SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): April 24, 1998
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Finlay Fine Jewelry Corporation
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(Exact name of registrant as specified in its charter)
Delaware 33-59380 13-3287757
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
529 Fifth Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 808-2800
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521 Fifth Avenue, New York, New York 10175
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Former name or former address, if changed since last report
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* 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
Current Report on Form 8-K.
<PAGE>
Item 5. Other Events.
On April 24, 1998, Finlay Fine Jewelry Corporation (the "Registrant"), a
wholly-owned subsidiary of Finlay Enterprises, Inc., a Delaware corporation
("Finlay Enterprises"), sold $150.0 million aggregate principal amount of its
8-3/8% Senior Notes due May 1, 2008 (the "Senior Notes"). Concurrently with the
closing of the sale of the Senior Notes, Finlay Enterprises and certain
stockholders of Finlay Enterprises ("Selling Stockholders") sold an aggregate of
1,800,000 shares of Common Stock of Finlay Enterprises (of which 567,310 shares
were sold by Finlay Enterprises (the "Equity Offering") and 1,232,690 shares
were sold by the Selling Stockholders), (ii) Finlay Enterprises sold $75.0
million aggregate principal amount of its 9% Senior Debentures due May 1, 2008
(the "Senior Debentures") and (iii) the Amended and Restated Credit Agreement
dated as of September 11, 1997, as amended, among General Electric Capital
Corporation, individually and as agent, certain other lenders and financial
institutions parties thereto, the Registrant and Finlay Enterprises, was amended
to increase the line of credit thereunder from $225.0 million to $275.0 million
and to make certain other changes (the "GECC Amendment"). In addition, the
Registrant entered into an amendment to the Gold Consignment Agreement dated as
of June 15, 1995, as amended, between the Registrant and Rhode Island Hospital
Trust National Bank (the "Gold Consignment Agreement") to (i) renew the Gold
Consignment Agreement through December 31, 2001, (ii) allow the Registrant to
obtain up to the lesser of (x) 85,000 fine troy ounces or (y) $32.0 million
worth of gold and (iii) make certain other modifications (the "RIHT Amendment").
Pursuant to the terms of the RIHT Amendment, effectiveness of certain portions
thereof is conditioned upon completion of the redemptions described below.
The net proceeds to the Registrant from the sale of the Senior Notes will
be used to redeem the Registrant's existing 10- 5/8% Senior Notes due 2003 (the
"10-5/8% Notes"), including associated premiums, and to make an intercompany
repayment of $0.9 million (as of January 31, 1998) to Finlay Enterprises. Finlay
Enterprises will use the net proceeds from the sale of the Senior Debentures and
the Equity Offering, together with the proceeds from the repayment of a note
receivable (including accrued interest thereon) of $1.3 million (as of January
31, 1998) from an executive officer and the repayment of the above- mentioned
intercompany liability by Finlay Jewelry, to redeem Finlay Enterprises' existing
12% Senior Discount Debentures due 2005, including associated premiums (the "12%
Debentures"). A formal notice of redemption specifying a May 26, 1998 redemption
date has been given by the Registrant and Finlay Enterprises with respect to the
10-5/8% Notes and 12% Debentures, respectively.
The descriptions of the terms of the Senior Notes, the GECC Amendment and
the RIHT Amendment are qualified in their entirety by reference to Exhibits 4.1,
10.1 and 10.2, respectively, attached hereto.
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<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits
1.1 Underwriting Agreement - Senior Notes.
4.1 Indenture between Finlay Fine Jewelry
Corporation and Marine Midland Bank, as
Trustee, dated as of April 24, 1998.
10.1 Amendment No. 3 dated as of April 24, 1998 to
Amended and Restated Credit Agreement dated
as of September 11, 1997, as amended, by and
among General Electric Capital Corporation,
individually and as agent, certain other
lenders and financial institutions parties
thereto, Finlay Fine Jewelry Corporation and
Finlay Enterprises, Inc.
10.2 Amendment No. 6 dated as of April 24, 1998 to
Gold Consignment Agreement dated as of June
15, 1995, as amended, between Finlay Fine
Jewelry Corporation and Rhode Island Hospital
Trust National Bank.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FINLAY FINE JEWELRY CORPORATION
Dated: May 6, 1998 By:
Name: Bruce Zurlnick
Title: Treasurer
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<PAGE>
EXHIBIT INDEX
1.1 Underwriting Agreement - Senior Notes.
4.1 Indenture between Finlay Fine Jewelry Corporation and
Marine Midland Bank, as Trustee, dated as of April 24,
1998.
10.1 Amendment No. 3 dated as of April 24, 1998 to Amended and
Restated Credit Agreement dated as of September 11, 1997,
as amended, by and among General Electric Capital
Corporation, individually and as agent, certain other
lenders and financial institutions parties thereto, Finlay
Fine Jewelry Corporation and Finlay Enterprises, Inc.
10.2 Amendment No. 6 dated as of April 24, 1998 to Gold
Consignment Agreement dated as of June 15, 1995, as
amended, between Finlay Fine Jewelry Corporation and Rhode
Island Hospital Trust National Bank.
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Finlay Fine Jewelry Corporation
8 3/8% Senior Notes due 2008
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Underwriting Agreement
April 20, 1998
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette
Securities Corporation,
NationsBanc Montgomery Securities LLC
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Finlay Fine Jewelry Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you as the several Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of $150,000,000 principal amount of the Company's
8 3/8% Senior Notes due May 1, 2008 (the "Securities").
1. Each of the Company and Finlay Enterprises, Inc., a Delaware corporation and
the parent of the Company ("Parent"), represents and warrants to, and agrees
with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-48563), as amended by
Amendments Nos. 1 and 2 thereto (the "Initial Registration Statement"), in
respect of the Securities has been filed with the Securities and Exchange
Commission (the "Commission"); such Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form;
other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which
became effective upon filing, no other document with respect to such
Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule
462(b) Registration Statement, if any, has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission to the
Company or its counsel (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act is hereinafter
called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto but excluding Form T-1 and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared effective or
such part of the Rule 462(b) Registration Statement, if any, that became or
hereafter becomes effective, each as amended at the time such part of the
registration statement became effective, are hereinafter collectively
called the
<PAGE>
"Registration Statement"; such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus";
(b) No order preventing or suspending the use of any Preliminary Prospectus has
been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements
of the Act, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and the statements made therein within the
coverage of Rule 175(b) under the Act were made by the Company with a
reasonable basis and in good faith; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus
will conform, in all material respects to the requirements of the Act and
the Trust Indenture Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date as
to the Registration Statement and any amendment thereto, and as of the
applicable filing date as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the statements made therein within
the coverage of Rule 175(b) under the Act were made by the Company with a
reasonable basis and in good faith; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(d) Neither Parent nor the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of Parent or the Company or any of its
subsidiaries, except for borrowings and repayments under the Revolving
Credit Agreement and the Gold Consignment Agreement (each as defined in the
Prospectus and as amended as described in the Prospectus) or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the business, operations, management, financial
position or condition, current assets, merchandise inventories,
stockholders' equity or results of operations of Parent and the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect"), otherwise
than as set forth or contemplated in the Prospectus;
(e) Parent and the Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
material personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by Parent and the Company and its subsidiaries; and any material
real property and buildings held under lease by Parent and the Company and
its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with
the use
<PAGE>
made and proposed to be made of such property and buildings by Parent and
the Company and its subsidiaries;
(f) Each of the Company and Parent has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; the
Company's indirect subsidiary, Societe Nouvelle d'Achat de Bijouterie -
S.O.N.A.B. ("Sonab") is duly organized and validly existing as a societe en
nom collectif in France; each other direct or indirect subsidiary of the
Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction;
(g) Parent has an authorized capitalization as set forth under the caption
"Description of Capital Stock" in the Prospectus, and all of the issued
shares of capital stock of Parent have been duly authorized and validly
issued, are fully paid and non-assessable and conform to the description of
such capital stock contained in the Prospectus; and all of the issued
shares of capital stock of the Company and each subsidiary of the Company
have been duly authorized and validly issued, are fully paid and
non-assessable and (except for directors' qualifying shares, if any, and
except as set forth in the Prospectus) are owned directly or indirectly by
Parent, free and clear of all liens, encumbrances, equities or claims;
(h) The Securities have been duly authorized by the Company and, on the Closing
Date, will have been duly executed, issued and delivered by the Company,
and when the Securities, in accordance with the provisions of the Indenture
(the "Indenture"), substantially in the form filed as an exhibit to the
Registration Statement, to be entered into by the Company and Marine
Midland Bank, as Trustee (the "Trustee"), have been authenticated by the
Trustee and delivered to and paid for by the Underwriters in accordance
with the terms of this Agreement, the Securities will be entitled to the
benefits of the Indenture and will constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles (regardless of whether enforcement is
sought in a proceeding in equity or at law); the Indenture has been duly
authorized by the Company and qualified under the Trust Indenture Act and
when duly executed and delivered by the Company and the Trustee, will
constitute a valid and legally binding instrument, enforceable against the
Company in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles (regardless of whether
enforcement is sought in a proceeding in equity or at law); and the
Securities and the Indenture will conform in all material respects to the
descriptions thereof in the Prospectus;
(i) The issue and sale of the Securities and the compliance by each of the
Company and Parent with all of the provisions of the Securities, the
Indenture and this Agreement applicable to it and the consummation of the
transactions herein and therein contemplated (i) will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, lease, license or other agreement or instrument to which Parent
or the Company or any of its subsidiaries is a party or by
<PAGE>
which Parent, the Company or any of its subsidiaries is bound or to which
and of the property or assets of Parent or the Company or any of its sub-
sidiaries is subject,except any such conflict, breach, violation or default
which has been consented to or waived in a valid and binding writing duly
executed and delivered to Parent or the Company by or on behalf of the
party granting such consent or waiver; (ii) will not result in any
violation of the provisions of Parent's or the Company's or any of its
subsidiaries' respective certificate or restated certificate of
incorporation or by-laws or restated by-laws or comparable documents and
(iii) will not result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over Parent or the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by
Parent or the Company of the transactions contemplated by this Agreement
and the Indenture, except such as have been obtained under the Act and the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under foreign or state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(j) Neither Parent nor the Company nor any of its subsidiaries is in violation
of its respective certificate or restated certificate of incorporation or
by-laws or restated by-laws or comparable documents, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease, license or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound which default
could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect;
(k) The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Senior Notes", insofar as they purport to constitute a
summary of the terms of the Securities and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and fair in all
material respects;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which Parent or the Company or any of
its subsidiaries is a party or of which any property of Parent or the
Company or any of its subsidiaries is the subject which, if determined
adversely to Parent or the Company or any of its subsidiaries, could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect; and, to the Company's and Parent's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(m) Each of the Company and Parent is not and, after giving effect to the
offering and sale of the Securities, will not be an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(n) Arthur Andersen LLP, who have certified certain consolidated financial
statements of the Company, are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(o) Parent and the Company and its subsidiaries directly or through host store
groups are subject to consent decrees, injunctions or comparable
governmental orders or decrees regarding the discount pricing and
advertising of jewelry from "regular" or "original" prices only in the
states of California, Colorado, Georgia, Oregon and Wisconsin, and Parent
and the Company and its subsidiaries are in compliance therewith and with
applicable federal and state laws with
<PAGE>
respect to such pricing and advertising practices, except for such non-
compliance previously identified in writing by the Company to the Under-
writers which could not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect;
(p) Neither Parent nor the Company nor any of its subsidiaries has received any
notice that any default by Parent or the Company or any of its subsidiaries
has occurred and is continuing under any of the license agreements with
host store groups described or identified in the Prospectus to which Parent
or the Company or any of its subsidiaries are a party and no condition
exists which could individually or in the aggregate reasonably be expected
to result in the termination or nonrenewal of any such license agreement;
each such license agreement has been duly authorized (and, in the case of
written license agreements, duly and validly executed and delivered) by and
on behalf of Parent or the Company and its subsidiaries, as the case may
be, and, assuming the due authorization (and, in the case of written
license agreements, the due and valid execution and delivery) thereof by
the other party or parties thereto, is the valid and binding obligation of
Parent and the Company, its subsidiaries and such other party or parties,
as the case may be, enforceable in accordance with its respective terms
against the respective parties thereto subject to the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium and similar laws affecting creditors' rights generally
and to general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law); and neither Parent nor the
Company nor any of its subsidiaries has received any notice (whether actual
or constructive) that the licensor thereunder is considering limiting,
suspending, revoking or non-renewing any such license; except that no
representation is made with respect to the Company's license agreement with
Liberty House as to the effect on such license agreement of the filing of a
voluntary petition by Liberty House under the Bankruptcy Code (as defined
in the Prospectus);
(q) Each of the Company and Parent has duly authorized the amendment to the
Revolving Credit Agreement that is described in the Prospectus.
Substantially contemporaneously with the Time of Delivery (as defined in
Section 4 hereof), the Company and Parent will duly execute and deliver
such amendment to the Revolving Credit Agreement. The Company has duly
authorized the amendment to the Gold Consignment Agreement that is
described in the Prospectus. Substantially contemporaneously with the Time
of Delivery, the Company will duly execute and deliver such amendment to
the Gold Consignment Agreement. Assuming the due authorization, execution
and delivery thereof by the other parties thereto, (a) the Revolving Credit
Agreement, as amended as described above, will constitute the legal, valid
and binding agreement of the Company and Parent and (b) the Gold
Consignment Agreement, as amended as described above, will constitute the
legal, valid and binding agreement of the Company, in each case,
enforceable against the Company and/or Parent, as the case may be, subject,
as to enforcement, to insolvency, reorganization, fraudulent conveyance or
transfer, moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles (regardless of
whether enforcement is sought in a proceeding in equity or at law); and
(r) Neither the Company nor Parent nor any of their respective affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes.
2. Subject to the terms and conditions herein set forth, the Company agrees
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
97.646% of the principal amount thereof, plus accrued interest, if any, from May
1, 1998 to the Time of Delivery hereunder, the principal amount of Securities
set forth opposite the name of such Underwriter in Schedule I hereto.
<PAGE>
3. Upon the authorization by Goldman, Sachs and Co., on behalf of the
Underwriters, of the release of the Securities, the several Underwriters propose
to offer the Securities for sale upon the terms and conditions set forth in the
Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of Federal (same-day) funds to the account specified by the
Company to Goldman, Sachs & Co. at least forty-eight hours in advance, by
causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at
DTC. The Company will cause the certificates representing the Securities to be
made available to Goldman, Sachs & Co. for checking at least twenty-four hours
prior to the Time of Delivery (as defined below) at the office of DTC or its
designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on April 24, 1998
or such other time and date as Goldman, Sachs & Co. and the Company may agree
upon in writing. Such time and date for delivery of the Securities is herein
called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, 37th Floor, New York, New York 10022 (the
"Closing Location"), and the Securities will be delivered at the Designated
Office, all at the Time of Delivery. A meeting will be held at the Closing
Location at 2:00 p.m., New York City time, on the New York Business Day next
preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the Time of Delivery which shall be disapproved by the
Underwriters promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or Prospectus, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or Prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
<PAGE>
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may reasonably request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction or to take
any other action which would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
offer and sale of the Securities in each jurisdiction in which the
Securities have been qualified as provided above;
(c) Prior to 12:00 noon, New York City time, on the New York Business Day next
succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Securities and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act or the Trust Indenture Act, to notify you and upon
your request to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies
as you may from time to time reasonably request of an amended Prospectus or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Securities
at any time nine months or more after the time of issue of the Prospectus,
upon your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as practicable,
but in any event not later than eighteen months after the effective date of
the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, not to (and
to cause each of its subsidiaries not to) register for sale, offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder, any
Securities or any securities that are substantially similar to the
Securities (other than the Senior Debentures (as defined in the Prospectus)
of Parent in an aggregate principal amount of $75.0 million), or any
securities of the Company or any such subsidiary of the Company convertible
into or exchangeable for securities of the Company or any such subsidiary
of the Company substantially similar to the Securities;
(f) Within the time limits prescribed by the Exchange Act, to furnish to the
holders of the Securities after the end of each fiscal year an annual
report (including a balance sheet and statements of operations, changes in
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, after the
end of each of the first three quarters of each fiscal year (beginning with
the fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company and
its subsidiaries for such quarter in reasonable detail;
<PAGE>
(g) During a period of five years from the effective date of the Registration
Statement, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders, and to deliver to you (i)
as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is
listed or quoted (such financial statements to be on a consolidated basis
to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission); and (ii) such additional information concerning the business
and financial condition of the Company or Parent as you may from time to
time reasonably request;
(h) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) If the Company elects to rely upon Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
Among Underwriters, this Agreement, the Indenture, any Blue Sky Memorandum,
closing documents (including any reasonable compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the reasonable fees and disbursements of counsel
for the Underwriters in connection with such qualification and in connection
with any Blue Sky and legal investment surveys, if any; (iv) all fees charged by
securities rating services for rating the Securities; (v) the filing fees
incident to, and the reasonable fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (vi) the cost of preparing certificates representing the Securities;
(vii) the fees and expenses of the Trustee and the Collateral Agent and any
agent of the Trustee and the Collateral Agent and the fees and disbursements of
counsel for the Trustee and the Collateral Agent in connection with the
Indenture and the Securities; (viii) all other costs and expenses incident to
the performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees
and disbursements of their counsel and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and Parent herein are, at and as of the Time of
Delivery, true and correct, the condition that each of the Company and Parent
shall have performed all of its obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m., Washington,
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or
<PAGE>
any part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) Jones, Day, Reavis & Pogue, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated the Time of Delivery, with respect to the
matters covered in paragraphs (i), (ii), (v), (vi), (vii), (x) and (xii) of
subsection (c) below as well as such other related matters as you may reasonably
request, and such counsel shall have received such documents and information as
they may reasonably request to enable them to pass upon such matters;
(c) Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Company,
shall have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto) (which opinion may be limited to the federal
laws of the United States, the laws of the State of New York and the General
Corporation Law of the State of Delaware and in giving such opinion such counsel
may state that, insofar as any opinions involve factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company or its subsidiaries and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of such
counsel's opinion), dated the Time of Delivery, in form and substance as
attached, to the effect that:
(i) Each of the Company and Parent has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) Parent has an authorized capitalization as set forth under the caption
"Description of Capital Stock" in the Prospectus, and all of the issued
shares of capital stock of Parent and the Company have been duly authorized
and validly issued, fully paid and non-assessable;
(iii)Each subsidiary of the Company (other than Sonab) has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each subsidiary of the Company (other than
Sonab) have been duly authorized and validly issued, are fully paid and
non-assessable, and (except for directors' qualifying shares, if any, and
except as otherwise set forth in the Prospectus) are owned of record
directly or indirectly by the Company, to the knowledge of such counsel,
free and clear of all liens, encumbrances and defects;
(iv) To such counsel's knowledge and other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which Parent or
the Company or any of its subsidiaries is a party or of which any property
of Parent or the Company or any of its subsidiaries is the subject which,
if determined adversely to Parent or the Company or any of its
subsidiaries, could individually or in the aggregate reasonably be expected
to have a Material Adverse Effect; and, to such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(v) This Agreement has been duly authorized, executed and delivered by the
Company and Parent;
(vi) The Securities have been duly authorized, executed, authenticated, issued
and delivered and constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture; and the
Securities and the Indenture conform in all material respects to the
descriptions thereof in the Prospectus;
<PAGE>
(vii)The Indenture has been duly authorized, executed and delivered by the
Company and, when duly authorized, executed and delivered by the other
parties thereto, will constitute a valid and legally binding instrument,
enforceable in accordance with its terms; the Indenture has been qualified
under the Trust Indenture Act;
(viii) The issue and sale of the Securities being delivered at the Time of
Delivery by the Company and the compliance by the Company and Parent with
the applicable provisions of the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, real property lease,
license or other material agreement or instrument known to such counsel to
which Parent or the Company or any of its subsidiaries is a party or by
which Parent or the Company or any of its subsidiaries is bound or to which
any of the property or assets of Parent or the Company or any of its
subsidiaries is subject, nor (b) will such action result in any violation
of the provisions of (i) the respective certificate or restated certificate
of incorporation, or respective by-laws or restated by-laws, as the case
may be, of the Company or Parent, (ii) any statute, rule or regulation
known to such counsel of any governmental agency or body having
jurisdiction over Parent or the Company or any of its subsidiaries or any
of their respective properties or (iii) any order applicable to Parent or
the Company, any of its subsidiaries or any of their respective properties
of any court, governmental agency or body known to such counsel based upon
an officer's certificate listing any such orders (which officer's
certificate shall be delivered with such opinion);
(ix) No consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required for
the issue and sale of the Securities or the consummation by the Company of
the transactions contemplated by the Indenture and this Agreement, except
such as have been obtained under the Act and the Trust Indenture Act and
such consents, approvals, authorizations, registrations or qualifications
as may be required under foreign or state securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by the
Underwriters;
(x) The statements set forth in the Prospectus under the caption "Description
of Certain Indebtedness", insofar as they purport to describe the
provisions of the documents referred to therein, under the caption
"Description of Senior Notes", insofar as they purport to constitute a
summary of the terms of the Securities, and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and fair in all
material respects;
(xi) Each of the Company and Parent is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act; and
(xii)The Registration Statement and the Prospectus and any further amendments
and supplements thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules and other
financial data included therein or omitted therefrom, as to which such
counsel need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in the opinion in
subsection (ix) of this Section 7(c), such counsel may state that such
counsel has participated in conferences at which the contents of the
Registration Statement and the Prospectus and related matters were
discussed, and, on the basis of such participation, they have no reason to
believe that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to the Time of Delivery
(other than the financial
<PAGE>
statements and related schedules and other financial data included therein
or omitted therefrom, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the Prospectus
or any further amendment or supplement thereto made by the Company prior to
the Time of Delivery (other than the financial statements and related
schedules and other financial data included therein or omitted therefrom,
as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of the Time of Delivery,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related schedules and
other financial data included therein or omitted therefrom, as to which
such counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required;
(d) Tenzer Greenblatt LLP, counsel for the Company, shall have furnished to
you their written opinion (a draft of such opinion is attached as Annex II(c)
hereto) (which opinion may be limited to the federal laws of the United States,
the laws of the State of New York and the General Corporation Law of the State
of Delaware and in giving such opinion such counsel may state that, insofar as
any opinions involve factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company or its subsidiaries and
certificates of responsible public officials, copies of which certificates will
be provided to you upon delivery of such counsel's opinion), dated the Time of
Delivery, in form and substance as attached, to the effect that:
(i) To such counsel's knowledge, neither Parent nor the Company nor any of its
subsidiaries is in violation of its respective certificate or restated
certificate of incorporation or by- laws or restated by-laws, or comparable
documents, or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound which default, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;
(e) Bonni G. Davis, Vice President, General Counsel and Secretary of the
Company, shall have furnished to you her written opinion (a draft of such
opinion is attached as Annex II(d) hereto) (which opinion may be limited to the
federal laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware and in giving such opinion Ms.
Davis may state that, insofar as any opinions involve factual matters, she has
relied, to the extent she deems proper, upon certificates of officers of the
Company or its subsidiaries and certificates of responsible public officials,
copies of which certificates will be provided to you upon delivery of Ms.
