupon such
obligation to make further loans or issue or cause the issuance of Letters
of Credit hereunder, as the case may be, shall terminate immediately, and
(ii) the Agent may, at its option, or, the Agent shall, upon the direction
of the Majority Lenders, declare any or all of the Lender Debt to be due
and payable, and the same, all interest accrued thereon and all other
obligations of the Borrowers to the Agent, each Issuing Bank and the
Lenders under or in connection with the Loan Documents shall forthwith
become due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, anything contained
herein or in any instrument evidencing the Lender Debt to the contrary
notwithstanding; provided, however, that notwithstanding the above, if
there shall occur an Event of Default under paragraph (f) or (g) above
(other than under clause (i) of paragraph (f)), then the obligation of the
Lenders to lend and of any Issuing Bank to issue or cause the issuance of
any Letters of Credit hereunder shall automatically terminate and any and
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all of the Lender Debt shall be immediately due and payable without any
action by the Agent, any Issuing Bank or any Lender;
(B) the Agent shall have and may exercise all rights and remedies of a
mortgagee or a secured party under the UCC in effect in the State of New
York at such time, whether or not applicable to the affected Collateral,
and otherwise, including, without limitation, the right to foreclose the
Liens granted herein or in any of the Security Documents by any available
judicial procedure and/or to take possession of any or all of the
Collateral, the other security for the Lender Debt and the books and
records relating thereto, with or without judicial process; for the
purposes of the preceding sentence, the Agent may enter upon any or all of
the premises where any of the Collateral, such other security or books or
records may be situated and take possession and remove the same therefrom;
and
(C) the Agent shall have the right, in its sole discretion, to
determine which rights, Liens or remedies it shall at any time pursue,
relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of them or any of
the Lenders' or any Issuing Bank's rights hereunder; and any moneys,
deposits, Accounts (including, without limitation, Eligible Receivables),
balances or other property which may come into any Lender's, any Issuing
Bank's or the Agent's hands at any time or in any manner, may be retained
by such Lender, any Issuing Bank or the Agent and applied to any of the
Indebtedness of the Credit Parties to the Agent any Issuing Bank and the
Lenders hereunder.
ss. 10.2. SUITS FOR ENFORCEMENT. In case any one or more Events of
Default shall occur and be continuing, the Agent on behalf of the Agent, each
Issuing Bank and the Lenders may proceed to protect and enforce their rights or
remedies either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, agreement or other provision contained
herein or in any document or instrument delivered in connection with or pursuant
to this Agreement or any other Loan Document, or to enforce the payment of the
Lender Debt or any other legal or equitable right or remedy.
ss. 10.3. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon the Lenders, any Issuing Bank or the Agent is intended to be
exclusive of any other right or remedy contained herein or in any instrument or
document delivered in connection with or pursuant to this Agreement or any other
Loan Document, and every such right or remedy shall be cumulative and shall be
in addition to every other such right or remedy contained herein and therein or
now or hereafter existing at law or in equity or by statute, or otherwise.
ss. 10.4. RIGHTS AND REMEDIES NOT WAIVED. No course of dealing
between any of the Credit Parties and any Lender, any Issuing Bank or the Agent
or any failure or delay on the part of any Lender, any Issuing Bank or the Agent
in exercising any rights or remedies hereunder shall operate as a waiver of any
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rights or remedies of the Lenders, any Issuing Bank or the Agent and no single
or partial exercise of any rights or remedies hereunder shall operate as a
waiver or preclude the exercise of any other rights or remedies hereunder or of
the same right or remedy on a future occasion.
ss. 10.5. APPLICATION OF PROCEEDS. After the occurrence of an Event of
Default and acceleration of the Lender Debt as herein provided, the proceeds of
the Collateral and of property of Persons other than the Credit Parties securing
the Lender Debt and collections from each Guaranty shall be applied by the Agent
to payment of the Lender Debt in the following order, unless a court of
competent jurisdiction shall otherwise direct:
(i) FIRST, to payment of all costs and expenses of the Agent, each
Issuing Lender and the Lenders incurred in connection with the
preservation, collection and enforcement of the Lender Debt or any
Guaranties, or of any of the Liens granted to the Agent pursuant to the
Security Documents or otherwise, including, without limitation, any amounts
advanced by the Agent or the Lenders to protect or preserve the Collateral;
(ii) SECOND, to payment of that portion of the Lender Debt
constituting accrued and unpaid interest and fees and indemnities payable
under Sections 2, 2A and 3 hereof, ratably amongst the Agent, each Issuing
Lender and the Lenders in accordance with the proportion which the accrued
interest and fees and indemnities payable under Sections 2, 2A and 3 hereof
constituting the Lender Debt owing to the Agent, each Issuing Lender and
each such Lender at such time bears to the aggregate amount of accrued
interest and fees and indemnities payable under Sections 2, 2A and 3 hereof
constituting the Lender Debt owing to the Agent, each Issuing Lender and
all of the Lenders at such time until such interest, fees and indemnities
shall be paid in full;
(iii) THIRD, to the Agent in an amount equal to the then aggregate
contingent Letter of Credit Obligations (to the extent that such
obligations exceed Letter of Credit Cash Collateral securing the payment of
same) to be held by the Agent for the payment of such Letter of Credit
Obligations when and if due and payable;
(iv) FOURTH, to payment of the principal of the Lender Debt (which
shall exclude all contingent Letter of Credit Obligations and shall include
all the other unpaid Letter of Credit Obligations), ratably amongst the
Lenders and each Issuing Bank in accordance with the proportion which the
principal amount of such Lender Debt owing to each such Lender and Issuing
Lender bears to the aggregate principal amount of such Lender Debt owing to
all of such Lenders and Issuing Lenders until such principal of such Lender
Debt shall be paid in full;
(v) FIFTH, to the payment of all other Lender Debt, ratably amongst
the Lenders in accordance with the proportion which the amount of such
other Lender Debt owing to each such Lender bears to the aggregate
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principal amount of such other Lender Debt owing to all of the Lenders
until such other Lender Debt shall be paid in full; and
(vi) SIXTH, the balance, if any, after all of the Lender Debt has been
satisfied, shall, except as otherwise provided in the Security Documents,
be deposited by the Agent in an operating account of the Company with the
Agent designated by the Company, or paid over to such other Person or
Persons as may be required by law.
In the event that the amount of monies received by the Agent under
clause (iii) above with respect to a Letter of Credit for which there are
contingent Letter of Credit Obligations at the time of the Agent's receipt of
such monies shall, together with any Letter of Credit Cash Collateral securing
such contingent Letter of Credit Obligations which is not securing other Lenders
Debt, exceed the amount of actual payments the applicable Issuing Lender shall
have made with respect to such Letter of Credit after the Agent's receipt of
such monies, which determination shall be made after such Letter of Credit has
been terminated or has expired, then the Agent shall apply such excess monies
and Letter of Credit Cash Collateral in accordance with this Section 10.5.
SECTION 11. REPRESENTATIONS AND WARRANTIES.
Each of the Parent and the Company hereby represents and warrants as
follows (which representations and warranties shall survive the execution and
delivery of this Agreement and the making of each Revolving Advance and shall be
deemed to be incorporated in each Borrower's Certificate submitted to the Agent
pursuant to Section 2.4 hereof, and shall be deemed repeated and confirmed with
respect to, and as of the date of (except that a representation or warranty
expressly made as of a specific date shall be deemed repeated and confirmed as
of such date), each borrowing hereunder (whether requested by a Borrower or
deemed requested by a Borrower) and of each issuance of a Letter of Credit):
ss. 11.1. CORPORATE STATUS. (a) Each Credit Party is a duly organized and
validly existing corporation in good standing under the laws of the state of its
incorporation with perpetual corporate existence, and has the corporate power
and authority to own its properties and to transact the business in which it is
engaged or presently proposes to engage.
(b) Each Credit Party is qualified as a foreign corporation and in
good standing in each other jurisdiction in which it owns or leases property of
a nature, or transacts business of a type, that would make such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect.
(c) The capital stock of each Credit Party is owned as set forth on
Schedule 11.1 hereto (which shall be updated from time to time upon the
formation of any new Subsidiary of the Parent and delivered to the Agent and
each Lender). The capital stock of the Company and its Subsidiaries is owned
free and clear of all Liens, except (i) Liens in favor of the Agent for the
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benefit of the Lenders and (ii) with respect to the capital stock of the
Company, Liens in favor of the trustee under the Debenture Indenture.
(d) None of the Credit Parties has any Subsidiaries except as set forth on
Schedule 11.1 hereto, which Schedule 11.1 correctly sets forth the name of each
such Subsidiary, its jurisdiction of incorporation and a statement of the
outstanding capitalization and ownership of capital stock of each such
Subsidiary as of the date of delivery of such Schedule 11.1. Other than Sonab,
no Subsidiary of the Company engages in any business ------------- operations or
owns any real or personal property.
ss. 11.2. POWER AND AUTHORITY. Each of the Credit Parties has the
corporate power and authority to execute, deliver and perform the terms and
provisions of this Agreement and the other Loan Documents to which it is a party
and all instruments and documents delivered by it pursuant hereto and thereto
and each of the Credit Parties has duly taken or caused to be duly taken all
necessary corporate action (including, without limitation, the obtaining of any
consent of stockholders required by law or its certificate of incorporation or
by-laws), to authorize the execution, delivery and performance of this Agreement
and each other Loan Document, in each case to which it is a party, and the
instruments and documents delivered by it pursuant hereto and thereto. Each of
this Agreement, the other Loan Documents, and each of the other instruments and
documents executed and delivered by any of the Credit Parties pursuant hereto
and thereto to which it is a party constitutes a legal, valid and binding
obligation of such Person, and is enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and by general equity principles.
ss. 11.3. NO VIOLATION OF AGREEMENTS. None of the Credit Parties is
in violation of any provision of its certificate or articles of incorporation,
as the case may be, or its by-laws or is in default under any indenture,
mortgage, deed of trust, agreement or other instrument to which any of them is a
party or by which any of them may be bound, which default is reasonably likely
to have a Material Adverse Effect. Neither the execution and delivery of this
Agreement, the other Loan Documents, or any of the instruments and documents to
be delivered pursuant hereto or thereto, the consummation of the transactions
herein and therein contemplated nor the compliance with any of the provisions
hereof or thereof, will violate any provision of the certificate or articles of
incorporation, as the case may be, or by-laws of any Credit Party or any law or
regulation, or any order or decree of any court or governmental instrumentality,
or will (i) conflict with, or result in the breach of, or constitute a default
or permit termination under, any material lease, indenture, mortgage, deed of
trust, agreement or other instrument to which any Credit Party is a party or by
which any of them or their respective properties may be bound, or (ii) except
for (x) Liens in favor of the Agent for the benefit of the Lenders and (y) Liens
in favor of Marine Midland Bank, N.A. pursuant to the "Pledge Agreement" (as
defined in the Debenture) covering the capital stock of the Company, result in
the creation or imposition of any Lien on any property of any Credit Party.
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ss. 11.4. NO LITIGATION. (a) There are no actions, suits or
proceedings pending, or, to the best knowledge of the Parent or the Company
threatened, against any of the Credit Parties or any of their respective
Subsidiaries before any court, arbitrator or governmental or administrative body
or agency which challenge the validity or propriety of the transactions
contemplated under this Agreement, the other Loan Documents, or the
documents, instruments and agreements executed or delivered in connection
herewith, therewith or related thereto, and which, if adversely determined,
might reasonably be expected to have a Material Adverse Effect.
(b) No Credit Party or any Subsidiary thereof is in default in any
material respect under any applicable statute, rule, order, decree or regulation
of any court, arbitrator or governmental body or agency having jurisdiction over
such Credit Party or Subsidiary.
(c) No judgment, order, injunction or other similar restraint with
respect to any Credit Party or any Subsidiary thereof exists which prohibits any
of the other transactions contemplated hereby or in connection therewith or
herewith.
ss. 11.5. GOOD TITLE TO PROPERTIES. (a) Except as set forth on
Schedule 11.5 hereto, neither the Credit Parties nor any of their respective
Subsidiaries own title to any real estate. Schedule 11.5 hereto correctly
identifies, categorized by the Company or Subsidiary of the Company, each parcel
of real estate leased or owned by or to the Company or any Subsidiary of the
Company, together in each case with an accurate street address and description
of the use of such parcel, and each other interest in real property owned,
leased or granted to or held by the Company or any Subsidiary of the Company.
All real property leased or owned by the Company and its Subsidiaries is set
forth on Schedule 11.5. Neither the Company nor its Subsidiaries is lessor under
any leases other than as set forth on Schedule 11.5. With respect to each such
leased property (it being understood that the provisions of clauses (i) and
(iii) below shall only apply to leases covering entire facilities or structures
and not space leases) except as set forth on Schedule 11.5:
(i) no structure owned or leased by the Company or any Subsidiary of
the Company fails to conform in any material respect with applicable
ordinances, regulations, zoning laws and restrictive covenants (including
in any such case and without limitation those relating to environmental
protection) nor encroaches upon property of others, nor is any such real
property encroached upon by structures of others in any case in any manner
that would reasonably likely have a Material Adverse Effect;
(ii) no charges or violations have been filed, served, made or
threatened, to the knowledge of the Company and its Subsidiaries, against
or relating to any such property or structure or any of the operations
conducted at any such property or structure, as a result of any violation
or alleged violation of any applicable ordinances, requirements,
regulations, zoning laws or restrictive covenants (including in any such
case and without limitation those relating to environmental protection) or
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as a result of any encroachment on the property of others where the effect
of same is reasonably likely to have a Material Adverse Effect;
(iii) other than pursuant to applicable laws, rules, regulations or
ordinances, covenants that run with the land or provisions in the
applicable leases or matters described on Schedule 11.5, there exists no
restriction on the use, transfer or mortgaging of any such property;
(iv) the Company and each of its Subsidiaries has adequate permanent
rights of ingress to and egress from any such property used by it for the
operations conducted thereon;
(v) there are no developments affecting any of the real property or
interests therein identified on Schedule 11.5 pending or threatened which
might reasonably be expected to curtail or interfere in any material
respect with the use of such property for the purposes for which it is now
used;
(vi) neither the Company nor any of its Subsidiaries has any option
(other than under any lease disclosed on Schedule 11.5) in, or any right or
obligation to acquire any interest in, any real property;
(vii) all permits, licenses and approvals from governmental bodies,
agencies or authorities having jurisdiction over each such property which
are necessary and required to be obtained by the tenant to permit the use
and occupancy of such property for the purposes for which it is now used
have been duly and validly issued and are in full force and effect, except
for permits, licenses or approvals which, if not in full force and effect
would not have a Material Adverse Effect;
(viii) the Company or its Subsidiaries have all the right, title and
interest of the lessee in each such lease and presently occupy the property
leased by them as lessee under each such lease to the extent not subleased;
no consent under any such lease is necessary for the consummation of the
transactions contemplated hereby; no event has occurred which (with the
giving of notice or passage of time or both) would impair any right of such
party to exercise and obtain the benefits of any options contained in any
such lease; and there is no default under or any reasonable basis for
acceleration or termination of, nor has any event occurred which (with the
giving of notice or passage of time or both) would constitute a default
under, any such lease, except for any such default which would not have a
Material Adverse Effect; and
(ix) municipal water service, storm sewer, sanitary sewer facilities,
and telephone, electric and/or gas service are available to serve all
parcels of real property identified on Schedule 11.5 at the lot lines of
such parcels, except where the failure to have such availability would not
have a Material Adverse Effect.
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(b) The buildings, improvements and fixtures, if any, of the Company
and its Subsidiaries are in all material respects structurally sound with no
known material defects and are in good operating condition and repair, normal
wear and tear excepted.
(c) Neither the whole nor any portion of the property or leaseholds
of the Company or any of its Subsidiaries described on Schedule 11.5 is subject
to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any governmental body or other entity with or
without payment of compensation therefor, nor has any such condemnation,
expropriation or taking been proposed to the Company or any of its Subsidiaries.
(d) Each of the Company and its Subsidiaries owns good and
marketable title to, or valid leasehold interests in or license rights in, all
of the property and assets necessary to properly conduct its business subject to
no Liens except the Liens permitted pursuant to Section 9.2 hereof.
(e) As to any fee simple title any of the Credit Parties and their
respective Subsidiaries shall hereafter acquire, each of them shall be deemed,
as of the date of such acquisition and as of the date of each Revolving Advance
thereafter to have repeated the representations and warranties contained in (a)
through (d) above with respect to such property.
ss. 11.6. FINANCIAL STATEMENTS AND CONDITION. (a) Each of the
Financial Statements presents fairly in accordance with GAAP (i) the financial
position of the Parent and its Subsidiaries as of the date of such financial
statements and (ii) the results of operations of the Parent and its Subsidiaries
for such period. Neither the Parent nor its Subsidiaries had any material direct
or indirect contingent liabilities as of the date of the Financial Statements
which are not reserved for therein or which in accordance with GAAP would have
to be included in footnotes thereto. Each of the Financial Statements has been
prepared in accordance with GAAP applied on a basis consistently maintained
throughout the period involved (except as described therein). There has been no
material adverse change in the business, operations, liabilities, assets,
properties, prospects or condition (financial or otherwise) of the Parent and
its Subsidiaries, taken as a whole, since the Reference Date.
(b) The Agent has been furnished projections of the future
performance of the Parent and its Subsidiaries. The projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by the Parent and the Company to be
reasonable at the time made, it being recognized by the Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by such projections may differ from
the projected results. No fact is known to any Credit Party as of the Closing
Date which would have a Material Adverse Effect, that has not been set forth in
the financial statements referred to in this Section 11.6 or disclosed herein or
otherwise disclosed to the Agent in writing prior to the Closing Date.
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ss. 11.7. TRADEMARKS, PATENTS, ETC. Each of the Credit Parties owns
or possesses all the trademarks, trade names, copyrights, patents, licenses or
rights in any thereof adequate for the conduct of its business, without, to the
best of its knowledge, conflict with the rights or claimed rights of others.
ss. 11.8. TAX LIABILITY. All federal income tax returns required to
be filed by the Parent and its Subsidiaries (and each Affiliate with which the
Parent or its Subsidiaries files consolidated, combined or unitary returns) and
all other material tax returns, reports and statements, domestic or foreign,
have been filed with the appropriate governmental agencies in all jurisdictions
in which such returns, reports and statements are required to be filed, and all
Charges and other impositions shown thereon to be due and payable have been paid
prior to the date in which any fine, penalty, interest, of late charge or loss
may be added thereto for nonpayment thereof, or any such fine, penalty,
interest, late charge or loss has been paid. Each of the Parent and its
Subsidiaries (and each such Affiliate) has paid when due and payable all
material Charges required to be paid by it. Proper and accurate amounts have
been withheld by the Parent and its Subsidiaries (and each such Affiliate) from
their respective employees for all periods in full and complete compliance with
the tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective governmental agencies. Schedule 11.8 sets forth, for each
of the Parent and its Subsidiaries (and each such Affiliate), those taxable
years for which its tax returns have been for all periods after December 1, 1994
or are being audited as of the date hereof by the Internal Revenue Service or
any other applicable governmental authority. No issue has been raised in writing
or, if not in writing, to the Company's knowledge in any such examination that,
by application of similar principles, reasonably may be expected to result in
assertion of a material deficiency for any other taxable year not so examined
that has not been accrued on the Financial Statements that would be required to
be so accrued in accordance with GAAP. Except as set forth in Schedule 11.8
hereto, neither the Parent nor any of its Subsidiaries has, as of the date
hereof, executed or filed with the Internal Revenue Service or, to its
knowledge, any other governmental authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. Except as set forth on Schedule 11.8 hereto, neither
the Parent nor any of its Subsidiaries has agreed or has been requested to make
any adjustment under Code Section 481(a) by reason of a change in accounting
method initiated by the Company or any of its Subsidiaries. Except for the Tax
Allocation Agreement, neither the Parent nor any of its Subsidiaries has any
obligation under any tax sharing agreement.
ss. 11.9. GOVERNMENTAL ACTION. No action of, or filing with, any
governmental or public body or authority (other than normal reporting
requirements or filing as to Collateral under the provisions of Section 4
hereof) is required to authorize, or is otherwise required in connection with,
the execution, delivery or performance by the Borrowers or any of their
respective Subsidiaries of this Agreement, the Security Documents, any Guaranty,
the Notes, the other Loan Documents or any of the instruments or documents to be
delivered pursuant hereto or thereto, except such as have been made or will be
made as contemplated by such agreements.
