Exhibit 10.1
LOAN AGREEMENT
among
TOWN & COUNTRY CORPORATION,
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
GOLD LANCE, INC.
L.G. BALFOUR COMPANY, INC.,
and
FOOTHILL CAPITAL CORPORATION
Dated as of July 3, 1996
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 24
1.3 Code 24
1.4 Construction 24
1.5 Schedules and Exhibits 24
2. LOAN AND TERMS OF PAYMENT 24
2.1 Revolving Advances 24
2.2 Overadvances 25
2.3 Mandatory Prepayments 25
2.4 Interest: Rates, Payments, and Calculations 26
2.5 Crediting Payments 27
2.6 Statements of Obligations 27
2.7 Fees 27
2.8 Letters of Credit and Letter of Credit Guarantees 28
3. CONDITIONS; TERM OF AGREEMENT 30
3.1 Conditions Precedent to Initial Revolving Advance
or Letter of Credit 30
3.2 Conditions Concurrent to Initial Revolving Advance
or Letter of Credit 33
3.3 Conditions Precedent to all Revolving Advances
and Letters of Credit 33
3.4 [Intentionally Omitted] 33
3.5 Term; Renewal 33
3.6 Effect of Termination 34
3.7 Early Termination by Borrower 34
3.8 Termination Upon Event of Default 35
4. COLLATERAL 35
4.1 Collection of Accounts, General Intangibles, Negotiable
Collateral 35
4.2 Delivery of Additional Documentation Required 36
4.3 Power of Attorney 36
4.4 Right to Inspect; Payment of Certain Costs, Fees, and
Expenses Relating to Collateral 36
5. REPRESENTATIONS AND WARRANTIES 37
5.1 No Prior Encumbrances 37
5.2 Eligible Accounts 37
5.3 Eligible Inventory 37
5.4 Location of Inventory and Equipment 37
5.5 Inventory Records 37
5.6 Location of Chief Executive Office 37
5.7 Due Organization and Qualification 38
5.8 Due Authorization; No Conflict 38
5.9 Litigation 38
5.10 No Material Adverse Change in Financial Condition 38
5.11 Solvency 38
5.12 ERISA 38
5.13 Environmental Condition 39
5.14 Ownership of Subsidiaries; Inactive Subsidiaries 39
5.15 Reliance by Foothill; Cumulative 39
6. AFFIRMATIVE COVENANTS 40
6.1 Accounting System 40
6.2 Collateral Reports 40
6.3 Schedules of Accounts 40
6.4 Financial Statements, Reports, Certificates 41
6.5 Tax Returns 42
6.6 Designation of Inventory 42
6.7 Returns 42
6.8 Title to Equipment 42
6.9 Maintenance of Equipment 42
6.10 Taxes 42
6.11 Insurance 43
6.12 Foothill Expenses 43
6.13 Financial Covenants 43
6.14 No Setoffs or Counterclaims 45
6.15 Location of Inventory and Equipment 45
7. NEGATIVE COVENANTS 45
7.1 Indebtedness 45
7.2 Liens 47
7.3 Restrictions on Fundamental Changes 47
7.4 Extraordinary Transactions and Disposal of Assets 47
7.5 Change Name 47
7.6 Guarantee 47
7.7 Nature of Business; Fiscal Year 47
7.8 Prepayments 47
7.9 Change of Control 48
7.10 Capital Expenditures 48
7.11 Consignments 48
7.12 Distributions 48
7.13 Accounting Methods 48
7.14 Investments 49
7.15 Transactions with Affiliates 49
7.16 Suspension 49
7.17 Compensation 49
7.18 Use of Proceeds 50
7.19 Amendment of Certain Documents 50
7.20 Specific Gold Covenants 50
8. EVENTS OF DEFAULT 51
9. FOOTHILL'S RIGHTS AND REMEDIES 53
9.1 Rights and Remedies 54
9.2 Remedies Cumulative 56
10. TAXES AND EXPENSES REGARDING THE COLLATERAL 56
11. WAIVERS; INDEMNIFICATION 56
11.1 Demand; Protest; etc. 56
11.2 Foothill's Liability for Inventory or Equipment 56
11.3 Indemnification 57
11.4 Suretyship Waivers and Consents 57
12. NOTICES 60
13. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER 61
14. DESTRUCTION OF BORROWER'S DOCUMENTS 62
15. GENERAL PROVISIONS 62
15.1 Effectiveness 62
15.2 Successors and Assigns 62
15.3 Section Headings 62
15.4 Interpretation 62
15.5 Severability of Provisions 63
15.6 Amendments in Writing 63
15.7 Counterparts; Telecopy Execution 63
15.8 Revival and Reinstatement of Obligations 63
15.9 Integration 63
15.10 Renegotiation of Certain Provisions
in Certain Instances 63
LOAN AGREEMENT
This LOAN AGREEMENT, is entered into as of July 3, 1996, among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of business
located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California
90025-3333, on the one hand, and, on the other hand, TOWN & COUNTRY CORPORATION,
a Massachusetts corporation ("T&C"), with its chief executive office located at
25 Union Street, Chelsea, Massachusetts 02150, TOWN & COUNTRY FINE JEWELRY
GROUP, INC., a Massachusetts corporation ("Group"), with its chief executive
office located at 25 Union Street, Chelsea, Massachusetts 02150, GOLD LANCE,
INC., a Massachusetts corporation ("GLI"), with its chief executive office
located at 1920 North Memorial Drive, Houston, Texas 77007, and L.G. BALFOUR
COMPANY, INC., a Delaware corporation ("Balfour"), with its chief executive
office located at 15 John Dietsch Boulevard, P.O. Box 1999, North Attelborough,
MA 02763. Effective on the Closing Date, this Agreement amends and restates in
its entirety that certain Loan Agreement dated as of May 14, 1993, between the
parties hereto (the "Prior Agreement"); provided that Section 11.3 of the Prior
Agreement shall not be terminated or superseded hereby. All "Obligations" (as
defined in the Prior Agreement) outstanding on the Closing Date automatically
shall become Obligations hereunder, as if new Revolving Advances were made or
Letters of Credit issued on the Closing Date, provided that all outstanding
advances and L/C's or L/C Guaranties issued under the Prior Agreement shall in
fact remain outstanding hereunder and shall not be deemed to have been repaid,
cancelled, or reissued merely because of the amendment and restatement provided
for herein.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have the
following definitions:
"Account Debtor" means any Person who is or may become obligated under, with
respect to, or on account of an Account.
"Accounts" means all presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to a Debtor arising out of the
sale or lease of goods or the rendition of services by such Debtor, irrespective
of whether earned by performance, and any and all credit insurance, guaranties,
or security therefor.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms controlling", "controlled by," and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly ten percent (10%) or more of the securities having
ordinary voting power for the election of directors or other members of the
governing body of a Person or ten percent (10%) or more of the partnership or
other ownership interests of a Person (other than as a limited partner of such
Person) shall be deemed to control such Person; (b) each director or officer of
a Person shall be deemed to be an Affiliate of such Person; and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed to be an Affiliate of such Person.
"Agreement" means this Loan Agreement and any extensions, riders, supplements,
notes, amendments, or modifications to or in connection with this Loan
Agreement.
"Asset Disposition" means any direct or indirect sale, conveyance, transfer,
lease or other disposition to any person other than Borrower or a Subsidiary in
one transaction or a series of related transactions, of any capital stock or
other interests (including partnership interests) any Subsidiary (other than
directors' qualifying shares) or any other property or asset of Borrower or any
Subsidiary (each referred to for purposes of this definition as a
"disposition"), including any disposition by means of a merger, consolidation or
similar transaction.
"Authorized Officer" means any officer of Borrower.
"Average Unused Portion of the Available Maximum Combined Facility" means: (a)
the lesser of (x) the Maximum Combined Facility, and (y) the Maximum Foothill
Amount plus the Syndicated Amount; less (b) the sum of (i) the average Daily
Balance of Revolving Advances that were outstanding during the immediately
preceding calendar month, plus (ii) the average Daily Balance of the L/C Amount
that was outstanding during the immediately preceding calendar month.
"Balfour" has the meaning ascribed thereto in the preamble to this Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. Section 101
et seq.), as amended from time to time.
"Borrower" means Balfour, GLI, Group, and T&C, individually and collectively,
and jointly and severally, and their respective successors and assigns.
"Borrower's Books" means all of each Debtor's books and records including:
ledgers; records indicating, summarizing, or evidencing such Debtor's assets or
liabilities, or the Collateral; all information relating to such Debtor's
business operations or financial condition; and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Borrowing Base" means (i) the sum of (a) Balfour's Net Eligible Accounts
Availability Component, (b) GLI's Net Eligible Accounts Availability Component,
(c) Group's Net Eligible Accounts Availability Component, and (d) T&C's Net
Eligible Accounts Availability Component, plus (ii) the lesser of (y) Twelve
Million Five Hundred Thousand Dollars ($12,500,000), and (z) the sum of (a)
Balfour's Eligible Inventory Availability Component, (b) GLI's Eligible
Inventory Availability Component, (c) Group's Eligible Inventory Availability
Component, and (d) T&C's Eligible Inventory Availability Component.
"Business Day" means any day which is not a Saturday, Sunday, or other day on
which national banks are authorized or required to close.
"Certificate of Designation" means the Certificate of Vote of Directors
Establishing the Exchangeable Preferred Stock that is certified by the Clerk of
T&C with respect to the rights and preferences of the New Exchangeable Preferred
Stock.
"Change of Control" means the occurrence of any of the following events:
(i) the sale or transfer of all or substantially all of the assets of
Borrower (or any entity composing Borrower) as an entirety to any Person or
related group of Persons other than an Affiliate or Affiliates of Borrower (or
any entity composing Borrower), other than pur to a transaction permitted under
Section 7.3 or Section 7.4 hereof;
(ii) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
(A) C.William Carey, (B) any relative or spouse of C. William Carey who has the
same principal residence as C. William Carey, or any relative of such spouse who
has the same principal residence as C. William Carey, (C) any trust or other
estate in which C. William Carey or any relative or spouse (who has the same
principal residence as C. William Carey) of C. William Carey (or any relative of
such spouse who has the same principal residence as C. William Carey) has a
substantial beneficial interest or as to which he or she, as the case may be,
serves as trustee or in a similar fiduciary capacity, or (D) any mutual fund or
other investment fund managed by Fidelity Management & Research Company, Inc.,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of 25% or more of the Voting Stock of
Borrower (or any entity composing Borrower);
(iii) Borrower (or any entity composing Borrower) engages in any merger,
consolidation, sale of capital stock, or any other transaction or series of
transactions with any other Person, with the effect that the stockholders of
Borrower (or any entity composing Borrower) immediately prior thereto own,
directly or indirectly, in the aggregate, less than 75% of the total voting
power entitled to vote in the election of directors of (x) Borrower if Borrower
is the surviving entity, or (y) the surviving or resulting entity if Borrower
is not the surviving entity, in each such case immediately after such
transaction; or
(iv) Borrower (or any entity composing Borrower) is liquidated, dissolved,
or adopts a plan of liquidation pursuant to the Bankruptcy Code or any other
bankruptcy law.
"Closing Date" means the date of the initial advance or the date of the initial
issuance of a Letter of Credit, whichever occurs first.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts; Borrower's Books; the
Equipment; the General Intangibles; the Inventory; the Negotiable Collateral;
any money, or other assets of Borrower which hereafter come into the possession,
custody, or control of Foothill; provided, however, that the foregoing shall not
include the Exchange Property; and the proceeds and products, whether tangible
or intangible, of any of the foregoing including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or other
tangible or intangible property resulting from the sale, exchange, collection,
or other disposition of the Collateral, or any portion thereof or interest
therein, and the proceeds thereof.
"Collateral Agent" means Foothill Capital Corporation, a California corporation,
in its capacity as Collateral Agent under and pursuant to the Intercreditor
Agreement.
"Collections Agents" means one or more commercial banks that are reasonably
acceptable to Foothill.
"Consigned Precious Metals" means Precious Metals consigned to Borrower by
another person or entity and not owned outright by Borrower.
"Consolidated" or "consolidated, with reference to any term defined herein,
shall mean that term as applied to the accounts of Borrower and the
Subsidiaries, consolidated in accordance with GAAP.
"Consolidated Adjusted EBITDA" means, with respect to any period, the
Consolidated Net Income for such period (i) increased by the sum, on a
consolidated basis, of (a) all interest expense, (b) depreciation and
amortization expense, and (c) non-cash taxes, in each case paid or accrued by
T&C for such period, and (ii) decreased by the amount, on a consolidated basis,
of all capital expenditures paid or accrued by T&C for such period.
"Consolidated Adjusted Net Income" means, for any period, the net income (loss)
of Borrower and the Subsidiaries determined on a consolidated basis in
accordance with GAAP for such period; provided, however, that there shall not be
included in such Consolidated Adjusted Net Income:
(i) any net income (loss) of any person if such person is not a Subsidiary,
except that Borrower's equity in the net income of any such person for such
period shall be included in such Consolidated Adjusted Net Income up to the
aggregate amount of cash actually distributed by such person during such period
to Borrower or a Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Subsidiary, to the limitations
contained in clause (iii) of this definition);
(ii) any net income (loss) of any Subsidiary if such Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions, loans or advances by such Subsidiary, directly or
indirectly, to Borrower (or on the ability of Borrower to receive or retain any
such dividend, distribution, loan or advance), except that Borrower's equity in
the net income of any such Subsidiary during such period shall be included in
Consolidated Adjusted Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary during any such period to Borrower or another
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to another Subsidiary, to the limitation
contained in this clause and in clause (v) of this definition);
(iii) any net income (loss) realized upon a sale or other disposition of any
property, plant or equipment of Borrower or any Subsidiary which is not sold or
otherwise disposed of in the ordinary course of business;
(iv) any gain or loss realized upon the sale or other disposition of any
capital stock of a Subsidiary; and
(v) the cumulative effect of a change in accounting principles.
"Consolidated Adjusted Total Senior Liabilities" means, as of the date of
determination thereof is to be made, the sum of Consolidated Total Senior
Liabilities plus Consolidated Precious Metal Liabilities.
"Consolidated Current Assets" means, as of the date of determination thereof is
to be made, aggregate amount of all current assets of Borrower and its
Subsidiaries calculated on a consolidated basis that would, in accordance with
GAAP, be classified on a balance sheet as current assets.
"Consolidated Current Liabilities" means, as of the date of determination
thereof is to be made, the aggregate amount of all current liabilities of
Borrower and its Subsidiaries, calculated on a consolidated basis that would, in
accordance with GAAP, be classified on a balance sheet
"Consolidated EBIT" means, with respect to any period, the Consolidated Adjusted
Net Income for such period increased (to the extent already deducted therefrom)
by the sum, on a consolidated basis, of (i) all income taxes paid or accrued by
Borrower and the Subsidiaries for such period, and (ii) all Consolidated Fixed
Charges for such period, in each case determined in accordance with GAAP.
"Consolidated Fixed Charge Ratio" means the ratio of (i) Consolidated EBIT for
the Reference Period to (ii) Consolidated Fixed Charges for the Reference
Period.
"Consolidated Fixed Charges" means the sum of (a) the aggregate amount of
interest (other than interest on the New Senior Subordinated Notes which is to
be paid in additional New Senior Subordinated Notes) required to be paid on
Indebtedness (other than Indebtedness incurred for the acquisition from the Gold
Consignor of gold or other precious metals pursuant to the Gold Consignment
Agreement) of Borrower and the Subsidiaries, plus (b) the imputed portion of
rental expense representing the interest factor of lease payments of Borrower
and the Subsidiaries, plus (c) the aggregate amount of distributions required to
be paid under the terms of any capital stock of Borrower, including the New
Exchangeable Preferred Stock, that may not be deferred at the option of
Borrower, plus (d) the net interest expenses and consignment fees associates
with the Gold Consignment Agreement, plus (e) the net interest expense and
consignment fees associated with the consignment to foreign Subsidiaries of gold
and other precious or semi-precious stones.
"Consolidated Interest Coverage Ratio" means the ratio (i) Consolidated Adjusted
EBITDA to (ii) the cash interest expense of T&C and its Subsidiaries, determined
on a consolidated basis.
"Consolidated Net Income" means, for any period, the net income (loss) of
Borrower and the Subsidiaries determined on a consolidated basis in accordance
with GAAP for such period.
"Consolidated Precious Metal Liabilities" shall mean, as of the date any
determination thereof is to be made, all liabilities of Borrower and the
Subsidiaries, calculated on a consolidated basis, in respect of all
consignments, leases, and similar financings of Precious Metals.
"Consolidated Tangible Capital Base" shall mean, as of the date any
determination thereof is to be made, the sum of (i) Consolidated Tangible Net
Worth, plus (ii) the book amount of Subordinated Indebtedness, calculated on a
consolidated basis.
"Consolidated Tangible Net Worth" means, as of the date of determination thereof
is to be made, Borrower and the Subsidiaries' total stockholder's equity, minus
the intangible assets of Borrower and the Subsidiaries, calculated on a
consolidated basis.
"Consolidated Total Liabilities" means, as of the date of determination thereof
is to be made, all liabilities of Borrower and the Subsidiaries, on a
consolidated basis, exclusive of the New Exchangeable Preferred Stock and
increased by the amount of minority interests.
"Consolidated Total Senior Liabilities" means, as of the date of determination
thereof is to be made, Consolidated Total Liabilities minus the book amount of
Subordinated Indebtedness.
"Creditor Agreement" means a Creditor Agreement, in form and substance
acceptable to Foothill and Borrower, whereby Gold Consignor agrees to act for
Collateral Agent with respect to certain matters specified therein relating to
gold of, or on consignment to, Borrower. "Daily Balance" means the amount of an
Obligation owed at the end of a given day.
"Debtor" means any one of Balfour, GLI, Group, or T&C.
"Dilution Reserve" means (a)(i) as of the date of determination, the percentage
of dilution (e.g., credits, discounts, samples, returns, etc.) of all Accounts
of a Debtor (the amount of such dilution to be determined by Foothill in its
sole judgment), minus (ii) five percentage points (5%), times (b) one and
one-quarter (1.25), times (c) as of the date of determination, the aggregate
amount of Eligible Accounts then extant of such Debtor.