Davis's opinion), dated the Time of Delivery, in form and substance as attached,
with respect to the matters covered in paragraphs (iv) and (viii) of subsection
(c) above and paragraph (i) of subsection (d) above and, in addition, to the
effect that:
(i) Each subsidiary of the Company (other than Sonab for which no opinion need
be given) has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification or is subject to no material
liability or disability by reason of failure to be so qualified in any such
jurisdiction; each of Parent and the Company has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction in which it owns or leases properties
or conducts
<PAGE>
any business so as to require such qualification or is subject to no
material liability or disability by reason of its failure to be so
qualified in any such jurisdiction;
(ii) Parent and the Company and its subsidiaries have good and marketable title
in fee simple to all real property owned by them in each case free and
clear of all liens, encumbrances and defects except such as are described
in the Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by Parent and the Company and its subsidiaries; to such
counsel's knowledge neither Parent nor the Company nor any of its
subsidiaries is in default under any lease for real property or buildings
held under lease by Parent or the Company or its subsidiaries except for
such defaults that are not material and do not interfere with the use made
and proposed to be made of such property and buildings by Parent and the
Company and its subsidiaries; and the leases listed on Schedule III hereto
are the only real property leases to which Parent and the Company and its
subsidiaries are a party and are valid, subsisting and enforceable as
against Parent and the Company and its subsidiaries (as the case may be)
with such exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by Parent and
the Company and its subsidiaries and except that the enforceability of such
leases is subject to the effect of any applicable , insolvency,
reorganization, fraudulent conveyance or transfer, moratorium and similar
laws affecting creditors' rights generally and general equity principles
(regardless of whether enforcement is sought in a proceeding in equity or
at law) (in giving the opinion in this clause, such counsel may state that
no examination of record titles for the purpose of such opinion has been
made, and that they are relying upon a general review of the titles of
Parent and the Company and its subsidiaries, upon opinions of local counsel
and abstracts, reports and policies of title companies rendered or issued
at or subsequent to the time of acquisition of such property by Parent or
the Company or its subsidiaries, upon opinions of counsel to the lessors of
such property and, in respect of matters of fact, upon certificates of
officers of Parent or the Company or its subsidiaries;
(iii)To such counsel's knowledge (a) neither Parent nor the Company nor any of
its subsidiaries has received any notice that any default by Parent or the
Company or any of its subsidiaries has occurred and is continuing under any
of the license agreements with host store groups described or identified in
the Prospectus to which Parent or the Company or any of its subsidiaries
are a party and (b) no condition exists which could individually or in the
aggregate reasonably be expected to result in the termination or nonrenewal
of any such license agreement, except that no opinion need be given with
respect to the Company's license agreement with Liberty House as to the
effect on such license agreement of the filing of a voluntary petition by
Liberty House under the Bankruptcy Code (as defined in the Prospectus); and
(iv) To such counsel's knowledge, no legal proceedings are pending or have been
threatened against Parent or the Company or any of its subsidiaries that
are of a nature required to be disclosed in the Prospectus which are not so
disclosed therein;
(f) Dechert Price & Rhoads, French counsel to the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached as
Annex II(e) hereto) (which opinion may be limited to the laws of France and in
giving such opinion French counsel may state that, insofar as any opinions
involve factual matters, it has relied, to the extent such counsel deems proper,
upon certificates of officers of the Company or its subsidiaries and
certificates of responsible public officials, copies of which certificates will
be provided to you upon delivery of such counsel's opinion), dated the Time of
Delivery, in form and substance as attached, to the effect that:
(i) Sonab has been duly organized and is validly existing as a societe en nom
collectif in France; and
<PAGE>
(ii) all of the issued equity interests of Sonab have been duly authorized and
validly created, are fully paid and non-assessable, and are validly held of
record directly or indirectly by the Company, to the knowledge of such
counsel, free of all liens, encumbrances and defects, other than the pledge
under the Company's Revolving Credit Agreement;
With respect to all opinions provided for above in paragraphs (b) through (f) of
this Section 7 as to validity, binding effect and/or enforceability, any such
counsel may state that any such opinion as to enforceability is subject to the
effect of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and other laws of general applicability
relating to or effecting creditor rights and to general equity principles
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(h) (i) Neither Parent nor the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any strike, boycott or similar labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of Parent or the Company or any of its subsidiaries except for
borrowings and repayments under the Revolving Credit Agreement and the Gold
Consignment Agreement (each as defined in the Prospectus and as amended as
described in the Prospectus), or any change, or any development involving a
prospective change, in or affecting the business, operations, management,
financial position or condition, current assets, merchandise inventories,
stockholders' equity or results of operations of Parent and the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is in the judgment of Goldman, Sachs & Co. on behalf of the Underwriters
so material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities on the terms and in
the manner contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's or Parent's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
or Parent's debt securities;
(j) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in Parent's securities on NASDAQ or in the
Company's securities if then listed or quoted; (iii) a general moratorium on
commercial banking activities declared by either federal or New York State
authorities; or (iv) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this clause (iv) in the
judgment of Goldman, Sachs & Co. on behalf of the Underwriters makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities being delivered at the Time of Delivery on the terms and in
the manner contemplated in the Prospectus;
<PAGE>
(k) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of officers of the Company and Parent,
respectively, reasonably satisfactory to you as to the accuracy of the
representations and warranties of the Company and Parent, respectively, herein
at and as of the Time of Delivery, as to the performance by each of the Company
and Parent, of all of their respective obligations hereunder to be performed at
or prior to the Time of Delivery, and as to such other matters as you may
reasonably request, and the Company and Parent shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections (a) and (h)
of this Section; and
(l) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement;
8. (a) The Company and Parent, jointly and severally, will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company and Parent shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(b) Each Underwriter severally will indemnify and hold harmless the Company
and Parent against any losses, claims, damages or liabilities to which the
Company or Parent may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through Goldman, Sachs & Co. expressly for use therein; and will reimburse the
Company and Parent for any legal or other expenses reasonably incurred by the
Company and Parent in connection with investigating or defending any such action
or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
<PAGE>
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, which consent shall not be unreasonably withheld,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and Parent on the one hand and the Underwriters on the other from
the offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and Parent on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and Parent on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and Parent on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, Parent and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company and Parent under this Section 8 shall be
in addition to any liability which the Company and Parent may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to
<PAGE>
each officer and director of the Company and Parent and to each person, if any,
who controls the Company and Parent within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Securities on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange for the purchase
of such Securities, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Securities, or the Company notify you
that they have so arranged for the purchase of such Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Securities to be purchased at the Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of shares which such Underwriter agreed to purchase hereunder at the Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Securities which such
Underwriter agreed to purchase hereunder) of the Securities of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Securities to be purchased at the Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Securities of a defaulting Underwriter or Underwriters,
then this Agreement shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or Parent, except for the expenses
to be borne by the Company and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Parent and the several Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company
or Parent or any officer or director or controlling person of the Company or
Parent, and shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof and Parent shall not then be under any
liability to any Underwriter except as provided in Section 8 hereof; but, if for
any other reason, any Securities are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the Underwriters through
you for all out-of-pocket expenses approved in writing
<PAGE>
by you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Securities not so delivered, but the Company shall then be under no further
liability to any Underwriter except as provided in Sections 6 and 8 hereof and
Parent shall then be under no further liability to any Underwriter except as
provided in Section 8 hereof.
12. In all dealings hereunder, Goldman, Sachs & Co. shall act on behalf of
each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of
you as the Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004, Attention: Registration Department; and
if to the Company or to Parent shall be delivered or sent by mail to the address
of the Company set forth in the Registration Statement, Attention: Secretary;
provided, however, that any notice to an Underwriter pursuant to Section 8(d)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and Parent and, to the extent provided in
Sections 8 and 10 hereof, the officers, directors and controlling persons of the
Company and Parent and each person who controls any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us ten counterparts hereof, and upon the acceptance hereof by the
Underwriters, this letter and such acceptance hereof shall constitute a binding
agreement among each of the Underwriters and the Company and Parent. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement Among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Finlay Fine Jewelry Corporation
By: /s/ Barry D. Scheckner
------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Finlay Enterprises, Inc.
By: /s/ Barry D. Scheckner
------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
NationsBanc Montgomery Securities LLC
By: /s/ Goldman, Sachs & Co.
------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities to be
Underwriter Purchased
----------- --------------------
<S> <C>
Goldman, Sachs & Co.................................. 60,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation............................. 60,000,000
NationsBanc Montgomery Securities LLC................ 30,000,000
-------------
Total.................................. $150,000,000
=============
</TABLE>
<PAGE>
SCHEDULE III
New York Leases
Section 7(e)(ii)
----------------
1. Lease Agreement dated as of August 27, 1993 between F.H.E.A. Associates and
the Company
2. Lease Agreement dated as of August 19, 1993 between 529 Fifth Company and the
Company, as amended
3. Lease Agreement dated as of August 19, 1993 between 521 Fifth Avenue
Associates and the Company, as amended
4. Lease Agreement dated as of June 17, 1986 between 521 Fifth Avenue Associates
and S&L Acquisition Company L.P., as amended
5. Lease Agreement dated as of May 1, 1995 between Alvin Jacobson Realty and the
Company
6. Lease Agreement dated as of October 4, 1994 between Tanger Properties Limited
Partnership and the Company, as amended
7. Lease Agreement dated May 2, 1996 between Horizon/Glen Outlet Centers Limited
Partnership and the Company
<PAGE>
ANNEX I
DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary financial
information and schedules examined by them (and, if applicable, financial
forecasts and/or pro forma financial information, on which they have
performed more limited procedures as specified in such letter, not
constituting an examination in accordance with generally accepted auditing
standards) and included in the Prospectus or the Registration Statement
comply as to form in all material respects (or, in the case of financial
forecasts and/or pro forma financial information, on the basis of such
limited procedures, nothing came to their attention that cause them to
believe that such financial forecasts and/or pro forma financial
information do not comply as to form in all material respects) with the
applicable accounting requirements of the Act and the related published
rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute
of Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been separately furnished to the Underwriters and are attached
hereto;
(iii)If applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon, copies of which have been
separately furnished to the Underwriters and are attached hereto, and on
the basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing came
to their attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included or incorporated by reference in the Company's Annual Reports
on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them
<PAGE>
to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302 (if applicable)
402 and 503(d) (if applicable), respectively, of Regulation S-K;
(vi) They have -
(a) Inquired of certain officials of the Company who have responsibility for
financial and accounting matters as to (i) whether all significant
assumptions regarding the business combinations and financing transactions
had been reflected in the pro forma adjustments, and (ii) whether the
unaudited pro forma condensed consolidated financial statements referred to
(vi)(a) comply as to form, in all material respects, with the applicable
accounting requirements of rule 11-02 of Regulation S-X; and that those
officials stated, in response to such inquiries, that all significant
assumptions regarding the business combinations and financing transactions
had been reflected in the pro forma adjustments and that the unaudited pro
forma condensed consolidated financial statements referred to in (vi)(a)
comply as to form, in all material respects, with the applicable accounting
requirements of rule 11-02 of Regulation S-X.
(b) Compared and/or recomputed the historical financial information for the
Company included on pages [ ] and [ ] in the Registration
Statement with the applicable historical financial information for the
Company on pages F-[ ] and F-[ ], respectively, and found them to be in
agreement.
(c) Proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the unaudited pro forma condensed
consolidated financial statements.
(vii)On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(a)(i) the unaudited consolidated statements of operations, consolidated balance
sheets and consolidated statements of cash flows included in the Prospectus
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations, or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of operations, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted accounting
principles;
(b) any other unaudited statement of operations data and balance sheet items
included in the Prospectus do not agree with the corresponding items in the
unaudited consolidated financial statements from which such data and items
were derived, and any such unaudited data and items were not determined on
a basis substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included in the
Prospectus;
<PAGE>
(c) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited statement of
operations data and balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial statements
included in the Prospectus;
(d) any unaudited pro forma consolidated condensed financial information
included in the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the published rules
and regulations thereunder or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of that information;
(e) as of a specified date not more than five days prior to the date of such
letter, there have been any changes in the consolidated capital stock
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding
on the date of the latest financial statements included in the Prospectus)
or any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Underwriters, or any
increases in any items specified by the Underwriters, in each case as
compared with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(f) for the period from the date of the latest financial statements included in
the Prospectus to the specified date referred to in Clause (E) there were
any decreases in consolidated net revenues or operating profit or the total
or per share amounts of consolidated net income or other items specified by
the Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length specified
by the Underwriters, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(viii) In addition to the examination referred to in their report(s) included in
the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting
an examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Underwriters, which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Underwriters, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them
to be in agreement.
- --------------------------------------------------------------------------------
FINLAY FINE JEWELRY CORPORATION
8 3/8% SENIOR NOTES DUE MAY 1, 2008
INDENTURE
------------------------------------
Dated as of April 24, 1998
------------------------------------
Marine Midland Bank
Trustee
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310(a)(1).................................................................7.10
(a)(2).................................................................7.10
(a)(3).................................................................N.A.
(a)(4).................................................................N.A.
(a)(5).................................................................7.l0
(b)....................................................................7.10
(c)....................................................................N.A.
311(a)....................................................................7.11
(b)....................................................................7.11
(c)....................................................................N.A.
312(a)....................................................................2.05
(b)...................................................................11.03
(c)...................................................................11.03
313(a)....................................................................7.06
(b)(1).................................................................N.A.
(b)(2)...........................................................7.06; 7.07
(c).............................................................7.06; 11.02
(d)....................................................................7.06
314(a).......................................................4.03; 4.04; 11.02
(b)....................................................................N.A.
(c)(1)................................................................11.04
(c)(2)................................................................11.04
(c)(3) ................................................................N.A.
(d)....................................................................N.A.
(e)...................................................................11.05
(f)....................................................................N.A.
315(a)....................................................................7.01
(b) ............................................................7.05, 11.02
(c)....................................................................7.01
(d)....................................................................7.01
(e)....................................................................6.11
316(a)(last sentence).....................................................2.09
(a)(1)(A)..............................................................6.05
(a)(1)(B)..............................................................6.04
(a)(2).................................................................N.A.
(b)....................................................................6.07
(c)....................................................................2.13
317(a)(1).................................................................6.08
(a)(2).................................................................6.09
(b)....................................................................2.04
318(a)...................................................................11.01
(b)....................................................................N.A.
(c)...................................................................11.01
_____________________________________________________
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.................................................1
SECTION 1.02. Other Definitions..........................................15
SECTION 1.03. Terms of TIA...............................................16
SECTION 1.04. Rules of Construction......................................16
ARTICLE 2
THE DEBENTURES
SECTION 2.01. Form and Dating............................................17
SECTION 2.02. Execution and Authentication...............................17
SECTION 2.03. Registrar and Paying Agent.................................18
SECTION 2.04. Paying Agent to Hold Money in Trust........................18
SECTION 2.05. Holder Lists...............................................19
SECTION 2.06. Transfer and Exchange......................................19
SECTION 2.07. Replacement Debentures.....................................21
SECTION 2.08. Outstanding Debentures.....................................21
SECTION 2.09. Treasury Debentures........................................22
SECTION 2.10. Temporary Debentures.......................................22
SECTION 2.11. Cancellation...............................................22
SECTION 2.12. Defaulted Interest.........................................23
SECTION 2.13. Record Date................................................23
SECTION 2.14. CUSIP Number...............................................23
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. Notices to Trustee.........................................23
SECTION 3.02. Selection of Debentures to Be Redeemed.....................24
SECTION 3.03. Notice of Redemption.......................................24
SECTION 3.04. Effect of Notice of Redemption.............................25
SECTION 3.05. Deposit of Redemption Price................................25
SECTION 3.06. Debentures Redeemed in Part................................26
SECTION 3.07. Optional Redemption........................................26
SECTION 3.08. Mandatory Redemption.......................................27
SECTION 3.09. Offer to Purchase by Application of Excess
Proceeds.................................................27
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Debentures......................................29
SECTION 4.02. Maintenance of Office or Agency............................29
SECTION 4.03. Reports....................................................29
SECTION 4.04. Compliance Certificate.....................................30
SECTION 4.05. Taxes......................................................31
SECTION 4.06. Stay, Extension and Usury Laws.............................31
SECTION 4.07. Restricted Payments........................................31
SECTION 4.08. Dividend and Other Payment Restrictions
Affecting Subsidiaries...................................34
SECTION 4.09. Incurrence of Indebtedness and Issuance
of Preferred Stock.......................................35
SECTION 4.10. Asset Sales................................................38
SECTION 4.11. Equity Interests of Wholly Owned Subsidiaries..............39
SECTION 4.12. Transactions with Affiliates...............................39
SECTION 4.13. Liens......................................................40
SECTION 4.14. Corporate Existence........................................40
SECTION 4.15. Offer to Repurchase upon Change of Control.................41
SECTION 4.16. Payments for Consent.......................................41
ARTICLE 5
SUCCESSORS
SECTION 5.01. Merger, Consolidation, or Sale of Assets...................42
SECTION 5.02. Successor Corporation Substituted.................42
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default..........................................43
SECTION 6.02. Acceleration...............................................45
SECTION 6.03. Other Remedies.............................................46
SECTION 6.04. Waiver of past Defaults....................................46
SECTION 6.05. Control by Majority........................................47
SECTION 6.06. Limitation on Suits........................................47
SECTION 6.07. Rights of Holders of Debentures to Receive
Payment..................................................47
SECTION 6.08. Collection Suit by Trustee.................................48
SECTION 6.09. Trustee May File Proofs of Claim...........................48
SECTION 6.10. Priorities.................................................48
SECTION 6.11. Undertaking for Costs......................................49
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee..........................................49
SECTION 7.02. Rights of Trustee..........................................50
<PAGE>
SECTION 7.03. Individual Rights of Trustee...............................50
SECTION 7.04. Trustee's Disclaimer.......................................50
SECTION 7.05. Notice of Defaults.........................................51
SECTION 7.06. Reports by Trustee to Holders of the Notes.................51
SECTION 7.07. Compensation and Indemnity.................................51
SECTION 7.08. Replacement of Trustee.....................................52
SECTION 7.09. Successor Trustee by Merger, Etc...........................53
SECTION 7.10. Eligibility; Disqualification..............................53
SECTION 7.11. Preferential Collection of Claims Against Company..........53
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...54
SECTION 8.02. Legal Defeasance and Discharge.............................54
SECTION 8.03. Covenant Defeasance........................................54
SECTION 8.04. Conditions to Legal or Covenant Defeasance.................55
SECTION 8.05. Deposited Money and Government Securities to Be Held in
Trust; Other Miscellaneous Provisions....................56
SECTION 8.06. Repayment to Company.......................................57
SECTION 8.07. Reinstatement..............................................57
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Notes........................57
SECTION 9.02. With Consent of Holders of Notes...........................58
SECTION 9.03. Compliance with Trust Indenture Act........................59
SECTION 9.04. Revocation and Effect of Consents..........................60
SECTION 9.05. Notation on or Exchange of Notes...........................60
SECTION 9.06. Trustee to Sign Amendments, Etc............................60
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01. Application................................................60
SECTION 10.02. Guarantee..................................................61
SECTION 10.03. Limitation on Guarantor Liability..........................62
SECTION 10.04. Execution and Delivery of Subsidiary Guarantee.............62
SECTION 10.05. Guarantors May Consolidate, Etc., on Certain Terms.........63
SECTION 10.06. Releases Following Sale of Assets..........................63
SECTION 10.07. Transfers of Intangible Assets.............................63
<PAGE>
ARTICLE 11
MSCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls...............................64
SECTION 11.02. Notices....................................................64
SECTION 11.03. Communication by Holders of Notes with Other
Holders of Notes.........................................65
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.........65
SECTION 11.05. Statements Required in Certificate or Opinion..............66
SECTION 11.06. Rules by Trustee and Agents................................66
SECTION 11.07. No Personal Liability of Directors, Officers, Employees
and Stockholders...........................................66
SECTION 11.08. Governing Law..............................................66
SECTION 11.09. No Adverse Interpretation of Other Agreements..............67
SECTION 11.10. Successors.................................................67
SECTION 11.11. Severability...............................................67
SECTION 11.12. Counterpart Originals......................................67
SECTION 11.13. Table of Contents, Headings, Etc...........................67
EXHIBIT A Form of Note
EXHIBIT B Form of License Agreement
EXHIBIT C Form of Subsidiary Guarantee
EXHIBIT D Form of Supplemental Indenture
EXHIBIT E Form of Subsidiary Intercompany Note
<PAGE>
INDENTURE dated as of April 24, 1998 between Finlay Fine Jewelry
Corporation, a Delaware corporation (the "Company" or "Finlay Jewelry"), and
Marine Midland Bank, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 83/8% Senior Notes
due May 1, 2008 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person; (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person; and (iii) Indebtedness
incurred by such Person in connection with the acquisition of assets from
another Person, including Indebtedness incurred by such other Person in
connection with, or in contemplation of, such specified Person acquiring such
assets.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Paying Agent, Registrar or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than sales of inventory or accounts receivable in the ordinary course of
business consistent with past practices) provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of Section 4.15 hereof or the provisions of Article 5 hereof and not by the
provisions of Section 4.10 hereof); and (ii) the issue or sale by the Company or
any of its Subsidiaries of Equity Interests of any of the Company's
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Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $2.0 million or (b) for net proceeds in excess of $2.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary of the Company or by a Wholly Owned Subsidiary of
the Company to the Company or to another Wholly Owned Subsidiary of the Company;
(ii) an issuance of Equity Interests by a Wholly Owned Subsidiary of the Company
to the Company or to another Wholly Owned Subsidiary of the Company; (iii) a
Restricted Payment that is permitted by the provisions of Section 4.07 hereof;
(iv) any sale of any item pursuant to the Gold Consignment Agreement or any item
deemed to be Consignment Inventory immediately prior to such sale; (v) any sale
and leaseback of any assets within 60 calendar days after the acquisition of
such assets; (vi) any sale, conveyance or other disposition, without recourse,
of Receivables to a Receivables Subsidiary, provided that cash or Cash
Equivalents in an amount at least equal to the fair market value thereof is
received in consideration thereof and, provided further, that any such transfer
to an entity that is not a Receivables Subsidiary or that ceases to be a
Receivables Subsidiary shall not be exempted from the definition of "Asset Sale"
by reason of this clause (vi); and (vii) sales of surplus and other property or
equipment that has become worn-out, obsolete, damaged or otherwise unsuitable
for use in connection with the business of the Company or any Subsidiary of the
Company, as the case may be, will not be deemed to be Asset Sales. Any Asset
Sale that occurs by reason of an entity ceasing to be a Receivables Subsidiary
as contemplated in clause (vi) above shall be deemed to have been made as of the
date of such cessation.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than a day on which banking institutions in The City of New York or at a
place of payment are authorized by law, legislation or executive order to remain
closed. If a payment date is a day other than a Business Day at a place of
payment, payment may be made at that place on the next succeeding Business Day,
and no interest shall accrue on such payment for the intervening period.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership, partnership interests
(whether general or limited); and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
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any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition; (iii) certificates of deposit and Eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating
of "B" or better; (iv) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above; and (v) commercial paper having one of the two
highest ratings obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties (as defined below); (ii)
the adoption of a plan relating to the liquidation or dissolution of the Company
or Finlay Enterprises; (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50%
of the voting power of the Company; (iv) the first day on which a majority of
the members of the Board of Directors of the Company or Finlay Enterprises are
not Continuing Directors; or (v) the first day on which Finlay Enterprises
ceases to own 100% of the outstanding Equity Interests of the Company. For
purposes of this definition, any transfer of an Equity Interest of an entity
that was formed for the purpose of acquiring voting stock of the Company shall
be deemed to be a transfer of such portion of such voting stock as corresponds
to the portion of the equity of such entity that has been so transferred.
"Company" means Finlay Fine Jewelry Corporation, and any and all successors
thereto.