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ss. 11.10. DISCLOSURE. Neither the Schedules hereto, nor the Financial
Statements, nor the certificates, statements, reports or other documents
furnished to any Lender or the Agent by or on behalf of any of the Credit
Parties in connection herewith or in connection with any transaction
contemplated hereby, nor this Agreement or any other Loan Document, contains, at
the time furnished, any untrue statement of a material fact or omits to state
any material fact (known to any such Person in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made.
ss. 11.11. REGULATION U. None of the Credit Parties or any of their
respective Subsidiaries owns any "margin stock" as such term is defined in
Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of the
borrowings made hereunder will be used only for the purposes set forth in
Section 7 hereof. None of the proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin stock or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry margin stock or for any other purpose which might constitute the Loan
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. None of the Credit Parties or
any of their respective Subsidiaries or any agent acting in its behalf has taken
or will take any action which might cause this Agreement or any of the documents
or instruments delivered pursuant hereto to violate any regulation of the Board
or to violate the Securities Exchange Act of 1934 or any applicable state
securities laws.
ss. 11.12. INVESTMENT COMPANY. None of the Credit Parties or any of their
respective Subsidiaries is an "investment company," or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended (15
U.S.C. ss.ss. 80a-1, et seq.). None of the transactions contemplated by this
Agreement, the other Loan Documents or any of the Sonab Acquisition Documents
shall violate the Investment Company Act of 1940, as amended.
ss. 11.13. EMPLOYEE BENEFIT PLANS. Neither any Credit Party nor any ERISA
Affiliate maintains or contributes to any Employee Plan or any Multiemployer
Plan other than those listed on Schedule 11.13 hereto. Each plan of any Credit
Party or any ERISA Affiliate which is not a Multiemployer Plan and which is
intended to be tax qualified under Code Section 401(a), has been determined by
the Internal Revenue Service to qualify under Code Section 401(a), and the
trusts created thereunder have been determined to be exempt from tax under the
provisions of Code Section 501(a). Nothing has occurred with regard to any such
plan which would cause the loss of such qualification or the imposition of any
Code or ERISA tax liability or penalty to any Credit Party, or any ERISA
Affiliate. Except as set forth on Schedule 11.13 hereto, with respect to each
Employee Plan, all reports required under ERISA or any other applicable law or
regulation to be filed by any Credit Party or any ERISA Affiliate with the
relevant governmental authority have been duly filed and all such reports are
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true and correct in all material respects as of the date given. Neither any
Credit Party nor any ERISA Affiliate has engaged in a "prohibited transaction,"
as such term is defined in Code Section 4975 and Title I of ERISA, in connection
with any Employee Plan which would subject any Credit Party or any ERISA
Affiliate (after giving effect to any exemption) to a tax or penalty on
prohibited transactions imposed by Code Section 4975 or Section 502 of ERISA
which is either material or is attributable to a knowing violation of either of
such sections. No plan has incurred an ERISA Event, nor has any accumulated
funding deficiency (as defined in Code Section 412(a)) been incurred (without
regard to any waiver granted under Code Section 412), nor has any funding waiver
from the Internal Revenue Service been received or requested with respect to any
Pension Benefit Plan. The value of the assets of each Pension Benefit Plan
subject to Title IV of ERISA equalled or exceeded the present value of the
"benefit liabilities," as defined in Title IV of ERISA of such plan as of the
end of the preceding plan year using plan actuarial assumptions as in effect for
such plan year. The funding methods used in connection with each Pension Benefit
Plan are acceptable under ERISA and the actuarial assumptions and methods used
in connection with such funding are reasonable. There are no claims (other than
claims for benefits in the normal course), actions or lawsuits asserted or
instituted against, and neither any Credit Party nor any ERISA Affiliate has
knowledge of any threatened litigation or claims (other than claims for benefits
in the ordinary course), against (i) the assets of any Pension Benefit Plan or
against any fiduciary of such Plan with respect to the operation of such Plan or
(ii) the assets of any employee welfare benefit plan within the meaning of ERISA
Section 3(l) or against any fiduciary thereof with respect to the operation of
any such plan. Neither any Credit Party nor any ERISA Affiliate has incurred (a)
any liability to the PBGC (other than routine claims and premium payments), (b)
any withdrawal liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal (within
the meaning of Section 4203 or 4205 of ERISA) from a Multiemployer Plan or (c)
any liability under ERISA Section 4062 to the PBGC, or to a trustee appointed
under ERISA Section 4042. No Credit Party or ERISA Affiliate has been notified
or otherwise has knowledge that any Multiemployer Plan is insolvent or in
reorganization within the meanings of Sections 4245 and 4241 of ERISA. Neither
any Credit Party nor any ERISA Affiliate nor any organization to which any
Credit Party or any such ERISA Affiliate is a successor or parent corporation
within the meaning of ERISA Section 4069(b) has engaged in a transaction within
the meaning of ERISA Section 4069(a). Neither any Credit Party nor any ERISA
Affiliate maintains an established welfare benefit plan within the meaning of
Section 3(1) of ERISA, other than those listed on Schedule 11.13 hereto, which
provides for continuing benefits or coverage for any participant --------------
or any beneficiary of a participant after such participant's termination of
employment except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and the regulations thereunder
or by applicable federal or other statutory law or regulation (whether domestic
or foreign). Each Credit Party and each ERISA Affiliate maintaining a welfare
benefit plan within the meaning of Section 3(1) of ERISA has complied with the
notice and continuation coverage requirements of COBRA and the regulations
thereunder so as not to result in any material loss of deduction under Section
162 of the Code or any material tax, penalty or liability to any such Credit
Party or any such ERISA Affiliate.
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ss. 11.14. DEBENTURE COLLATERAL. The Liens in favor of the trustee for the
holders of the Debentures if any, secure only the obligations of the Parent
under or with respect to the Debentures.
ss. 11.15. PERMITS, ETC. (a) Each Credit Party and each Subsidiary thereof
possesses all material permits, licenses, approvals and consents of Federal,
state and local governments and regulatory authorities required to conduct its
business as presently conducted and proposed to be conducted;
(b) Each such permit, license, approval and consent is and will be
in full force and effect, and no event has occurred which permits the revocation
or termination of any such permit, license, approval or consent or the
imposition of any restriction thereon of such nature as may materially limit the
operation of the business covered thereby;
(c) All approvals, applications, filings, registrations, consents or
other actions required of any local, state or Federal authority to enable each
Credit Party and the Subsidiaries thereof to use any such permit, license,
approval or consent has been obtained or made;
(d) No Credit Party nor any Subsidiary of any Credit Party (i) is in
violation of any duty or obligation required by law or any rule or regulation
applicable to the operation of any of its businesses, or (ii) has received any
written notice from the granting body or any other governmental authority with
respect to any material breach of any covenant under, or any material default
with respect to, any such permit, license, approval or consent;
(e) Before and upon giving effect to this Agreement, the Notes and
the other Loan Documents, no material default shall have occurred and be
continuing under any such permit, license, approval or consent;
(f) All consents and approvals of, filings and registrations with,
and all other actions in respect of, all governmental agencies, authorities or
instrumentalities required to maintain any such permit, license, approval or
consent in full force and effect prior to the scheduled date of expiration
thereof has been, or, prior to the time when required, will have been, obtained,
given, filed or taken and are or will be in full force and effect;
(g) There is not pending or threatened, any action to revoke,
cancel, suspend, modify or refuse to renew any such permit, license, approval or
consent and each business covered by each such permit, license, approval or
consent is being operated in substantial compliance with such permit, license,
approval or consent;
(h) There is not now issued or outstanding or threatened any notice
of any hearing, violation or complaint against such Credit Party or Subsidiary
thereof with respect to any such permit, license, approval or consent and no
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Credit Party or Subsidiary thereof has any knowledge that any Person intends to
contest the renewal of any such permit, license, approval or consent; and in the
case of clauses (a) through (h) of this Section 11.15, the breach of which will
not reasonably be expected to have a Material Adverse Effect.
ss. 11.16. ENVIRONMENTAL STATUS. Except as disclosed on Schedule 11.16
hereto, (i) the operations of the Company and each of its Subsidiaries comply in
all material respects with all applicable Environmental Laws; (ii) the Company
and each of its Subsidiaries have no environmental, health and safety Permits
and to the best of the Company's knowledge, no such permits are necessary for
its operation; (iii) the Company and each of its Subsidiaries and all of their
present Facilities or operations, as well as to the knowledge of the Company and
its Subsidiaries their past Facilities or operations, are not subject to any
outstanding written order or agreement with any governmental authority or
private party respecting (a) any Environmental Laws, (b) any Remedial Action, or
(c) any Environmental Claims arising from the Release of a Hazardous Material
into the environment; (iv) none of the operations of the Company or any of its
Subsidiaries is subject to any judicial or administrative proceeding under any
Environmental Law; (v) to the best of the knowledge of the Company and its
Subsidiaries, none of the operations of the Company or any of its Subsidiaries
is the subject of any Federal or state investigation evaluating whether any
Remedial Action is needed to respond to a Release of any Hazardous Material into
the environment in violation of any Environmental Law; (vi) neither the Company
nor any of its Subsidiaries or to the knowledge of the Company and its
Subsidiaries any predecessor of the Company or any Subsidiary has filed any
notice under Environmental Law indicating past or present treatment, storage, or
disposal of a hazardous waste in violation of any Environmental Law or reporting
a Release of a Hazardous Material into the environment; (vii) to the best of the
knowledge of the Company and its Subsidiaries, neither the Company nor any of
its Subsidiaries has any contingent liability in connection with any Release of
any Hazardous Material into the environment; (viii) none of the Company's or any
Subsidiary's operations involve the generation, transportation, treatment or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any
applicable state equivalent; (ix) neither the Company nor any of its
Subsidiaries has disposed of any Hazardous Material by placing it in or on the
ground or waters of any premises owned, leased or used by the Company or such
Subsidiary and to the knowledge of the Company and its Subsidiaries neither has
any lessee, prior owner, or other person; (x) to the best knowledge of the
Company no underground storage tanks or surface impoundments, as referred to in
the Environmental Laws, are on the Company's or any of its Subsidiaries'
Facilities; and (xi) to the best knowledge of the Company no Lien in favor of
any governmental authority for (A) any liability under Environmental Laws or
regulations, or (B) damages arising from or costs incurred by such governmental
authority in response to a Release of a Hazardous Material into the environment,
has been filed or attached to the Company's or any of its Subsidiaries'
Facilities; provided that a breach of a representation under this Section 11.16
by the Company or any of its Subsidiaries shall not constitute an Event of
Default under Section 10.1 unless such breach may reasonably be expected to
result in liability to the Company or any of its Subsidiaries in excess of
$100,000 or result in a Material Adverse Effect. The foregoing representations
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and warranties shall survive the expiration or earlier termination of this
Agreement until such time as the environmental indemnity referred to in Section
8.16 hereof is terminated.
ss. 11.17. SOLVENCY. Both before and after giving effect to the
making of the initial Revolving Advance, each of the Borrowers was Solvent.
ss. 11.18. PROJECTIONS. The Parent's or the Company's, as
applicable, (i) monthly forecasts on a consolidated basis for each Fiscal Year
and (ii) annual forecasts on a consolidated basis, consolidated results of
operations and cash flows and balance sheets for each Fiscal Year, copies of
which have been delivered to Agent on or prior to the Closing Date, disclose all
material assumptions expressly made in formulating such projections. No facts
exist on the Closing Date which would result in any material change in any of
such projections. The projections are based upon reasonable estimates and
assumptions, all of which are reasonable in light of the conditions which
existed at the time the projections were made, have been prepared on the basis
of the assumptions stated therein, and reflect as of the Closing Date the
reasonable estimate of each of the Borrowers of the results of operations and
other information projected therein, it being recognized that such projections
as to future events are not to be viewed as facts and that actual results during
the period or periods covered by such projections may differ from the
projections.
ss. 11.19. BANK ACCOUNTS. The names and addresses of all the banks
holding one or more Blocked Accounts, together with the account numbers of the
Blocked Accounts at such banks, are specified in Schedule 11.19 hereto. The
Borrowers and Sonab have no bank accounts other than as set forth on Schedule
11.19 hereto.
ss. 11.20. EMPLOYMENT AGREEMENTS. Except as set forth on Schedule
11.20 hereto, the Employment Agreements constitute all agreements of the type
described in Section 5.12(b) hereof between any Credit Party and any other
Person, a true and complete copy of each of which has been furnished to the
Agent.
ss. 11.21. LABOR MATTERS. There are no strikes or other labor
disputes against the Company or any of its Subsidiaries pending or threatened
which would have a Material Adverse Effect. Hours worked by and payment made to
employees of the Company and its Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters
the violation of which would have a Material Adverse Effect. All payments due
from the Company or any of its Subsidiaries on account of employee health and
welfare insurance which would have a Material Adverse Effect if not paid have
been paid or accrued as a liability on the books of the Company or such
Subsidiary. Except as set forth on Schedule 11.21 hereto, there are no
collective bargaining or other labor agreements covering any employees of the
Company or any of its Subsidiaries.
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ss. 11.22. OTHER VENTURES. Neither the Parent nor any Subsidiary thereof is
engaged in any joint venture or partnership with any other Person, except for
the Investment in Sonab, Sonab Holdings or Sonab International permitted by
Section 9.4(e) hereof.
ss. 11.23. BROKERS AND CONSULTANTS. Except as set forth on Schedule 11.23
hereto, no broker, finder or consultant acting on behalf of the Parent or any of
its Subsidiaries brought about the obtaining, making or closing of the loans
made pursuant to this Agreement, and neither the Parent nor any Subsidiary
thereof has any obligation to any Person in respect of any finder's, consulting
or brokerage fees in connection with the Loan contemplated by this Agreement.
ss. 11.24. MATERIAL CONTRACTS. Schedule 11.24 sets forth all the contracts,
agreements and documents (other than those set forth on any other Schedule
hereto or constituting an Exhibit hereto) that materially affect or relate to
the business or operations of the Parent and its Subsidiaries.
ss. 11.25. LICENSE AGREEMENTS. Schedule 11.25 sets forth all the
License Agreements of the Company, and each of the License Agreements listed
thereon is in full force and effect (or have been approved in writing (which
approval has not been rescinded in writing) as an acceptable arrangement by the
Agent), and except as disclosed by the Company in writing to the Agent from time
to time, the Company is in compliance with the material terms thereof and there
exists no default on the part of the Company under any of the License
Agreements.
ss. 11.26. UNWRITTEN AGREEMENTS. Neither the Company nor any Subsidiary
thereof is party to any arrangement which, if approved by the Agent would
constitute a License Agreement or Consignment Agreement and which is not
evidenced by a written agreement other than those previously disclosed to the
Agent.
ss. 11.27. UCC FINANCING STATEMENTS. Any documents (including, without
limitation, financing statements) required to be filed (if any) in order to
create in favor of the Agent for the benefit of the Lenders, a perfected
security interest in the Collateral with respect to which a security interest
may be perfected by a filing under the UCC have been duly executed and delivered
by the Company on the Closing Date and will be properly filed in each
jurisdiction required in order to create in favor of the Agent for the benefit
of the Lenders a perfected Lien on the Collateral immediately following the
Closing Date.
SECTION 12. MISCELLANEOUS.
ss. 12.1. COLLECTION COSTS. If an Event of Default occurs, the Borrowers
shall pay all court costs and costs of collection paid or incurred by the Agent
and Lenders in connection with the Lender Debt, the Collateral and the Loan
Documents, including, without limitation, reasonable fees, expenses and
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disbursements of counsel employed in connection with any and all collection
efforts. The attorney's fees arising from such services, including those of any
appellate proceedings, and all expenses, costs, charges and other fees incurred
by such counsel in any way or with respect to or arising out of or in connection
with or relating to any of the events or actions described in this Section 12.1
shall be payable by the Borrowers to the Agent, each Issuing Lender and each
Lender, as the case may be, on demand, and shall be additional obligations under
this Agreement. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: recording costs, appraisal costs, paralegal
fees, costs and expenses; accountants' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram
charges; telecopier charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with any of the
foregoing.
ss. 12.2. AMENDMENT, MODIFICATION AND WAIVER. (a) No amendment,
modification or waiver of any provision of the Loan Documents and no consent by
the Agent, any Issuing Lender or any Lender to any departure therefrom by any of
the Credit Parties shall be effective unless such amendment, modification or
waiver shall be in writing and signed by a duly authorized officer of the
appropriate Credit Party, the Agent, the Lenders, each Issuing Lender or the
Majority Lenders, as the case may be (as more fully described below), and the
same shall then be effective only for the period and on the conditions and for
the specific instances and purposes specified in such writing.
(b) No notice to or demand on any of the Credit Parties in any case
shall entitle any of the Credit Parties to any other or further notice or demand
in similar or other circumstances.
(c) Any term or provision of any Loan Document may be amended or
modified and the observance of any provision of any Loan Document may be waived
with the written consent of the Credit Parties being a party to such Loan
Document and the Majority Lenders; provided, however, that no such amendment,
modification or waiver shall, without the prior written consent of the Agent,
amend or waive any of the provisions of Section 3.6, 12.13 or 12.15 of this
Agreement, or otherwise change any of the rights or obligations of the Agent
under any of the Loan Documents or, without the prior written consent of GE
Capital, amend or waive any of the provisions of Section 12.13 or Section 12.15
hereof; provided, further, that no such amendment, modification or waiver shall,
without the prior written consent of each Issuing Lender which has any Letters
of Credit, or any Commitment to issue Letters of Credit, outstanding, amend or
waive any of the provisions of Section 2A of this Agreement or otherwise
materially adversely affect any of the rights or obligations of such Issuing
Lender under any of the Loan Documents; and provided, further, that no such
amendment, modification or waiver shall, without the prior written consent of
all of the Lenders:
(i) extend the due date of any principal of any Loan, or
portion thereof, extend the final scheduled maturity of any Loan or the
Revolving Credit Facility Commitment, reduce the rate of interest on any
Loan, or portion thereof, reduce the amount of any principal or accrued
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interest payable on any Loan, or portion thereof, or reduce the fees
payable to any Lender hereunder;
(ii) substitute, discharge, release or surrender all or
substantially all of the Collateral (which defined term for purposes of
this clause (ii) shall include any Guaranties of any or all the Lender
Debt);
(iii) except as provided in Sections 2.14(e) and 12.15 hereof,
change the proportion of any Lender's Revolving Commitment to the
aggregate Revolving Commitments of all Lenders or the amount of any
Lender's Revolving Commitment;
(iv) modify any provision of this Section 12.2 or any other
provision which expressly requires the consent of all Lenders;
(v) amend the definition of "Majority Lenders"; or
(vi) amend the last sentence of Section 4.4(c) hereof or amend
Section 10.5 hereof.
The Agent, the Lenders other than GE Capital, and the Credit Parties
hereby agree to cooperate with GE Capital to effectuate the provisions of
Section 12.15 of this Agreement, including, without limitation, with respect to
the execution of one or more amendments of this Agreement or any other Loan
Document.
(d) From and after the Closing Date, "Lender Debt" arising under or
in connection with the Original Credit Agreement shall continue to be "Lender
Debt" arising under or in connection with this Agreement.
ss. 12.3. NEW YORK LAW. THIS AGREEMENT AND THE NOTES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
ss. 12.4. NOTICES. All notices, requests, demands or other
communications provided for herein shall be in writing (unless otherwise
expressly provided herein) and shall be deemed to have been given (a) if by
registered or certified mail, return receipt requested, four (4) Business Days
following the date when sent, (b) if by telex, when sent and answer back
received, (c) if by overnight courier, when received, (d) if by telecopier, when
sent, or (e) if personally delivered or delivered by messenger, when receipted
for, in each case, addressed to the appropriate Credit Party or to the Agent,
any Issuing Lender or any Lender, at its respective office under its name on the
signature pages of this Agreement and to the attention of the Person so
designated, or to such Person or address as any party hereto shall designate to
the other from time to time in writing forwarded in like manner. All notices,
requests, demands or other communications given or deemed given to any Borrower
shall be deemed given to both Borrowers.
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ss. 12.5. FEES AND EXPENSES. Whether or not any Revolving Advances or other
financial accommodations are made hereunder, the Borrowers shall pay all
reasonable out-of-pocket costs and expenses paid or incurred by the Agent or GE
Capital in connection with the Loan Documents and the financing contemplated
thereunder, including but not limited to appraisal fees, reasonable syndication
fees (excluding fees payable to any syndicate member taking an assignment from
GE Capital of any portion of the Loan or Commitment of GE Capital hereunder),
title insurance fees, audit fees, recording fees, travel and transportation
fees, search and filing fees, and the reasonable fees and expenses of Weil,
Gotshal & Manges LLP, special counsel, and all local counsel to the Agent or GE
Capital and of any industry, environmental, tax, accounting and other
consultants retained by the Agent or GE Capital. Such expenses shall also
include, without limitation, any costs paid or incurred by the Agent or GE
Capital in connection with the administration of the financial accommodations
herein provided (including of any Collateral), any waivers, amendments,
modifications, extensions, renewals, renegotiations or "work-outs" of this
Agreement or any instrument or document delivered in connection herewith and any
consents or approvals provided hereunder or otherwise requested by any Credit
Party. Without limiting the generality of the foregoing, such expenses, costs,
charges and fees may include, to the extent they are out-of-pocket as to the
Agent or GE Capital: recording costs, appraisal costs, paralegal fees, costs and
expenses; accountants' fees, costs and expenses; photocopying and duplicating
expenses; long distance telephone charges; air express charges; telegram
charges; telecopier charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with any of the
foregoing.
ss. 12.6. STAMP OR OTHER TAX. Should any stamp or excise tax become payable
in respect of this Agreement, any Note, any other Loan Document, the Lender
Debt, the Collateral or any modification hereof or thereof, each of the Credit
Parties shall pay, the liability of which is joint and several, the same
(including interest and penalties, if any) and shall hold the Lenders and the
Agent harmless with respect thereto.
ss. 12.7. WAIVER OF JURY TRIAL AND SET-OFF. In any litigation in any court
with respect to, in connection with, or arising out of this Agreement, any of
the Revolving Advances, any of the Notes or other Loan Documents, the
Collateral, or any instrument or document delivered pursuant to this Agreement,
or the validity, protection, interpretation, collection or enforcement thereof,
or any other claim or dispute howsoever arising, between any Credit Parties and
any of the Lenders, any Issuing Bank party hereto or the Agent, (a) EACH OF THE
CREDIT PARTIES HEREBY, to the fullest extent it may effectively do so, waives
the right to interpose any set-off, recoupment, counterclaim or cross-claim in
connection with any such litigation, irrespective of the nature of such set-off,
recoupment, counterclaim or cross-claim, unless such set-off, recoupment,
counterclaim or cross-claim could not, by reason of any applicable Federal or
State procedural laws, be interposed, pleaded or alleged in any other action and
(b) EACH OF THE CREDIT PARTIES AND THE LENDERS, TO THE FULLEST EXTENT IT MAY
EFFECTIVE LY DO SO, WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
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EACH OF THE CREDIT PARTIES AGREES THAT THIS SEC TION 12.7 IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT NONE OF THE LENDERS
WOULD EXTEND TO THE COMPANY ANY FINANCIAL ACCOMMODATIONS HEREUNDER IF THIS
SECTION 12.7 WERE NOT PART OF THIS AGREEMENT.
ss. 12.8. TERMINATION OF AGREEMENT. (a) The Agent on behalf of
the Lenders shall have the right to, or the Agent upon the direction of the
Majority Lenders shall, terminate this Agreement immediately, at any time,
during the continuance of an Event of Default under Section 10 hereof.
(b) The termination of this Agreement shall not affect any rights of
the Credit Parties, any Lender, any Issuing Lender or the Agent or any
obligation of any of the Credit Parties, any Lender, any Issuing Lender or the
Agent to the others, arising on or prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all Lender Debt and obligations of the Credit Parties hereunder incurred
on or prior to such termination have been paid and performed in full.
(c) Upon the giving of notice of termination of this Agreement, all
Lender Debt (including, without limitation, the Revolving Loan and amounts in
respect of Letters of Credit) shall be due and payable on the date of
termination specified in such notice.
