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U.S. $225,000,000
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of May 19, 2005,
among
GENERAL ELECTRIC CAPITAL CORPORATION,
individually and in its capacity as administrative agent,
BANK OF AMERICA, N.A.,
individually and in its capacity as documentation agent,
CERTAIN OTHER LENDERS AND
FINANCIAL INSTITUTIONS PARTIES HERETO,
FINLAY FINE JEWELRY CORPORATION
CARLYLE & CO. JEWELERS
and
FINLAY ENTERPRISES, INC.
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS AND ACCOUNTING TERMS.............................. 1
Section 1.1. CERTAIN DEFINED TERMS................................... 2
Section 1.2. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE............ 32
Section 1.3. COMPUTATION OF TIME PERIODS............................. 32
Section 1.4. ACCOUNTING TERMS........................................ 32
Section 1.5. OTHER PROVISIONS REGARDING DEFINITIONS.................. 32
SECTION 2. AMOUNT AND TERMS.............................................. 32
Section 2.1. REVOLVING ADVANCES; SWING LINE FACILITY................. 32
Section 2.2. REVOLVING CREDIT FACILITY COMMITMENT AND BORROWING
LIMIT................................................ 34
Section 2.3. REVOLVING NOTES......................................... 34
Section 2.4. NOTICE OF BORROWING; BORROWER'S CERTIFICATE............. 35
Section 2.5. TERMINATION OR REDUCTION OF REVOLVING CREDIT FACILITY
COMMITMENTS.......................................... 36
Section 2.6. INTEREST................................................ 37
Section 2.7. CONVERSION OF BORROWINGS; RENEWALS...................... 38
Section 2.8. COMPUTATION OF INTEREST................................. 39
Section 2.9. INCREASED COSTS......................................... 39
Section 2.10. CHANGE IN LAW RENDERING EURODOLLAR ADVANCES UNLAWFUL.... 40
Section 2.11. EURODOLLAR AVAILABILITY................................. 41
Section 2.12. INDEMNITIES............................................. 41
Section 2.13. DISBURSEMENT............................................ 44
Section 2.14. AGENT'S AVAILABILITY ASSUMPTION......................... 44
Section 2.15. PRO RATA TREATMENT AND PAYMENTS......................... 45
Section 2.16. EURODOLLAR OFFICES...................................... 45
Section 2.17. TELEPHONIC NOTICE....................................... 45
Section 2.18. MAXIMUM INTEREST........................................ 46
Section 2.19. RECEIPT OF PAYMENTS..................................... 46
Section 2.20. APPLICATION OF PROCEEDS................................. 47
Section 2.21. ACCOUNTING.............................................. 47
Section 2.22. TAXES................................................... 48
SECTION 2A. LETTERS OF CREDIT............................................ 50
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Section 2A.1. ISSUANCE................................................ 50
Section 2A.2. ADVANCES AUTOMATIC; PARTICIPATIONS...................... 50
Section 2A.3. CASH COLLATERAL......................................... 51
Section 2A.4. FEES AND EXPENSES....................................... 52
Section 2A.5. REQUEST FOR INCURRENCE OF LETTER OF CREDIT OBLIGATIONS.. 52
Section 2A.6. OBLIGATION ABSOLUTE..................................... 52
Section 2A.7. INDEMNIFICATION; NATURE OF LENDERS' DUTIES.............. 53
SECTION 3. PAYMENTS AND PREPAYMENTS...................................... 53
Section 3.1. MANDATORY PAYMENTS...................................... 53
Section 3.2. CERTAIN PAYMENTS........................................ 54
Section 3.3. OPTIONAL PREPAYMENTS.................................... 55
Section 3.4. PROCEDURES FOR PAYMENT.................................. 55
Section 3.5. UNUSED FACILITY FEE..................................... 56
Section 3.6. FEES.................................................... 56
SECTION 4. SECURITY AND GUARANTIES....................................... 56
Section 4.1. PLEDGE OF STOCK AND NOTES............................... 56
Section 4.2. SECURITY AGREEMENT - TRADEMARK, PATENT AND COPYRIGHT.... 57
Section 4.3. SECURITY AGREEMENTS..................................... 57
Section 4.4. REAL PROPERTY; MORTGAGES; LEASEHOLD MORTGAGES; TITLE
INSURANCE............................................ 58
Section 4.5. ADDITIONAL COLLATERAL................................... 59
Section 4.6. FILING AND RECORDING.................................... 59
Section 4.7. INTERPRETATION OF SECURITY DOCUMENTS.................... 59
Section 4.8. GUARANTIES.............................................. 59
Section 4.9. ASSIGNMENTS OF INSURANCE................................ 60
Section 4.10. CASH COLLATERAL AGREEMENT............................... 60
Section 4.11. CONCERNING THE COLLATERAL............................... 60
SECTION 5. CONDITIONS PRECEDENT TO AMENDMENT AND RESTATEMENT............. 60
Section 5.1. OPINIONS OF COUNSEL..................................... 60
Section 5.2. QUALIFICATION........................................... 61
Section 5.3. SECURITY DOCUMENTS AND INSTRUMENTS...................... 61
Section 5.4. NOTES................................................... 61
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Section 5.5. FEES AND EXPENSES....................................... 61
Section 5.6. LITIGATION.............................................. 61
Section 5.7. COMPLIANCE WITH LAW..................................... 61
Section 5.8. PROCEEDINGS; RECEIPT OF DOCUMENTS....................... 61
Section 5.9. EVIDENCE OF INSURANCE................................... 62
Section 5.10. LOCKBOX................................................. 62
Section 5.11. REPAYENT OF PRIOR LENDER OBLIGATIONS. SATISFACTION OF
OUTSTANDING LETTERS OF CREDIT........................ 63
Section 5.12. APPROVALS............................................... 63
Section 5.13. CAPITAL STRUCTURE: OTHER INDEBTEDNESS................... 63
Section 5.14. DUE DILIGENCE........................................... 63
Section 5.15. CONSUMMATION OF RELATED TRANSACTIONS.................... 63
SECTION 6. CONDITIONS PRECEDENT TO EACH BORROWING AND ISSUANCE OF LETTERS
OF CREDIT.................................................. 63
Section 6.1. CONDITIONS.............................................. 63
Section 6.2. WRITTEN NOTICE.......................................... 64
SECTION 7. USE OF PROCEEDS............................................... 64
SECTION 8. AFFIRMATIVE COVENANTS......................................... 64
Section 8.1. FINANCIAL STATEMENTS AND OTHER INFORMATION.............. 64
Section 8.2. TAXES AND CLAIMS........................................ 69
Section 8.3. INSURANCE............................................... 71
Section 8.4. BOOKS AND RESERVES...................................... 71
Section 8.5. PROPERTIES IN GOOD CONDITION............................ 71
Section 8.6. MAINTENANCE OF EXISTENCE, ETC........................... 71
Section 8.7. INSPECTION BY THE AGENT AND THE LENDERS................. 71
Section 8.8. PAY INDEBTEDNESS TO LENDERS AND PERFORM OTHER
COVENANTS............................................ 72
Section 8.9. NOTICE OF DEFAULT....................................... 72
Section 8.10. REPORTING OF MISREPRESENTATIONS......................... 72
Section 8.11. COMPLIANCE WITH LAW..................................... 72
Section 8.12. ERISA................................................... 72
Section 8.13. FURTHER ASSURANCES...................................... 73
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Section 8.14. CONSIGNMENT AGREEMENTS.................................. 73
Section 8.15. AUDITS.................................................. 74
Section 8.16. ENVIRONMENTAL MATTERS, ETC.............................. 74
Section 8.17. FINANCIAL COVENANTS..................................... 76
Section 8.18. LEASES; NEW REAL ESTATE................................. 77
Section 8.19. LICENSE AGREEMENTS...................................... 78
Section 8.20. SUPPLEMENTAL DISCLOSURE................................. 78
Section 8.21. AGREEMENTS.............................................. 79
Section 8.22. COLLECTION AND PAYMENT; LOCK BOX; BANK ACCOUNTS......... 79
Section 8.23. EMPLOYMENT AGREEMENTS................................... 80
Section 8.24. ASSIGNMENT OF FACTORING CREDIT BALANCES AGREEMENTS...... 80
Section 8.25. MORTGAGE................................................ 80
Section 8.26. NEW STORES.............................................. 80
Section 8.27. LANDLORDS' AGREEMENTS, MORTGAGE AGREEMENTS AND BAILEE
LETTERS.............................................. 80
Section 8.28. INTERCOMPANY CHARGES AND MANDATORY DIVIDENDS RELATING TO
FINLAY MERCHANDISING................................. 81
Section 8.29. INTERCOMPANY CHARGES AND MANDATORY DIVIDENDS RELATING TO
eFINLAY.............................................. 81
SECTION 9. NEGATIVE COVENANTS............................................ 81
Section 9.1. CAPITAL EXPENDITURES.................................... 82
Section 9.2. LIENS................................................... 82
Section 9.3. INDEBTEDNESS............................................ 83
Section 9.4. LOANS, INVESTMENTS AND GUARANTEES....................... 85
Section 9.5. MERGER, SALE OF ASSETS, DISSOLUTION, ETC................ 87
Section 9.6. DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS............... 88
Section 9.7. TRANSACTIONS WITH AFFILIATES............................ 90
Section 9.8. BLOCKED ACCOUNTS........................................ 92
Section 9.9. MANAGEMENT COMPENSATION AND OTHER PAYMENTS.............. 92
Section 9.10. COMPROMISE OF RECEIVABLES............................... 92
Section 9.11. NONCOMPLIANCE WITH ERISA................................ 92
Section 9.12. AMENDMENT AND MODIFICATION OF CERTAIN DOCUMENTS......... 93
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Section 9.13. FISCAL YEAR............................................ 93
Section 9.14. CHANGE OF BUSINESS..................................... 93
Section 9.15. NO NEGATIVE PLEDGES.................................... 94
Section 9.16. RENTAL OBLIGATIONS..................................... 94
Section 9.17. LEASE-BACKS............................................ 94
Section 9.18. CAPITAL STOCK.......................................... 94
Section 9.19. DEBT INCURRENCE AND PAYMENTS TO THE PARENT............. 94
Section 9.20. THE PARENT............................................. 94
Section 9.21. INDENTURE GUARANTEES................................... 95
SECTION 10. DEFAULTS AND REMEDIES........................................ 95
Section 10.1. EVENTS OF DEFAULT...................................... 95
Section 10.2. SUITS FOR ENFORCEMENT.................................. 99
Section 10.3. RIGHTS AND REMEDIES CUMULATIVE......................... 99
Section 10.4. RIGHTS AND REMEDIES NOT WAIVED......................... 99
Section 10.5. APPLICATION OF PROCEEDS................................ 99
SECTION 11. REPRESENTATIONS AND WARRANTIES............................... 100
Section 11.1. CORPORATE STATUS....................................... 101
Section 11.2. POWER AND AUTHORITY.................................... 101
Section 11.3. NO VIOLATION OF AGREEMENTS............................. 101
Section 11.4. NO LITIGATION.......................................... 101
Section 11.5. GOOD TITLE TO PROPERTIES............................... 102
Section 11.6. FINANCIAL STATEMENTS AND CONDITION..................... 103
Section 11.7. TRADEMARKS, PATENTS, ETC............................... 104
Section 11.8. TAX LIABILITY.......................................... 104
Section 11.9. GOVERNMENTAL ACTION.................................... 104
Section 11.10. DISCLOSURE............................................. 105
Section 11.11. REGULATION U........................................... 105
Section 11.12. INVESTMENT COMPANY..................................... 105
Section 11.13. EMPLOYEE BENEFIT PLANS................................. 105
Section 11.14. [Intentinally Deleted]................................. 106
Section 11.15. PERMITS, ETC........................................... 106
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Section 11.16. ENVIRONMENTAL STATUS................................... 107
Section 11.17. SOLVENCY............................................... 108
Section 11.18. PROJECTIONS............................................ 108
Section 11.19. BANK ACCOUNTS.......................................... 108
Section 11.20. EMPLOYMENT AGREEMENTS.................................. 108
Section 11.21. LABOR MATTERS.......................................... 108
Section 11.22. OTHER VENTURES......................................... 108
Section 11.23. BROKERS AND CONSULTANTS................................ 108
Section 11.24. MATERIAL CONTRACTS..................................... 109
Section 11.25. LICENSE AGREEMENTS..................................... 109
Section 11.26. UNWRITTEN AGREEMENTS................................... 109
Section 11.27. UCC FINANCING STATEMENTS............................... 109
SECTION 12. MISCELLANEOUS................................................ 109
Section 12.1. COLLECTION COSTS....................................... 109
Section 12.2. AMENDMENT, MODIFICATION AND WAIVER..................... ▇▇▇
▇▇▇▇▇▇▇ ▇▇.▇. ▇▇▇ ▇▇▇▇ LAW........................................... 111
Section 12.4. NOTICES................................................ 111
Section 12.5. FEES AND EXPENSES...................................... 111
Section 12.6. [Intentionally Deleted]................................ 111
Section 12.7. WAIVER OF JURY TRIAL AND SET-OFF....................... 111
Section 12.8. TERMINATION OF AGREEMENT............................... 112
Section 12.9. CAPTIONS............................................... 113
Section 12.10. LIEN; SET-OFF BY LENDERS............................... 113
Section 12.11. PAYMENT DUE ON NON-BUSINESS DAY........................ 113
Section 12.12. SERVICE OF PROCESS..................................... 113
Section 12.13. GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT......... 113
Section 12.14. NON-RECOURSE TO PARENT................................. 117
Section 12.15. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS... 117
Section 12.16. COUNTERPARTS; FACSIMILE SIGNATURE...................... 120
Section 12.17. INVALIDITY............................................. 120
Section 12.18. DISCLOSURE OF FINANCIAL INFORMATION.................... 120
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SCHEDULES AND EXHIBITS
Schedule 2A.1(a) - Letters of Credit
Schedule 2A.1(b) - Bank of America Letters of Credit
Schedule 4.4 - Real Property Mortgages
Schedule 4.4(a)(ii) - Excluded Leases
Schedule 8.3 - Insurance
Schedule 8.22 - Lockbox Accounts
Schedule 9.2 - Existing Liens
Schedule 9.3 - Indebtedness
Schedule 9.4 - Outstanding Investments
Schedule 9.9 - Compensation Policies
Schedule 9.21 - Indenture Guarantees
Schedule 11.1 - Subsidiaries
Schedule 11.5 - Real Property
Schedule 11.7 - Trademarks, Patents, Etc.
Schedule 11.8 - Taxes
Schedule 11.13 - ERISA
Schedule 11.16 - Environmental Matters
Schedule 11.19 - Collection, Concentration and Special Accounts
Schedule 11.20 - Employment Agreements
Schedule 11.21 - Labor Matters
Schedule 11.22 - Other Ventures
Schedule 11.24 - Material Contracts
Schedule 11.25 - License Agreements
Exhibit A - Lenders, Commitments and Initial Eurodollar Offices
Exhibit B - Form of Indemnification Agreement
Exhibit C - Form of Master Agreement for Documentary
Letters of Credit
Exhibit D - Form of Master Agreement for Standby Letters of Credit
Exhibit 2.1(c)(ii) - Form of Swing Line Note
Exhibit 2.3(a) - Form of Revolving Note
Exhibit 2.4 - Form of Borrower's Certificate
Exhibit 4.1(a) - Form of Pledge Agreement
Exhibit 4.2 - Form of Trademark, Patent and Copyright
Security Agreement
Exhibit 4.3(a) - Form of Security Agreement
Exhibit 4.8 - Form of Guaranty
Exhibit 4.9(a) - Assignment of Life Insurance
Exhibit 4.9(b) - Assignment of Business Interruption Insurance
Exhibit 5.1 - Form of Opinion of Counsel for the Credit Parties
Exhibit 8.1(p) - Form of Borrowing Base Certificate
Exhibit 8.14 - Form of Consignor Letter
Exhibit 9.2(j) - Form of Collateral Description Regarding Gold
Consignment Documents
Exhibit 12.15(c) - Form of Assignment
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EXECUTION COPY
THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 19, 2005,
among FINLAY FINE JEWELRY CORPORATION, a Delaware corporation ("Finlay" or
"Borrower Representative") and Carlyle & Co. Jewelers, a Delaware corporation
("Carlyle") (Finlay and Carlyle are collectively referred to herein as the
"Borrowers" and individually as a "Borrower"), FINLAY ENTERPRISES, INC., a
Delaware corporation (the "Parent"), GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation having an office at ▇▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("GE
Capital"), individually and as administrative agent for each of the Lenders
hereunder (GE Capital, in such capacity, together with any successor
administrative agent under Section 12.13 hereof, being the "Agent"), BANK OF
AMERICA, N.A. ("Bank of America"), individually and as documentation agent for
each of the Lenders hereunder (Bank of America, in such capacity, being the
"Documentation Agent"), and the other banks and other financial institutions
named herein and whose signatures appear on the signature pages hereto (GE
Capital, Bank of America, and such other banks and other financial institutions
and their respective successors and assigns, individually, a "Lender" and
collectively, the "Lenders").
WHEREAS, Finlay borrowed certain sums pursuant to the Credit Agreement
dated as of May 26, 1993 among Finlay, the Parent, the Lenders thereunder and GE
Capital, individually as a Lender thereunder and as agent for the Lenders
thereunder (such Credit Agreement, as amended, is referred to herein as the
"Original Credit Agreement");
WHEREAS, the Original Credit Agreement was amended and restated in its
entirety pursuant to the Amended and Restated Credit Agreement dated as of
September 11, 1997 among the Borrower, the Parent, the Lenders thereunder and GE
Capital, individually as a Lender thereunder and as agent for the Lenders
thereunder (such Amended and Restated Credit Agreement, as amended, is referred
to herein as the "First Amended and Restated Credit Agreement");
WHEREAS, the First Amended and Restated Credit Agreement was amended
and restated in its entirety pursuant to the Second Amended and Restated Credit
Agreement dated as of January 22, 2003 among Finlay, the Parent, the Lenders
thereunder and GE Capital, individually as a Lender thereunder and as agent for
the Lenders thereunder (such Second Amended and Restated Credit Agreement, as
amended, is referred to herein as the "Second Amended and Restated Credit
Agreement");
WHEREAS, pursuant to the Agreement and Plan of Merger dated as of the
date hereof, by among Finlay, FFJ Acquisition Corp., Carlyle, certain
stockholders of Carlyle and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as stockholders' agent, Finlay
acquired Carlyle, resulting in Carlyle being a wholly owned subsidiary of
Finlay;
WHEREAS, Finlay has requested that the Lenders continue to make
secured revolving credit advances from time to time for the purposes set forth
in Section 7 hereof;
WHEREAS, the Credit Parties have requested that the Agent, the Lenders
and the L/C Issuer amend and restate the Second Amended and Restated Credit
Agreement; and
WHEREAS, (a) this Agreement shall amend and restate the Second Amended
and Restated Credit Agreement in its entirety as of the Closing Date on the
terms and subject to the conditions set forth herein, (b) this Agreement shall
not constitute a novation of the obligations and liabilities existing under the
Second Amended and Restated Credit Agreement or evidence payment of all or any
of such obligations and liabilities and (c) from and after the Closing Date, the
Second Amended and Restated Credit Agreement shall be of no further force or
effect, except to (i) evidence the Obligations (as defined therein) incurred,
(ii) the representations and warranties made and (iii) the actions or omissions
performed, or required to be performed, thereunder prior to the Closing Date.