"Consignment Inventory" means, at any time, each item of merchandise
(including any gold content thereof) which (i) at such time is in possession of
the Company, Finlay Enterprises or any of their respective Subsidiaries as
consignee pursuant to a written consignment agreement or other consignment
arrangement including, without limitation, a consignment order or consignment
invoice, (ii) at such time is identified in computer records of the Company,
Finlay Enterprises or any of their respective Subsidiaries as being "memo" or
"consigned inventory", (iii) as of such time has not been sold, and (iv) to
which title, at such time, is retained by a consignor under such consignment
agreement or other consignment arrangement until such item of merchandise is
sold or deemed sold by the consignor to the consignee. Title to an item of
merchandise described in the foregoing sentence is deemed to be retained by such
consignor until, in accordance with the applicable consignment agreement or
other consignment arrangement, title is transferred (or deemed to be
transferred) to a buyer, the Company, Finlay Enterprises or any of their
respective Subsidiaries, regardless of whether any procedures have been
performed to protect the consignor's title with respect to such item of
merchandise.
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"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income); plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income;
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income; plus (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income; plus (v)
without duplication, the nonrecurring expenses of such Person and its
Subsidiaries relating to the Equity Offering and the Refinancing to the extent
that any such expense was deducted (and not capitalized) in computing such
Person's Consolidated Net Income; minus (vi) non-cash items increasing
consolidated revenues in determining such Consolidated Net Income for such
period, in each case on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization of a Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof; (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders; (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded; and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
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"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all Investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company or Finlay Enterprises who (i) was a
member of such Board of Directors on the date of this Indenture or (ii) was
nominated for election or elected to such Board of Directors with the approval
of two-thirds of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provisions of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature; provided that any
Capital Stock issued to employees, consultants or directors of the Company or
any of its Subsidiaries pursuant to a stock option or other compensation plan of
the Company or any of its Subsidiaries shall not be deemed to be Disqualified
Stock solely because of any mandatory repurchase features contained in such
plan, except to the extent that the repurchase obligations of the Company and
its Subsidiaries in respect thereof exceed $5.0 million in the aggregate since
the date of this Indenture.
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"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock). "Equity Offering" means
the sale by Finlay Enterprises and certain selling stockholders of an aggregate
of 1,800,000 shares of the Common Stock of Finlay Enterprises on the date of
this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Revolving Debt) in
existence on the date of this Indenture, until such amounts are repaid.
"Finlay Enterprises" means Finlay Enterprises, Inc., a Delaware corporation
and the sole stockholder of the Company.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income and shall
reflect any pro forma expense and cost reductions attributable to such
acquisitions (to the extent such expense and cost reduction would be permitted
under Regulation S-X promulgated pursuant to the Securities Act to be reflected
in pro forma financial statements included in a registration statement filed
with the Commission) and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded; and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
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such period, whether paid or accrued (including, without limitation,
amortization of original issue discount and deferred financing costs, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations); and (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period; and (iii) to the extent
not included in clause (i), any interest expense on Indebtedness of another
Person for such period that is Guaranteed by such Person or one of its
Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such Guarantee or Lien is called upon); (iv) to the
extent not included in clause (i), any costs, commissions, discounts, other fees
or charges relating to or in respect of any Receivables Subsidiary; and (v) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Subsidiary) for such period on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person for such period, expressed as
a decimal, in each case, on a consolidated basis and in accordance with GAAP;
provided, however, that in no event shall any amortization of deferred financing
costs incurred in connection with the Equity Offering or the Refinancing be
included in Fixed Charges.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture, provided,
however, that all reports and other financial information provided by the
Company to the Holders, the Trustee and/or Commission shall be prepared in
connection with GAAP, as in effect on the day of such report or other financial
information.
"Gold Consignment Agreement" means the Gold Consignment Agreement, dated as
of June 15, 1995, by and between Finlay Jewelry and Rhode Island Hospital Trust
National Bank, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, restated, renewed, supplemented, refunded, replaced or
refinanced from time to time.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each direct and indirect Subsidiary of the Company that
executes a Subsidiary Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
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"Hedging Obligation" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, currency swap agreements,
interest rate cap agreements and interest rate collar agreements, (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates and foreign exchange rates and (iii) precious metal options
and futures contracts and other precious metal hedging obligations.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as, to the extent not otherwise
included, all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. Notwithstanding the foregoing, the term "Indebtedness"
shall not include up to $3.0 million at any one time outstanding of deferred
compensation arrangements that are not evidenced by bonds, notes, debentures or
similar instruments. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest, (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due
in the case of any other Indebtedness and (iii) for purposes of calculating the
amount of Indebtedness of any Receivables Subsidiaries, the Receivables
Financing Amount relating thereto.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities of such other Persons, together with all items of
such other Persons that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interest of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided, however, that licenses of intellectual property or similar assets
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granted pursuant to and in compliance with (i) the provisions of Section 10.07
hereof or (ii) the applicable provisions of the Senior Debenture Indenture shall
not be deemed to be Liens.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sales (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Revolving Credit Agreement) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Subsidiaries (other than a Receivables Subsidiary with respect to
its own Indebtedness) (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness) or (b)
is directly or indirectly liable (as a guarantor or otherwise); and (ii) no
default with respect to which would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company or any of its Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its Stated Maturity; and (iii) as to which
the lenders have been notified in writing that they will not have any recourse
to the stock or assets of the Company or any of its Subsidiaries (other than a
Receivables Subsidiary with respect to its own Indebtedness); provided that,
notwithstanding the foregoing, the Company and any of its Subsidiaries that sell
Receivables to the Person incurring such Indebtedness shall be allowed to
provide such representations, warranties, covenants and indemnities as are
customarily required in such transactions so long as no such representations,
warranties, covenants or indemnities constitute a Guarantee of payment or
recourse against credit losses.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
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"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 11.05
hereof.
"Old Debentures" means Finlay Enterprises' 12% Senior Discount Debentures
due 2005.
"Old Notes" means the Company's 105/8% Senior Notes due 2003.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company that is evidenced by Capital Stock or
Subsidiary Intercompany Notes; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person that is
evidenced by Capital Stock or Subsidiary Intercompany Notes if as a result of
such Investment (i) such Person becomes a Wholly Owned Subsidiary of the Company
and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is
a Guarantor; (d) any capital contribution (including any transaction deemed to
be a capital contribution in accordance with GAAP) by the Company to any of its
Wholly Owned Subsidiaries; (e) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the provisions of Section 4.10 hereof; (f) advances to
vendors in the ordinary course of business consistent with past practices; (g)
any Investment existing on the date of this Indenture; (h) loans and relocation,
travel and similar advances to employees and officers of the Company or its
Subsidiaries in the ordinary course of business for bona-fide purposes
reasonably related to the business of the Company and its Subsidiaries, not in
excess of $5.0 million at any one time outstanding; (i) any acquisition,
redemption or repurchase of Senior Debentures or the Notes; (j) any Investments
relating to a Receivables Subsidiary, provided that any Investment in an entity
that ceases to be a Receivables Subsidiary shall cease to be a Permitted
Investment by virtue of this clause and shall be deemed to constitute a new
Investment as of the date of such cessation; and (k) other Investments in any
Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (k),
not to exceed $10.0 million at any time outstanding.
"Permitted Liens" means (i) Liens securing the Senior Revolving Debt that
were permitted by the terms of this Indenture to be incurred; (ii) Liens in
favor of the Company; (iii) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were in existence prior to the
<PAGE>
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds, landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens incurred in the ordinary course of business;
(vi) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by Section 4.09(b)(vi) hereof covering only the assets acquired with
such Indebtedness); (vii) Liens on Consignment Inventory; (viii) Liens under the
Gold Consignment Agreement; (ix) Liens existing on the date of this Indenture;
(x) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (xi) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Subsidiary; (xii) Liens securing Capital Lease
Obligations and purchase money Indebtedness incurred in accordance with clauses
(vi) and (vii), respectively, of the definition of Permitted Debt; provided,
however that in the case of purchase money Indebtedness (a) the Indebtedness
shall not exceed the cost of such property or assets being acquired or
constructed and shall not be secured by any property or assets of the Company or
any Subsidiary of the Company other than the property and assets being acquired
or constructed and (b) the Lien securing such Indebtedness shall be created
within 30 days of such acquisition or construction; (xiii) Liens granted to
lessors or licensors in the ordinary course of business consistent with past
practice with respect to fixtures and equipment at store locations leased or
licensed from such lessors or licensors; (xiv) Liens securing any Permitted
Refinancing Indebtedness to the extent the Indebtedness being exchanged,
extended, renewed, replaced or refunded (and such Permitted Refinancing
Indebtedness) was permitted to be so secured; (xv) zoning restrictions,
easements, rights of way, licenses and restrictions on the use of real property
or minor irregularities in title thereto, which do not materially impair the use
of such property in the normal operation of the business of the Company or any
of its Subsidiaries or the value of such property for the purpose of such
business; (xvi) Liens for judgments, attachments, seizures or levies not to
exceed $500,000 in the aggregate outstanding at any time; and (xvii) Liens on
Receivables transferred to a Receivables Subsidiary or on assets of a
Receivables Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used within 60 days after the incurrence thereof to extend, refinance,
renew, replace, defease or refund, other Indebtedness of the Company or any of
its Subsidiaries that was permitted by this Indenture to be incurred; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses,
premiums, penalties, consent fees and interest incurred in connection
<PAGE>
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary of the Company which is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (v) such Permitted Refinancing Indebtedness shall be secured (if
secured) in a manner no more adverse (including, without limitation, by way of
any increase in the amount of Indebtedness secured) to the holders of the Notes
than the terms of the Liens (if any) securing such refinanced Indebtedness.
"Person" means a natural person, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Principals" means David B. Cornstein, Arthur E. Reiner, Thomas H. Lee,
Thomas H. Lee Capital LLC, employees of Thomas H. Lee Capital LLC and
Equity-Linked Investors-II.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Stock) of Finlay Enterprises registered under the
Securities Act (other than a public offering registered on Form S-8 under the
Securities Act) after the date of this Indenture that results in net proceeds of
at least $10.0 million to Finlay Enterprises.
"Qualified Proceeds" means any of the following or any combination of the
following: (i) assets (other than cash or Cash Equivalents) or inventory that
are used or useable in the business engaged in by the Company or any of its
Subsidiaries on the date of this Indenture (or in a business reasonably related
thereto) or (ii) the Equity Interests of any Person engaged primarily in a
business similar to that of the Company or any of its Subsidiaries as of the
date of this Indenture, if, in connection with the receipt by the Company or any
Subsidiary of the Company of such Equity Interests, (a) such Person becomes a
Wholly Owned Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or any Wholly Owned
Subsidiary of the Company.
"Receivables" means, collectively, (a) the Indebtedness and other
obligations owed to the Company or any of its Subsidiaries (before giving effect
to any sale or transfer thereof pursuant to a Receivables Facility), whether
constituting an account, chattel paper, an instrument, a document or general
intangible, arising in connection with the sale of goods and/or services by the
Company or such Subsidiary, including the obligation to pay any late fees,
interest or other finance charges with respect thereto (each of the foregoing,
collectively, an "Account Receivable"), (b) all of the Company's or such
Subsidiary's interest in the goods (including returned goods), if any, the sale
of which gave rise to any Account Receivable, and all insurance contracts with
respect thereto, (c) all other security interests or Liens and property subject
thereto from time to time, if any, purporting to secure payment of any Account
Receivable, together with all financing statements and security agreements
describing any collateral securing such Account Receivable, (d) all Guarantees,
insurance and other agreements or arrangements of whatever character from time
to time supporting or securing payment of any Account Receivable, (e) all
contracts, invoices, books and records of any kind related to any Account
Receivable, (f) all cash collections in respect of, and cash proceeds of, any of
the foregoing and any and all lockboxes, lockbox accounts, collection accounts,
<PAGE>
concentration accounts and similar accounts in or into which such collections
and cash proceeds are now or hereafter deposited, collected or concentrated, and
(g) all proceeds of any of the foregoing. "Receivables Facility" means, with
respect to any Person, any Receivables securitization or factoring program
pursuant to which such Person receives proceeds pursuant to a sale, pledge or
other encumbrance of its Receivables.
"Receivables Financing Amount" means at any date, with respect to any
Receivables Facility of any Person, the sum on such date of (a) the aggregate
uncollected balances of Accounts Receivable (as defined in the definition of
"Receivables") transferred ("Transferred Receivables") in such Receivables
Facility plus (b) the aggregate amount of all collections of Transferred
Receivables theretofore received by such Person but not yet remitted to the
purchaser, net of all reserves and holdbacks retained by or for the benefit of
the purchaser and net of any interest retained by such Person and reasonable
costs and expenses (including fees and commissions and taxes other than income
taxes) incurred by such Person in connection therewith and not payable to any
Affiliate of such Person.
"Receivables Subsidiary" means any Wholly Owned Subsidiary created
primarily to purchase or finance the Receivables of the Company and/or its
Subsidiaries pursuant to a Receivables Facility, so long as it: (a) has no
Indebtedness other than Non-Recourse Debt and (b) is a Person with respect to
which neither the Company nor any of its other Subsidiaries has any direct
obligation to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results other than to
act as servicer of Receivables. If, at any time, such Receivables Subsidiary
would fail to meet the foregoing requirements as a Receivables Subsidiary, it
shall thereafter cease to be a Receivables Subsidiary for purposes of this
Indenture and any Indebtedness of such Receivables Subsidiary shall be deemed to
be incurred by a Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under provisions of
Section 4.09 hereof, the Company shall be in default of such covenant).
"Refinancing" means (i) the offering by Finlay Enterprises of the Senior
Debentures, (ii) the offering by Finlay Jewelry of the Notes, (iii) the
repurchase or redemption of the Old Debentures by Finlay Enterprises; (iv) the
repurchase or redemption of the Old Notes by Finlay Jewelry, (v) the repayment
of the original issue discount on the Old Debentures, and (vi) the proposed
amendment of the Revolving Credit Agreement to increase the line of credit
thereunder to $275.0 million and to make certain other changes.
"Related Parties" with respect to any Principal means any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or a trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest of which
consist of such Principal and/or such other Persons referred to in the
immediately preceding clause.
<PAGE>
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of September 11, 1997, among Finlay Jewelry and Finlay
Enterprises, as Borrowers (as defined therein), and General Electric Capital
Corporation, as Agent (as defined therein) and Lender (as defined therein), and
the other Lenders named therein, providing for revolving credit borrowings,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, restated, renewed, supplemented, refunded, replaced or refinanced from
time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Security and Pledge Agreement" means the Security and Pledge Agreement,
dated the date hereof, by and between Finlay Enterprises and Marine Midland
Bank, as Collateral Agent.
"Senior Debentures" means Finlay Enterprises' 9% Senior Debentures due
May 1, 2008.
"Senior Debenture Indenture" means the indenture, dated the date hereof, by
and between Finlay Enterprises and Marine Midland Bank, as trustee, relating to
the Senior Debentures.
"Senior Revolving Debt" means revolving credit borrowings under the
Revolving Credit Agreement and revolving consignments under the Gold Consignment
Agreement and, if any, a substantially similar gold consignment agreement
pursuant to Section 4.09(b)(iv)(y)(b) hereof.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of share of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
<PAGE>
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Intercompany Notes" means the intercompany notes, subordinate
(in accordance with the terms of this Indenture) in right of payment to all
existing Indebtedness of the issuer (other than Indebtedness which by its terms
is subordinate in right of payment to other Indebtedness of such issuer), issued
by the Company or a Subsidiary of the Company in favor of the Company or a
Subsidiary of the Company to evidence advances by the Company or a Subsidiary of
the Company, in each case, in the form attached as Exhibit E to this Indenture.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated as of
November 1, 1992, between the Company and Finlay Enterprises.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS 77aaa-77bbbb), as
in effect on the date on which this Indenture is qualified under the TIA.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction" ..........................................4.12
"Asset Sale Offer"................................................3.09
"Authentication Order" ...........................................2.02
"Change of Control Offer" ........................................4.15
"Change of Control Payment" ......................................4.15
"Change of Control Payment Date" .................................4.15
"Commission" .....................................................4.03
"Covenant Defeasance" ............................................8.03
"Definitive Note" ................................................2.01
<PAGE>
"Event of Default" ...............................................6.01
"Excess Proceeds" ................................................4.10
"Global Note" ....................................................2.01
"incur" ..........................................................4.09
"Legal Defeasance" ...............................................8.02
"Offer Amount"....................................................3.09
"Offer Period" ...................................................3.09
"Paying Agent" ...................................................2.03
"Payment Default" ................................................6.01
"Permitted Debt"..................................................4.09
"Purchase Date" ..................................................3.09
"Registrar" ......................................................2.03
"Restricted Payments".............................................4.07
SECTION 1.03. TERMS OF TIA.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees, if any, means the
Company and the Guarantors, respectively, and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
<PAGE>
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions;
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or
rules adopted by the Commission from time to time; and
(7) words implying the feminine or masculine gender shall be deemed to
include all genders.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, and each Guarantor (if any),
by its execution and delivery of its Subsidiary Guarantee, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form (each a "Global Note") shall
be substantially in the form of Exhibit A attached hereto (including the
"Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes
issued in definitive form (each a "Definitive Note") shall be substantially in
the form, if any, of Exhibit A attached hereto (but without the "Schedule of
Exchanges of Interests in Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and each
shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
<PAGE>
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an Officer
(an "Authentication Order"), authenticate Notes for original issue up to the
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with Section 7.7 hereof. The Company
or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints the Depository Trust Company to act as
Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
<PAGE>
or the Trustee all money held by the Paying Agent for the payment of principal,
premium, if any, or interest on the Notes, and will notify the Trustee of any
default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA S 312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee at least seven Business
Days before each interest payment date and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of the Holders of Notes and
the Company shall otherwise comply with TIA S 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary, (ii)
the Company in its sole discretion determines that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee, or (iii) there shall have occurred and be
continuing an Event of Default. Upon the occurrence of any of the preceding
events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Except as set forth in the second sentence of this Section 2.06(a),
every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b) hereof.
(b) Transfer and Exchange of Beneficial Interests in Global Notes. The
transfer and exchange of beneficial interests in Global Notes shall be effected
through the Depositary, in accordance with the provisions of this Indenture and
<PAGE>
the Applicable Procedures. No written orders or instructions shall be required
to be delivered to the Registrar to effect the transfers described in this
Section 2.06(b).
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes. Any
contrary provision hereof notwithstanding, no Definitive Notes shall be issued
or exchanged for beneficial interests in any Global Note except upon the
satisfaction of the conditions set forth in Section 2.06(a)(i), (ii) or (iii)
hereof.
(d) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(d), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his or her attorney, duly authorized in writing. Upon receipt of a request to
register such a transfer, the Registrar shall register the Notes pursuant to the
instructions from the Holder thereof.
(e) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction.
(f) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to an owner of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06 and 9.05
hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
<PAGE>
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption under
Section 3.02 hereof and ending at the close of business on the day of selection,
(B) to register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part or (C) to register the transfer of or to exchange a Note
between a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and for
all other purposes, and none of the Trustee, any Agent or the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
<PAGE>
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Affiliate of the Company, shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Notes that are to be acquired by the Company, any
Subsidiary of the Company or an Affiliate of the Company pursuant to an exchange
offer, tender offer or other agreement shall not be deemed to be owned by the
Company, such Subsidiary of the Company or an Affiliate of the Company until
legal title to such Notes passes to the Company or such Subsidiary or Affiliate,
as the case may be.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
<PAGE>
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of the
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA
S316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number and, if it does
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed, and (iv) the redemption price. In addition, in the case of
a redemption pursuant to the provisions of Section 3.07(a) hereof, if the
obligations of the Company in respect of such redemption are subject to the
provisions of Section 3.04(b) hereof, such Officer's Certificate shall so state.
<PAGE>
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail to its registered address, a notice of redemption
to each Holder whose Notes are to be redeemed .
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed;
<PAGE>
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes; and
(i) in the case of a notice of redemption pursuant to the provisions of
Section 3.07(a) hereof subject to revocation in accordance with the provisions
of such Section, that the Company reserves the right to revoke such notice of
redemption at any time not later than the date which is ten days prior to the
date of redemption specified in such notice.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice pursuant to this
Section 3.03.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
(a) Subject to the provisions of Section 3.04(b) hereof, (i) once notice of
redemption is mailed in accordance with Section 3.03 hereof, Notes called for
redemption become irrevocably due and payable on the redemption date at the
redemption price, and (ii) a notice of redemption may not be conditional.
(b) In the case of a notice of redemption pursuant to the provisions of
Section 3.07(a) hereof which is revoked in accordance with the provisions of
such Section, (i) the Notes shall not become due on the redemption date
specified in such revocable notice of redemption, (ii) the Company shall not be
required to pay the redemption price or, unless the proposed redemption date was
also a semi-annual interest payment date, any accrued interest in respect of the
Notes, on such date and (iii) the principal of the Notes shall remain due and
payable as if such revocable notice of redemption had not been given.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of and accrued interest on all
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
<PAGE>
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered. SECTION OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to May 1, 2003. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003.....................................................104.188%
2004.....................................................102.792%
2005.....................................................101.396%
2006 and thereafter .....................................100.000%
provided, however, that if the Company, at its option, specifies in the notice
of redemption provided for in this Section 3.07(a) that such notice is
revocable, then the Company may revoke such notice at its further option at any
time on or prior to the date which is 10 days prior to the redemption date
specified in such notice (provided such notice so specifies) by providing a
notice of revocation to the Trustee on or prior to the date on which the
Company's revocation right expires (and the Trustee shall promptly mail such
notice to the Holders by first class mail).
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
until May 1, 2001, the Company may on any one or more occasions redeem up to
$50.0 million in aggregate principal amount of Notes at a redemption price of
108.375% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date, with the net cash proceeds of Public
Equity Offerings by the Company; provided that at least $100.0 million in
aggregate principal amount of Notes remains outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided, further, that such redemption shall occur within
120 days of the date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth in Sections 4.10 and 4.15 hereof, the Company shall not
be required to make mandatory redemption payments with respect to the Notes.
There are no sinking fund payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(c) the Offer Amount, the purchase price and the Purchase Date;
(d) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(e) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(f) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
<PAGE>
(g) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(h) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his or her election to have such Note purchased;
(i) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(j) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof. Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
at the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the Securities
and Exchange Commission (the "Commission"), so long as any Notes are
<PAGE>
outstanding, the Company shall furnish to the Trustee and, upon receipt thereof,
the Trustee shall mail to the Holders of Notes, all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, in each case
within the time periods specified in the Commission's rules and regulations. In
addition, whether or not required by rules and regulations of the Commission,
the Company shall file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. Any materials required to be furnished to
Holders of Notes by this Section 4.03 shall discuss, in reasonable detail,
either on the face of the financial statements included therein or in the
footnotes thereto and in any Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and the Guarantors, if any, separate from the
financial condition and results of operations of the other Subsidiaries of the
Company. The Company and each Guarantor, if any, shall also comply with the
provisions of TIA S314(a).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes are
prohibited or, if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe (i) that the Company has
violated any provisions of Article 4 (other than Sections 4.02, 4.03 (except as
set forth below), 4.04 and 4.06, as to which no belief need be expressed) or
Article 5 hereof or, if any such violation has occurred, specifying the nature
and period of existence thereof or (ii) that the information contained in the
Company's filings on Forms 10-Q and 10-K failed to comply in any material
respect with the requirements of Regulations S-K and S-X under the Securities
Act insofar as they relate to accounting matters or, if any such filing has
<PAGE>
failed to comply in any material respect with such Regulations, specifying the
nature of such violations; it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company hereby, and each of the Guarantors by execution and delivery of
its Subsidiary Guarantee, covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company and each of the
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of the
Company's Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable solely to the Company or any Wholly Owned Subsidiary of
the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests in the Company or any Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company);
<PAGE>
(iii) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is subordinated
to the Notes or any Guarantee thereof, other than a payment of interest or
principal at the Stated Maturity for such payment; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(x) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(y) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the provisions of
Section 4.09(a) hereof; and
(z) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date of
this Indenture (excluding Restricted Payments permitted by the provisions of
Sections 4.07(b)(ii), (iii) and (vi) (to the extent that payments to Finlay
Enterprises pursuant to the Tax Allocation Agreement are less than or equal to
the total tax liabilities of the Company and its Subsidiaries that would be
payable if the Company and its Subsidiaries were to file a separate consolidated
return) hereof), is less than the sum of (1) 50% of the Consolidated Net Income
of the Company (which Consolidated Net Income shall first be reduced by the
amount of any payments to Finlay Enterprises of the type described in Section
4.07(b)(viii) hereof) for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of this
Indenture to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (2) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale since the date of this Indenture of, or
capital contributions with respect to, Equity Interests of the Company, or of
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities) sold to
a Subsidiary of the Company and other than Disqualified Stock or debt securities
that have been converted into Disqualified Stock), plus (3) to the extent that
any Restricted Investment that was made after the date of this Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (4) 100% of any dividends, distributions or other interest actually
received in cash by the Company after the date of this Indenture from a
Subsidiary of the Company, the Net Income of which Subsidiary has been excluded
from the computation of Consolidated Net Income; plus (5) $7.5 million.