(d) The Liens and rights granted to the Agent on behalf of the Agent
and the Lenders hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Lender Debt
has been paid (or in the case of Letters of Credit Obligations, cash
collateralized to the satisfaction of the Agent) in full or the Credit Parties
have furnished the Lenders, each Issuing Lender and the Agent with an
indemnification satisfactory to the Lenders, such Issuing Lenders and the Agent;
provided that notwithstanding anything herein or in any other Loan Document to
the contrary in the event that all Lender Debt is paid (or in the case of
Letters of Credit Obligations, cash collateralized to the satisfaction of the
Agent) in full (or such satisfactory indemnification is provided) and this
Agreement is terminated, the Liens in favor of the Agent shall terminate (and
the Agent shall execute and deliver in accordance with the requirements of the
UCC, appropriate UCC-3 termination statements).
(e) All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof unless otherwise
provided.
(f) Notwithstanding the foregoing, if after receipt of any payment
of all or any part of the Lender Debt, the Agent, any Issuing Lender or any
Lender is for any reason compelled to surrender such payment to any Person or
entity because such payment is deter mined to be void or voidable as a
preference, an impermissible set-off, a diversion of trust funds or for any
other reason, this Agreement shall continue in full force, and the Credit
Parties, as appropriate, shall be liable to, and shall indemnify and hold such
Lender, such Issuing Lender or the Agent, as the case may be, harmless for, the
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amount of such payment surrendered until such Lender, such Issuing Lender or the
Agent, as the case may be, shall have been finally and irrevocably paid in full.
The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lenders,
such Issuing Lender or the Agent in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to the Lenders', such
Issuing Lender's or the Agent's rights under this Agreement and shall be deemed
to have been conditioned upon such payment having become final and irrevocable.
(g) All indemnities provided for under this Agreement and the other
Loan Documents, including, without limitation, under Sections 2.12 and 12.5
hereof and this Sec tion 12.8, shall survive the termination of this Agreement
and the payment in full of the Lender Debt.
ss. 12.9. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
ss. 12.10. LIEN; SET-OFF BY LENDERS. Each of the Credit Parties
hereby grants to each Lender and the Agent a continuing Lien for all Lender Debt
upon any and all monies, securities and other property of such Credit Party and
the proceeds thereof, now or hereafter held or received by, or in transit to,
such Lender or the Agent from or for such Credit Party, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of such Credit Party with, and any
and all claims of such Credit Party against, any Lender or the Agent, at any
time existing (which shall constitute part of the Collateral). Upon the
occurrence and during the continuance of an Event of Default, each Lender and
the Agent is hereby authorized at any time and from time to time, without notice
to such Credit Party, to set-off, appropriate and apply any or all items
hereinabove referred to against all Lender Debt under the Loan Documents.
ss. 12.11. PAYMENT DUE ON NON-BUSINESS DAY. Whenever any payment to
be made hereunder or under any other Loan Document or on any Revolving Advance
shall be stated to be due and payable, or whenever the last day of any Interest
Period would otherwise occur, on a day which is not a Business Day, such payment
shall be made and the last day of such Interest Period shall occur on the next
succeeding Business Day and such extension of time shall in such case be
included in computing interest on such payment; provided, however, if such
extension would cause a payment of a Eurodollar Advance to be made, or the last
day of such Interest Period for a Eurodollar Advance to occur, in the next
following calendar month, such payment shall be made and the last day of such
Interest Period shall occur on the next preceding Business Day.
ss. 12.12. SERVICE OF PROCESS. Each of the Credit Parties hereby
irrevocably consents to the jurisdiction of the courts of the State of New York
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and of any Federal Court located in the City of New York in connection with any
action or proceeding arising out of or relating to this Agreement, any Guaranty,
any of the Security Documents, all or any of the Lender Debt, the Collateral,
all or any of the Notes, any other Loan Document or any document or instrument
delivered pursuant to this Agreement. In any such litigation, each of the Credit
Parties waives, to the fullest extent it may effectively do so, personal service
of any summons, complaint or other process and agrees that the service thereof
may be made by certified or registered mail directed to any Credit Party at its
address set forth in Section 12.4 hereof. Each of the Credit Parties hereby
waives, to the fullest extent it may effectively do so, the defenses of forum
non conveniens and improper venue.
ss. 12.13. GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT.
(a) Each Lender hereby irrevocably designates and appoints GE Capital as the
agent of such Lender under each of the Loan Documents in which GE Capital is
named as agent, and each such Lender hereby irrevocably authorizes GE Capital,
as the agent for such Lender to take such action on behalf of each Lender under
the provisions of the Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in the Loan Documents,
the Agent shall not have any duties or responsibilities except those expressly
set forth in the Loan Documents, nor any fiduciary relationship with any Lender
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Loan Documents or otherwise exist against the
Agent.
(b) The Agent may execute any of its duties under the Loan Documents
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except for its or such Person's own gross
negligence or wilful misconduct), or (ii) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by any
of the Credit Parties or any of their respective Subsidiaries or any officer
thereof contained in the Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent under
or in connection with the Loan Documents, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the Loan Documents
or for any failure of any of the Credit Parties or any of their respective
Subsidiaries to perform its obligations under the Loan Documents. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, the Loan Documents, or to inspect the properties, books or
records of any of the Credit Parties or any of their respective Subsidiaries.
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(d) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation reasonably believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Credit Parties), independent
accountants and other experts selected by the Agent.
(e) The Agent shall be fully justified in failing or refusing to
take any action under the Loan Documents unless it shall first receive such
advice or concurrence of the Majority Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Loan Documents in
accordance with a request of the Majority Lenders (or where required by the
terms of this Agreement, the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
(f) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent shall
have received notice from a Lender or one of the Credit Parties referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Majority Lenders; provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
(g) Each Lender expressly acknowledges that neither the Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Agent hereafter taken, including any review of the affairs of any of the
Credit Parties or any of their respective Subsidiaries, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of each of the Credit Parties and their respective
Subsidiaries, and made its own decision to make its loans and other financial
accommodations hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, liabilities, assets, properties and condition (financial or
otherwise) and creditworthiness of each of the Credit Parties and their
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respective Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of any of the Credit Parties
or any of their respective Subsidiaries which may come into the possession of
the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
(h) Each Lender agrees to indemnify the Agent in its capacity as
such (to the extent not reimbursed by the Credit Parties and without limiting
the obligation of the Credit Parties to do so), ratably according to the total
loan percentages set forth opposite its name on Exhibit A hereto from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including without limitation at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan Documents,
the financing thereunder or any of the transactions contemplated thereby or any
action taken or omitted by the Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or wilful misconduct. The agreements in this Section 12.13(h)
shall survive the payment of the Notes and the Lender Debt.
(i) The Agent and its affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Credit Parties as
though the Agent were not the Agent hereunder. With respect to its pro rata
share of the Revolving Advances made or renewed by it and any Note issued to it,
the Agent shall have the same rights and powers under this Agreement as any
Lender and may exercise the same as though it were not the Agent. The terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
(j) The Agent may resign as Agent upon thirty (30) days' written
notice to the Lenders. In the event that the Agent shall enter receivership or a
proceeding in bankruptcy or insolvency shall be commenced by or against the
Agent, then the Lenders (other than the Lender which is the acting as Agent, if
applicable) may by unanimous consent of such Lenders, remove the Agent under
this Agreement. If the Agent shall give a notice of its intention to resign as
Agent under this Agreement or the Agent shall be removed, then the Majority
Lenders shall appoint a successor agent for the Lenders, whereupon such
successor agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall mean such successor agent effective upon its appointment,
and the former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation hereunder as Agent or any Agent's removal, the provisions of
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this Section 12.13 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
(k) Each Lender agrees that (i) all obligations of the Credit Parties to
each Lender under this Agreement and under the Notes rank pari passu in all
respects with each other, and (ii) if any Lender shall, through the exercise of
a right of banker's lien, set-off, counterclaim or otherwise, obtain payment
with respect to its Revolving Commitment which results in its receiving more
than its pro rata share of the aggregate payments in respect of the Aggregate
Revolving Commitments, then (A) such Lender shall be deemed to have
simultaneously purchased from each of the other Lenders a share in its Revolving
Advances so that the amount of the Revolving Advances of all Lenders shall be
pro rata and (B) such other adjustments shall be made from time to time as shall
be equitable to insure that all Lenders share such payments ratably. If all or
any portion of any such excess payment is thereafter recovered from the Lender
which received the same, the purchase provided in this Section 12.13(k) shall be
deemed to have been rescinded to the extent of such recovery, without interest.
Each of the Credit Parties expressly consents to the foregoing arrangements and
agrees that each Lender so purchasing a portion of another Lender's loan may
exercise all rights of payment (including, without limitation, all rights of
set-off, banker's lien or counterclaim) with respect to such portion as fully as
if such Lender were the direct holder of such portion.
(l) The Agent agrees that it shall promptly deliver to each Lender copies
of all notices, demands, statements and communications which the Agent gives to
the Credit Parties, except for routine notices of payments due under the Loan
Documents and other miscellaneous notices, demands, statements and
communications, which are not material to the interests of any Lender. The Agent
shall have no liability to any Lender, nor shall a cause of action arise against
the Agent, as a result of the failure of the Agent to deliver to any Lender any
such notice, demand, statement or communication.
(m) The Agent shall endeavor to exercise the same care in administering the
Loan Documents as it exercises with respect to similar transactions in which it
is involved and where no other co-lenders or participants are involved; provided
that the liability of the Agent for failing to do so shall be limited as
provided in the preceding paragraphs of this Section 12.13.
(n) (If at any time or times it shall be necessary or prudent in
order to conform to any law of any jurisdiction in which any of the
Collateral shall be located, or the Agent shall be advised by counsel,
that it is so necessary or prudent in the interest of the Lenders, or the
Agent shall deem it necessary for its own protection in the performance of
its duties hereunder, the Agent and (to the extent required by the Agent)
each Credit Party shall execute and deliver all instruments and agreements
reasonably necessary or proper to constitute another bank or trust
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company, or one or more individuals approved by the Agent (to the extent
necessary or requested by the Agent) (each an "Approved Delegate"), either
to act as co-agent or co-agents or trustee of all or any of the
Collateral, jointly with the Agent originally named herein or any
successor, or to act as separate agent or agents or trustee of any such
Collateral. In the event that any of the Credit Parties shall not have
joined in the execution of such instruments or agreements with any
Approved Delegate within thirty (30) Business Days after the receipt of a
written request from the Agent to do so, or in case an Event of Default
shall have occurred and be continuing, each of the Credit Parties hereby
irrevocably appoints the Agent as its agent and attorney to act for it
under the foregoing provisions of this Section 12.13(n) in such
contingency.
(i) Every separate agent and every co-agent and every trustee, other
than any agent which may be appointed as successor to the Agent, shall, to
the extent permitted by applicable law, be appointed to act and be such,
subject to the following provisions and conditions, namely:
(A) except as otherwise provided herein, all rights, remedies,
powers, duties and obligations conferred upon, reserved or imposed
upon the Agent in respect of the custody, control and management of
moneys, paper or securities shall be exercised solely by the Agent
hereunder;
(B) all rights, remedies, powers, duties and obligations
conferred upon, reserved to or imposed upon the Agent hereunder
shall be conferred, reserved or imposed and exercised or performed
by the Agent except to the extent that the instrument appointing
such separate agent or separate agents or co-agent or co-agents or
trustee shall otherwise provide, and except to the extent that under
any law of any jurisdiction in which any particular act or acts are
to be performed, the Agent shall be incompetent or unqualified to
perform such act or acts, in which event such rights, remedies,
powers, duties and obligations shall be exercised and performed by
such separate agents or co- agent or co-agents to the extent
specifically directed in writing by the Agent;
(C) no power given hereby to, or which it is provided hereby
may be exercised by, any such separate agent or separate agents or
co-agent or co- agents or trustee shall be exercised hereunder by
such separate agent or separate agents or co-agent or co-agents or
trustee except jointly with, or with the consent in writing of, the
Agent, anything herein contained to the contrary notwithstanding;
(D) no separate agent or co-agent or trustee constituted under
this Section 12.13(n) shall be personally liable by reason of any
act or omission of any other agent, separate agent, co-agent or
trustee hereunder; and
(E) the Agent, at any time by an instrument in writing,
executed by it, may accept the resignation of or remove any such
separate agent or co-agent or trustee, and in that case, by an
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instrument in writing executed by the Agent and the Credit Parties
(to the extent necessary or requested by the Agent) jointly, may
appoint a successor to such separate agent or co-agent or trustee,
as the case may be, anything herein contained to the contrary
notwithstanding. In the event that any of the Credit Parties shall
not have joined in the execution of any such instrument with a
Person or entity within ten (10) days after the receipt of a written
request from the Agent to do so, or in the case an Event of Default
shall have occurred and be continuing, the Agent, acting alone, may
appoint a successor and may execute any instrument in connection
therewith, and the Credit Parties hereby irrevocably appoint the
Agent its agent and attorney to act for it in such connection in
either or such contingencies.
ss. 12.14. CONCERNING JOINT AND SEVERAL LIABILITY OF THE
BORROWERS. (a) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodations to be provided by the
Lenders, the Issuing Banks and the Agent under this Agreement, for the mutual
benefit, directly and indirectly, of each of the Borrowers and in consideration
of the undertakings of each of the Borrowers to accept joint and several
liability for the obligations of each of them.
(b) Each of the Borrowers jointly and severally hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with each other Borrower, with respect to the
payment and performance of all of the obligations arising under this Agreement,
it being the intention of the parties hereto that all the obligations shall be
the joint and several obligations of all the Borrowers without preferences or
distinction among them.
(c) If and to the extent that any of the Borrowers shall fail to
make any payment with respect to any of the obligations hereunder as and when
due or to perform any of such obligations in accordance with the terms thereof,
then in each such event the other Borrower will make such payment with respect
to, or perform, such obligation.
(d) The obligations of each Borrower under the provisions of this
Section 12.14(d) constitute full recourse obligations of such Borrower
enforceable against it to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Agreement or
any other circumstance whatsoever.
(e) Except as otherwise expressly provided herein, each Borrower
hereby waives notice of acceptance of its joint and several liability, notice of
any and all Revolving Advances made or Letters of Credit issued under this
Agreement, notice of occurrence of any Event of Default, or of any demand for
any payment under this Agreement, notice of any action at any time taken or
omitted by the Lenders, the Issuing Banks or the Agent under or in respect of
any of the obligations hereunder, any requirement of diligence and, generally,
all demands, notices and other formalities of every kind in connection with this
Agreement. Each Borrower hereby assents to, and waives notice of, any extension
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or postponement of the time for the payment of any of the obligations hereunder,
the acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by the Lenders, the Issuing Banks or the Agent at any
time or times in respect of any default by any Borrower in the performance or
satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by the Lenders, the Issuing Banks or
the Agent in respect of any of the obligations hereunder, and the taking,
addition, substitution or release, in whole or in part, at any time or times, of
any security for any of such obligations or the addition, substitution or
release, in whole or in part, of any Borrower. Without limiting the generality
of the foregoing, each Borrower assents to any other action or delay in acting
or failure to act on the part of the Lenders, the Issuing Banks or the Agent
including, without limitation, any failure strictly or diligently to assert any
right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might, but for the provisions of this Section
12.14, afford grounds for terminating, discharging or relieving such Borrower,
in whole or in part, from any of its obligations under this Section 12.14, it
being the intention of each Borrower that, so long as any of the obligations
hereunder remain unsatisfied, the obligations of such Borrower under this
Section 12.14 shall not be discharged except by performance and then only to the
extent of such performance. The obligations of each Borrower under this Section
12.14 shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar proceeding
with respect to any Borrower or the Lenders, the Issuing Banks or the Agent. The
joint and several liability of the Borrowers hereunder shall continue in full
force and effect notwithstanding any absorption, merger, amalgamation or any
other change whatsoever in the name, membership, constitution or place of
formation of any Borrower or the Lenders, the Issuing Banks or the Agent.
(f) The provisions of this Section 12.14 are made for the benefit of
the Lenders, the Issuing Banks and the Agent and their successors and assigns,
and may be enforced by them in accordance with the terms of this Agreement from
time to time against any of the Borrowers as often as occasion therefor may
arise and without requirement on the part of the Lenders, the Issuing Banks or
the Agent first to marshall any of their claims or to exercise any of their
rights against the other Borrower or to exhaust any remedies available to them
against the other Borrower or to resort to any other source or means of
obtaining payment of any of the obligations hereunder or to elect any other
remedy. The provisions of this Section 12.14 shall remain in effect until all
the obligations hereunder shall have been paid in full or otherwise fully
satisfied. If at any time, any payment, or any part thereof, made in respect of
any of the obligations, is rescinded or must otherwise be restored or returned
by the Lenders, the Issuing Banks or the Agent upon the insolvency, bankruptcy
or reorganization of the Borrowers, or otherwise, the provisions of this Section
12.14 will forthwith be reinstated in effect, as though such payment had not
been made.
(g) Notwithstanding the provisions of this Section 12.14, in no
event shall the amount of the Lender Debt for which the Parent is liable
hereunder at any time exceed the outstanding Parent's Revolving Loan at such
time plus accrued and unpaid interest thereon.
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ss. 12.15. BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their respective successors
and assigns, except that the obligation of the Lenders and any Issuing Lender
hereto to make Revolving Advances and other financial accommodations hereunder
shall not inure to the benefit of any successors and assigns of the Borrowers.
(b) No Borrower may assign or transfer any of its interest hereunder
without the prior written consent of the Lenders. Each of the Lenders may make,
carry or transfer its pro rata share of the Revolving Advances at, to or for the
account of any of its branch offices or the office of one or more of its
Affiliates.
(c) Following the Closing Date (or for GE Capital, either before, on or
following the Closing Date), each Lender may, with the prior written consent of
the Agent, which consent shall not be unreasonably withheld or delayed (and, so
long as no Event of Default shall have occurred and be continuing, the prior
written consent of the Company as to the identity of the proposed assignees,
which consent shall not be unreasonably withheld or delayed), assign its rights
and delegate its obligations under this Agreement and may, with the prior
written consent of the Agent, which consent shall not be unreasonably withheld
or delayed (and, so long as no Event of Default shall have occurred and be
continuing, the prior written consent of the Company as to the identity of the
proposed assignees, which consent shall not be unreasonably withheld or
delayed), assign, sell, or without the consent of the Agent or the Company,
grant participations in, all or any part of its pro rata share of any Revolving
Advance or Revolving Advances made by it or its Revolving Commitment or any
other interest herein or in its Notes to another bank or other financial
institution, in which event:
(i) in the case of an assignment, upon notice thereof by such
Lender to the Borrowers, the assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and
benefits as it would have if it were such Lender hereunder and the holder
of a Note, and
(ii) n the case of a participation, the participant shall not have
any rights under this Agreement or any Note or any other Loan Document
(the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto which agreement shall
not, in any event, grant to the participant the right of consent as to any
matter under the Loan Documents other than those which require the consent
of all Lenders).
(d) Subject to the confidentiality requirement set forth in Section
12.18 hereof, each Lender may furnish any information concerning the Credit
Parties and their respective Subsidiaries in the possession of such Lender from
time to time to assignees and participants (including prospective assignees and
participants).
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(e) In the event that any Lender shall assign or sell all or any part of
its pro rata share of any Revolving Advance or Revolving Advances made by it or
its Revolving Commitment or any other interests herein or in its Notes, such
Lender shall at the time of such assignment or sale give written notice to the
Agent of the name and address of the assignee (including the name of the account
officer if applicable), and, with respect to the assignment or sale of its
Notes, shall make all endorsements to the grid schedule attached thereto to make
the information contained therein accurate. Further, and as a condition to the
effectiveness of any such assignment or sale, the assignee shall pay to the
Agent a fee of $2,500 to record such assignment or sale.
(f) Notwithstanding anything herein to the contrary, any partial assignment
of the Revolving Loan and/or the Revolving Credit Facility Commitment shall be
in an aggregate amount at least equal to $10,000,000 and any partial
participation of the Loan and/or the Revolving Credit Facility Commitment shall
be in an aggregate amount at least equal to $10,000,000.
(g) The Parent and the Company will assist GE Capital in effectuating any
such assignments, sales or participations by GE Capital (or such other Lenders
referred to above) in whatever manner GE Capital (or such other Lenders referred
to above) deems necessary, including, but not limited to, assisting in the
preparation by GE Capital of offering memoranda and the participation of members
of the Borrowers' management in meetings with prospective assignees and
participants.
(h) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights to receive monies under this Agreement (including, without limitation,
under its share of the Loan and Notes held by such Lender) in favor of any
Federal Reserve Bank of the Board of Governors of the Federal Reserve System.
(i) Any assignment and delegation by a Lender of any portion of its
Revolving Commitment made in accordance with the terms hereof after the Closing
Date shall relieve such Lender of the portion of its Revolving Commitment so
assigned and delegated.
ss. 12.16. COUNTERPARTS; FACSIMILE SIGNATURE. (a) This Agreement may be
executed by the parties hereto individually or in any combination, in one or
more counterparts, each of which shall be an original and all of which shall
together constitute one and the same agreement.
(b) Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
ss. 12.17. INVALIDITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under all
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applicable laws and regulations. If, however, any provision of this Agreement
shall be prohibited by or invalid under any such law or regulation, it shall be
deemed modified to conform to the minimum requirements of such law or
regulation, or, if for any reason it is not deemed so modified, it shall be
ineffective and invalid only to the extent of such prohibition or invalidity
without the remainder thereof or any of the remaining provisions of this
Agreement being prohibited or invalid.
ss. 12.18. DISCLOSURE OF FINANCIAL INFORMATION. The Agent and each Lender
are each hereby authorized to deliver a copy of any financial statement or any
other information relating to the business, operations or financial condition of
the Parent and each of its Subsidiaries which may be furnished to it hereunder
or otherwise, to any Affiliate of such Lender, any other Lender, any court,
regulatory body or agency having jurisdiction over the Agent or such Lender, to
any Person which shall, or shall have any right or obligation to, succeed to all
or any part of the Agent's or such Lender's interest in any of the Revolving
Advances, this Agreement and any Collateral or to any actual or prospective
participant therein or assignee thereof. Subject to the foregoing, the Agent and
each Lender (i) agree to take all reasonable precautions and to exercise due
care to maintain the confidentiality of all information provided to it by the
Parent and its Subsidiaries in connection with this Agreement, (ii) agree and
undertake that neither it nor any of its Affiliates shall use any such
information other than for the purpose of the financing contemplated by the
Agreement or as otherwise permitted above, and (iii) shall treat all such
information confidentially and shall cause each prospective participant or
assignee of the type described in this Section 12.18 or participant or assignee
of such Lender to agree in writing to treat such information confidentially and
to abide by the provisions of this sentence. Information that is available to
the public shall not be subject to the confidentiality requirements of this
Section 12.18. In no event shall the Agent or any Lender be liable under this
Section 12.18 for any direct, indirect, consequential or punitive damages
resulting from disclosure permitted under this Section 12.18.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
FINLAY FINE JEWELRY CORPORATION
By: /s/ Barry D. Scheckner
-------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Address:
529 Fifth Avenue, 5th Flr.
New York, New York 10017
Attention: Barry Scheckner
Telecopier: (212) 867-3326
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FINLAY ENTERPRISES, INC.