NOW, THEREFORE, IT IS AGREED THAT THE SECOND AMENDED AND RESTATED
CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS
FOLLOWS:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. CERTAIN DEFINED TERMS. For all purposes of this
Agreement, unless the context otherwise requires, the following terms shall have
the meanings set forth below (the following meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"A Rated Bank" shall have the meaning set forth in Section 9.4(b).
"Account Debtor" means any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an Account, Chattel Paper
or General Intangibles (including a payment intangible).
"Accounts" means all "accounts," as such term is defined in the UCC,
now owned or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments) (including
any such obligations that may be characterized as an account or contract right
under the UCC), (b) all of each Credit Party's rights in, to and under all
purchase orders or receipts for goods or services, (c) all of each Credit
Party's rights to any goods represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), (d) all rights
to payment due to any Credit Party for property sold, leased, licensed, assigned
or otherwise disposed of, for a policy of insurance issued or to be issued, for
a secondary obligation incurred or to be incurred, for energy provided or to be
provided, for the use or hire of a vessel under a charter or other contract,
arising out of the use of a credit card or charge card, or for services rendered
or to be rendered by such Credit Party or in connection with any other
transaction (whether or not yet earned by performance on the part of such Credit
Party), (e) all health care insurance receivables and (f) all collateral
security of any kind, given by any Account Debtor or any other Person with
respect to any of the foregoing. Without limiting the foregoing, "Accounts"
shall include amounts payable to Finlay under License Agreements as provided in
the second paragraph of the definition of Eligible Receivables.
"Acquisition" shall mean the purchase by Finlay of all of the
outstanding capital stock of Carlyle pursuant to the Acquisition Agreement.
"Acquisition Agreement" shall mean the Agreement and Plan of Merger
dated as of May 19, 2005 by and among Finlay FFJ Acquisition Corp., Carlyle,
certain stockholders of Carlyle and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as stockholder agent.
"Additional Indebtedness" shall mean all Obligations other than
principal of Revolving Advances and interest thereon.
"Additional Repurchase Amount" shall mean as of the Fiscal Year ending
on the Saturday closest to January 31, 2005, and each Fiscal Year end
thereafter, 50% of the amount of net income (without giving effect to
extraordinary gains or losses or gains or losses resulting from the repurchase,
acquisition or redemption of Senior Notes) of Finlay and its Subsidiaries.
"Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for a Eurodollar Advance, the rate obtained by dividing (i) the
Eurodollar Rate for such Interest Period by (ii) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on the day that is two (2)
Eurodollar Business Days prior to the beginning of such Interest Period
(including basic, supplemental, marginal and emergency reserves under
2
any regulations of the Federal Reserve Board or other Governmental Authority
having jurisdiction with respect thereto, as now and from time to time in
effect) for Eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Federal Reserve Board) that are required to
be maintained by a member bank of the Federal Reserve System, and adding thereto
the Applicable Eurodollar Margin.
"Adverse Environmental Condition" shall mean any of the matters
referred to in clause (i), (ii) or (iii) of the definition of Environmental
Claim, which could give rise to an Environmental Claim.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or which is a director, officer or
partner (limited or general) of such specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means the
possession, direct or indirect, of the power to vote five percent (5%) or more
of the securities having ordinary voting power for the election of directors or
the power to direct or cause the direction of the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" shall have the meaning set forth in the preamble to this
Agreement.
"Aggregate Borrowing Base" shall mean as of any date of determination,
an amount equal to (i) the sum of the Carlyle Borrowing Base and the Finlay
Borrowing Base; less (ii) any reserves except to the extent already deducted
therefrom.
"Aggregate Revolving Commitments" shall mean at any time the sum of
the Revolving Commitments of the Lenders at such time.
"Agreement" shall mean this Third Amended and Restated Credit
Agreement, as amended, restated, modified or supplemented from time to time.
"Applicable Eurodollar Margin" shall mean the per annum interest rate
margin from time to time in effect and payable in addition to the Eurodollar
Rate applicable to the Revolving Loan, as determined by reference to Section
2.6(f) of this Agreement.
"Applicable Index Margin" shall mean the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Revolving Loan, as determined by reference to Section 2.6(f)
of this Agreement.
"Applicable Margins" means collectively the Applicable Index Margin
and the Applicable Eurodollar Margin.
"Approved Delegate" shall have the meaning set forth in Section
12.13(n) hereof.
"Assignment Agreement" shall have the meaning set forth in Section
12.15(c) hereof.
"Assignment of Business Interruption Insurance" shall have the meaning
set forth in Section 4.9 hereof.
"Assignment of Life Insurance" shall have the meaning set forth in
Section 4.9 hereof.
"Authorized Representative" shall mean each Person designated from
time to time, as appropriate, in a Written Notice of the Borrower Representative
to the Agent for the purposes of giving notices of borrowing, requests for
issuances of Letters of Credit or guaranties thereof, or conversion or
3
renewal of, Revolving Advances, which designation shall continue in force and
effect until terminated in a Written Notice to the Agent.
"Base Rate" shall mean a fluctuating interest rate per annum as shall
be in effect from time to time, which rate per annum shall be equal to the Index
Rate plus the Applicable Index Margin.
"Base Rate Advance" shall mean the portion of any Revolving Advance
which is not a Eurodollar Advance.
"Base Repurchase Amount" shall mean the sum of (i) $5,000,000 plus
(ii) as of the Fiscal Year ending on the Saturday closest to January 31, 2005,
and each Fiscal Year end thereafter, 25% of the amount of net income (without
giving effect to extraordinary gains or losses or gains or losses resulting from
the repurchase, acquisition or redemption of Senior Notes) of the Finlay and its
Subsidiaries.
"Blocked Accounts" shall mean each deposit account (including all
funds on deposit therein) of each Borrower and its Domestic Subsidiaries
designated as "Blocked Accounts" on Schedule 11.19 hereto and such other deposit
accounts as the Agent may from time to time approve in writing as "Blocked
Accounts" for purposes of this Agreement.
"Blocked Account Agreement" means, with respect to any deposit
account, an agreement, in form and substance satisfactory to the Agent, among
the Collecting Bank, the Agent and the applicable Borrower, in each case as
amended, supplemented or otherwise modified from time to time with the prior
written consent of the Agent, effective to grant "control" (as defined under the
applicable UCC) over such account to the Agent.
"Board" shall mean the Board of Governors of the Federal Reserve
System or any successor agency or entity performing substantially the same
functions.
"Borrower" shall have the meaning set forth in the preamble to this
Agreement.
"Borrower's Certificate" shall have the meaning set forth in Section
2.4 hereof.
"Borrower Representative" shall have the meaning set forth in the
preamble to this Agreement.
"Borrowing Base Certificate" shall have the meaning set forth in
Section 8.1(p) hereof.
"Borrowing Limit" shall have the meaning set forth in Section 2.2(a)
hereof.
"Business Day" shall mean:
(a) for all portions of the Revolving Advances on which interest
accrues based upon the Base Rate, any day other than a Saturday, Sunday or other
day on which banks in New York, New York are authorized or required to close,
and
(b) for portions of the Revolving Advances on which interest accrues
based upon the Adjusted Eurodollar Rate, the Business Days described in the
immediately preceding subclause (a) for the definition of Business Day, but
excluding therefrom any day on which commercial banks are not open for dealings
in Dollar deposits in the London (England) interbank market.
"Capital Expenditures" shall mean, for any Person, any expenditures or
costs (excluding any Initial License Expense) made by such Person for the
acquisition, maintenance or repair of fixed or capital assets (which are
required to be capitalized into the fixed asset caption on the balance sheet of
such Person in accordance with GAAP), including, without limitation, the
incurrence or assumption of
4
any Indebtedness in respect of such fixed or capital asset, and, without double
counting, any payment made in respect of such incurrence or assumption.
"Capital Lease" of any Person shall mean any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to be, accounted for as a capital lease on the
balance sheet of such Person.
"Capitalized Lease Obligations" of any Person shall at any time mean
all obligations under Capital Leases of such Person in each case taken at the
amount thereof accounted for as liabilities in accordance with GAAP at such
time.
"Carlyle" shall mean Carlyle & Co. Jewelers, a Delaware corporation
and wholly owned Subsidiary of Finlay.
"Carlyle Blocked Account" means a Blocked Account held by a Carlyle
Credit Party.
"Carlyle Borrowing Base" shall mean, at any time, an amount equal to
(a) the Carlyle Borrowing Base Percentage of the value of Carlyle Eligible
Inventory; minus (b) Excess Lay-Away Deposits, minus (c) at the option of the
Agent, reserves from time to time established by the Agent in accordance with
the Agent's customary business practices, plus (c) 50% of the book value of all
repair parts held by a Carlyle Credit Party up to a maximum amount of $300,000.
In no event shall the Carlyle Borrowing Base be attributable to Foreign
Inventory.
The Agent reserves the right to adjust the Carlyle Borrowing Base in
its reasonable judgment by revising standards of eligibility, establishing
reserves, and/or subject to the following sentence increasing or decreasing from
time to time the percentages set forth above, in which case "Carlyle Borrowing
Base" shall be defined to include such revisions, reserves or altered
percentages. Notwithstanding the foregoing, any increase in the percentages set
forth above shall require the consent of the Majority Lenders."
"Carlyle Borrowing Base Percentage" shall mean the lesser of (a) 60%
of net amount of Carlyle Eligible Inventory and (b) 85% of the GOB Appraisal
Value.
"Carlyle Credit Parties" shall mean, collectively, Carlyle,
Montgomery, ▇.▇. ▇▇▇▇▇▇▇▇ and Park Promenade.
"Carlyle Credit Party Management, Services and Allocation Agreements"
shall have the meaning set forth in Section 9.7(b) hereof.
"Carlyle Concentration Account" means the Blocked Account at the
Carlyle Concentration Account Bank with account no. ▇▇▇▇-▇▇▇▇-▇▇▇▇, or such
other account acceptable to the Agent.
"Carlyle Concentration Account Bank" means Bank of America, N.A. or
such other banking institution acceptable to the Agent.
"Carlyle Eligible Inventory" shall mean such of the Domestic Inventory
(valued at the lower of cost (on a first-in, first-out basis) or fair market
value) of the Carlyle Credit Parties, which the Agent, in its reasonable
discretion, shall deem eligible, less such reserves as the Agent, in its
reasonable discretion, shall from time to time deem appropriate and shall
exclude, in any event, the categories of Inventory of any Carlyle Credit Party
deemed ineligible as set forth on the Borrowing Base Certificate most recently
delivered by the Borrower Representative prior to the Closing Date. The Agent
does not intend to treat an item of Inventory as eligible if any warranty or
representations contained in any of the Loan Documents applicable either to
Eligible Inventory in general or to any such specific Inventory has
5
been breached with respect to such Inventory. Without limiting the discretion of
the Agent to establish other criteria of ineligibility, Carlyle Eligible
Inventory shall not include any Inventory:
(a) that is not owned by a Carlyle Credit Party;
(b) (i) that is not subject to the Agent's Liens, which are perfected as to
such Inventory, or (ii) that is subject to any other Lien whatsoever; provided
that Inventory subject to the Rolex Security Agreement shall not be deemed to be
ineligible solely because of the provisions of this clause (ii);
(c) that does not consist of finished goods or raw materials;
(d) that consists of work-in-process, "suspense", scrap, chemicals,
samples, prototypes, supplies, or packing and shipping materials;
(e) that is not in good condition, is unmerchantable, is defective, or does
not meet all standards imposed by any Governmental Authority having regulatory
authority over such goods, their use or sale;
(f) that is not currently either usable or salable, at prices approximating
at least cost, in the normal course of a Carlyle Credit Party's business, or
that is slow moving or stale;
(g) that is located outside the United States of America (or that is
in-transit from vendors or suppliers);
(h) that is located in a public warehouse or in possession of a bailee or
in a facility, other than stores operated by a Carlyle Credit Party or its
Subsidiaries in the ordinary course of business, leased by a Carlyle Credit
Party, if the warehouseman, or the bailee, or the lessor has not delivered to
the Agent, if requested by the Agent, a subordination agreement in form and
substance satisfactory to the Agent or if a reserve for rents or storage charges
has not been established for Inventory at that location;
(i) that contains or bears any proprietary rights licensed to a Carlyle
Credit Party by any Person, if the Agent is not satisfied that it may sell or
otherwise dispose of such Inventory in accordance with the terms of the Security
Agreement without infringing the rights of the licensor of such proprietary
rights or violating any contract with such licensor (and without payment of any
royalties other than any royalties due with respect to the sale or disposition
of such Inventory pursuant to the existing license agreement), and, as to which
a Carlyle Credit Party has not delivered to the Agent a consent or sublicense
agreement from such licensor in form and substance acceptable to the Agent if
requested; provided, however, there shall be included as Carlyle Eligible
Inventory (i) all Rolex Inventory and (ii) certain Inventory subject to the DAR
License Agreement with an aggregate cost value of $500,000;
(j) that is not reflected in the details of a current perpetual inventory
report; or
(k) that is Inventory placed on consignment.
If any Inventory at any time ceases to be Eligible Inventory, such
Inventory shall promptly be excluded from the calculation of Carlyle Eligible
Inventory.
"Carlyle Employment Agreements" shall mean the Carlyle Executives
Employment Agreements and each other written employment agreement between
Carlyle and any other full time employee of Carlyle in effect at any time, as
each may be amended, modified, supplemented, restated, renewed, replaced or
extended from time to time in accordance with its terms and the limitations set
forth in Section 9.12 hereof.
6
"Carlyle Executives Employment Agreements" shall mean the ▇▇▇▇ ▇▇▇▇▇
Employment Agreement and the ▇▇▇▇▇▇▇ ▇▇▇▇▇ Employment Agreement.
"Carlyle/Finlay Lease" shall have the meaning set forth in Section
9.7(b) hereof.
"Carlyle Intercompany Services and Allocation Agreements" shall have
the meaning set forth in Section 9.7(b) hereof.
"Carlyle License Agreement" shall mean any Trade Name License
Agreement entered into on or at any time after the Closing Date among Finlay
Merchandising and any one or more of the Carlyle Credit Parties (as any such
agreement may be amended, modified, or supplemented from time to time in
accordance with its terms and the terms hereof) which shall provide for the
licensing back to such Carlyle Credit Parties of any Trademarks previously
transferred by the Carlyle Credit Parties to Finlay Merchandising pursuant to
Section 9.5(j) on licensing terms substantially similar to those provided for in
the Finlay License Agreement.
"Cash Collateral Account" shall have the meaning set forth in Section
2A.3(a) hereof.
"Cash Collateral Agreement" shall have the meaning set forth in
Section 4.10 hereof.
"Cash Equivalents" shall have the meaning set forth in Section 2A.3(a)
hereof.
"Cash Interest Expense" shall mean, for any period, the aggregate
amount of cash required to be applied by the Parent and its Subsidiaries to
Interest Expense of Finlay and its Subsidiaries during such period.
"Certificate of Exemption" shall have the meaning set forth in Section
2.22(c).
"Change of Control" shall mean a "Change of Control" as such term is
defined in the Senior Note Indenture.
"Charge" shall mean all Federal, state, county, city, municipal,
local, foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) any
Collateral, (ii) any Obligations, (iii) any of the Parent's or any of its
Subsidiaries' employees, payroll, income or gross receipts, (iv) the Parent's or
any of its Subsidiaries' ownership or use of any of its assets, or (v) any other
aspect of the Parent's or any of its Subsidiaries' business.
"Chattel Paper" means any "chattel paper," as such term is defined in
the UCC, including electronic chattel paper, now owned or hereafter acquired by
any Credit Party.
"Claims" shall have the meaning set forth in Section 2.12(c) hereof.
"Clean Down Period" shall mean each period which begins on or after
December 15 of a calendar year and ends on the last day in February of the
immediately succeeding calendar year.
"Closing Date" shall mean May 19, 2005.
"COBRA" shall have the meaning set forth in Section 11.13 hereof.
"Code" shall mean, at any date, the Internal Revenue Code of 1986, as
the same shall be in effect at such date.
7
"Collateral" shall mean all property and interests therein (real or
personal, tangible or intangible) in which a Lien is now or hereafter granted to
the Agent or any one or more of the Lenders by any Credit Party or any
Subsidiary thereof as security for all or any portion of the Obligations or any
guarantee thereof.
"Collecting Bank" means the banks listed on Schedule 11.19 hereto
under the heading "Blocked Accounts" and such other banks as the Agent may from
time to time approve in writing as "Collecting Banks" for purposes of this
Agreement.
"Consignment Agreement" shall mean (i) each written consignment
agreement existing as of the Closing Date or entered into after the Closing Date
and as to which Finlay has complied with Section 8.14 hereof, in each case, as
in effect from time to time, and (ii) each consignment arrangement, which is not
evidenced by or memorialized in a writing signed by the consignor and as to
which Finlay has complied with Section 8.14 hereof, in each case, under which
Finlay or any Domestic Subsidiary thereof is the consignee thereunder.
"Consignment Inventory" shall mean, at any time, each item of
merchandise which (i) at such time is in the possession of the Borrowers or any
Domestic Subsidiary thereof as consignee pursuant to a Consignment Agreement
which, if not in a writing signed by the consignor, has been approved in writing
by the Agent, (ii) at such time is identified by item number in the computer
records of the Borrowers or any Domestic Subsidiary thereof (to which the Agent
has on-line access to the extent required by Section 8.7(b) hereof) as being
"memo" or "consigned" inventory, (iii) as of such time has not been sold or
deemed sold to or by the Borrowers or any Domestic Subsidiary thereof, (iv) to
which ownership, at such time, is retained by a consignor under such Consignment
Agreement or other consignment arrangement until such item of merchandise is
sold or deemed sold by the consignor to the consignee, and (v) accordingly, at
such time, is not an asset of the Borrowers or any Domestic Subsidiary thereof.
Ownership of an item of merchandise described in the foregoing sentence is
deemed to be retained by such consignor until, in accordance with the applicable
Consignment Agreement or other consignment arrangement, ownership is transferred
(or deemed to be transferred) to a buyer, the Borrowers or any Domestic
Subsidiary thereof, regardless of whether any procedures have been performed to
protect the third party's title to such item of merchandise. Additionally,
"Consignment Inventory" (a) includes, at any time, any item of merchandise
(including the gold content thereof) which (i) contains gold which is leased by
or consigned or lent to the Borrowers or any Domestic Subsidiary thereof, and
(ii) complies at such time with clauses (ii) and (iii) of the first sentence of
this definition, and (b) excludes all cash and non-cash proceeds of any item of
merchandise (and any gold content thereof) which constituted Consignment
Inventory.