"Dollar" or "dollar" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section 3.7.
"Eligible Accounts" means those Accounts created by a Debtor in the ordinary
course of business that arise out of such Debtor's sale of goods or rendition of
services, that strictly comply with all of Borrower's representations and
warranties to Foothill, and that are and at all times shall continue to be
acceptable to Foothill in all respects (in the reasonable exercise of its
discretion); provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill (in the reasonable exercise of its
discretion). Eligible Accounts shall not include the following:
(a) Accounts that are more than thirty one (31), but less than sixty (60)
days past due from the due date of the applicable invoices, to the extent that
the aggregate amount of all such Accounts of all of the Debtors exceeds Five
Million Dollars ($5,000,000);
(b) Accounts that the Account Debtor has failed to pay within sixty (60)
days, or more, of the due date of the applicable invoice;
(c) Accounts originated by the EPG division of Balfour;
(d) [Intentionally omitted];
(e) Accounts with selling terms of more than ninety (90) days from the date
of the applicable invoice, with the exception of Accounts as to which Montgomery
Ward is the Account Debtor in which case the Accounts will be ineligible if they
contain selling terms of more than hundred twenty (120) days from the date of
the applicable invoice;
(f) Accounts with respect to which the Account Debtor is an officer,
employee, Affiliate, or agent of any Debtor;
(g) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, so-called
'special event sales', or other terms by reason of which the payment by the
Account Debtor may be conditional;
(h) Accounts with respect to which the Account Debtor is not a resident of
the United States or Canada, and that are not either (1) covered by credit
insurance in form and amount, and by an insurer, satisfactory to Foothill, or
(2) supported by one or more letters of credit that are assignable and have been
delivered to Foothill in an amount and of a tenor, and issued by a financial
institution, acceptable to Foothill;
(i) Accounts with respect to which the Account Debtor is the United States or
any department, agency, or instrumentality of the United States and with respect
to which Borrower has not complied with the provisions of the Federal Assignment
of Claims Act to assign the right to payment to Foothill, or Accounts with
respect to which the Account Debtor is any state of the United States or any
city, town, municipality, or division thereof;
(j) Accounts with respect to which such Debtor is or is reasonably likely to
become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to such Debtor; provided, however, that such Accounts only shall
be deemed ineligible under this clause to the extent of the actual or likely
offsetting amount as reasonably determined by Foothill;
(k) Accounts with respect to an Account Debtor whose total obligations to
Borrower exceed ten percent (10%) of all Eligible Accounts owed to Borrower, to
the extent of the obligations of such Account Debtor in excess of such
percentage; provided, however, that, (1) in the case of K-Mart Corporation, HSN
Broadcasting of Illinois, Inc., Wal-Mart Stores, Inc., Sears Roebuck & Company,
and Montgomery Ward, and such other highly creditworthy Account Debtors as to
which Foothill has agreed to in writing, the foregoing percentage may, in
Foothill's reasonable discretion, be increased to up to twenty percent (20%)
before the excess would be deemed ineligible, and (2) in the case of Zale
Corporation and Gordon Jewelry Corporation (collectively with their respective
successors hereinafter "Zale/Gordon"), the foregoing percentage for Zale/Gordon,
on a combined basis, may, in Foothill's reasonable discretion, be increased to
up to fifteen percent (15%) before the excess would be deemed ineligible;
(l) Accounts with respect to which the Account Debtor disputes liability or
makes any claim with respect thereto, or is subject to any Insolvency
Proceeding, or become insolvent, or goes out of business; provided, however,
that disputed Accounts or Accounts subject to claims only shall be deemed
ineligible under this clause to the extent of the actual or likely offsetting
amount as reasonably determined by Foothill unless Foothill, in the exercise of
its reasonable judgment, believes that the dispute or claim will jeopardize the
repayment of all or substantially all of the Account in a timely manner;
(m) Accounts which are payable in other than United States Dollars;
(n) Accounts the collection of which Foothill, in the reasonable exercise
of its judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(o) Accounts owed by an Account Debtor that has failed to pay fifty percent
(50%), or more, of its Accounts owed to such Debtor within sixty (60) days of
the due date of the applicable invoices; and
(p) Accounts arising from the sale of Inventory that is proceeds of the Zale
Bankruptcy Claim.
"Eligible Finished Goods Inventory" means (a) that portion of Eligible Inventory
consisting of finished goods less (b) to the extent not already excluded from
Eligible Inventory, the value of the Precious Metals component of such finished
goods.
"Eligible Gold" means gold that is owned by Borrower, or that is owned by Gold
Consignor and on consignment to Borrower pursuant to the Gold Consignment
Agreement and with respect to which Gold Consignor has not demanded the return
thereof from Borrower, except for and excluding gold with respect to which
Borrower is in breach of any covenant contained in the Specific Gold Covenants.
"Eligible Inventory" means Inventory consisting of first quality finished goods
held for sale in the ordinary course of a Debtor's business and raw materials
consisting solely of stones or diamonds for such finished goods, that are
located at such Debtor's premises set forth on Schedule E-1 (as such schedule
may be amended from time to time so long as concurrent therewith such Debtor
complies with the provisions of Section 6.15 regarding the establishment of new
locations), are acceptable to Foothill in all respects, and strictly comply with
all of Borrower's representations and warranties to Foothill. Eligible Inventory
shall not include any Inventory of Balfour, any Inventory of GLI, any Inventory
constituting Precious Metals, slow moving or obsolete items, restrictive or
custom items (unless the identifying markings can be readily removed at minor
expense), work in process, components which are not part of finished goods,
spare parts, packaging and shipping materials, supplies used or consumed in such
Debtor's business, Inventory at the premises of third parties, Inventory that is
subject to a security interest or lien in favor of any third Person other than
the Collateral Agent for the benefit of the Secured Parties, bill and hold
goods, Inventory that is not subject to a first priority perfected security
interest in favor of the Collateral Agent for the benefit of Foothill (or, in
the case of 'Mixed Inventory' (as that term is defined in the Intercreditor
Agreement), a first priority perfected security interest in favor of the
Collateral Agent for the benefit of Foothill and the Gold Consignor), defective
goods, 'seconds', Inventory acquired on consignment, Inventory consigned by such
Debtor to third Persons, samples, or purchased fabrication items. Eligible
Inventory shall be valued at the lower of Borrower's cost or market value, on a
first-in, first-out basis, excluding any labor or overhead component, and less
reserves (without duplication) for shrinkage, samples, obsolescence, or
revaluation as such reserves are set forth in Borrower's Books in a manner
consistent with such Debtor's past practices.
"Eligible Inventory Availability Component" means, as of the date any
determination thereof is to be made, and for each individual Debtor, an amount
equal to the lesser of:
(i) seventy-five percent (75%) of the amount of credit availability
created by such Debtor's Net Eligible Accounts; and
(ii) the sum of:
(y) forty percent (40%) of such Debtor's Eligible Finished Goods
Inventory, plus
(z) forty percent (40%) of such Debtor's Raw Materials Inventory.
"Eligible Raw Materials Inventory" means that portion of Eligible Inventory
consisting of raw materials.
"Equipment" means all of each Debtor's present and hereafter acquired machinery,
machine tools, motors, equipment, furniture, furnishings, fixtures, vehicles
(including motor vehicles and trailers), tools, parts, dies, jigs, goods (other
than consumer goods, farm products, or Inventory), and any interest in any of
the foregoing, wherever located, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to army of the
foregoing, wherever located.
"Equity Precious Metals" means Precious Metals owned outright by Borrower and
not on consignment to Borrower from other persons or entities.
"ERISA" means the Employment Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated and
whether or not foreign) which is or may hereafter become a member of a group of
which Borrower is a member and which is treated as a single employer under ERISA
Section 4001(b)(1), or IRC Section 414.
"Event of Default" has the meaning set forth in Section 8.
"Exchange Property" shall have the meaning set forth in the Trust Agreement,
dated as of May 14, 1993, between T&C and BayBank, as trustee.
"Excluded Assets" means those assets of Borrower described on Schedule E-2.
"Exiting Gold Banks" means Rhode Island Hospital Trust National Bank, Republic
National Bank, and ABN AMRO Bank, N.V.
"Foothill" has the meaning set forth in the preamble to this Agreement.
"Foothill Expenses" means all: costs or expenses (including taxes, photocopying,
notarization, telecommunication and insurance premiums) required to be paid by
any Debtor under any of the Loan Documents that are paid or advanced by
Foothill; all amounts required to be paid to Foothill pursuant to
indemnification provisions contained in any of the Loan Documents; documentation
filing, recording, publication, appraisal (including periodic Collateral
appraisals), real estate survey, environmental audit, and search fees assessed,
paid, or incurred by Foothill in connection with Foothill's transactions with
Borrower; costs and expenses incurred by Foothill in the disbursement of funds
to Borrower (by wire transfer or otherwise); charges paid or incurred by
Foothill resulting from the dishonor of checks; costs and expenses paid or
incurred by Foothill to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; out-of-pocket costs and expenses paid or incurred by Foothill in
examining Borrower's Books; costs and expenses of third party claims or any
other suit paid or incurred by Foothill in enforcing or defending the Loan
Documents; and Foothill's reasonable attorneys' fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys' fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning one or more of the Debtors), defending, or concerning the Loan
Documents, irrespective of whether suit is brought. For purposes of this
definition, the term 'Foothill' shall apply irrespective of whether Foothill is
acting in its capacity as a lender, as a representative of lenders, as the
Collateral Agent, as a subagent of the Collateral Agent, or otherwise. Without
limiting the generality of the foregoing, all costs, expenses, and fees payable
to Gold Consignor under the Gold Consignment Agreement or the Creditor Agreement
shall be Foothill Expenses to the extent that Foothill, in its sole discretion,
elects to pay same and charge same to the Loan Account (which Borrower agrees
that Foothill may do in its sole discretion, should Borrower fail to pay same
when due, but which Foothill shall not be obligated to do). Without limiting the
generality of the foregoing, if any Gold Letter of Credit, or any letter of
credit issued by another person and backed by a Gold Letter of Credit, is drawn,
or if Foothill exercises its option under the Creditor Agreement to purchase the
claims of Gold Consignor after an Event of Default has occurred under the Gold
Consignment Agreement, and if, in any such event, Foothill thereafter enters
into one or more "Hedging Contracts" (as defined in the Creditor Agreement),
then any costs and expenses incurred by Foothill in connection with any such
Hedging Contracts or in relation to obtaining or keeping in effect any letter of
credit issued by Norwest Bank Minnesota, N.A. (or any other issuing bank) in
favor of Gold Consignor to support the obligations of Foothill with respect to
any such Hedging Contracts, shall be Foothill Expenses.
"fto" means fine troy ounce.
"GAAP" means the generally accepted accounting principles, applicable in the
United States, 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 may be approved by a significant
segment of the accounting profession of the United States, that, in the case of
the calculation of the covenants in Sections 6.13 and 7.10, were used by
Borrower in the preparation of its audited financial statements as of and for
the period ended February 25, 1996, and, in all other circumstances, means such
generally accepted accounting principles as in effect from time to time, in all
circumstances, consistently applied.
"General Intangibles" means all of each Debtor's present and future general
intangibles and other personal property (including contract rights, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, monies due under any royalty or licensing
agreements, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims) other than goods and Accounts.
"GLI" has the meaning ascribed thereto in the preamble to this Agreement.
"gold" means the malleable ductile metallic chemical element known as gold, and
represented in the table of chemical elements by the symbol "Au," having a
fineness of not less than 0.9995, without regard to whether it is alloyed or
unalloyed, either in bullion form or as contained in or processed into other
materials that contain elements other than gold.
"Gold Borrowing Base" means, as of any date of determination thereof, eighty
three percent (83%) of the total Gold Value of all Eligible Gold, less a dollar
reserve equal to the aggregate dollar amount due from Borrower to all Outside
Processors.
"Gold Cap" means, as of any date of determination prior to the Pending Material
Transaction Closing Date, the dollar amount equal to seventy thousand (70,000)
times the Gold Value of one fto of gold, and, as of any date of determination on
or after the Pending Material Transaction Closing Date, the dollar amount equal
to sixty thousand (60,000) times the Gold Value of one fto of gold .
"Gold Consignment Agreement" means that certain Second Amended and Restated
Consignment Agreement among Borrower and the Gold Consignor that provides
Borrower with gold consignment availability of up to 70,000 ftos of gold, the
form and substance of which shall be reasonably satisfactory to Foothill. "Gold
Consignment Agreement" shall refer to such agreement as it may be amended or
modified from time to time in accordance with the provisions of this Agreement.
"Gold Consignor" means Fleet Precious Metals Inc., a Rhode Island corporation.
"Gold Content" means, with respect to any Eligible Gold, the exact quantity of
gold contained therein, computed on the most accurate basis practicable,
measured in ftos (including fractions thereof).
"Gold Coverage Deficiency" means, as of any date of determination, the greater
of: (a) zero dollars; and (b) the Gold L/C Amount minus the Gold Letter of
Credit Limit.
"Gold Day" means any day (a) that is a Business Day, and (b) that is a day on
which the London gold bullion market is open for business and on which gold
bullion price fixings transpire in such market.
"Gold L/C Amount" means, as of any date of determination, the aggregate L/C
Amount with respect to all Gold Letters of Credit.
"Gold Letter of Credit" means any standby Letter of Credit issued for the
benefit of Gold Consignor with respect to obligations of Borrower to Gold
Consignor that arise under or relate to the Gold Consignment Agreement.
"Gold Letter of Credit Total Exposure" means, as of any date of determination,
the Gold L/C Amount plus aggregate Gold Reimbursement Obligations.
"Gold Letter of Credit Limit" means, as of any date of determination, the least
of (a) the Maximum Gold Letter of Credit Amount, (b) the Gold Borrowing Base,
and (c) the Gold Cap.
"Gold Price" means, as of any date of determination that is a Gold Day, the
price of gold per fto in dollars determined by the Second London Gold Fixing on
such day in the London gold bullion market, as determined by Foothill by any
reasonable method, and, as of any date of determination that is not a Gold Day,
the Gold Price on the most recent prior date that was a Gold Day. In the event
that London Bullion Brokers shall discontinue or alter its usual practice of
quoting a price in dollars for gold on any day for which such a price is
necessary for the purposes hereof, Foothill may by notice to Borrower announce a
reasonable substituted index or mechanism which shall thereupon become the basis
for valuation of gold hereunder.
"Gold Reimbursement Obligation" means, as to any Gold Letter of Credit with
respect to which there has occurred one or more drawings that have not yet been
fully reimbursed by Borrower, the outstanding unreimbursed amount of all such
drawings; provided that, if Revolving Advances are made or deemed made to repay
all or any part of such amount, the amount so advanced thereafter shall be
treated as a Revolving Advance rather than as a Gold Reimbursement Obligation.
"Gold Value" means, with respect to any Eligible Gold, as of any date of
determination, the dollar amount equal to the product of the Gold Content
thereof times the Gold Price.
"Group" has the meaning ascribed thereto in the preamble to this Agreement.
"Hazardous Materials" means all or any of the following: (a) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable laws
or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity or "EP
toxicity"; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
"Inactive Subsidiaries" means (i) L.S. Holding, Inc., a Massachusetts
corporation, (ii) Gleamrich Jewelry (N.A.) Limited, a Hong Kong corporation,
(iii) TOCO Sunjay International Private Limited, an India corporation, (iv) Dara
Gold Creations, a Hong Kong corporation, (v) GM Jewelry Factory, a Hong Kong
corporation, (vi) Essex Jewelry Manufacturing Company, Ltd., a Thailand
corporation, (vii) Gleamrich Jewelry Limited, a Hong Kong corporation, and
(viii) TNC Holding B.V., a Netherlands corporation.
"Indebtedness" shall mean: (a) all obligations of any Debtor for borrowed money;
(b) all obligations of any Debtor evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of a Debtor
in respect of letters of credit, letter of credit guaranties, bankers
acceptances, interest rate swaps, controlled disbursement accounts, or other
financial products; (c) all obligations under capitalized leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any asset owned by any Debtor (including consignments intended as security),
irrespective of whether such obligation or liability is assumed; (e) all
obligations or liabilities of any Debtor arising out of the consignment of
inventory to such Debtor by a third Person; and (f) any obligation of a Debtor
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Intercreditor Agreement" means that certain Collateral Agency and Intercreditor
Agreement, dated as of May 14, 1993, among Foothill, the Gold Consignor, the
Exiting Gold Banks, the representative of the holders of the Senior Notes, the
representative of the holders of the New Senior Subordinated Notes, the
representative of the holders of the industrial revenue bonds heretofore issued
with respect to the Group facility in New York, New York (which bonds have since
been retired), the Collateral Agent, and Borrower.
"Inventory" means all present and future inventory in which any Debtor has any
interest, including goods held for sale or lease or to be furnished under a
contract of service and all of each Debtor's present and future raw materials,
work in process, finished goods, and packing and
shipping materials, wherever located, and any documents of title representing
any of the above.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
"Judicial Officer or Assignee" means any trustee, receiver, controller,
custodian, assignee for the benefit of creditors, or any other Person having
powers or duties like or similar to the powers and duties of a trustee,
receiver, controller, custodian, or assignee for the benefit of creditors.
"L/C" has the meaning set forth in Section 2.8(a).
"L/C Amount" means, as of any date that a determination thereof is to be made,
the aggregate outstanding undrawn amount under Letters of Credit issued by
Foothill pursuant to the terms of this Agreement.
"L/C Guaranty" has the meaning set forth in Section 2.8(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the context requires.
"Loan Account" means the loan account maintained by Foothill with respect to
Borrower in relation to the Obligations, wherein Foothill records charges and
payments with respect thereto.
"Loan Documents" means, collectively, this Agreement, the Intercreditor
Agreement, the Lock Box Agreements, the Mortgages, the Patent Collateral
Assignments, the Security Agreements, the Stock Pledge Agreements, the Trademark
Collateral Assignments, any note or notes executed by Borrower and payable to
Foothill, and any other agreement entered into in connection with this
Agreement, together with all alterations, amendments, changes, extensions,
modifications, refinancings, refundings, renewals, replacements, restatements,
or supplements, of or to any of the foregoing.