By: /s/ Barry D. Scheckner
-------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Address:
521 Fifth Avenue, 3rd Flr.
New York, New York 10175
Attention: Bonni G. Davis, Esq.
Telecopier: (212) 557-3848
with copies of all notices and other communications to be sent to:
Finlay Fine Jewelry Corporation
521 Fifth Avenue, 3rd Flr.
New York, New York 10175
Attention: Bonni G. Davis, Esq.
Telecopier: (212) 557-3848
- and -
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: James Martin Kaplan, Esq.
Telecopier: (212) 223-1151
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GENERAL ELECTRIC CAPITAL
CORPORATION, Individually and
as Agent
By: /s/ Rick Luck
--------------------------------
Name: Rick Luck
Title: Its Duly Authorized Signatory
Address:
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Account Manager - Finlay
Telecopier: (203)
with copies of all notices and other communications to be sent to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Commercial Finance Group Legal Counsel
Telecopier: (203) 840-4520
-and-
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopier: (212) 310-8007
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Each of the Guarantors and parties to the Security Documents, by signing below,
confirms in favor of the Agent and the Lenders that it consents to the terms and
conditions of this 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 or Security Document
and that all terms of such Guaranty or Security Document shall continue in full
force and effect, subject to the terms thereof and shall continue to secure the
Lender Debt as amended thereby.
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
Attorney-in-Fact
158
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EXHIBIT A
LENDERS, COMMITMENTS AND INITIAL EURODOLLAR OFFICES
Lender and Initial Revolving
Eurodollar Office Commitment
Amount %
General Electric $75,000,000 42.85%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals, Inc. $50,000,000 28.57%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners, L.P. $25,000,000 14.29%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $25,000,000 14.29%
111 West 40th Street, 10th Floor
New York, New York 10018
Revolving
Sublimit
Commitment %
General Electric $10,712,500 42.85%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals, Inc. $7,142,500 28.57%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners, L.P. $3,572,500 14.29%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $3,572,500 14.29%
111 West 40th Street
New York, New York 10018
- --------
1. As such amount may vary pursuant to the definition of Parent Revolving Credit
Facility Sublimit Commitment.
159
AMENDMENT No. 1
AMENDMENT AGREEMENT No. 1 dated as of September 11, 1997 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, the Company desires to fund its proposed acquisition of
certain assets pursuant to that certain Asset Purchase Agreement (as defined
herein) by amending the terms of 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. Consent to Asset Purchase Agreement. The Lenders hereby consent
to the transactions contemplated by that certain Asset Purchase Agreement dated
as of September 3, 1997 by and among the Parent, the Company, Zale Corporation
and Zale Delaware Inc. (the "Asset Purchase Agreement"), as in effect on the
date hereof, without any waivers or modifications not consented to by the
Majority Lenders, provided that such transaction is consummated by no later than
November 14, 1997. This consent shall become
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effective upon the due execution and delivery of this Amendment by each of the
Company, the Parent and each of the Lenders. In connection with such
acquisition, the Company agrees to execute, deliver and file at the Company's
expense all financing statements requested by the Agent to be filed to perfect
the Agent's and the Lenders' Liens on the assets to be purchased.
3. Amendments to Credit Agreement. Upon the Effective Date (as
defined herein), the Credit Agreement shall be amended as follows:
(a) The definition of "Revolving Credit Facility Commitment"
contained in Section 1.1 of the Credit Agreement is hereby amended by deleting
the amount "$175,000,000" appearing therein, and substituting "$225,000,000"
therefor.
(b) Section 3.1(c)(i) of the Credit Agreement is hereby amended by
deleting the amount "$10,000,000" appearing therein and substituting
"$50,000,000" therefor.
(c) Section 9.1(ii) of the Credit agreement is hereby amended by
deleting the amount "$18,500,000" appearing therein and substituting
"$19,500,000" therefor.
(d) Exhibit A to the Credit Agreement is hereby amended in its
entirety to read as set forth on Exhibit A hereto.
4. 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,
moratorium and similar laws affecting the enforcement of creditors' rights
generally and by general equity principles.
2
<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.
5. 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 transactions contemplated by
the Asset Purchase Agreement shall have been consummated by no later than
November 14, 1997 and a letter from the Company to that effect shall have been
delivered to the Agent and (iv) the Parent and the Company shall have delivered
to the Agent for each of the Lenders new Revolving Notes reflecting their new
Revolving Commitments. On the Effective Date, upon the written request of the
Agent, each Lender whose Revolving Commitment has increased on the Effective
Date shall wire transfer immediately available funds to the Agent in an amount
required to purchase such Lender's new pro rata share of the then outstanding
amount of the Revolving Loan. Such funds will be paid by the Agent to each
3
<PAGE>
Lender whose Revolving Commitment did not increase on the Effective Date so as
to reduce such Lender's pro rata share of the Revolving Loan immediately prior
to the Effective Date to its new pro rata share of the Revolving Loan on the
Effective Date.
6. 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 and related UCC financing statement filings.
7. 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.
8. 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.
9. 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.
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
4
<PAGE>
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
Its Duly Authorized Signatory
FLEET PRECIOUS METALS, INC.
By: /s/ David P. Berube
-------------------------------
Name: David P. Berube
Title: Assistant Vice President
By: /s/ Anthony J. Capuano
-------------------------------
Name: Anthony J. Capuano
Title: Senior Vice President
THE CHASE MANHATTAN BANK
By: /s/ Dolores A. Walsh
--------------------------------
Name: Dolores A. Walsh
Title: Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ Ed Forst
-----------------------------
Name: Ed Forst
Title: Managing Director
5
<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. 1 to this 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
Attorney-in-Fact
6
<PAGE>
EXHIBIT A
LENDERS, COMMITMENTS AND INITIAL EURODOLLAR OFFICES
Lender and Initial Revolving
Eurodollar Office Commitment
Amount %
General Electric $75,000,000 33.333%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals, Inc. $50,000,000 22.222%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners L.P. $50,000,000 22.222%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $50,000,000 22.222%
111 West 40th Street, 10th Floor
New York, New York 10018
Revolving
Sublimit
Commitment%
-----------
General Electric $8,333,500 33.333%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals, Inc. $5,555,5000 22.222%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners $5,555,5000 22.222%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $5,555,500 22.222%
111 West 40th Street
- --------
As such amount may vary pursuant to the definition of Parent Revolving Credit
Facility Sublimit Commitment.
-1-
AMENDMENT NO. 2 AND LIMITED CONSENT
THIS AMENDMENT NO. 2 AND LIMITED CONSENT (this "Amendment") is made as of
September 10, 1997, 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 and consent to certain
actions to be taken by the Consignee, all as hereinafter more fully set forth;
WHEREAS, the Consignor is willing to amend the terms of the Consignment
Agreement in such respects and to grant such consent, upon the terms and subject
to the conditions contained herein; and
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:
ss.1. Amendments to the Consignment Agreement. Subject to
the satisfaction of the conditions precedent set forth in
ss.4 hereof, the Consignment Agreement is hereby amended as
follows:
(a) by deleting the definition of "Second Sonab Intercompany Note"
contained in Section 1 of the Consignment Agreement in its
entirety and substituting in lieu thereof the following new
definition:
"Second Sonab Intercompany Note: The demand promissory note
dated October 28, 1994 executed by Sonab to the order of the
Consignee in the original principal amount of $13,000,000,
together with any replacement or
<PAGE>
-2-
substitution thereof and any amendment or modification thereof
provided that the aggregate principal amount in respect thereof shall not exceed
$33,000,000."
(b) by deleting Section 8.2(c)(xx) of the Consignment Agreement in
its entirety and substituting in lieu thereof the following text:
"(xx) by the Consignee in Sonab (A) in amounts up to
$12,000,000 in the aggregate at any time outstanding (1) in the form
of intercompany Indebtedness for Borrowed Money evidenced by the
First Sonab Intercompany Note, or (2) in the form of common equity
existing on or after February 1, 1996 as a result of the conversion
and/or exchange of the First Sonab Intercompany Note into or for
common equity of Sonab, and (B) in the form of intercompany
Indebtedness for Borrowed Money evidenced by the Second Sonab
Intercompany Note (provided that the aggregate unpaid principal
amount of such Indebtedness for Borrowed Money evidenced by the
Second Sonab Intercompany Note shall not at any time exceed
$33,000,000);".
ss.2.Limited Consent. Subject to the satisfaction of the conditions
precedent set forth inss.4 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 March
28, 1995, among the Consignee, the Parent, the Dollar Agent and
the lenders under the Dollar Facility, such Amendment No. 3 being
in substantially the form attached hereto as Exhibit A.
ss.3.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.
(b) Authority, No Conflicts, Etc. The execution, delivery and
performance by the Consignee of this Amendment and the consummation
<PAGE>
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,
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
(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 ss.4 hereof), (iii) do not
violate any provisions of any law, rule or regulation or any
provision of any order, writ, judgment, injunction, decree,
determination or awar 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, 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.
ss.4. Condition to Effectiveness. The effectiveness of this Amendment shall
be subject to the delivery of the following, each in form and substance
satisfactory to the Consignor:
(a) this Amendment executed by each of the Consignee and the
Consignor; and
<PAGE>
-4-
(b) evidence of the consent of the Dollar Agent and each of the
lenders under the Dollar Facility to the execution and delivery of
this Amendment by the Consignor and the Consignee.
ss.5. 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.
ss.6. 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.
ss.7. 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.
ss.8. 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.
<PAGE>
-5-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FINLAY FINE JEWELRY
CORPORATION
By: /s/ Barry D. Scheckner
-------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK
By: /s/ Jerry Zimmerman
-------------------------------
Name: Jerry Zimmerman
Title: Vice President
-1-
AMENDMENT NO. 3 AND LIMITED CONSENT
THIS AMENDMENT NO. 3 AND LIMITED CONSENT (this "Amendment") is made as of
September 11, 1997, 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 and consent to certain
actions to be taken by the Consignee, all as hereinafter more fully set forth;
WHEREAS, the Consignor is willing to amend the terms of the Consignment
Agreement in such respects and to grant such consent, upon the terms and subject
to the conditions contained herein; and
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:
ss.1. Amendments to the Consignment Agreement. Subject to the
satisfaction of the conditions precedent set forth in ss.4 hereof, the
Consignment Agreement is hereby amended as follows:
(a) by deleting the definition of "Dollar Facility" contained
in Section 1 of the Consignment Agreement in its entirety and substituting
in lieu thereof the following new definition:
"Dollar Facility: Collectively, the Loan Documents, as such
term is defined in the Amended and Restated Credit Agreement dated as
of September __, 1997, among the Consignee, the Parent, the Dollar Agent
and the Lenders (as defined therein), as such facility has been or may be
<PAGE>
-2-
amended, restated or otherwise modified or as such facility may be
replaced, increased, renewed, supplemented, refunded or refinanced by another
facility, provided that such Dollar Facility shall be subject at all times to
the terms and provisions of the Intercreditor Agreement."
(b) by deleting Section 8.3(b) of the Consignment Agreement in its entirety
and substituting in lieu thereof the following new text:
"(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:
10/31/97 6.30:1
01/31/98 4.30:1"
ss.2. Limited Consent. Subject to the satisfaction of the conditions
precedent set forth inss.4 hereof, the Consignor hereby consents to the
execution and delivery by the Consignee of an Amended and Restated Credit
Agreement dated as of September __, 1997 (the "Restated Credit Agreement"),
among the Consignee, the Parent, the Dollar Agent and the lenders parties
thereto, such Restated Credit Agreement being in substantially the form attached
hereto as Exhibit A.
ss.3. 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>
-3-
(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,
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
(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 ss.4 hereof), (iii) do not
violate any provisions of any law, rule or regulation or any
provision of any order, writ, judgment, injunction, decree,
determination or awar 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,
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.
ss.4. Condition to Effectiveness. The effectiveness of this Amendment shall
be subject to the delivery of the following, each in form and substance
satisfactory to the Consignor:
<PAGE>
-4-
(a) this Amendment executed by each of the Consignee and the
Consignor; and
(b) evidence of the consent of the Dollar Agent and each of the
lenders under the Dollar Facility to the execution and delivery of
this Amendment by the Consignor and the Consignee.
ss.5. 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.
ss.6. 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.
ss.7. 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.
ss.8. 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.
<PAGE>
-5-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FINLAY FINE JEWELRY
CORPORATION
By: /s/ Barry D. Scheckner
-------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK
By: /s/ Jerry Zimmerman
-------------------------------
Name: Jerry Zimmerman
Title: Vice President
ASSET PURCHASE AGREEMENT
DATED September 3, 1997
By and Among
FINLAY ENTERPRISES, INC.,
FINLAY FINE JEWELRY CORPORATION,
ZALE CORPORATION
and
ZALE DELAWARE, INC.
<PAGE>
Table of Contents
-----------------
1. Certain Definitions.................................................. 2
2. Sale and Purchase of Division Assets................................. 8
3. Purchase Price for Division Assets and Dillard's
Inventories.......................................................... 15
(a) Division Assets................................................. 15
(b) Dillard's Inventories.......................................... 19
(c) Allocation of Division Assets Purchase Price................... 22
4. Merchandise Returns; Repairs; Consignments........................... 22
5. The Closing; Termination............................................. 25
6. Assumption of Liabilities; Consents.................................. 27
7. Representations, Warranties and Covenants of the Parent
and the Seller....................................................... 33
(a) Organization and Standing...................................... 33
(b) Authorization.................................................. 34
(c) Financial Statements........................................... 36
(d) Title to Division Assets; Liens and
Encumbrances. ................................................. 36
(e) Computer System................................................ 38
(f) Contracts and Commitments...................................... 38
(g) Compliance with Laws........................................... 39
(h) Litigation; Decrees............................................ 40
(i) Taxes.......................................................... 40
(j) Insurance...................................................... 41
(k) No Adverse Changes............................................. 42
(l) Employees...................................................... 43
(m) Benefit Plans.................................................. 45
(n) Return Policies; Warranties; No Customer Special
Orders; Etc.................................................... 45
(o) Inventories.................................................... 46
(p) Advertising.................................................... 46
(q) Department Lease and License Agreements........................ 47
(r) Capital Expenditure Commitments................................ 47
(s) Assets Necessary to the Business............................... 48
(t) Absence of Environmental Liabilities........................... 48
(u) Updates........................................................ 49
8. Representations, Warranties and Covenants of
Enterprises and the Buyer............................................ 50
(a) Organization and Standing...................................... 50
(b) Authorization.................................................. 50
(c) Litigation..................................................... 51
9. Certain Employment Matters........................................... 51
i
<PAGE>
Table of Contents
-----------------
10. Brokers.............................................................. 52
11. Indemnification...................................................... 53
(a) Indemnification by Enterprises and the Buyer................... 53
(b) Indemnification by the Parent and the Seller................... 54
(c) Notice of Claim and Assumption of Defense...................... 58
(d) Settlement of Claim by an Indemnified Party.................... 60
(e) Damages........................................................ 61
(f) Exclusive Remedy................................................ 61
12. Closing Conditions of Enterprises and the Buyer...................... 61
13. Closing Conditions of the Parent and the Seller...................... 65
14. Deliveries by the Parent and the Seller on the Closing
Date................................................................. 68
15. Deliveries by the Buyer on the Closing Date.......................... 69
16. Obligations of the Parent and the Seller............................. 69
17. Confidentiality; Other Covenants..................................... 75
18. Certain Payments..................................................... 76
19. Further Assurances................................................... 77
20. Mail................................................................. 79
21. Sales, Use and Similar Taxes......................................... 79
22. Bulk Sales Laws...................................................... 79
23. Press Releases, Etc.................................................. 79
24. Miscellaneous Provisions............................................. 80
(a) Survival....................................................... 80
(b) Notices........................................................ 80
(c) Entire Agreement............................................... 81
(d) Waiver......................................................... 82
(e) Amendments..................................................... 82
(f) Execution in Counterparts...................................... 82
(g) Successors and Assigns......................................... 82
(h) Governing Law.................................................. 83
(i) Headings....................................................... 83
(j) Severability................................................... 84
(k) Expenses....................................................... 84
25. Special Re-apporionments............................................. 84
ii
<PAGE>
Exhibits
--------
Exhibit 3(b) - Form of Dillard's Transfer
Agreement
Exhibit 12(g) - Form of Services Agreement
Exhibit 12(i)(ii) - Form of Opinion of Troutman
Sanders LLP
Exhibit 12(i)(iii)(a) - Form of Bill of Sale
Exhibit 12(i)(iii)(b) - Form of Assumption Agreement
Exhibit 13(e)(iv) - Form of Opinion of Zimet, Haines,
Friedman & Kaplan
Exhibit 14(g) - Mercantile Assignment
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Schedules
---------
Schedule 2(a)(i) - Marshall Field's Departments
Schedule 2(a)(ii) - Parisian Departments
Schedule 2(a)(iii) - Mercantile Departments
Schedule 2(a)(iv) - Certain Agreements
Schedule 2(a)(xiii) - Prepaids, Refunds and Deposits
Schedule 3(b) - Seller's Policy re Severance and
Retention
Schedule 3(c) - Purchase Price Allocation
Schedule 7(b) - Consents re: Parent and Seller
Schedule 7(c) - Financial Statements
Schedule 7(d)(i) - Liens
Schedule 7(d)(ii) - Equipment, etc. Locations; Net book
and)(iii) value, etc.
Schedule 7(f) - Contracts and Commitments
Schedule 7(g) - Permits, Etc.
Schedule 7(h) - Litigation; Decrees
Schedule 7(j) - Insurance
Schedule 7(k) - No Adverse Changes
Schedule 7(l) - Employee Matters
Schedule 7(m) - Benefit Plans
Schedule 7(n) - Diamond Trade-up Policy
Schedule 7(o) - Policy re Outlets
Schedule 7(p) - Advertising
Schedule 7(q) - Locations of Acquired Departments
Schedule 7(r) - Capital Expenditures
Schedule 7(s) - Necessary Assets; Certain Services
Schedule 8(b) - Consents re: Enterprises and Buyer
Schedule 12(c) - Requisite Consents for Parent and Seller
Schedule 13(c) - Requisite Consents for Enterprises and
Buyer
Schedule 16(j) - Ad Valorem Tax Estimate
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<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT made and entered into on this 3rd day of September, 1997,
by and among Finlay Enterprises, Inc., a Delaware corporation ("Enterprises"),
Finlay Fine Jewelry Corporation, a Delaware corporation which is a wholly-owned
subsidiary of Enterprises ("Buyer"), Zale Corporation, a Delaware corporation
("Parent"), and Zale Delaware, Inc., a Delaware corporation which is a
wholly-owned subsidiary of Parent ("Seller").
W I T N E S S E T H:
WHEREAS, the Seller currently owns certain assets which are operated as its
Diamond Park Fine Jewelers division (the "Division"); and
WHEREAS, the Division is engaged in the business (the "Business") of
operating leased fine jewelry departments (each a "Department" and collectively,
the "Departments") in department stores owned by Marshall Field & Company
("Marshall Field's"), Parisian, Inc. ("Parisian"), Mercantile Stores Company,
Inc. ("Mercantile") and Dillard Department Stores, Inc. ("Dillard's");
WHEREAS, the Buyer desires to purchase, and the Seller desires to sell, the
"Division Assets" and the "Dillard's Inventories" (as such terms are hereinafter
defined), upon the terms and subject to the conditions hereinafter set forth.
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<PAGE>
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements hereinafter contained, the
parties hereby agree as follows:
1. Certain Definitions. The following terms, as used herein, have the
following meanings:
"AA" has the meaning set forth in Section 3(a)(iii).
"Acquired Business" has the meaning set forth in Section 2(a)(iv).
"Acquired Departments" has the meaning set forth in Section 2(a)(iii).
"Acquisition Proposal" has the meaning set forth in Section 16(h).
"Assumed Liabilities" has the meaning set forth in Section 6(a).
"Assumption Agreement" has the meaning set forth in Section 12(i)(iii).
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"Bill of Sale" has the meaning set forth in Section 12(i)(iii).
"Business" has the meaning set forth in the recitals hereto.
"Capital Payments" has the meaning set forth in Section 25.
"Closing" has the meaning set forth in Section 5(a).
"Closing Date" has the meaning set forth in Section 5(a).
"Closing Inventory Price" has the meaning set forth in Section 3(a)(i).
"Code" has the meaning set forth in Section 7(m).
"Damages" has the meaning set forth in Section 11(a)(i).
"Department Agreements" has the meaning set forth in Section 2(a)(iii).
"Department" and "Departments" have the meaning set forth in the recitals
hereto.
3
<PAGE>
"Dillard's" has the meaning set forth in the recitals hereto.
"Dillard's Agreement" has the meaning set forth in Section 2(a)(vii).
"Dillard's Departments" has the meaning set forth in Section 2(a)(vii).
"Dillard's Inventories" has the meaning set forth in Section 3(b).
"Dillard's Inventories Purchase Price" has the meaning set forth in Section
3(b).
"Dillard's Transfer" has the meaning set forth in Section 3(b).
"Dillard's Transfer Agreement" has the meaning set forth in Section 3(b).
"Distribution Center" has the meaning set forth in Section 2(a)(vii).
"Division" has the meaning set forth in the recitals hereto.
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<PAGE>
"Division Agreements" has the meaning set forth in Section 2(a)(iv).
"Division Assets" has the meaning set forth in Section 2(a).
"Division Assets Purchase Price" has the meaning set forth in Section
3(a)(i).
"Division Employees" has the meaning set forth in Section 7(l).
"Effective Date" has the meaning set forth in Section 7(u).
"Employee Plans" has the meaning set forth in Section 7(l).
"ERISA" has the meaning set forth in Section 7(l).
"Excluded Assets" has the meaning set forth in Section 2(b).
"Excluded Liabilities" has the meaning set forth in Section 6(b).
5
<PAGE>
"Financial Statements" has the meaning set forth in Section 7(c).
"GAAP" has the meaning set forth in Section 3(a)(i).
