EXHIBIT 10.7
EXECUTION COPY
PRENTICE CAPITAL MANAGEMENT, LP
Terms for Treatment of Trade Indebtedness Of Whitehall Jewelers, Inc.
This term sheet (the "Term Sheet") is intended to be and constitutes a legally
binding commitment or agreement of Whitehall Jewelers, Inc. (the "Company"),
Prentice Capital Management, LP, and the trade vendors signatory hereto in
connection with the treatment by the Company of its indebtedness to suppliers of
inventory in the event of consummation of the Investor's proposed investment in
the Company (the "Investment").
COMPANY: Whitehall Jewelers, Inc.
INVESTOR: Funds and accounts managed directly or
indirectly by, and other investors approved by,
Prentice Capital Management, LP.
SUPPLIERS: All suppliers of inventory to the Company.
PAYMENT TERMS: The Company's indebtedness to each Supplier, in
each case as of September 23, 2005 (the "Trade
Debt"), shall be satisfied as follows:
- Twenty-five (25%) of the Trade Debt due
and owing each Supplier shall be paid in
cash, and a Note shall be issued to the
Collateral Trustee (as defined below) for
the benefit of the Suppliers upon the
first funding of the Investment, which
payment and Note shall be released from
the Escrow Account (defined below) upon
delivery to the Company of 50% in the
aggregate of the asset merchandise to be
delivered to the Company in October 2005
(the "First Payment");
- Twelve and one-half percent (12.5%) of the
Trade Debt due and owing each Supplier
shall be paid in cash to such Supplier on
or about December 23, 2005;
- Twelve and one-half percent (12.5%) of the
Trade Debt due and owing each Supplier
shall be paid in cash to such Supplier on
or about January 16, 2006; and
- Fifty percent (50%) of the Trade Debt due
and owing each Supplier shall be paid in
cash to such Supplier on or about
September 30, 2007.
Upon consummation and funding of the Investment,
the Company shall deposit with the Collateral
Trustee (the "Escrow Account") that portion of
the proceeds of the Investment sufficient to pay
the cash component of the First Payment. If any
Supplier delivers either (i) the asset
merchandise scheduled to be delivered by such
Supplier to the Company in October 2005, or (ii)
the memo/consignment goods scheduled to be
delivered by such Supplier to the Company in
October 2005, such Supplier shall receive its
pro rata share of the cash component of the
First Payment from the Escrow Account,
regardless of whether or not 50% in the
aggregate of the asset merchandise scheduled to
be delivered to the Company in October 2005 has
been so delivered. The Escrow Account shall be
an interest bearing account, with all accrued
interest payable to the Company.
Upon the Company's completion of all of the
foregoing payments, (i) the Trade Debt of each
Supplier shall be deemed satisfied in full, and
(ii) each Supplier shall forgive any and all
other debts due or owing to them by the Company,
including any and all amounts in excess of such
Supplier's
CONFIDENTIAL
Trade Debt that could have or should have been
invoiced to the Company prior to or on September
23, 2005.
NOTE PRIORITY AND SECURITY: Each Note shall be secured by a perfected lien
on and security interest in those assets and
property in and on which the Company has granted
security interests and liens to the Investor.
Such lien and security interest will be
subordinate in all respects to the liens and
security interests of the Company's existing
senior secured lenders and the Investor.
NOTE MATURITY: Each Note shall mature on September 30, 2007
(the "Maturity Date"), with the principal
balance of the Note payable on the Maturity
Date.
INTEREST: Starting on January 17, 2006, each Note shall
accrue interest at the rate of six percent (6%)
per annum, payable on the Maturity Date.
MEMO GOODS: September 23, 2005 through January 15, 2006: One
week reporting and one day pay (by wire).
After January 15, 2006: One week reporting and
15-day payment (by wire).
On or about December 1, 2005, the Company shall
cause to be issued a standby letter of credit
(the "Letter of Credit") naming the Collateral
Trustee as beneficiary for the benefit of the
Suppliers, to be drawn upon only in the event
the Company fails to timely make required
payments for memo goods. The face amount of the
Letter of Credit shall be:
- $7 million from December 1, 2005 through
December 18, 2005;
- $10 million from December 19, 2005 until
the date of payment for all sales through
December 26, 2005 (expected to be December
27, 2005);
- $5 million from the day (expected to be
December 27, 2005) following the date of
payment for all sales through December 26,
2005 through January 15, 2006.
- The letter of credit shall terminate on
January 15, 2006.