<PAGE>
(b) The provisions of Section 4.07(a) hereof will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
for purposes of Section 4.07(a)(z)(2) hereof;
(iii) the defeasance, redemption or repurchase of subordinated Indebtedness
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness or the substantially concurrent sale (other than to a Subsidiary of
the Company) of Equity Interests of the Company (other than Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such defeasance, redemption or repurchase shall be excluded for purposes of
Section 4.07(a)(z)(2) hereof;
(iv) payments to Finlay Enterprises to permit the substantially concurrent
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Finlay Enterprises held by any officer, employee, consultant
or director of Finlay Enterprises or any of its Subsidiaries, or by the estate
of any such Person, pursuant to any equity subscription, stock option,
employment or similar agreement upon the death, retirement or termination, as
the case may be, of such Person; provided that, the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $3.0 million during any twelve-month period (which amount shall not be
cumulative), plus (A) the aggregate cash proceeds received by Finlay Enterprises
during such twelve-month period from any reissuance of Equity Interests by
Finlay Enterprises to any officer, employee, consultant or director of Finlay
Enterprises or any of its Subsidiaries, plus (B) the aggregate amount, if any,
paid during such twelve-month period in connection with the repurchase,
redemption, retirement or acquisition of Equity Interests of Finlay Enterprises
pursuant to any one or more agreements between Finlay Enterprises and Arthur E.
Reiner as in effect on the date of this Indenture, and, provided further, no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction;
(v) purchases of Equity Interests upon cashless exercise of options, to the
extent cashless exercise is permitted under the terms of the relevant stock
option agreement and of the incentive plan pursuant to which such options were
issued;
(vi) payments to Finlay Enterprises pursuant to the Tax Allocation
Agreement, as it may be amended from time to time in a manner that is not
materially adverse to the Company;
(vii) payments to Finlay Enterprises in an amount not to exceed in any
fiscal year the greater of $1.0 million and an amount equal to 0.25% of net
<PAGE>
sales for the immediately preceding fiscal year (without cumulation) in order to
pay expenses incurred by Finlay Enterprises in the ordinary course of business;
(viii) payments to Finlay Enterprises to enable Finlay Enterprises to pay
when due accrued but unpaid interest on the Senior Debentures, provided no
Default or Event of Default then exists and provided further that such amounts
are promptly used by Finlay Enterprises to pay such interest; and
(ix) required purchases of subordinated Indebtedness upon a Change of
Control or similar event constituting a "change in control" for purposes of the
agreement or agreements governing such subordinated Indebtedness, provided that,
prior to making any such purchases of such Subordinated Indebtedness, the
Company makes a Change of Control Offer and makes the Change of Control Payments
on the Change of Control Payment Date (in each case, whether or not otherwise
required to do so by this Indenture) that would be required if a Change in
Control had occurred.
(c) In determining whether any Restricted Payment is permitted by this
Section 4.07, the Company may allocate or reallocate any portion or all of such
Restricted Payment among the clauses (i) through (ix) of Section 4.07(b) hereof
or among such clauses and Section 4.07(a) hereof, including clauses (x), (y) and
(z), provided that, after giving effect to such allocation or reallocation, all
such Restricted Payments, or allocated portions thereof, would be permitted
under the various provisions of such Sections.
(d) The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may be,
pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined by the Board of Directors, whose
resolutions with respect thereto shall be set forth in Officers' Certificate
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accountant, appraisal or investment banking firm of
national standing if such fair market value exceeds $10.0 million. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, which calculations shall be based upon the
Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of the
Company to (i)(a) pay dividends or make any other distributions to the Company
or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries; (ii) make loans or
advances to the Company or any of its Subsidiaries; or (iii) transfer any of its
<PAGE>
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date hereof, (b) the Revolving Credit Agreement
and the Gold Consignment Agreement as in effect as of the date hereof, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Agreement and the Gold Consignment Agreement as in effect on the date,
(c) this Indenture and the Notes, and the Senior Debenture Indenture and the
Senior Debentures, (d) applicable law, (e) any instrument governing Indebtedness
or Capital Stock of a Person acquired by the Company or any of its Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms hereof to be incurred, (f) customary non-assignment
provisions in leases and other contracts entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in the beginning of this clause (iii) on the property so
acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, (i) Permitted Liens, (j) any instrument binding
upon a Receivables Subsidiary, provided that such instrument does not bind the
Company or any other Subsidiary of the Company or any of their respective
properties or assets or (k) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company
(i) shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guaranty or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and
(ii) shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and its Subsidiaries may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
<PAGE>
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
(b) The provisions of Section 4.09(a) hereof shall not apply to any of the
following (collectively, "Permitted Debt"):
(i) the incurrence by the Company or any of its Subsidiaries of revolving
credit Indebtedness and letter of credit obligations pursuant to the Revolving
Credit Agreement in an aggregate principal amount not to exceed at the time of
incurrence thereof the greater of (x) $275.0 million or (y) 70% of inventory
plus 85% of accounts receivable (each as determined in accordance with GAAP, but
excluding accounts receivable that are past due by more than 60 days, other than
by reason of any Bankruptcy Law) at any one time outstanding, provided that such
$275.0 million specified in clause (i)(x) above shall be permanently reduced by
the aggregate amount of Indebtedness of all Receivables Subsidiaries of the
Company and its Subsidiaries;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iv) the incurrence by Finlay Jewelry of Indebtedness or other obligations
in an aggregate principal amount of up to the greater of (x) $37.0 million and
(y) 90% of the fair market value of the fine gold content of specified
Consignment Inventory eligible to be consigned under (a) the Gold Consignment
Agreement or (b) a substantially similar gold consignment agreement that Finlay
Jewelry may enter into subsequent to the date of this Indenture which provides
for the transfer of title to the gold content of Consignment Inventory from the
relevant vendor to a gold consignor; provided that such $37.0 million specified
in clause (x) above shall be permanently reduced by the aggregate amount of all
Net Proceeds of Asset Sales applied to repay such Indebtedness pursuant to
Section 4.10(b)(i) hereof;
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations in aggregate principal
amount not to exceed $4.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by mortgage financings or purchase money obligations,
in each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $4.0 million at any time outstanding;
(vii) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness;
(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among Finlay Enterprises, the Company and
any of its Wholly Owned Subsidiaries; provided, however, that (x) if the Company
<PAGE>
is the obligor on such Indebtedness, such Indebtedness is expressly subordinate
(in accordance with the terms of this Indenture) to the payment in full of all
Obligations with respect to the Notes and (y)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held by
a Person other than Finlay Enterprises, the Company or a Wholly Owned Subsidiary
of the Company and (B) any sale or other transfer of any such Indebtedness to a
Person that is not Finlay Enterprises, the Company or a Wholly Owned Subsidiary
of the Company shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate Indebtedness that is permitted by the
terms of this Indenture to be outstanding;
(x) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging commodity
price risk, entered into in the ordinary course of business and not for
speculative purposes, to protect against fluctuations in the prices of raw
materials used in the Company's or such Subsidiary's business in amounts
reasonably related to such business;
(xi) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging foreign
exchange rate risk, entered into in the ordinary course of business and not for
speculative purposes and in amounts reasonably related to the businesses of the
Company and its Subsidiaries;
(xii) the incurrence by the Company or any of its Subsidiaries of Acquired
Debt of a Person incurred prior to the date upon which such Person was (or such
Person's assets were) acquired by the Company or any of its Subsidiaries
(excluding Indebtedness incurred by such Person in connection with, or in
contemplation of, such acquisition) in an aggregate principal amount not to
exceed $10.0 million at any one time outstanding;
(xiii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of worker's compensation claims, self-insurance
obligations, performance, surety and similar bonds and completion guarantees
provided by the Company or any of its Subsidiaries in the ordinary course of
business;
(xiv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from any agreement entered into by the Company or any of
its Subsidiaries providing for indemnification, purchase price adjustment or
similar obligations, in each case incurred or assumed in connection with any
asset sale;
(xv) the incurrence of Indebtedness by the Company or any of its
Subsidiaries in connection with a Guarantee of any Indebtedness of the Company
or any of its Subsidiaries that was permitted to be incurred by another
provision of this Section 4.09;
(xvi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from the honoring by a bank or other financial institution
<PAGE>
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is extinguished within five
Business Days of incurrence; and
(xvii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of this
Section 4.09(b) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $40.0 million.
(c) For purposes of determining compliance with the provisions of Section
4.09(b), in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Permitted Debt described in Sections 4.09(b)(i)
through (xvii) above or is entitled to be incurred pursuant to Section 4.09(a)
hereof, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with the provisions of this Section
4.09 and such item of Indebtedness will be treated as having been incurred
pursuant to only one of such clauses or pursuant to Section 4.09(a) hereof.
Indebtedness permitted to be incurred pursuant to Sections 4.09(b)(i) through
(xvii) above may be incurred pursuant to one agreement or several agreements
with one lender or several lenders.
SECTION 4.10 ASSET SALES.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
engage in an Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Subsidiary is in
the form of (a) cash or Cash Equivalents or (b) Qualified Proceeds, provided,
that the aggregate fair market value of Qualified Proceeds that may be received
pursuant to this clause (ii)(b) shall not exceed an aggregate of $10.0 million
after the date of this Indenture; provided further, that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary of the Company (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are promptly (and in any event, in not more than 30 days) converted by the
Company or such Subsidiary into cash or Cash Equivalents (to the extent of the
cash or Cash Equivalents received), shall be deemed to be cash for purposes of
this provision.
(b) Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds at its option to (i) repay
revolving indebtedness or other obligations either under the Revolving Credit
Agreement or the Gold Consignment Agreement (or a substantially similar gold
consignment agreement pursuant to Section 4.09(b)(iv)(y)(b) hereof) or a
combination thereof (and to correspondingly permanently reduce revolving
borrowing commitments or revolving consignment commitments or a combination
<PAGE>
thereof with respect thereto) or (ii) the acquisition of a controlling interest
in another business, the making of capital expenditures or the acquisition of
other assets used or useable, in each such case, in the business engaged in by
the Company or any of its Subsidiaries on the date hereof or in a business
reasonably related thereto. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Senior Revolving Debt or otherwise
make an Investment of such Net Proceeds in any manner that is not prohibited by
the terms of this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this Section 4.10(b)
will be deemed to constitute "Excess Proceeds". When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company shall make an offer to all
Holders of Notes (an "Asset Sale Offer") in accordance with the provisions of
Section 3.09 hereof to purchase the maximum principal amount of Notes that may
be purchased out of such Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company shall make an offer to all holders of Senior Debentures in
accordance with the provisions of Section 3.09 hereof and on the same terms and
conditions offered to Holders of Notes to purchase the maximum principal amount
of Senior Debentures that may be purchased out of the remaining Excess Proceeds.
To the extent that the aggregate amount of Senior Debentures tendered pursuant
to any such offer is less than the remaining Excess Proceeds, the Company or any
of its Subsidiaries may use any remaining Excess Proceeds for general corporate
purposes or otherwise make an Investment of such remaining amounts in any manner
that is not prohibited by this Indenture. If the aggregate principal amount of
Notes (or Debentures, as the case may be) surrendered by Holders (or holders)
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes (or Debentures) to be purchased on a pro rata basis.
SECTION 4.11. EQUITY INTERESTS OF WHOLLY OWNED SUBSIDIARIES.
The Company (a) shall not, and shall not permit any Wholly Owned Subsidiary
of the Company to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of the Company to any Person (other
than to the Company or to a Wholly Owned Subsidiary of the Company), unless (i)
such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Subsidiary and (ii) the Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the provisions of Section 4.10 and, if applicable pursuant to
the provisions of Section 4.10 hereof, Section 3.09 hereof and (b) shall not
permit any Wholly Owned Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or to a
Wholly Owned Subsidiary of the Company.
SECTION 4.12 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to or Investment in, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
<PAGE>
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution approved by a majority of
the disinterested members of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, an opinion issued by an accounting, appraisal or investment banking
firm of national standing as to the fairness of such Affiliate Transaction, from
a financial point of view, to the Holders; provided that (a) any employment,
deferred compensation, stock option, noncompetition, consulting, indemnification
or similar agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (b) transactions between or among the Company and/or
its Wholly Owned Subsidiaries, (c) Restricted Payments and Permitted Investments
that are permitted by the provisions of Section 4.07 hereof, (d) any payments
due to the Thomas H. Lee Capital LLC or Desai Capital Management Incorporated
under the Lee Management Agreement or the Desai Management Agreement, each as
amended as of the date hereof, (e) the performance by the Company of its
obligations under the Stockholders' Agreement and the Registration Rights
Agreement, each as amended as of the date hereof, (f) any payments by or to the
Company or any Wholly Owned Subsidiary of the Company pursuant to the terms of
the Tax Allocation Agreement, as amended as of the date hereof, (g) transfers,
conveyances, sales, leases or other dispositions of Receivables to a Receivables
Subsidiary, and (h) contracts, agreements and understandings in existence in
writing on the date hereof and as in effect on such date, in each case, shall
not be deemed Affiliate Transactions.
SECTION 4.13 LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or otherwise cause or suffer to
exist or become effective any Lien of any kind, other than Permitted Liens, upon
any of their property or assets, now owned or hereafter acquired, or any income
or profits therefrom or assign or convey any right to receive income therefrom,
securing Indebtedness or trade payables, unless all payments due hereunder and
under the Notes are secured on an equal and ratable basis with the obligations
so secured until such time as such obligations are no longer secured by a Lien.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
<PAGE>
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(cc) Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Change of Control
Payment").
(dd) Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by this Section 4.15, which procedures shall be
described in such notice. The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
(ee) On a date that is at least 30 but no more than 60 days from the date
on which the Company mails notice of the Change of Control (the "Change of
Control Payment Date"), the Company shall, to the extent lawful, (1) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (2) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Notes or portions thereof so
tendered and (3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to each Holder of Notes so tendered the Change of
Control Payment for such Notes, and the Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each tendering Holder a new
Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above shall apply whether or not
any other provision hereof is applicable.
(ff) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and purchases all Notes validly tendered
and not withdrawn under such Change of Control Offer.
<PAGE>
SECTION 4.16. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and hereunder
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) shall have Consolidated Net Worth
immediately after the transaction equal to or greater than 90% of the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
Section 4.09(a) hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
<PAGE>
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) default for 30 days in the payment when due of interest on the Notes;
(b) default in payment when due of the principal of or premium, if any, on
the Notes;
(c) failure by the Company to comply with the provisions of Sections 3.09,
4.10 or 4.15 or Article 5 hereof;
(d) failure by the Company for 45 days after notice to comply with any of
its other covenants hereunder or under the Notes;
(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (including any
Indebtedness the payment of which is guaranteed by the Company or any of its
Subsidiaries) other than a Receivables Subsidiary whether such Indebtedness or
guarantee now exists, or is created after the date hereof, which default:
(i) is caused by a failure to pay principal or a premium, if any, on such
Indebtedness at the Stated Maturity for such payment of principal or premium, if
any, or such later date as has been agreed in a writing (provided such writing
is entered into prior to such Stated Maturity) by the parties to the
documentation relating to such Indebtedness (a "Payment Default") or
(ii) results in the acceleration of such Indebtedness prior to its express
maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$12.5 million or more;
(f) failure by the Company or any of its Subsidiaries other than a
Receivables Subsidiary to pay final judgments aggregating in excess of $12.5
million, which judgments are not paid, discharged or stayed for a period of 60
days (or 90 days if prior to such sixtieth day the Company has delivered to the
Trustee an Officers' Certificate attesting that a financially responsible
insurance company of recognized national standing has acknowledged in writing
complete liability for such judgment and attached a copy of such acknowledgment
thereto);
<PAGE>
(g) repudiation by any Subsidiary of its obligations under any Subsidiary
Guarantee or, except as permitted hereunder, any Subsidiary Guarantee shall be
held in a judicial proceeding to be unenforceable or invalid in any material
respect or shall cease to be in full force and effect;
(h) the Company or any of its Subsidiaries (other than a Receivables
Subsidiary) within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Subsidiaries (other
than a Receivables Subsidiary);
(ii) appoints a custodian of the Company or any of its Subsidiaries or for
all or substantially all of the property of the Company or any of its
Subsidiaries (other than a Receivables Subsidiary); or
(iii) orders the liquidation of the Company or any of its Subsidiaries
(other than a Receivables Subsidiary);
and the order or decree remains unstayed and in effect for 60 consecutive days.
SECTION 6.02. ACCELERATION.
(a) If any Event of Default occurs and is continuing (other than as
specified in Sections 6.01(h) or (i)), the Trustee or the Holders of at least
25% in principal amount of the then outstanding Notes by written notice to the
Trustee and the Company may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
<PAGE>
arising from Sections 6.01(h) or (i) hereof, with respect to the Company, any
Significant Subsidiary of the Company or any group of its Subsidiaries that,
taken together, would constitute a Significant Subsidiary of the Company, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce this Indenture or the Notes except as
provided in this Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
(b) If an Event of Default occurs on or after May 1, 2003 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law, anything in this Indenture or in the Notes to the contrary notwithstanding.
If an Event of Default occurs prior to May 1, 2003 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable in an amount, for each of the
years beginning on May 1 of the years set forth below, as set forth below
(expressed as a percentage of the principal amount to the date of payment that
would otherwise be due but for the provisions of this sentence):
Year Percentage
---- ----------
1998 ..............................................108.375%
1999 ..............................................107.538%
2000 ..............................................106.700%
2001 ..............................................105.863%
2002 ..............................................105.025%
2003 ..............................................104.188%
(c) In the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of a Payment Default
or the acceleration of any Indebtedness described in Section 6.01(e) hereof, the
declaration of acceleration of the Notes shall be automatically annulled if
(i) any Payment Default described in clause (i) of such Section has been
cured or waived and
(ii) the holders of any accelerated Indebtedness described in clause (ii)
of such Section have rescinded the declaration of acceleration in respect of
such Indebtedness provided in each such case that (a) such cure, waiver or
rescission of such declaration of acceleration shall have been made in writing
within 30 days of the date of such Payment Default or declaration, as the case
may be, and (b) the annulment of the acceleration of such Notes would not
conflict with any judgment or decree of a court of competent jurisdiction and
(c) all existing Events of Default, except nonpayment of principal or interest
<PAGE>
on the Notes that became due solely because of the acceleration of the Notes,
have been cured or waived.
(d) A Default under Section 6.01(d) hereof is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes give written notice to the Company of the default and the
Company does not cure the Default within the period provided therein. The notice
must specify in reasonable detail the Default, demand that it be remedied and
state that the notice is a "Notice of Default". If the Holders of 25% or more in
principal amount of the then outstanding Notes request the Trustee to give such
notice on their behalf, the Trustee shall do so.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes
(including in connection with an offer to purchase); provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration. Upon such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. The Trustee may, however, refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.
<PAGE>
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25 % in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
<PAGE>
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
<PAGE>
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to
Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. The Trustee shall examine the
certificates and opinions, however, to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this clause does not limit the effect of clause (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
<PAGE>
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to clauses (a), (b),
and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. In the event
that the Trustee acquires any conflicting interest, however, it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
<PAGE>
as trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
actually known to a Responsible Officer of the Trustee, the Trustee shall mail
to Holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default relating to
the payment of principal or interest on any Note, the Trustee may withhold the
notice if it determines that withholding the notice is in the interests of the
Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each April 24 beginning with the April 24 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA S 313(a) (but if no event described in TIA
S 313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA S 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA S 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the Commission and each stock
exchange on which the Notes are listed in accordance with TIA S 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
<PAGE>
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA S 313(b)(2) to the
extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
<PAGE>
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to the
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA S 310(a)(1), (2) and (5). The Trustee is subject to TIA S 310(b).
<PAGE>
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA S 311(a), excluding any creditor relationship
listed in TIA S 311(b). A Trustee who has resigned or been removed shall be
subject to TIA S 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02 and subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, the Company shall be deemed to have
been discharged from its obligations with respect to all outstanding Notes on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance") and the obligations of the Guarantors under the Subsidiary
Guarantees, if any, then existing shall concurrently terminate. For this
purpose, Legal Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Notes,
which shall thereafter be deemed to be "outstanding" only for the purposes of
Section 8.05 hereof and the other Sections of this Indenture referred to in (a)
and (b) below, and to have satisfied all its other obligations under such Notes
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive,
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Articles 2 and 7 and Section 4.02
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article 8. Subject to compliance with this Article 8, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
<PAGE>
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13 and 4.15 hereof with respect to the outstanding Notes on and
after the date the conditions set forth in Section 8.04 are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, the Company's failure to perform
its obligations pursuant to Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13
and 4.15 hereof shall not result in an Event of Default pursuant to Section
6.01(d) hereof, nor shall Sections 6.01(e) or 6.01(f) hereof constitute Events
of Default. In connection with any Covenant Defeasance, the Company may, at its
option, by written notice given to the Trustee prior to the delivery to the
Trustee of the Opinion of Counsel referred to in Section 8.04(c) hereof, elect
that any or all of the Subsidiary Guarantees, if any, then existing will be
terminated on the date the obligations set forth in Section 8.04 hereof are
satisfied. If no such notice is given to the Trustee with respect to a
Subsidiary Guarantee, such Subsidiary Guarantee shall remain in full force and
effect following such Covenant Defeasance.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the Stated Maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
<PAGE>
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or, insofar as
Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is bound including, without limitation, the Revolving Credit
Agreement and the Gold Consignment Agreement;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over any other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding any other creditors
of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
<PAGE>
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non- callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non- callable Government Securities in accordance with Section 8.02 or
Section 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or Section 8.03 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 or Section 8.03 hereof, as the case may be; provided, however,
that, if the Company makes any payment of principal of, premium, if any, or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
<PAGE>
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's (and Guarantors')
obligations to the Holders of the Notes in the case of a merger or consolidation
or sale of all or substantially all of the Company's (and Guarantors') assets
pursuant to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Note; and
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA;
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02(b) hereof, the Trustee shall join with the Company and the Guarantors, if
any, in the execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture and the Notes and any Subsidiary
Guarantees may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes, except a
<PAGE>
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a purchase of,
tender offer or exchange offer for, Notes). The determination as to which Notes
are considered to be "outstanding" for purposes of this Section 9.02 shall be
made in accordance with the provisions of Section 2.08 hereof.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver under this Section 9.02 may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes;
(c) reduce the rate of or change the time for payment of interest on any
Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, or interest on the Notes;
<PAGE>
(g) waive a redemption payment with respect to any Note or make any change
in Sections 4.10, 4.15, 6.04 or 6.07 hereof or in the foregoing amendment and
waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Any such Holder of a Note or subsequent Holder of a Note, however, may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder of a Note.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
<PAGE>
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01 APPLICATION.