"Governmental Entities" has the meaning set forth in Section 7(b).
"HSR Act" has the meaning set forth in Section 12(f).
"Indemnified Party" has the meaning set forth in Section 11(c).
"Indemnifying Party" has the meaning set forth in Section 11(c).
"Inventories" has the meaning set forth in Section 2(a)(vii).
"Invoiced Cost" has the meaning set forth in Section 3(a)(iii).
"Liens" has the meaning set forth in Section 7(d).
"Marshall Field's" has the meaning set forth in the recital hereto.
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<PAGE>
"Marshall Field's Agreement" has the meaning set forth in Section 2(a)(i).
"Marshall Field's Departments" has the meaning set forth in Section
2(a)(i).
"Maximum Inventory Amount" has the meaning set forth in Section 3(a)(i).
"Mercantile" has the meaning set forth in the recitals hereto.
"Mercantile Agreement" has the meaning set forth in Section 2(a)(iii).
"Mercantile Departments" has the meaning set forth in Section 2(a)(iii).
"Parent" has the meaning set forth at the head of this Agreement.
"Parisian" has the meaning set forth in the recitals hereto.
"Parisian Agreement" has the meaning set forth in Section 2(a)(ii).
7
<PAGE>
"Parisian Departments" has the meaning set forth in Section 2(a)(ii).
"Purchase Price" has the meaning set forth in Section 3(b).
"Seller's Warehouse" has the meaning set forth in Section 2(a)(viii).
"Services Agreement" has the meaning set forth in Section 12(g).
"Supplement" has the meaning set forth in Section 7(u).
"Taxes" has the meaning set forth in Section 6(b)(vii).
"Tax Returns" has the meaning set forth in Section 7(i).
"Unassigned Asset" has the meaning set forth in Section 6(c).
2. Sale and Purchase of Division Assets.
----------------------------------------
(a) Subject to the terms and conditions of this Agreement, at the "Closing"
(as hereinafter defined), the Seller shall sell, convey, transfer and assign to
the Buyer, and the Buyer shall purchase and acquire from the Seller, all of the
Seller's right, title and interest to the following assets owned by the Seller
as of the Closing (collectively, the "Division Assets"):
8
<PAGE>
(i) that certain Licensed Department Agreement, dated as of
January 25, 1994, between the Seller and Marshall Field's, as
amended on July 5, 1996 and modified on October 2, 1996 (the
"Marshall Field's Agreement"), relating to the operation of
the Departments listed on Schedule 2(a)(i) (collectively, the
"Marshall Field's Departments");
(ii) that certain Concession and License Agreement, dated June
10, 1996, between the Seller and Parisian (the "Parisian
Agreement"), relating to the operation of the Departments
listed on Schedule 2(a)(ii) (collectively, the "Parisian
Departments");
(iii) that certain Concession and License Agreement, dated as
of February 2, 1997, between the Seller and Mercantile (the
"Mercantile Agreement"), relating to the operation of the
Departments listed on Schedule 2(a)(iii) (collectively, the
"Mercantile Departments") (the Marshall Field's Agreement, the
Parisian Agreement
ZH-81341.3
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<PAGE>
and the Mercantile Agreement are hereinafter collectively
referred to as the "Department Agreements" and the Marshall
Field's Departments, the Parisian Departments and the
Mercantile Departments are hereinafter collectively referred
to as the "Acquired Departments");
(iv) the other contracts, distribution arrangements, vendor,
sales, purchase, advertising and similar agreements, equipment
leases, other agreements and business arrangements to which
the Seller is a party and which are used primarily in
connection with the operation of the Business relating to the
Acquired Departments or Division Assets (the "Acquired
Business") and which are listed on Schedule 2(a)(iv) hereof
(collectively with the Department Agreements, the "Division
Agreements"), except that the Buyer will succeed only to
agreements and arrangements for the purchase of merchandise on
order (excluding consignment merchandise) as at the Closing
Date having an "Invoiced Cost" (as hereinafter defined) of no
more than $17,000,000 in the aggregate, subject to the terms
of Section 25(b) hereof, provided that the scheduled delivery
date therefor is on or before November 30, 1997;
ZH-81341.3
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<PAGE>
(v) all equipment, fixtures, furniture, leasehold improvements
and personal property owned by the Seller and related
exclusively to, used solely by, or located in the Acquired
Departments, including without limitation, all counters,
countertops, tables, chairs, shelving, countertop fixtures,
showcases, ringholders, display equipment, jewelry fixtures,
mirrors, floors, floor coverings, signholders and signs,
lamps, chandeliers and special lighting fixtures, wall
coverings, diamond/cz checkers, safes, locks and associated
keys (including, without limitation, department keys, core
keys and system-wide keys), alarm system equipment, telephone
equipment, calculators, photocopy and facsimile equipment,
repair and other tools, other movable personal property and
special decor, but excluding computer equipment;
(vi) to the extent assignable, all permits, certifications,
franchises, licenses, approvals and other authorizations held
by the Seller which relate primarily to the operation of the
Acquired Business;
(vii) subject to the provisions of Section 3(a) relating to
the Maximum Inventory Amount, all
ZH-81341.3
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<PAGE>
finished goods inventories, comprised of fine jewelry and
watches, which relate primarily to the operation of the
Acquired Business and are located in the Seller's distribution
center in Irving, Texas (the "Distribution Center"), and in
the Acquired Departments (collectively, the "Inventories"),
but excluding (A) all inventories held on consignment, (B) all
inventories located, or to be utilized, at the leased fine
jewelry departments in department stores owned or operated,
pursuant to that certain Master License Agreement, dated as of
November 4, 1993, as amended effective February 1, 1995 and
February 1, 1997, between the Seller and Dillard's (the
"Dillard's Agreement"), by the Seller (the "Dillard's
Departments"), which inventories are not to be transferred
pursuant to this Section 2(a) but shall be subject to the
terms and conditions of Section 3(b) below, (C) all
inventories which are damaged (whether or not under repair)
and not saleable in the ordinary course of business of the
Acquired Business, (D) all inventories at locations owned,
operated or otherwise controlled by or for any of the
Division's vendors and (E) all goods in transit from any
vendor to the Seller on the Closing Date;
ZH-81341.3
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<PAGE>
(viii) all supplies, spare and replacement parts, findings,
batteries, watch straps and bands, product attachments
(including, without limitation, watch bezels), bags, watch and
jewelry boxes, supplies furnished by host stores, cases,
packing materials, watch warranty and instruction booklets for
each watch included in Inventories, sales checks and other
forms, business cards and thank you notes, cleaning and
polishing materials and cloths located in the Acquired
Departments and in the Seller's warehouse in Irving, Texas
("Seller's Warehouse") which are used primarily in connection
with the operation of the Acquired Business;
(ix) all of the Seller's data, trade secrets and confidential
information exclusively related to the operation of the
Acquired Business, if any;
(x) all goodwill relating to the operation of the Acquired
Business, if any, and all advertising and promotional
materials and all other printed or written materials primarily
used in connection with the operation of the Acquired
Business;
(xi) all of Seller's books and records relating solely to the
operation of the Acquired Business,
ZH-81341.3
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<PAGE>
including inventory records and lists (including, without
limitation, all diamond count books in respect of the
Division), price lists, marketing information, sales records,
records (if any) pertaining to customers and accounts, tax
records, lists and records pertaining to suppliers and copies
of all books, ledgers, files and business records relating
solely to the operation of the Acquired Business;
(xii) to the extent assignable, dedicated telephone lines in
respect of equipment at the Acquired Departments;
(xiii) all prepayments and prepaid expenses, refunds and
deposits, relating primarily to the operation of the Acquired
Business and of the type set forth on Schedule 2(a)(xiii); and
(xiv) all petty cash on hand at the Acquired Departments as at
the Closing.
(b) Notwithstanding the provisions of Section 2(a) above, the
parties agree that the Division Assets shall not include any of the following
assets (the "Excluded Assets"):
ZH-81341.3
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<PAGE>
(i) cash and cash equivalent items and bank accounts, except
petty cash on hand at the Acquired Departments as at the
Closing;
(ii) accounts receivable or other receivables;
(iii) any assets located in the Dillard's Departments, or used
primarily in connection with the operation of the Dillard's
Departments;
(iv) any computer equipment or computer software used in
connection with the operation of the Business;
(v) Seller's rights under or pursuant to this Agreement;
(vi) Seller's employee files and records;
(vii) Seller's employee and operating manuals; and
(viii) any of Seller's assets which are not specifically
listed in Section 2(a) above.
ZH-81341.3
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<PAGE>
3. Purchase Price for Division Assets and Dillard's Inventories. (a)
Division Assets. (i) The purchase price for the sale and transfer of the
Division Assets (in addition to the assumption by the Buyer of the Assumed
Liabilities) shall be the sum of: (A) the "Closing Inventory Price" (determined
in the manner set forth in subsection (iii) below), such amount not to exceed
$53,200,000 in the aggregate (the "Maximum Inventory Amount"); (B) the
amortized/depreciated cost of fixed or capital assets located in the Acquired
Departments, as reflected on the books and records of the Seller as of the
Closing Date and determined in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), such amount not to exceed $4,348,347
in the aggregate, subject to the provisions of Section 25(a) hereof; (C) the
aggregate amount of petty cash at the Acquired Departments, the amount thereof
to be determined by the parties at the time the Inventories are counted and
reconciled in accordance with Section 3(a)(iii); (D) the aggregate amount of
prepayments, prepaid expenses, refunds and deposits assigned to the Buyer
pursuant to Section 2(a)(xiii) as reflected on the books and records of the
Seller as of the Closing Date and determined in accordance with GAAP; (E) the
aggregate amount of the items sold to the Buyer pursuant to Section 2(a)(viii)
hereof which are located at the Seller's Warehouse, as reflected on the books
and records of the Seller as of the Closing Date and determined in accordance
with GAAP, such amount not to exceed $125,000 in the aggregate; and (F)
$2,400,000 (collectively, the "Division Assets Purchase Price").
ZH-81341.3
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<PAGE>
(ii) Subject to the terms and conditions hereof, the Buyer will pay
and deliver the Division Assets Purchase Price, and any amount to be paid by the
Buyer pursuant to Section 4(b) hereof, to the Seller at the Closing by a wire
transfer of immediately available funds to such bank account as the Seller will
direct.
(iii) Buyer and Seller shall in good faith calculate the Division
Assets Purchase Price in accordance herewith. The Closing Inventory Price shall
be based on a physical count of the Inventories ("Inventories Count") to be
conducted by representatives of the Buyer and the Seller and may be supervised
or observed, if requested by either Buyer or Seller (and at the requesting
party's sole expense), by Arthur Andersen LLP ("AA"), as brought forward and
adjusted (utilizing perpetual inventory records) through the close of business
on the day before the Closing to reflect sales of merchandise by the Division at
the Acquired Departments. It is acknowledged and agreed that all expenses
incurred by and all sales made by the Acquired Business on and after the Closing
Date shall be for the account and benefit of the Buyer. The Closing Inventory
Price shall be determined based on the Seller's cost for such Inventories using
the retail method FIFO and in accordance with GAAP as reflected on the Seller's
books and records (including capitalized freight in and freight out and
advertising and other loads) ("Invoiced Cost"). With respect to such advertising
and other loads excluding freight in and freight out (collectively, the
"Loads"), the amount by which such Loads
ZH-81341.3
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<PAGE>
exceed $1,100,000 (the "Excess Costs") will be excluded from the inventory
valuation, and, therefore, the Closing Inventory Price. In connection with the
calculation of the Closing Inventory Price, the Buyer and AA, if requested by
the Buyer, will have reasonable access to all requisite accounting and other
records of Seller and to the Acquired Departments, the Distribution Center and
Seller's Warehouse, if necessary. The parties will commence taking the
Inventories Count no later than 14 days prior to the scheduled Closing Date and
will use their respective best efforts to complete said count by no later than
72 hours prior to Closing. In any event, the actual Inventory Count shall be
completed prior to Closing. During the taking of the Inventories Count, the
parties shall exclude any damaged merchandise, and such damaged merchandise
shall not be included in the Inventories transferred hereunder. During the
period after commencement of the Inventories Count and ending on the Closing
Date, the parties' representatives at the Acquired Departments shall endeavor to
agree upon which merchandise is damaged and if such representatives cannot agree
on whether particular merchandise is damaged, the merchandise in question shall
be forwarded to the Distribution Center where representatives of the parties
will again analyze said merchandise and endeavor to agree upon which merchandise
is damaged prior to the Closing. If the parties cannot agree upon which
merchandise is damaged at least twenty-four (24) hours prior to the Closing, the
parties shall submit such matter to John James of Lone Star Liquidators (or such
other third party as may be mutually agreed upon by the parties)
ZH-81341.3
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<PAGE>
for review and resolution, with the fees and expenses thereof to be shared
equally by the parties; and any determination by John James (or such other
party) shall be final and binding upon the parties. The parties agree that the
Closing shall occur only after the Inventory Count has been completed and all
matters in respect of damaged merchandise are resolved in accordance herewith.
In the event the Closing Inventory Price is determined to be in excess of the
Maximum Inventory Amount, then, for purposes of this Agreement, the most
recently acquired Inventories having an aggregate Invoiced Cost equal to the
Maximum Inventory Amount, as determined pursuant to this subparagraph, shall be
the only Inventories included in the Division Assets; provided, however, that
Buyer shall have the option of purchasing any such excess Inventories pursuant
hereto by increasing the Division Assets Purchase Price by an amount equal to
the Invoiced Cost of such excess Inventories (in which case the excess
Inventories purchased by Buyer shall be included in the Division Assets).
(b) Dillard's Inventories. The Seller will continue to operate all
of the Dillard's Departments until the expiration of the Dillard's Agreement on
January 31, 1998. Subject to the terms and conditions contained herein, the
Seller agrees to sell, convey, transfer, assign and deliver to the Buyer, and
the Buyer agrees to purchase and acquire from the Seller (the "Dillard's
Transfer"), on February 27, 1998 (or on such other date as the Buyer and the
Seller shall mutually agree), all finished goods inventories,
ZH-81341.3
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comprised of fine jewelry and watches, of the Division located at the Dillard's
Departments as of January 31, 1998 (the "Dillard's Inventories"), but excluding
(i) all inventories held on consignment, (ii) all inventories which are damaged
(whether or not under repair) and not saleable in the ordinary course of
business (iii) all inventories at locations owned, operated or otherwise
controlled by or for any of the Division's vendors and (iv) all goods in transit
from any vendor to the Seller on the date of closing of the Dillard's Transfer.
No other assets shall be the subject of the Dillard's Transfer. The purchase
price for the sale and transfer of the Dillard's Inventories (the "Dillard's
Inventories Purchase Price" and when referred to collectively with the Division
Assets Purchase Price, the "Purchase Price") shall be the Invoiced Cost (such
anount not to exceed $4,950,000 in the aggregate) thereof (as reflected on the
Seller's books and records based on the retail method FIFO and in accordance
with GAAP), and the Buyer shall pay and deliver the Dillard's Inventories
Purchase Price to the Seller at the closing of the Dillard's Transfer by a wire
transfer of immediately available funds to such bank account as the Seller will
direct; provided, however, that, the Invoiced Cost of the Dillard's Inventories
shall include only Loads in respect thereof up to the amount, if any, by which
Loads for the Inventories transferred pursuant to Section 2(a)(vii) hereof is
less than $1,100,000. The Seller shall arrange to have all of the Dillard's
Inventories from said departments moved to, and organized for inspection at, the
Distribution Center by February 15, 1998;
ZH-81341.3
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<PAGE>
such merchandise shall be sorted by category/class (for example, diamonds,
watches, gold and gemstones) and a corresponding list thereof shall be provided
to the Buyer not later than such date. Not later than three days before the
closing of the Dillard's Transfer (or at such other time as Buyer and Seller may
agree), Buyer and Seller shall in good faith calculate the Dillard's Inventories
Purchase Price in accordance herewith. The Dillard's Inventories Purchase Price
shall be based on a physical count of the Dillard's Inventories as of such date
to be conducted by representatives of the Buyer and the Seller and as may be
supervised or observed, if requested by either Buyer or Seller (and at the
requesting party's sole expense), by AA, in a manner consistent with the
procedures (including matters concerning damaged merchandise) set forth in
Section 3(a)(iii). In connection with the calculation of the Dillard's
Inventories Purchase Price, the Buyer and AA, if requested by the Buyer will
have reasonable access to all requisite accounting and other records of Seller
and to the Distribution Center, if necessary. In the event Dillard's Inventories
Purchase Price is determined to be in excess of $4,950,000, then, for purposes
of this Agreement, the most recently acquired Dillard's Inventories having an
aggregate Invoiced Cost of $4,950,000 shall be the only Dillard's Inventories
sold to Buyer hereunder; provided, however, that Buyer shall have the option of
purchasing any such excess Dillard's Inventories pursuant hereto by increasing
the Dillard's Inventories Purchase Price by an amount equal to the Invoiced Cost
of such excess Dillard's Inventories (in
ZH-81341.3
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<PAGE>
which case the excess merchandise purchased by Buyer shall be included in the
Dillard's Inventories). In addition, the Buyer agrees to reimburse the Seller,
subject to the terms hereof, for severance pay and "retention pay" for group and
regional managers and field personnel of the Seller employed at or in respect of
the Dillard's Departments at any time between the Closing Date and the date of
closing of the Dillard's Transfer; provided, however, that the amount of such
reimbursement shall not exceed the sum of $900,000 in the aggregate. The
severance and retention amounts to be reimbursed hereunder shall be paid in
accordance with the Seller's policy described on Schedule 3(b). At the Closing,
the parties shall execute and deliver to each other an agreement substantially
in the form of Exhibit 3(b) attached hereto (the "Dillard's Transfer
Agreement").
(c) Allocation of Division Assets Purchase Price. The parties hereto
shall allocate the Division Assets Purchase Price in accordance with Schedule
3(c). Buyer and Seller agree to file Form 8594 and all required federal, state,
local and foreign Tax Returns (as hereinafter defined) in accordance with such
allocation schedule. The parties also agree that the Dillard's Inventories
Purchase Price shall be allocated in respect of the Dillard's Inventories in
accordance with the Seller's Invoiced Cost therefor (and that they will file all
applicable Tax Returns in accordance therewith).
ZH-81341.3
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<PAGE>
4. Merchandise Returns; Repairs; Consignments. (a) With respect to
any merchandise sold at the Acquired Departments prior to the Closing, the Buyer
agrees to follow and adhere to the corresponding Department's policy regarding
returns, credits and refunds. The Parent and the Seller shall have no obligation
to reimburse Buyer for any credits or refunds given by Buyer with respect to any
such returned merchandise, and Buyer shall be entitled to resell such returned
merchandise without paying any additional consideration therefor to Parent or
Seller.
(b) Without limiting the generality of any other provisions of this
Agreement, it is acknowledged and agreed that the Division Assets do not include
any damaged merchandise, regardless of whether any such merchandise is under
repair (or to be repaired). With respect to any customer property delivered to
an Acquired Department prior to the Closing for repair, the parties agree as
follows. The repair of such customer property shall be at the cost and expense
of the Seller. On the Closing Date, the Seller shall deliver to the Buyer a list
of all customer items under repair (or to be repaired), which were received by
the Seller during the 90-day period prior to the Closing Date, including
information regarding the original date the merchandise was received by the
Seller and the sales dollar amount expected by the Seller to be realized from
such repairs. With respect to any of such items being repaired (or delivered to
a third party for repair) by the Seller as of the Closing, the Buyer shall pay
to the
ZH-81341.3
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<PAGE>
Seller at the Closing an amount equal to fifty percent (50%) of the aggregate
sales dollar amount so specified, it being agreed that Buyer shall not be
required to pay any amounts in respect of items repaired by or for the Buyer.
The Seller shall transfer to the Buyer at Closing all of the Seller's right,
title and interest in and to all customer items under repair or to be repaired.
It is agreed that the Buyer shall not be required to pay to the Seller any
amount with respect to any customer items under repair (or to be repaired) which
were received by the Seller prior to the commencement of the aforementioned
90-day period, however, the Seller shall transfer to the Buyer at Closing all of
the Seller's right, title and interest in and to all such customer items.
Promptly after the Closing, the Seller shall deliver to Buyer all of the
customer items held by it on behalf of the Acquired Business for repair,
together with a list thereof. As to any items not repaired by or for the Seller,
the Buyer shall make or arrange for the repair thereof in the ordinary course of
business of the Acquired Business.
(c) Seller will return all merchandise located in the Acquired
Departments and held on consignment to the appropriate owner thereof prior to
the Closing, unless Buyer notifies Seller, by September 17, 1997, that it wants
to retain any such merchandise on a consignment basis and the owner of the
merchandise consents thereto, in which case such specified merchandise shall
remain in
ZH-81341.3
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<PAGE>
the corresponding Acquired Department after the Closing (with Buyer to be named
as replacement consignee in respect thereof).
5. The Closing; Termination.
(a) Provided that all of the conditions contained in Sections 12 and
13 hereof have been satisfied or waived in accordance therewith, the closing of
the transactions contemplated hereby involving the transfer of the Division
Assets (the "Closing") shall take place at the offices of Zimet, Haines,
Friedman & Kaplan, at 10:00 a.m. local time on October 6, 1997 or at such other
time and on such date as the parties hereto shall agree. The date on which the
Closing occurs shall be the "Closing Date".
In the event that at any time after the Closing any further actions
are deemed necessary by either Buyer or Seller in its reasonable discretion to
carry out the purposes of this Agreement, the appropriate party shall take all
such actions, without receiving any additional consideration therefor.
(b) Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing, as follows:
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(i) by mutual written consent of all the parties
hereto;
(ii) by written notice of Enterprises or the Buyer, if there
shall have been a material breach of any covenant,
representation or warranty hereunder by the Seller or the
Parent, and such breach shall not have been remedied within
ten business days after receipt of a notice in writing from
Enterprises or the Buyer specifying the breach and requesting
such be remedied;
(iii) by written notice of the Parent or the Seller, if there
shall have been a material breach of any covenant,
representation or warranty hereunder by Enterprises or the
Buyer, and such breach shall not have been remedied within ten
business days after receipt of a notice in writing from Parent
or the Seller specifying the breach and requesting such be
remedied;
(iv) by any party hereto, if the Closing does not occur on or
prior to October 6, 1997; or
(v) by Enterprises or the Buyer at any time on or before
September 10, 1997, by delivering a written
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termination notice to the Parent or the Seller in the event
Enterprises or the Buyer is not satisfied with its due
diligence review of the Division, the Business and the
Division Assets.