The Company, each of the senior secured lenders
and the Investor will recognize the valid and
perfected consignment/purchase money security
interests of the Suppliers in current and future
memo goods without regard to technical
perfection; provided, however, that each of the
Suppliers acknowledges that its respective
consignment/purchase money security interests in
the memo goods relate solely to such goods and
terminate once such goods are sold. Each of the
Suppliers will agree not to challenge the valid
and perfected security interests of the Investor
or the senior secured lenders in the Company's
assets. Each of the Suppliers will disclaim any
interest in the collateral of the senior secured
lenders, other than those security interests
provided for herein with respect to the Note.
All consigned/memo goods shall, in the event of
a store closing sale, remain in place and be
liquidated along with all other inventory. Each
Supplier will be paid for the consigned/memo
goods in the amount that would be owed by the
Company, as the proceeds of the liquidation sale
are received.
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CONFIDENTIAL
COMMERCIALLY REASONABLE Each Supplier shall use its commercially
EFFORTS: reasonable efforts to satisfy all shipping
deadlines set forth in the Company's outstanding
purchase orders, as amended and agreed to by the
Company and the respective Supplier, and in all
purchase orders placed on or after September 26,
2005, which are hereafter accepted by the
respective Supplier, in its discretion.
PAYMENT TERMS FOR 60-days for goods delivered between September
ASSET GOODS: 26, 2005 and December 15, 2005
90-days for goods delivered after December 15,
2005.
REPORTING: Financial reporting by the Company to the
Collateral Trustee for the benefit of the
Suppliers in form and substance to be agreed
upon by the parties.
COLLATERAL TRUSTEE: A trustee shall be appointed as the
representative of the Suppliers for purposes of
implementation of the transactions contemplated
by this Term Sheet, including, among others,
maintaining the Escrow Account, serving as
beneficiary of the Letter of Credit, receiving
financial reporting from the Company
implementation of the transactions contemplated
by this Term Sheet. The reasonable expenses of
the Collateral Trustee shall be paid by the
Company.
CONVERTIBLE NOTES INTEREST: Interest on convertible notes issued to Investor
to accrue for a period of not less than 12
months from date of issuance, after which,
interest to continue to accrue or be paid at any
time at Investor's option.
SENIOR BANK FACILITIES Only covenant in senior bank facilities to be
minimum excess availability covenant.
OTHER MATTERS:
REPRESENTATIONS, WARRANTIES, The definitive documentation shall contain
AND COVENANTS: representations, warranties, and covenants
customary for a transaction of this nature,
including default/acceleration provisions based
on, inter alia, (i) payment defaults, (ii)
failure to post the Letter of Credit, (iii) a
provision that a default under the Company's
credit agreements with the secured lenders and
the Investor shall cause a default under this
Term Sheet, and (iv) a provision that remedies
for a default under this Term Sheet shall be
limited to those contained in an inter-creditor
agreement to be entered into by the parties.
CONDITIONS PRECEDENT TO - Execution and delivery by Suppliers
PAYMENT OF SETTLEMENT AMOUNT holding not less than 90%, or such lesser
AND AGREEMENT OF THE SUPPLIERS: percentage as agreed to in writing by the
Investor, of the Company's total Trade
Debt of appropriate definitive
documentation, including, but not limited
to, an extension agreement and related
acceptance form, in form and substance
satisfactory to the Investor and including
customary closing conditions, and the
satisfaction of all such conditions.
- Consummation of the Investment.
- No law or injunction or other legal
restraint existing that prevents
consummation of payment of the Settlement
Amount or entry into the other
transactions contemplated hereby.
- The aggregate of all payables due to
Suppliers as of September 23,
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CONFIDENTIAL
2005 shall have been confirmed to the
satisfaction of the Company and the
Investor.
- Satisfaction of additional customary
closing conditions.
ALTERNATE TRANSACTIONS: This transaction has been negotiated by the
Company, the Investor and the Suppliers. The
Suppliers reserve the right not to enter into
the same transaction or any other transaction
with any other investor, except in their sole
and absolute discretion.
CONFIDENTIALITY: All parties agree to keep this proposal and all
conversations and exchanged information related
thereto strictly confidential, with the
exception of any disclosure required for
purposes of compliance with applicable law.
Notwithstanding the foregoing, any Supplier may
discuss the terms of this proposal with another
Supplier, but no Supplier shall, without the
prior written consent of the Company and the
Investor, disclose the existence or terms of
this proposal to any party other than a
Supplier.
BINDING EFFECT The signature below of an authorized
representative of a Supplier shall constitute an
acceptance by such Supplier (each, a
"Participating Supplier") of the terms set forth
in this Term Sheet. This Term Sheet shall bind
and benefit each of the Company, the Investor
and the Participating Suppliers and their
respective successors, assigns, executors,
administrators, and successors in interest;
provided, however, that Suppliers that have not
expressly accepted the terms herein by execution
of this Term Sheet, shall have no right to
enforce such terms against the Company or the
Investor.