The provisions of Sections 10.02 through 10.06 hereof shall apply in
respect of (a) each Subsidiary of the Company (other than a Subsidiary organized
under the laws of a jurisdiction other than the United States of America, its
territories and possessions, any State thereof or the District of Colombia) to
which the Company conveys, transfers, contributes, sells, leases or assigns or
otherwise distributes any tangible property or assets after the date of this
Indenture and (b) each Subsidiary of the Company which is acquired or created by
the Company after the date of this Indenture, in either case, in any transaction
or series of transactions involving aggregate value or consideration in excess
of $10.0 million; provided, however, that for the purposes of determining the
applicability of this Article 10, the value of property or assets (other than
cash) transferred to any such Subsidiary of the Company in exchange for cash in
an amount equal to the fair market value of such property or assets, as
determined by the Board of Directors of the Company and evidenced by a
resolution set forth in an Officers' Certificate and delivered to the Trustee,
shall be excluded.
SECTION 10.02 GUARANTEE.
Subject to this Article 10, the Company shall cause each of the Guarantors,
jointly and severally, unconditionally to guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that: (a)
the principal of and interest on the Notes will be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Notes, if any, if lawful, and
all other obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The Company shall cause each Guarantor, failing payment when due of
any amount so guaranteed or any performance so guaranteed for whatever reason,
to be jointly and severally obligated to pay the same immediately. The Company
shall cause each Guarantor further to agree that such guarantee is a guarantee
of payment and not a guarantee of collection.
The Company shall further cause each Guarantor (i) to agree that its
obligations under its Subsidiary Guarantee shall be unconditional, irrespective
of the validity, regularity or enforceability of the Notes or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor; (ii) to waive diligence, presentment,
<PAGE>
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever; and (iii) to covenant that
its Subsidiary Guarantee shall not be discharged except by complete performance
of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or any
Guarantor, any amount paid by the Company or any Guarantor either to the Trustee
or to such Holder, each Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
The Company shall further cause each Guarantor to agree that (i) it shall
not be entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby, and (ii) as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed by the Subsidiary Guarantees may be accelerated as
provided in Article 6 hereof for the purposes of the Subsidiary Guarantees
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed by the Subsidiary
Guarantees, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article 6 hereof, such obligations (whether or not
due and payable) shall forthwith become due and payable by the Guarantors for
the purpose of the Subsidiary Guarantees. The Guarantors shall have the right to
seek contribution from any non- paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 10.03 LIMITATION ON GUARANTOR LIABILITY.
By its execution of its Subsidiary Guarantee, each Guarantor, and by its
acceptance of Notes, each Holder, confirms that it is the intention of all such
parties that the Subsidiary Guarantee of such Guarantor not constitute a
fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law to the extent applicable to any Subsidiary
Guarantee. To effectuate the foregoing intention, the Trustee and the Holders
hereby irrevocably agree, and by its execution of its Subsidiary Guarantee each
Guarantor shall irrevocably agree, that the obligations of such Guarantor under
its Subsidiary Guarantee and this Article 10 shall be limited to such maximum
amount as will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 10, result
in the obligations of such Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
<PAGE>
SECTION 10.04 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee, the Company shall cause each
Guarantor to agree that a notation of such Subsidiary Guarantee substantially in
the form included in Exhibit D hereto shall be endorsed by an Officer of such
Guarantor on each Note authenticated and delivered by the Trustee on or after
the date of such Guarantee. Further, the Company shall cause each Guarantor
promptly to execute a supplemental indenture substantially in the form of
Exhibit E hereto.
The Company shall further cause each Guarantor to agree that its Subsidiary
Guarantee shall remain in full force and effect notwithstanding any failure
to
endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on any Subsidiary Guarantee no longer
holds that office at the time the Trustee authenticates the Note on which such
Subsidiary Guarantee is endorsed, such Subsidiary Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of each Subsidiary Guarantee
theretofore or thereafter executed and delivered by or on behalf of the
Guarantors or any of them.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, the Company shall cause such
Subsidiaries to execute supplemental indentures to this Indenture and Subsidiary
Guarantees in accordance with this Article 10.
SECTION 10.05 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person) another corporation, Person or other
entity whether or not affiliated with such Guarantor unless (i) subject to the
provisions of Section 10.06 hereof, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor under its Subsidiary Guarantee, the Notes and the
Indenture pursuant to a supplemental indenture, in form and substance reasonably
satisfactory to the Trustee; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted immediately after giving effect to such transaction to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.09(a) hereof.
SECTION 10.06 RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of any
Guarantor (other than to the Company or another Guarantor), by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of any Guarantor (other than to the Company or another Guarantor), then
such Guarantor (in the event of a sale or other disposition, by way of such a
<PAGE>
merger, consolidation or otherwise, of all of the Capital Stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee and any such
acquiring corporation will not be required to assume any obligations of such
Guarantor under the applicable Subsidiary Guarantee; provided that such sale or
other disposition complies with all applicable provisions of this Indenture
including, without limitation, Section 4.10 hereof.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of such Guarantor under this
Indenture as provided in this Article 10.
SECTION 10.07 TRANSFERS OF INTANGIBLE ASSETS.
If the Company or any Wholly Owned Subsidiary of the Company proposes to
convey, transfer, contribute, sell, lease or assign or otherwise distribute
(collectively, "transfer") any intellectual property or similar assets to any
other Subsidiary of the Company after the date of this Indenture, (i) such
transfer shall be made only to another Wholly Owned Subsidiary of the Company
and (ii) prior to or concurrently with such transfer, the Company or such Wholly
Owned Subsidiary effecting such transfer shall enter into a license agreement
with such other Wholly Owned Subsidiary in the form attached hereto as Exhibit B
(with such modifications as may be agreed to by the Trustee and the Company (or
the Trustee and such Wholly Owned Subsidiary of the Company, as the case may
be)), pursuant to which the Company or such Wholly Owned Subsidiary effecting
such transfer, as the case may be, shall be permitted to utilize such property
or assets in the same manner and to the same extent as such property or assets
were used by such entity prior to the transfer thereof.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA S 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
<PAGE>
If to the Company and/or any Guarantor:
Finlay Fine Jewelry Corporation
529 Fifth Avenue, New York, New York 10175
Telecopier No.: (212) 808-2800
Attention: Secretary and Corporate Counsel
With a copy to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: James Martin Kaplan
If to the Trustee:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Telecopier No. (212) 658-6425
Attention: Corporate Trust Administration
The Company, any Guarantor or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA S 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
<PAGE>
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA S 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA
S 312(c).
SECTION 1.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA S 314(a)(4)) shall comply with the provisions of TIA S 314(e)
and shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
<PAGE>
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, IF ANY,
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together constitute the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of April 24, 1998 FINLAY FINE JEWELRY CORPORATION
By: /s/Barry D. Scheckner
----------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
Attest:/s/Bruce E. Zurlnick
Name: Bruce E. Zurlnick
Title: Treasurer
Dated as of April 24, 1998 MARINE MIDLAND BANK, as Trustee
By: Frank Godino
-----------------------------------
Name: Frank Godino
Title: Vice President
<PAGE>
EXHIBIT A
(Face of Note)
- --------------------------------------------------------------------------------
CUSIP/CINS 317887AB3
8 3/8% Senior Note due May 1, 2008
No. $_____________
Finlay Fine Jewelry Corporation promises to pay to _______________ or
registered assigns, the principal sum of _______________ Dollars on May 1, 2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
FINLAY FINE JEWELRY CORPORATION
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
MARINE MIDLAND BANK, as Trustee
By:_________________________
Name:
Title:
Dated:______________, 1998
- --------------------------------------------------------------------------------
<PAGE>
(Back of Note)
8 3/8% Senior Note due May 1, 2008
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Finlay Fine Jewelry Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 8
3/8% per annum from April 24, 1998 until maturity. The Company shall pay
interest semiannually in arrears on May 1 and November 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
April 24, 1998; provided that if there is no existing Default in the payment of
interest, and if this Note (other than Note No. 1) is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be November
1, 1998. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the April 15 or October 15 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. Principal, premium, if any, and
interest on the Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments of principal, premium and interest
with respect to Notes the Holders of which have given wire transfer instructions
to the Company prior to the relevant record date will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
<PAGE>
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
April 24, 1998 ("Indenture") between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code SS 77aaa-77bbbb), as in effect on the date on which the Indenture is
qualified thereunder. The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $150.0 million in aggregate
principal amount, subject to the provisions of Sections 2.07 and 2.08 of the
Indenture.
5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Notes are not redeemable at the Company's option prior to May
1, 2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve- month period
beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003.........................................104.188%
2004.........................................102.792%
2005.........................................101.396%
2006 and thereafter..........................100.000%
provided, however, that if the Company, at its option, specifies in the notice
of redemption provided for in this paragraph 5(a) that such notice is revocable,
then the Company may revoke such notice at its further option at any time on or
prior to the date which is 10 days prior to the redemption date specified in
such notice (provided such notice so specifies) by providing a notice of
revocation to the Trustee on or prior to the date on which the Company's
revocation right expires (and the Trustee shall promptly mail such notice to the
Holders by first class mail).
(b) Notwithstanding the foregoing, until May 1, 2001, the Company may on
any one or more occasions redeem up to $50.0 million in aggregate principal
amount of Notes at a redemption price of 108.375% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date, with the net cash proceeds of Public Equity Offerings by the Company;
provided that at least $100.0 million in aggregate principal amount of Notes
remains outstanding immediately after the occurrence of each such redemption
(excluding Notes held by the Company and its Subsidiaries); and provided
further, that such redemption shall occur within 120 days of the date of the
closing of such Public Equity Offering.
<PAGE>
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes. There are no sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control,
each Holder of Notes will have the right to require the Company to make an offer
(a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes as a result of a Change of Control.
(b) If the Company or any Subsidiary of the Company consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company shall make an offer to all holders of Senior Debentures in accordance
with the provisions of Section 3.09 of the Indenture and on the same terms and
conditions offered to Holders of Notes to purchase the maximum principal amount
of Senior Debentures that may be purchased out of the remaining Excess Proceeds.
To the extent that the aggregate amount of Senior Debentures tendered pursuant
to any such offer is less than the remaining Excess Proceeds, the Company or any
of its Subsidiaries may use any remaining Excess Proceeds for general corporate
purposes or otherwise make an investment of such remaining amounts in any manner
that is not prohibited by the Indenture. If the aggregate principal amount of
Notes tendered in connection with such Asset Sale Offer and surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Subject to the
Company's right of revocation under the Indenture in connection with any
redemption pursuant to Paragraph 5(a) hereof, notices of redemption may not be
conditional. Notes and portions of Notes selected for redemption shall be in
amounts of $1,000 or whole multiples of $1,000, except that if all of the Notes
<PAGE>
of a Holder are to be redeemed, the entire outstanding amount of Notes held by
such Holder, even if not a multiple of $1,000, shall be redeemed. If any Note is
to be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest ceases to accrue on Notes or portions
thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required (a) to issue, to
register the transfer of or to exchange any Notes during a period beginning at
the opening of business 15 days before the day of any selection of Notes for
redemption and ending at the close of business on the day of selection, (b) to
register the transfer of or to exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a record
date and the next succeeding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes, subject to the provisions of the Indenture with
respect to record dates for the payment of interest.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes) and, subject to the provisions
of Sections 6.04 and 6.07 of the Indenture, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes). Without the consent of any
Holder of Notes, the Company and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
the Notes in case of a merger or consolidation, or sale of all or substantially
all of the Company's assets, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
<PAGE>
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company to comply with the provisions of Sections 3.09, 4.10, 4.15 or
Article 5 of the Indenture; (iv) failure by the Company for 45 days after notice
to comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (including any Indebtedness
the payment of which is guaranteed by the Company or any of its Subsidiaries)
other than a Receivables Subsidiary whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal or a premium, if any, on such Indebtedness
at the Stated Maturity for such payment of principal or premium, if any, or such
later date as has been agreed in a writing (provided such writing is entered
into prior to such Stated Maturity) by the parties to the documentation relating
to such Indebtedness (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $12.5 million or more; (vi) failure
by the Company or any of its Subsidiaries other than a Receivables Subsidiary to
pay final judgments aggregating in excess of $12.5 million, which judgments are
not paid, discharged or stayed for a period of 60 days (or 90 days if prior to
such sixtieth day the Company has delivered to the Trustee an Officers'
Certificate attesting that a financially responsible insurance company of
recognized national standing has acknowledged in writing complete liability for
such judgment and attached a copy of such acknowledgment thereto); (vii)
repudiation by any Subsidiary of its obligations under any Subsidiary Guarantee
or, except as permitted by the Indenture, any Subsidiary Guarantee shall be held
in a judicial proceeding to be unenforceable or invalid in any material respect
or shall cease to be in full force and effect; (viii) the Company or any of its
Subsidiaries (other than a Receivables Subsidiary) within the meaning of any
Bankruptcy Law (a) commences a voluntary case, (b) consents to the entry of an
order for relief against it in an involuntary case, (c) consents to the
appointment of a custodian of it or for all or substantially all of its
property, (d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; and (ix) a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that
(a) is for relief against the Company or any of its Subsidiaries (other than a
Receivables Subsidiary), (b) appoints a custodian of the Company or any of its
Subsidiaries or for all or substantially all of the property of the Company or
any of its Subsidiaries (other than a Receivables Subsidiary) or (c) orders the
liquidation of the Company or any of its Subsidiaries (other than a Receivables
Subsidiary) and any such order or decree described in this clause (ix) remains
unstayed and in effect for 60 consecutive days.
In the event of a declaration of acceleration of the Notes because an Event
of Default has occurred and is continuing as a result of a Payment Default or
the acceleration of any Indebtedness described in clause (v) of the preceding
paragraph, the declaration of acceleration of the Notes shall be automatically
annulled if (i) any Payment Default described in clause (v)(a) of the preceding
paragraph has been cured or waived and (ii) the holders of any accelerated
Indebtedness described in clause (v)(b) of the preceding paragraph have
<PAGE>
rescinded the declaration of acceleration in respect of such Indebtedness,
provided in each such case that (a) such cure, waiver or rescission of such
declaration of acceleration shall have been made in writing within 30 days of
the date of such Payment Default or declaration, as the case may be, and (b) the
annulment of the acceleration of such Notes would not conflict with any judgment
or decree of a court of competent jurisdiction and (c) all existing Events of
Default, except nonpayment of principal or interest on the Notes that became due
solely because of the acceleration of the Notes, have been cured or waived.
A Default under clause (iv) the first paragraph of this Paragraph 12 is not
an Event of Default until the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes give written notice to the
Company of the default and the Company does not cure the Default within the
period provided in such clause. The notice must specify in reasonable detail the
Default, demand that it be remedied and state that the notice is a "Notice of
Default". If the Holders of 25% or more in principal amount of the then
outstanding Notes request the Trustee to give such notice on their behalf, the
Trustee shall do so.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes by
written notice to the Trustee and the Company may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising under clause (viii) or (ix) of the first paragraph of
this Paragraph 12, with respect to the Company, any Significant Subsidiary or
any group of Subsidiaries, that taken together would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to May
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to May 1, 2003, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
<PAGE>
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
14. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
15. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (-- joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
18. ADDITIONAL INFORMATION. The Company shall furnish to any Holder upon
written request and without charge a copy of the Indenture and/or the Security
and Pledge Agreement. Requests may be made to:
Finlay Fine Jewelry Corporation
529 Fifth Avenue
New York, New York 10017
Attention: Secretary and Corporate Counsel
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________ to transfer this Note on
the books of the Company. The agent may substitute another to act for him or
her.
Date:____________
Your Signature:______________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee.*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_|Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased (if all, write "ALL"): $_________
Date:__________ Your Signature:________________________________________
(Sign exactly as your name appears
on the Note)
Tax Identification No:_________________________________
Signature Guarantee.*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
Principal
Amount
Amount of Amount of of this
decrease in increase in Global Signature of
Principal Principal Debenture authorized
Amount of Amount of following such officer
Date of this Global this Global decrease (or of Trustee or
Exchange Debenture Debenture increase) Custodian
-------- --------- --------- --------- ---------
___________________________
1/ This should be included only if the Note is issued in global form.
<PAGE>
EXHIBIT B
[FORM OF TRADE NAME LICENSE AGREEMENT]
Trade Name License Agreement (this "Agreement"), dated as of ____________,
________, between [_____________], a corporation organized and existing under
the laws of [state] (the "Licensor"), and [____________], a corporation
organized and existing under the laws of [state] (the "Licensee").
Whereas, the Licensee is the owner of certain trade names and service marks
shown on Schedule A hereto and has utilized such trade names and services marks
in the operation of jewelry departments or stores and related activities; and
Whereas, on the date hereof Licensee has sold, transferred, conveyed and
assigned its right, title and interest to use such trade names and service marks
and goodwill associated therewith in the United States (but not elsewhere) to
Licensor; and
Whereas, pursuant to the Indenture dated as of April __, 1998 between
Finlay Fine Jewelry Corporation and Marine Midland Bank, as trustee (the
"Indenture"), relating to Finlay Fine Jewelry Corporation's __% Senior Notes due
2008 (the "Senior Notes"), in connection with such sale, transfer, conveyance
and assignment, Licensee and Licensor are required to enter into this Agreement;
and
Whereas, the Licensee desires to obtain, and the Licensor desires to grant
to the Licensee, an exclusive right to use the Licensed Trade Names (as defined
in Section 1) in the Territory (as defined in Section 1) on or in connection
with the operation of jewelry departments or stores and related purchasing,
consigning, merchandising, selling, marketing, promoting, advertising,
distributing, manufacturing, importing of or other activities relating to
jewelry upon the terms and conditions set forth below;
Now therefore, to effect the foregoing, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
"Affiliate" as used herein means, with respect to either party, any entity
controlling, controlled by or under common control with such party. For purposes
of the foregoing definition, the term "control" (and correlative terms) means
the power, whether by contract, equity ownership or otherwise, to direct the
policies or management of an entity.
"Governmental Authority" as used herein means any federal, state, county,
local or other governmental department, regulatory body, commission, board,
bureau, agency or instrumentality.
<PAGE>
"Licensed Products" as used herein means jewelry products which are sold in
jewelry departments or stores operated by the Licensee or any other products
sold in any other venue with the prior approval of the Licensor.
"Licensed Trade Names" as used herein means the trade names and service
marks shown on Schedule A attached hereto.
"Licensee" as used herein means the Licensee, its Affiliates (other than
the Licensor), sublicensees and successors to the Licensee's business.
"Parties" as used herein means the Licensor and the Licensee.
"Quality" as used herein means products marketed and promoted as quality
items which meet or exceed the quality standards set forth in Section 4 below.
"Revenues" as used herein means gross revenues generated by sales of the
Licensed Products in the Territory less sales taxes, shipping, freight, or
transport charges if separately stated on an invoice; actual discounts or
allowances to customers; and returns in the normal course of business.
"Territory" as used herein means the United States of America, any
political subdivisions thereof and its territories, commonwealths and
possessions.
SECTION 2. GRANT TO THE LICENSEE AND RELATED MATTERS.
(a) Exclusivity. The Licensor hereby grants to the Licensee, except as
otherwise provided herein, an exclusive right in the Territory to use the
Licensed Trade Names in connection with the operation of jewelry departments and
stores whether now existing or hereafter established and the related purchasing,
consigning, merchandising, selling, marketing, promoting, advertising,
distributing, manufacturing, importing of or other activities relating to the
Licensed Products.
(b) Reserved Rights. All rights in the Licensed Trade Names other than
those specifically granted herein are reserved to the Licensor for its own use
and benefit.
(c) Ownership. The parties acknowledge and agree that the Licensed Trade
Names are the sole and exclusive property of the Licensor. The Licensee
acknowledges and agrees that the Licensee shall not acquire any right, title or
interest in or to the Licensed Trade Names as a result of this License
Agreement, or the Licensee's use thereof, or as a result of any other act or
thing, that the Licensee shall not attack the Licensor's title to or ownership
of the Licensed Trade Names, and that all use of the Licensed Trade Names by the
Licensee and all goodwill generated thereby shall inure to the benefit of the
Licensor. The Licensee shall not use or register or claim rights in any trade
name, trade dress or other indicia confusingly similar, in whole or in part, to
the Licensed Trade Names.
<PAGE>
(d) Sublicenses. The Licensee shall not grant any sublicense to use the
Licensed Trade Names, other than to Licensee's Affiliates without the express
prior written approval of the Licensor.
(e) Royalty Provisions. Upon receipt of an invoice from the Licensor,
Licensee agrees to pay the Licensor a royalty equal to [___ percent (__%) of
Revenues generated from sales of the Licensed Products by the Licensee in the
Territory.]
(f) Statements and Payments.
(i) Licensor has the option to request payment of such royalties at the end
of each six-month period by sending an invoice to Licensee. Within thirty (30)
days after receipt of such invoice, Licensee shall furnish a statement,
certified as accurate by an officer of Licensee, showing in reasonable detail
Licensee's sales of the Licensed Products, applicable allowances or credits,
uncollectible amounts, invoiced free or sample items distributed and a
calculation of Revenues for the Licensed Products, as well as the amount of
royalties payable with respect to such prior six month period.
(ii) Acceptance by the Licensor of any statement furnished or royalty paid
shall not preclude the Licensor from questioning its correctness and, if any
inconsistencies or mistakes are discovered, they shall immediately be rectified.
(iii) All payments made by Licensee hereunder will be paid to Licensor or
its designee in United States Dollars.
(iv) The Licensee shall pay interest on any overdue royalty payment at the
prime rate in effect on the date on which such payment was due, and such
interest shall accrue from the date on which such payment was due.
(v) If the Licensee does not receive an invoice from the Licensor, all
royalties due and payable shall be paid within thirty (30) days after receiving
the next invoice, together with interest on such royalties at the prime rate in
effect on the date such payment was initially due, and such interest shall
accrue from the date on which such payment was due.
(g) Audit.
(i) The Licensee shall keep complete and accurate records and books of
account at its principal place of business covering all transactions relating to
this Agreement, and the Licensor and/or its duly authorized representative shall
have the right, during regular business hours and upon ten (10) days reasonable
notice, at least once quarterly, to examine such books and all other documents
and materials in Licensee's possession or control with respect to this
Agreement. Neither Licensor nor any of its representatives shall disclose to any
other person, firm or corporation any information acquired as a result of such
examination, provided, however, that nothing herein contained shall be construed
to prevent Licensor and/or Licensee or their duly authorized representatives
from testifying in any court of competent jurisdiction with respect to the
information obtained as a result of any such examination in any action
instituted to enforce the rights of Licensor under the terms of this Agreement.
If such an audit reveals an underpayment by the Licensee, the Licensee shall
<PAGE>
immediately remit payment to the Licensor in the amount of the underpayment plus
interest calculated at the prime rate then in effect from the date such
payment(s) were actually due. If such underpayment is greater than __% of the
royalties payable for the audited period, the Licensee shall reimburse the
Licensor for the costs and expenses of such audit.
(ii) All books of account and records of the Licensee relating to this
Agreement shall be retained for at least two (2) years after termination of this
Agreement.
SECTION 3. METHOD OF USE OF THE LICENSED TRADE NAMES.
(a) Use. The Licensee acknowledges that the Licensed Trade Names have
acquired a valuable secondary meaning and goodwill to department stores and
vendors in the retail jewelry market place. Accordingly, the Licensee undertakes
and agrees not to use the Licensed Trade Names in any manner whatsoever which,
directly or indirectly, would derogate or detract from its repute or which would
dilute, demean, ridicule or reflect adversely upon the Licensed Trade Names or
the Licensor, it being mutually agreed that use by the Licensee of the Licensed
Trade Names in the manner being used on the date hereof shall meet Licensor's
standards. The Licensee acknowledges that the Licensed Trade Names have become
associated generally with products and services that possess a positive and
quality image, and the Licensee agrees not to use the Licensed Trade Names in
any manner inconsistent with such image. The Licensee agrees to utilize the
Licensed Trade Names in a Quality manner in connection with the operation of
jewelry departments or stores and the purchasing, consigning, merchandising,
selling, marketing, promoting, advertising, distributing, manufacturing,
importing of or other activities relating to the Licensed Products.