If this Agreement is terminated and the transactions contemplated hereby are
abandoned as described in this Section 5, this Agreement shall become void and
of no further force and effect, except for the provisions of Sections 18 and 24
(including, without limitation, the requirement that each party shall bear its
own fees and expenses, except as otherwise expressly set forth herein), but
excluding Section 24(a) (regarding survival of representations).
6. Assumption of Liabilities; Consents.
(a) Subject to the conditions specified in this Agreement, the Buyer
hereby agrees to assume at the Closing and to thereafter fully pay and discharge
in a timely manner the following liabilities and obligations of Seller (all of
which relate primarily to the operation of the Acquired Business and are
hereinafter referred to as the "Assumed Liabilities"):
(i) the Seller's liabilities and obligations under the
Division Agreements; provided, however, that Buyer shall have
no liability or responsibility for, and the Assumed
Liabilities shall not include,
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any liability or obligation arising under any Division
Agreement arising or resulting from any breach thereof by the
Seller or other failure to perform as required thereunder on
or prior to the Closing, and provided, further, that in the
event the Buyer elects, in its sole discretion, to assume any
liabilities and obligations with respect to "on order"
merchandise, if any, in excess of the $17,000,000 aggregate
amount assigned pursuant to Section 2(a)(iv) (as such amount
may be adjusted pursuant to Section 25(b) hereof), then, upon
notice thereof from the Buyer to the Seller, such liabilities
and obligations shall be deemed to be Assumed Liabilities
hereunder; and
(ii) the Seller's liabilities and obligations for capital
expenditures and other costs to be paid after the date hereof
for the acquisition, renovation or repair of fixed or capital
assets of the Acquired Business; provided, however, that the
maximum amount of such liabilities and obligations incurred
prior to the Closing but to be paid after the Closing shall
not exceed $639,518 in the aggregate.
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(b) Except as and to the extent otherwise expressly provided in this
Agreement, the Buyer has not agreed to pay, shall not be required to assume and
shall not have any liability or obligation, direct or indirect, absolute or
contingent, known or unknown, of the Seller or the Division or any other person
or entity, the assumption of which by the Buyer is not expressly provided for in
this Agreement ("Excluded Liabilities"), including without limitation;
(i) all accounts payable, accrued expenses and liabilities for
inventories and services, owed by the Seller in connection
with the Business arising prior to the Closing, including,
without limitation, any and all charges from, or other costs
and expenses payable to, host stores (reflected on store
statements or otherwise) in respect of the operation of the
Business by the Seller prior to the Closing;
(ii) all liabilities relating to the Business from or in
respect of merchandise sold on or before the Closing Date,
except for returns of merchandise to the extent provided in
Section 4;
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(iii) all liabilities relating to the Dillard's Departments
(except as otherwise expressly set forth herein with respect
to severance pay);
(iv) any claims relating to periods prior to the Closing Date
relating to or arising under any Employee Plan (as hereinafter
defined), including, without limitation, accrued vacation
benefits, severance benefits (except as otherwise set forth in
Section 3(b)), medical costs, reimbursement plans and the
like, any claims relating to the termination of any employee
benefits or Employee Plan of any type or nature on or prior to
the Closing Date or claims relating to the termination of
employment of any employee of the Acquired Departments on or
prior to the Closing Date, including, without limitation, (A)
claims arising under any applicable law in connection with
payments to terminated employees and judgments and penalties
in respect thereof, and (B) any obligations to any employees
or former employees of the Acquired Business under The
Consolidated Omnibus Budget Reconciliation Act of 1985;
(v) any claims made by any employee or former employee of
Seller relating to: employment prior to
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the Closing; any incident or event occurring during the term
of employment by Seller of any employee or former employee,
whether or not such employee is later employed by the Buyer;
or any injury suffered or illness contracted or any exposure
to any substance or condition by any such employee or former
employee while so employed;
(vi) any liability or obligation arising out of any other
cause of action or judicial or administrative action, suit,
proceeding or investigation relating to an event occurring
prior to the Closing Date;
(vii) any liability or obligation of Seller (and other persons
(excluding Enterprises and the Buyer), if Seller is liable by
law or contract for Taxes owed by such other persons) in
respect of any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, customs duties, franchise,
profits, withholding, social security (or similar),
unemployment, disability, real property, personal property,
sales, use, transfer, value added, alternative or add-on
minimum, estimated, or other tax of any kind
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whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not (a "Tax"
or collectively "Taxes");
(viii) any liability or obligation of Parent or Seller under
this Agreement; and
(ix) all other liabilities or obligations of Parent or Seller
not acquired or assumed by the Buyer pursuant to this
Agreement.
(c) The parties shall use their reasonable efforts to obtain any
necessary consent in respect of the transactions contemplated by this Agreement.
To the extent that any contract (other than a Department Agreement), permit,
license or other asset included in the Division Assets is not capable of being
assigned or transferred without the consent or waiver of a third party (whether
or not a Governmental Entity), and the parties agree to close the transactions
contemplated hereby without such consent or waiver, this Agreement (and any
related documents delivered at the Closing) shall not constitute an actual or
attempted assignment or transfer thereof unless and until such consent or waiver
of such third party has been duly obtained or such assignment or transfer has
otherwise become lawful (any lease, contract, permit, license or other asset
otherwise included in the Division Assets and not assigned or
ZH-81341.3
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transferred as a result of this Section 6(c) is hereinafter
referred to as an "Unassigned Asset").
To the extent that the consents and waivers referred to in
this Section 6(c) are not obtained prior to the Closing, or until the
impracticalities of transfer referred to therein are resolved, Seller shall,
upon Buyer's request and at Buyer's sole expense, use its reasonable efforts to
(A) provide or cause to be provided to the Buyer the benefits of any Unassigned
Asset, (B) cooperate in any arrangement, reasonable and lawful as to both the
Seller and the Buyer, designed to provide such benefits to the Buyer and (C)
enforce for the account of the Buyer any rights of the Seller arising from such
Unassigned Asset, including all rights to indemnification, insurance and the
right to elect to terminate in accordance with the terms thereof, in each case
after consulting with and upon the advice and direction of the Buyer. To the
extent necessary to effect the foregoing, the Seller agrees to make its
personnel, and applicable books and records, reasonably available to the Buyer
in order to effect all actions reasonably required to be taken by the Sellers
under this Section 6(c).
7. Representations, Warranties and Covenants of the Parent and the
Seller. The Parent and the Seller jointly and severally represent and warrant
to, and covenant with, Enterprises and the Buyer as follows:
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(a) Organization and Standing. The Division is owned and operated by
the Seller. Each of the Parent and the Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Seller has full corporate power and authority necessary to enable it to own,
lease or otherwise hold its properties and assets and to carry on its business
as presently conducted consistent with past practice. The Seller is in good
standing and duly qualified to do business in each jurisdiction in which the
nature of the Acquired Business or the ownership, leasing or holding of the
Division Assets makes such qualification necessary.
(b) Authorization. Each of the Parent and the Seller has full right,
power and authority to enter into this Agreement and to perform its obligations
hereunder. All corporate acts and other proceedings required to be taken by the
Parent and the Seller to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and properly taken. This Agreement has been duly and validly executed
and delivered by each of the Parent and the Seller and constitutes a legal,
valid and binding obligation of such party, enforceable in accordance with its
terms (except as limited by bankruptcy, insolvency and other laws of general
application relating to the enforcement of creditors' rights and by general
equitable principles). Except as set forth in Schedule 7(b) hereto, no consent
of any lender, trustee, security holder or
ZH-81341.3
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<PAGE>
any other person or entity is required to be obtained by the Parent or the
Seller in connection with the execution, delivery and performance of this
Agreement by the Parent and the Seller and the consummation of the transactions
contemplated hereby, except where the failure to obtain such consent would not
have a material adverse effect on the Acquired Business. Except as set forth in
Schedule 7(b) hereto, the execution, delivery and performance of this Agreement
by the Parent and the Seller: (i) does not violate or constitute a breach of or
default under any contract, agreement or commitment to which the Parent or the
Seller is a party, under which it is obligated or to which it or any of the
Division Assets are subject, except where such breach or default would not have
a material adverse effect on the Acquired Business; (ii) does not violate any
judgment, order, statute, rule or regulation to which the Parent, the Seller or
the Division Assets is subject, or the certificate of incorporation or by-laws
of the Parent or the Seller; and (iii) will not result in the creation of any
lien, charge or encumbrance on any of the Division Assets other than a
"Permitted Lien" (as hereinafter defined). Except as set forth on Schedule 7(b),
no consent, approval, license, permit, or authorization of, or registration,
declaration or filing with, any federal, state, local or foreign court,
administrative or regulatory agency or commission or other governmental
authority or instrumentality, or any arbitral tribunal (collectively,
"Governmental Entities") or any other third party is required to be obtained or
made by or with respect to the Parent or the Seller in
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<PAGE>
connection with the execution and delivery of this Agreement or the consummation
by the Parent and the Seller of the transactions contemplated hereby.
(c) Financial Statements. Attached hereto as Schedule 7(c) are true
and correct copies of the following (collectively, the "Financial Statements"):
the unaudited balance sheet of the Division as at July 31, 1996 and the related
statement of operations of the Division for the year ended July 31, 1996 and the
unaudited balance sheets of the Division as at July 31, 1997 and the related
statement of operations for the year ended July 31, 1997. The Financial
Statements fairly present in all material respects the financial condition of
the Division at the dates thereof and the results of operations of the Division
for the fiscal periods reported upon thereon, and were prepared in accordance
with generally accepted accounting principles in a manner consistent with past
practices in respect of the Division. The Parent and the Seller will use all
reasonable efforts to provide in a timely manner all financial information
requested by the Buyer which the Buyer deems necessary, in its reasonable
discretion, in connection with the preparation of its financial statements and
supplemental information with respect thereto for GAAP and regulatory purposes,
including without limitation Securities and Exchange Commission purposes; such
information will be provided only if it is available. The expense of providing
such financial information will be borne solely by the Buyer.
ZH-81341.3
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<PAGE>
(d) Title to Division Assets; Liens and Encumbrances. (i) The Seller
has, or on the Closing Date will have, good and marketable title to and is the
sole owner of (or has valid and enforceable leases for) the Division Assets.
Except as set forth on Schedule 7(d)(i), all of the Division Assets are free and
clear of any and all claims, liens, encumbrances, security interests, judgments,
and charges of every nature whatsoever (collectively, "Liens"). At the Closing,
the Buyer shall acquire all the Division Assets free and clear of all Liens,
except for liens for Taxes which have been accrued but are not yet due and
payable (it being agreed that Seller shall maintain appropriate reserves
therefor and shall pay such Taxes when due) and security interests arising by
law in favor of vendors in respect of the purchase of inventory (it being agreed
that all invoices of such vendors in respect thereof shall be paid by the Seller
in the ordinary course of business) (collectively, the "Permitted Liens").
(ii) No assets of the Division have been disposed of since July 31,
1996, except in the ordinary course of business of the Division. Schedule
7(d)(ii) sets forth the locations of all of the equipment, furniture, fixtures
and other tangible personal property and leasehold improvements of the Seller
relating to the Acquired Departments. All of such tangible personal property
(other than the Inventories which are addressed in Section 7(o) hereof) are
being sold "AS IS, WHERE IS." Schedule 7(d)(iii) sets forth the net book value,
and estimated useful life, of the
ZH-81341.3
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<PAGE>
fixtures located in the Acquired Departments as reflected on the books and
records of the Seller as of the date hereof, determined in accordance with GAAP;
provided, however, that no representation or warranty as to the accuracy of such
estimated useful life is made hereby. True and correct copies of the purchase
records in respect of such property (to the extent the Seller has such records)
have been provided to the Buyer. Any leased personal property included in the
Division Assets is in all material respects in the condition required of such
property by the terms of the leases applicable thereto. All cash register
equipment used in Acquired Departments are provided by Marshall Field's,
Parisian and Mercantile pursuant to the Department Agreements.
(e) Computer System. The Division utilizes the Seller's central
system computer hardware and software programs, data and related materials.
(f) Contracts and Commitments. Except as set forth in Schedule 7(f)
hereto, neither the Parent nor the Seller, primarily in respect of the Division,
is a party to any written (i) lease or license agreement or arrangement; (ii)
agreement with any vendor or other supplier; (iii) royalty, distribution,
agency, territorial or license agreement; (iv) contract or agreement (for
employment or otherwise) with any officer, employee, director, professional
person or firm, independent contractor or advertising firm or agency which is
not terminable at will by Seller on not more than
ZH-81341.3
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<PAGE>
30 days' notice without payment or other penalty; (v) contract or collective
bargaining agreement with any labor union or representative of employees; (vi)
commitment, contract or agreement guaranteeing the payment or performance of the
obligations of any other person or entity; or (vii) material commitment,
contract or agreement not made in the ordinary course of business of the
Division. Except as set forth on Schedule 7(f), there are no oral
understandings, arrangements or agreements to which the Parent or the Seller in
respect of the Division is bound or which modify any of the Division Agreements,
except to the extent such understandings, arrangements or agreements do not have
a material adverse effect on such Division Agreement or the Acquired Business.
Each of the Division Agreements is a valid and subsisting contract in full force
and effect without modification and each of the Parent and the Seller has
performed in all material respects all of its obligations thereunder and, to the
knowledge of the Parent and the Seller, each other party thereto has performed
in all material respects all obligations required to be performed by it and, to
the knowledge of the Parent and the Seller, no default or event of default has
occurred and is continuing thereunder. A true and complete copy of each Division
Agreement has been provided to the Buyer.
(g) Compliance with Laws. To the knowledge of each of the Parent and
the Seller, it has fully complied with, and is not in default under, any laws,
regulations or orders applicable to the
ZH-81341.3
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Division Assets or the Acquired Business, except to the extent that any such
noncompliance or default would not have a material adverse effect on the
Acquired Business. Schedule 7(g) lists the material permits, licenses, consents
and authorizations, whether federal, state, or local, held by the Seller
primarily relating to the operation of the Acquired Business.
(h) Litigation; Decrees. Except as set forth on Schedule 7(h), there
are no actions, suits, proceedings or investigations pending (or, to the
knowledge of the Parent and the Seller, threatened) against the Parent or Seller
or, to the knowledge of the Parent and the Seller, any of its officers,
directors, employees, agents or affiliates in their capacities as such in
respect of the operation of the Division, in any court or before any
Governmental Entity. Except as set forth in Schedule 7(h), there are no
outstanding judgments, orders, consents, agreements or decrees with, of or by
any Governmental Entity against Parent or Seller relating to the Acquired
Business or the Division Assets; a summary description of each of said
judgments, orders, consents, agreements or decrees is included on Schedule 7(h).
(i) Taxes. Seller (and other persons (excluding Enterprises and the
Buyer), if Seller is liable by law or contract for Taxes owed by such other
persons), with respect to the Division, have filed all federal, state, county
and local tax
ZH-81341.3
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returns and other returns and reports which were required to be filed in respect
of all Taxes, levies, license, registration and permit fees, charges or
withholding of any nature whatsoever ("Tax Returns"), and have withheld and paid
all applicable Taxes, levies and assessments relating to the Division, except
for Taxes accrued but not yet due and payable. All such Tax Returns were correct
and complete in all material respects. The Seller, with respect to the Division,
is not in default in the payment of Taxes due or payable or any assessments
received in respect thereof. There are no unpaid assessments or proposals for
additional federal, state or local Taxes relating to the Division for which the
Seller does not have adequate reserves. Seller (and other persons (excluding
Enterprises and the Buyer), if Seller is liable by law or contract for Taxes
owed by such other persons) have filed all required federal, state, county and
local Tax Returns and has withheld and paid all required Taxes, levies and
assessments (other than Taxes accrued but not yet due and payable), except to
the extent the failure to do any of the foregoing would not have a material
adverse affect on Parent. Seller (and other persons (excluding Enterprises and
the Buyer), if Seller is liable by law or contract for Taxes owed by such other
persons), with respect to the Division, will file all required federal, state,
county and local Tax Returns and will withhold and pay all applicable Taxes,
levies and assessments relating to the Division (other than Taxes accrued but
not yet due and payable, which Seller will pay when due), with respect to any
period of time up to the Closing Date.
ZH-81341.3
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(j) Insurance. All premiums on all insurance policies held by the
Seller with respect to the Division have been paid in full, and a list of all
such policies is set forth on Schedule 7(j) hereto. From the date hereof until
the Closing, such insurance will be maintained in full force and effect.
(k) No Adverse Changes. Since July 31, 1996, there has not been: (i)
any material adverse change in the financial condition, assets, liabilities,
business or results of operations of the Division; (ii) any damage, destruction
or loss, whether or not covered by insurance, materially and adversely affecting
the Division Assets in the aggregate; (iii) except in the ordinary course of the
business of the Acquired Business: (A) except as set forth on Schedule 7(k), any
increase in the rate of compensation or commission payable or to become payable
to any Division Employee, distributor, commission salesman or agent, or any
employee hired at an annual salary in excess of 150% of the applicable Acquired
Department average; or (B) or any payment of any bonus, profit sharing or other
extraordinary compensation to any Division Employee, except pursuant to
contract; (iv) any material change in the accounting methods or practices
followed by the Seller with respect to the Division or any material change in
amortization policies or rates theretofore applied; (v) any sale, lease,
abandonment or other disposition of any material asset of the Division (other
than in the ordinary course of business of the Division); or (vii) any
cancellation of the debts owed to or claims
ZH-81341.3
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held by the Seller with respect to the Division, except in the ordinary course
of business of the Division.
(l) Employees. Each of the Parent and the Seller with respect to the
Division has no outstanding liability for payment of wages, salaries, bonuses,
pensions, or contributions under any Employee Plans under any written labor or
employment contracts, based upon or accruing with respect to those services of
the Division Employees performed prior to the date of this Agreement, except for
any payments due for the current payment period or not yet due and payable. For
purposes of this Agreement, "Employee Plans" means all plans, practices and
arrangements, written or unwritten, formal or informal, whether applicable to a
group of individuals or a single individual, and whether active, frozen or
terminated, providing compensation (other than salary or wages) or other
benefits of any type or nature with respect to Division Employees, including but
not limited to all plans providing benefits for such employees that are employee
benefit plans as defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Schedule 7(l) contains a true,
complete and accurate list of the names, titles, whether full-time or part-time,
Acquired Department locations, and current salary for all group and regional
managers and field personnel employed by, for or in respect of the Division with
respect to the Acquired Business ("Division Employees"), it being acknowledged
and agreed that the term "Division Employees" shall not include any corporate
ZH-81341.3
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office personnel other than any such managers. Complete personnel files
(excluding medical records) in respect of the Division Employees have been made
available to the Buyer for its inspection. There is no, and during the past two
years there has been no, labor strike, picketing, dispute, slow-down, work
stoppage, union organization effort, grievance filing or proceeding, or other
labor difficulty actually pending or, to the knowledge of the Parent and the
Seller, threatened against or involving the Parent or Seller relating to the
Division. Neither the Parent nor the Seller is a party to any collective
bargaining agreement relating to the Division and no such agreement determines
the terms and conditions of the employment of Division Employees. No collective
bargaining agent has been certified as a representative of any of employees of
Parent or Seller relating to the Division and, to the knowledge of the Parent
and the Seller, no representation campaign or election is now in progress with
respect to any such employees of Seller. Each of the Parent and the Seller is in
full compliance with its obligations, if any, pursuant to the Worker Adjustment
and Retraining Notification Act of 1988 ("WARN") and all other obligations
arising under any other law, rule or regulation relating to the termination of
employees, except to the extent that any such non-compliance would not have a
material adverse effect on the Acquired Business. The Parent and the Seller have
not taken and will not take any action which could be reasonably expected to
result in a "plant closing" or "mass layoff" (as those terms are defined in
WARN) with respect to the operations or business of the
ZH-81341.3
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Division prior to the Closing Date. The Parent and the Seller have not been
informed, by any of the Division Employees that such Division Employee intends
to terminate his employment with Seller prior to the Closing or would not be
willing to work for Buyer thereafter.
(m) Benefit Plans. Schedule 7(m) lists all group health or life
insurance, death benefits, pension, severance, profit sharing, retirement,
supplemental unemployment, disability, medical, dental, vision, employee
assistance, retiree health care and insurance, bonus, incentive, stock option or
purchase or other benefit plans, arrangements and practices maintained for or on
behalf of the Division Employees, including plans qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the "Code") (including pension,
savings and profit sharing plans and employee stock ownership plans), excess
benefit plans, deferred compensation arrangements, employee discounts and
matching gift programs. The Seller has provided to the Buyer copies of all
summary plan descriptions provided to Division Employees, with respect to all
plans referred to in Schedule 7(m), which have such summary descriptions.
(n) Return Policies; Warranties; No Customer Special Orders; Etc.
Except as required pursuant to the Department Agreements, the Seller has made no
warranties or guaranties relating to merchandise sold by or through the Acquired
Business
ZH-81341.3
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and has no separate return policy. There are no "club plan" or similar deferred
sales plans, lay-a-way plans or similar arrangements with respect to the
Acquired Departments. Schedule 7(n) sets forth a summary description of the
Division's diamond trade-up policy. The Division does not accept, and prior to
the Closing will not accept, any customer special orders for merchandise.
(o) Inventories. The Inventories included in the Division Assets
will have been acquired in the ordinary course of business of the Division, will
not be damaged and will be saleable in the ordinary course of business of the
Acquired Business. All watches included in the Inventories include the warranty
and instruction booklets therefor and, where specific boxes are utilized for
particular watch styles, the boxes therefor. For purposes hereof, merchandise
shall be deemed "damaged" if not saleable in the ordinary course of business of
the Acquired Business. Appropriate price tickets are, and will be on the Closing
Date, attached to the Inventories, indicating SKU, style and retail price. All
of the Inventories of the Seller are fairly reflected in the inventory accounts
on the balance sheet included in the Financial Statements and are valued at the
retail method FIFO, all in accordance with GAAP. Also included on Schedule 7(o)
is a statement setting forth the Seller's policy regarding how and when
merchandise is transferred to Seller's outlet facilities.