"Consignor Letter" shall mean a letter agreement executed and
delivered by a consignor of "memo" or "consigned" inventory to the Borrowers
substantially in the form of Exhibit 8.14 attached hereto (it being understood
and agreed that a letter agreement substantially in the form of the
corresponding exhibit to the Original Credit Agreement or the First or Second
Amended and Restated Credit Agreement shall be acceptable).
"Contingent Obligations" of any Person shall mean any direct or
indirect liability, contingent or otherwise, of such Person:
(i) with respect to any indebtedness, lease, dividend, letter of
credit or other obligation of another if the primary purpose or intent
in creating such liability is to provide assurance to the obligee of
such obligation of another that such obligation of another will be
paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof;
8
(ii) under any letter of credit issued for the account of such
Person or for which such Person is otherwise liable for reimbursement
thereof;
(iii) under any Hedge Agreement; or
(iv) to advance or supply funds or otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect
thereof.
Contingent Obligations shall include, without limitation:
(a) the direct or indirect guarantee, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, and
(b) any liability of such Person for the obligations of another
through any agreement (contingent or otherwise):
(i) to purchase, repurchase or otherwise acquire such obligation
or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise);
(ii) to maintain the solvency or any balance sheet item, level of
income or financial condition of another; or
(iii) to make take-or-pay or similar payments if required
regardless of non-performance by any other party or parties to an
agreement,
if in the case of any agreement described under subclause (i) or (ii) of this
sentence the primary purpose or intent thereof is as described in the
immediately preceding sentence. The amount of any Contingent Obligation shall be
equal to the amount of the obligation so guaranteed or otherwise supported.
"Contracts" means all "contracts," as such term is defined in the UCC,
now owned or hereafter acquired by any Credit Party, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.
"Control Agreement" means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated, securities entitlements and
other financial assets held in a securities account in the name of any Credit
Party, (iii) a futures commission merchant or clearing house, as applicable,
with respect to commodity accounts and commodity contracts held by any Credit
Party, effective to grant "control" (as defined under the applicable UCC) over
such account to the Agent.
"Controlled Securities Accounts" means each securities account or
commodity account (including all financial assets held therein and all
certificates and instruments, if any, representing or evidencing such financial
assets) that is the subject of an effective Control Agreement and that is
maintained by any Credit Party with a securities intermediary or commodity
intermediary approved by the Agent.
"Copyright License" means any and all rights now owned or hereafter
acquired by any Credit Party under any written agreement granting any right to
use any Copyright or Copyright registration.
9
"Copyrights" means all of the following now owned or hereafter adopted
or acquired by any Credit Party: (a) all copyrights and General Intangibles of
like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"Credit Card Services Account" shall mean that certain deposit account
maintained with Bank of America, N.A., account no. 684073343, established in
connection with the Credit Card Services Agreement.
"Credit Card Services Agreement" shall mean that certain Merchant
Credit Card Agreement dated as of May 9, 2002 by and among Carlyle, certain
Subsidiaries of Carlyle and Paymentech Merchant Services, Inc. or any similar
agreement acceptable to the Agent providing for credit card services and
amending or replacing such agreement.
"Credit Parties" shall mean and include the Borrowers, the Parent and
each other Guarantor.
"Current Liabilities" of any Person, determined at any time, shall
mean all liabilities of such Person which would, in accordance with GAAP, be
classified as current liabilities excluding Revolving Advances and excluding the
current portion of long-term Indebtedness for Borrowed Money.
"DAR License Agreement" shall mean that certain Licensing Agreement
effective January 1, 2003 between National Society Daughters of the American
Revolution and ▇.▇. ▇▇▇▇▇▇▇▇, as the same has been, or may hereafter be,
amended, supplemental, extended or otherwise modified from time to time.
"Default" shall mean an event, act or condition which with the giving
of notice or the lapse of time, or both, would constitute an Event of Default.
"Deposit Accounts" means all "deposit accounts" as such term is
defined in the UCC, now or hereafter held in the name of any Credit Party.
"Designated Officer" shall mean the chief financial officer,
president, any vice president having responsibility for financial affairs,
treasurer or controller of the Parent or the Borrowers, as the case may be.
"Disbursement Account" shall mean with respect to each Borrower, the
zero-balance accounts of such Borrower into which shall be deposited funds for
the purpose of managing disbursements, payroll and withholding tax and the
Master Disbursement Accounts.
"Disqualified Stock" shall mean any capital stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to date on
which the Senior Debentures mature.
"Documentation Agent" shall have the meaning set forth in the preamble
to this Agreement.
"Documents" means all "documents," as such term is defined in the UCC,
now owned or hereafter acquired by any Credit Party, wherever located.
10
"Domestic Inventory" shall mean Inventory (i) owned by any Finlay
Credit Party or Carlyle Credit Party and (ii) located in the United States of
America.
"Domestic Subsidiary" shall mean any Subsidiary of the Parent which is
not a Foreign Subsidiary.
"EBITDA" shall mean, for the Parent and its Subsidiaries, on a
consolidated basis for any period, the sum of:
(i) the net income (or net loss) from operations of the Parent
and its Subsidiaries on a consolidated basis (determined in accordance
with GAAP) for such period without giving effect to any extraordinary
gains or non-cash extraordinary losses, but giving effect to cash
extraordinary losses; plus
(ii) to the extent that any of the items referred to in any of
clauses (A) through (C) below were deducted in calculating such net
income:
(A) Interest Expense of the Parent and its Subsidiaries, on
a consolidated basis for such period;
(B) income tax expense of the Parent and its Subsidiaries,
on a consolidated basis with respect to operations for such
period; and
(C) the amount of all depreciation and amortization of the
Parent and its Subsidiaries, on a consolidated basis for such
period; plus (or minus)
(iii) without double counting items taken into account in clause
(C) above, all other non-cash charges or credits including any "LIFO"
charges or credits of the Parent and its consolidated Subsidiaries for
such period provided that such non-cash charges (or credits) cannot
become cash in accordance with GAAP;
(iv) any losses or gains resulting from the repurchase,
acquisition or redemption of Senior Notes.
"eFinlay" shall mean eFinlay, Inc., a Delaware corporation and
wholly-owned Subsidiary of Finlay.
"eFinlay Agreements" shall mean, collectively, the eFinlay
Contribution Agreement, the eFinlay FFJC Services Agreement, the eFinlay FMBI
Services Agreement and the eFinlay Lease Agreement.
"eFinlay Contribution Agreement" shall mean that certain Contribution
Agreement dated as of September 29, 2000 between Finlay and eFinlay (as
originally in effect, without any waivers or modifications materially adverse to
the Lenders not consented to by the Majority Lenders) pursuant to which Finlay
transferred certain assets to eFinlay.
"eFinlay FFJC Services Agreement" shall mean that certain Services
Agreement dated as of September 29, 2000 between Finlay and eFinlay (as
originally in effect, without any waivers or modifications materially adverse to
the Lenders not consented to by the Majority Lenders) pursuant to which Finlay
provides certain managerial advice, direction and services to eFinlay.
"eFinlay FMBI Services Agreement" shall mean that certain Services
Agreement dated as of September 29, 2000 between Finlay Merchandising and
eFinlay (as originally in
11
effect, without any waivers or modifications materially adverse to the Lenders
not consented to by the Majority Lenders) pursuant to which Finlay Merchandising
provides certain merchandising and buying services to eFinlay.
"eFinlay Lease Agreement" shall mean that certain Lease Agreement
dated as of September 29, 2000 between Finlay and eFinlay (as originally in
effect, without any waivers or modifications materially adverse to the Lenders
not consented to by the Majority Lenders) pursuant to which Finlay leases
certain space in its Connecticut distribution center to eFinlay.
"Eligible Inventory" shall mean, collectively, Finlay Eligible
Inventory and Carlyle Eligible Inventory.
"Employee Plan" shall mean an "employee benefit plan" as defined in
Section 3(3) of ERISA, which is maintained for, or contributions are made on
behalf of, employees of any Credit Party, and any ERISA Affiliate, other than a
Multiemployer Plan.
"Employment Agreements" shall mean the Finlay Employment Agreements
and the Carlyle Employment Agreements.
"Environmental Claim" shall mean any written notice of violation,
claim, demand, abatement or other order by any Governmental Authority or any
person for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or deed or use restrictions, resulting from or based upon (i) the
existence, or the continuation of the existence, of a Release (including,
without limitation, sudden or non-sudden, accidental or nonaccidental Releases),
of, or exposure to, any Hazardous Material or any substance, chemical, material,
pollutant, contaminant, odor or audible noise in, into or onto the environment
(including, without limitation, the air, ground, water or any surface) at, in,
by or from any of the Facilities, (ii) the environmental aspects of the
transportation, storage, treatment or disposal of materials in connection with
the operation of any of the Facilities or (iii) the violation, or alleged
violation by the Parent or any of its Subsidiaries, of any statutes, ordinances,
orders, rules, regulations, Permits or licenses of or from any Governmental
Authority, agency or court relating to environmental matters connected with any
of the Facilities, under any applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Oil
Pollution Act of 1990 (P.L. 101-380), the Safe Drinking Water Act (42 U.S.C.
Section 300(f), et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.),
the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601 et seq.),
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), as such laws have been and hereafter may be amended or supplemented, and
any analogous future federal, or any analogous present or future, and
applicable, state or local, statutes and regulations promulgated pursuant
thereto, or any other federal, state or local statute, ordinance or regulation
which regulates or creates liability with respect to a Hazardous Material.
"Equipment" means all "equipment," as such term is defined in the UCC,
now owned or hereafter acquired by any Credit Party, wherever located and, in
any event, including all such Credit Party's machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto,
12
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"Equity Interests" shall mean capital stock and all warrants, options
or other rights to acquire capital stock or that are measured by the value of
capital stock (but excluding any debt security that is convertible into, or
exchangeable for, capital stock).
"ERISA" shall mean, at any date, the Employee Retirement Income
Security Act of 1974 and the regulations promulgated and rulings issued
thereunder, all as the same shall be in effect at such date.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated), any individual, trust, firm, partnership or joint venture that
for purposes of Title I and Title IV of ERISA and Section 412 of the Code is a
member of any Credit Party's controlled group or is under common control with
any Credit Party within the meaning of Section 414(b), (c), (m) or (o) of the
Code, and the regulations promulgated and rulings issued thereunder.
"ERISA Event" shall mean, with respect to any Credit Party or any
ERISA Affiliate and with respect to any Pension Benefit Plan subject to Title IV
of ERISA or Section 412 of the Code, (a) a Reportable Event (other than a
Reportable Event for which the 30-day notice to the PBGC has been waived under
section 4043 of ERISA and the regulations promulgated thereunder), (b) the
withdrawal of any Credit Party or any ERISA Affiliate from a Pension Benefit
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the provision of a notice of intent to
terminate a Pension Benefit Plan under Section 4041 of ERISA, resulting in a
material liability (d) the institution of proceedings to terminate a Pension
Benefit Plan by the PBGC under Section 4042 of ERISA, (e) the failure to make
required contributions which would result in the imposition of a Lien under
Section 412 of the Code or Section 302 of ERISA, or (f) any other event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Benefit Plan or to cause the imposition of any material
liability on any Credit Party or any ERISA Affiliate under Title IV of ERISA.
"Eurodollar Advance" shall mean the portion of any Revolving Advance
designated to bear interest based upon the Adjusted Eurodollar Rate as provided
in Section 2 of this Agreement.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Advance
for any Interest Period, a rate of interest determined by Agent equal to the
offered rate for deposits in U.S. dollars for the applicable Interest Period
that appears on Telerate Page 3750 as of 11:00 a.m. (London time), on the second
full Eurodollar Business Day next preceding the first day of such Interest
Period (unless such date is not a Business Day, in which event the next
succeeding Business Day will be used), subject, however, to the provisions of
Section 2.11 hereof. If such interest rates shall cease to be available from
Telerate News Service, the Eurodollar Rate shall be determined from such
financial reporting service or other information as shall be mutually acceptable
to the Borrower and the Agent. The term "Eurodollar Business Day" means a
Business Day on which banks in London, England are generally open for interbank
or foreign exchange transactions.
"Events of Default" shall have the meaning set forth in Section 10.1
hereof.
"Excess Availability" shall mean, as of any date of determination, the
excess, if any, of (a) the lesser of (i) the Aggregate Borrowing Base or (ii)
the aggregate Revolving Credit Facility Commitment minus (b) the aggregate
outstanding Loans and Letter of Credit Obligations at such time.
13
"Excess Lay-Away Deposits" shall mean the amount of deposits received
by a Carlyle Credit Party in respect of in-stock merchandise pursuant to
Carlyle's lay-away program in excess of $500,000.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Claims" shall have the meaning set forth in Section 2.12(c)
hereof.
"Excluded Taxes" shall mean (A) franchise taxes and taxes upon or
determined by reference to any Lender's net income, in each case, imposed by the
United States of America or any political subdivision or taxing authority
thereof or therein or by any jurisdiction in which the Initial Eurodollar Office
or other branch of any Lender is located, is resident or in which any Lender is
organized or has its principal or registered office (including, without
limitation, branch taxes imposed by the United States or similar taxes imposed
by any subdivision thereof), (B) any United States withholding taxes payable
with respect to payments hereunder or the Notes or under the Loan Documents
under laws (including any statute, treaty or regulation) in effect on the
Closing Date (or, in the case of (i) an assignee, the date of the Assignment
Agreement, (ii) a successor Agent, the date of the appointment of such Agent,
and (iii) a successor L/C Issuer, the date such L/C Issuer becomes an L/C
Issuer) applicable to such Lender, such L/C Issuer or the Agent, as the case may
be, but not excluding any United States withholding tax payable with respect to
interest arising under a Loan Document as a result of any change in such laws
occurring after the Closing Date (or the date of such Assignment Agreement or
the date of such appointment of such Agent or the date such L/C Issuer becomes
an L/C Issuer), (C) any other United States federal taxes, and (D) all
liabilities, penalties and interest with respect to any of the foregoing.
"Existing Carlyle Credit Agreement" shall mean the Fourth Amended and
Restated Credit Agreement dated as of November 18, 2004 between Bank of America,
N.A. and Carlyle.
"Facilities" shall mean real property owned, operated or leased by any
Credit Party.
"Factor Guaranties" shall mean collectively the factor guaranties
dated as of December 9, 2002 issued by GE Capital Commercial Services, Inc. to
Finlay, guaranteeing receivables from certain customers of Finlay and any future
factor guaranties in form and substance similar to the existing factor
guaranties or otherwise reasonably acceptable to the Agent, including the
Assignment of Factoring Credit Balances to be entered into pursuant to Section
8.24.
"Federal Bankruptcy Code" shall mean Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto.
"Federal Funds Rate" shall mean, for any day, a floating rate equal to
the weighted average of the rates on overnight Federal funds transactions among
members of the Federal Reserve System, as determined by the Agent.
"Fee Letters" shall mean, collectively, those certain fee letters,
each dated as of the date hereof between GE Capital and the Borrowers.
"Financial Statements" shall mean the financial statements most
recently delivered to the Agent prior to the Closing Date pursuant to Section
8.1 of the First Amended and Restated Credit Agreement.
"Finlay" shall have the meaning set forth in the preamble to this
Agreement.
"Finlay Blocked Account" means a Blocked Account held by a Finlay
Credit Party.
14
"Finlay Borrowing Base" shall mean, at any time, the sum of (i) an
amount equal to sixty percent (60%) of the aggregate value (lower of cost (on a
first-in-first-out basis consistent with Finlay's practices) and current market
value) of Finlay Eligible Inventory plus (ii) an amount equal to eighty-five
percent (85%) of the Net Amount of Eligible Receivables of the Finlay Credit
Parties; in each case as indicated on the most recent monthly Borrowing Base
Certificate delivered to the Agent by Finlay as of such time, unless a more
recent Borrowing Base Certificate has been requested by the Agent pursuant to
Section 8.1 and delivered by Finlay to the Agent, in which case as indicated on
such more recent Finlay Borrowing Base Certificate. In no event shall the Finlay
Borrowing Base be attributable to Foreign Inventory and Foreign Receivables.
The Agent reserves the right to adjust the Finlay Borrowing Base in
its reasonable judgment by revising standards of eligibility, establishing
reserves, and/or subject to the following sentence increasing or decreasing from
time to time the percentages set forth above, in which case "Finlay Borrowing
Base" shall be defined to include such revisions, reserves or altered
percentages. Notwithstanding the foregoing, any increase in the percentages set
forth above shall require the consent of the Majority Lenders.
"Finlay Credit Parties" shall mean, collectively, Finlay, Finlay
Jewelry, Finlay Merchandising and eFinlay.
"Finlay Eligible Inventory" shall mean such of the Domestic Inventory
(valued at the lower of cost (on a first-in-first-out basis) and current market
value) of the Finlay Credit Parties which is subject to no Lien (other than in
favor of the Agent or otherwise permitted by the Loan Documents) and which the
Agent, in its reasonable discretion, shall deem eligible, less such reserves as
the Agent, in its reasonable discretion, shall from time to time deem
appropriate and shall exclude, in any event, the categories of Inventory deemed
ineligible as set forth on the Borrowing Base Certificate most recently
delivered by the Borrower Representative prior to the Closing Date. The Agent
does not intend to treat an item of Inventory as eligible if any warranty or
representations contained in any of the Loan Documents applicable either to
Eligible Inventory in general or to any such specific Inventory has been
breached with respect to such Inventory.