(b) Form and Manner. Except as may be otherwise specifically provided in
this Agreement, the Licensee may not (i) make any change in the form of the
Licensed Trade Names, (ii) use any partial version of the Licensed Trade Names
at any time for any purpose, or (iii) use the Licensed Trade Names in
combination, juxtaposition or conjunction with, or as part of, any other
trademarks, service marks or trade names without the express prior written
approval of the Licensor, which approval may not be unreasonably withheld, it
being mutually agreed that use by the Licensee of the Licensed Trade Names in
the manner being used on the date hereof shall meet Licensor's standards. Any
mark approved pursuant to this paragraph shall be owned solely and exclusively
by the Licensor and after approval shall be deemed a Licensed Trade Name
pursuant to this Agreement.
(c) Marking. The Licensee shall apply such trade name notices, copyright
notices or other markings in connection with the Licensed Trade Names as may be
necessary or reasonably deemed desirable by the Licensor under the laws or
regulations of each jurisdiction of the Territory where such Licensed Trade
Names are used.
<PAGE>
SECTION 4. QUALITY STANDARDS.
(a) Quality. The Licensee shall not sell any Licensed Products or operate
any jewelry departments or stores or conduct related activities in connection
with the Licensed Trade Names that shall fail to meet the quality standards and
specifications employed in connection with use of the Licensed Trade Names as of
the date hereof or such additional standards or specifications as may be
reasonably specified by the Licensor from time to time, it being mutually agreed
that use by the Licensee of the Licensed Trade Names in the manner being used on
the date hereof shall meet Licensor's standards. The Licensee shall operate
jewelry departments or stores or conduct related activities in connection with
the Licensed Trade Names only in a manner that will protect the reputation of
the Licensed Trade Names.
(b) On Site Inspections. Upon reasonable notice, the Licensor or its
representatives shall have access for inspection purposes to the jewelry
departments or stores operated by Licensee during regular business hours at such
time or times as to not unduly interfere with the operations of the Licensee to
determine compliance with quality control standards. If any inspection of any
premises reveals that the Licensee has failed to comply with the quality
standards or other requirements of this Section 4, the Licensor shall be
entitled to reinspect such premises until receipt of notice of cure by the
Licensee. All expenses of conducting such inspections shall be borne by the
Licensor.
(c) Governmental Inquiries. The Licensee shall immediately notify the
Licensor in writing of any investigation, inquiry, claim or sanction by any
Governmental Authority regarding any quality, labeling, advertising or other
regulatory matter relating to the Licensed Products and shall keep the Licensor
advised of the progress and findings of such investigation or inquiry.
(d) Compliance; Fitness for Use. The Licensee shall be solely responsible
for and shall comply with all laws, rules and regulations, if any, of
Governmental Authorities in connection with the operation of jewelry departments
or stores in connection with the Licensed Trade Names and the related
purchasing, consigning, merchandising, selling, marketing, promoting,
advertising, distributing, manufacturing, importing of or other activities
relating to any goods or services.
SECTION 5. TERM.
The term of this License Agreement shall commence as of the date hereof and
continue until the earlier of (a) the date on which none of the Senior Notes is
outstanding and all obligations of Finlay Fine Jewelry Corporation under the
Indenture have been satisfied in full, (b) the date on which Licensee
permanently ceases operating jewelry departments and stores and the related
purchasing, consigning, merchandising, selling, marketing, promoting,
advertising, distributing, manufacturing, importing of or other activities
relating to the Licensed Products, or (c) the date on which the Licensor sells,
transfers, conveys and assigns to the Licensee all of the Licensor's right,
title and interest in and to the Licensed Trade Names. Upon the termination of
this Agreement, all the rights of the Licensee hereunder shall automatically
revert to the Licensor, the parties shall perform all other acts which may be
necessary or useful to render effective the termination of the interest of the
Licensee in the Licensed Trade Names, and the Licensee shall execute any
<PAGE>
assignment, conveyance, acknowledgment or other document that the Licensor may
require, relinquishing or conveying to the Licensor any and all rights to or
interest in use of the Licensed Trade Names that the Licensee has and any
goodwill associated therewith. Without any limitation of the foregoing, the
Licensee hereby consents to any application which the Licensor may make, upon
termination of this Agreement, to limit or terminate the Licensee's status as a
registered user and hereby irrevocably agrees not to contest, oppose or dispute
such application.
SECTION 6. REMEDIES.
(a) In the event of a breach of this Agreement, the aggrieved party's sole
and exclusive remedy shall be specific performance of this Agreement, including
any injunctive relief necessary to effect such specific performance. In
particular and without any limitation of the foregoing, the Licensor shall not
institute litigation against any person or entity for infringement of any
Licensed Trade Name based in whole or in part on any activities or rights
covered or protected by this Agreement, and Licensee shall not commence any
action seeking a declaration of invalidity, unenforceability or noninfringement
of any registrations or applications covering the Licensed Trade Names or
asserting any rights to the Licensed Trade Names or any mark or name confusingly
similar thereto.
(b) The parties further agree that this Agreement and the license granted
herein may under no circumstances be rescinded and may be terminated only as
expressly provided in Section 5 above.
SECTION 7. PROTECTION OF THE LICENSED TRADE NAMES.
(a) Maintenance. The Licensor shall maintain at its expense each of the
registrations for the Licensed Trade Names shown on Schedule A, if any, in full
force and effect as long as this Agreement continues in effect, and the Licensee
agrees to provide such assistance and documentation as is required for such
maintenance. The Licensor shall file such additional applications as Licensee
shall reasonably request to protect the Licensed Trade Names, and Licensor shall
diligently prosecute such applications and maintain any registrations issuing
thereon.
(b) Infringement. The Licensee shall notify the Licensor of any suspected,
actual or threatened infringement of or act of unfair competition or other
harmful or wrongful activities of third parties with respect to the Licensed
Trade Names as to which it has notice. The Licensee shall cooperate with the
Licensor with respect to any action to be taken with respect thereto. The
Licensor will have the obligation to take whatever steps are reasonably
necessary or desirable to protect the Licensed Trade Names from any such
infringement or other harmful or wrongful activities of third parties and shall
have the right to control any litigation or other proceeding undertaken by it
for any such purpose. Such steps may include the filing and prosecution of
(i) litigation against infringement or unfair competition by third parties,
(ii) opposition proceedings to oppose applications for trade name or service
mark registration for marks that are confusingly similar to any one or more of
the Licensed Trade Names, and (iii) cancellation proceedings to cancel
<PAGE>
registration of trade names or service marks that are confusingly similar to any
one or more of the Licensed Trade Names.
(c) Claims Against the Licensee. The Licensee shall promptly notify the
Licensor of any claim of infringement or any complaint based upon the Licensee's
use of the Licensed Trade Names and of any suit, action or proceeding brought
against the Licensee based upon said claim or complaint, and the provisions of
Section 10 shall apply.
SECTION 8. RECORDATION OF AGREEMENT.
The parties shall cooperate to determine and comply with applicable laws or
regulations throughout the Territory with respect to the recordation of,
validation of, or otherwise to render effective this Agreement. In countries
having registered user or license recordation requirements, the parties shall
execute all documents which may be necessary to record the Licensee as a
registered user or licensee for the Licensed Trade Names, and all costs of
preparing and recording any necessary documents or other costs in connection
therewith shall be borne by the Licensee.
SECTION 9. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of the Licensor. The Licensor represents
and warrants as follows:
(i) Due Organization and Power of the Licensor. The Licensor is a corporation
duly organized, validly existing and in good standing under the laws of
[state] and has all requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
(ii) Authorization and Validity of the Agreement. The execution, delivery and
performance by the Licensor of this Agreement and the consummation by it of
the transactions contemplated hereby has been duly authorized by its Board
of Directors and, if necessary, its shareholders, and no other corporate
action on the part of the Licensor is necessary for the execution, delivery
and performance by the Licensor of this Agreement and the consummation by
the Licensor of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Licensor, and this License
Agreement is the legal, valid and binding obligation of the Licensor,
enforceable against the Licensor in accordance with and subject to its
terms except as may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium, or other similar laws and
equitable principles relating to or limiting creditor's rights generally.
(iii)No Conflict. The execution, delivery and performance by the Licensor of
this Agreement and the consummation by the Licensor of the transactions
contemplated hereby does not and will not (A) violate any provision of any
federal, state, local or foreign law, rule or regulation or any order,
injunction, judgment or decree applicable to the Licensor; (B) require any
<PAGE>
consent or approval of, or filing with or notice to, any Governmental
Authority under any provision of law applicable to the Licensor other than
filings under applicable trade name laws or except as may be contemplated
under any provision of this Agreement; (C) violate any provision of the
Certificate of Incorporation or By- Laws or other constituent documents of
the Licensor; or (D) require any consent, approval or notice under,
conflict with, or result in the breach, lapse, cancellation or termination
of, or result in the acceleration (whether after the filing of notice or
the lapse of time or both) of any right or obligation of or the performance
by the Licensor under, or result in a loss of any benefit to which the
Licensor is entitled under, or constitute a default under any indenture,
mortgage, deed of trust, lease, license, franchise, contract, agreement,
concession or other instrument to which the Licensor is a party or by which
it, or any of its assets, are bound or encumbered, where the failure to
obtain such consent, approval or notice or the occurrence of any of the
matters referred to in this subsection (D) would materially adversely
affect the Licensee's rights hereunder.
Except as expressly provided above in this Section 9(a) or elsewhere in this
Agreement, the Licensor makes no other representations or warranties regarding
this Agreement or the rights Licensed hereunder.
(b) Representations and of Warranties of the Licensee. The Licensee
represents and warrants as follows:
(i) Due Organization and Power of the Licensee. The Licensee is a corporation
duly organized, validly existing and in good standing under the laws of
[state] and has all requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
(ii) Authorization and Validity of the Agreement. The execution, delivery and
performance by the Licensee of this Agreement and the consummation by it of
the transactions contemplated hereby have been duly authorized by its Board
of Directors, and no other corporate action on the part of the Licensee is
necessary for the execution, delivery and performance by the Licensee of
this Agreement and the consummation by the Licensee of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Licensee, and this Agreement is the legal, valid and binding obligation
of the Licensee, enforceable against the Licensee in accordance with and
subject to its terms except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or other
similar laws and equitable principles relating to or limiting creditors'
rights generally.
(iii)No Conflict. The execution, delivery and performance by the Licensee of
this Agreement and the consummation by the Licensee of the transactions
contemplated hereby does not and will not (A) violate any provision of any
federal, state, local or foreign law, rule or regulation or any order,
injunction, judgment or decree applicable to the Licensee; (B) require any
<PAGE>
consent or approval of, or filing with or notice to, any Governmental
Authority under any provision of law applicable to the Licensee;
(C) violate any provision of the Certificate of Incorporation or By-Laws or
other constituent documents of the Licensee; or (D) require any consent,
approval or notice under, conflict with, or result in the breach, lapse,
cancellation or termination of, or result in the acceleration (whether
after the filing of notice or the lapse of time or both) of any right or
obligation of or the performance by the Licensee under, or result in a loss
of any benefit to which the Licensee is entitled under, or constitute a
default under any indenture, mortgage, deed of trust, lease, license,
franchise, contract, agreement, concession or other instrument to which the
Licensee is a party or by which it or any of its assets are bound or
encumbered, where the failure to obtain such consent, approval or notice or
the occurrence of any of the matters referred to in this subsection
(D) would materially adversely affect the Licensee's rights hereunder..
SECTION 10. INDEMNIFICATION.
(a) By the Licensor. The Licensor shall indemnify, defend and hold harmless
the Licensee from and against and in respect of any and all claims, losses,
damages, expenses, obligations, penalties, demands, suits, procedures,
assessments, judgments, costs and liabilities (including costs of collection,
investigation, reasonable attorneys' fees and other costs of defense) ("Losses")
incurred by it, arising out of or resulting from any breach of any
representation, warranty, covenant or agreement made by the Licensor herein.
(b) By the Licensee. The Licensee shall indemnify, defend and hold harmless
the Licensor and its Affiliates from and against and in respect of any and all
Losses incurred by them arising out of or resulting from any breach of any
representation, warranty, covenant or agreement made by the Licensee herein.
(c) Procedure. If a claim by a third party is made against an indemnified
party, the indemnified party shall promptly notify the indemnifying party of
such claim. Failure to so notify the indemnifying party shall not relieve the
indemnifying party of any liability which the indemnifying party might have,
except to the extent that such failure materially prejudices the indemnifying
party's legal rights. The indemnifying party shall have thirty days after
receipt of such notice to undertake, conduct and control, through counsel of its
own choosing (subject to the consent of the indemnified party, such consent not
to be unreasonably withheld) and at its expense, the settlement or defense of
such claim, and the indemnified party shall cooperate with the indemnifying
party in connection therewith; provided, however, that (i) the indemnifying
party shall permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, provided that the fees
and expenses of such counsel shall be borne by the indemnified party and
(ii) the indemnifying party shall reimburse the indemnified party for the full
amount of any Loss resulting from such claim and all related expenses incurred
by the indemnified party within the limits of this Section 10 as such are
incurred. Notwithstanding anything contained herein, the indemnifying party
shall not enter into any settlement without the consent of the indemnified
party, unless the settlement involves the payment of money only and the
indemnified party is solely liable for payment of said money. So long as the
indemnifying party is reasonably contesting any such claim in good faith, the
indemnified party shall not pay or settle any such claim. Notwithstanding the
<PAGE>
foregoing, the indemnified party shall have the right to pay or settle any such
contested claim (provided that such settlement does not adversely affect any
rights of the indemnifying party with respect to the Licensed Trade Names), but
in such event it shall automatically waive any right to indemnity therefor by
the indemnifying party. If the indemnifying party does not notify the
indemnified party within thirty days after receipt of the indemnified party's
notice of a claim of indemnity hereunder that it elects to undertake the defense
thereof, or so notifies the indemnified party but fails to undertake or maintain
such defense promptly and in good faith, the indemnified party shall have the
right to contest, settle or compromise the claim in the exercise of its
reasonable judgment and without prejudice to the rights of the indemnified party
to indemnification hereunder.
(d) Survival. The provisions of this Section 10 shall survive the
termination or expiration of this Agreement.
SECTION 11. MISCELLANEOUS.
(e) Notices. Except as otherwise provided herein, all notices, requests,
demands, waivers and other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or by overnight courier with delivery charges
prepaid, or mailed by certified or registered mail, postage prepaid, receipt
requested, or sent by telecopy, as follows:
If to the Licensor, to it at:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
<PAGE>
with a copy to:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
If to the Licensee, to it at:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
with a copy to:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
or to such other person or address as either party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery.
(f) Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
<PAGE>
to confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
(g) Entire Agreement. This Agreement (including the Schedule hereto)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
(h) Assignability. This Agreement shall be freely assignable by the
Licensee to any successor of the Licensee's business which is a wholly owned
subsidiary of the Licensee with respect to the operation of jewelry departments
and the related purchasing, consigning, merchandising, selling, marketing,
promoting, advertising, distributing, manufacturing, importing of or other
activities relating to jewelry products. This Agreement shall not be assignable
by the Licensor.
(i) Relationship of the Parties. This Agreement shall in no way constitute
or give rise to a partnership, joint venture or agency between the parties, it
being acknowledged and agreed that the relationship created hereby is strictly
that of licensor and licensee. Except as may be expressly provided to the
contrary herein, nothing in this Agreement shall constitute or be deemed to
constitute either party as the legal representative or agent of the other, nor
shall either party have the right or authority to assume, create or incur any
liability or any obligation of any kind, express or implied, in the name of or
on behalf of the other party.
(j) Amendment and Modification; Waiver. Subject to applicable law, this
Agreement (including Schedule A hereto) may only be amended, modified and
supplemented by written instrument expressly identified as an amendment hereto
authorized and executed by the Licensor and the Licensee at any time prior to
the termination hereof with respect to any of the terms contained herein. No
waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach. No
failure on the part of either party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof.
(k) Further Assurances. From time to time, pursuant to the request of the
Licensee delivered to the Licensor, the Licensor, at the Licensee's expense,
shall execute and deliver such instruments and documents and take such actions
as the Licensee may reasonably request in order to allow the Licensee the use of
the Licensed Trade Names contemplated hereby or otherwise to carry out the
purposes and intent of this Agreement. From time to time, pursuant to the
request of the Licensor delivered to the Licensee, the Licensee, at the
Licensor's expense, shall execute and deliver such instruments and documents and
take such actions as the Licensor may reasonably request to carry out the
purposes and intent of this Agreement.
(l) Section Headings. The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
<PAGE>
(m) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, and all of which shall be deemed to be one
and the same agreement.
(n) Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to choice of laws or principles thereof.
(o) Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or enforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this License Agreement
as of the date first above written.
[NAME OF LICENSOR]
By:___________________________
Name:
Title:
[NAME OF LICENSEE]
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE A
Licensed Trade Names
<PAGE>
EXHIBIT C
FORM OF SUBSIDIARY GUARANTEE
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned Guarantor (which term includes any
successor Person under the Indenture) jointly and severally, hereby
unconditionally guarantees, subject to the provisions in the Indenture dated as
of April 24, 1998 (the "Indenture") among Finlay Fine Jewelry Corporation and
Marine Midland Bank, as trustee (the "Trustee"), but irrespective of the
validity and enforceability of the Indenture, the Notes and the obligations of
the Company thereunder, (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Notes (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of the Indenture and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set
forth in Article 10 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a
Note, by accepting the same, agrees to and shall be bound by such provisions.
[Name of Guarantor]
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSIDIARY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among ___________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Finlay Fine Jewelry Corporation (or its permitted successor), a
Delaware corporation (the "Company"), the other Guarantors (as defined in the
Indenture referred to herein) and Marine Midland Bank, as trustee under the
Indenture referred to below (the "Trustee").
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of April 24, 1998 providing for the
issuance of an aggregate principal amount of up to $150.0 million of 83/8% Notes
due May 1, 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein and in the Indenture (the "Subsidiary
Guarantee"); and
WHEREAS, pursuant to Sections 9.01 and 9.06 of the Indenture, the Trustee
is authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary, the Company and the Trustee mutually covenant and agree
for the equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
unconditionally guarantees all of the Company's Obligations as set forth in
Article 10 of the Indenture in the same manner and to the same extent as if it
had executed the Indenture on the date thereof as Guarantor thereunder.
3. Continuing Agreement. Except as herein amended, all terms, provisions
and conditions of the Indenture, all Exhibits thereto and all instruments
executed in connection therewith shall continue in full force and effect and
shall remain enforceable and binding in accordance with their respective terms.
4. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING
<PAGE>
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together constitute the same agreement.
6. Effect of Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
7. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ______________, ____
[GUARANTEEING SUBSIDIARY]
By: ________________________________
Name:
Title:
FINLAY FINE JEWELRY CORPORATION
By: ________________________________
Name:
Title:
MARINE MIDLAND BANK, as Trustee
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT E
[FORM OF SUBSIDIARY INTERCOMPANY NOTE]
PROMISSORY NOTE
$[____________________] New York, New York
[date]
FOR VALUE RECEIVED, [_________________], a [____________] corporation
("Borrower"), promises to pay to the order of [__________________], a
[_____________] corporation ("Payee"), [upon demand by the Payee] [on
[________________]], at its office at [____________________], or at such other
place as Payee may, from time to time, designate in writing, in lawful money of
the United States of America, in immediately available funds, the principal sum
of [___________] Dollars ($[_______]) [together with interest thereon at a rate
of [___]% per annum from [___________] until maturity].
PAYEE AND ANY HOLDER HEREOF, BY ITS ACCEPTANCE OF THIS PROMISSORY NOTE,
AGREES THAT THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON, IF ANY, THIS
PROMISSORY NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL
IN CASH OF ALL INDEBTEDNESS OF THE BORROWER OTHER THAN INDEBTEDNESS WHICH BY ITS
TERMS IS SUBORDINATE IN RIGHT OF PAYMENT TO OTHER INDEBTEDNESS OF THE BORROWER
("SENIOR DEBT"), WHETHER OUTSTANDING ON THE DATE HEREOF OR HEREAFTER CREATED,
INCURRED, ASSUMED OR GUARANTEED, AND THAT THE SUBORDINATION IS FOR THE BENEFIT
OF THE HOLDERS OF THE SENIOR NOTES.
[Borrower will pay interest [semi-annually] in arrears on [ ] and [ ] of
each year, or if any such day is not a Business Day, on the next succeeding
<PAGE>
Business Day (each an "Interest Payment Date"). Interest on this Promissory Note
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided that the first
Interest Payment Date shall be [ ]. [Borrower shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal from time to time on demand at a rate that is [ ]% per annum in excess
of the rate then in effect; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful.] Interest will be computed on the
basis of a 360-day year of twelve 30-day months.]
Upon any distribution to creditors of Borrower in an insolvency or in
connection with any proceeding under Bankruptcy Law relating to Borrower or its
property, (i) holders of Senior Debt shall be entitled to receive payment in
full in cash of all Obligations due in respect of such Senior Debt (including
post-petition interest in any proceeding under Bankruptcy Law) before the holder
hereof shall be entitled to receive any payment of the principal hereof or
interest, if any, hereon and (ii) until all Obligations with respect to Senior
Debt are paid in full in cash, any distribution to which the holder hereof would
otherwise be entitled shall be made to the holders of such Senior Debt on a pro
rata basis.
Any contrary provision hereof notwithstanding, Borrower may not make any
payment of the principal hereof or interest, if any, hereon if a default occurs
and is continuing with respect to any Senior Debt.
Upon the failure of the Borrower to pay principal [or accrued interest]
when due and at any time thereafter [(but prior to the payment in full of all
<PAGE>
such accrued and unpaid interest)] the holder of this Promissory Note may
declare the unpaid principal balance and all accrued and unpaid interest hereon
to be immediately due and payable.
In the event that any action shall be brought for the enforcement hereof,
the undersigned hereby promises to pay all costs and expenses hereof, including,
but not limited to, reasonable attorneys' fees and disbursements.
Borrower's obligations hereunder shall be unconditional and shall not be
subject to any defense (other than prior payment), set-off, deduction,
counterclaim or recoupment whatsoever by Borrower.
Any amounts due under this Promissory Note may be prepaid at any time or
times in whole or in part without premium or penalty.
Presentation, notice of protest, and demand are hereby expressly waived by
the undersigned.
Capitalized terms used but not defined herein have the meanings ascribed to
such terms in the Indenture, dated as of April 24, 1998, between Finlay Fine
Jewelry Corporation and Marine Midland Bank, as trustee.
THE TERMS OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
BORROWER
By: ______________________________
Name:
Title:
AMENDMENT No. 3
AMENDMENT AGREEMENT No. 3 dated as of April 24, 1998 among FINLAY
ENTERPRISES, INC. a Delaware corporation (the "Parent"), FINLAY FINE JEWELRY
CORPORATION, a Delaware corporation (the "Company"), the lenders named herein
and signatory hereto (the "Lenders") and GENERAL ELECTRIC CAPITAL CORPORATION,
as agent (the "Agent") for the Lenders.