ZH-81341.3
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(p) Advertising. Schedule 7(p) hereto sets forth (to the extent each
has been determined as of the date hereof and to the extent each relates solely
to the Acquired Business): (i) a schedule of all merchandise (identified by SKU
number) to be advertised by Seller for the Fall 1997 season, indicating whether
such merchandise is owned or held on consignment; (ii) Seller's anticipated
advertising plans for fiscal year 1998 (including details regarding co-op
advertising); (iii) Seller's Fall 1997 advertising calendar; and (iv) Seller's
net advertising expense summary for its fiscal years ended July 31, 1997, 1996
and 1995, expressed as a percentage of the Seller's annual sales for such
periods in the Marshall Field's Departments, the Parisian Departments and the
Mercantile Departments.
(q) Department Lease and License Agreements. Set forth on Schedule
7(q) hereto is a list of the locations of each of the Acquired Departments.
Except for the Department Agreements (true and correct copies of which have been
delivered to the Buyer), there are no agreements between the Seller and Marshall
Field's, Parisian or Mercantile, as the case may be, relating to the operation
of the Acquired Departments. From and after the date hereof, no modification of
any Department Agreement shall be made without the Buyer's prior written consent
(which consent shall not be unreasonably withheld). There are and will be no
charges from the Division's host stores, for which the Buyer shall be
responsible, for the period through and including the Closing Date.
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(r) Capital Expenditure Commitments. Set forth on Schedule 7(r) is a
list and summary of all expenditures and other costs incurred prior to the date
hereof and to be paid after the date hereof for the acquisition, maintenance,
renovation or repair of fixed or capital assets of the Division. The Seller has
provided to the Buyer true and correct copies of all related plans, drawings and
expense agreements (if any) in respect thereof.
(s) Assets Necessary to the Business. The Division Assets, together
with the Excluded Assets, include all of the properties, assets and rights which
are used in, or are necessary to carry on the Business as currently conducted.
Set forth on Schedule 7(s) is a list of all of the material services presently
rendered by the Seller and/or any affiliate thereof to the Division,
irrespective of whether an intercompany charge is reflected on any financial
statements of the Seller.
(t) Absence of Environmental Liabilities. To the knowledge of the
Parent and the Seller, the Seller with respect to the Acquired Business has
complied with, and at all times prior to the Closing Date will comply with, all
applicable environmental laws, orders, regulations, rules and ordinances
adopted, imposed or promulgated by any Governmental Entity relating to the
Departments, except to the extent that such noncompliance would not have a
material adverse effect on the Acquired Business. To the knowledge of the Parent
and the Seller, Seller with respect to the Acquired
ZH-81341.3
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Business or any of the Acquired Departments is not in violation of any federal,
state or local law, ordinance or regulation relating to industrial hygiene,
worker safety, environmental hazardous materials or waste or toxic materials on,
under or about any of the properties, except to the extent that such violation
would not have a material adverse effect on the Acquired Business.
(u) Updates. From the date hereof, until the Closing, the Parent and
the Seller will promptly notify the Buyer by written update to its
representations and warranties contained herein (including the Schedules hereto)
of any matter occurring after the Effective Date (as hereinafter defined) which,
if existing or occurring on the Effective Date would have been required to be
set forth on a Schedule to this Agreement or which would render inaccurate any
of the representations, warranties or statements of the Parent or Seller set
forth in this Agreement (each, a "Supplement"). For purposes hereof, the
"Effective Date" shall mean, generally, the date hereof, except that if a
particular representation is qualified as of a certain date, the Effective Date
shall be such date with respect to such representation and warranty. Upon
Buyer's receipt of such Supplement, such representations and warranties will be
deemed to be automatically updated as set forth therein; provided, however, that
no Supplement provided pursuant to this section shall be deemed to cure any
breach of any representation, warranty or covenant in this Agreement existing as
of the date hereof.
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8. Representations, Warranties and Covenants of Enterprises and the
Buyer. Enterprises and the Buyer, jointly and severally, represent and warrant
to, and covenant with, the Parent and the Seller as follows:
(a) Organization and Standing. Each of Enterprises and the Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
(b) Authorization. Each of Enterprises and the Buyer has full right,
power and authority to enter into this Agreement and to perform its obligations
hereunder. All corporate and other proceedings required to be taken by
Enterprises and the Buyer to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and properly taken. This Agreement has been duly and validly
executed and delivered by each of Enterprises and the Buyer and constitutes a
legal, valid and binding obligation of such party, enforceable in accordance
with its terms (except as limited by bankruptcy, insolvency and other laws of
general application relating to the enforcement of creditors' rights and by
general equitable principles). Except as set forth in Schedule 8(b) hereto, no
consent of any lender, trustee, security holder or any other person or entity is
required to be obtained by Enterprises or the Buyer in connection with the
execution, delivery and performance of this Agreement by Enterprises and the
Buyer and the
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consummation of the transaction contemplated hereby. Except as set forth in
Schedule 8(b) hereto, the execution, delivery and performance of this Agreement
by Enterprises and the Buyer: (i) does not violate or constitute a breach of or
default under any contract, agreement or commitment to which Enterprises or the
Buyer is a party, under which it is obligated or to which Enterprises or the
Buyer is subject; and (ii) does not violate any judgment, order, statute, rule
or regulation to which Enterprises or the Buyer is subject or the certificate of
incorporation or by-laws of Enterprises or the Buyer. Except as set forth on
Schedule 8(b), no consent, approval, license, permit or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party is required to be obtained or made by or with respect to Enterprises or
the Buyer in connection with the execution and delivery of this Agreement or the
consummation by Enterprises and the Buyer of the transactions contemplated
hereby.
(c) Litigation. There are no actions, suits, proceedings or
investigations pending in any court or before any Governmental Entity (or, to
the knowledge of Enterprises or the Buyer, threatened) which might adversely
affect its performance under this Agreement.
9. Certain Employment Matters. Buyer shall offer employment to all
Division Employees (other than (i) such individuals who have committed or
otherwise been involved in a
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theft or embezzlement from the Seller (or a host store) and (ii) subject to
Section 3(b) hereof, any group and regional managers and field personnel of the
Seller employed at or in respect of the Dillard's Departments), at comparable
salary levels, hours and locations and on other terms and conditions to be
determined in the Buyer's sole discretion, and the Buyer shall be afforded the
opportunity to discuss the terms of any prospective employment or other
arrangements with any Division Employees from and after the date on which a
public announcement of the transactions contemplated by this Agreement is made.
The Buyer is not assuming and the Parent and the Seller agree that the Buyer
shall have no liability for accrued wages (including salaries, commissions and
bonuses), severance pay, vacation pay, sick leave or other benefits (including
options to purchase shares of stock of the Parent or Seller), on account of
Seller's employment of or termination of such employees arising on or before the
Closing Date, or under any Employee Plans. Buyer will waive any and all
applicable waiting periods which would otherwise not permit such Division
Employees who accept a job with the Buyer to participate immediately in the
Buyer's group medical plan or group life insurance plan, and such Division
Employees will be given full credit for all time worked with the Seller for
purposes of determining their benefits with the Buyer.
10. Brokers. Each party hereto hereby represents and warrants to the
other that, except for Financo, Inc., no broker,
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finder, or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement. The Seller shall be solely responsible for the payment of any and all
fees and expenses of Financo, Inc. Except as otherwise expressly set forth
herein, each party hereto shall pay its own fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby.
11. Indemnification.
(a) Indemnification by Enterprises and the Buyer. Subject to Section
24(a), Enterprises and the Buyer shall jointly and severally indemnify and hold
the Parent, the Seller and their respective directors, employees, shareholders,
affiliates and agents harmless from and against the following:
(i) any and all liabilities, losses, damages, claims, costs
and expenses, including without limitation reasonable
attorneys' fees ("Damages") resulting from any
misrepresentation, breach of any warranty, or nonfulfillment
of any agreement or covenant on the part of Enterprises or the
Buyer (including Buyer's obligation to pay, discharge or
perform the Assumed Liabilities), whether contained in this
Agreement or in any exhibit or schedule
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hereto or any certificate furnished to the Seller
pursuant to this Agreement; and
(ii) any and all Damages in respect of any actions, suits,
proceedings, demands, assessments, judgments, costs and
expenses incident to any of the foregoing, including without
limitation reasonable attorneys' fees.
(b) Indemnification by the Parent and the Seller. Subject to Section
24(a), the Parent and the Seller shall jointly and severally indemnify and hold
Enterprises and the Buyer and their respective directors, employees,
shareholders, affiliates and agents harmless from and against the following:
(i) any and all Damages resulting from any misrepresentation,
breach of any representation or warranty, or nonfulfillment of
any agreement or covenant on the part of the Parent or the
Seller (including Parent's and Seller's obligation to pay,
discharge and perform the Excluded Liabilities), whether
contained in this Agreement or in any exhibit or schedule
hereto or any certificate furnished to Enterprises or the
Buyer pursuant to this Agreement;
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(ii) any and all Damages arising by reason of any obligations
(A) relating to or affecting the Business or relating to the
Division Assets or the Dillard's Inventories, which
obligations arise from any event, occurrence or action
occurring prior to the Closing or from any failure of the
Parent or Seller to act prior to the Closing (including,
without limitation, charges from any host stores in respect of
periods up to and including the Closing Date) and (B) which
are not included in the Assumed Liabilities;
(iii) any and all Damages arising by reason of any obligations
to any customer or other third party for merchandise
delivered, prior to the Closing, to the Seller for repair,
which merchandise is subsequently damaged, lost or stolen or
is otherwise not in the condition specified by the customer,
except to the extent such Damages occur after the Closing as a
result of any action or omission of any employee or other
representative of Enterprises or the Buyer;
(iv) any and all Damages relating to Taxes of the Seller (and
other persons (excluding Enterprises and the Buyer), if Seller
is liable by law or
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contract for Taxes owed by such other persons) with respect to
periods up to the Closing Date, and Taxes of the Seller (and
other persons (excluding Enterprises and the Buyer), if Seller
is liable by law or contract for Taxes owed by such other
persons) that may result from the transactions provided for
under this Agreement;
(v) any Damages suffered, sustained, incurred or required to
be paid by reason of the Parent's or Seller's failure to
comply with any applicable bulk sales or similar laws and/or
its failure to discharge any claims of the Parent's or
Seller's creditors in respect of the operation of the Business
(other than the Assumed Liabilities);
(vi) any and all Damages arising out of any claims for accrued
wages, severance pay (except as otherwise expressly set forth
herein), vacation pay, sick leave or other benefits of any
type or nature, or any other claims, arising from the Seller's
employment, or termination of employment, of any of the
Division Employees prior to the Closing Date;
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(vii) any and all Damages arising out of any Employee Plans
(except as otherwise expressly set forth herein with respect
to severance pay); and
(viii) any and all Damages in respect of any actions, suits,
proceedings, demands, assessments, judgments, costs and
expenses incident to any of the foregoing, including without
limitation reasonable attorneys' fees.
Notwithstanding anything else in this Section 11(b) to the contrary,
the Parent and the Seller shall have no liability to Enterprises and the Buyer
pursuant to this Section 11 except to the extent the aggregate amount of
Enterprises' and Buyer's Damages recoverable pursuant hereto exceed $200,000,
provided that the foregoing limitation shall not apply to Damages arising out of
(a) any breaches of the representations, warranties and covenants set forth in
Section 7(d)(i) and Section 7(i) and (b) any failure by the Seller or Parent to
pay the costs of construction and remodeling of the Marshall Field's Old
Orchard, Northbrook, Galleria and Oak Brook Departments as shown on Schedule C
to Schedules 7(d)(ii) and (iii) hereof; and the maximum aggregate amount of
liability of the Parent and the Seller to Enterprises and the Buyer for all
claims hereunder shall be $2,400,000 (less any other Damages theretofore
recovered by Enterprises and the Buyer pursuant to this Agreement), provided
that the foregoing limitation
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shall not apply to Damages arising out of any breaches of the representations,
warranties and covenants set forth in Section 7(d)(i) (the maximum aggregate
liability of the Parent and the Seller pursuant thereto to be an amount equal to
the sum of the Closing Inventory Price plus the amount of the
amortized/depreciated cost of fixtures referred to in Section 3(a)(i)(B), less
any other Damages theretofore recovered by Enterprises and the Buyer pursuant to
this Agreement), and Section 7(i) and the matters relating to the Parent's and
Seller's obligation to pay, discharge and perform the Excluded Liabilities and
the matters relating to the Seller's failure to comply with any applicable bulk
sales or similar laws and/or any failure thereof to discharge any claims of the
Seller's creditors in respect of the operation of the Business (other than the
Assumed Liabilities).
(c) Notice of Claim and Assumption of Defense. A party indemnified
hereunder (an "Indemnified Party") shall give notice to each party extending
indemnification hereunder (an "Indemnifying Party") promptly after the
Indemnified Party has knowledge of any claim against the Indemnified Party or
any Indemnifying Party as to which recovery may be sought against the
Indemnifying Party because of the indemnity set forth in this Section 11, or of
the commencement of any legal proceedings against the Indemnified Party as to
such claim after the Indemnified Party has knowledge of such proceedings,
whichever shall first occur, and shall permit the Indemnifying Party to assume
the defense of any such claim or any
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litigation resulting from such claim. Failure by the Indemnified Party to so
notify the Indemnifying Party promptly of a demand for indemnification pursuant
to this Section 11 shall not preclude it from seeking indemnification pursuant
to this Section 11 with respect to such claim unless such failure materially and
adversely affects the Indemnifying Party. Failure by the Indemnifying Party to
notify the Indemnified Party of its election to defend such action within twenty
days after notice thereof shall have been given to the Indemnifying Party shall
be deemed a waiver by the Indemnifying Party of its right to defend such action.
If the Indemnifying Party assumes the defense of any such claim or litigation
resulting therefrom, the Indemnified Party shall give to the Indemnifying Party
information and assistance reasonably necessary to defend or settle such claim
and any litigation arising therefrom. The Indemnifying Party shall not, in the
defense of such claim or any litigation resulting therefrom, consent to entry of
any judgment against the Indemnified Party (or settle any claim involving an
admission of fault on the part of the Indemnified Party), except with the
consent of the Indemnified Party (which consent shall not be unreasonably
withheld).
In any case where the Indemnifying Party has assumed the
defense thereof, the Indemnified Party shall have the right to employ its own
counsel and such counsel may participate in such action, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party.
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(d) Settlement of Claim by an Indemnified Party. If the Indemnifying
Party shall not assume the defense of any such claim or litigation resulting
therefrom, the Indemnified Party may defend against such claim or litigation in
such manner as it may deem appropriate and the Indemnified Party may settle such
claim or litigation on such terms as it may deem appropriate (and to which the
Indemnifying Party has consented, such consent not to be unreasonably withheld)
and the Indemnifying Party shall promptly reimburse the Indemnified Party for
the amount of such settlement and all expenses, legal or otherwise, incurred by
the Indemnified Party in connection with the defense against or settlement of
such claim or litigation. If no settlement of such claim or litigation is made,
the Indemnifying Party shall pay or, at the option of the Indemnified Party,
promptly reimburse the Indemnified Party for the amount of any judgment rendered
with respect to such claim or in such litigation and of all expenses, legal or
otherwise, incurred by the Indemnified Party in the defense against such claim
or litigation. If the Indemnifying Party shall assume the defense of any such
claim or litigation resulting therefrom, and if the Indemnified Party shall
settle such claim or litigation on terms which were not approved in writing by
the Indemnifying Party, the Indemnified Party shall be deemed to have waived its
right to indemnification from the Indemnifying Party pursuant to the terms of
this Agreement.
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(e) Damages. Neither party shall be liable to the other party or
parties hereto or to any other person or entity for any consequential or
indirect damages, including, without limitation, loss of profit, loss of use or
business stoppage.
(f) Exclusive Remedy. Except as set forth in Section 18 hereof, or
in the case of injunctive relief available to remedy any breach of Section 16(g)
or 17, the rights of indemnification provided in this Section 11 shall be the
exclusive remedy of the parties hereto for any breach of this Agreement.
12. Closing Conditions of Enterprises and the Buyer. All of the
obligations of Enterprises and the Buyer under this Agreement are subject to the
fulfillment of each of the following conditions at or prior to the Closing, any
or all of which may be waived (in whole or in part) by Enterprises and the
Buyer:
(a) The representations and warranties of the Parent and the Seller
contained herein or in any certificate, exhibit or other document delivered
pursuant to the provisions hereof, or in connection herewith, shall be true in
all material respects as of the date when made (without regard to any schedule
updates delivered by the Seller to the Buyer) and, except to the extent such
representations and warranties speak of an earlier date (other than the date of
this Agreement), shall be deemed to be made again (as updated pursuant hereto by
Seller) at and as of the Closing
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Date and shall be true in all material respects at and as of such time, and none
of such updated representations or warranties have a material adverse effect on
the Acquired Business or the operation thereof.
(b) The Parent and the Seller shall have substantially performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) The Parent and the Seller shall have provided to Enterprises and
the Buyer those consents, in form reasonably satisfactory to Enterprises and the
Buyer, set forth on Schedule 12(c) and Enterprises and the Buyer shall have
obtained the consents set forth on Schedule 13(c).
(d) Since August 1, 1996, there shall have been no material adverse
change in the assets, liabilities, business, financial condition, or results of
operations or prospects of the Division, and the Division shall not have
suffered any material loss (whether or not insured) by reason of physical damage
caused by fire, earthquake, accident or other calamity which materially and
adversely affects the value of the Business or the Division Assets.
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(e) Each of Enterprises and the Buyer shall have completed, to its
satisfaction, its due diligence with respect to the Division, the Business and
the Division Assets; provided, however, that this condition shall be deemed to
be satisfied unless Enterprises or the Buyer notifies the Seller in writing on
or before September 10, 1997, that Enterprises and the Buyer are terminating
this Agreement pursuant to Section 5(b)(v) hereof.
(f) The waiting periods (and any extensions thereof) or necessary
approvals with respect to any filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired, been
terminated or received, as the case may be, and the Closing shall be permitted
to occur without violation thereof.
(g) A services agreement in the form of Exhibit 12(g) hereto (the
"Services Agreement"), shall have been entered into by the Seller.
(h) The Seller shall have obtained a release of all Liens on the
Division Assets (except Permitted Liens) and shall have provided Buyer with
evidence reasonably satisfactory to it thereof, including Uniform Commercial
Code termination statements for all jurisdictions where financing statements
have been filed in connection with such Liens.
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(i) The Parent and the Seller shall have delivered to Enterprises
and the Buyer:
(i) A certificate executed by the Chief Executive Officer and
the Chief Financial Officer of each of the Parent and the
Seller, dated the Closing Date, certifying the fulfillment of
the conditions specified in subsections (a) and (b) above;
(ii) An opinion of Troutman Sanders LLP, or other or
additional counsel for Seller reasonably acceptable to
Enterprises and the Buyer, dated the Closing Date,
substantially in the form of Exhibit 12(i)(ii) hereto;
(iii) Separate assignments to the Buyer of each of the
Department Agreements; and a Bill of Sale and Assignment (the
"Bill of Sale") and Instrument of Assumption of Liabilities
(the "Assumption Agreement") in substantially the forms of
Exhibit 12(i)(iii)(a) and (b), respectively, hereto; and
(iv) The Dillard's Transfer Agreement.
(j) No action, suit or proceeding shall be pending in any court or
before any Governmental Entity in which it is sought
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to restrain or prohibit the consummation of the transaction
contemplated hereby.
(k) The Parent and the Seller shall have provided such other
documents or instruments which in the reasonable opinion of counsel for
Enterprises and the Buyer are necessary or desirable to effectuate the
transaction contemplated hereby.
All of the instruments and documents to be furnished by the Parent
and the Seller at the Closing shall be in form and substance reasonably
satisfactory to counsel for Enterprises and the Buyer.
13. Closing Conditions of the Parent and the Seller. All of the
obligations of the Parent and the Seller under this Agreement are subject to the
fulfillment of each of the following conditions at or prior to the Closing, any
or all of which may be waived (in whole or in part) by the Parent and the
Seller:
(a) The representations and warranties of Enterprises and the Buyer
contained herein or in any certificate, exhibit or other document delivered
pursuant to the provisions hereof, or in connection herewith, shall be true in
all material respects as of the date when made and, except to the extent such
representations and warranties speak of an earlier date (other than the date of
this Agreement), shall be deemed to be made again at and as of the
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Closing Date and shall be true in all material respects at and as of such time.
(b) Enterprises and the Buyer shall have substantially performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Enterprises and the Buyer shall have provided to the Seller
those consents, in form reasonably satisfactory to the Seller set forth on
Schedule 13(c) and the Parent and the Seller shall have obtained the consents
set forth on Schedule 12(c).
(d) The waiting periods (and any extensions thereof) or necessary
approvals with respect to any filings under the HSR Act shall have expired, been
terminated or received, as the case may be, and the Closing shall be permitted
to occur without violation thereof.
(e) The Buyer shall have delivered to the Seller:
(i) The Division Assets Purchase Price in the manner set forth
in Section 3(a)(i) hereof;
(ii) A certificate executed by the President of Enterprises
and the Chairman of the Buyer dated the
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Closing Date, certifying the fulfillment of the
conditions specified in subsections (a) and (b)
above;
(iii) The Assumption Agreement;
(iv) An opinion of Zimet, Haines, Friedman & Kaplan, counsel
for the Buyer, dated the Closing Date, substantially in the
form of Exhibit 13(e)(iv); and
(v) The Dillard's Transfer Agreement.
(f) No action, suit or proceeding shall be pending in any court or
before any Governmental Entity in which it is sought to restrain or prohibit the
consummation of the transaction contemplated hereby.
(g) Enterprises and the Buyer shall have provided such other
documents or instruments which in the reasonable opinion of counsel for the
Seller are necessary or desirable to effectuate the transactions provided for
hereby.
All of the instruments and documents to be furnished by Enterprises
and the Buyer at the Closing shall be in form and substance reasonably
satisfactory to counsel for the Seller.
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14. Deliveries by the Parent and the Seller on the Closing Date. The
Parent and the Seller agree to deliver to Enterprises and the Buyer on the
Closing Date:
(a) The certificate of the Seller referred to in Section 12(i)(i)
hereof.
(b) The opinion of counsel to the Seller referred to in Section
12(i)(ii) hereof.
(c) The assignments referred to in Section 12(i)(iii) hereof,
together with the Bill of Sale and Assumption Agreement.
(d) The Services Agreement.
(e) A true and correct list of all merchandise "on order" as at the
Closing Date for delivery on or prior to November 30, 1997.
(f) The Dillard's Transfer Agreement.
(g) An Assignment and Assumption of Contract and Contract Amendment
in the form of Exhibit 14(g) with Mercantile ("Mercantile Assignment"), which
has been duly executed by the Seller.