"Finlay Eligible Receivables" shall mean (A) amounts payable to a
Finlay Credit Party, whether or not due under the License Agreements (and
attributable to an underlying sale of inventory to a customer of the host
store), including, without limitation, at any time during any calendar month (or
other relevant calculation period under a License Agreement), amounts which,
based on gross sales in accordance with the terms of the License Agreements, the
Finlay Credit Parties has calculated will become due and payable to the Finlay
Credit Parties under the License Agreements as of the end of such calendar month
(or other relevant calculation period under a License Agreement), in each case,
less (B) (a) all amounts payable by a Finlay Credit Party (by set-off or
otherwise), whether or not due under the License Agreements, including, without
limitation, at any time during any calendar month (or other relevant calculation
period under a License Agreement), all amounts which, based on the terms of such
License Agreement or otherwise, the Finlay Credit Parties have calculated will
become due and payable (by set-off or otherwise) by the Finlay Credit Parties
(including, without limitation, by means of offset or deduction from amounts
payable to the Finlay Credit Parties under the License Agreements) as of the end
of such calendar month (or other relevant calculation period under a License
Agreement), such amounts payable by the Finlay Credit Parties to include,
without limitation, the percentage of sales, net sales or other amount which is
withheld from the Finlay Credit Parties by the other party thereto as a license
fee, rental fee or otherwise, all amounts denominated as "Other Costs" or any
similar term under any License Agreement, including, without limitation,
discounts payable in respect of credit card sales, interest, carrying or service
charges collected by the other party to any License Agreements, and charges
payable by or charged to the Finlay Credit Parties in respect of advertising or
promotion, (b) the amount of all sales in respect of which goods have been
returned and (c) all other amounts or adjustments which, based on the License
Agreements or otherwise, was or as of the end of any calendar month (or other
relevant
15
calculation period) will be deducted from amounts payable to the Finlay Credit
Parties or will be payable by the Finlay Credit Parties under the License
Agreements (the excess of (A) over (B), the "Net Amount of Eligible
Receivables"), in each case, as such amounts and deductions described in clauses
(A) and (B) are set forth on the most recent Borrowing Base Certificate
delivered by the Finlay Credit Parties under Section 8.1(p) hereof or pursuant
to the request of the Agent, in each case, except to the extent that the Agent
has determined that any amount payable to the Finlay Credit Parties under any
one or more License Agreements is not an Eligible Receivable or has determined
that any amount payable by the Finlay Credit Parties should be increased, and
less such reserves as the Agent shall reasonably deem appropriate.
For the purposes of this Agreement, the term "Account" shall also
include, with respect to any License Agreement, amounts described in clause (A)
of this definition payable to the Finlay Credit Parties under such License
Agreement (whether or not due), less the amounts described in clauses (B)(a),
(B)(b) and (B)(c) of this definition which have been or will be deducted
therefrom or will be payable by the Finlay Credit Parties.
Without in any way limiting the discretion of the Agent to deem or not
deem any Account arising from any License Agreement as an Eligible Receivable,
Agent does not currently intend to treat an Account as eligible if:
(a) any warranty or representation contained in any of the Loan
Documents applicable either to Accounts in general or to any such specific
Account or related License Agreement has been breached with respect to such
Account or License Agreement;
(b) 50% or more of the outstanding Accounts from the Account Debtor
which constituted Eligible Receivables at the time they arose have become, or
been determined by the Agent, in its reasonable credit judgment, to be,
ineligible;
(c) such Account is owed by an Account Debtor which has commenced a
voluntary case under the bankruptcy or insolvency laws of any jurisdiction, or
made an assignment for the benefit of creditors, or against which a decree or
order for relief has been entered by a court in an involuntary case under the
bankruptcy or insolvency laws of any jurisdiction, or against which any other
petition or other application for relief under the bankruptcy or insolvency laws
of any jurisdiction has been filed, or which has suspended business or consented
to or suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs (except that
such an Account shall not be deemed ineligible under this clause (c) if the
Agent, in its reasonable discretion, deems such Account as not ineligible or to
the extent that and only so long as the Account Debtor on such Account shall
have a debtor-in-possession credit facility or other credit support, in each
instance reasonably satisfactory to the Agent, to assure timely payment of such
Account and such Account (to the extent not covered by credit insurance) shall
constitute a post-petition claim against such Account Debtor);
(d) any amount payable in respect of such Account is more than 60 days
past due;
(e) the License Agreement under which such Account arises has been
terminated (or notice of termination given) or is otherwise not in full force or
effect (or, if not in effect because such License Agreement has been approved as
a reasonably acceptable arrangement by the Agent, if the Agent's approval has
been rescinded), Finlay or the licensor thereunder is in material default under
such License Agreement, the licensor under such License Agreement is entitled to
withhold amounts which may be withheld only upon default by Finlay thereunder,
or the Account Debtor under such License Agreement has no place of business in
the United States;
(f) the Account Debtor is an Affiliate or employee of the Parent or
any of its Subsidiaries;
16
(g) such Account is denominated in other than United States dollars or
is payable outside the United States;
(h) such Account is subject to any claim or dispute by the Account
Debtor, in which event such Account will be deemed ineligible to the extent of
such claim or dispute;
(i) such Account may become subject to any setoff (not already taken
into account in clauses (B)(a), (B)(b) or (B)(c) of this definition) by the
Account Debtor, in which event such Account will be deemed ineligible to the
extent of such setoff;
(j) such Account is not subject to an enforceable and duly perfected
first priority Lien in favor of the Agent as security for the Obligations, or
such Account is not owned by Finlay free and clear of all Liens, claims,
defenses or rights of others except the Liens granted to the Agent pursuant to
the Loan Documents or otherwise permitted hereunder;
(k) any sale taken into account in determining the amount payable to
Finlay in respect of such Account by the Account Debtor was made other than in
accordance with the terms of the applicable License Agreement;
(l) such Account is not a genuine, bona fide obligation of the Account
Debtor or is not valid, binding and enforceable against the Account Debtor in
accordance with its terms;
(m) such Account is evidenced by any note, draft, trade acceptance or
other instrument for the payment of money which has not been delivered in pledge
to the Agent (endorsed in a manner acceptable to the Agent); or
(n) such Account is assigned to the credit insurance company pursuant
to the Factor Guaranties.
"Finlay Employment Agreements" shall mean (a) the written employment
agreement dated as of January 30, 2005 between Finlay and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, (b)
the letter agreement dated April 18, 1997 by the Parent in favor of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, and (c) each other written employment agreement between Finlay and any
other full time employee of Finlay in effect at any time, as each may be
amended, modified, supplemented, restated, renewed, replaced or extended from
time to time in accordance with its terms and the limitations set forth in
Section 9.12 hereof.
"Finlay Jewelry" shall mean Finlay Jewelry, Inc., a Delaware
corporation.
"Finlay License Agreement" shall mean the Trade Name License Agreement
dated as of October 28, 1998 among Finlay Merchandising, Finlay and the Parent,
as such may be amended, modified or supplemented from time to time in accordance
with its terms and the terms hereof.
"Finlay Merchandising" shall mean Finlay Merchandising & Buying, Inc.,
a Delaware corporation and wholly owned Subsidiary of Finlay.
"FIRREA" shall mean the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended from time to time.
"First Amended and Restated Credit Agreement" shall have the meaning
set forth in the second "WHEREAS" clause to this Agreement.
"First Supplemental Indenture" shall mean, collectively, the
Supplemental Indentures to the Senior Indenture and the respective Subsidiary
Guarantees relating thereto pursuant to which each of the Carlyle Credit Parties
shall guaranty the Senior Notes, each dated the date hereof.
17
"Fiscal Year" shall mean, with respect to the Parent and its
consolidated Subsidiaries, each annual accounting period which begins on the day
immediately following the end of the preceding period and ends on the Saturday
closest to January 31 of each year.
"Fixed Charges" shall mean, for any period, the sum of (i) Cash
Interest Expense for such period, plus (ii) the amount of payments of principal
on Indebtedness for Borrowed Money, including, without limitation, Capitalized
Lease Obligations, scheduled to be made during such period excluding payments of
principal on the Revolving Loan or in respect of reimbursement of Letters of
Credit (or guaranties thereof), plus (iii) dividends paid in cash by the Parent
during such period plus (iv) to the extent the aggregate amount of Senior Notes
repurchased after January 31, 2005 under Section 9.6(b)(ii) hereof exceeds the
Base Repurchase Amount, the amount of such excess; provided that, to avoid
duplication, in calculating Fixed Charges for a test period, any amount under
clause (iv) included in the calculation of Fixed Charges for any prior test
period shall be deducted from the aggregate amount of Senior Notes repurchased.
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of
(a) the excess, if any, of (i) EBITDA of the Parent and its Subsidiaries for
such period over the sum of (x) the amount of cash applied by the Parent to the
payment of income taxes of the Parent and its Subsidiaries in respect of such
period, whether directly or pursuant to the Tax Allocation Agreement plus (y)
the amount of Capital Expenditures made by the Parent and its Subsidiaries
during such period to (b) Fixed Charges.
"Fixtures" means all "fixtures" as such term is defined in the UCC,
now owned or hereafter acquired by any Credit Party.
"Foreign Lender" shall have the meaning set forth in Section 2.22(c).
"Foreign Subsidiary" shall mean a Subsidiary of the Parent organized
under the laws of a country other than the United States or any State thereof.
"GAAP" shall mean, for the Parent or any of its Subsidiaries,
generally accepted accounting principles in the United States of America,
consistent with those applied in the preparation of the financial statements of
the Parent and its Subsidiaries from time to time; provided, however, that for
the purposes of determining compliance with the financial covenants contained in
Section 8.17 hereof (and the definitions contained herein to the extent employed
in determining such compliance) only, GAAP shall mean such accounting principles
as in effect and as applied on the Closing Date.
"GE Capital" shall have the meaning set forth in the preamble to this
Agreement.
"General Intangibles" means all "general intangibles," as such term is
defined in the UCC, now owned or hereafter acquired by any Credit Party,
including all right, title and interest that such Credit Party may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, IP Licenses, Copyrights, Trademarks, Patents, and all applications
therefor and reissues, extensions or renewals thereof, rights in Intellectual
Property, interests in partnerships, joint ventures and other business
associations, licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models, drawings,
materials and records, goodwill (including the goodwill associated with any
Trademark or Trademark License), all rights and claims in or under insurance
policies (including insurance for fire, damage, loss and casualty, whether
covering personal property, real property, tangible rights or intangible rights,
all liability, life, key man and business interruption insurance, and all
unearned premiums), uncertificated securities, choses in action, deposit,
checking and other bank accounts, rights to receive tax refunds and other
payments, rights to receive dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, rights of indemnification, all books and records, correspondence,
credit files, invoices and other papers, including
18
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Credit Party or any
computer bureau or service company from time to time acting for such Credit
Party.
"GOB Appraisal Value" shall mean that value, net of expenses,
established by the appraisal conducted by the GB Asset Advisors on September 9,
2004 and each other periodic appraisal delivered pursuant to Section 8A(c)
hereof.
"Gold Consignment Agreement" shall mean the Amended and Restated Gold
Consignment Agreement dated as of March 30, 2001 among Finlay, eFinlay,
Sovereign Bank and Commerzbank International S.G. as amended, restated, modified
or supplemented from time to time in accordance with its terms and the
limitations set forth in Section 9.12 hereof.
"Gold Consignment Documents" shall mean and include the Gold
Consignment Agreement and each of the Consignment Documents (as defined
therein), other than the Sovereign Intercreditor Agreement, in each case, as
amended, modified or supplemented from time to time in accordance with its terms
and the limitations set forth in Section 9.12 hereof; provided that the Gold
Consignment Documents shall be subject at all times to the terms and provisions
of the Sovereign Intercreditor Agreement.
"Goods" means all "goods" as defined in the UCC, now owned or
hereafter acquired by any Credit Party, wherever located, including embedded
software to the extent included in "goods" as defined in the UCC, manufactured
homes, standing timber that is cut and removed for sale and unborn young of
animals.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantor" shall mean, at any time, each present or future direct and
indirect Subsidiary of the Borrowers, or other Person, in any case, which shall
have executed and delivered a Guaranty as of such time.
"Guaranty" shall mean any guaranty executed and delivered pursuant to
Section 4.8 hereof, as each may be amended, supplemented or otherwise modified
from time to time in accordance with its terms.
"Guaranty Obligations" shall mean the obligations of any Guarantor
under the Loan Documents to which such Guarantor is a party.
"Hazardous Material" shall mean any pollutant, contaminant, chemical,
or industrial or hazardous or toxic waste, substance or material, as defined in
or regulated by any Environmental Law and any other toxic, reactive, or
flammable chemicals, including (without limitation) any asbestos, any petroleum
(including crude oil or any fraction), any radioactive substance and any
polychlorinated biphenyls; provided, in the event that any Environmental Law is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment; and
provided, further, to the extent that the applicable laws of any state establish
a meaning for "hazardous material," "hazardous substance," "hazardous waste,"
"solid waste" or "toxic substance" which is broader than that specified in any
Environmental Law, such broader meaning shall apply.
"Hedge Agreements" shall mean and include (i) interest rate swap
agreements, currency swap agreements, interest rate cap agreements and interest
rate collar agreements, (ii) other agreements or arrangements designed to hedge
against fluctuations in interest rates or foreign exchange rates and (iii)
precious metal options and futures contracts and other precious metal hedging
obligations.
19
"Indebtedness" of any Person shall mean all items which, in accordance
with GAAP, would be included in determining total liabilities of such Person as
shown on the liability side of a balance sheet as at the date Indebtedness of
such Person is to be determined and, in any event, shall include (without
limitation and without duplication):
(i) all trade accounts payable of such Person;
(ii) any liability of such Person secured by any Lien on property
owned or acquired by such Person, whether or not such liability shall
have been assumed;
(iii) all Contingent Obligations of such Person;
(iv) letters of credit issued for the account of such Person or
an Affiliate thereof, and all obligations of such Person relating
thereto;
(v) all obligations (other than obligations to pay fees in
connection therewith) of such Person in respect of Hedge Agreements;
and
(vi) all obligations of such Person under the Gold Consignment
Documents, whether or not due; provided that if in accordance with
GAAP any such obligations under the Gold Consignment Documents would
not be included in determining total liabilities of such Person as
shown on the liability side of a balance sheet of such Person, then
for purposes of the calculation of the financial covenants in Section
8.17 hereof, such excluded obligations shall not constitute
"Indebtedness".
"Indebtedness for Borrowed Money" of any Person shall mean all
Indebtedness for borrowed money or evidenced by notes, bonds, debentures or
similar evidences of Indebtedness of such Person (including in the event that
any obligations of such Person under the Gold Consignment Documents would, in
accordance with GAAP, be included in determining total liabilities of such
Person as shown on the liability side of a balance sheet of such Person, such
obligations under the Gold Consignment Documents), all obligations of such
Person for the deferred and unpaid purchase price of any property, service, or
business (other than trade accounts payable incurred in the ordinary course of
business and constituting Current Liabilities and other than Hedge Agreements),
and all obligations of such Person under Capitalized Lease Obligations and
finance leases.
"Indemnification Agreements" shall mean, collectively, each of the
Indemnification Agreements among the Parent and Finlay, and each of their (and
their Subsidiaries') respective directors and executive officers, substantially
in the form of Exhibit B attached hereto, as each may be amended, modified or
supplemented from time to time in accordance with its terms and the terms
hereof.
"Indemnified Party" shall have the meaning set forth in Section
2.12(c) hereof..
"Independent Retail Store" shall mean a retail store location operated
by any of the Carlyle Credit Parties as an independent retail establishment (and
not as a department in an establishment owned or operated by another person)
selling fine jewelry and fine giftware and related products and services in a
location consisting of a standalone store or a store located in a shopping mall
or similar location.
"Index Rate" shall mean, for any day, a floating rate equal to the
higher of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "prime rate" (or, if The Wall Street Journal ceases quoting a
"prime rate", the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus fifty (50) basis points per
20
annum. Each change in any interest rate provided for in this Agreement based
upon the Index Rate shall take effect at the time of such change in the Index
Rate.
"Initial Adjustment Date" shall have the meaning set forth in Section
2.6(f) hereof.
"Initial Eurodollar Office" shall mean, for any Lender, the branch or
Affiliate of such Lender designated as the Initial Eurodollar Office of such
Lender in Exhibit A hereto.
"Initial License Expense" shall mean any franchise or other fee or
other expense paid in cash by Finlay or a Foreign Subsidiary as consideration
for the initial granting of a license under a License Agreement.
"Instruments" means all "instruments," as such term is defined in the
UCC, now owned or hereafter acquired by any Credit Party, wherever located, and,
in any event, including all certificated securities, all certificates of
deposit, and all promissory notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" means any and all IP Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks.
"Interest Expense" shall mean, with respect to any Person for any
period, the interest expense (whether cash or accretion) of such Person during
such period determined in accordance with GAAP, and shall include in any event,
without limitation, interest expense with respect to Indebtedness for Borrowed
Money (including with respect to Finlay, in the event that the obligations and
liabilities of Finlay under the Gold Consignment Documents would, in accordance
with GAAP, be included in determining total liabilities of Finlay as shown on
the liability side of a balance sheet of Finlay, "Daily Consignment Fees" as
such term is defined in the Gold Consignment Agreement as in effect on the date
of execution thereof) and payments under Hedge Agreements that are designed to
hedge against fluctuations in interest rates and shall exclude the write off of
deferred financing fees.
"Interest Payment Date" shall mean, with respect to each Eurodollar
Advance, the last day of the Interest Period for such Eurodollar Advance;
provided, however, that with respect to each Interest Period for any Eurodollar
Advance of a duration of more than three months, interest shall be payable at
three-month intervals and on the last day of such Interest Period.
"Interest Period" shall mean, with respect to each Eurodollar Advance,
initially, the period commencing on, as the case may be, the borrowing or
conversion date with respect to such Eurodollar Advance and ending one, two,
three or (if available) six months thereafter, as selected by Borrowers; and
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Advance and ending one, two, three
or (if available) six months thereafter, as selected by Borrowers; provided,
however, that no Interest Period may be selected for a Eurodollar Advance which
expires later than the Maturity Date; provided, further, that any Interest
Period in respect of a Eurodollar Advance which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
the foregoing proviso, end on the last Business Day of a calendar month.
Notwithstanding the above, all Interest Periods shall be adjusted in accordance
with Section 12.11 hereof.
"Inventory" means all "inventory," as such term is defined in the UCC,
now owned or hereafter acquired by any Credit Party, wherever located, and in
any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Credit Party for sale or lease or are
furnished or are to be furnished under a contract of service, or that constitute
raw materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party's business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
21
and embedded software. Without limiting the foregoing, "Inventory" shall include
such inventory as is on consignment to third party consignees, leased to
customers of the Borrowers, or otherwise temporarily out of the custody or
possession of the Borrowers, excluding any Consignment Inventory.
"Investment" shall have the meaning set forth in Section 9.4 hereof.
"Investment Property" means all "investment property" as such term is
defined in the UCC now owned or hereafter acquired by any Credit Party, wherever
located, including (i) all securities, whether certificated or uncertificated,
including stocks, bonds, interests in limited liability companies, partnership
interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of any Credit Party, including the rights of any Credit
Party to any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account; (iii)
all securities accounts of any Credit Party; (iv) all commodity contracts of any
Credit Party; and (v) all commodity accounts held by any Credit Party.
"IP License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Credit Party.
"▇.▇. ▇▇▇▇▇▇▇▇" shall mean ▇.▇. ▇▇▇▇▇▇▇▇ Co., a Pennsylvania
corporation.
"▇▇▇▇ ▇▇▇▇▇ Employment Agreement" shall mean the Employment Agreement
dated as of the date hereof (as originally in effect or as amended in accordance
with its terms and the limitations set forth in Section 9.12 hereof) among ▇▇▇▇
▇. ▇▇▇▇▇ and Carlyle.