"Lock Box" shall have the meaning provided in the respective Lock Box
Agreements.
"Lock Box Agreements" means, collectively, those certain Tri-Party Agreements,
dated as of the Closing Date, each of which is among Borrower, Foothill, and one
of the Collection Agents.
"LSI" means Little Switzerland, Inc., a Delaware corporation.
"Maturity Date" shall mean (i) the Renewal Date if the term hereof is not
renewed pursuant to Section 3.5 hereof, or (ii) the date that is three (3) years
from the Renewal Date if the term hereof is renewed pursuant to Section 3.5
hereof.
"Maximum Amount" means, (a) from and after the Closing Date and prior to the
Pending Material Transaction Closing Date, Forty Million Dollars ($40,000,000),
and (b) on and after the Pending Material Transaction Closing Date, Thirty-Five
Million Dollars ($35,000,000), subject to reduction pursuant to Section 2.3
hereof.
"Maximum Combined Facility" means, (a) from and after the Closing Date and prior
to the Pending Material Transaction Closing Date, Sixty Five Million Dollars
($65,000,000), and (b) on and after the Pending Material Transaction Closing
Date, Fifty-Five Million Dollars ($55,000,000), subject to reduction by the
amount of any reduction of the Maximum Amount pursuant to Section 2.3 hereof.
"Maximum Foothill Amount" means that portion of the Maximum Combined Facility
for which Foothill shall be responsible, exclusive of any participations with
Participants, which amount is (a) from and after the Closing Date and prior to
the Pending Material Transaction Closing Date, Twenty Five Million Dollars
($25,000,000), and (b) on and after the Pending Material Transaction Closing
Date, Twenty Million Dollars ($20,000,000); provided, however, that each time
the Maximum Combined Facility is reduced (other than on the Pending Material
Transaction Closing Date as a result of the consummation of the Pending Material
Transaction), the Maximum Foothill Amount shall be reduced proportionately.
"Maximum Gold Letter of Credit Amount" means, from and after the Closing Date
and prior to the Pending Material Transaction Closing Date, Thirty Million
Dollars ($30,000,000), and (b) on and after the Pending Material Transaction
Closing Date, Twenty-Five Million Dollars ($25,000,00
"Monthly Gold Certificate" means, with respect to any fiscal month of Borrower,
a certificate in the form of Exhibit M-1, properly completed to include all
relevant information with respect to such period, and certified to be complete,
true, and correct by the chief financial office of T&C.
"Mortgages" shall mean one or more mortgages or deeds of trust executed by the
Debtor that owns the relevant parcel and, or in favor of, the Collateral Agent,
the form and substance of which shall be satisfactory to Foothill. The Mortgages
shall be executed by those entities and shall encumber those fee and leasehold
estates respecting the parcels of real property, and the related improvements
thereto, that are identified on Schedule M-1 attached hereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA Sections
3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of Borrower or
any ERISA Affiliate.
"Negotiable Collateral" means all of each Debtor's present and future letters of
credit, notes, drafts, instruments, certificated securities (including the
shares of stock of Balfour, GLI, and Group), documents, personal property leases
(wherein a Debtor is the lessor), chattel paper and Borrower's Books relating to
any of the foregoing.
"Net Cash Proceeds" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to, or in liquidation of, any note or installment receivable or
otherwise, but only as and when received, except that, with respect to any cash
equivalents received from an Asset Disposition, Borrower shall be deemed to have
received on the date of such Asset Disposition a cash payment equal to the fair
value of such cash equivalents on such date) therefrom, in each case net of all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred and all taxes and other charges required to be paid or accrued under
GAAP with respect to such Asset Disposition, in each case net of all payments
required to be made on any Indebtedness which is secured by a Permitted Lien on
any assets subject to such Asset Disposition which Permitted Lien has priority
over the security interest or lien in and to such asset that is held by the
Collateral Agent for the benefit of Foothill, and in each case net of all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition.
"Net Eligible Accounts" means, as of the date any determination thereof is to be
made, (i) the amount of a Debtor's Eligible Accounts, less (ii) the amount of
the Dilution Reserve, if any, applicable to such Debtor's Accounts.
"Net Eligible Accounts Availability Component" means, as of the date any
determination thereof is to be made, and for each individual Debtor, an amount
equal to the lesser of:
(i)(y) eighty percent (80%) of the amount of Net Eligible Accounts of such
Debtor that are less than thirty-one (31) days from the due date of the
applicable invoices, plus (z) fifty percent (50%) of the amount of Net Eligible
Accounts of such Debtor that are more than thirty (30) days, but less than sixty
one (61) days, from the due date of the applicable invoices, and
(ii) an amount equal to such Debtor's cash collections for the immediately
preceding (y) sixty (60) calendar day period during the months of December
through August, and (z) seventy-five (75) day period for the months September
through November.
"New Exchangeable Preferred Stock" shall mean a class of exchangeable preferred
stock of T&C, entitled to a liquidation preference which shall initially be
$14.59 per share plus accrued and unpaid dividends, which is entitled to a
liquidation preference over all common stock of T&C. Each share of New
Exchangeable Preferred Stock shall be exchangeable at the option of the holder
thereof, on a share-for-share basis, for T&C's shares of LSI. Such New
Exchangeable Preferred Stock shall provide for cumulative dividends to be
payable when, as, and if declared by the board of directors of T&C at the rate
of 6% per annum times the liquidation preference per share plus accrued and
unpaid dividends and be payable semi-annually commencing May 14, 1995.
"New Senior Subordinated Notes" shall mean up to Fifty Six Million Nine Hundred
Ninety Nine Thousand Seven Hundred Thirty Five Dollars ($56,999,735) of a class
of senior subordinated notes issued by T&C. Such New Senior Subordinated Notes
shall: (a) provide for interest to accrue from and after the Closing Date at 13%
per annum and be payable semi-annually commencing six months after the date of
issuance thereof; (b) provide that T&C shall have the option of paying the
interest accrued thereon in cash or in kind for a period of not less than two
years from and after the Closing Date; and (c) provide that no principal thereof
shall be scheduled to be payable prior to May 14, 1998.
"New Senior Subordinated Notes Guarantees" means those certain guarantees
executed and delivered by certain of the Debtors respecting the obligations of
T&C with respect to the New Senior Subordinated Notes.
"New Senior Subordinated Notes Indenture" means the indenture pursuant to which
the New Senior Subordinated Notes are issued. "New Senior Subordinated Notes
Indenture" shall refer to such indenture as it may be amended or modified from
time to time in accordance with the provisions of this Agreement.
"Non-Gold L/C Amount" means, as of any date of determination, the aggregate L/C
Amount with respect to all Non-Gold Letters of Credit.
"Non-Gold Letter of Credit" means any Letter of Credit other than a Gold Letter
of Credit.
"Non-Gold Letter of Credit Total Exposure" means, as of any date of
determination, the Non-Gold L/C Amount plus aggregate Non-Gold Reimbursement
Obligations.
"Non-Gold Reimbursement Obligation" means, as to any Non-Gold Letter of Credit
with respect to which there has occurred one or more drawings that have not yet
been fully reimbursed by Borrower, the outstanding unreimbursed amount of all
such drawings; provided that, if Revolving Advances are made or deemed made to
repay all or any part of such amount, the amount so advanced thereafter shall be
treated as a Revolving Advance rather than as a Non-Gold Reimbursement
Obligation.
"Not Insolvent" means, with respect to any Person on a particular date, that on
such date, at fair valuations, all of the assets of such Person are greater than
the sum of the debts, including contingent liabilities, of such Person. In
computing the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Obligations" means all loans, advances, debts, principal, interest (including
any interest that, but for the provisions of the Bankruptcy Code, would have
accrued), contingent reimbursement obligations owing to Foothill under any
outstanding L/Cs or L/C Guarantees, premiums, liabilities (including all amounts
charged to Borrower's loan account pursuant to any agreement authorizing
Foothill to charge Borrower's loan account), obligations, fees (including Early
Termination Premiums), lease payments, guaranties, covenants, and duties owing
by Borrower (or any Debtor composing Borrower) to Foothill of any kind and
description (whether pursuant to or evidenced by the Loan Documents, by any note
or other instrument, or by any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
any Debtor to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Other Non-Contingent Obligations" means Obligations of Borrower to Foothill
charged to the Loan Account by Foothill other than the principal of the
Revolving Advances, such as (but not limited to) interest that is accrued and
payable and Foothill Expenses that are due from Borrower, from and after the
time such Obligations are charged to the Loan Account and are not merely
contingent Obligations; provided that Reimbursement Obligations shall not be
classified as Other Non-Contingent Obligations even if charged to the Loan
Account.
"Outside Processor" means any person or entity other than Borrower in possession
of Precious Metals, or with respect to which Precious Metals are in transit from
Borrower to such person or entity, or from such person or entity to Borrower,
for the purpose of fabrication, refinement, or processing of same by such person
or entity, or for the purpose of the use or incorporation by such person or
entity of same in a manufacturing process.
"Overadvance" has the meaning set forth in Section 2.2.
"Participant" means any entity, other than Foothill, that has committed to
provide a portion of the financing contemplated herein.
"Patent Collateral Assignments" means one or more Patent Collateral Assignments,
dated as of May 14, 1993, between Balfour, GLI, Group, and T&C, on the one hand,
and, on the other hand, Collateral Agent, pursuant to which Balfour, GLI, Group,
and T&C, as applicable, grant Collateral
Agent a perfected security interest in their patents and related rights in order
to secure their obligations owing to the Secured Parties.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Pending Material Transaction" means the proposed sale by T&C of GLI and
Balfour, on terms and conditions to be approved by Foothill.
"Pending Material Transaction Closing Date" means the date, if any, that the
Pending Material Transaction closes and is consummated.
"Permitted Affiliate Transactions" means (i) transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms, and no
less favorable to Borrower than would be obtained in an arm's length transaction
with a non-Affiliate, and (ii) the transactions contemplated by the terms of,
and the performance of Borrower's obligations under, the Registration
Effectiveness Agreement; provided, however, that in no event shall a transaction
with one or more Inactive Subsidiaries be deemed to be a Permitted Affiliate
Transaction.
"Permitted Asset Disposition" means (i) the use of cash in the ordinary course
of business as currently conducted, (ii) dispositions of Inventory in the
ordinary course of business as currently conducted, (iii) subject to the
security interest of the Collateral Agent therein, licenses by Borrower or a
Subsidiary of intellectual property in the ordinary course of business as
currently conducted, (iv) isolated dispositions of capital stock or other
interests (including partnership interests) or any other property or asset of
Borrower of any Subsidiary that do not exceed $100,000 individually or that do
not aggregate in excess of $250,000 per annum, and (v) any disposition of
properties and assets of Borrower or any Subsidiary that compose Excluded
Assets, or cash or non-cash proceeds from or related to the Excluded Assets, in
accordance with the provisions of the Intercreditor Agreement, to the extent
applicable.
"Permitted Investments" means (i) obligations that carry the full faith and
credit of the United States of America with a maturity of one year or less; (ii)
certificates of deposit or acceptances with a maturity of one year or less of
any financial institution that is a member of the United States Federal Reserve
System having combined capital and surplus and undistributed profits of not less
than $500,000,000; (iii) commercial paper with a maturity of one year or less
issued by a corporation (except Borrower or any Affiliate of Borrower), bank,
trust company or national banking association organized under the laws of any
state of the United States of America or the District of Columbia and rated at
least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investor
Services, Inc. (or if neither such organization shall rate such commercial paper
at any time, a comparable rating by any nationally recognized rating
organization in the United States of America); (iv) debt of any State or
political subdivision that is rated AA or better by Standard & Poor's
Corporation or by Moody's Investor Services, Inc., and matures within one year;
and (v) the Exchange Property, if any, returned to Borrower upon termination of
the trust established pursuant to the Trust Agreement, dated as of even date
herewith, between T&C and BayBank, as trustee.
"Permitted Liens" means: (a) liens and security interests held by Foothill; (b)
liens for unpaid taxes that are not yet due and payable; (c) liens and security
interests set forth on Schedule P-2 attached hereto, and any liens securing
refinancings of the obligations originally secured thereby to the extent
permitted under Section 7.1(n) hereof; (d) liens and security interests granted
to the Collateral Agent for the benefit of the Secured Parties; (e) purchase
money security interests and liens of lessors under capitalized leases to the
extent that the acquisition or lease of the underlying asset was permitted under
Section 7.10, and so long as the security interest or lien only secures the
purchase price of the asset; (f) liens in respect of judgments, decrees, or
orders of any court, so long as such lien is the subject of a Permitted Protest
and any appropriate legal proceedings that may have been duly initiated for the
review of such judgment, decree, or order shall not have been finally terminated
or the period within which such proceedings may be initiated shall not have
expired; (g) liens arising as a result of security for payment of workers'
compensation or other insurance; (h) liens arising as a result of deposits to
secure public or statutory obligations incurred in the ordinary course of
business; (i) liens imposed by operation of law in favor of carriers,
warehousemen, landlords, mechanics, materialmen, laborers, or suppliers,
incurred in the ordinary course of business for sums that are not yet delinquent
and that, in the aggregate, do not exceed $500,000; (j) security for surety or
appeal bonds that, in the aggregate, do not exceed $2,500,000; and (k)
easements, rights-of-way, zoning and similar covenants and restrictions and
other similar encumbrances or minor title defects which exist as of the Closing
Date and that do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of Borrower.
"Permitted Protest" the right of Borrower to protest any lien, tax, or other
charge, other than any such lien or charge which secures the Obligations,
provided (i) a reserve with respect to such obligation is established on the
books of Borrower in an amount that is reasonably satisfactory to Foothill, (ii)
any such protest is instituted and diligently prosecuted by Borrower in good
faith, and (iii) Foothill is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the liens or security interests of Foothill in and to the property or assets
of Borrower.
"Plan" means any plan described in ERISA Section 3(2) maintained for employees
of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Precious Metals" has the meaning ascribed thereto in the Intercreditor
Agreement and includes gold.
"Prior Agreement" shall have the meaning ascribed to such term in the
introductory paragraph hereof.
"Prohibited Transaction" means any transaction described in Section 406 of ERISA
which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c)(2) of the IRC.
"Proposal Expiry Date" means July 12, 1996.
"Reference Period" means, with respect to any computation of the Consolidated
Fixed Charge Ratio, the most recent four full quarters ending at least 45 days
prior to the date of determination of the Consolidated Fixed Charge Ratio.
"Reference Rate" means the variable rate of interest, per annum, most recently
announced by Norwest Bank Minnesota, National Association, or any successor
thereto, as its "base rate," irrespective of whether such announced rate is the
best rate available from such financial institution.
"Registration Effectiveness Agreement" means that certain Registration
Effectiveness Agreement, dated as of May 14, 1993, among T&C, on the one hand,
and certain other parties, on the other hand.
"Reimbursement Obligation" means a Gold Reimbursement Obligation or a Non-Gold
Reimbursement Obligation.
"Renewal Date" has the meaning set forth in Section 3.5.
"Reportable Event" means a reportable event described in Section 4043 of ERISA
or the regulations thereunder, a withdrawal from a Plan described in Section
4063 of ERISA, or a cessation of operations described in Section 4068(f) of
ERISA.
"Revolving Advance" means any revolving advance made by Foothill to Borrower
pursuant to Section 2.1 hereof. In addition, any Other Non-Contingent Obligation
shall be deemed a Revolving Advance from and after the date it is charged to the
Loan Account by Foothill.
"Secured Parties" means the following: (i) Foothill; (ii) the holders of the
Senior Notes; (iii) the holders of the New Senior Subordinated Notes; (iv) the
Gold Consignor; and (v) the holders of the industrial revenue bonds relative to
the Group facility located in New York, New York (which bonds were retired
subsequent to May 14, 1993), and their respective successors and assigns.
"Security Agreements" means one or more Security Agreements, dated as of May 14,
1993, between Balfour, GLI, Group, and T&C, on the one hand, and, on the other
hand, Collateral Agent, pursuant to which Balfour, GLI, Group, and T&C grant
Collateral Agent a perfected security interest in substantially all of their
assets (including all of their assets that would constitute Collateral) in order
to secure their obligations owing to the Secured Parties.
"Senior Notes" shall mean Thirty Million Dollars ($30,000,000) of a class of
senior notes issued by T&C. Such Senior Notes shall: (a) provide for interest to
accrue from and after May 14, 1993, at 11-1/2% per annum and be payable
semi-annually commencing six months after the date of issuance thereof; and (b)
provide that no principal thereof shall be scheduled to be payable prior to
September 15, 1997.
"Senior Notes Guarantees" means those certain guarantees executed and delivered
by certain of the Debtors respecting the obligations of T&C with respect to the
Senior Notes.
"Senior Notes Indenture" means the indenture pursuant to which the Senior Notes
are issued. "Senior Notes Indenture" shall refer to such indenture as it may be
amended or modified from time to time in accordance with the provisions of this
Agreement.
"Solomon Brothers" means Solomon Brother, Ltd., a Bahamas corporation.
"Solvent" means, with respect to any Person on a particular date, that on such
date (i) at fair valuations, all of the assets of such Person are greater than
the sum of the debts, including contingent liabilities, of such Person, (ii) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (iii) such Person is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (iv) such
Person does not intend to, and does not believe that it will, incur debts beyond
such Person's ability to pay as such debts mature, and (v) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's assets would constitute unreasonably
small capital after giving due consideration to the prevailing practices in the
industry in which such Person is engaged. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount that, in light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.
"Specific Gold Covenants" means the covenants set forth in Section 7.20 hereof.
"Stock Pledge Agreements" shall mean one or more Stock Pledge Agreements (or the
equivalent thereof to the extent dictated by custom and usage of the local law
of the jurisdiction of organization of a foreign Subsidiary), dated as of May
14, 1993, between T&C (or one or more Subsidiaries) and Collateral Agent
pursuant to which T&C (or one or more of such Subsidiaries) grants Collateral
Agent, for the benefit of the Secured Parties, a first priority perfected
security interest in (a) all of the issued and outstanding shares of stock of
all of T&C's domestic Subsidiaries (including Balfour, GLI, and Group), other
than any domestic Subsidiary that is an Inactive Subsidiary, (b) sixty-five
percent (65%) of the issued and outstanding shares of stock of all of T&C's
foreign Subsidiaries, other than any foreign Subsidiary that is an Inactive
Subsidiary, and (c) all of the issued and outstanding shares of stock of Solomon
Brothers owned by T&C, in each case, in order to secure the obligations of
Borrower owing to the Secured Parties.