W I T N E S S E T H :
WHEREAS, the Parent, the Company, the Lenders and the Agent are parties to
an Amended and Restated Credit Agreement dated as of September 11, 1997 (as
heretofore and hereafter amended, modified or supplemented from time to time in
accordance with its terms, the "Credit Agreement") and;
WHEREAS, subject to the terms and conditions contained herein, the parties
hereto desire to amend certain provisions of the Credit Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and subject to the fulfillment of the conditions set forth
below, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise specifically defined herein, all
capitalized terms used herein shall have the respective meanings ascribed to
such terms in the Credit Agreement.
2. Amendments to Credit Agreement. The Credit Agreement shall be amended as
follows upon the Effective Date (as defined herein):
(a) Section 1.1 of the Credit Agreement is hereby amended to add the
following definitions in their proper alphabetical sequence:
"Acquisition Facility Advance" shall mean any Revolving Advance which also
constitutes an Acquisition Facility Advance in accordance with Section 2.1.A
hereof.
<PAGE>
"Additional Unused Facility Fee" shall mean, as applicable, a nonrefundable
fee, due and payable on the first day of each month, if no Acquisition Facility
Advance is outstanding, equal to (i) twenty-five basis points (.25%) per annum
on the difference between $275,000,000 and the sum of (A) the average daily
outstanding principal balance of the Revolving Loan during the preceding
calendar month or longer period and (B) the average daily Letter of Credit
Obligations during the preceding calendar month or longer period, on such day
(provided that in no event shall such .25% be charged on more than $50,000,000),
or, if any Acquisition Facility Advance is outstanding, equal to (ii)
thirty-seven and one-half basis points (.375%) per annum on the difference
between $275,000,000 and the sum of (A) the average daily outstanding principal
balance of the Revolving Loan during the preceding calendar month or longer
period and (B) the average daily Letter of Credit Obligations during such
preceding calendar month or longer period, on such day.
"New Debenture Indenture" shall mean the indenture dated as of April 24,
1998 between the Parent and Marine Midland Bank, as trustee, under which the New
Senior Debentures were issued, as such indenture is in effect on the Effective
Date of Amendment No. 3. to this Credit Agreement.
"New Senior Debentures" shall mean the Parent's 9% New Senior Debentures
due 2008 in the original principal amount of $75,000,000.
"New Senior Note Indenture" shall mean the indenture dated as of April 24,
1998 between the Company and Marine Midland Bank, as trustee under which the New
Senior Notes were issued, as such indenture is in effect on the Effective Date
of Amendment No. 3 to this Credit Agreement.
"New Senior Notes" shall mean the Company's 8 3/8% Senior Notes due 2008 in
the original principal amount of $150,000,000.
"Offering Expenses" means Non-recurring charges, costs and expenses
(including transaction expenses, any write-off of deferred financing costs, debt
discount costs and redemption premiums, and including interest expense incurred
solely in respect of the Senior Notes and the Debentures and solely during the
period prior to the redemption thereof during which the New Senior Notes and the
New Senior Debentures shall also be outstanding) incurred
2
<PAGE>
by the Parent and the Company in connection with (a) the Parent's offering of
its common stock on or about the Effective Date of this Amendment No 3., (b) the
Parent's offering of the New Senior Debentures, (c) the Company's offering of
the New Senior Notes and (d) the related redemption of the Debentures and the
Senior Notes.
"Permitted Acquisition" means any acquisition by the Company to which the
Majority Lenders have delivered their prior written consent, which consent may
be withheld in their sole discretion.
"Permitted Acquisition Request" means the notice, substantially in the form
of Exhibit D hereto, delivered by the Company to the Agent requesting that the
Lenders make an Acquisition Facility Advance available to the Company.
"Security and Pledge Agreement" shall mean that certain Security and Pledge
Agreement dated as of April 24, 1998 between the Parent and Marine Midland Bank.
"Supplemental Equity Offering" shall mean that certain public offering by
the Parent of an aggregate of 1,800,000 shares of its common stock (together
with any overallotment shares) (567,310, together with any overallotment shares,
of which are being offered for sale by the Parent, and the balance of which are
being offered for sale by shareholders of the Parent), of which the Net Cash
Proceeds to Parent shall be used by the Parent to redeem the Debentures.
"Third Party Interactives" shall mean all Persons with whom Borrowers and
their Subsidiaries exchange data electronically in the ordinary course of
business, including, without limitation, customers, suppliers, third-party
vendors, subcontractors, processors-converters, shippers and warehousemen.
"Tranche 1 Advance" shall mean any Acquisition Facility Advance made based
upon a Borrowing Base comprised of 60.01% to 65.00% of Eligible Inventory and
Foreign Eligible Inventory and 85% of Eligible Receivables and Foreign Eligible
Receivables as provided herein.
"Tranche 2 Advance" shall mean any Acquisition Facility Advance made based
upon a Borrowing Base comprised of 65.01% to 70.00% of Eligible Inventory and
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<PAGE>
Foreign Eligible Inventory and 85% of Eligible Receivables and Foreign Eligible
Receivables as provided herein.
"Year 2000 Assessment" shall mean a comprehensive written assessment of the
nature and extent of Borrowers' and their Subsidiaries' Year 2000 Problems and
Year 2000 Date- Sensitive Systems/Components, including, without limitation,
Year 2000 Problems regarding data exchanges with Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to Borrowers and their
Subsidiaries, all actions necessary to eliminate such Persons' Year 2000
Problems, including, without limitation, computer code enhancements and
revisions, upgrades and replacements of Year 2000 Date-Sensitive
Systems/Components, and coordination of such enhancements, revisions, upgrades
and replacements with Third Party Interactives.
"Year 2000 Corrective Plan" shall mean, with respect to Borrowers and their
Subsidiaries, a comprehensive plan to eliminate all of their respective Year
2000 Problems on or before December 31, 1998, including without limitation (i)
computer code enhancements or revisions, (ii) upgrades or replacements of Year
2000 Date-Sensitive Systems/Components, (iii) test and validation procedures,
(iv) an implementation time line and budget and (v) designation of specific
employees who will be responsible for planning, coordinating and implementing
each phase or subpart of the Year 2000 Corrective Plan.
"Year 2000 Date-Sensitive System/Component shall mean, as to any Person,
any system, software, network software applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar related
data accurately; such systems and components shall include, without limitation,
mainframe computers, fileserver/client systems, computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC Systems.
"Year 2000 Implementation Testing" shall mean, as to any Person, (i) the
performance of test and validation procedures regarding Year 2000 Corrective
Actions on a unit basis and on a systemwide basis; (ii) the performance of test
and validation procedures regarding data exchanges among Borrowers and
Borrowers' and their Subsidiaries' Year 2000 Date- Sensitive Systems/Components
and data exchanges with Third Party Interactives, and (iii) the design and
implementation of additional Year 2000 Corrective Actions the need for which has
been demonstrated by test and validation procedures.
"Year 2000 Problems" shall mean, with respect to Borrowers' and their
Subsidiaries', limitations on the capacity or readiness of any such Person's
Year 2000 Date- Sensitive Systems/Components to accurately accept, create,
manipulate, sort, sequence, calculate, compare, control or output calendar date
information with respect to calendar year 1999 or any subsequent calendar year
beginning on or after January 1, 2000 (including leap year computations)
including, without limitation, exchanges of information among Year 2000 Date-
Sensitive Systems/Components of Borrowers' and their Subsidiaries' and exchanges
of information among Borrowers and their Subsidiaries and Year 2000
Date-Sensitive systems/Components of Third Party Interactives and functionality
of peripheral interfaces, firmware and embedded microchips.
(b) the definition of "Borrowing Base" contained in Section 1.1 of the
Credit Agreement shall be amended by adding the following immediately after the
penultimate sentence in the first full paragraph of such definition
"Notwithstanding the foregoing, for the purposes of making any Tranche 1
Advance, the reference to sixty percent contained in clause (i) hereof shall be
replaced with an amount from sixty and one one-hundredth percent (60.01%) up to
and including sixty-five percent (65.00%), and for the purposes of making any
Tranche 2 Advance, the reference to sixty percent contained in clause (i) hereof
shall be replaced with an amount from sixty-five and one one-hundredth percent
(65.01%) up to and including seventy percent (70.00%)."
(c) the definition of "Revolving Credit Facility Commitment" contained in
Section 1.1 of the Credit Agreement shall be amended by deleting the amount
"$225,000,000" contained therein and substituting "$275,000,000" therefor;
(d) the following Section 2.1.A shall be added immediately following the
last full sentence of Section 2.1(v) of the Credit Agreement:
4
<PAGE>
"S 2.1.A ACQUISITION FACILITY.
(a) At the request of the Company, Revolving Advances may be designated by
the Agent as "Acquisition Facility Advances", provided that such amounts shall
only be available to the Company to fund Permitted Acquisitions and cannot be so
designated until receipt by the Agent of the written consent of the Majority
Lenders to a Permitted Acquisition Request.
(b) After receipt of a Permitted Acquisition Request, the Agent shall
designate such Acquisition Facility Advance as either a Tranche 1 Advance or a
Tranche 2 Advance based upon the Borrowing Base at the time such Permitted
Acquisition Request is approved. The Company, by written notice to the Agent,
may terminate the designation of Acquisition Facility Advances at any time
provided, that, the Company may not deliver such notice unless the Revolving
Loan can be supported by the Borrowing Base at the time such termination is
requested. Upon Agent's receipt and acceptance of such written notice of
termination (i) any designation of outstanding Acquisition Facility Advances
then existing shall immediately terminate, and from the date of receipt of such
written notice of termination for all purposes hereunder be treated as Revolving
Advances which are not Acquisition Facility Advances, and (ii) the Company shall
no longer be able to request that the Agent designate Revolving Advances as
Acquisition Facility Advances.
(c) No Revolving Advance that constitutes a Tranche 1 Advance may remain
outstanding for more than an aggregate of eighteen months from the date any
Tranche 1 Advance is made, and all Tranche 1 Advances and Tranche 2 Advances
must be repaid in full on or prior to the eighteen month anniversary of the
first funding of any Tranche 1 Advance (the "Tranche 1 Availability Period"). No
Revolving Advance that constitutes a Tranche 2 Advance may remain outstanding
for longer than the nine month anniversary of the first funding of any Tranche 2
Advance (the "Tranche 2 Availability Period"), but in any event must be repaid
by the earlier of the end of the Tranche 1 Availability Period and the Tranche 2
Availability Period. The Company may prepay Acquisition Facility Advances, in
full or in part, and without premium or penalty, subject to Section 3.3 hereof.
(d) Each Permitted Acquisition Request shall be executed and delivered by
the Company and shall constitute, unless otherwise disclosed in writing to the
Agent and the Lenders, a representation and warranty by the Company that (1) the
representations and
5
<PAGE>
warranties contained in this Agreement are true and correct in all material
respects on and as of such date as though made on and as of such date, (2) after
giving effect to the Acquisition Facility Advance, no Default or Event of
Default has occurred and (3) such requested Acquisition Facility Advance, when
added to the aggregate Revolving Loans, Letters of Credit and unpaid
reimbursement obligations related to drawings under such Letters of Credit which
are then outstanding and Revolving Loans and Letters of Credit for which
requests have been delivered to the Agent by the Borrowers do not exceed the
Revolving Credit Facility Commitments. Acquisition Facility Advances shall
constitute Revolving Advances and Revolving Loans for all purposes of this
Agreement and the other Loan Documents.
(e) The following Section 3.5.A shall be added immediately following the
last full sentence of Section 3.5 of the Credit Agreement:
"S3.5.A Additional Unused Facility Fee.
From and after the Effective Date of Amendment No. 3 to this Credit
Agreement, the Borrowers shall pay to the Agent for the ratable benefit of the
Lenders, the Additional Unused Facility Fee."
(f) Section 2.6(f) of the Credit Agreement shall be amended to add the
following immediately after the last full sentence immediately following the
Applicable Margin Grid: "Notwithstanding the foregoing, if any Tranche 1 Advance
shall be outstanding, the interest rate during such period shall be the sum of
(i) the Index Rate or Eurodollar Rate (as the case may be) plus the Applicable
Margin plus 0.375% per annum on $50,000,000 of the outstanding Revolving Loan
and (ii) the Index Rate or Eurodollar Rate (as the case may be) plus the
Applicable Margin multiplied by any outstanding amounts in excess of such
$50,000,000; if any Tranche 2 Advance shall be outstanding, the interest rate
during such period shall be the sum of (i) the Index Rate or Eurodollar Rate (as
the case may be) plus the Applicable Margin plus 0.750% per annum on $50,000,000
of the outstanding Revolving Loan and (ii) the Index Rate or Eurodollar Rate (as
the case may be) plus the Applicable Margin multiplied by any outstanding
amounts in excess of such $50,000,000."
(g) Section 8.17 of the Credit Agreement shall be amended to add the
following new paragraph immediately after the word "thereafter" appearing at the
end of the Sonab EBITDA covenants:
6
<PAGE>
"Notwithstanding the foregoing provisions of this Section 8.17, for the
purposes of calculating the financial covenants set forth in Sections 8.17(a),
8.17(b) and 8.17(c) hereof for the fiscal quarters ending April 30, 1998, July
31, 1998, October 31, 1998 and January 31, 1999, all Offering Expenses shall be
excluded from such calculations."
(h) the following Section 8.27 shall be added immediately following the
last full sentence of Section 8.26 of the Credit Agreement:
"S 8.27 YEAR 2000.
On or prior to October 31, 1998, Borrowers and their Subsidiaries shall
complete and deliver to Agent a Year 2000 Assessment, and on or prior to January
31, 1999 Borrowers and their Subsidiaries shall complete and deliver to Agent a
Year 2000 Corrective Plan. On or prior to March 31, 1999, Borrowers and their
Subsidiaries shall implement Year 2000 Corrective Actions. On or before May 31,
1999 Borrowers and their Subsidiaries shall complete Year 2000 Corrective
Actions and Year 2000 Implementation Testing. On or before July 31, 1999,
Borrowers and their Subsidiaries shall eliminate all Year 2000 Problems, except
where failure to correct the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate."
(i) Section 9.2(e) of the Credit Agreement shall be deleted in its entirety
and replaced by the following:
"(e) Liens in favor of Marine Midland Bank pursuant to the "Pledge
Agreement" (as defined in the Debenture Indenture) covering the capital stock of
the Company, and Liens in favor of Marine Midland Bank pursuant to the Security
and Pledge Agreement."
(j) Section 9.3 of the Credit Agreement shall be amended to delete the
"and" immediately following 9.3(q), to delete the reference to "$25,000,000"
contained in Section 9.3(r) and substitute "$32,000,000" therefor, and to delete
the period at the end of 9.3(r) and to insert a semi-colon immediately
thereafter and to add the following immediately thereafter;
"(s) Indebtedness of the Company evidenced by the New Senior Notes,
provided, that all Net Cash Proceeds received by the Company in respect of such
New Senior Notes shall be used to pay in full or otherwise retire the Senior
Notes; and
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<PAGE>
(t) Indebtedness of the Parent evidenced by the New Senior Debentures,
provided, that all Net Cash Proceeds received by the Parent in respect of such
New Senior Debentures shall be used to pay in full or otherwise retire the
Debentures."
(k) Section 9.6 of the Credit Agreement shall be amended as follows:
(i) Section 9.6(b) of the Credit Agreement shall be amended to add the words
"and the New Senior Notes" immediately following the reference to "Senior
Notes" contained therein.
(ii) Section 9.6(b)(ii) of the Credit Agreement shall be amended by deleting
references to "Senior Notes" contained therein and inserting "New Senior
Notes" in lieu thereof;
(iii)Section 9.6(b)(iii) of the Credit Agreement shall be amended by deleting
references to "Debentures" contained therein and in lieu thereof inserting
"New Senior Debentures";
(iv) by deleting the "and" immediately following Section 9.6(b)(iv) thereof,
deleting the period immediately following the word "Documents" in the last
sentence of Section 9.6(b)(v), and inserting ";" in lieu thereof and then
adding the following:
"(vi)The Company may use proceeds from the issuance of the New Senior Notes to
redeem the Senior Notes, including any premiums associated therewith;
(vii)The Parent shall use the aggregate proceeds from the issuance of the New
Senior Debentures to redeem the Debentures, including any costs and
premiums associated therewith;
(viii) The Company may make payments to the Parent in such amounts as necessary
(a) to permit the Parent to make interest payments on the New Senior
Debentures; and
(ix) The Parent shall (a) make an initial capital contribution to the Company in
the aggregate principal amount of $33,000,000 within five (5) Business Days
of the final and irrevocable redemption of the Debentures and Senior Notes
8
<PAGE>
and (b) make an additional capital contribution to the Company consisting
of any funds received by the Parent which were not used by the Parent for
the final and irrevocable redemption of the Debentures, including payment
of costs and premiums associated therewith, within sixty-five (65) Business
Days of the final and irrevocable redemption of the Debentures and Senior
Notes."
(l) Section 9.15 of the Credit Agreement shall be amended by deleting the
period immediately following the last sentence thereof and adding the phrase
"except that the Parent may enter into the New Debenture Indenture and the New
Senior Note Indenture".
(m) Section 9.16 of the Credit Agreement is hereby amended to add the words
"and shall not include rental obligations incurred by the Company pursuant to or
as a result of the Diamond Park Acquisition" immediately following the word
"hereof" at the end of the proviso to Section 9.16(i) hereof.
(n) The Credit Agreement shall be amended to attach a revised Schedule 9.21
thereof in the form attached hereto as Exhibit E.
(o) Exhibit A to the Credit Agreement is hereby amended in its entirety to
read as set forth on Exhibit A hereto and Exhibit D hereto is added to the
Credit Agreement as Exhibit D thereto.
3. Representations and Warranties. Each of the Parent and the Company
represents and warrants as follows (which representations and warranties shall
survive the execution and delivery of this Amendment):
(a) Each of the Parent and the Company has taken all necessary action to
authorize the execution, delivery and performance of this Amendment.
(b) This Amendment has been duly executed and delivered by the Parent and
the Company and the acknowledgement attached hereto has been duly executed and
delivered by each Subsidiary. This Amendment and the Credit Agreement as amended
hereby constitute the legal, valid and binding obligation of the Parent and the
Company, enforceable against them in accordance with their respective terms,
subject to applicable bankruptcy, reorganization, insolvency, fraudulent
conveyance or transfer, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equity principles.
9
<PAGE>
(c) No consent or approval of any person, firm, corporation or entity, and
no consent, license, approval or authorization of any governmental authority is
or will be required in connection with the execution, delivery, performance,
validity or enforcement of this Amendment other than any such consent, approval,
license or authorization which has been obtained and remains in full force and
effect or where the failure to obtain such consent, approval, license or
authorization would not result in a Material Adverse Effect.
(d) After giving effect to this Amendment, each of the Company and the
Parent is in compliance with all of the various covenants and agreements set
forth in the Credit Agreement and each of the other Loan Documents.
(e) After giving effect to this Amendment, no event has occurred and is
continuing which constitutes a Default or an Event of Default.
(f) All representations and warranties contained in the Credit Agreement
and each of the other Loan Documents are true and correct in all material
respects as of the date hereof, except to the extent that any representation or
warranty relates to a specified date, in which case such are true and correct in
all material respects as of the specific date to which such representations and
warranties relate.
4. Effective Date. The amendments to the Credit Agreement contained herein
shall not become effective (the "Effective Date") until (i) this Amendment has
been duly executed and delivered by the Company, the Parent and each of the
Lenders; (ii) the acknowledgement attached hereto shall have been executed and
delivered by each of the Subsidiaries; (iii) the Parent and the Company shall
have delivered to the Agent for each of the Lenders new Revolving Notes
reflecting their new Revolving Commitments; (iv) solely with respect to
paragraphs 2(b), 2(c), 2(d), 2(e) and 2(f) hereof, such paragraphs shall be of
no force or effect until the Supplemental Equity Offering shall have been
consummated, or, if the Supplemental Equity Offering is not consummated or if
the Parent shall fail to receive gross proceeds from the Supplemental Equity
Offering equal to or excess of $15,000,000, Borrowers shall have increased the
New Senior Debentures and/or New Senior Notes offerings by an amount, such that
the gross proceeds of such increase in offering amounts, when added to the gross
proceeds from the Supplemental Equity Offering will equal or exceed $15,000,000;
and (v) Borrowers shall have paid to Agent for the benefit of the Lenders all
fees set forth in that certain commitment letter dated March 24, 1998 between
the Agent and the Borrowers.
10
<PAGE>
5. Expenses. The Company agrees to pay on demand all costs and expenses,
including reasonable attorneys' fees, of the Agent incurred in connection with
this Amendment.
6. Continued Effectiveness. The term "Agreement", "hereof", "herein" and
similar terms as used in the Credit Agreement, and references in the other Loan
Documents to the Credit Agreement, shall mean and refer to, from and after the
Effective Date, the Credit Agreement as amended by this Amendment. Each of the
Company and the Parent hereby agrees that all of the covenants and agreements
contained in the Credit Agreement and the Loan Documents are hereby ratified and
confirmed in all respects.
7. Gold Consignment Agreement. The Lenders hereby consent to the execution
and delivery by the Company of Amendment No. 6 and Limited Consent to the Gold
Consignment Agreement, such Amendment No. 6 and Limited Consent being
substantially in the form attached hereto as Exhibit C.
8. Supplemental Equity Offering. The Lenders hereby consent to the
Supplemental Equity Offering provided that the Parent shall have received gross
proceeds from the Supplemental Equity Offering in an amount not less than
$15,000,000, provided, that if the Parent shall fail to receive gross proceeds
in excess of $15,000,000 from such offering, Borrowers shall increase the amount
of New Senior Debentures and/or New Senior Notes offered by an amount, such that
the gross proceeds of such increased offering, when added to the gross proceeds
received from the Supplemental Equity Offering will equal or exceed $15,000,000.
9. Counterparts. This Amendment may be executed in counterparts, each of
which shall be an original, and all of which, taken together, shall constitute a
single instrument. Delivery of an executed counterpart of a signature page to
this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.
10. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to the
conflict of laws provisions thereof.
11
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly
executed by their respective officers as of the date first written above.
FINLAY ENTERPRISES, INC.
By: /s/Barry D. Scheckner
------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
FINLAY FINE JEWELRY CORPORATION
By: /s/Barry D. Scheckner
------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
GENERAL ELECTRIC CAPITAL CORPORATION,
Individually and as Agent
By: /s/Rick Luck
------------------------------------
Name: Rick Luck
Title: Duly Authorized Signatory
FLEET PRECIOUS METALS INC.
By: /s/David P. Berube
------------------------------------
Name: David P. Berube
Title: AVP
By: /s/Anthony J. Capuano
------------------------------------
Name: Anthony J. Capuano
Title: SVP
12
<PAGE>
THE CHASE MANHATTAN BANK
By: /s/Dolores A. Walsh
----------------------------------
Name: Dolores A. Walsh
Title: Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/E.C. Forst
----------------------------------
Name: E.C. Forst
Title: Authorized Signatory
BANK LEUMI USA
By: /s/David Selove
----------------------------------
Name: David Selove
Title: Vice President
By: /s/Jeffrey E. Pfeffer
----------------------------------
Name: Jeffrey E. Pfeffer
Title: Senior Vice President
ABN AMRO BANK, N.V.
By: /s/Jeffrey Sarfaty
-----------------------------------
Name: Jeffrey Sarfaty
Title: VP
By: /s/Ned Koppelson
-----------------------------------
Name: Ned Koppelson
Title: VP
13
<PAGE>
Each of the Guarantors, by signing below, confirms in favor of the Agent and the
Lenders that it consents to the terms and conditions of the foregoing Amendment
No. 3 to the Amended and Restated Credit Agreement and agrees that it has no
defense, offset, claim, counterclaim or recoupment with respect to any of its
obligations or liabilities under its respective Guaranty and that all terms of
such Guaranty shall continue in full force and effect, subject to the terms
thereof.