"L/C Issuer" shall have the meaning set forth in Section 2A.1 hereof.
"L/C Sublimit" shall have the meaning set forth in Section 2A.1
hereof.
"Land" shall have the meaning set forth in the definition of Real
Estate herein.
"Landlord's Certificate" shall have the meaning set forth in Section
4.3 hereof.
"Lease" shall mean each lease or sublease of real property existing on
the date hereof under which any Credit Party is the lessee or sublessee and each
future lease or sublease of real property under which any Credit Party is the
lessee or sublessee; provided, however, that in no event shall the term "Lease"
be deemed to include any License Agreement. The exclusion of License Agreements
from the defined term "Lease" shall not be construed as an admission,
determination or opinion of the Agent or any Lender that the License Agreements
are not leases or executory contracts for the purposes of Section 365 of the
Federal Bankruptcy Code.
"Leasehold Mortgage" shall have the meaning set forth in Section
4.4(a)(ii) hereof.
"▇▇▇ Group" shall mean THL Equity Partners, L.P., together with its
Affiliates and their respective successors and assigns.
"Lender" and "Lenders" shall have the respective meanings set forth in
the preamble to this Agreement.
"Letter of Credit Cash Collateral" shall have the meaning set forth in
Section 3.1(a) hereof.
"Letter of Credit Fee" shall have the meaning set forth in Section
2A.4 hereof.
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"Letter of Credit Obligations" means all outstanding obligations
incurred by Agent and Lenders at the request of Borrower Representative, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of Letters of Credit by Agent or another L/C Issuer or the purchase
of a participation as set forth in Section 2A with respect to any Letter of
Credit. The amount of such Letter of Credit Obligations shall equal the maximum
amount that may be payable by Agent or Lenders thereupon or pursuant thereto.
"Letters of Credit" means documentary or standby letters of credit
issued for the account of either Borrower by any L/C Issuer, and bankers'
acceptances issued by any Borrower, for which Agent and Lenders have incurred
Letter of Credit Obligations, and shall include such letters of credit
outstanding on the Closing Date issued pursuant to the Original Credit Agreement
or the First Amended and Restated Credit Agreement.
"Letter-of-Credit Rights" means letter-of-credit rights as such term
is defined in the UCC, now owned or hereafter acquired by any Credit Party,
including rights to payment or performance under a letter of credit, whether or
not such Credit Party, as beneficiary, has demanded or is entitled to demand
payment or performance.
"Leverage Ratio" shall mean, as of the end of any period, the ratio of
(a) the aggregate principal amount of all Indebtedness for Borrowed Money of the
Parent and its Subsidiaries as of the end of such period to (b) EBITDA of the
Parent and its Subsidiaries, for such period.
"License Agreement" shall mean an agreement (or an arrangement not in
writing which has been described by Finlay in writing to the Agent and approved
by the Agent in writing) (i) between Finlay and another Person (which is not an
Affiliate of Finlay), whether entered into prior to or after the Closing Date,
granting to Finlay the right to operate a fine jewelry department in an
establishment owned or operated by such Person or (ii) between eFinlay and
another Person (which is not an Affiliate of Finlay), whether entered into prior
to or after the Closing Date, granting eFinlay the right to sell fine jewelry
through a website owned or operated by such Person, in each case in the form as
in effect on the Closing Date or as amended, modified, extended or supplemented
in accordance with the terms thereof and hereof. If a License Agreement which is
an approved arrangement as of the Closing Date is memorialized in a writing
signed by the licensor after the Closing Date, it shall be deemed entered into
and effective as of the Closing Date. The failure of Finlay to obtain the
written approval of the Agent for an Unapproved License Agreement, shall result
in such arrangement not constituting a License Agreement hereunder (including,
without limitation, for the purpose of the definition of Eligible Receivables)
but shall not be an Event of Default hereunder.
The Agent reserves the right, in its reasonable judgment, to withdraw
at any time its approval with respect to any License Agreement which is not
evidenced by a written agreement and immediately upon such withdrawal of its
approval of such arrangement, such arrangement shall cease to constitute a
License Agreement for purposes of this Agreement.
"Lien" shall mean any lien, mortgage, pledge, security interest or
other type of charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other
encumbrance on title to real property and any financing statement filed in
respect of any of the foregoing. For the purposes of this Agreement, a Credit
Party shall be deemed to be the owner of any property which it has placed in
trust for the benefit of the holder of Indebtedness of such Credit Party (or any
agent or trustee of such holder) which Indebtedness is deemed to be extinguished
under GAAP but for which such Credit Party or trust remains legally liable, and
such trust shall be deemed to be a Lien.
"Loan" shall mean the Revolving Loan.
"Loan Account" shall have the meaning set forth in Section 2.21.
23
"Loan Documents" shall mean this Agreement, each Security Document,
each Guaranty, the Notes, the Master Standby Agreement, the Master Documentary
Agreement, the Borrower's Certificate, each Borrowing Base Certificate, each
Landlord's Certificate, each Collecting Bank Agreement, the Fee Letter, and each
other document or instrument now or hereafter delivered to the Agent or any
Lender pursuant to or in connection herewith or therewith.
"Long Term Incentive Plan" shall mean the Long Term Incentive Plan of
the Parent, as amended, modified, supplemented, restated, renewed or replaced
from time to time in accordance with its terms and the terms hereof, which shall
include the 1997 Long Term Incentive Plan of the Parent.
"Master Disbursement Accounts" shall mean Finlay's deposit account at
Deutsche Bank Trust Company Americas, number ▇▇-▇▇▇-▇▇▇ and Carlyle's deposit
account at Bank of America, N.A., number ▇▇▇▇-▇▇▇▇-▇▇▇▇.
"Majority Lenders" shall mean, at any time, (a) in the event there are
at least two or more Lenders at such time, at least two Lenders having at least
fifty-one percent (51%) of the amount of the Aggregate Revolving Commitments of
the Lenders at such time or (b) in the event there is only one Lender at such
time, such Lender having one hundred percent (100%) of the amount of the
Aggregate Revolving Commitments at such time.
"Master Documentary Agreement" means the Master Agreement for
Documentary Letters of Credit, in substantially the form of Exhibit C, dated as
of the Closing Date between Borrowers, as Applicant, and GE Capital, as Issuer.
"Master Standby Agreement" means the Master Agreement for Standby
Letters of Credit, in substantially in the form of Exhibit D, dated as of the
Closing Date between Borrowers, as Applicant, and GE Capital, as Issuer.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, operations or financial or other condition of the Parent
and its Subsidiaries, taken as a whole, (ii) the Parent's, the Borrowers' and
their Subsidiaries' collective ability to pay the Obligations in accordance with
the terms thereof or (iii) the Agent's Lien on any material portion of the
Collateral or the priority of any such Lien.
"Maturity Date" shall mean the earliest of (a) January 15, 2008, (b)
the date of termination of Lenders' obligations to make Revolving Advances and
to incur Letter of Credit Obligations or permit existing Revolving Advances to
remain outstanding pursuant to Section 10.1, and (c) the date of indefeasible
prepayment in full by Borrowers of the Loan and the cancellation and return (or
stand-by guarantee) of all Letters of Credit or the cash collateralization of
all Letter of Credit Obligations pursuant to Section 2A, and the permanent
reduction of the Revolving Commitment to zero dollars ($0).
"Maximum Lawful Rate" shall have the meaning set forth in Section
2.18(a) hereof.
"Maximum Permissible Rate" shall have the meaning set forth in Section
2.18(b) hereof.
"Montgomery" shall mean Carlyle & Co. of Montgomery, an Alabama
corporation.
"Mortgage" shall have the meaning set forth in Section 4.4(a)(i)
hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" (as defined in
Section 4001(a)(3) in ERISA) maintained or contributed to for employees of (i)
the Parent or any of its Subsidiaries; (ii) any Credit Party; or (iii) any ERISA
Affiliate.
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"Net Amount of Eligible Receivables" shall have the meaning set forth
in the definition of "Eligible Receivables" contained herein.
"Net Cash Proceeds" shall mean, with respect to any transaction, (i)
cash (freely convertible into U.S. dollars) received by a Credit Party from such
transaction (including cash received as consideration for the assumption or
incurrence of liabilities incurred in connection with or anticipation of such
transaction), after (a) provision for all income, title, recording or other
taxes measured by or resulting from such transaction, (b) payment of all
brokerage commissions, reasonable investment banking and legal fees and other
fees and expenses related to such transaction, (c) deduction of appropriate
amounts to be provided by such Credit Party as a reserve, in accordance with
GAAP, against any liabilities associated with the assets sold or disposed of in
such transaction and retained by such Credit Party after such transaction,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such transaction and (d) amounts paid to satisfy Indebtedness (other than any
Obligations) which are required to be repaid in connection with any such
transaction and (ii) promissory notes received by such Credit Party from such
transaction or such other disposition upon the liquidation or conversion of such
notes into cash.
"Notes" shall mean and include each of the Revolving Notes and the
Swing Line Note.
"Obligations" shall mean and include all Revolving Advances (including
Swing Line Advances), Letter of Credit Obligations, and all other Indebtedness
(including, without limitation, Additional Indebtedness) owing at any time by
any Credit Party to the Agent or any one or more of the Lenders (including,
without limitation, all principal, interest, fees, indemnities, costs, charges
and other amounts payable under the Loan Documents) arising under or in
connection with this Agreement, the Notes, any Security Document, any of the
other Loan Documents, any Guaranty in favor of the Agent or any one or more of
the Lenders, whether absolute or contingent, secured or unsecured, due or not,
arising by operation of law or otherwise, and all interest and other charges
thereon.
"Original Credit Agreement" shall have the meaning set forth in the
first "WHEREAS" clause to this Agreement.
"Other Taxes" shall have the meaning set forth in Section 2.22(a)
hereof.
"Parent" shall have the meaning set forth in the preamble to this
Agreement.
"Park Promenade" shall mean Park Promenade, Inc., a Florida
corporation.
"Patent License" means rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right with respect to any
invention on which a Patent is in existence.
"Patents" means all of the following in which any Credit Party now
holds or hereafter acquires any interest: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.
"Payment Accounts" shall have the meaning set forth in Section 2.4(c)
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereof under ERISA.
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"Pension Benefit Plan" shall mean any Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA).
"Permits" shall mean any permit, approval, authorization, license or
variance required from a Governmental Authority having jurisdiction under an
applicable Environmental Law.
"Person" shall mean an individual, trust, firm, partnership, limited
liability company, corporation (including business trust), unincorporated
association, joint venture, government or any political subdivision or agency
thereof or any other form of public, private or governmental entity or
authority.
"Pledge Agreement" shall have the meaning set forth in Section 4.1
hereof.
"Prior Lender" shall mean the lenders under the Existing Carlyle
Credit Agreement.
"Prior Lender Obligations" shall mean the Obligations as defined in
the Existing Carlyle Credit Agreement.
"pro rata" shall mean, with respect to each Lender, a percentage equal
to the ratio that the Revolving Commitment of such Lender bears to the Aggregate
Revolving Commitments of all Lenders.
"Proceeds" means "proceeds," as such term is defined in the UCC,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Credit Party from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of Governmental Authority), (c) any claim of any Credit Party against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.
"Purchased Accounts" shall mean all accounts receivable of the Carlyle
Credit Parties that are purchased by the Receivables Purchaser pursuant to the
Receivables Purchase Agreements.
"Qualified Assignee" means (a) any Lender, any Affiliate of any Lender
and, with respect to any Lender that is an investment fund that invests in
commercial loans, any other investment fund that invests in commercial loans and
that is managed or advised by the same investment advisor as such Lender or by
an Affiliate of such investment advisor, and (b) any commercial bank, savings
and loan association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies, in
each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or
higher from ▇▇▇▇▇'▇ at the date that it becomes a Lender and which in the case
of any person of the type under clause (a) or (b), through its applicable
lending office, is capable of lending to Borrower without the imposition of any
withholding or similar taxes; provided that no Person determined by Agent to be
acting in the capacity of a vulture fund or distressed debt purchaser shall be a
Qualified Assignee and no Person or Affiliate of
26
such Person (other than a Person that is already a Lender) holding Subordinated
Debt or Stock issued by any Credit Party shall be a Qualified Assignee.
"Real Estate" shall mean all of those plots, pieces or parcels of land
now owned or hereafter acquired by Finlay and its Domestic Subsidiaries or any
interest therein (the "Land"), including, without limitation, those listed on
Schedule 11.5 hereto and more particularly described in the Mortgages, together
with the right, title and interest of Finlay and its Domestic Subsidiaries, if
any, in and to the streets, the land lying in the bed of any streets, roads or
avenues, opened or proposed, in front of, adjoining, or abutting the Land to the
center line thereof, the air space and development rights pertaining to the Land
and right to use such air space and development rights, all rights of way,
privileges, liberties, tenements, hereditaments, and appurtenances belonging or
in any way appertaining thereto, awards from any condemnation or eminent domain
proceedings and insurance proceeds resulting from any casualty or other damage
to the buildings and other improvements on the Land, all fixtures, all easements
now or hereafter benefiting the Land and all royalties and rights appertaining
to the use and enjoyment of the Land, including, without limitation, all alley,
vault, drainage, mineral, water, oil, coal, gas, timber and other similar
rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, all fixtures and all additions thereto and
substitution and replacement thereof.
"Receivables Intercreditor Agreement" shall mean (i) that certain
Intercreditor Agreement and Assignment of Proceeds dated as of the date hereof
by and among the Agent, the Receivables Purchaser and Carlyle, as from time to
time amended, supplemented or replaced or (iii) any replacement Intercreditor
Agreement by and among Agent, Carlyle and any replacement Receivables Purchaser
as provided for in clause (ii) of the definition of "Receivables Purchaser"
below.
"Receivables Purchaser" shall mean (i) ▇▇▇▇▇▇ United Bank, doing
business through its unincorporated division Shoppers Charge Accounts Co., as
purchaser of the accounts receivable pursuant to the Receivables Purchase
Agreements or (ii) any replacement receivables purchaser provided such
receivables purchaser has entered into an intercreditor agreement with the Agent
in form and substance identical to the Receivables Intercreditor Agreement in
effect on the Closing Date.
"Receivables Purchase Agreements" shall mean (i) that certain Credit
Card Program and Security Agreement dated September 28, 1998 between Carlyle and
the Receivables Purchaser, that certain Operating Agreement, undated, between
Carlyle and the Receivables Purchaser, and all related documents and agreements
executed or delivered in connection with the Receivables Purchase Program, as
amended, supplemented or restated from time to time with the written consent of
the Agent or (ii) any replacement receivables purchase agreement between Carlyle
and a receivables purchaser qualifying as a "Receivables Purchaser" under clause
(ii) of the definition of "Receivables Purchaser" above in form and substance
substantially similar and no less advantageous to Carlyle and its subsidiaries
than the Receivables Purchase Agreement in effect on the Closing Date and all
related documents and agreements executed and delivered in connection therewith.
"Receivables Purchase Program" shall mean the credit card account
purchase program between Carlyle and the Receivables Purchaser established
pursuant to the Receivables Purchase Agreements.
"Reference Date" shall mean January 31, 2004.
"Refinancing" shall mean the repayment in full of the Prior Lender
Obligations on the Closing Date.
"Registration Rights Agreement" shall mean the registration rights
agreement dated as of May 26, 1993 among the Parent, certain existing holders of
the common stock of the Parent and the ▇▇▇ Group, as such may be amended,
modified, supplemented, restated, renewed or replaced from time to time in
accordance with its terms and the terms hereof.
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"Regulation D" shall mean Regulation D of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
reserve requirements.
"▇▇▇▇▇▇ Employment Agreement" shall mean the Employment Agreement
dated as of January 30, 2005 (as originally in effect or as amended in
accordance with its terms and the limitations set forth in Section 9.12 hereof)
among ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ and the Parent.
"Related Party" shall mean with respect to any Person (i) any
controlling stockholder, general or limited partner, 80% (or more) owned
subsidiary, or spouse or immediate family member (in the case of an individual)
of such Person or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons beneficially holding an
80% or more controlling interest of which consist of such Person and/or such
other persons referred to in the immediately preceding clause (i), and with
respect to the Parent, "Related Party" shall include any full-time employee of
the ▇▇▇▇▇▇ ▇. ▇▇▇ Company or an Affiliate thereof.
"Related Transactions" shall mean the borrowing under the Revolving
Loan on the Closing Date, the Acquisition, the Refinancing, the payment of all
fees, costs and expenses associated with all of the foregoing and the execution
and delivery of all of the Related Transactions Documents.
"Related Transactions Documents" shall mean the Loan Documents, the
Acquisition Agreement and Rolex Intercreditor Agreement, the Receivables
Intercreditor Agreement and all other agreements or instruments executed in
connection with the Related Transactions.
"Release" shall mean any releasing, spilling, escaping, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting, leaching,
disposing or dumping. The meaning of the term shall also include any threatened
Release.
"Remedial Action" shall mean all actions required by any Environmental
Law to (1) clean up, remove, treat or dispose of Hazardous Materials in the
indoor or outdoor environment; (2) prevent the Release or minimize the further
Release of Hazardous Materials so they do not migrate or otherwise endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; or (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care in respect of actions contemplated in the
preceding clauses (1) and (2).
"Reportable Event" shall have the meaning set forth in Section
8.12(b)(i) hereof.
"Repurchase Basket" shall mean $25,000,000 plus the Additional
Repurchase Amount.
"Revolving Advance" shall have the meaning set forth in Section 2.1(a)
hereof and shall include, except where the context otherwise requires, Swing
Line Advances.
"Revolving Commitment" as to any Lender shall have the meaning set
forth in Section 2.2(b) hereof.
"Revolving Credit Facility" shall mean, collectively, the facilities
provided by the Agent and the Lenders to the Borrowers hereunder to make
Revolving Advances (including Swing Line Advances) and to incur Letter of Credit
Obligations.
"Revolving Credit Facility Commitment" shall mean, at any time, an
amount equal to $225,000,000 or such lesser amount after giving effect to each
reduction of the Revolving Credit Facility Commitment pursuant to Section 2.5
hereof.
"Revolving Loan" shall have the meaning set forth in Section 2.1(a)
hereof.
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"Revolving Note" and "Revolving Notes" shall have the respective
meanings set forth in Section 2.3(a) hereof.
"Rolex Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated as of the date hereof by and between Rolex Watch U.S.A. and the
Agent.
"Rolex Security Agreement" shall mean that certain Security Agreement
dated as of the date hereof by and between Rolex Watch U.S.A. and Carlyle, in
form and substance acceptable to the Agent.
"▇▇▇▇▇▇▇ ▇▇▇▇▇ Employment Agreement" shall mean the Employment
Agreement dated as of the date hereof (as originally in effect or as amended in
accordance with its terms and the limitations set forth in Section 9.12 hereof)
among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and Carlyle.
"Security Agreement" shall have the meaning specified in Section 4.3
hereof.