"Subordinated Indebtedness" shall mean Indebtedness of Borrower that is
subordinated, in writing and on terms and conditions reasonably acceptable to
Foothill, in right of payment to the prior payment in full of all of the
Obligations.
"Subsidiary" means any corporation, association, partnership, joint venture or
other business entity of which Borrower, directly or indirectly, either (i) with
respect to a corporation, owns or controls 50% or more of the voting power and
has the ability to elect at least a majority of the board of directors or
similar managing body, irrespective of whether a class or classes shall or might
have voting power by reason of the happening of any contingency, or (ii) with
respect to an association, partnership, joint venture or other business entity,
is entitled to share in 50% or more of the profits and losses, however
determined, and has voting control with respect thereto.
"Syndicated Amount" means a sub-component of the Maximum Combined Facilities
equal to the aggregate financing commitments (to the extent not breached or
terminated) of all Participants.
"T&C" has the meaning ascribed thereto in the preamble to this Agreement.
"Trademark Collateral Assignments" means one or more Trademark Collateral
Assignments, dated as of May 14, 1993, between Balfour, GLI, Group, and T&C, on
the one hand, and, on the other hand, Collateral Agent, pursuant to which
Balfour, GLI, Group, and T&C, as applicable, grant Collateral Agent a perfected
security interest in their trademarks and related rights in order to secure
their obligations owing to the Secured Parties.
"Voidable Transfer" has the meaning set forth in Section 15.8 hereof.
"Voting Stock" means capital stock of a Person that is entitled to vote in the
election of directors without the happening of any contingency or condition. Any
reference to a percentage of Voting Stock shall refer to the percentage of votes
eligible to be cast for the election of directors that are attributable to the
applicable shares of Voting Stock.
"Working Capital" means: (a) Consolidated Current Assets; less (b) Consolidated
Current Liabilities.
"Zale Payment" shall have the meaning ascribed thereto in the Intercreditor
Agreement.
"Zale Bankruptcy Claim" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. When used herein, the term 'financial
statements' shall include the notes and schedules thereto. Whenever the term
'Borrower' is used in respect of a financial covenant or a related definition it
shall be understood to mean Borrower on a consolidated basis unless the context
clearly requires otherwise.
1.3 Code. Any terms used in this Agreement which are defined in the Code shall
be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term 'including' is not limiting, and the term
'or' has, except where otherwise indicated, the inclusive meaning represented by
the phrase 'and/or.' The words 'hereof,' 'herein,' 'hereby,' 'hereunder,' and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section, subsection, clause, and
exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances. Subject to the terms and conditions of this Agreement,
and so long as no Event of Default has occurred and is continuing, Foothill
agrees to make Revolving Advances to Borrower in an amount not to exceed the
Borrowing Base.
Anything to the contrary in the definition of Borrowing Base, the definition of
Net Eligible Accounts Availability Component, or the definition of Eligible
Inventory Availability Component notwithstanding, Foothill may reduce its
advance rates based upon Net Eligible Accounts and Eligible Inventory without
declaring an Event of Default if it determines, in its reasonable discretion,
that there is a material impairment of the prospect of repayment of all or any
portion of the Obligations or a material impairment of the value or priority of
the security interests held by, or for the benefit of, Foothill in and to the
Collateral.
Foothill shall have no obligation to make Revolving Advances hereunder to the
extent they would cause any of the following limits to be exceeded at any time:
(i) outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
shall not exceed the lesser of the Borrowing Base and the Maximum Amount; (ii)
outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
plus Gold Letter of Credit Total Exposure shall not exceed the Maximum Combined
Facility; and (iii) outstanding Revolving Advances plus Non-Gold Letter of
Credit Total Exposure plus Gold Letter of Credit Total Exposure shall not exceed
the Maximum Foothill Amount plus the Syndicated Amount.
Foothill is authorized to make advances under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Officer of Borrower or, without instructions, if in Foothill's
discretion such advances are necessary to meet Obligations. Borrower agrees to
establish and maintain a single designated deposit account for the purpose of
receiving the proceeds of the advances requested by Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any
advance requested by Borrower and made by Foothill hereunder shall be made to
such designated deposit account. Amounts borrowed pursuant to this Section 2.1
may be repaid and, so long as no Event of Default has occurred and is
continuing, reborrowed at any time during the term of this Agreement.
2.2 Overadvances. If, at any time or for any reason, the amount of Obligations
owed by Borrower to Foothill pursuant to Section 2.1 is greater than either the
dollar or percentage limitations set forth in Section 2.1 (an "Overadvance")
Borrower shall immediately pay to Foothill, in cash, the amount of such excess.
2.3 Mandatory Prepayments. Except to the extent otherwise required by the terms
of the Intercreditor Agreement, immediately upon receipt by Borrower or any of
its Subsidiaries of Net Cash Proceeds of any Asset Disposition (other than a
Permitted Asset Disposition), which proceeds exceed $100,000 (it being
understood that if the proceeds exceed $100,000, the entire proceeds and not
just the portion in excess of the foregoing amount shall be subject to this
section) for any single transaction or series of related transactions or which
proceeds when aggregated with all other Net Cash Proceeds from Asset
Dispositions (other than Permitted Asset Dispositions) received during the same
fiscal year exceed $250,000 (it being understood that if the proceeds exceed
$250,000, the entire proceeds and not just the portion in excess of the
foregoing amount shall be subject to this section), Borrower shall prepay the
advances outstanding under Section 2.1 in an amount equal to the Net Cash
Proceeds of such Asset Disposition and, at Foothill's option, either (i) the
Maximum Amount shall be permanently reduced by the amount of such prepayment, or
(ii) the definition of Eligible Inventory Availability Component shall be
modified to reflect a reduction in the advance rates applicable to Eligible
Finished Good Inventory and Eligible Raw Materials Inventory to the extent
reasonably required by Foothill to reflect the absence of the asset or assets
that are the subject of the Asset Disposition from the Collateral.
2.4 Interest: Rates, Payments, and Calculations.
(a) Interest Rate and Letter of Credit Fees. Subject to Section 2.4(b), all
Obligations, except for undrawn Letters of Credit, shall bear interest, on the
average Daily Balance, at a rate of two (2) percentage points above the
Reference Rate. Subject to Section 2.4(b), Foothill shall be entitled to charge
Borrower a fee on the Non-Gold L/C Amount equal to two and one-half percent
(2.5%) per annum times the average Daily Balance of the Non-Gold L/C Amount
during the immediately preceding calendar month. Subject to Section 2.4(b),
Foothill shall be entitled to charge Borrower a fee on the Gold L/C Amount equal
to three percent (3.0%) per annum times the average Daily Balance of the Gold
L/C Amount during the immediately preceding calendar month. The foregoing Letter
of Credit fees are in addition to any fees charged by any issuer of a letter of
credit other than Foothill that is supported by a Letter of Credit issued by
Foothill.
(b) Default Rate. All Obligations, except for undrawn Letters of Credit,
shall bear interest, from and after the occurrence and during the continuance of
an Event of Default, at a rate equal to six (6) percentage points above the
Reference Rate. From and after the occurrence and during the continuation of an
Event of Default, Foothill shall be entitled to charge Borrower a fee on the
Non-Gold L/C Amount equal to six and one-half percent (6.5%) per annum times the
average Daily Balance of the Non-Gold L/C Amount during the immediately
preceding calendar month. From and after the occurrence and during the
continuation of an Event of Default, Foothill shall be entitled to charge
Borrower a fee on the Gold L/C Amount equal to seven percent (7.0%) per annum
times the average Daily Balance of the Gold L/C Amount during the immediately
preceding calendar month. The foregoing Letter of Credit fees are in addition to
any fees charged by any issuer of a letter of credit other than Foothill that is
supported by a Letter of Credit issued by Foothill.
(c) Minimum Interest. In no event shall the rate of interest chargeable
hereunder with respect to Revolving Advances or Reimbursement Obligations for
any month be less than eight percent (8%) per annum, nor shall the aggregate
amount of interest accrued and payable to Foothill be less than Two Hundred
Forty Thousand Dollars ($240,000) per annum, such amount to be pro-rated for any
partial year. To the extent that interest accrued hereunder at the rate set
forth herein (including the minimum interest rate) would yield less than the
foregoing minimum amount, the interest rate chargeable hereunder for the period
in question shall be deemed automatically increased to that rate that would
result in the minimum amount of interest being accrued and payable hereunder.
(d) Payments. Interest and fees payable hereunder shall be due and payable
monthly in arrears on the first day of each calendar month during the term
hereof. Foothill shall, at its option, charge such interest and fees, all
Foothill Expenses, and all installments due under any note payable to Foothill
to Borrower's loan account, which amounts shall thereafter accrue interest at
the rate then applicable hereunder. Any interest or fees not paid when due shall
be compounded by becoming a part of the Obligations, and such interest or fees
shall thereafter accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of this date is eight and one-quarter
percent (8.25%) per annum. In the event the Reference Rate is changed from time
to time hereafter, the applicable rate of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to the Reference
Rate change. The rates of interest charged hereunder shall be based upon the
average Reference Rate in effect during the month. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.5 Crediting Payments. The receipt of any wire transfer of funds, check, or
other item of payment by Foothill (whether from transfers to Foothill by the
Collection Agents pursuant to the Lock Box Agreements or otherwise) shall be
immediately applied to provisionally reduce the Obligations, but shall not be
considered a payment on account unless such wire transfer is of immediately
available federal funds and is made to the appropriate deposit account of
Foothill or unless and until such check or other item of payment is honored when
presented for payment. Foothill shall be entitled to charge Borrower for two (2)
Business Days of "float" at the rate set forth in Section 2.4(a) on all
collections, checks, wire transfers, or other items of payment that are received
by Borrower or processed through the Lock Boxes (irrespective of whether
forwarded by the Collection Agents to Foothill, whether owned by Foothill or
Borrower or collected as agent for another, whether provisionally applied to
reduce the Obligations or otherwise). This across-the-board two (2) Business Day
float charge on all of Borrower's receipts is acknowledged by the parties to
constitute an integral aspect of the pricing of Foothill's facility to Borrower,
and shall apply irrespective of the characterization of whether receipts are
owned by Borrower or Foothill, and irrespective of the level of Borrower's
Obligations to Foothill. Should such check or item of payment not be honored
when presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any wire transfer, check, or other
item of payment received by Foothill after 11:00 a.m. Los Angeles time shall be
deemed to have been received by Foothill as of the opening of business on the
immediately following Business Day.
2.6 Statements of Obligations. Foothill shall render statements to Borrower of
the Obligations, including principal, interest, fees, and an itemization of all
charges and expenses constituting Foothill Expenses owing, and such statements,
absent manifest error, shall be conclusively presumed to be correct and accurate
and constitute an account stated between Borrower and Foothill unless, within
thirty (30) days after receipt thereof by Borrower, Borrower shall deliver to
Foothill by registered or certified mail at its address specified in Section 12,
written objection thereto describing the error or errors contained in any such
statements.
2.7 Fees. Borrower shall pay to Foothill the following fees:
(a) Unused Line Fee. On the first day of each calendar month during the term
of this Agreement, a fee, payable monthly in arrears, in an amount equal to one
half of one percent (0.5%) per annum times the Average Unused Portion of the
Available Maximum Combined Facility;
(b) Annual Facility Fee. On the Closing Date, a fee in an amount equal to
Three Hundred Twenty Five Thousand Dollars ($325,000), which fee shall be fully
earned on the Closing Date. Thereafter, on each anniversary date of the Closing
Date, a fee in an amount equal to one-half of one percent (0.5%) of the Maximum
Combined Facility in effect on such date, each of which such fees shall be fully
earned on each such anniversary date;
(c) Financial Examination, Documentation, and Appraisal Fees. Foothill's
customary fee of Five Hundred Dollars ($650) per day per examiner, plus
out-of-pocket expenses for each financial analysis and examination of Borrower
performed by Foothill or its agents; Foothill's customary appraisal fee of One
Thousand Five Hundred Dollars ($1,500) per day per appraiser, plus out-of-pocket
expenses for each appraisal of the Collateral performed by Foothill or its
agents; the costs and expenses incurred by Foothill for engaging a licensed,
professional gemologist to evaluate and appraise the Inventory of Borrower; and
Foothill's customary fee of One Thousand Dollars ($1,000) per year for its loan
documentation review;
(d) Servicing/Agency Fee. On the first day of each month during the term of
this Agreement, and thereafter so long as any Obligations are outstanding, a
servicing/agency fee in an amount equal to Ten Thousand Dollars ($10,000) per
month. The foregoing fee includes the $3,500 per month collateral agency fee
formerly separately payable to Foothill as Collateral Agent under the written
agreement referred to in Section 46 of the Intercreditor Agreement, which
separate collateral agency fee is prospectively waived by Foothill and replaced
by this combined fee set forth in this paragraph.
(e) Syndication Fee. A fee of Two Hundred Fifty Thousand Dollars ($250,000)
due and payable and fully earned on the Closing Date.
2.8 Letters of Credit and Letter of Credit Guarantees.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to issue standby letters of credit (or amendments thereof consented to by the
beneficiaries thereof) for the account of Borrower (each, including any such
amendment, an "L/C") or to issue standby letters of credit (or amendments
thereof consented to by the beneficiaries thereof) or guarantees of payment (or
amendments thereof consented to by the beneficiaries thereof; each such letter
of credit or guaranty, including any such amendment, an "L/C Guaranty") with
respect to commercial or standby letters of credit (or amendments thereof
consented to by the beneficiaries thereof) issued by another person for the
account of Borrower in an aggregate outstanding undrawn face amount not to
exceed: (A) with respect to Non-Gold Letters of Credit, the lesser of: (i) the
Borrowing Base less the combined amount of outstanding Revolving Advances and
Non-Gold Reimbursement Obligations, and (ii) One Million Dollars ($1,000,000);
and (B) with respect to Gold Letters of Credit, the lesser of: (i) the Gold
Borrowing Base less outstanding Gold Reimbursement Obligations, and (ii) the
Gold Letter of Credit Limit. Borrower expressly understands and agrees that
Foothill shall have no obligation to arrange for the issuance by other financial
institutions of L/Cs that are to be the subject of L/C Guarantees. Except as
Foothill may otherwise agree in its sole discretion, each such L/C (including
those that are the subject of L/C Guarantees) shall have an expiry date no later
than sixty (60) days prior to the date on which this Agreement is scheduled to
terminate under Section 3.5 and all such L/Cs and L/C Guarantees shall be in
form and substance acceptable to Foothill in its sole discretion. Foothill shall
not have any obligation to issue any Letter of Credit to the extent that, after
giving effect thereto, any of the following limits would be exceeded: (i)
outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
shall not exceed the lesser of the Borrowing Base and the Maximum Amount; (ii)
outstanding Revolving Advances plus Non-Gold Letter of Credit Total Exposure
plus Gold Letter of Credit Total Exposure shall not exceed the Maximum Combined
Facility; (iii) outstanding Revolving Advances plus Non-Gold Letter of Credit
Total Exposure plus Gold Letter of Credit Total Exposure shall not exceed the
Maximum Foothill Amount plus the Syndicated Amount; and (iv) Gold Letter of
Credit Total Exposure shall not exceed the Gold Letter of Credit Limit. The
Non-Gold Letters of Credit issued under this Section 2.8 shall be used by
Borrower, consistent with this Agreement, for working capital purposes. The Gold
Letters of Credit issued under this Section 2.8 shall be used by Borrower,
consistent with this Agreement, for the purpose of supporting obligations of
Borrower to the Gold Consignor pursuant to the Gold Consignment Agreement. If
Foothill is obligated to advance funds under a Letter of Credit, the related
Reimbursement Obligation shall be immediately due and payable to Foothill, shall
be immediately reimbursed by Borrower to Foothill unless otherwise agreed by
Foothill in its sole discretion (provided that Borrower may direct Revolving
Advances to be made to reimburse same to the extent of availability and subject
to the terms and conditions set forth herein), and shall bear interest as if it
were a Revolving Advance; and, without limiting the foregoing, Foothill at its
sole option may make a Revolving Advance for the account of Borrower without
notice to Borrower to repay such Reimbursement Obligation, or may elect to deem
such Reimbursement Obligation to be a Revolving Advance made by Foothill to
Borrower pursuant to Section 2.1 which, thereafter, shall bear interest on the
terms and conditions provided in Section 2.4.
(b) Borrower hereby agrees to indemnify, save, defend, and hold Foothill
harmless from any loss, cost, expense, or liability, including payments made by
Foothill, expenses, and reasonable attorneys' fees incurred by Foothill arising
out of or in connection with any L/Cs or L/C Guarantees. Borrower agrees to be
bound by the issuing bank's regulations and interpretations of any L/Cs
guarantied by Foothill and opened to or for Borrower's account or by Foothill's
interpretations of any L/C issued by Foothill to or for Borrower's account, even
though this interpretation may be different from Borrower's own, and Borrower
understands and agrees that Foothill shall not be liable for any error,
negligence (other than gross negligence of Foothill), or mistakes, whether of
omission or commission, in following Borrower's instructions or those contained
in the L/Cs or any modifications, amendments, or supplements thereto. Borrower
understands that the L/C Guarantees may require Foothill to indemnify the
issuing bank for certain costs or liabilities arising out of claims by Borrower
against such issuing bank. Borrower hereby agrees to indemnify, save, defend,
and hold Foothill harmless with respect to any loss, cost, expense (including
attorneys fees), or liability incurred by Foothill under any L/C Guaranty as a
result of Foothill's indemnification of any such issuing bank.
(c) Borrower hereby authorizes and directs any bank that issues an L/C
guaranteed by Foothill to deliver to Foothill all instruments, documents, and
other writings and property received by the issuing bank pursuant to the L/C,
and to accept and rely upon Foothill's instructions and agreements with respect
to all matters arising in connection with the L/C and the related application.