FINLAY JEWELRY, INC.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President
and Chief Financial Officer
SONAB HOLDINGS, INC.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President
and Chief Financial Officer
SONAB INTERNATIONAL, INC.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President
and Chief Financial Officer
SOCIETE NOUVELLE D'ACHAT DE BIJOUTERIE - S.O.N.A.B.
By: /s/Barry D. Scheckner
------------------------------------------
Name: Barry D. Scheckner
Title: Attorney-in-Fact
14
<PAGE>
EXHIBIT A
---------
LENDERS, COMMITMENTS AND INITIAL EURODOLLAR OFFICES
Revolving
Lender and Initial Commitment
Eurodollar Office Amount %
- ----------------- ------ -
General Electric $91,666,667 33.333%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals, Inc. $61,111,111 22.222%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners, L.P. $48,888,889 17.778%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $30,555,556 11.111%
111 West 40th Street, 10th Floor
New York, New York 10018
Bank Leumi USA $12,222,222 4.444%
562 Fifth Avenue
New York, New York 10036
ABN AMRO Bank, N.V. $30,555,556 11.111%
(New York Branch)
500 Park Avenue
New York, New York 10022
<PAGE>
Revolving
Sublimit
Commitment1 %
----------- -
General Electric $8,333,333 33.333%
Capital
Corporation
201 High Ridge Road
Stamford, CT 06927
Fleet Precious Metals Inc. $5,555,556 22.222%
111 Westminster Street
Providence, Rhode Island 02903
Goldman Sachs Credit Partners L.P. $4,444,444 17.778%
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank $2,777,778 11.111%
111 West 40th Street
Bank Leumi USA $1,111,111 4.444%
562 Fifth Avenue
New York, New York 10036
ABN AMRO Bank, N.V. $2,777,778 11.111%
(New York Branch)
500 Park Avenue
New York, New York 10022
_________________________________
1As such amount may vary pursuant to the definition of Parent Revolving Credit
Facility Sublimit Commitment.
AMENDMENT NO. 6
THIS AMENDMENT NO. 6 (this "Amendment") is made as of April_24, 1998, by
and between FINLAY FINE JEWELRY CORPORATION, a Delaware corporation with its
principal office at 521 Fifth Avenue, New York, New York 10175 (the "Consignee")
and RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, a national banking association
with its principal office at One Hospital Trust Plaza, Providence, Rhode Island
02903 (the "Consignor") amending certain provisions of the Gold Consignment
Agreement dated as of June 15, 1995 (as amended, modified or supplemented and in
effect, the "Consignment Agreement"), by and between the Consignee and the
Consignor. Capitalized terms used herein which are defined in the Consignment
Agreement and not defined herein shall have the same meaning herein as therein.
WHEREAS, the Consignee has requested that the Consignor agree to amend the
terms of the Consignment Agreement in certain respects as hereinafter more fully
set forth;
WHEREAS, the Consignor is willing to amend the terms of the Consignment
Agreement in such respects upon the terms and subject to the conditions
contained herein;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Consignment Agreement, herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
S1. Amendments of S1 of the Consignment Agreement.__Section 1 of the
Consignment Agreement is hereby amended by:
(a) deleting the text "two and one quarter percent (2-1/4%)" from clause (b) of
the definition of "Consignment Fixed Rate" and substituting in lieu thereof
the text "one and three-quarters percent (1-3/4%)".
(b) deleting the dollar amount "$25,000,000" contained in clause (b) of the
definition of "Consignment Limit" and substituting in lieu thereof the
dollar amount "$32,000,000".
(c) inserting in the place required by alphabetical order the following new
definitions:
"Existing Senior Discount Debentures: The Parent's 12% Senior Discount
Debentures due 2005, issued pursuant to an Indenture dated as of May 26, 1993,
as supplemented by the First Supplemental Indenture thereto dated as of October
28, 1994 and by the Second
<PAGE>
Supplemental Indenture thereto dated as of July 14, 1995, in the form
provided to the Consignor."
"Existing Senior Notes: The Consignee's 10-5/8% Senior Notes due 2003, issued
pursuant to an Indenture dated as of May 26, 1993 as supplemented by the
First Supplemental Indenture thereto dated as of October 28, 1994 and by
the Second Supplemental Indenture thereto dated as of July 14, 1995, in the
form provided to the Consignor."
"1998Offering Expenses: Non-recurring charges, costs and expenses (including
transaction expenses, any write-off of deferred financing costs, debt
discount costs and redemption premiums and including interest expense
incurred solely in respect of the Existing Senior Notes and the Existing
Senior Discount Debentures and solely during the period prior to the
redemption thereof during which the Senior Debentures and the Senior Notes
shall also be outstanding), incurred by the Parent and its Subsidiaries in
connection with (a) the Parent's offering of its common stock on or about
the Sixth Amendment Effective Date pursuant to a registration statement
filed by the Parent with the Securities Exchange Commission on March 24,
1998, as such registration statement may be amended from time to ime, (b)
the Parent's offering of the Senior Debentures, (c) the Consignee's
offering of the Senior Notes and (d) the related redemption of the Existing
Senior Discount Debentures and the Existing Senior Notes."
(d) deleting the definition of "Maturity Date", in its entirety and
substituting in lieu thereof the following new definition:
"Maturity Date: The earliest of (a) December 31, 2001, (b) the maturity date
from time to time in effect under the Dollar Facility, or (c) such other
date on which all Obligations may become due and payable pursuant to the
terms hereof."
(e) deleting definitions of "Senior Discount Debentures" and "Senior Notes" in
their entirety and substituting in lieu thereof the following new
definitions:
"Senior Debentures. The Parent's Senior Debentures due 2008 in the original
principal amount of $75,000,000, as in effect on the Sixth Amendment
Effective Date, which Senior Debentures are being issued pursuant to a
registration statement filed by the Parent with the Securities Exchange
Commission on March 24, 1998, as such registration statement may be amended
from time to time."
<PAGE>
"Senior Notes: The Consignee's Senior Notes due 2008 in the original principal
amount of $150,000,000, as in effect on the Sixth Amendment Effective Date,
which Senior Notes are being issued pursuant to a registration statement
filed by the Consignee with the Securities Exchange Commission on March 24,
1998, as such registration statement may be amended from time to time."
"Sixth Amendment: Amendment No. 6 dated as of April 24, 1998 between the
Consignor and the Consignee, amending certain provisions of this
Agreement."
"Sixth Amendment Effective Date: The date upon which the conditions to the
effectiveness of the Sixth Amendment set forth in Section 10 thereof, other
than the condition set forth in subparagaph (j) of such Section 10, shall
have been satisfied or waived in accordance with the terms of the Sixth
Amendment."
S2. Amendment of S5 of the Consignment Agreement.__Section 5 of the
Consignment Agreement is hereby amended by deleting the first paragraph thereof
in its entirety and substituting in lieu thereof the following new paragraph:
"On or prior to the Sixth Amendment Effective Date, the Consignee shall pay
to the Consignor a closing fee in the amount of $120,000. The Consignee shall
also pay to the Consignor, on the first day of each calendar month following the
Sixth Amendment Effective Date and upon the earlier to occur of the Maturity
Date or the date upon which the Commitment is no longer in effect, a commitment
fee calculated at a rate per annum which is equal to one half of one percent
(1/2%) of the average daily difference by which the Commitment amount (in
Dollars) exceeds the aggregate of the Fair Market Value of all Consigned
Precious Metal outstanding during the preceding calendar month or portion
thereof; provided, however, that no such commitment fee shall accrue or be
payable with respect to any calendar month or portion thereof during which the
average Fair Market Value of all Consigned Precious Metal outstanding during
such calendar month or portion thereof during which the Fair Market Value of all
Consigned Precious Metal outstanding during such calendar month or portion
thereof shall exceed $12,000,000. The Consignee shall also pay to the Consignor,
on or prior to the Sixth Amendment Effective Date and on each anniversary of the
date hereof, a collateral administration fee in the amount of $25,000 per
annum."
S3. Amendment of S6 of the Consignment Agreement.__Section 6 of the
Consignment Agreement is hereby amended by (a) replacing the period at the end
of subparagraph (p) thereof with a semicolon followed by the word "and", and (b)
adding the following new subparagraph (q) thereto immediately following
subparagraph (p):
<PAGE>
"(q)__ttthe Consignee and its Subsidiaries have reviewed or are reviewing
the areas within their businesses and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (i.e. the risk that computer applications
used by any of the Consignee and its Subsidiaries may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999). Based upon such review, the Consignee
reasonably believes that the "Year 2000 Problem" will not have any materially
adverse effect on the business or financial condition of any of the Consignee or
its Subsidiaries."
S4. Amendment of S8.1 of the Consignment Agreement.__Section 8.1 of the
Consignment Agreement is hereby amended by (a) replacing the period at the end
of subparagraph (j) thereof with a semicolon followed by the word "and", and (b)
adding the following new subparagraphs (k) and (l) thereto immediately following
subparagraph (j):
"(k)__comply in all respects with Section 8.27 of the Amended and Restated
Credit Agreement dated as of September 11, 1997 entered into in connection with
the Dollar Facility, as such agreement is in effect on the Sixth Amendment
Effective Date (such Section 8.27 and the defined terms used therein being
incorporated by reference herein with the same effect as if set forth in their
entirety herein), and deliver to the Consignor copies of all information, plans,
assessments, reports or other documents delivered to the Dollar Agent or the
lenders under the Dollar Facility pursuant to such Section 8.27; and
(l)__the Parent shall (i) make an initial capital contribution to the
Consignee in the aggregate principal amount of $33,000,000 within five (5)
Business Days of the final and irrevocable redemption of the Existing Senior
Discount Debentures and (ii) make an additional capital contribution to the
Consignee consisting of any funds received by the Parent from the aggregate
proceeds of the issuance of the Senior Debentures which were not used by the
Parent for the payment of costs and premiums associated with the final and
irrevocable redemption of the Existing Senior Discount Debentures, including any
premiums associated therewith."
S5. Amendment of S8.2 of the Consignment Agreement.__Section 8.2 of the
Consignment Agreement is hereby amended by:
(a) deleting subparagraph (vi) of clause (a) thereof in its entirety and
substituting in lieu thereof the following new subparagraph (vi):
<PAGE>
"(vi)__Indebtedness of the Consignee (A) evidenced by the Senior Notes in an
aggregate principal amount not to exceed $150,000,000, and (B) evidenced by
the Existing Senior Notes in an aggregate principal amount not to exceed
$135,000,000, provided that such Indebtedness described in this clause (B)
shall be permitted solely until the earlier of (1) redemption of such
Existing Senior Notes with the proceeds from the issuance of the Senior
Notes and other available cash and (2) June 24, 1998;"
(b) replacing the period at the end of subparagraph (d)(ii)(F) thereof with a
semicolon followed by the word "and"
(c) adding the following new subparagraph (d)(ii)(G) thereto immediately
following existing subparagraph (d)(ii)(F) thereof:
"(G) so long as no Default or Event of Default has occurred and is continuing or
would occur after giving effect thereto, the Consignee may make payments to
the Parent in such amounts as are necessary to enable the Parent to make
interest payments on the Senior Debentures;"
(d) adding the following new clause (D) to the proviso contained in
subparagraph (h) thereof immediately prior to the semicolon at the end of
clause (C) of such proviso:
",and (D) the Consignee shall redeem or repurchase all of the Existing
Senior Notes with the proceeds from the issuance of the Senior Notes
and other available cash".
S6. Amendment of S8.3 of the Consignment Agreement. Section 8.3 of the
Consignment Agreement is hereby amended by:
(a) (i) deleting the ratio "1.15 to 1; or" in su paragraph (a) thereof and
substituting in lieu thereof the phrase "the ratio set forth opposite the
date set forth in the table below upon which such period shall have ended"
and (ii) inserting the following new table at the end of subparagraph (a)
thereof:
"Period Ending: Ratio:
1/31/98 1.17:1
4/30/98 1.17:1
7/31/98 1.17:1
10/31/98 1.17:1
1/31/99 1.26:1
<PAGE>
4/30/99 1.26:1
7/31/99 1.26:1
10/31/99 1.31:1
1/31/00 and 1.35:1"
thereafter
(b) deleting subparagraph (b) thereof in its entirety and substituting in lieu
thereof the following new subparagraph (b):
"(b) __permit the ratio of (i) the aggregate principal amount of all
Indebtedness for Borrowed Money of the Parent and its Subsidiaries on
a consolidated basis as of any fiscal quarter ending date set forth in
the table below to (ii) Consolidated EBITDA of the Parent and its
Subsidiaries for the period of four consecutive fiscal quarters ending
on such fiscal quarter ending date in such table, to exceed the ratio
set forth opposite such date in such table:
Fiscal Quarter
Ending Date: Ratio:
1/31/98 4.73:1
4/30/98 6.55:1
7/31/98 6.55:1
10/31/98 6.33:1
1/31/99 4.29:1
4/30/99 6.16:1
7/31/99 6.16:1
10/31/99 5.94:1
1/31/00 4.24:1
4/30/00 5.50:1
7/31/00 5.50:1
10/31/00 5.28:1
1/31/01 3.85:1
4/30/01 4.95:1
7/31/01 4.95:1
10/31/01 4.73:1
1/31/02 3.52:1
;provided, however, that solely for the purposes of calculating the
above ratio as of, and for the fiscal period ended on, October 31,
<PAGE>
1997 only, there shall be excluded from such calculation any effect
upon Indebtedness for Borrowed Money of the Parent and its
Subsidiaries and on Consolidated EBITDA of the Parent and its
Subsidiaries resulting from the acquisition by the Consignee of the
assets and business acquired from the Diamond Park Fine Jewelry
Division (the "Diamond Park Division") of Zale Delaware, Inc. (the
"Seller") pursuant to the terms of a certain Asset Purchase Agreement
dated September 3, 1997 among the Parent, the Consignee, the Seller
and Zale Corporation, as in effect on the date of Amendment No. 4
hereto (the "Acquisition"), or from the related financing of such
Acquisition under the Dollar Facility; and provided, further, that
solely for the purposes of calculating the above ratio as of, and for
the fiscal periods ending on, January 31, 1998, April 30, 1998 and
July 31, 1998, the Consignee may utilize the actual historical
earnings information (provided to the Consignee by Zale Corporation
pursuant to the Acquisition) in respect of the operation of the
Diamond Park Division by the Seller prior to the Consignee's
acquisition of the Diamond Park Division to calculate Consolidated
EBITDA for such fiscal periods."
(c) inserting the following new subparagraph (c) therein immediately
following subparagraph (b) thereof:
"(c) permit Consolidated EBITDA of the Parent and its Subsidiaries for
any period of four consecutive fiscal quarters ending on any date
set forth in the table below to be less than the amount set forth
opposite such date in such table:
Date: Amount:
1/31/98 $55,800,000
4/30/98 $58,500,000
7/31/98 $58,500,000
10/31/98 $60,300,000
1/31/99 $63,000,000
4/30/99 $63,000,000
7/31/99 $63,000,000
10/31/99 $63,000,000
1/31/00 $67,500,000
4/30/00 $67,500,000
7/31/00 $67,500,000
10/31/00 $67,500,000
1/31/01 $72,000,000
4/30/01 $73,800,000
7/31/01 $73,800,000
<PAGE>
10/31/01 $73,800,000
1/31/02 $78,300,000
;provided, however, that solely for the purposes of calculating
Consolidated EBITDA for the fiscal periods ending on October 31, 1997,
January 31, 1998, April 30, 1998 and July 31, 1998, the Consignee may
utilize the actual historical earnings information (provided to the
Consignee by Zale Corporation pursuant to the Acquisition) in respect
of the operation of the Diamond Park Division by the Seller prior to
the Consignee's acquisition of the Diamond Park Division to calculate
Consolidated EBITDA for such fiscal periods."
(d) inserting the following new text therein immediately following
subparagraph (c) thereof:
"Notwithstanding the foregoing provisions of this Section 8.3, for
purposes of calculating the financial covenants set forth in
Sections 8.3(a), (b) and (c) above, there shall be excluded from
such calculations the effect of any 1998 Offering Expenses."
S7. References to "Senior Discount Debentures". The Consignment Agreement
is hereby amended to delete each reference to "Senior Discount Debentures" in
its entirety and to substitute in lieu thereof the text "Senior Debentures".
S8. Limited Consent. Subject to the satisfaction of the conditions
precedent set forth in S10 hereof, the Consignor hereby consents to the
execution and delivery by the Consignee of Amendment No. 3 to the Amended and
Restated Credit Agreement dated as of September 11, 1997, among the Consignee,
the Parent, the Dollar Agent and the lenders party thereto, such Amendment No. 3
being in substantially the form attached hereto as Exhibit A.
S9. Representations and Warranties.__The Consignee hereby represents and
warrants to the Consignor as follows:
(a) Representations and Warranties in Consignment Agreement. The
representations and warranties of the Consignee contained in the
Consignment Agreement were true and correct in all material respects when
made and continue to be true and correct in all material respects on the
date hereof, except to the extent of changes resulting from transactions
contemplated or permitted by the Consignment Documents and this Amendment
and changes occurring in the ordinary course of business that do not result
in a Materially Adverse Effect, and to the extent that such representations
and warranties relate expressly to an earlier date.
<PAGE>
(b) Authority, No Conflicts, Etc. The execution, delivery and performance by
the Consignee of this Amendment and the consummation of the transactions
contemplated hereby (i)__are within the corporate power of the Consignee
and have been duly authorized by all necessary corporate action on the part
of the Consignee, (ii)__do not require any approval or consent of, or
filing with, any governmental agency or authority, or any other person,
association or entity (except for the consent of the Dollar Agent and each
of the lenders under the Dollar Facility, which consent is being obtained
concurrently herewith as required by Section 10 hereof), which bears on the
validity of this Amendment or the Consignment Documents and which is
required by law or the regulation or rule of any agency or authority, or
other person, association or entity, (iii)__do not violate any provisions
of any law, rule or regulation or any provision of any order, writ,
judgment, injunction, decree, determination or award presently in effect in
which the Consignee is named in a manner which has or could reasonably be
expected to have a Materially Adverse Effect, (iv)__do not violate any
provision of the Charter Documents of the Consignee, (v)__do not result in
any breach of or constitute a default under any agreement or instrument to
which the Consignee is a party or by which it or any of its properties is
bound, including without limitation any indenture, loan or credit
agreement, lease, debt instrument or mortgage, in a manner which has or
could reasonably be expected to have a Materially Adverse Effect, and
(vi)__do not result in or require the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon any of the assets or properties of the
Consignee except in favor of the Consignor pursuant to the Security
Documents.
(c) Enforceability of Obligations. This Amendment has been duly executed
and delivered by the Consignee and constitutes the legal, valid and binding
obligation of the Consignee, enforceable against the Consignee in accordance
with its terms, provided that (a)__enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws of general application affecting the rights and
remedies of creditors, and (b)__enforcement may be subject to general principles
of equity, and the availability of the remedies of specific performance and
injunctive relief may be subject to the discretion of the court before which any
proceedings for such remedies may be brought.
S10. Condition to Effectiveness.__The effectiveness of this Amendment shall
be subject to satisfaction of the following conditions precedent, in each case
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in form and substance satisfactory to the Consignor; provided that the
effectiveness of the amendments described in Section 5(a) of this Amendment (and
the associated amendments to the definitions of "Senior Notes" and "Existing
Senior Notes", in each case solely for purposes of using such amended
definitions in such Section 5(a) hereof) shall not be subject to satisfaction of
the condition precedent set forth in subparagraph (j) of this Section 10:
(a) this Amendment duly executed by each of the Consignee and the Consignor;
(b) a Certificate of the Secretary or Assistant Secretary of the Consignee
certifying as to the Consignee's charter documents (as certified by the
Secretary of State of the State of Delaware), by-laws, incumbency and
authorizing resolutions of the Consignee's board of directors authorizing
the transactions contemplated by the Amendment;
(c) a good standing certificate from the Secretary of State of the State of
Delaware regarding the Consignee's good standing;
(d) foreign qualification certificates for the Consignee from each jurisdiction
in which the Consignee has qualified to do business as a foreign
corporation;
(e) a legal opinion of Tenzer Greenblatt LLP, counsel to the Consignee;
(f) a cash amount equal to $145,000, comprised of (i) the closing fee in the
amount of $120,000 contemplated by S5 of the Consignment Agreement (as
amended by this Amendment) and (ii) the annual collateral administration
fee in the amount of $25,000 contemplated by S5 of the Consignment
Agreement (as amended by this Amendment);
(g) evidence of the issuance by the Parent of its Senior Debentures due 2008 in
the maximum aggregate principal amount of $75,000,000 (the "New Senior
Debentures"), the net cash proceeds of which shall be used to redeem the
Senior Discount Debentures (as defined in the Consignment Agreement prior
to the amendments contemplated by this Amendment);
(h) evidence of the issuance by the Consignee of its Senior Notes due 2008 in
the maximum aggregate principal amount of $150,000,000 (the "New Senior
Notes"), the net cash proceeds of which shall be used to redeem the Senior
Notes (as defined in the Consignment Agreement prior to the amendments
contemplated by this Amendment);
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(i) evidence of the issuance by the Parent of up to $19,200,000 (and in any
event yielding net cash proceeds to the Parent of not less than
$12,700,000) of its common stock, provided that if the Parent shall be
unable to complete such issuance of common stock for any reason, the Parent
shall have instead issued additional New Senior Debentures or other
Indebtedness of the Parent in an aggregate principal amount not less than
$12,700,000 on terms and conditions satisfactory to the Consignor in its
sole discretion; and provided further that the net cash proceeds of such
issuance shall be used to redeem the Senior Discount Debentures (as defined
in the Consignment Agreement prior to the amendments contemplated by this
Amendment);
(j) evidence of the repayment in full of the existing Senior Discount
Debentures (as defined in the Consignment Agreement prior to the amendments
contemplated by this Amendment) of the Parent and the existing Senior Notes
(as defined in the Consignment Agreement prior to the amendments
contemplated by this Amendment) of the Consignee with the proceeds of the
New Senior Debentures and the New Senior Notes and other available cash,
including the retirement in full of all such Senior Discount Debentures and
Senior Notes and all fees and expenses in connection therewith;
(k) evidence of the amendment of the Dollar Facility to provide for, among
other things, an increase in the maximum principal amount of credit to be
extended thereunder from $225,000,000 to $275,000,000; and
(l) evidence of the Consignee's receipt of all necessary or appropriate third
party consents or approvals to the transactions contemplated hereby,
including, without limitation, consents or approvals from the Dollar Agent
and each of the lenders under the Dollar Facility.
S11. Ratifications, etc.__Except as expressly provided in this Amendment,
all of the terms and conditions of the Consignment Agreement and the other
Consignment Documents shall remain in full force and effect. All references in
the Consignment Agreement or any related agreement or instrument to the
Consignment Agreement shall hereafter refer to the Consignment Agreement as
amended hereby. The Consignee confirms and agrees that the Obligations of the
Consignee to the Consignor under the Consignment Documents, as amended and
supplemented hereby, are secured by and are entitled to the benefits of the
Security Documents.
S12.__No Implied Waiver. Except as expressly provided herein, nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligations of the Consignee or any right of the
Consignor consequent thereon.
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S13. Governing Law.__This Amendment is intended to take effect as an
instrument under seal and shall be construed according to and governed by the
internal laws of the State of Rhode Island.
S14. Execution in Counterparts.__This Amendment may be executed in any
number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart signed
by the party against whom enforcement is sought.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
FINLAY FINE JEWELRY
CORPORATION
By: /s/Barry D. Secheckner
--------------------------------
Name: Barry D. Scheckner
Title: Senior Vice President and
Chief Financial Officer
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK
By:/s/ Albert L. Brown
---------------------------------
Name: Albert L. Brown
Title: Sr. Vice President