"Security Documents" shall have the meaning specified in Section 4.3
hereof.
"Senior Note Indenture" shall mean the indenture dated as of June 3,
2004 between Finlay and HSBC Bank USA, as trustee under which the Senior Notes
were issued.
"Senior Notes" shall mean the Borrower's 8.375% Senior Notes due 2012
in the original principal amount of $200,000,000 and any notes that may
subsequently be issued in exchange therefor that are substantially identical in
all material respects (other than with respect to any transfer restrictions).
"Services Agreement" shall mean the Services Agreement dated as of
October 28, 1998 between Finlay Merchandising and Finlay, as such may be
amended, modified or supplemented from time to time in accordance with its terms
and the terms hereof.
"Shareholders Agreement" shall mean the stockholders' agreement dated
as of March 6, 1995 among the Parent and certain existing holders of the common
stock of the Parent, as such may be amended, modified, supplemented, restated,
renewed or replaced from time to time in accordance with its terms and the
limitations set forth in Section 9.12 hereof.
"Software" means all "software" as such term is defined in the UCC,
now owned or hereafter acquired by any Credit Party, other than software
embedded in any category of goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"Solvent" and "Solvency" shall mean, with respect to any Person on a
particular date, that on such date,
(a) the fair value of the property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person; and
(b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; and
(c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and
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(d) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital.
"Sonab Entities" shall mean, collectively, Sonab Holdings and Sonab
International.
"Sonab Holdings" shall mean Sonab Holdings, Inc., a Delaware
corporation.
"Sonab International" shall mean Sonab International, Inc., a Delaware
corporation.
"Sovereign Intercreditor Agreement" shall mean the Amended and
Restated Intercreditor Agreement dated as of March 30, 2001 between the Agent
and Sovereign Bank and acknowledged by Finlay and eFinlay, as amended, modified
or supplemented from time to time in accordance with its terms.
"Specified Default" shall mean an Event of Default under Sections
10.1(a), including, without limitation, by virtue of any payment required under
Sections 3.1 or 3.2 hereof, 10.1(b), 10.1(d), 10.1(f), 10.1(g), 10.1(h) (to the
extent such Event of Default involves a judgment of $5,000,000 or more),
10.1(j), 10.1(k) or 10.1(l) hereof or, to the extent arising from a Default
under Section 8.1(c), Section 8.1(g), Section 8.1(p), Section 8.6 (to the extent
such Default involves the maintenance of existence of the Borrowers or the
Parent), Section 8.17, Section 8.22, any one or more of Sections 9.1 through 9.9
inclusive, 9.12, 9.14 or 9.20 hereof.
"Stock" means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934).
"Subordinated Debt" means any Indebtedness of any Credit Party
subordinated to the Obligations in a manner and form satisfactory to Agent and
Lenders in their sole discretion, as to right and time of payment and as to any
other rights and remedies thereunder.
"Subsidiary" of any Person shall mean any corporation or other
business entity of which more than fifty percent (50%) of the issued and
outstanding securities having ordinary voting power for the election of
directors is owned or controlled, directly or indirectly, by a Person and/or one
or more of its Subsidiaries. The use of the term Subsidiary in the phrase Parent
and its Subsidiaries on a consolidated basis, or the like, shall only include
Subsidiaries whose accounts or financial reports are consolidated with Parent in
accordance with GAAP, and in any event shall include the Borrower.
"Supporting Obligations" means all supporting obligations as such term
is defined in the UCC, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.
"Swing Line Advance" has the meaning assigned to it in Section
2.1(c)(i).
"Swing Line Availability" has the meaning assigned to it in Section
2.1(c)(i).
"Swing Line Commitment" shall mean, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Loans in the amount of up
to $15,000,000, which commitment constitutes a subfacility of the Revolving
Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
30
"Swing Line Loan" shall mean, as the context may require, at any time,
the aggregate amount of Swing Line Advances outstanding to the Borrowers.
"Swing Line Note" has the meaning assigned to it in Section
2.1(c)(ii).
"Tax Allocation Agreement" shall mean the tax allocation agreement
dated as of November 1, 1992 between the Parent and Finlay, as such may be
amended, modified or supplemented from time to time in accordance with its terms
and the terms hereof.
"Taxes" means any and all taxes, levies, imposts, deductions, Charges
or withholdings, and all liabilities with respect thereto, excluding Excluded
Taxes.
"Trade Name License Agreements" shall mean the Carlyle License
Agreement and the Finlay License Agreement.
"Trademark, Patent and Copyright Security Agreement" shall have the
meaning set forth in Section 4.2 hereof.
"Trademark License" means rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right to use any
Trademark.
"Trademarks" means all of the following now owned or hereafter adopted
or acquired by any Credit Party: (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by any
of the foregoing.
"U.S. dollars" and "$" shall mean lawful currency of the United States
of America.
"U.S. Lender" shall mean each Lender, each L/C Issuer or each Agent
that is a United States person as defined in Section 7701(a)(30) of the Code.
"UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be enacted and in effect in the State of New York; provided, that
to the extent that the UCC is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the UCC, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Agent's or any Lender's Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term "UCC" shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.
"Unapproved License Agreement" shall mean an unwritten arrangement
(not yet approved in writing by the Agent or as to which the approval of the
Agent has been withdrawn) between Finlay or a Foreign Subsidiary and another
Person, granting to Finlay or a Foreign Subsidiary the right to operate a fine
jewelry department in an establishment owned or operated by such Person.
"Written Notice" and "in writing" shall mean any form of written
communication or a communication by means of electronic mail, telex, telecopier
device, telegraph or cable.
31
Section 1.2. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. Each term
defined in the UCC of the State of New York and used herein shall have the
meaning given therein unless otherwise defined herein.
Section 1.3. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including," the words "to" and "until" each
shall mean "to but excluding" and the word "through" shall mean "to and
including."
Section 1.4. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed, as to a specified Person, in accordance with
GAAP.
Section 1.5. OTHER PROVISIONS REGARDING DEFINITIONS. (a) The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(b) The terms defined in this Section 1, unless the context requires
otherwise, will have the meanings applied to them in this Section 1, references
to an "Exhibit," "exhibit," "Schedule" or "schedule" are, unless otherwise
specified, to one of the exhibits or schedules attached to this Agreement and
references to a "section" or "Section" are, unless otherwise specified, to one
of the sections of this Agreement.
(c) The term "or" is not exclusive.
SECTION 2 . AMOUNT AND TERMS.
Section 2.1. REVOLVING ADVANCES; SWING LINE FACILITY. (a) Each of the
Lenders severally agrees to lend to the Borrowers, subject to and upon the terms
and conditions herein set forth, at any time or from time to time on or after
the Closing Date and before the Maturity Date, such Lender's pro rata share, as
determined under Section 2.4(c) hereof, of such borrowings as may be requested
or be deemed requested by the Borrower Representative in accordance with the
terms of this Agreement (each such borrowing, a "Revolving Advance" and the
outstanding principal balance of all Revolving Advances (including Swing Line
Advances) from time to time, the "Revolving Loan"), subject to the limitations
contained in Section 2.2 hereof.
(b) Each Revolving Advance shall be in an amount equal to $100,000 or
any integral multiple of $100,000 and shall be made on the date specified in the
Written Notice as described in Section 2.4(a) hereof; provided, however, that if
the Borrowers shall be deemed to request a Revolving Advance under Section 2A.2
hereof, no notice of a borrowing by the Borrowers shall be necessary and such
Revolving Advance shall be in the amount of the reimbursement obligation of the
Borrowers for the drawing made under the Letter of Credit for which such
Revolving Advance is deemed requested. Each Revolving Advance shall be either a
Base Rate Advance or a Eurodollar Advance, or a combination thereof, as the
Borrowers shall request, subject to and in accordance with the provisions of
this Agreement. Any portion of a Revolving Advance which shall be a Eurodollar
Advance shall be in an amount equal to $1,000,000 or any greater integral
multiple thereof.
(c) Swing Line Facility. (i) Agent shall notify the Swing Line Lender
upon Agent's receipt of any Written Notice requesting a Revolving Advance.
Subject to the terms and conditions hereof, the Swing Line Lender may, in its
discretion, make available from time to time until the Maturity Date advances
(each, a "Swing Line Advance") in accordance with any such notice. The aggregate
amount of Swing Line Advances outstanding shall not exceed the lesser of (A) the
Swing Line Commitment and (B) the Aggregate Borrowing Base less the outstanding
balance of the Revolving Loan and Letter of Credit Obligations at such time
("Swing Line Availability"). Until the Maturity Date, Borrowers may from time to
time borrow, repay and reborrow under this Section 2.1(c). Each Swing
32
Line Advance shall be made pursuant to a Written Notice of Revolving Advance
delivered to Agent by Borrower Representative in accordance with Section 2.4(a)
hereof. Those notices must be given no later than 12:00 noon (New York time) on
the Business Day of the proposed Swing Line Advance. Notwithstanding any other
provision of this Agreement or the other Loan Documents, the Swing Line Loan
shall constitute a Base Rate Advance and a Revolving Advance. Borrowers shall
repay the aggregate outstanding principal amount of the Swing Line Loan upon
demand therefor by Agent.
(ii) Borrowers shall execute and deliver to the Swing Line Lender
a promissory note to evidence the Swing Line Commitment. The note
shall be in the principal amount of the Swing Line Commitment of the
Swing Line Lender, dated the Closing Date and substantially in the
form of Exhibit 2.1(c)(ii) (the "Swing Line Note"). The Swing Line
Note shall represent the obligation of Borrowers to pay the amount of
the Swing Line Commitment or, if less, the aggregate unpaid principal
amount of all Swing Line Advances made to the Borrowers together with
interest thereon. The entire unpaid balance of the Swing Line Loan and
all other non-contingent Obligations shall be immediately due and
payable in full in immediately available funds on the Maturity Date if
not sooner paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender, at
any time and from time to time in its sole and absolute discretion
(but no less frequently than once per week), may on behalf of
Borrowers (and the Borrowers hereby irrevocably authorize the Swing
Line Lender to so act on its behalf) request each Lender (including
the Swing Line Lender) to make a Revolving Advance to the Borrowers
(which shall be a Base Rate Advance) in an amount equal to such
Lender's pro rata share of the principal amount of the Borrowers'
Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the
date such notice is given. Unless any of the events described in
Section 10 shall have occurred (in which event the procedures of this
Section shall apply) and regardless of whether the conditions
precedent set forth in this Agreement to the making of a Revolving
Advance are then satisfied, each Lender shall disburse directly to
Agent, its pro rata share of a Revolving Advance on behalf of the
Swing Line Lender, prior to 3:00 p.m. (New York time), in immediately
available funds on the date such notice is given. The proceeds of such
Revolving Advances shall be immediately paid to the Swing Line Lender
and applied to repay the Swing Line Loan of the Borrower.
(iv) Participation in Swing Line Loans. If, prior to refunding a
Swing Line Loan with a Revolving Advance pursuant to Section
2.1(c)(iii), one of the events described in Section 10 shall have
occurred, then, subject to the provisions of Section 2.1(c)(v) below,
each Lender will, on the date such Revolving Advance was to have been
made for the benefit of the Borrowers, purchase from the Swing Line
Lender an undivided participation interest in the Swing Line Loan to
the Borrowers in an amount equal to its pro rata share of such Swing
Line Loan. Upon request, each Lender will promptly transfer to the
Swing Line Lender, in immediately available funds, the amount of its
participation.
(v) Lenders' Obligations Unconditional. Each Lender's obligation
to make Revolving Advances in accordance with Section 2.1(c)(iii) and
to purchase participating interests in accordance with Section
2.1(c)(iv) shall be absolute and unconditional and shall not be
affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right which such Lender may have against
the Swing Line Lender, Borrowers or any other Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event
of Default; (C) any inability of Borrowers to satisfy the conditions
precedent to borrowing set forth in this Agreement on the date upon
which such participating interest is to be purchased; or (D) any other
circumstance, happening
33
or event whatsoever, whether or not similar to any of the foregoing.
If any Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Section
2.1(c)(iii) or 2.1(c)(iv), as the case may be, the Swing Line Lender
shall be entitled to recover such amount on demand from such Lender,
together with interest thereon for each day from the date of
non-payment until such amount is paid in full at the Federal Funds
Rate for the first two Business Days and at the Base Rate thereafter.
Section 2.2. REVOLVING CREDIT FACILITY COMMITMENT AND BORROWING LIMIT.
(a) The aggregate unpaid principal amount of the Revolving Loan (including the
Swing Line Loan) outstanding to the Borrowers at any time, when added to the
aggregate amount of Letter of Credit Obligations of the Borrowers at such time,
shall not exceed an amount (the "Borrowing Limit") equal to the lesser of (i)
the Revolving Credit Facility Commitment at such time and (ii) except in the
case of Revolving Advances to be made under Section 2A.2 hereof as to which this
clause (ii) shall not apply to prevent such Revolving Advances (but this
exception shall not limit the application of Section 3.1(a) hereof), an amount
equal to the Aggregate Borrowing Base at such time. Moreover, the sum of the
Revolving Loan (including the Swing Line Loan) and the amount of Letter of
Credit Obligations outstanding to any Borrower shall not exceed at any time (x)
in the case of Finlay, the Finlay Borrowing Base at such time and (y) in the
case of Carlyle, the Carlyle Borrowing Base at such time. Notwithstanding the
foregoing, except for Revolving Advances to be made under Section 2A.2 hereof,
no Revolving Advance shall be made if, after giving effect to the making of such
Revolving Advance, a prepayment would be required under Section 3.1(a) hereof.
(b) Subject to the limitations of Sections 2 and 3 hereof, the
Borrowers may borrow, repay and reborrow the Revolving Loan. The portion of the
Revolving Loan to be funded by each Lender shall not exceed in aggregate
principal amount at any one time outstanding, and no Lender shall have any
obligation to fund its pro rata share of any Revolving Advance if, after giving
effect thereto, the outstanding portions of Revolving Advances made by such
Lender shall be in the aggregate in excess of, the revolving commitment amount
set forth opposite such Lender's name on Exhibit A hereto for the Revolving
Credit Facility Commitment, as reduced from time to time (for each Lender, its
"Revolving Commitment").
Section 2.3. REVOLVING NOTES. (a) The pro rata portion of the
Revolving Advances made by each Lender shall be evidenced by, and be repayable
with interest in accordance with the terms of, a promissory note issued by the
Borrowers payable to the order of such Lender or its registered assignees, in
the maximum principal amount of such Lender's Revolving Commitment and in the
form of Exhibit 2.3(a) hereto (together with any replacement, modification,
renewal or substitution thereof, individually, a "Revolving Note" and
collectively, the "Revolving Notes").
(b) Each Revolving Note shall be dated the Closing Date and be duly
completed, executed and delivered by the Borrowers and such Revolving Notes
shall replace the Revolving Notes previously delivered by Finlay to the Lenders
in connection with the Original Credit Agreement, the First Amended and Restated
Credit Agreement or the Second Amended and Restated Credit Agreement.
(c) Each Lender shall record that portion of the amount of each
Revolving Advance which it has made to each Borrower and the amount of each
payment or prepayment of principal thereon in its records; provided, however,
that the failure of any Lender to make any such recordation shall not in any
manner affect the obligation of the Borrowers to repay to such Lender the
portion of the Revolving Advance advanced by such Lender under the applicable
Revolving Note held by such Lender. Any such recordation shall represent
conclusive evidence of the date and amount of such Lender's pro rata share of
any Revolving Advance or payment or prepayment of principal thereon, absent
manifest error.
(d) Each of the Revolving Notes shall mature on the Maturity Date, and
shall be subject to payment and prepayment as provided in Sections 2 and 3
hereof.
34
Section 2.4. NOTICE OF BORROWING; BORROWERS' CERTIFICATE; APPOINTMENT
OF BORROWER REPRESENTATIVE. (a) Subject to Section 3.2(e) hereof, whenever any
Borrower desires to make a borrowing of a Revolving Advance, Borrower
Representative on behalf of the applicable Borrower shall give the Agent, at its
address set forth in Section 12.4 hereof, not later than 12:00 noon (New York
time), at least three (3) Business Days' prior Written Notice (or same day prior
Written Notice in the case of a Revolving Advance which shall be a Base Rate
Advance) from an Authorized Representative (which notice shall be irrevocable)
of its desire to make a borrowing of a Revolving Advance. Each notice of
borrowing under this Section 2.4(a) shall be substantially in the form of
Exhibit 2.4 hereto (each a "Borrower's Certificate") and specify the date on
which such Borrower desires to make a borrowing of a Revolving Advance (which in
each instance shall be a Business Day), the amount of such borrowing, whether
such borrowing shall be a Base Rate Advance or a Eurodollar Advance or a
combination thereof, and, in the case of the selection of a Eurodollar Advance,
the proposed Interest Period therefor, and shall refer to the most recent
Borrowing Base Certificate delivered by such Borrower to the Agent pursuant to
Section 8.1(p) hereof or at the request of the Agent and set forth the
applicable Borrowing Base provided therein. If such notice shall be with respect
to a borrowing of a Eurodollar Advance but fails to state an applicable Interest
Period therefor, then such notice shall be deemed to be a request for a
one-month Interest Period. If (x) any Borrower shall fail to state in any such
notice whether such Revolving Advance shall be a Base Rate Advance or a
Eurodollar Advance or (y) the Borrowers shall be deemed to make a borrowing of a
Revolving Advance pursuant to Section 2A.2 hereof, then the Borrowers shall be
deemed to have selected a Base Rate Advance. Subject to the other provisions of
this Agreement, Revolving Advances of more than one type may be outstanding at
the same time; provided, however, that no more than seven (7) Eurodollar
Advances in the aggregate may be outstanding at any one time.
(b) Borrowers shall not be permitted to select a borrowing of a
Eurodollar Advance (x) to the extent such selection would be prohibited by
Section 2.10 or Section 2.11 hereof or (y) if a Default or an Event of Default
shall be in existence as of the date of selection or commencement of the
applicable Interest Period.
(c) Agent shall notify Lenders upon Agent's receipt of any Written
Notice requesting a Revolving Advance. Each Lender shall make available to the
Agent such Lender's pro rata portion of the Revolving Advance to be made on the
date specified in the aforementioned notice (which for purposes of Revolving
Advances made pursuant to Section 2A.2 hereof shall be deemed to be the Business
Day after receipt of the written or telephonic notice by the Agent to each such
Lender of such borrowing) not later than 2:00 p.m. (New York time) on such
specified date in U.S. dollars in immediately available funds, at the account of
the Agent located at Deutsche Bank Trust Company Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ Number: ▇▇▇-▇▇▇-▇▇▇, Account Title: GECC/CAF Depository, Account
Number: ▇▇-▇▇▇-▇▇▇, Reference: Finlay Fine Jewelry/Carlyle & Co. Jewelers, or
such other accounts as the Agent may from time to time direct (the "Payment
Account"). The portion of each Revolving Advance to be funded by each Lender
shall be an amount equal to (x) the dollar amount of the Revolving Advance
requested or deemed requested by the Borrowers under Section 2.1(a) or 2A.2
hereof, multiplied by (y) the percentage set forth opposite such Lender's name
on Exhibit A hereto for the Revolving Credit Facility Commitment.