Borrower may or may not be the "account party" on such L/Cs.
(d) Any and all service charges, commissions, fees and costs incurred by
Foothill relating to the L/Cs guaranteed by Foothill shall be considered
Foothill Expenses for purposes of this Agreement and shall be immediately
reimbursable by Borrower to Foothill. Service charges, commissions, fees and
costs may be charged to Borrower's loan account at the time the service is
rendered or the cost is incurred.
(e) Immediately upon the termination of this Agreement, Borrower agrees to
either: (i) provide cash collateral to Foothill in an amount equal to the
maximum amount of Foothill's obligations under L/Cs plus the maximum amount of
Foothill's obligations to any issuing bank under outstanding L/C Guarantees, or
(ii) cause to be delivered to Foothill releases of all of Foothill's obligations
under its outstanding L/Cs and L/C Guarantees. At Foothill's discretion, any
proceeds of Collateral received by Foothill may be held as the cash collateral
required by this Section 2.8(e).
(f) Should there exist, at any time, for any reason, a Gold Coverage
Deficiency, Foothill may, at its sole option, (i) demand that Borrower
immediately cause one or more outstanding Gold Letters of Credit to be reduced
in outstanding undrawn amount (by amendment thereof accepted by the beneficiary
thereof, and to which Borrower hereby consents in advance) so as to reduce the
Gold Letter of Credit Undrawn Exposure by an amount sufficient to eliminate such
Gold Coverage Deficiency, (ii) prior to any such reduction under clause (i), or
in lieu thereof, impose reserves against the Borrowing Base for Revolving
Advances in an amount up to such Gold Coverage Deficiency, (iii) prior to any
such reduction under clause (i), or in lieu thereof, demand that Borrower post
cash collateral with Foothill sufficient to cover such Gold Coverage Deficiency
(with which demand Borrower immediately shall comply).
3. CONDITIONS; TERM OF AGREEMENT
3.1 Conditions Precedent to Initial Revolving Advance or Letter of Credit. The
obligation of Foothill to make the initial Revolving Advance or to provide the
initial Letter of Credit hereunder is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) the Closing Date shall occur on or before the Proposal Expiry Date;
(b) Foothill shall have received copies of each Debtor's By-laws and
Articles or Certificate of Incorporation, as amended, modified, or supplemented
to the Closing Date, certified by the Secretary or Clerk of each such Debtor;
(c) Foothill shall have received a certificate of corporate status with
respect to each Debtor, dated within twenty (20) days of the Closing Date, by
the Secretary of State of the state of incorporation of such Debtor, which
certificate shall indicate that such Debtor is in good standing in such state;
(d) Foothill shall have received a certificate from the Secretary or Clerk
of each Debtor attesting to the resolutions of such Debtor's Board of Directors
authorizing its execution and delivery of this Agreement and the other Loan
Documents to which such Debtor is a party and authorizing specific officers of
such Debtor to execute same;
(e) [Intentionally omitted];
(f) Foothill shall have received the insurance certificates or certified
copies of the policies of insurance required by Section 6.11 hereof along with
a 438BFU Lender's Loss Payable Endorsement, or an equivalent endorsement, naming
the Collateral Agent and each of the Secured Parties as loss payees or
additional assureds, as applicable, as their interests may appear, all in form
and substance satisfactory to Foothill and its counsel;
(g) To the extent that such documents were not delivered in connection with
the Prior Agreement, Foothill shall have received each of the following
documents, duly executed, and each of the following documents (including those
delivered in connection with the Prior Agreement) shall be and remain in full
force and effect after giving effect to this Agreement:
(i) the Intercreditor Agreement;
(ii) the Lock Box Agreements;
(iii) the Mortgages;
(iv) the Creditor Agreement;
(v) the Patent Collateral Assignments;
(vi) the Security Agreements;
(vii) the Stock Pledge Agreements; and
(viii) the Trademark Collateral Assignments;
(h) Foothill shall have received confirmation that the Collateral Agent (or
its subagent, in the case of shares of stock of foreign Subsidiaries) is in
possession of (i) all of the issued and outstanding shares of stock of all of
T&C's domestic Subsidiaries (including Balfour, GLI, and Group), other than any
domestic Subsidiary that is an Inactive Subsidiary, (ii) sixty-five percent
(65%) of the issued and outstanding shares of stock of all of T&C's foreign
Subsidiaries, other than any foreign Subsidiary that is an Inactive Subsidiary,
and (iii) all of the issued and outstanding shares of stock of Solomon Brothers
owned by T&C, as well as stock powers with respect thereto endorsed in blank;
(i) Foothill shall have received such searches as it may require reflecting
the filing of the Collateral Agent's financing statements and fixture filings,
and the Collateral Agent shall have received certificates of title with respect
to the Collateral which shall have been duly executed in order to perfect all of
the security interests granted to the Collateral Agent;
(j) Foothill shall have received an opinion of Borrower's counsel in form
and substance satisfactory to Foothill in its sole discretion;
(k) To the extent that Foothill is not already in possession of same with
respect to the Prior Agreement, Foothill shall have received landlord waivers
from the lessors of those locations listed on Schedule 6.15B attached hereto;
(l) Foothill shall have received a certificate from Borrower, dated as of
the Closing Date, duly executed by an Authorized Officer and a Secretary or
Clerk of each Debtor composing Borrower, certifying that no Event of Default has
occurred and is continuing on the Closing Date;
(m) Foothill shall have received executed disbursement instructions from
Borrower, addressed to Foothill, with respect to the advances to be made on the
Closing Date, directing Foothill to disburse the proceeds of such advances in
accordance with the terms of Section 7.18 hereof;
(n) Foothill shall have received a compliance certificate from Borrower, dated
as of the Closing Date, duly executed either by the chief financial officer of
Borrower or by Robert Hannon as the assistant clerk of and attorney-in-fact for
Borrower, detailing the calculations made by Borrower, by which Borrower has
determined that it is in compliance with the covenants contained in Section 6.13
which are applicable as of the Closing Date;
(o) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the due consummation of the transactions
contemplated hereby shall have been issued and remain in force by any
governmental authority against Borrower, Foothill, any of the other Secured
Parties, or any of their Affiliates;
(p) Foothill shall have received a copy of the fully executed Gold
Consignment Agreement, together with a certificate of a Clerk of T&C certifying
same to be a true and correct copy thereof;
(q) [Intentionally omitted];
(r) Foothill shall have received confirmation that the notification to the
Attorney General of the Commonwealth of Massachusetts that is required to exempt
the transactions hereunder from the provisions of the usury laws of
Massachusetts has been sent to and received by such office; and
(s) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
3.2 Conditions Concurrent to Initial Revolving Advance or Letter of Credit. The
obligation of Foothill to make the initial Revolving Advance or to provide the
initial Letter of Credit hereunder is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
concurrent on the Closing Date:
(a) all obligations of Borrower to the Exiting Gold Banks shall have been
satisfied, any gold owned by the Exiting Gold Banks and consigned to Borrower
shall have been purchased by Borrower, returned to the Exiting Gold Banks, or
transferred by the Exiting Gold Banks to Gold Consignor to be on consignment to
Borrower pursuant to the Gold Consignment Agreement, all claims of the Exiting
Gold Banks to any security interests or liens on Collateral shall have been
terminated or released by the Exiting Gold Banks, and each of the foregoing
items shall have been demonstrated to Foothill to its reasonable satisfaction;
(b) the proceeds of any initial advances made hereunder on the Closing Date
shall be used for the purposes set forth in Section 7.18 of this Agreement;
3.3 Conditions Precedent to all Revolving Advances and Letters of Credit. The
following shall be conditions precedent to all Revolving Advances and Letters of
Credit hereunder:
(a) the representations and warranties of Borrower contained in this
Agreement and the Loan Documents shall be true and correct in all respects on
and as of the date of such Revolving Advance or Letter of Credit as though made
on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date); and
(b) no Event of Default or event which with the giving of notice or passage
of time would constitute an Event of Default shall have occurred and be
continuing on the date of such Revolving Advance or Letter of Credit, nor shall
either result from the making or issuance of the Revolving Advance or Letter
of Credit.
3.4 [Intentionally Omitted].
3.5 Term; Renewal. This Agreement shall become effective as of the date first
set forth herein upon the execution and delivery hereof by Borrower and Foothill
and, except as otherwise set forth herein, shall continue in full force and
effect for a term ending on the date (the "Renewal Date") that is two (2) years
from such date first set forth herein. This Agreement may be renewed by
Foothill, prior to the Renewal Date, at Foothill's sole option, for an
additional term of three (3) years following the Renewal Date, by notice from
Foothill to Borrower given not less than sixty (60) days prior to the Renewal
Date, if this Agreement has not been sooner terminated pursuant to the terms
hereof. In the event Foothill so extends the term hereof, such extended term
shall expire on the date that is five (5) years from the date first set forth
herein. Borrower may not terminate this Agreement prior to the expiration of the
term hereof (including the three-year extended term if Foothill so elects to
extend the term hereof), except in accordance with Section 3.7 hereof. The
foregoing notwithstanding, Foothill shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence of an Event of Default.
3.6 Effect of Termination. On the date of termination, all Obligations
(including contingent reimbursement obligations under any outstanding Letters of
Credit) shall become immediately due and payable without notice or demand. No
termination of this Agreement, however, shall relieve or discharge Borrower of
Borrower's duties, Obligations, or covenants hereunder, and the Collateral
Agent's continuing security interest in the Collateral for the benefit of
Foothill shall remain in effect until all Obligations have been fully discharged
and Foothill's obligation to extend credit hereunder is terminated.
3.7 Early Termination by Borrower. The provisions of Section 3.5 that restrict
the ability of Borrower to terminate this Agreement by Borrower notwithstanding,
at any time after the Closing Date, Borrower has the option, upon ninety (90)
days prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations (including any contingent reimbursement
obligations of Foothill under Letters of Credit), together with a premium (the
"Early Termination Premium") equal to:
(a) If such termination occurs on or before the first anniversary of the
date first set forth herein, an amount equal to five percent (5.0%) of the
Maximum Combined Facility;
(b) If such termination occurs after the first anniversary of the date first
set forth herein and on or before the second anniversary of the date first set
forth herein, an amount equal to four percent (4.0%) of the Maximum Combined
Facility;
(c) If Foothill exercises its option to extend the term hereof for three
years after the Renewal Date, and if such termination occurs after the second
anniversary of the date first set forth herein and on or before the third
anniversary of the date first set forth herein, an amount equal to three percent
(3.0%) of the Maximum Combined Facility;
(d) If Foothill exercises its option to extend the term hereof for three
years after the Renewal Date, and if such termination occurs after the third
anniversary of the date first set forth herein and on or before the fourth
anniversary of the date first set forth herein, an amount equal to two percent
(2.0%) of the Maximum Combined Facility; and
(e) If Foothill exercises its option to extend the term hereof for three
years after the Renewal Date, and if such termination occurs after the fourth
anniversary of the date first set forth herein and before the fifth anniversary
of the date first set forth herein, an amount equal to one percent (1.0%) of the
Maximum Combined Facility.
The foregoing notwithstanding, any payments by Borrower required in conjunction
with any reductions required as a result of consummation of the Pending Material
Transaction shall be without premium or penalty.
3.8 Termination Upon Event of Default. If Foothill terminates this Agreement
upon the occurrence of an Event of Default, in view of the impracticability and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Foothill's lost profits as a result
thereof, Borrower shall pay to Foothill upon the effective date of such
termination, a premium in an amount equal to the Early Termination Premium. The
Early Termination Premium shall be presumed to be the amount of damages
sustained by Foothill as the result of the early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. The Early
Termination Premium provided for in this Section 3.8 shall be deemed included in
the Obligations.
4. COLLATERAL
4.1 Collection of Accounts, General Intangibles, Negotiable Collateral. On or
before the Closing Date, Foothill, Borrower, and the Collection Agents shall
enter into the Lock Box Agreements, in form and substance satisfactory to
Foothill in its sole discretion, pursuant to which all of Borrower's cash
receipts, checks, and other items of payment will be forwarded to Foothill on a
daily basis; provided, however, that the foregoing shall not apply to any
property or asset that composes the Excluded Assets. At any time, Foothill or
Foothill's designee may (in the reasonable exercise of its discretion): (a)
notify customers or Account Debtors of Borrower that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Foothill or that
Foothill is the beneficiary of a security interest therein; and (b) collect the
Accounts, General Intangibles, and Negotiable Collateral directly and charge the
collection costs and expenses to Borrower's loan account; provided, however,
that the foregoing shall not apply to any property or asset that composes the
Excluded Assets. Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any cash receipts, checks, and other items of payment that
it receives on account of the Accounts, General Intangibles, or Negotiable
Collateral and immediately will deliver said cash receipts, checks, and other
items of payment to Foothill in their original form as received by Borrower;
provided, however, that the foregoing shall not apply to any property or asset
that composes the Excluded Assets. In the event that Foothill receives the
proceeds of any Excluded Assets, Foothill shall dispose of such proceeds in
accordance with the terms and conditions of the Intercreditor Agreement. In this
regard, Foothill and Borrower have agreed that, prior to the occurrence and
continuance of an Event of Default, any Zale Payments are to be made available
to Borrower with Borrower being responsible to remit the portion thereof
constituting a portion of the Zale Bankruptcy Claim to the representative of the
Secured Party with the first priority interest therein. From and after the
occurrence and during the continuance of an Event of Default, Foothill may
exercise control over the Zale Payments and require same to be paid to an
account controlled solely by Foothill. If Foothill does exercise such control
over and with respect to the Zale Payments, Foothill shall determine the amount
thereof that is allocable to the Zale Bankruptcy Claim and, subject to the terms
of the Intercreditor Agreement, shall remit such portion to the representative
of the Secured Party with the first priority interest therein. In order to
effectuate such understanding, Borrower and Foothill have agreed to establish a
joint account with one of the Collection Agents and to provide such Collection
Agent with standing instructions designed to implement such agreement.
4.2 Delivery of Additional Documentation Required. Borrower shall execute and
deliver to Foothill or the Collateral Agent, as the case may be, at any time and
from time to time at the request of Foothill, all financing statements,
continuation financing statements, fixture filings, security agreements, chattel
mortgages, pledges, assignments, endorsements of certificates of title,
applications for title, affidavits, reports, notices, schedules of accounts,
letters of authority, and all other documents that Foothill may reasonably
request, in form reasonably satisfactory to Foothill, to perfect and continue
perfected the security interests of the Collateral Agent in the Collateral and
in order to fully consummate all of the transactions contemplated under the Loan
Documents.
4.3 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Collateral Agent and Foothill, in its capacity as a subagent of the
Collateral Agent under the Intercreditor Agreement (and any of Foothill's
officers, employees, or agents designated by Foothill) as Borrower's true and
lawful attorney, with power (in Collateral Agent's or Foothill's reasonable
discretion) to: (a) if Borrower fails to, or refuses timely to execute and
deliver any of the documents described in Section 4.2, sign the name of Borrower
on any of the documents described in Section 4.2 or on any other similar
documents to be executed, recorded, or filed in order to perfect or continue
perfected the Collateral Agent's security interest in the Collateral (so long as
such act is not prohibited by the terms of the Intercreditor Agreement); (b)
sign Borrower's name on any invoice or bill of lading relating to any Account,
drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors; (c) send requests for
verification of Accounts; (d) endorse Borrower's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment or security that may
come into Collateral Agent's or Foothill's possession; (e) at any time that an
Event of Default has occurred, notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Collateral
Agent or Foothill, to receive and open all mail addressed to Borrower, and to
retain all mail relating to the Collateral and forward all other mail to
Borrower; (f) at any time that an Event of Default has occurred or Foothill
reasonably deems itself insecure, make, settle, adjust all claims under, and
make all determinations and decisions with respect to Borrower's policies of
insurance relating to the Collateral as to which Foothill holds, or is the
beneficiary of, a first priority security interest; and (g) at any time that an
Event of Default has occurred or Foothill reasonably deems itself insecure,
settle and adjust disputes and claims respecting the Accounts directly with
Account Debtors, for amounts and upon terms which Faithful determines to be
reasonable, and Collateral Agent or Foothill may cause to be executed and
delivered any documents and releases which Collateral Agent or Foothill
reasonably determines to be necessary. The appointment of Collateral Agent and
Foothill as Borrower's attorney, and each and every one of Collateral Agent's
and Foothill's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.4 Right to Inspect; Payment of Certain Costs, Fees, and Expenses Relating to
Collateral. Foothill (through any of its officers, employees, agents, or
independent contractors (including the Gold Consignor)) shall have the right, at
Borrower's expense, from time to time hereafter to inspect the Collateral and
Borrower's Books and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral. So long as no Event of
Default has occurred and is continuing, Foothill and Borrower agree that any
such inspections shall occur during normal business hours. Without limiting the
generality of the foregoing, subject to the Intercreditor Agreement, Borrower
shall pay when due all costs, expenses, and fees charged to it by Gold Consignor
pursuant to the Gold Consignment Agreement or the Creditor Agreement.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Foothill as follows:
5.1 No Prior Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of liens, claims, security interests, or encumbrances
except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are, at the time of the creation
thereof and as of each date on which Borrower includes them in a Borrowing Base
calculation or certification, bona fide existing obligations created by the sale
and delivery of Inventory or the rendition of services to Account Debtors in the
ordinary course of Borrower's business, and, to the best of Borrower's
knowledge, unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. At the time of the creation of an Eligible Account and as of
each date on which Borrower includes an Eligible Account in a Borrowing Base
calculation or certification, Borrower has not received notice of actual or
imminent bankruptcy, insolvency, or material impairment of the financial
condition of any applicable Account Debtor regarding such Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is now and at all times hereafter
shall be of good and marketable quality.
5.4 Location of Inventory and Equipment. The Inventory and Equipment are not
stored with a bailee, warehouseman, or similar party (without Foothill's prior
written consent) and are located only at the locations identified on Schedule
6.15A or otherwise permitted by Sections 6.15 and 7.11.
5.5 Inventory Records. Borrower now keeps, and hereafter at all times shall
keep, correct and accurate records itemizing and describing the kind, type,
quality, and quantity of the Inventory, and Borrower's cost therefor; it being
expressly understood, however, that the EPG division of Balfour and GLI do not
maintain a perpetual inventory reporting system.