Superseded by Definitive Documents: This agreement shall have no effect upon the
execution of definitive agreements regarding the subject matter hereof.
Counterparts: This Term Sheet may be signed in two or more original or
facsimiled counterparts, any one of which need not contain the signature of more
than one party, but all such counterparts taken together will constitute one and
the same agreement. The rights under this Term Sheet may not be assigned.
Amendments: This agreement may only be amended through a written instrument
executed by all of the parties hereto.
Whitehall Jewelers, INC. Prentice Capital Management, LP
By: /s/ John Desjardins By: /s/ Jonathan Duskin
---------------------------------
Name: John Desjardins Name: Jonathan Duskin
Title: Executive VP and CFO Title: Managing Director
Address for Notices: Address for Notices:
155 North Wacker Drive, 5th Floor 623 Fifth Avenue, 32nd Floor
Chicago, Illinois 60606 New York, New York 10022
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CONFIDENTIAL
ACKNOWLEDGED AND AGREED, WITH RESPECT TO "MEMO GOODS" AND "SENIOR BANK
FACILITIES":
lasalle national bank, as Agent
By: /s/ Robert Barnhand
-------------------
Name: Robert Barnhand
Title: Senior Vice President, Group Head
Address for Notices:
______________________
______________________
______________________
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
S.H.R. Ltd.
By: /s/ Michael Shaffet
Name: Michael Shaffet
Title: Treasurer
Address for Notices:
One Rockefeller Plaza
New York, NY 10020
ACCEPTED AND AGREED TO:
Clover Corporation
By: /s/ Michael Shaffet
Name: Michael Shaffet
Title: Treasurer
Address for Notices:
One Rockefeller Plaza
New York, NY 10020
ACCEPTED AND AGREED TO:
[ ]
By: /s/ David Gaynes
Name: David Gaynes
Title: President
Address for Notices:
154 W. 14th Street, 12th Floor
New York, NY 10011
ACCEPTED AND AGREED TO:
Paras Diamond Corporation d/b/a Amikam
By: /s/ Ravi Gopalan
Name: Ravi Gopalan
Title: Vice President
Address for Notices:
592 Fifth Ave., 3rd Floor
New York, NY 10036
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Aurafin LLC
By: /s/ Steven L. Hansen
Name: Steven L. Hansen
Title: CFO
Address for Notices:
6701 Nob Hill Road
Tamarac, FL 33076
ACCEPTED AND AGREED TO:
Rharat Diamond Corp
By: /s/ Shreyas R. Mehta
Name: Shreyas R. Mehta
Title: President
Address for Notices:
Rharat Diamond Corp
50 Main Street #1260
White Plains, NY 10606
ACCEPTED AND AGREED TO:
Basic Programs
Paul Winston - Eurostar
By: /s/ Isaac Gold
Name: Isaac Gold
Title: President
Address for Notices:
151 West 46th St. 11th Floor
New York, NY 10036
ACCEPTED AND AGREED TO:
B&M Imports, Inc.
By: /s/ Mois Medine
Name: Mois Medine
Title: President
Address for Notices:
12 East 46th Street
4th Floor
New York, NY 10017
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Color Craft
By: /s/ Todd Wolleman
Name: Todd Wolleman
Title: President
Address for Notices:
45 West 45th Street
New York, NY 10036
ACCEPTED AND AGREED TO:
Combine International, Inc.
By: /s/ Shrikant Mehta
Name: Shrikant Mehta
Title: President/CEO
Address for Notices:
Combine International, Inc.
354 Indusco Court
Troy, MI 48083
Attn: Roger Parsons
ACCEPTED AND AGREED TO:
Continental Jewellery (Mfg) Ltd.
By: /s/ Charles Chan
Name: Charles Chan
Title: Managing Director
Address for Notices:
Flat M, 1/F. Kaiser Estate
Phase 3, li Hok Yuen Street
Hunghom, Kowloon
Hong Kong
ACCEPTED AND AGREED TO:
Diaco International
By: /s/ Eli Hollander
Name: Eli Hollander
Title: Controller
Address for Notices:
Diaco International
1271 Avenue of the Americas, 47th Floor
New York, NY 10020
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Epoque Jewelry Inc.
By: /s/ John Wong
Name: John Wong
Title: Vice President
Address for Notices:
207 Canal Street
New York, NY 10013
ACCEPTED AND AGREED TO:
Eyalrd Corp.
By: /s/ Albert Kallati
Name: Albert Kallati
Title: President
Address for Notices:
ACCEPTED AND AGREED TO:
M. Fabrikant & Sons
By: /s/ Michael Shaffet
Name: Michael Shaffet
Title: Treasurer
Address for Notices:
One Rockefeller Plaza
New York, NY 10020
ACCEPTED AND AGREED TO:
Fabrikant - Leer International Ltd. /f/k/a Leer Gem Ltd.