(d) Except for Revolving Advances made pursuant to Section 2A.2 hereof
(which Revolving Advances shall be applied to the reimbursement of drawings
under the Letter of Credit for which such Revolving Advance was made in
accordance with such Section 2A.2 hereof), proceeds of each Revolving Advance
received by the Agent shall be made available to the Borrowers by the Agent at
the Borrower's Disbursement Account upon satisfaction of all applicable
conditions.
(e) Carlyle hereby designates Finlay as its representative and agent
on its behalf for the purposes of issuing notices of borrowing, giving
instructions with respect to the disbursement of the proceeds of the Loans,
selecting interest rate options, requesting Letters of Credit, giving and
receiving all
35
other notices and consents hereunder or under any of the other Loan Documents
and taking all other actions (including in respect of compliance with covenants)
on behalf of Carlyle under the Loan Documents. Borrower Representative hereby
accepts such appointment. Agent and each Lender may regard any notice or other
communication pursuant to any Loan Document from Borrower Representative as a
notice or communication from both Borrowers, and may give any notice or
communication required or permitted to be given to Carlyle or Borrowers
hereunder to Borrower Representative on behalf of Borrowers. Carlyle agrees that
each notice, election, representation and warranty, covenant, agreement and
undertaking made on its behalf by Borrower Representative shall be deemed for
all purposes to have been made by Carlyle and shall be binding upon and
enforceable against Carlyle to the same extent as if the same had been made
directly by Carlyle.
Section 2.5. TERMINATION OR REDUCTION OF REVOLVING CREDIT FACILITY
COMMITMENTS. (a) The Borrowers shall have the right, upon not less than three
(3) Business Days' prior Written Notice from the Borrower Representative to the
Agent (and the Agent shall promptly notify each Lender thereof in writing or by
telephone confirmed promptly in writing), to terminate the Revolving Credit
Facility Commitment or, from time to time, to reduce ratably (as among the
Lenders) in part the amount of the Revolving Credit Facility Commitment;
provided, however, that:
(i) any such partial reduction of the Revolving Credit Facility
Commitment shall be in the aggregate amount of at least $25,000,000
(or an integral multiple of $5,000,000 in excess thereof) or following
the first partial reduction under this Section 2.5(a)(i), an amount
equal to $50,000,000 minus the amount of such first partial reduction
of the Revolving Credit Facility Commitment and shall be accompanied
by prepayment of the Revolving Loan, together with the payment of any
fees, premiums, costs and charges required to be paid by the Borrowers
pursuant to Section 2.12 hereof, and accrued interest on the amount so
prepaid to the date of such prepayment, to the extent, if any, that
the aggregate principal amount of the sum of the Revolving Loan and
the Letter of Credit Obligations then outstanding exceeds the
Borrowing Limit at such time (after giving effect to such reduction in
the Revolving Credit Facility Commitment); provided, however, that
notwithstanding the foregoing, the Borrowers shall not (x) reduce
(except in connection with a termination) the Revolving Credit
Facility Commitment by more than $50,000,000 in the aggregate during
the term of this Agreement or (y) reduce the Revolving Credit Facility
Commitment to an amount which is less than the sum of the aggregate
unpaid principal balance of the then outstanding Letter of Credit
Obligations;
(ii) any termination of the Revolving Credit Facility Commitment
shall be accompanied by prepayment in full of the Revolving Loan
(together with all other Obligations) then outstanding hereunder,
together with the payment of any unpaid fees owing with respect to the
Revolving Credit Facility Commitment, any fees, premiums, costs and
charges required to be paid by the Borrowers pursuant to Section 2.12
hereof, and accrued interest on the amount so prepaid to the date of
such prepayment, together with the cancellation or termination of any
outstanding Letters of Credit (or the providing of Letter of Credit
Cash Collateral equal to the undrawn amount under all outstanding
Letters of Credit) and the reimbursement of any unreimbursed Letters
of Credit; and
(iii) any termination of the Revolving Credit Facility Commitment
while Eurodollar Advances are outstanding thereunder and any reduction
thereof that reduces the amount of the Revolving Credit Facility
Commitment below the principal amount of such Eurodollar Advances then
outstanding thereunder may be made only on the last day of the
respective Interest Periods for such Eurodollar Advances.
(b) Upon the giving of Written Notice of termination or reduction of
the Revolving Credit Facility Commitment, the amount of Revolving Advances
required to be prepaid in subsection (a) above shall be due and payable on the
date therein specified for such reduction or termination, together
36
with all accrued interest thereon to such date plus any fees, premiums, charges
or costs provided for hereunder, and the Revolving Credit Facility Commitment
shall be permanently reduced pro rata among Lenders by the amount of such
reduction on the date specified in such Written Notice for such reduction or
termination.
Section 2.6. INTEREST. (a) Interest on Eurodollar Advances. Except as
provided in Section 2.6(c) hereof, each Borrower shall pay interest on the
unpaid principal amount of each Eurodollar Advance made to it hereunder which is
outstanding from time to time, on each Interest Payment Date with respect to
such Eurodollar Advance, at the date of conversion of such Eurodollar Advance
(or portion thereof) to a Base Rate Advance and at maturity of such Eurodollar
Advance at an interest rate per annum equal during the Interest Period for such
Eurodollar Advance to the Adjusted Eurodollar Rate for the Interest Period in
effect for such Eurodollar Advance, and after maturity of such Eurodollar
Advance (whether by acceleration or otherwise) upon demand. Interest not paid
when due shall be payable on demand.
(b) Interest on Base Rate Advances. Except as provided in Section
2.6(c) hereof, each Borrower shall pay interest on the unpaid principal amount
of each Base Rate Advance and, to the extent due and payable, Additional
Indebtedness incurred by it, in each case, which is outstanding from time to
time at an interest rate per annum equal to the Base Rate in effect from time to
time. Interest on Base Rate Advances shall be payable monthly in arrears on the
first day of each month, upon conversion thereof to a Eurodollar Advance and at
maturity (whether by acceleration or otherwise) and thereafter on demand.
Interest on Additional Indebtedness shall be payable upon demand.
(c) Default Interest. During the continuation of any Event of Default,
interest on the Eurodollar Advances, Base Rate Advances and, to the extent due
and payable, Additional Indebtedness, and Letter of Credit fees pursuant to
Section 2A.4 hereof shall accrue and be payable at a rate two percentage points
(2%) in excess of the rate of interest or fee otherwise applicable to such
Eurodollar Advances, Base Rate Advances, Additional Indebtedness, or Letters of
Credit, as the case may be, and interest on any interest in default shall accrue
and shall be payable upon demand at a rate equal to two percentage points (2%)
in excess of the rate then applicable to Base Rate Advances.
(d) Eurodollar Rate Determination. The Agent, upon determining the
Eurodollar Rate and the Adjusted Eurodollar Rate for any Interest Period, shall
promptly notify by telephone (confirmed promptly in writing) or in writing the
Borrowers and the Lenders thereof. Such determination shall, in the absence of
manifest error, be conclusive and binding upon the Borrowers, the Agent and the
Lenders.
(e) Changes in Index Rate. After each change in the Index Rate, the
Agent shall promptly notify the Borrowers and each Lender of the date of such
change and the new Index Rate; provided, however, that the failure of the Agent
to so notify the Borrowers or any Lender shall not affect the effectiveness of
such change.
(f) The Applicable Index Margin and Applicable Eurodollar Margin, will
be 0.50% and 1.50% per annum, respectively, as of the Closing Date. The
Applicable Margins will then be adjusted (up or down) prospectively on a
quarterly basis as determined by Parent's consolidated financial performance for
the trailing four quarters most recently then ended, commencing (such date being
the "Initial Adjustment Date") on the fifth Business Day after delivery of the
Parent's financial statements to Lenders for the fiscal quarter ending July 30,
2005. Adjustments in Applicable Margins will be determined by reference to the
following grids:
"IF LEVERAGE APPLICABLE APPLICABLE
RATIO IS INDEX MARGIN EURODOLLAR MARGIN
------------ ------------ -----------------
greater than or = 3.50 1.00% 2.00%
less than 3.50 but greater than or = 3.00 0.75% 1.75%
37
"IF LEVERAGE APPLICABLE APPLICABLE
RATIO IS INDEX MARGIN EURODOLLAR MARGIN
------------ ------------ -----------------
less than 3.00 but greater than or = 2.25 0.50% 1.50%
less than 2.25 but greater than or = 1.50 0.25% 1.25%
less than 1.50 0.00% 1.00%"
All adjustments in the Applicable Margins will be implemented
quarterly on a prospective basis, for each calendar month commencing after the
date of delivery to Lenders of the quarterly unaudited or annual audited (as
applicable) financial statements of the Parent evidencing the need for an
adjustment. Concurrently with the delivery of those financial statements, the
Borrower Representative shall deliver to the Agent and Lenders a certificate,
signed by its chief financial officer, setting forth in reasonable detail the
basis for the continuance of, or any change in, the Applicable Margins. Failure
to timely deliver such financial statements in accordance with Section 8.1
shall, in addition to any other remedy provided for in this Agreement, result in
an increase in the Applicable Margins to the highest level set forth in the
foregoing grid, until the first day of the first calendar month following the
delivery of those financial statements demonstrating that such an increase is
not required. If an Event of Default shall have occurred and be continuing at
the time any reduction in the Applicable Margins is to be implemented, that
reduction shall be deferred until the first day of the first calendar month
following the date on which such Event of Default is waived or cured.
Section 2.7. CONVERSION OF BORROWINGS; RENEWALS. (a) The Borrowers
may, from time to time prior to the Maturity Date convert (i) all or a portion
of outstanding Base Rate Advances to one or more Eurodollar Advances, except as
provided in the last sentence of Section 2.4(a) or in Section 2.10 or 2.11
hereof, and only in amounts of $1,000,000 or more, or (ii) all or a portion of
outstanding Eurodollar Advances to a Base Rate Advance so long as the aggregate
principal balance of the portion of the Eurodollar Advances not being converted,
if any, is $1,000,000 or any greater integral multiple thereof; provided,
however, that Borrowers shall not be entitled to convert any Base Rate Advance,
or portion thereof, to a Eurodollar Advance unless all accrued interest on the
Base Rate Advance, or portion thereof, to be converted through the date of such
conversion shall have been paid in full. Each conversion by Borrowers of any
Revolving Advance or portion thereof (other than a conversion pursuant to
Section 2.10 or 2.11 hereof) shall be made not later than 12:00 noon (New York
time) on a Business Day on at least three (3) Business Days' prior Written
Notice from an Authorized Representative to the Agent (and the Agent shall
promptly notify each Lender thereof in writing or by telephone confirmed
promptly in writing). Each such notice (which notice shall be irrevocable) shall
specify (i) the date of the conversion and the amount to be converted, (ii) the
particular Base Rate Advance, or portion thereof, to be converted, and (iii) in
the case of conversion of any Base Rate Advance, or portion thereof, to a
Eurodollar Advance, the duration of the Interest Period for such Eurodollar
Advance. Notwithstanding the above, Borrowers shall not be entitled to convert
any Base Rate Advance, or portion thereof, to a Eurodollar Advance if a Default
or Event of Default shall have occurred and be continuing. Except as provided in
Section 2.10 hereof, any conversion of a Eurodollar Advance, or portion thereof,
to a Base Rate Advance shall be made only on the last day of the Interest Period
with respect to such Eurodollar Advance.
(b) Each renewal by Borrowers of an outstanding Eurodollar Advance or
portion thereof shall be made on Written Notice to the Agent (and the Agent
shall promptly notify each Lender thereof in writing or by telephone confirmed
promptly in writing) given not later than 12:00 noon (New York time) on the
third Business Day prior to the last day of the Interest Period just ending for
such Eurodollar Advance. Each notice (which notice shall be irrevocable) by
Borrowers of the renewal of a Eurodollar Advance or portion thereof, shall be in
writing from an Authorized Representative and shall specify (i) the amount of
such renewal of the Eurodollar Advance or portion thereof and (ii) the duration
of the Interest Period for such renewal; provided, however, that if the
Borrowers fail to select the duration
38
of any Interest Period for the renewal of such Eurodollar Advance or portion
thereof, the duration of such Interest Period shall be one month.
Notwithstanding the above, Borrowers shall not be entitled to renew a Eurodollar
Advance or a portion thereof, (i) if at the time of the selection of such
renewal there shall exist a Default or an Event of Default, or (ii) to the
extent such renewal would be prohibited by the last sentence of Section 2.4(a)
or by Section 2.10 or 2.11 hereof.
(c) Any Eurodollar Advance or portion thereof as to which the Agent
shall not have received a proper notice of conversion or renewal as provided in
Section 2.7(a) or 2.7(b) hereof or notice of payment or prepayment by 12:00 noon
(New York time) at least three (3) Business Days prior to the last day of the
Interest Period just ending for such Eurodollar Advance shall (whether or not
any Default or Event of Default has occurred) automatically be converted to a
Base Rate Advance on the last day of the Interest Period for such Eurodollar
Advance.
Section 2.8. COMPUTATION OF INTEREST. Interest on Base Rate Advances
and Eurodollar Advances and fees and other amounts calculated on the basis of a
rate per annum shall be computed on the basis of actual days elapsed over a
360-day year. Any rate of interest on the Loan, Additional Indebtedness or on
interest which is computed on the basis of the Base Rate shall change when and
as the Index Rate changes.
Section 2.9. INCREASED COSTS. In the case of the pro rata share of any
Lender in any Eurodollar Advance, in the event any law, treaty, order,
directive, rule or regulation shall be adopted, issued or become effective after
the Closing Date or in the event of any change in any law, treaty, order,
directive, rule or regulation from that in effect on the Closing Date or in the
interpretation thereof by any governmental or other regulatory authority charged
with the administration thereof (including, without limitation, Regulation D),
in any case, which:
(i) subjects such Lender or any branch or Affiliate of such
Lender to any charge with respect to such share of such Eurodollar
Advance (other than with respect to taxes and amounts relating thereto
(payment with respect to which shall be governed by Section 2.22); or
(ii) imposes, modifies or deems applicable any reserve, deposit
or similar requirement against any assets held by, deposits with or
for the account of, or loans or commitments by, an office of any
Lender or any branch or Affiliate of such Lender; or
(iii) imposes upon such Lender or any branch or Affiliate of such
Lender any other condition with respect to such share of such
Eurodollar Advance or this Agreement;
and the result of any of the foregoing is to increase the actual cost by an
amount such Lender reasonably deems to be material to such Lender or any branch
or Affiliate of such Lender of making, funding or maintaining such share of such
Eurodollar Advance hereunder, or to reduce the amount of any payment (whether of
principal, interest, or otherwise) received or receivable by such Lender or any
branch or Affiliate of such Lender, or to require such Lender or any branch or
Affiliate of such Lender to make any payment, in each case by or in an amount
which such Lender in its sole judgment deems material, then and in any such
case:
(1) such Lender shall promptly notify the Borrower
Representative, the Agent and the other Lenders in writing of the
happening of such event;
(2) such Lender shall promptly deliver to the Borrower
Representative, the Agent and the other Lenders a certificate
stating the change which has occurred, or the reserve
requirements or other conditions which have been imposed on such
Lender or branch or Affiliate of such Lender, or the request,
directive or requirement with which it has complied, together
with the
39
date thereof, the amount of such increased cost, reduction or
payment and the way in which such amount has been calculated; and
(3) the Borrowers hereby agree to pay to the Agent for the
benefit of such Lender on demand by such Lender (with a notice of
such demand to be sent by such Lender to the Agent) such an
amount or amounts as will compensate such Lender or its branch or
Affiliate for such additional cost, reduction or payment.
The certificate of such Lender as to the additional amounts payable pursuant to
this Section 2.9 delivered to the Borrower Representative and the Agent shall in
the absence of manifest error be conclusive of the amount thereof. The
protection of this Section 2.9 shall be available to such Lender regardless of
any possible contention of invalidity or inapplicability of the law, regulation,
treaty, order, directive, interpretation or condition which has been imposed.
Section 2.10. CHANGE IN LAW RENDERING EURODOLLAR ADVANCES UNLAWFUL.
(a) Notwithstanding anything to the contrary herein contained, in the event that
any law, treaty, order, directive, rule or regulation adopted, issued or
becoming effective after the Closing Date or any change in any law, treaty,
order, directive, rule or regulation from that in effect on the Closing Date or
in the interpretation thereof by any governmental or other regulatory authority
charged with the administration thereof (in any case, whether or not having the
force of law), should make it unlawful for any Lender to fund any portion of a
Eurodollar Advance or to give effect to its obligations as contemplated hereby
with respect to Eurodollar Advances, such Lender shall, upon the happening of
such event, notify the Agent, the other Lenders and the Borrowers thereof in
writing stating the reason therefor, and the obligation of such Lender to allow
conversion to or selection or renewal with respect to its pro rata share of any
Eurodollar Advance by the Borrowers shall, upon the happening of such event,
forthwith be suspended for the duration of such illegality and during such
illegality such Lender shall fund its share of all Revolving Advances as Base
Rate Advances and there shall be no renewal of, or conversion to, any share of
such Lender in any Eurodollar Advance. If and when such illegality ceases to
exist, such suspension shall cease and such affected Lender shall similarly
notify the Agent, the other Lenders and the Borrowers.
(b) Notwithstanding anything to the contrary contained herein, in the
event that any law, treaty, order, directive, rule or regulation adopted, issued
or becoming effective after the Closing Date or any change in any law, treaty,
order, directive, rule or regulation from that in effect on the Closing Date or
in the interpretation thereof by any governmental or other regulatory authority
charged with the administration thereof (in any case, whether or not having the
force of law) shall make it commercially impracticable or unlawful for any
Lender to continue in effect the funding of any portion of a Eurodollar Advance
previously made by it hereunder and then outstanding, such Lender shall, upon
the happening of such event, notify the Agent, the other Lenders and the
Borrower Representative thereof in writing stating the reasons therefor, and
such Lender's pro rata share of such Eurodollar Advance shall automatically be
converted to a Base Rate Advance. The Borrowers shall pay to the Agent for the
benefit of such Lender accrued interest owing on such converted portion of such
Eurodollar Advance made to the Borrowers through the date of such conversion,
together with any amounts payable under Section 2.12 hereof with respect to such
prepayment. After such notice shall have been given and until the circumstances
giving rise to such notice no longer exist, each request for such Lender's pro
rata share of a Eurodollar Advance or for conversion to or renewal of such
Lender's pro rata share of a Eurodollar Advance shall be deemed a request by
Borrowers for a Base Rate Advance. If and when such impracticability or
illegality ceases to exist, such suspension shall cease and such affected Lender
shall similarly notify the Agent, the other Lenders and the Borrowers.