5.6 Location of Chief Executive Office. The chief executive office of each
Debtor is located at the address indicated in the first paragraph of this
Agreement and Borrower covenants and agrees that it will not, without thirty
(30) days prior written notification to Foothill, relocate any of such chief
executive offices.
5.7 Due Organization and Qualification. Each Debtor is and shall at all times
hereafter be duly organized and existing and in good standing under the laws of
the state of its incorporation and qualified and licensed to do business in, and
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified or where the failure to
be so licensed or qualified could reasonably be expected to have a material
adverse effect on the business, operations (financial or otherwise), finances,
or prospects of Borrower.
5.8 Due Authorization; No Conflict. The execution, delivery, and performance of
the Loan Documents are within each Debtor's corporate powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in such Debtor's Articles or Certificate of Organization or
Incorporation, or By-laws, nor will they constitute an event of default under
any material agreement to which such Debtor is a party.
5.9 Litigation. There are no actions or proceedings pending by or against
Borrower before any court or administrative agency and Borrower does not have
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for ongoing collection matters in which Borrower is
the plaintiff, matters disclosed on Schedule 5.9, and matters arising after the
date hereof that, if decided adversely to Borrower, would not materially impair
the prospect of repayment of any portion of the Obligations or materially impair
the value or priority of Foothill's beneficial security interest in the
Collateral.
5.10 No Material Adverse Change in Financial Condition. All financial statements
relating to Borrower that have been or may hereafter be delivered by Borrower to
Foothill have been prepared in accordance with GAAP and fairly present
Borrower's financial condition as of the date thereof and Borrower's results of
operations for the period then ended. There has not been a material adverse
change in the financial condition of Borrower as measured against the most
recent financial statements delivered to Foothill pursuant to the Prior
Agreement.
5.11 Solvency. Each of T&C and Group is Solvent. Each of GLI and Balfour is Not
Insolvent. No transfer of property is being made by any Debtor and no obligation
is being incurred by any Debtor in connection with the transactions contemplated
by this Agreement or the other Loan Documents with the intent to hinder, delay,
or defraud either present or future creditors of such Debtor.
5.12 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has been in
violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a) or any of the published interpretations
thereunder. No notice of intent to terminate a Plan has been filed under Section
4041 of ERISA, nor has any Plan been terminated under Section 4041(e) of ERISA.
The PBGC has not instituted proceedings to terminate, or appoint a trustee to
administer, a Plan and no event has occurred or condition exists that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan. Neither Borrower nor any ERISA
Affiliate would be liable for any amount pursuant to Sections 4062, 4063, or
4064 of ERISA if all Plans terminated as of the most recent valuation dates of
such Plans. Neither Borrower nor any ERISA Affiliate have: withdrawn from a
"multiple employer Plan" during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; or failed to make a payment
to a Plan required under Section 302(f)(1) of ERISA such that security would
have to be provided pursuant to Section 307 of ERISA. No lien upon the assets of
Borrower has arisen with respect to a Plan. No prohibited transaction or
Reportable Event has occurred with respect to a Plan. Neither Borrower nor any
ERISA Affiliate has incurred any withdrawal liability with respect to any
Multiemployer Plan. Borrower and each ERISA Media have made all contributions
required to be made by them to any Plan or MultiempLoyer Plan when due. There is
no accumulated funding deficiency in any Plan, whether or not waived.
5.13 Environmental Condition. Except to the extent disclosed on Schedule 5.13,
none of Borrower's properties or assets has ever been used by Borrower or, to
the best of Borrower's knowledge, by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, except for the storage and handling of immaterial amounts
of Hazardous Materials commonly and lawfully used in office buildings and
distribution centers and in the manufacture of jewelry. Except to the extent
disclosed on Schedule 5.13, none of Borrower's properties or assets has ever
been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by Borrower. Except to the extent
disclosed on Schedule 5.13, Borrower has not received a summons, citation,
notice, or directive from the Environmental Protection Agency or any other
federal or state governmental agency concerning any action or omission by
Borrower resulting in the releasing or disposing of Hazardous Materials into the
environment.
5.14 Ownership of Subsidiaries; Inactive Subsidiaries. Schedule 5.14 attached
hereto accurately sets forth (i) the correct legal name of each of the
Subsidiaries owned, directly or indirectly, by T&C, (ii) the number of
authorized, issued, and outstanding shares of capital stock of each such
Subsidiary, (iii) the ownership of such shares of capital stock, and (iv)
whether such shares are fully paid and non-assessable. All of the shares of
stock of each of such Subsidiaries owned by T&C, or one or more of the
Subsidiaries, are free and clear of all liens, security interests, or other
encumbrances other than those in favor of the Collateral Agent for the benefit
of the Secured Parties. The Inactive Subsidiaries do not have any properties or
assets, except perhaps properties or assets of de minimis value, nor are they
conducting any business or operations.
5.15 Reliance by Foothill; Cumulative. Each warranty and representation
contained in this Agreement shall be automatically deemed repeated with each
Revolving Advance or issuance of a Letter of Credit and shall be conclusively
presumed to have been relied on by Foothill regardless of any investigation made
or information possessed by Foothill. The warranties and representations set
forth herein shall be cumulative and in addition to any and all other warranties
and representations that Borrower shall now or hereinafter give, or cause to be
given, to Foothill.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until payment in full of the Obligations, and unless Foothill
shall otherwise consent in writing, each Debtor composing Borrower shall do all
of the following:
6.1 Accounting System. Borrower at all times hereafter shall maintain a standard
and modern system of accounting in accordance with GAAP with ledger and account
cards or computer tapes, discs, printouts, and records pertaining to the
Collateral which contain information as from time to time may be reasonably
requested by Foothill. Borrower shall also keep proper books of account showing
all sales, claims, and allowances on its Inventory.
6.2 Collateral Reports. Borrower shall deliver to Foothill, no later than the
tenth (10th) Business Day of each fiscal month of Borrower during the term of
this Agreement, a Monthly Gold Certificate, a detailed aging, by total, of the
Accounts, a reconciliation statement, and a summary aging, by vendor, of all
accounts payable and any book overdraft. Borrower shall deliver to Foothill,
each Business Day, or at such less frequent intervals as may from time to time
be required by Foothill, a Gold roll-forward report, setting forth the opening
balance of Gold (owned and consigned) of Borrower in fto (which opening balance
shall be the same as the closing balance from the last such report, additions in
fto for the period covered by the report, subtractions in fto for the period
covered by the report, and the closing balance in fto as at the end of the
period covered by the report, the purpose of which roll-forward reports shall be
to enable Foothill to be updated as to the status of Gold (owned and consigned)
of Borrower in between receipt of Monthly Gold Certificates, and which
roll-forward reports shall be in such format as may reasonably be required by
Foothill. Original sales invoices evidencing daily sales shall be mailed by
Borrower to each Account Debtor with, at Foothill's request, a copy to Foothill,
and, at any time that an Event of Default has occurred or Foothill reasonably
deems itself insecure, at Foothill's request, the invoices shall indicate on
their face that the Account has been assigned to Foothill and that all payments
are to be made directly to Foothill. Borrower shall deliver to Foothill, as
Foothill may from time to time reasonably require, collection reports, sales
journals, invoices, original delivery receipts, customer's purchase orders,
shipping instructions, bills of lading, and other documentation respecting
shipment arrangements. Absent such a request by Foothill, copies of all such
documentation shall be held by Borrower as custodian for Foothill. In addition
to the foregoing, Borrower shall comply with all reporting requirements of Gold
Consignor under the Gold Consignment Agreement or the Creditor Agreement.
6.3 Schedules of Accounts. With such regularity as Foothill shall reasonably
require, Borrower shall provide Foothill with schedules describing all Accounts.
Foothill's failure to request such schedules or Borrower's failure to execute
and deliver such schedules shall not affect or limit Foothill's security
interest or other rights in and to the Accounts.
6.4 Financial Statements, Reports, Certificates. Borrower agrees to deliver to
Foothill: (a) as soon as available, but in any event within thirty (30) days
after the end of each month during each of Borrower's fiscal years, a company
prepared balance sheet, income statement, and cash flow statement covering
Borrower's operations during such period; and (b) as soon as available, but in
any event within ninety (90) days after the end of each of Borrower's fiscal
years, financial statements of Borrower for each such fiscal year, audited by
independent certified public accountants reasonably acceptable to Foothill and
certified, without any qualifications, by such accountants to have been prepared
in accordance with GAAP, together with a certificate of such accountants
addressed to Foothill stating that such accountants do not have knowledge of the
existence of any event or condition constituting an Event of Default, or that
would, with the passage of time or the giving of notice, constitute an Event of
Default. Such audited financial statements shall include a balance sheet, profit
and loss statement, and cash flow statement, and, to the extent prepared, such
accountants' letter to management. Borrower shall have issued written
instructions to its independent certified public accountants authorizing them to
communicate with Foothill and to release to Foothill whatever financial
information concerning Borrower that Foothill may request. In addition to the
financial statements referred to above, Borrower agrees to deliver financial
statements prepared on a consolidating basis so as to present Borrower and each
of its Subsidiaries separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to Foothill T&C's Form 10-Q
Quarterly Reports, Form 10-K Annual Reports, and Form 8-K Current Reports, and
any other filings made by T&C with the Securities and Exchange Commission, if
any, within fifteen (15) days after the same are filed, or any other information
that is provided by T&C to its shareholders generally, and any other report
reasonably requested by Foothill relating to the Collateral or the financial
condition of Borrower.
Each month, together with the financial statements provided pursuant to Section
6.4(a), Borrower shall deliver to Foothill a certificate signed by T&C's chief
financial officer to the effect that: (a) all reports, statements, or computer
prepared information of any kind or nature delivered or caused to be delivered
to Foothill hereunder have been prepared in accordance with GAAP and fully and
fairly present the financial condition of Borrower; (b) Borrower is in timely
compliance with all of its covenants and agreements hereunder; (c) the
representations and warranties of Borrower contained in this Agreement and the
Loan Documents are true and correct in all material respects on and as of the
date of such certificate, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an earlier
date); and (d) on the date of delivery of such certificate to Foothill there
does not exist any condition or event which constitutes an Event of Default (or,
in each case, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action Borrower
has taken, is taking or proposes to take with respect thereto).
Borrower hereby irrevocably authorizes and directs all auditors, accountants, or
other third parties to deliver to Foothill, at Borrower's expense, copies of
Borrower's financial statements, papers related thereto, and other accounting
records of any nature in their possession, and to disclose to Foothill any
information they may have regarding Borrower's business affairs and financial
conditions.
6.5 Tax Returns. Borrower agrees to deliver to Foothill copies of each of T&C's
future federal income tax returns, and any amendments thereto, within thirty
(30) days of the filing thereof with the Internal Revenue Service.
6.6 Designation of Inventory. Borrower shall now and from time to time
hereafter, but not Less frequently than monthly, execute and deliver to Foothill
a designation of Inventory specifying Borrower's cost and the wholesale market
value of Borrower's raw materials, work in process, and finished goods, and
further specifying such other information (including the percentage of such
value that is composed of precious metals) as Foothill may reasonably request.
6.7 Returns. Returns and allowances, if any, as between Borrower and its Account
Debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. If at any time prior to the occurrence of an Event of
Default, any Account Debtor returns any Inventory to Borrower, Borrower shall
promptly determine the reason for such return and, if Borrower accepts such
return, issue a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor. Borrower shall notify Foothill on a
daily basis of all returns and recoveries (other than so-called 'memo'
transactions) and of all disputes and claims involving amounts in excess of
$20,000.
6.8 Title to Equipment. At any time that an Event of Default has occurred or
Foothill reasonably deems itself insecure, at Foothill's request, Borrower shall
immediately deliver to the Collateral Agent, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment.
6.9 Maintenance of Equipment. Borrower shall keep and maintain the Equipment in
good operating condition and repair (ordinary wear and tear excepted), and make
all necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and the Equipment is now and shall at all times remain
personal property.
6.10 Taxes. All assessments and taxes, whether real, personal, or otherwise, due
or payable by, or imposed, levied, or assessed against Borrower or any of its
property have been paid, and shall hereafter be paid in full, before deficiency
or before the expiration of any extension period. Borrower shall make due and
timely payment or deposit of all federal, state, and local taxes, assessments,
or contributions required of it by law, and will execute and deliver to
Foothill, on demand, appropriate certificates attesting to the payment or
deposit thereof. Borrower will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable law, including those
Laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and
federal income taxes, and will, upon request, furnish Faithful with proof
satisfactory to Foothill indicating that Borrower has made such payments or
deposits. The foregoing to the contrary notwithstanding, Borrower shall not be
required to pay or discharge any such assessment or tax so long as the validity
thereof shall be the subject of a Permitted Protest.
6.11 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrower's ownership and use of the Collateral, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All such policies of insurance (except those of public liability and property
damage) shall contain a 438BFU lender's loss payable endorsement, or all
equivalent endorsement in a form satisfactory to Foothill, showing the
Collateral Agent and each of the Secured Parties as Loss payees or additional
assureds thereof, as the case may be, and as their interests may appear, and
shall contain a waiver of warranties, and shall specify that the insurer must
give at least thirty (30) days prior written notice to the Collateral Agent and
Foothill before canceling its policy for any reason. Borrower shall deliver to
Foothill certificates respecting such policies of insurance and, upon request
therefor by Foothill, evidence of the payment of all premiums therefor. Except
to the extent that the Intercreditor Agreement may provide otherwise, all
proceeds payable under any such policy with respect to Collateral as to which
Foothill has, or is the beneficiary of, a first priority security interest shall
be payable to Foothill to be applied on account of the Obligations.
6.12 Foothill Expenses. Borrower shall immediately, upon written notice,
reimburse Foothill for all sums expended by Foothill which constitute Foothill
Expenses and Borrower hereby authorizes and approves all advances and payments
by Foothill for items constituting Foothill Expenses and authorizes Foothill,
without prior written notice, to charge Borrower's loan account for the amount
thereof as and when incurred or expended.
6.13 Financial Covenants. Borrower shall maintain:
(a) Current Ratio. A ratio of Consolidated Current Assets divided by
Consolidated Current Liabilities of at least one and three-quarters to one
(1.75:1.0), measured on a fiscal quarter basis.
(b) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth of at
least Forty-Eight Million Dollars ($48,000,000), measured on a fiscal quarter
basis.
(c) Working Capital. Working Capital of not less than Seventy Five Million
Dollars ($75,000,000), measured on a fiscal quarter basis.
(d) Consolidated Interest Coverage Ratio. A Consolidated Interest Coverage
Ratio of not less than three-quarters to one (.75:1.0), measured on a fiscal
quarter basis (for the purposes hereof, the Consolidated Interest Coverage Ratio
will be calculated based upon the most recently completed twelve (12) month
period.
(e) Consolidated Total Senior Liabilities to Consolidated Tangible Capital
Base. A ratio of Consolidated Total Senior Liabilities divided by Consolidated
Tangible Capital Base of not more than nine tenths to one (.90:1.0), measured on
a fiscal quarter basis.
(f) Consolidated Adjusted Total Senior Liabilities to Consolidated Tangible
Capital Base. A ratio of Consolidated Adjusted Total Senior Liabilities divided
by Consolidated Tangible Capital Base of not more than one and fifteen
one-hundredths to one (1.15:1.0), measured on a fiscal quarter basis.
(g) Consolidated Operating Income. Borrower shall not permit its
consolidated operating income to be less than Twelve Million Dollars
($12,000,000) for any fiscal year of Borrower commencing with Borrower's fiscal
year ending February 23, 1997.
(h) Operating Income at Town & Country Fine Jewelry Group, Inc. Borrower
shall not permit Group's operating income to be less than Ten Million Three
Hundred Thousand Dollars ($10,300,000) for any fiscal year of Group commencing
with Group's fiscal year ending February 23, 1997.
(i) Operating Income at L.G. Balfour Company, Inc. Borrower shall not permit
Balfour's operating income to be less than Two Million Eight Hundred Thousand
Dollars ($2,800,000) for any fiscal year of Balfour commencing with Balfour's
fiscal year ending February 23, 1997.
(j) Gross Profit at Town & Country Fine Jewelry Group, Inc. Borrower shall
not permit Group's gross profit to be less than Twenty Six Million One Hundred
Thousand Dollars ($26,100,000) for any fiscal year of Group commencing with
Group's fiscal year ending February 23, 1997.
With respect to the foregoing covenants, Foothill and Borrower agree that
Borrower has made a good faith estimate of the expenses incurred or to be
incurred relating to the restructuring of its Gold facility (which expenses are
estimated at $900,000) and the Pending Material Transaction (which expenses are
estimated at $1,100,000). Of such $2,000,000, T&C expensed $450,000 in its
fiscal year ended February 25, 1996. Borrower believes there should not be any
significant increase in these expenses, which therefore currently would be
expected to have an approximate $1,550,000 impact on its financial statements
for its fiscal year ending in 1997. Foothill agrees that up to, but not more
than, $2,000,000 of such expenses shall be disregarded for purposes of making
all financial covenant calculations that pertain to Borrower's fiscal year
ending Febraury 23, 1997.
Should the Pending Material Transaction be consummated with the consent of
Foothill, Borrower and Foothill will negotiate in good faith to reset the
foregoing covenants at reasonable levels within forty-five days following the
Pending Material Transaction Closing Date, taking into account the effect of the
consummation of the Pending Material Transaction.