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15. Deliveries by the Buyer on the Closing Date. The Buyer agrees to
deliver to the Seller on the Closing Date:
(a) The Division Assets Purchase Price to be delivered pursuant to
Section 3(a)(i) hereof.
(b) The certificate of Enterprises and the Buyer referred to in
Section 13(e)(ii) hereof.
(c) The Assumption Agreement.
(d) The opinion of counsel to the Buyer referred to in Section
13(e)(iv).
(e) The Services Agreement.
(f) The Dillard's Transfer Agreement.
(g) The Mercantile Assignment, which has been duly executed by the
Buyer.
16. Obligations of the Parent and the Seller. The Parent and the
Seller jointly and severally covenant that from the date of this Agreement until
the Closing:
(a) The Buyer and its counsel, accountants, and other
representatives (including representatives of its' financing
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sources) shall have, upon advance notice to Seller, all reasonable access during
normal business hours to all properties, books, accounts, records, contracts and
documents of or relating to the Division Assets and the Assumed Liabilities. The
Seller shall make available upon reasonable notice or cause to be made available
to the Buyer and its representatives all data and information concerning the
Division Assets and the Assumed Liabilities that may reasonably be requested by
the Buyer or its representatives. The Seller shall further cause the Division's
officers, employees and agents to cooperate fully with and will request Seller's
independent accountants and legal counsel to cooperate fully with, the Buyer and
its financing sources in connection with their examination of the Division.
Notwithstanding the foregoing, the Buyer agrees not to contact any stores or
their respective representatives, or any competitors of Seller, without the
prior written consent of the Seller in each instance.
(b) The Parent and the Seller will cause the Division to carry on
its business and activities in substantially the same manner as it previously
has been carried on, and the Parent and the Seller shall ensure that the
Division does not make or institute any methods of purchase (including without
limitation policies, procedures and practices relating to merchandise orders),
sale, lease, management, accounting, advertising, or operation that will vary
materially from those methods used by the Division as of the date of this
Agreement.
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(c) The Parent and the Seller will use their respective reasonable
efforts to preserve the business organization of the Division intact, to keep
available its present Division Employees (and, except for any group and regional
managers and field personnel of the Seller employed at or in respect of the
Dillard's Departments, not transfer or solicit or arrange for the transfer
thereof to another division or affiliate of the Seller), and to preserve its
present relationships with suppliers, customers, and others having business
relationships with the Division.
(d) The Parent and the Seller will cause the Division to continue to
carry its existing insurance insuring its assets and business, subject to
variations in amounts required by the ordinary operations of its business.
(e) The Parent and the Seller will not do, or agree to do, or permit
the Division to do, any of the following acts other than in the ordinary course
of business of the Division: (i) except as previously agreed or contracted for,
grant any increase in salaries, including any increase in commissions, payable
or to become payable by the Seller to any officer, employee, class of employees,
sales agent, or representative of the Business; (ii) except as previously agreed
or contracted for, increase the benefits payable by the Seller to any officer,
key employee, sales agent, or representative of the Business under any bonus or
pension plan or other contract or commitment; or (iii) enter into or modify
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any collective bargaining agreement to which the Seller on behalf of the
Business is or will be a party or by which it is or will be bound.
(f) With respect to transactions affecting the Division, the Parent
and the Seller will not, without the Buyer's written consent, enter into any
contract, commitment, or transaction other than in the ordinary course of
business of the Division.
(g) For a period of seven years following the Closing Date, neither
the Parent nor any entity controlled by the Parent (including, without
limitation, Seller) will engage, directly or indirectly, in any state in the
United States, in the third party retail leased jewelry department business in
any traditional department store; provided, however, this restriction shall not
apply to any business conducted by Parent (or any entity controlled by Parent)
in a traditional department store if the owner or operator of such department
store, directly or indirectly, controls, is controlled by or is under common
control with the Parent or any entity controlled by the Parent (including,
without limitation, the Seller).
(h) Prior to the Closing, the Parent and the Seller shall not (and
shall instruct their respective officers, directors, agents and other
representatives to not), directly or indirectly, encourage, solicit, initiate or
participate in discussions or
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negotiations with, or provide any information or assistance to, any corporation,
partnership, person, or other entity or group (other than the Buyer and its
representatives) concerning any merger or sale or disposition of securities or
assets (other than sales of inventory in the ordinary course of business
consistent with past practice) or similar transaction involving the sale of all
or a material portion (excluding any outlet business) of the Division (each, an
"Acquisition Proposal"), or assist or participate in, facilitate or encourage
any effort or attempt by any other person to do or seek to do any of the
foregoing.
(i) Prior to the Closing, the Seller shall maintain a consistent
inventory mix (by merchandise category/class, vendor and vendor style
classifications, portion deemed "clearance" merchandise, and allocation of
merchandise among the Departments) in accordance with the ordinary course of
business of the Acquired Business on a year-to-year basis and on a
season-to-season basis.
(j) (i) For purposes of determining Excluded
Liabilities and the rights and obligations of the
parties under Section 11 hereof, those Ad Valorem
taxes which have been assessed prior to the Closing
Date but are not due and payable prior to the
Closing Date will be allocated between the Seller
and Buyer on a pro rata basis based on the lien
date for each taxing authority, excluding states
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where the tax values are based on an average on-going value.
The Seller will remit to the Buyer copies of the tax bills
upon receipt from the appropriate taxing authorities with
detail of the Buyer's pro rata share of the tax liability. The
Buyer shall remit to the Seller its pro rata share within
thirty (30) days after receipt of the detail from the Seller.
The Seller shall be responsible for timely remittance of the
full tax liability to each taxing authority. For illustration
purposes only, Schedule 16(j) details a current estimate as of
the Closing Date of such Ad Valorem tax liability and
allocation between the Buyer and Seller.
(ii) With respect to any Division Agreement, the parties agree
that as to any amounts paid or received by either Buyer or
Seller, which relate to any period of time beginning prior to
and ending after the Closing Date, the Buyer and Seller shall
in good faith allocate such amounts between themselves on a
pro rata, daily basis for such period (with Buyer responsible
for the Closing Date) and promptly pay to the other any
amounts required in connection therewith.
ZH-81341.3
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<PAGE>
17. Confidentiality; Other Covenants. The Parent and the Seller, on
the one hand, and Enterprises and the Buyer, on the other hand, each agree that,
unless acting with the prior written consent of the other (excluding necessary
accounting disclosures and disclosures required by law), it will not at any time
hereafter disclose or use, directly or indirectly, except for the purposes of
the transactions hereunder, on behalf of itself or any other person or business
entity, any confidential and propriety information or data or trade secrets
concerning the business or activities of the other or the other's subsidiaries
or affiliates, which is divulged or discovered during the negotiations which led
to this Agreement or the pursuit or consummation of the transactions hereunder.
Such data or information shall include, but not be limited to, customer lists,
supplier lists, price lists, manufacturing and purchasing practices and
techniques, wage scales and sales policies. Notwithstanding the foregoing,
information or data concerning the Parent or the Seller, on the one hand, or
Enterprises or the Buyer, on the other hand, shall not include information or
data which: (a) at the time of disclosure is in the public domain or thereafter
enters the public domain through no wrongful act or omission of the receiving
party (or any of its affiliates), (b) is already known by the receiving party at
the time of disclosure and such information is not otherwise subject to
confidentiality obligations of the receiving party, or (c) is available to the
receiving party at the time of disclosure from a third party who, to the
receiving party's knowledge, may disclose such information without violation of
any
ZH-81341.3
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<PAGE>
confidentiality obligation. During the two (2) year period commencing on the
date hereof, each of the Parent and the Seller further agrees that it will not
directly or indirectly solicit for employment any Division Employee employed by
the Buyer pursuant hereto. The obligations of the parties under this Section 17
shall survive the Closing Date.
18. Certain Payments. If, notwithstanding the satisfaction of all
the conditions set forth in Section 12 hereof, (a) the Parent and the Seller are
prepared to close the transactions contemplated hereby, Enterprises' and the
Buyer's conditions to close have all been satisfied or waived by Enterprises
and/or the Buyer, and Enterprises and the Buyer fail to so close on or before
October 6, 1997; or (b) the Seller terminates this Agreement because of a
material breach hereof by the Buyer (which is not cured during any applicable
grace period), then the Buyer shall thereafter, within five business days after
demand by the Seller, pay to the Seller the sum of $3,000,000 in cash.
If, notwithstanding the satisfaction of all the conditions set forth
in Section 13 hereof, (a) Enterprises and the Buyer are prepared to close the
transactions contemplated hereby, the Parent's and Seller's conditions to close
have all been satisfied or waived by the Parent and/or Seller, and the Parent
and Seller fail to so close on or before October 6, 1997; or (b) the Buyer
terminates this Agreement because of a material breach hereof
ZH-81341.3
76
<PAGE>
by Parent and/or Seller (which is not cured during any applicable grace period),
then the Parent and Seller shall thereafter, within five business days after
demand by the Buyer, reimburse the Buyer for all out-of-pocket expenses incurred
by the Buyer in connection with the transactions contemplated hereby (up to a
maximum aggregate amount of $600,000).
The parties hereto acknowledge and agree that in the event one of
the foregoing events occurs, then the sole and exclusive remedy of the party
prepared to close or the terminating party, as the case may be, for monetary
damages or otherwise, with respect to or arising out of this Agreement shall be
pursuant to this Section 18.
Notwithstanding the foregoing, it is acknowledged and agreed that,
except as otherwise expressly set forth herein, each party shall bear its own
fees and expenses in accordance with the terms of Section 24(k) hereof.
The parties acknowledge and agree that this Section 18 shall not
apply in respect of any termination of this Agreement pursuant to Sections
5(b)(i), (iv), or (v).
19. Further Assurances. Enterprises, the Buyer, the Parent and the
Seller will each (a) execute and deliver such
ZH-81341.3
77
<PAGE>
instruments and take such other actions as the other may reasonably require in
order to carry out the intent of this Agreement; (b) use its reasonable efforts
to obtain the consents of all third parties, governmental authorities or others
necessary for the consummation of the transactions contemplated by this
Agreement; and (c) use its reasonable efforts so that the conditions precedent
to the obligations of the other are satisfied. Each of the Parent and the
Seller, on the one hand, and Enterprises and the Buyer, on the other hand,
agrees to use its reasonable efforts to cooperate with the other in connection
with the defense of any lawsuits or claims by third parties relating to the
operation of the Division prior to the Closing. Without limitation of the
foregoing sentence, Enterprises and the Buyer, on the one hand, and the Parent
and the Seller, on the other hand, shall provide to each other reasonable access
to their respective records relating to the Business prior to the Closing and to
their respective employees which are necessary or appropriate for the defense of
any lawsuits or claims. The Parent and the Seller, on the one hand, and
Enterprises and the Buyer, on the other hand, will reimburse the other for
out-of-pocket expenses incurred in connection with its cooperation in any such
matter. Following the Closing Date, the Parent and the Seller shall provide to
Enterprises and the Buyer reasonable access to the personnel records (excluding
medical records) of the Seller relating to the Division Employees actually hired
by Buyer.
ZH-81341.3
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<PAGE>
20. Mail. From and after the Closing Date, (a) the Parent and the
Seller will promptly forward to Enterprises and the Buyer all mail, including
checks, which the Parent or the Seller may receive and which relate to the
operation of the Acquired Business, including Division Assets and Assumed
Liabilities and (b) the Buyer will promptly forward to the Seller all mail,
including checks, which the Buyer may receive and which relate to the Excluded
Assets or Excluded Liabilities.
21. Sales, Use and Similar Taxes. All sales, use and transfer and
similar taxes arising in respect of the transactions provided for under this
Agreement shall be paid by the Seller.
22. Bulk Sales Laws. The parties hereto waive compliance with the
"bulk sales" provisions of the Uniform Commercial Code as it is in effect in any
jurisdiction in connection with the sale of the Division Assets and Dillard's
Inventories. The Parent and the Seller, jointly and severally, warrant and agree
to pay and discharge, when due, all claims of creditors which could be asserted
against any party by reason of such non-compliance (other than the Assumed
Liabilities).
23. Press Releases, Etc. No press release relating to this
Agreement, or the transactions contemplated hereby, or other announcement to the
employees, customers or suppliers of the Division, or to any other third person
or entity, will be issued or
ZH-81341.3
79
<PAGE>
made without the written approval of the Seller and the Buyer, except any public
disclosure which the Seller or the Buyer, as the case may be, in good faith
believes is required by law (in which case the parties will use all reasonable
efforts to consult prior to making such disclosure).
24. Miscellaneous Provisions.
(a) Survival. All representations and warranties made herein or in
any certificate or other instrument delivered by or on behalf of any of the
parties pursuant hereto shall survive the Closing Date, and shall continue until
March 30, 1999, provided that such time limitation shall not apply to the
matters referred to in Section 7(i) (such representations and warranties to
survive until the expiration of the statute of limitations applicable to the
Taxes in question, taking into account any extensions of such statute of
limitations). All covenants and agreements contained in this Agreement (to the
extent not required to be performed prior to Closing) shall survive the Closing.
(b) Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by personal delivery, reputable overnight courier
service or certified mail (postage pre-paid, return receipt requested), as
follows:
ZH-81341.3
80
<PAGE>
If to the Parent or Seller: If to Enterprises or the Buyer:
- --------------------------- -------------------------------
Zale Corporation Finlay Enterprises, Inc.
901 W. Walnut Hill Lane 521 Fifth Avenue
Irving, Texas 75038-1003 New York, New York 10175
Attn: Chairman Attn: President
-and-
Finlay Fine Jewelry Corporation
521 Fifth Avenue
New York, New York 10175
Attn: Chairman
With a copy to: With a copy to:
Alan P. Shor, Esq. Zimet, Haines Friedman & Kaplan
Executive Vice President 460 Park Avenue; 9th Floor
and Chief Administrative New York, New York 10022
Officer Attn: James Martin Kaplan, Esq.
Zale Corporation
901 W. Walnut Hill Lane
Irving, Texas 75038-1003
Any party may change the address to which notices, requests, demands and other
communications to such party shall be delivered personally or mailed by giving
notice thereof to the other parties hereto in the manner herein provided.
Notices shall be deemed given at the time they are delivered personally; if by
overnight courier, the next business day following the delivery thereof to such
courier (or such later date as is demonstrated by a bona fide receipt therefor);
or if given by certified mail (postage pre-paid, return receipt requested),
three days after deposit in the mail.
(c) Entire Agreement. This Agreement and the instruments,
agreements, exhibits, schedules and other documents contemplated hereby
supersede all prior discussions and agreements between the parties with respect
to the matters contained herein,
ZH-81341.3
81
<PAGE>
and this Agreement and the instruments, agreements and other documents
contemplated hereby contain the entire agreement between the parties hereto with
respect to the transactions contemplated hereby; provided, however, that the
terms of the confidentiality agreement dated February 13, 1997 between the Buyer
and the Seller shall apply to the subject matter thereof in the event this
Agreement is terminated.
(d) Waiver. Any term or condition of this Agreement may be waived at
any time by the party thereto which is entitled to the benefit thereof, but such
waiver shall only be effective if evidenced by a writing signed by such party. A
waiver on one occasion shall not be deemed to be a waiver of the same or of any
other breach on a future occasion.
(e) Amendments. This Agreement may be amended only by a writing
signed by all of the parties hereto.
(f) Execution in Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same instrument.
(g) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns. This
ZH-81341.3
82
<PAGE>
Agreement may not be assigned by any party, without the prior written consent of
the other parties hereto. This Agreement is not made for the benefit of, and
there shall be no, third party beneficiaries hereof.
(h) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts made and performed entirely within such State. Each of the parties
hereto hereby agrees that any suit, action or proceeding for the enforcement of
the award of an arbitrator pursuant to this Agreement shall be brought only in
the state courts of or federal courts sitting in the State of Delaware. Each
party hereto irrevocably consents to the jurisdiction of the state courts of and
the federal courts sitting in the State of Delaware and to service of process in
any such suit, action or proceeding being made upon such party by registered or
certified mail at the address specified for notices herein. Each party hereto
hereby waives any objection it may now or hereafter have to the venue of any
such suit, action or proceeding or any such court or that such action or
proceeding is brought in an inconvenient forum.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed a part of this Agreement.
ZH-81341.3
83
<PAGE>
(j) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
(k) Expenses. Except as otherwise expressly set forth herein, each
party hereto shall bear its own fees and expenses (including without limitation,
legal, accounting, investment banking and broker's fees), regardless of whether
or not this Agreement is terminated.
25. Special Re-apportionments. Notwithstanding anything else
contained herein to the contrary:
(a) In the event Seller pays any amounts ("Capital
Payments") for capital expenditures or any other
costs for the acquisition, renovation or repair of
fixed or capital assets of the Acquired Business
between the date hereof and the Closing, then the
$639,518 maximum amount contained in Section
6(a)(ii) hereof shall be reduced by an amount equal
to such Capital Payments and the $4,348,347 maximum
ZH-81341.3
84
<PAGE>
amount contained in Section 3(a)(i)(B) hereof shall be
increased by an amount equal to such Capital Payments (up to
$639,518 in the aggregate).
(b) In the event Buyer delivers a written request to
Seller that the delivery of all or any portion of
the on-order finished goods merchandise relating to
the Acquired Business which is scheduled to be
delivered to Seller during the month of September
1997 be deferred from September 1997 until October
1997, then (i) the Buyer shall have the right to
address such matter with the Seller's vendors
directly, and the Seller shall use all reasonable
efforts to effect such request, and (ii) the
Maximum Inventory Amount shall be reduced by an
amount (the "Deferred Invoiced Cost") equal to the
Invoiced Cost of all such merchandise for which the
parties are able to defer delivery and the Maximum
Amount contained in Section 2(a)(iv) hereof shall
be increased by such Deferred Invoiced Cost.
ZH-81341.3
85
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed on the day and year first above written.
ZALE CORPORATION
By: /s/ Alan P. Shor
-------------------------------------
Name: Alan P. Shor
Title: Executive Vice President & CAO
ZALE DELAWARE, INC.
By: /s/ Alan P. Shor
-------------------------------------
Name: Alan P. Shor
Title: Executive Vice President & CAO
FINLAY ENTERPRISES, INC.
By: /s/ Arthur E. Reiner
------------------------------
Name: Arthur E. Reiner
Title: President and Chief
Executive Officer
FINLAY FINE JEWELRY CORPORATION
By: /s/ Arthur E. Reiner
------------------------------
Name: Arthur E. Reiner
Title: Chairman and Chief
Executive Officer
86
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
---------------------------------------
AMENDMENT NO. 2, dated as of July 1, 1997, to the employment
agreement dated May 26, 1993 (as heretofore and hereafter amended, modified or
supplemented from time to time in accordance with its terms, the "Employment
Agreement"), by and between Finlay Fine Jewelry Corporation, a Delaware
corporation (the "Corporation"), and David B. Cornstein (the "Executive").
W I T N E S S E T H :
WHEREAS, the parties hereto mutually desire to amend
certain provisions of the Employment Agreement;
NOW, THEREFORE, for good and valuable consideration, the parties
hereto agree, as follows:
1. (a) The preamble to the Employment Agreement shall be amended by
deleting the clause ", President and Chief Executive Officer" from the third
"WHEREAS" clause therein.
(b) Section 2(a) of the Employment Agreement shall be amended
by deleting the clause ", President and Chief Executive Officer" from the second
sentence thereof.
(c) Section 2(b) of the Employment Agreement shall be amended
by deleting the clause ", President and Chief Executive Officer" in the first
sentence thereof.
(d) Each of Section 8(c)(i) and (ii) shall be amended by
deleting the clause ", President and Chief Executive Officer" therefrom.
(e) A new Section 8(c)A shall be added to the Employment
Agreement immediately after the text of Section 8(c) thereof, which shall read
in its entirety as follows:
"8(c)A. The Executive may elect to terminate his employment
hereunder and such termination shall be deemed to be a termination
of his employment without "cause" in the event Executive commences
service, whether on a full-time or part-time basis, as an officer,
director, commissioner, employee or assumes any other position with
a federal, state, municipal or other governmental,
quasi-governmental or regulatory agency, commission or other
authority, or assumes any other public or political office."
<PAGE>
(f) The provisions of Section 9(b) of the Employment Agreement
shall be amended so that the clause "or Section 8(c)A above" is inserted in the
first sentence thereof immediately after the clause "Section 8(c) above".
(g) The provisions of this Paragraph 1 shall be effective as
of January 30, 1996.
2. (a) Section 2(a) of the Employment Agreement shall be amended by
deleting the date "January 31, 1998" in the first sentence thereof and
substituting therefor the date "January 31, 1999" and Section 8(a) of the
Employment Agreement shall be amended by deleting the date "January 31, 1998" in
clause (iv) thereof and substituting therefor the date "January 31, 1999."
(b) Except as expressly set forth herein, the Executive shall
have no other title with the Corporation or any affiliate thereof.
(c) The provisions of this Paragraph 2 shall be effective as
of July 1, 1997.
3. Upon expiration of the term of the Employment Agreement on
January 31, 1999, the Executive shall be appointed Chairman Emeritus of
Enterprises and shall be retained in such capacity for a period of two years
thereafter.
4. Except as amended hereby, the Employment Agreement shall remain
in full force and effect, without change or modification.
5. This instrument may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this
Amendment as of the day and year first above written.
FINLAY FINE JEWELRY CORPORATION
By _____________________________
Name:
Title:
The undersigned agrees to
and accepts the foregoing
amendment:
FINLAY ENTERPRISES, INC.
By: ____________________
Name:
Title:
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINLAY FINE
JEWELRY CORPORATION FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> AUG-02-1997
<CASH> 3,236
<SECURITIES> 0
<RECEIVABLES> 29,884
<ALLOWANCES> 0
<INVENTORY> 221,393
<CURRENT-ASSETS> 263,556
<PP&E> 81,235
<DEPRECIATION> 25,141
<TOTAL-ASSETS> 419,227
<CURRENT-LIABILITIES> 197,884
<BONDS> 135,000
0
0
<COMMON> 0
<OTHER-SE> 78,634
<TOTAL-LIABILITY-AND-EQUITY> 419,227
<SALES> 282,652
<TOTAL-REVENUES> 282,652
<CGS> 137,834
<TOTAL-COSTS> 137,834
<OTHER-EXPENSES> 136,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,416
<INCOME-PRETAX> (3,391)
<INCOME-TAX> (1,143)
<INCOME-CONTINUING> (2,248)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,248)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