By: /s/ Michael Shaffet
Name: Michael Shaffet
Title: Treasurer
Address for Notices:
One Rockefeller Plaza
New York, NY 10020
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Fine Facet Diamonds, Inc.
By: /s/ Jhaveri Abjiay F.
Name: Jhaveri Abjiay F.
Title: President
Address for Notices:
Fine Facet Diamonds, Inc.
15 W. 47th Street, 10th Floor, #1005
New York, NY 10036
ACCEPTED AND AGREED TO:
Frederick Goldman Inc.
By: /s/ Richard Goldman
Name: Richard Goldman
Title: President
Address for Notices:
154 West 14th Street
New York, New York 10011
ACCEPTED AND AGREED TO:
Nathan Hennick & Co. Ltd.
By: /s/ Brian Hennick
Name: Brian Hennick
Title: Vice -President
Address for Notices:
Nathan Hennick & Co. Ltd.
6 Tippett Road
Toronto Ontario M3H2V2
ACCEPTED AND AGREED TO:
Jewelex New York, Ltd.
By: /s/ Nandini Doshi (Rupa)
Name: Nandini Doshi (Rupa)
Title: CFO
Address for Notices:
22 West 48th St.
New York, NY 10036
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
JC Trading, Inc.
By: /s/Simon Jeckell
Name: Simon Jeckell
Title: Vice President
Address for Notices:
JC Trading, Inc.
1001 West Newport Center, Suite 111
Deerfield Beach, FL 33442
ACCEPTED AND AGREED TO:
Simon Korn Inc.
By: /s/ David Bader
Name: David Bader
Title: President
Address for Notices:
580 5th Ave. #612
New York, NY 10036
ACCEPTED AND AGREED TO:
Legend Jewelry Co. Ltd. (Macao Commercial Offshore)
By: /s/ Patrick Luk
Name: Patrick Luk
Title: Managing Director
Address for Notices:
Legend Jewelry Co. Ltd (Macao Commercial Offshore)
Avenida Xian Xing Hai, S/N Edf.
Zhu Kuan C.C., 13 Andar K. NAPE Macau
ACCEPTED AND AGREED TO:
Lorenzo Jewelry Inc.
By: /s/ Daryl Shamitoff
Name: Daryl Shamitoff
Title: President
Address for Notices:
5506 6th Ave. S
Seattle, WA 98108
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Merit Diamond Corporation
By: /s/ Henry M. Dubron
Name: Henry M. Dubron
Title: CFO
Address for Notices:
33 West 46th St.
New York, NY 10036
ACCEPTED AND AGREED TO:
Rosy Blue, Inc.
By: /s/ Nirau Dalal
Name: Nirau Dalal
Title: Controller
Address for Notices:
529 Fifth Avenue
New York, NY 10017
Attn: Nirav Dalal
with a copy to:
Laurence L. Ginsburg, Esq.
Moses & Singer LLP
The Chrysler Building
ACCEPTED AND AGREED TO:
Sandberg & Sikorski Corp.
By: /s/ Samuel Sandberg
Name: Samuel Sandberg
Title: Secretary & Treasurer
Address for Notices:
37 West 26th Street
New York, NY 10010
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Leo Schachter Diamonds, LLC
By: /s/ Eric Austein
Name: Eric Austein
Title: Partner
Address for Notices:
579 5th Ave.
New York, NY 10017
ACCEPTED AND AGREED TO:
SDC Designs
By: /s/ Abhay Javeri
Name: Abhay Javeri
Title: President
Address for Notices:
6 East 45th St., Suite #901
New York, NY 10017
ACCEPTED AND AGREED TO:
STS Jewels Inc.
By: /s/ Paramjeet Bhaha
Name: Paramjeet Bhaha
Title: Chief Operating Officer
Address for Notices:
30-00 LIC Center - I
5th Floor
Long Island City, NY 11101
ACCEPTED AND AGREED TO:
Suberi Bros. LLC
By: /s/ Maniu Markman
Name: Maniu Markman
Title: Chairman & CEO
Address for Notices:
902 Broadway
New York, NY 10010
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Sumit Diamond Corp.
By: /s/ Kumar Javeri
Name: Kumar Javeri
Title: President
Address for Notices:
592 5th Ave.
New York, NY 10036
ACCEPTED AND AGREED TO:
Thien Po Jewelry Ltd.
By: /s/ Kenneth Lo
Name: Kenneth Lo
Title: Managing Director
Address for Notices:
47/27 M004, Sukhaphban 2 Road
Dokmar, Pravet
Bangkok 10250, Thailand
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