6.14 No Setoffs or Counterclaims. All payments hereunder and under the other
Loan Documents made by or on behalf of Borrower shall be made without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.15 Location of Inventory and Equipment. The Inventory and Equipment shall not
at any time now or hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent. Except as otherwise provided in
the last sentence of this Section 6.15, Borrower shall keep the Inventory and
Equipment only at the locations identified on Schedule 6.15A; provided, however,
that Borrower may amend Schedule 6.15A so long as such amendment occurs by
written notice to Foothill not less than thirty (30) days prior to the date on
which the Inventory or Equipment is moved to such new location and so long as,
at the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Collateral Agent's security interest in such assets and also provides to
Foothill a landlord's waiver in form and substance satisfactory to Foothill;
provided further, however, that the foregoing shall not prevent Borrower from
providing Inventory to its sales personnel or from providing Inventory 'samples'
to customers or potential customers so long as such activities are in the
ordinary course of Borrower's business, consistent with its past practices, and
involve a de minimis amount of Inventory. The foregoing notwithstanding,
Borrower may permit not more than 800 fto of Precious Metals in the aggregate at
any time to be in the possession of Outside Processors at locations not listed
on Schedule 6.15A, so long as not more than 100 fto of such Precious Metals are
maintained at any time at any such location, and so long as such Precious Metals
are accounted for in the Monthly Gold Certificates provided by Borrower to
Foothill in accordance with the provisions of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until payment in full of the Obligations, each Debtor composing
Borrower will not do any of the following without Foothill's prior written
consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness,
except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness existing as of the closing Date and set forth on Schedule
7.1 attached hereto;
(c) Indebtedness evidenced by the Senior Notes, together with the Senior
Notes Guarantees with respect thereto;
(d) Indebtedness evidenced by the New Senior Subordinated Notes and such
additional New Senior Subordinated Notes as may be issued after the date on
which the New Senior Subordinated Notes are originally issued in lieu of the
payment of cash interest on the New Senior Subordinated Notes in accordance with
the original terms and conditions of the New Senior Subordinated Notes and the
New Senior Subordinated Notes Indenture therefor, together with the New Senior
Subordinated Notes Guarantees with respect thereto;
(e) [intentionally omitted];
(f) [intentionally omitted];
(g) Indebtedness evidenced by the Gold Consignment Agreement;
(h) [intentionally omitted];
(i) Indebtedness secured by Permitted Liens;
(j) Indebtedness of any Debtor owing to any other Debtor or to any
Subsidiary, so long as such Indebtedness is subordinated, in writing, in right
of payment to the payment in full of the Obligations on terms and conditions
reasonably satisfactory to Foothill;
(k) Indebtedness evidenced by the New Exchangeable Preferred Stock, together
with accrued but unpaid dividends thereon;
(l) interest rate protection agreements of Borrower covering Indebtedness of
Borrower, (which Indebtedness (i) bears interest at fluctuating interest rates,
and (ii) is otherwise permitted to be issued under this Section 7.1), in each
case, only if the notional principal amount of such interest rate protection
agreement does not exceed the principal amount of the Indebtedness to which the
interest rate protection agreement relates;
(m) Indebtedness arising under the provisions of the Registration
Effectiveness Agreement; and
(n) refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) through (l) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrower, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly,
any lien on or with respect to any of its property or assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Permitted Liens that are continued or
renewed as permitted under Section 7.1(n)).
7.3 Restrictions on Fundamental Changes. Enter into any acquisition, merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one traction or a series of transactions, all or substantially all of its
business, property, or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the assets, stock, or
other evidence of beneficial ownership of any Person or entity.
7.4 Extraordinary Transactions and Disposal of Assets. Enter into any
transaction not in the ordinary and usual course of Borrower's business,
including any Asset Disposition; provided, however, that the foregoing shall not
prevent the making of any Permitted Asset Disposition or any disposition of real
property listed on Schedule 7.4 on substantially the terms previously disclosed
to Foothill.
7.5 Change Name. Change its name, business structure, or identity, or add any
new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with respect to
the obligations of any third party in an aggregate amount in excess of $250,000,
except by endorsement or instruments or items of payment for deposit to the
account of Borrower or which are transmitted or turned over to Foothill and
except that one Debtor may guarantee or otherwise become liable with respect to
any Indebtedness of another Debtor so long as the underlying Indebtedness is
permitted under Section 7.1 hereof.
7.7 Nature of Business; Fiscal Year. Make any change in the nature of Borrower's
business or the commencement and expiration of its fiscal year.
7.8 Prepayments. Except as permitted by Section 7.l(n), prepay, redeem, or
repurchase any Indebtedness owing to any third party; provided, however, that
this Section 7.8 shall not prohibit: (i) the performance by T&C of its mandatory
redemption obligations set forth in Sections 3.02, 4.05, 4.08, 4.11, or 4.13 of
the Senior Notes Indenture, and/or the redemption by T&C of Senior Notes
pursuant to Section 3.09 of the Senior Notes Indenture (as added by the First
Supplemental Indenture thereto dated as of August 31, 1993) from "Collateral
Proceeds" (as such term is defined in the Senior Notes Indenture); and (ii) so
long as no Event of Default has occurred and is continuing and so long as to do
so would not be in contravention of the subordination terms contained in such
New Senior Subordinated Notes Indenture, the performance by T&C of its mandatory
redemption obligations as set forth in Sections 4.04, 4.08, 4.10, and 4.12 of
the New Senior Subordinated Notes Indenture. In addition, Borrower agrees that
it will not pay in cash any interest that it is contractually permitted to
pay-in-kind.
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly, any
Change of Control.
7.10 Capital Expenditures. Make any capital expenditure, or any commitment
therefor, in excess of One Million Dollars ($l,000,000) for any individual
transaction or where the aggregate amount of such capital expenditures, made or
committed for in any fiscal year, is in excess of Four Million Dollars
($4,000,000). Should the Pending Material Transaction be consummated with the
consent of Foothill, Borrower and Foothill will negotiate in good faith to reset
the foregoing covenants at reasonable levels within forty-five days following
the Pending Material Transaction Closing Date, taking into account the effect of
the consummation of the Pending Material Transaction.
7.11 Consignments. Consign any Inventory, sell any Inventory on bill and hold,
sale or return, sale on approval, or other conditional terms of sale; provided,
however, that the foregoing shall not prevent Borrower from consigning Inventory
to third Persons in the ordinary course Borrower's business, consistent with its
past practices, so long as at the time of any such consignment, Borrower takes
such steps as may be necessary so as to ensure that such consigned Inventory is
not subject to the claims of the consignees creditors or that Borrower has
priority over any perfected security interests in the inventory of such
consignee.
7.12 Distributions. Make any distribution or declare or pay any dividends (in
cash or in stock) on, or purchase, acquire, redeem, or retire any of Borrower's
capital stock, of any class, whether now or hereafter outstanding; provided,
however, that this Section 7.12 shall not prohibit: (i) the payment of dividends
payable solely in shares of a class of stock (other than stock that has a
mandatory dividend or redemption obligation) to the holders of that class or a
dividend consisting solely of options or warrants or other rights to purchase
capital stock (other than stock that has a mandatory dividend or redemption
obligation); (ii) the performance by T&C of its obligations under the
Registration Effectiveness Agreement; (iii) the exchange of shares of New
Exchangeable Preferred Stock for shares of common stock of LSI to the extent and
as provided for in the Certificate of Designation; (iv) dividends or
distributions payable by a Debtor to another Debtor; and (v) so long as no Event
of Default has occurred and is continuing and so long as the Consolidated Fixed
Charge Ratio is greater than 1.25 to 1 at the time of and after giving effect to
such declaration and payment, dividends payable to holders of the New
Exchangeable Preferred Stock.
7.13 Accounting Methods. Modify or change its method of accounting or enter
into, modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of Borrower's accounting records without said
accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Foothill pursuant to or in accordance with this Agreement, and agrees that
Foothill may contact directly any such accounting firm or service bureau in
order to obtain such information.
7.14 Investments. Directly or indirectly make or acquire any beneficial interest
in (including stock, partnership interest, or other securities of), or make any
loan, advance, or capital contribution to, any Person, except for the following:
(a) Permitted Investments;
(b) investments by a Debtor in another Debtor;
(c) loans by one or more of the Debtors to one or more of the foreign
Subsidiaries of T&C (other than a foreign Subsidiary that is an Inactive
Subsidiary), so long as the aggregate amount of all such loans outstanding at
any one time does not exceed $2,000,000;
(d) loans to employees of Borrower in an aggregate principal amount at any
time outstanding not in excess of $500,000;
(e) the shares of stock of Solomon Brothers and LSI owned by T&C as of the
Closing Date, together with any non-cash dividends and distributions issued,
from time to time, with respect thereto; and
(f) any reorganization securities issued to Borrower in connection with
Borrower's claim filed in the chapter 11 bankruptcy proceedings relating to Zale
Corporation and certain of its Affiliates.
Anything contained in this Agreement to the contrary notwithstanding, in no
event shall Borrower or any of the Subsidiaries, directly or indirectly, make or
ache any further beneficial interest in (including stock, partnership interest,
or other securities of), or make any loan, advance, or capital contribution to,
one or more of the Inactive Subsidiaries.
7.15 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of Borrower except for Permitted
Affiliate Transactions. To the extent that any such proposed transaction
involves $250,000 or more, Borrower shall provide Foothill with prior notice and
the details thereof.
7.16 Suspension. Suspend or go out of a substantial portion of its business.
7.17 Compensation. Pay or accrue compensation, during any year, to the officers
and senior management employees (exclusive of those who also serve as officers
or senior management employees of T&C) of any of the Subsidiaries in excess of
the amounts that have been pre-approved by the senior officers of T&C; pay or
accrue compensation, during any year, to the officers and senior management
employees of T&C (inclusive of those who also serve as officers or senior
management employees of T&C) in excess of the amounts that have been
pre-approved by the Compensation Committee of the Board of Directors of T&C,
which committee shall be composed solely of independent directors. Borrower
agrees that it shall not accept the resignation of an officer or senior
management employee of T&C and appoint such individual as an officer or senior
management employee of any of the Subsidiaries unless there is a valid business
purpose to do so and so long as the resignation and appointment is not motivated
by a desire to circumvent the requirements of this Section 7.17.
7.18 Use of Proceeds. Use the proceeds of the advances made hereunder for any
other purpose than (i) to repay or retire obligations due the Exiting Gold
Banks; (ii) to refinance in full, on the Closing Date, the outstanding
principal, accrued interest, accrued fees and any other "Obligations" (as
therein defined) owing under the Prior Agreement; (iii) to pay Transaction
Costs; and (iv) thereafter, consistent with the terms and conditions hereof, for
Borrower's lawful and permitted corporate purposes.
7.19 Amendment of Certain Documents.
(a) Agree to any amendment to, or waive any of its rights with respect to,
the terms and provisions regarding interest rates, principal or interest payment
amounts, total principal amounts or similar material terms and provisions of any
or all of the Senior Notes or the Senior Notes Indenture, or the New Senior
Subordinated Notes or the New Senior Subordinated Notes Indenture, or any
related documents or agreements, or any amendments or waivers with respect to
any of the foregoing, without in each case obtaining the prior written consent
of Foothill to such amendment or waiver; provided, however, that the foregoing
shall not restrict any amendment of any indenture pursuant to which such
debentures or notes were or are issued in order to conform such documents with
the provisions of the Trust Indenture Act.
(b) Agree to any amendment to or waiver of the subordination terms and
provisions of any or all of the New Senior Subordinated Notes, without obtaining
the prior written consent of Foothill thereto.
(c) Agree to any amendment to or waiver of the events of default, redemption
provisions, or affirmative and negative covenants of any or all of the Senior
Notes or the Senior Notes Indenture, or the New Senior Subordinated Notes or the
New Senior Subordinated Notes Indenture (including the defined terms related to
any of the foregoing), which would make such terms or conditions materially more
onerous or restrictive to Borrower, without obtaining the prior written consent
of Foothill to such amendment or waiver.
Anything contained herein to the contrary notwithstanding, this Section 7.19
shall not prohibit or restrict the refinancing of any Indebtedness to the extent
permitted by Section 7.1 hereof.
7.20 Specific Gold Covenants.
(a) Consign or deliver Precious Metals to foreign Subsidiaries or foreign
sales representatives.
(b) Deliver "memo Inventory" (including Precious Metals) anywhere outside
the United States of America.
(c) Consign or deliver goods containing an aggregate, at any one time, of
more than seven thousand five hundred (7,500) fto of Precious Metals to the
sales representatives or agents of Borrower.
(d) Consign or deliver (including on memo or any similar arrangement) goods
containing an aggregate, at any time, of more than fifteen thousand (15,000) fto
of Precious Metals to customers of Borrower (and, for the purpose of this
paragraph, Balfour sales representatives' sample lines will be treated as
consignments to customers of Borrower).
(e) Consign or deliver (including on memo or any similar arrangement) goods
containing an aggregate, at any time, of more than five thousand (5,000) fto of
Precious Metals to any single customer (and, for the purpose of this paragraph,
Balfour sales representatives' sample lines, as a whole, will be treated as
consignments to a single customer of Borrower).
(f) Have more than thirteen thousand (13,000) fto of Precious Metals in the
aggregate, at any time, at, or in transit to or from, Outside Processors.
(g) Fail to maintain Equity Precious Metals in an aggregate amount equal to
or greater than the aggregate amount of Precious Metal of Borrower on memo or
consignment to customers of Borrower (and, for the purpose of this paragraph,
Balfour sales representatives' sample line will be treated as consignments to
customers of Borrower).
(h) Permit the aggregate number of fto of Precious Metals of Borrower
(whether consisting of Consigned Precious Metals or Equity Precious Metals), at
any time, without duplication, (i) at, or in transit to or from, Outside
Processors, (ii) on consignment to customers of Borrower, (iii) at, or in
transit to or from, customers of Borrower pursuant to "memo" transactions, or
(iv) in the possession of sales representatives of Borrower, minus one hundred
percent (100%) of the aggregate number of fto of Equity Precious Metals, to
equal or exceed ten percent (10%) of the aggregate number of fto of Consigned
Precious Metals.
(i) Obtain Precious Metals on consignment from a third person or entity
except for consignments by Gold Consignor to Borrower pursuant to the Gold
Consignment Agreement.
Should the Pending Material Transaction be consummated with the consent of
Foothill, Borrower and Foothill will negotiate in good faith to reset the
foregoing covenants at reasonable levels within forty-five days following the
Pending Material Transaction Closing Date, taking into account the effect of the
consummation of the Pending Material Transaction.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an event of default
(each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrower fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in any
of the Loan Documents, or in any other present or future agreement between
Borrower and Foothill (irrespective of whether in its capacity as a lender, as a
representative of lenders, as the Collateral Agent, as a subagent of the
Collateral Agent, or otherwise);
8.3 If, in the reasonable judgment of Foothill, there is a material impairment
of the prospect of repayment of any portion of the Obligations owing to Foothill
or a material impairment of the value or priority of the security interests held
by, or for the benefit of, Foothill in and to the Collateral;
8.4 If any material portion of Borrower's assets is attached, seized, subjected
to a writ or distress warrant, or is levied upon, or comes into the possession
of any Judicial Officer or Assignee;
8.5 If an Insolvency Proceeding is commenced by any Debtor;
8.6 If an Insolvency Proceeding shall be commenced against any Debtor and any of
the following events occur: (1) such Debtor consents to the institution of the
Insolvency Proceeding against such Debtor; (2) the petition commencing the
Insolvency Proceeding is not timely controverted; (3) the petition commencing
the Insolvency Proceeding is not dismissed within sixty (60) calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, Foothill shall be relieved of its obligation to make additional
advances or to issue additional L/Cs or L/C Guarantees; (4) an interim trustee
is appointed to take possession of all or a substantial portion of the assets
of, or to operate all or any substantial portion of the business of, any Debtor;
or (5) an order for relief shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by court order
(which order is not stayed or discharged) from continuing to conduct all or any
material part of its business affairs;
8.8 (a) If a notice of lien, levy, or assessment is filed of record with respect
to any of Borrower's assets by the United States Government, or any department,
agency, or instrumentality thereof, or if any taxes or debts owing at any time
hereafter to the United States Government, or any department, agency, or
instrumentality thereof, becomes a lien, whether choate or otherwise, upon any
of Borrower's assets; or (b) if a notice of lien, levy, or assessment is filed
of record with respect to any material portion of Borrower's assets by any
state, county, municipal, or governmental agency, or if any taxes or debts in an
aggregate amount in excess of $250,000, or more, owing at any time hereafter to
any one or more of such entities becomes a lien, whether choate or otherwise,
upon any of Borrower's assets and the same is not paid on the payment date
thereof;
8.9 If there is a default in any material agreement to which Borrower is a party
with third parties (including, the Senior Notes Indenture, the New Senior
Subordinated Notes Indenture, or the Gold Consignment Agreement) resulting in a
right by such third parties, irrespective of whether exercised, to accelerate
the maturity of Borrower's Indebtedness thereunder (or the right of Gold
Consignor to demand return of consigned Precious Metals);
8.10 If Borrower is obligated to redeem or repurchase (or to offer to redeem or
repurchase) any or all of the Senior Notes under and pursuant to the terms and
conditions of the Senior Notes Indenture, other than redemptions or repurchases
required under Sections 3.02, 4.08, and 4.11 of such indenture;
8.11 If Borrower is obligated to redeem or repurchase (or to offer to redeem or
repurchase) any or all of the New Senior Subordinated Notes under and pursuant
to the terms and conditions of the New Senior Subordinated Notes Indenture,
other than redemptions or repurchases required under Sections 4.08 and 4.10 of
such indenture;
8.12 [Intentionally omitted];
8.13 If Borrower makes any payment on account of Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.14 If any material misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or report made to Foothill by
Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn by any officer or director; or
8.15 If a Prohibited Transaction or Reportable Event shall occur with respect to
a Plan which could have a material adverse effect on the financial condition of
Borrower; if any lien upon the assets of Borrower in connection with any Plan
shall arise; if Borrower or any ERISA Affiliate shall completely or partially
withdraw from a Multiemployer Plan or Multiple Employer Plan of which Borrower
or such ERISA Affiliate was a substantial employer, and such withdrawal could,
in the opinion of Foothill, have a material adverse effect on the financial
condition of Borrower; if Borrower or any of its ERISA Affiliates shall fail to
make full payment when due of all amounts which Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer Plan as one
or more contributions thereto; if Borrower or any of its ERISA Affiliates
creates or permits the creation of any accumulated funding deficiency, whether
or not waived; or upon the voluntary or involuntary termination of any Plan
which termination could, in the opinion of Foothill, have a material adverse
effect on the financial condition of Borrower.
9. FOOTHILL'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event of Default Foothill
may, at its election, without notice of its election and without demand, do any
one or more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit (including L/Cs or L/C
Guarantees) to or for the benefit of Borrower under this Agreement, under any of
the loan Documents, or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of Foothill, but without affecting Foothill's
rights and security interest in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Foothill considers advisable and which are
commercially reasonable, and in such cases, Foothill will credit Borrower's loan
account with only the net amounts received by Foothill in payment of such
disputed Accounts after deducting all Foothill Expenses incurred or expended in
connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for Foothill,
segregate all returned Inventory from all other property of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of Foothill;
(f) Without notice to or demand upon Borrower, make such payments and do
such acts as Foothill considers necessary or reasonable to protect its security
interest in the Collateral. So long as to do so would not be inconsistent with
the superior rights, if any, of one or more of the other Secured Parties,
Borrower agrees to assemble the Collateral if Foothill so requires, and to make
the Collateral available to Foothill as Foothill may designate. Borrower
authorizes Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien that in
Foothill's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With respect
to any of Borrower's owned premises, Borrower hereby grants Foothill a license
to enter into possession of such premises and to occupy the same, without
charge, for up to one hundred twenty (120) days in order to exercise any of
Foothill's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived) set off
and apply to the Obligations any and all (i) balances and deposits of Borrower
held by Foothill (including any amounts received in the Lock Boxes established
pursuant to the Lock Box Agreements), or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Foothill. In this regard,
Borrower agrees that Foothill may hold such cash collateral to secure the
Obligations (including the L/C Amount) and need not apply same to reduce the
Obligations unless and until it holds an amount equal to one hundred and two
percent (102%) of the L/C Amount at which time the excess amount shall be
applied in reduction of the remaining Obligations and the amount that is
continued to be held as cash collateral shall be applied to satisfy a drawing
under an L/C or L/C Guaranty at such time as the drawing is paid or, if the L/C
or L/C is retired undrawn, the allocable amount shall be applied to the balance
of the Obligations;
(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. To the extent that Borrower has the legal right to do so, Foothill
is hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to Foothill's benefit;
(i) Sell, or cause the Collateral Agent (or its agents) to sell, the
Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as Foothill determines is commercially
reasonable. It is not necessary that the Collateral be present at any such sale;
(j) Foothill (or the Collateral Agent) shall give notice of the disposition
of the Collateral as follows:
(1) Foothill (or the Collateral Agent) shall give Borrower and each
holder of a security interest in the Collateral who has filed with Foothill (or
the Collateral Agent) a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral, then the
time on or after which the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least five (5) Business Days
before the date fixed for the sale, or at least five (5) Business Days before
the date on or after which the private sale or other disposition is to be made,
unless the Collateral is perishable or threatens to decline speedily in value.
Notice to Persons other than Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have furnished to Foothill (or the
Collateral Agent);
(3) If the sale is to be a public sale, Foothill (or the Collateral
Agent) also shall give notice of the time and place by publishing a notice one
time at least five (5) calendar days before the date of the sale in a newspaper
of general circulation in the county, parish, or the equivalent thereof, in
which the sale is to be held;
(k) Foothill may credit bid and purchase at any public sale; and
(l) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower. Any excess will be returned
promptly, without interest and subject to the rights of third parties, by
Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Foothill shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or inequity. No exercise by Foothill of one right or remedy
shall be deemed an election, and no waiver by Foothill of any Event of Default
shall be deemed a continuing waiver. No delay by Foothill shall constitute a
waiver, election, or acquiescence by it. Absent an effective waiver or
modification contained herein or in one or more of the Loan Documents, the
rights and remedies of Foothill and the Collateral Agent with respect to the
Collateral following an Event of Default shall be subject to the provisions of
Chapter 5 of Division 9 of the Code.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL
If Borrower fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third Persons or entities, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could have a material adverse effect on
Foothill's interests in the Collateral, in its discretion and without prior
notice to Borrower, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in Borrower's
loan account as Foothill deems necessary to protect Foothill from the exposure
created by such failure, provided that Foothill agrees to endeavor to provide
Borrower with prompt notice of the amount of such reserves as and when
established; or (c) obtain and maintain insurance policies of the type described
in Section 6.11, and take any action with respect to such policies as Foothill
deems prudent. Any amounts paid or deposited by Foothill shall constitute
Foothill Expenses, shall be immediately charged to Borrower's loan account and
become additional Obligations, shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Foothill shall not constitute an agreement by Foothill to make similar
payments in the fixture or a waiver by Foothill of any Event of Default under
this Agreement. Foothill need not inquire as to, or contest the validity of, any
such expense, tax, security interest, encumbrance, or lien and the receipt of
the usual official notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Foothill on which Borrower may in any way be liable.
11.2 Foothill's Liability for Inventory or Equipment. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to indemnify Foothill and its officers,
employees, and agents and hold Foothill harmless against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party arising
out of or relating to the transactions contemplated by this Agreement or any
other Loan Document, and (b) all losses in any way suffered, incurred, or paid
by Foothill as a result of or in any way arising out of, following, or
consequential to the transactions contemplated by this Agreement or any other
Loan Document, except, in any such case, to the extent that the same arises from
the gross negligence or willful misconduct of Foothill or its officers, agents,
or employees. This provision shall survive the termination of this Agreement.
11.4 Suretyship Waivers and Consents. Each Debtor acknowledges that the
obligations of such Debtor undertaken herein might be construed to consist, at
least in part, of the guaranty of obligations of Persons or entities other than
such Debtor (including the other Debtors party hereto) and, in full recognition
of that fact, each Debtor consents and agrees that Foothill may, at any time and
from time to time, without notice or demand, whether before or after any actual
or purported termination, repudiation or revocation of this Agreement by any one
or more Debtors, and without affecting the enforceability or continuing
effectiveness hereof as to each Debtor: (a) supplement, restate, modify, amend,
increase, decrease, extend, renew, accelerate or otherwise change the time for
payment or the terms of the Obligations or any part thereof, including any
increase or decrease of the rate(s) of interest thereon; (b) supplement,
restate, modify, amend, increase, decrease or waive, or enter into or give any
agreement, approval or consent with respect to, the Obligations or any part
thereof, or any of the Loan Documents or any additional security or guarantees,
or any condition, covenant, default, remedy, right, representation or term
thereof or thereunder; (c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof; (d) accept partial payments on the Obligations;
(e) receive and hold additional security or guarantees for the Obligations or
any part thereof; (f) release, reconvey, terminate, waive, abandon, fail to
perfect, subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of sale
thereof as Foothill in its sole and absolute discretion may determine; (g)
release any Person from any personal liability with respect to the Obligations
or any part thereof; (h) settle, release on terms satisfactory to Foothill or by
operation of applicable laws or otherwise liquidate or enforce any Obligations
and any security therefor or guaranty thereof in any manner, consent to the
transfer of any security and bid and purchase at any sale; or (i) consent to the
merger, change or any other restructuring or termination of the corporate or
partnership existence of any Debtor or any other Person, and correspondingly
restructure the Obligations, and any such merger, change, restructuring or
termination shall not affect the liability of any Debtor or the continuing
effectiveness hereof, or the enforceability hereof with respect to all or any
part of the Obligations.
Upon the occurrence and during the continuance of any Event of Default, Foothill
may enforce this Agreement independently as to each Debtor and independently of
any other remedy or security Foothill at any time may have or hold in connection
with the Obligations, and it shall not be necessary for Foothill to marshal
assets in favor of any Debtor or any other Person or to proceed upon or against
or exhaust any security or remedy before proceeding to enforce this Agreement.
Each Debtor expressly waives any right to require Foothill to marshal assets in
favor of any Debtor or any other Person or to proceed against any other Debtor
or any collateral provided by any Person, and agrees that Foothill may proceed
against Debtors or any collateral in such order as it shall determine in its
sole and absolute discretion.
Foothill may file a separate action or actions against any Debtor, whether
action is brought or prosecuted with respect to any security or against any
other Person, or whether any other Person is joined in any such action or
actions. Each Debtor agrees that Foothill and any Debtor and any Affiliate of
any Debtor may deal with each other in connection with the Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the continuing efficacy of this Agreement. Each Debtor expressly
waives the benefit of any statute of limitations affecting its liability
hereunder or the enforcement of the Obligations or any rights of Foothill
created or granted herein.
Foothill's rights hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by Foothill, all as though such amount had not been
paid. The rights of Foothill created or granted herein and the enforceability of
this Agreement at all times shall remain effective to cover the full amount of
all the Obligations even though the Obligations, including any part thereof or
any other security or guaranty therefor, may be or hereafter may become invalid
or otherwise unenforceable as against any Debtor and whether or not any other
Debtor shall have any personal liability with respect thereto.
To the maximum extent permitted by applicable law, each Debtor expressly waives
any and all defenses now or hereafter arising or asserted by reason of (a) any
disability or other defense of any other Debtor with respect to the Obligations,
(b) the unenforceability or invalidity of any security or guaranty for the
Obligations or the lack of perfection or continuing perfection or failure of
priority of any security for the Obligations, (c) the cessation for any cause
whatsoever of the liability of any other Debtor (other than by reason of the
full payment and performance of all Obligations), (d) any failure of Foothill to
marshal assets in favor of any Debtor or any other Person, (e) any failure of
Foothill to give notice of sale or other disposition of collateral to any Debtor
or any other Person or any defect in any notice that may be given in connection
with any sale or disposition of collateral, (f) any failure of Foothill to
comply with applicable law in connection with the sale or other disposition of
any collateral or other security for any Obligation, including any failure of
Foothill to conduct a commercially reasonable sale or other disposition of any
collateral or other security for any Obligation, (g) any act or omission of
Foothill or others that directly or indirectly results in or aids the discharge
or release of any of any Debtor or the Obligations or any security or guaranty
therefor by operation of law or otherwise, (h) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation,
(i) any failure of Foothill to file or enforce a claim in any bankruptcy or
other proceeding with respect to any Person, (j) the election by Foothill of the
application or non-application of Section 1111(b)(2) of the Bankruptcy Code, (k)
any extension of credit or the grant of any lien under Section 364 of the
Bankruptcy Code, (l) any use of cash collateral under Section 363 of the
Bankruptcy Code, (m) any agreement or stipulation with respect to the provision
of adequate protection in any bankruptcy proceeding of any Person, (n) the
avoidance of any lien in favor of Foothill for any reason, or (o) any action
taken by Foothill that is authorized by this section or any other provision of
any loan Document. Until such time, if any, as all of the Obligations have been
paid and performed in full and no portion of any commitment of Foothill to
Borrower under any Loan Document remains in effect, no Debtor shall have any
right of subrogation, contribution, reimbursement or indemnity, and each Debtor
expressly waives any right to enforce any remedy that Foothill now has or
hereafter may have against any other Person and waives the benefit of, or any
right to participate in, any collateral now or hereafter held by Foothill. Each
Debtor expressly waives all setoffs and counterclaims and all presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Obligations, and
all notices of acceptance of this Agreement or of the existence, creation or
incurring of new or additional Obligations.
In the event that all or any part of the Obligations at any time are secured by
any one or more deeds of trust or mortgages or other instruments creating or
granting liens on any interests in real property, each Debtor authorizes
Foothill (or the Collateral Agent (or its agents) on Foothill's behalf), upon
the occurrence of and during the continuance of any Event of Default, at its
sole option, without notice or demand and without affecting the obligations of
any Debtor, the enforceability of this Agreement, or the validity or
enforceability of any liens of, or for the benefit of Foothill on any
collateral, to foreclose any or all of such deeds of trust or mortgages or other
instruments by judicial or nonjudicial sale.
To the fullest extent permitted by applicable law, each Debtor expressly waives
any defenses to the enforcement of this Agreement or any rights of Foothill
created or granted hereby or to the recovery by Foothill against any Debtor or
any other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale, even though such a foreclosure or sale may
impair the subrogation rights of Debtors and may preclude Debtors from obtaining
reimbursement or contribution from other Debtors. Each Debtor expressly waives
any defenses or benefits that may be derived from California Code of Civil
Procedure ee 580a, 580b, 580d or 726, or comparable provisions of the laws of
any other jurisdiction, and all other suretyship defenses it otherwise might or
would have under California law or other applicable law. Each Debtor expressly
waives any right to receive notice of any judicial or nonjudicial foreclosure or
sale of any real property or interest therein of another Debtor that is subject
to any such deeds of trust or mortgages or other instruments and any Debtor's
failure to receive any such notice shall not impair or affect such Debtor's
obligations or the enforceability of this Agreement or any rights of Foothill
created or granted hereby.
Debtors and each of them warrant and agree that each of the waivers and consents
set forth herein are made after consultation with legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, destroy or
otherwise adversely affect rights which Debtors otherwise may have against other
Debtors, Foothill or others, or against Collateral, and that, under the
circumstances, the waivers and consents herein given are reasonable and not
contrary to public policy or law. If any of the waivers or consents herein are
determined to be contrary to any applicable law or public policy, such waivers
and consents shall be effective to the maximum extent permitted by law.
12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
therewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by prepaid overnight courier service,
telex, TWX, telefacsimile, or telegram (with messenger delivery specified) to
Borrower or to Foothill, as the case may be, at its addresses set forth below:
If to Borrower: TOWN & COUNTRY CORPORATION 25 Union Street Chelsea,
Massachusetts 02150 Attn: Chief Financial Officer
TOWN & COUNTRY FINE JEWELRY GROUP, INC.
25 Union Street
Chelsea, Massachusetts 02150
Attn: Chief Financial Officer
GOLD LANCE, INC.
25 Union Street
Chelsea, Massachusetts 02150
Attn: Chief Financial Officer
L.G. BALFOUR COMPANY, INC.
25 Union Street
Chelsea, Massachusetts 02150
Attn: Chief Financial Officer
with copies to: GOODWIN, PROCTER & HOAR, LLP
53 State Street
Boston, Massachusetts 02109
Attn: Kevin M. Dennis, Esq.
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
and to: FOOTHILL CAPITAL CORPORATION
60 State Street, Suite 1150
Boston, MA 02109
Attn: Loan Administration Manager
with copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: Jeffrey S. Turner, Esq.
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section 12, other than notices
by Foothill in connection with Sections 9504 or 9505 of the Code, shall be
deemed received on the earlier of the date of actual receipt or three (3)
calendar days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505 of
the Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION
OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. EACH DEBTOR AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. EACH DEBTOR AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH DEBTOR AND FOOTHILL REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings, or other papers delivered to
Foothill may be destroyed or otherwise disposed of by Foothill four (4) months
after they are delivered to or received by Foothill, unless Borrower requests,
in writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS
15.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided,
however, that Borrower may not assign this Agreement or any rights or duties
hereunder without Foothill's prior written consent and any prohibited assignment
shall be absolutely void. No consent to an assignment by Foothill shall release
Borrower from its Obligations. Foothill may assign this Agreement and its rights
and duties hereunder. Foothill reserves the right to sell, assign, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Foothill's rights and benefits hereunder. In connection therewith, Foothill may
disclose all documents and information which Foothill now or hereafter may have
relating to Borrower or Borrower's business; provided, however, that, with
respect to any potential participants or assignees that are first contacted by
Foothill on or after the Closing Date, Foothill agrees to use its best efforts
to secure a confidentiality agreement from such potential participants or
assignees in form and substance reasonably satisfactory to Borrower. To the
extent that, Foothill assigns its rights and obligations hereunder to a third
party, Foothill shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
15.3 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each paragraph applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Foothill or Borrower, whether
under any rule of construction or otherwise. On the contrary, this Agreement has
been reviewed by all parties and shall be construed and interpreted according to
the ordinary meaning of the words used so as to fairly accomplish the purposes
and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement cannot be changed or terminated
orally. All prior agreements, understandings, representations, warranties, and
negotiations, if any, are merged into this Agreement.
15.7 Counterparts; Telecopy Execution. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile shall also deliver a executed counterpart of
this Agreement but the failure to deliver a manually counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by Borrower or the transfer by Borrower to Foothill of any
property of Borrower should for any reason subsequently be declared to be
improper under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required to repay or restore,
and as to all reasonable costs, expenses and attorneys' fees of Foothill related
thereto, the liability of Borrower shall automatically be revived, reinstated,
and restored and shall exist as though such Voidable Transfer had never been
made.
15.9 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted, modified, or
qualified by any other agreement, oral or written, whether before or after the
date hereof.
15.10 Renegotiation of Certain Provisions in Certain Instances. Should the
Pending Material Transaction be consummated with the consent of Foothill,
Borrower and Foothill will negotiate in good faith to revise any
representations, warranties, or covenants specifically affected thereby, in a
reasonable and appropriate manner, within forty-five days following the Pending
Material Transaction Closing Date, taking into account the effect of the
consummation of the Pending Material Transaction, provided that nothing in this
section shall require Foothill to renegotiate the reductions in dollar or fto
levels specifically set forth herein as applicable with respect to the
consummation of the Pending Material Transaction (such as, by way of example
only, and without limitation, the reduction of the dollar level of the "Maximum
Amount" or the reduction of the fto level of the "Gold Cap" that occur on the
Pending Material Transaction Closing Date), nor shall this section require
Foothill to renegotiate the pricing, fee structure, or term hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
TOWN & COUNTRY CORPORATION,
a Massachusetts corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
a Massachusetts corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
GOLD LANCE, INC.,
a Massachusetts corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
L.G. BALFOUR COMPANY, INC.,
a Delaware corporation
By___/s/ Robert Hannon_______________
Its__Attorney-in-fact________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By___/s/ Anthony Aloi________________
Its__Assistant Vice President________
Exhibits
Exhibit M-1 Monthly Gold Certificate
Schedules
Schedule E-1 Locations of Eligible Inventory
Schedule E-2 Excluded Assets
Schedule M-1 Mortgaged Properties
Schedule P-1 [Intentionally Omitted]
Schedule P-2 Permitted Liens
Schedule 6.15A Locations of Inventory and Equipment
Schedule 6.15B Locations Requiring Landlord Waivers
Schedule 5.9 Litigation
Schedule 5.13 Environmental Condition
Schedule 5.14 Subsidiaries
Schedule 7.1 Permitted Indebtedness
Schedule 7.4 Permitted Real Property Dispositions