(c) Within 15 days after receipt by Borrowers of written notice and
demand from any Lender (an "Affected Lender") for payment of additional amounts
or increased costs as provided in Sections 2.9, 2.10 or 2.12(b), Borrowers may,
at their option, notify Agent and such Affected Lender of
40
its intention to replace the Affected Lender. So long as no Default or Event of
Default has occurred and is continuing, Borrowers, with the consent of Agent,
may obtain, at Borrowers' expense, a replacement Lender ("Replacement Lender")
for the Affected Lender, which Replacement Lender must be reasonably
satisfactory to Agent. If Borrowers obtain a Replacement Lender within 90 days
following notice of its intention to do so, the Affected Lender must sell and
assign its Loans and Revolving Commitments to such Replacement Lender for an
amount equal to the principal balance of all Loans held by the Affected Lender
and all accrued interest and fees with respect thereto through the date of such
sale; provided, that Borrowers shall have reimbursed such Affected Lender for
the additional amounts or increased costs that it is entitled to receive under
this Agreement through the date of such sale and assignment. Notwithstanding the
foregoing, Borrowers shall not have the right to obtain a Replacement Lender if
the Affected Lender rescinds its demand for increased costs or additional
amounts within 15 days following its receipt of Borrowers' notice of intention
to replace such Affected Lender. Furthermore, if Borrowers give a notice of
intention to replace and do not so replace such Affected Lender within 90 days
thereafter, Borrowers' rights under this Section 2.10(c) shall terminate and
Borrowers shall promptly pay all increased costs or additional amounts demanded
by such Affected Lender pursuant to Sections 2.9, 2.10 and 2.12(b).
Section 2.11. EURODOLLAR AVAILABILITY. (a) In the event, and on each
occasion, that on the day two (2) Business Days prior to the commencement of any
Interest Period for a Eurodollar Advance, the Agent shall have determined in
good faith that dollar deposits in the amount of the principal amount of such
Eurodollar Advance are not generally available in the London (England) interbank
market, or that the rate at which such dollar deposits are being offered will
not accurately reflect the cost to one or more Lenders of making or funding the
principal amount of their portions of such Eurodollar Advance during such
Interest Period, or that reasonable means do not exist for ascertaining the
Eurodollar Rate, the Agent shall, as soon as practicable thereafter, give
written or telephonic notice of such determination to the Lenders and the
Borrowers, and any request by Borrowers for a Eurodollar Advance pursuant to
Section 2.4 hereof or for conversion to or renewal of a Eurodollar Advance
pursuant to Section 2.7 hereof shall thereupon, and until the circumstances
giving rise to such notice no longer exist (as notified by the Agent to the
Borrowers and the Lenders), be deemed a request by the Borrowers for the making
of or conversion to a Base Rate Advance.
(b) If, at any time, the Agent shall have determined that any
contingency has occurred which adversely affects the London (England) interbank
market or that any law, treaty, order, directive, rule or regulation adopted,
issued or becoming effective after the Closing Date or any change in any
existing law, treaty, order, directive, rule or regulation from that in effect
on the Closing Date or in the interpretation thereof (in any case, whether or
not having the force of law) or other circumstance affecting one or more Lenders
or the London (England) interbank market makes the funding of any portion of a
Eurodollar Advance impracticable, the Agent shall, as soon as practicable
thereafter, give written or telephonic notice of such determination to the
Lenders and the Borrowers and any request by Borrowers for a Eurodollar Advance
pursuant to Section 2.4 hereof or for conversion to or renewal of a Eurodollar
Advance pursuant to Section 2.7 hereof shall thereupon, and until the
circumstances giving rise to such notice no longer exist (as notified by the
Agent to the Borrowers and the Lenders), be deemed a request by the Borrowers
for the making of or conversion to a Base Rate Advance.
Section 2.12. INDEMNITIES. (a) Each of Borrowers and Parent hereby
indemnifies each Lender on demand against any loss or reasonable expense which
such Lender or its branch or Affiliate may sustain or incur as a consequence of:
(i) any default in payment or prepayment of the principal amount
of any Eurodollar Advance made to the Borrowers or any portion of any
thereof or interest accrued thereon, as and when due and payable (at
the due date thereof, by irrevocable notice of payment or prepayment,
or otherwise),
41
(ii) the effect of the occurrence of any Event of Default upon
any Eurodollar Advance made to it, including, but not limited to, any
loss or reasonable expense sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or maintain
such Eurodollar Advance or any portion thereof,
(iii) the payment or prepayment of the principal amount of any
Eurodollar Advance made to it or any portion thereof, pursuant to
Section 2 or 3 hereof, or otherwise, on any day other than the last
day of an Interest Period or the payment of any interest on any
Eurodollar Advance made to it, or portion thereof, on a day other than
an Interest Payment Date for such Eurodollar Advance, or
(iv) the failure by Borrowers to accept or make a borrowing of a
Eurodollar Advance or a conversion to or renewal of a Eurodollar
Advance after it has given notice of such borrowing, conversion or
renewal.
Each Lender shall provide to the Borrowers, the Agent and the other Lenders a
statement, supported where applicable by documentary evidence, explaining the
amount and calculation of any such loss or expense it incurs, which statement
shall be conclusive absent manifest error.
(b) If any law, treaty, order, directive, rule or regulation shall be
adopted, issued or becoming effective after the Closing Date or if any change in
any law, treaty, order, directive, rule or regulation from that in effect on the
Closing Date or in the interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof (and including in
any event all risk based capital guidelines heretofore adopted by the
Comptroller of the Currency, the Board or any other banking regulatory agency,
domestic or foreign, to the extent that any provision contained therein does not
have to be complied with as of the date hereof) shall, or if the compliance by
any Lender with any guideline or request from any central bank or other
Governmental Authority, shall:
(i) impose upon, modify, require, make or deem applicable to any
one or more Lenders, or any of their Affiliates or branches, any
reserve requirement, special deposit requirement, insurance assessment
or similar requirement against or affecting the Revolving Commitment
of such Lender or Lenders or such Affiliates or branches, or
(ii) impose any condition upon or cause in any manner the
addition of, any supplement to or any increase of any kind to the
capital or cost base of such Lender or Lenders, or such Affiliates or
branches thereof, for extending or maintaining the Revolving
Commitment of such Lender, which results in an increase in the capital
requirement supporting the Revolving Commitment, or
(iii) impose upon, modify, require, make or deem applicable to
such Lender or Lenders or any such Affiliates or branches any capital
requirement, increased capital requirement or similar requirement,
and the result of any events referred to in clause (i), (ii) or (iii) above
shall be to (A) increase the amount of capital required or expected to be
required to be maintained by such Lender or any such Affiliate or branch and
such Lender determines that the amount of such capital requirement is incurred
by or based on the Revolving Commitment of such Lender or other commitments of
this type or (B) increase the costs or decrease the benefit in any way to such
Lender or Lenders, or any such Affiliate or branch, of extending or maintaining
the Revolving Commitment or extending or maintaining such Lender's or Lenders'
portion of the Loan or holding any Collateral;
then and in such event the Borrowers shall, on or prior to the tenth (10th)
Business Day after the giving of Written Notice of such increased costs and/or
decreased benefits to the Borrowers and the Agent by such Lender or Lenders (or
any such Affiliate or branch), pay to the Agent for the benefit of such Lender
or
42
Lenders all such additional amounts which in the good faith calculation of such
Lender or Lenders are properly allocable to the Revolving Commitment of such
Lender, such Lender's or Lenders' portion of the Loan and/or the Collateral, as
the case may be, and which:
(1) in the case of events referred to in clause (i) above,
shall be sufficient to compensate it for all such increased costs
and/or decreased benefits, and/or
(2) in the case of events referred to in clauses (ii) and
(iii) above, shall be an amount equal to the reduction, as
reasonably determined by such Lender, in the after-tax rate of
return on such Lender's capital resulting from any such capital
or increased capital or similar requirement (including, without
limitation, any such Lender's or Lender's Affiliates' or
branches' cost of taking action in anticipation of the
effectiveness of any event described in clause (ii) or (iii) in
order to enable such Lender, Lenders, Affiliate or branch to be
in compliance therewith upon such effectiveness), all as
certified by such Lender or Lenders in said Written Notice to the
Borrowers. Such certification shall be conclusive and binding on
the Borrowers absent manifest error.
(c) Each Credit Party hereby indemnifies and holds harmless the Agent
and each Lender and their respective Affiliates, directors, officers, agents,
representatives, counsel and employees and each other Person, if any,
controlling them or any of their Affiliates within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20(a) of the Securities
Exchange Act of 1934 (each an "Indemnified Party"), from and against any and all
losses, claims, damages, costs, expenses (including reasonable counsel fees and
disbursements) and liabilities which may be incurred by or asserted against such
Indemnified Party with respect to or arising out of the financing contemplated
by this Agreement, the commitments hereunder to make, or the making of the
Revolving Advances or the financings contemplated hereby, the other Loan
Documents, the Collateral (including, without limitation, the use thereof by any
of such Persons or any other Person, the exercise by the Agent or any Lender of
rights and remedies or any power of attorney with respect thereto, and any
action or inaction of the Agent or any Lender under any Security Document), the
use of proceeds of any financial accommodations provided hereunder, any
investigation, litigation or other proceeding brought or threatened relating
thereto, or the role of any such Person or Persons in connection with the
foregoing whether or not they or any other Indemnified Party is named as a party
to any legal action or proceeding ("Claims"). No Credit Party will, however, be
responsible to any Indemnified Party hereunder for any Claims to the extent that
any such Claim shall have arisen out of or resulted from actions taken or
omitted to be taken by such Indemnified Party which constitute the gross
negligence or willful misconduct of such Indemnified Party ("Excluded Claims").
Further, should any of the Agent's or any of the Lender's employees be involved
in any legal action or proceeding in connection with the transactions
contemplated hereby (other than relating to an Excluded Claim), each Credit
Party hereby agrees to pay to the Agent and each Lender an amount equal to the
actual per diem compensation for each employee for each day or portion thereof
that such employee is involved in preparation and testimony pertaining to any
such legal action or proceeding. The Indemnified Party shall give the Borrowers
prompt written notice of any Claim setting forth a description of those elements
of the Claim of which such Indemnified Party has knowledge. The Borrowers shall
have the right at any time during which a Claim is pending to select counsel to
defend and settle any Claims so long as in any such event the Borrowers shall
have stated in a writing delivered to the applicable Indemnified Party that, as
between the Borrowers and such Indemnified Party, the Borrowers are responsible
to such Indemnified Party with respect to such Claim; provided, however, that
the Borrowers shall not be entitled to control the defense of any Claim in the
event that there are defenses available to the Indemnified Party which are not
available to the Borrowers. In any other case, the Indemnified Party shall have
the right to select counsel and control the defense of any Claims; provided,
however, that no Indemnified Party shall settle any Claim as to which it is
controlling the defense without the consent of the Borrowers, which consent
shall not be unreasonably withheld or delayed. With respect
43
to any Claim for which the Borrowers are entitled to select counsel, each
Indemnified Party shall have the right, at its expense, to participate in the
defense of such Claim. In the event that, with respect to any Claim, more than
one Indemnified Party shall be permitted hereunder to select counsel to defend
such Claim at the expense of the Borrowers and shall decide to do so, then all
such Indemnified Parties shall select the same counsel to defend such
Indemnified Parties with respect to such Claim; provided, however, that if any
such Indemnified Party shall in its reasonable opinion (or in the reasonable
opinion of its counsel) consider that the retention of one joint counsel as
aforesaid shall result in a conflict of interest to it, such Indemnified Party
may, at the reasonable expense of the Borrowers, select its own counsel to
defend such Indemnified Party with respect to such Claim. The Indemnified
Parties and the Borrowers and their respective counsel shall cooperate with each
other in all reasonable respects in any investigation, trial and defense of any
such Claim and any appeal arising therefrom.
(d) If for any reason the foregoing indemnity is unavailable to any
Indemnified Party or insufficient to hold it free and harmless as contemplated
by the preceding paragraph (c), then the Borrowers shall contribute to the
amount paid or payable by the Indemnified Party as a result of any Claim in such
proportion as is appropriate to reflect, not only the relative benefits received
by the Borrowers on the one hand and such Indemnified Party on the other hand,
but also the relative fault of the Borrowers and such Indemnified Party, as well
as any other relevant equitable considerations.
(e) Notwithstanding anything to the contrary set forth herein, no
indemnity is provided, nor may any Claim be made, pursuant to this Section 2.12
with respect to taxes (and amounts relating thereto), the indemnification for
which shall be governed solely and exclusively by Section 2.22.
Section 2.13. DISBURSEMENT. Each Revolving Advance shall be disbursed
by the Agent to the Disbursement Account as provided in Section 2.4(d) hereof
and shall be charged, together with interest, fees and other amounts payable by
Borrowers hereunder, to the account of the Borrowers on the books of the Agent
from time to time.
Section 2.14. AGENT'S AVAILABILITY ASSUMPTION. (a) Unless the Agent
shall have been notified by any Lender by Written Notice prior to a borrowing
date that such Lender does not intend to make available to the Agent such
Lender's pro rata portion of any Revolving Advance which it shall be obligated
to make on such date, the Agent may assume that such Lender has made such amount
available to the Agent on the date for such borrowing and the Agent may, in
reliance upon such assumption, make available to the Borrowers a corresponding
amount. If such corresponding amount is not in fact made available to the Agent
by such Lender on such date of borrowing, the Agent shall be entitled to recover
such corresponding amount on demand from such Lender, which demand shall be made
in a reasonably prompt manner. If such Lender does not pay such corresponding
amount forthwith upon the Agent's demand therefor, the Agent shall promptly
notify the Lenders and the Borrowers and the Borrowers shall pay such
corresponding amount to the Agent on demand.
(b) The Agent shall also be entitled to recover from such Lender or
the Borrower interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Agent to the
Borrowers to the date such corresponding amount is recovered by the Agent, at a
rate per annum equal to (x) if paid by such Lender, the cost to the Agent of
funding such amount as notified in writing by the Agent to such Lender, or (y)
if paid by Borrowers, the applicable rate for Base Rate Advances or Eurodollar
Advances, as the case may be.
(c) In the event that any Lender shall fail to fund its pro rata share
of any Revolving Advance or letter of credit participation under Section 2A.2
hereof, the Agent on behalf of the L/C Issuer shall be entitled to recover such
amount on demand from such Lender, which demand shall be made in a reasonably
prompt manner. If such Lender does not pay such amount forthwith upon the
Agent's demand therefor, the Agent shall notify promptly the Lenders and the
Borrowers thereof and the Borrowers shall pay such amount to the Agent. The
Agent on behalf of the L/C Issuer, shall also be entitled to recover from such
Lender or the Borrowers, as the case may be, interest on such corresponding
amount in respect
44
of each day from the date such Revolving Advance was made, or the date such
purchase was to have been made or funded, to the date such amount is recovered
by the Agent, at a rate per annum equal to (x) if paid by such Lender, the cost
to the L/C Issuer of funding the payment of the drawing under the Letter of
Credit for which the Revolving Advance was made or participation purchased under
Section 2A.2 hereof, or (y) if paid by the Borrowers, the applicable rate for
Base Rate Advances in the case of a Revolving Advance made or participation
purchased under Section 2A.2 hereof.
(d) Nothing herein shall be deemed to relieve any Lender from its
obligation to fund or purchase its pro rata share of any Revolving Advance or
purchase any participation as required hereunder, or to prejudice any rights
which Borrowers may have against any Lender as a result of any default by such
Lender hereunder. No Lender shall be responsible for any default of any other
Lender in respect of any other Lender's obligation to make its pro rata share of
any Revolving Advances hereunder nor shall the Revolving Commitment of any
Lender hereunder be increased as a result of such default of any other Lender.
Each Lender shall be obligated to the extent provided herein regardless of the
failure of any other Lender to fulfill its obligations hereunder.
(e) Notwithstanding anything contained herein to the contrary, so long
as any Lender shall be in default in its obligation to fund its pro rata share
of any Revolving Advance (as notified to such Lender by the Agent; the Agent
agreeing to use good faith efforts to give such notification promptly following
the occurrence of such default) or shall have rejected any such commitment, then
such Lender shall not be entitled to receive any payments of principal of or
interest on its pro rata share of the Revolving Loan or its share of any
commitment or other fees payable hereunder unless and until (x) the Loan and all
interest thereon has been paid in full, (y) such failure to fulfill its
obligation to fund is cured and such Lender shall have paid, as and to the
extent provided in this Section 2.14, to the applicable party, if any, interest
on the amount of funds that such Lender failed to timely fund or (z) the
Obligations under this Agreement shall have been declared or shall have become
immediately due and payable, and until the earlier to occur of (x) or (y) above,
for purposes of voting or consenting to matters with respect to the Loan
Documents, such Lender shall be deemed not to be a "Lender" hereunder and such
Lender's Revolving Commitment shall be deemed to be zero (0). No Revolving
Commitment of any Lender shall be increased or otherwise affected by any such
failure or rejection by any Lender. Any payments of principal of or interest on
Obligations which would, but for this paragraph (e), be paid to any Lender,
shall be paid to the Lenders who shall not be in default under their respective
Revolving Commitments and who shall not have rejected any Revolving Commitment,
for application to Obligations or to provide Letter of Credit Cash Collateral in
such manner and order (pro rata among such Lenders) as shall be determined by
the Agent.
Section 2.15. PRO RATA TREATMENT AND PAYMENTS. Except as contemplated
by this Agreement, including, without limitation, Sections 2.1(c), 2.9, 2.10,
2.12, 2.13, 2.14, 2.18, 12.1, 12.5 and 12.13(h) hereof, each Revolving Advance
and each payment (including each prepayment) on account of the principal of and
interest on the Loan and fees described in this Agreement shall be made pro rata
to each Lender according to the respective percentages of each Lender set forth
opposite its name on Exhibit A hereto. The Agent will distribute each payment to
the Lenders in accordance with Section 2.19 hereof.
Section 2.16. EURODOLLAR OFFICES. Each Lender intends to initially
fulfill its commitment with respect to such Lender's pro rata share of any
Eurodollar Advance by causing the Initial Eurodollar Office of such Lender to
make such Lender's proportionate share of such Eurodollar Advance; provided,
however, that each Lender may at its option fulfill such commitment by causing
another branch or an Affiliate of such Lender to make such Lender's pro rata
share of such Eurodollar Advance; and provided, further, that the selection by
such Lender of the Initial Eurodollar Office of such Lender or any other such
branch or Affiliate shall not affect the obligations of the Borrowers to repay
such Lender's pro rata share of the Eurodollar Advances in accordance with the
terms of this Agreement.
Section 2.17. TELEPHONIC NOTICE. Without in any way limiting
Borrowers' obligation to confirm in writing any telephonic notice of a
borrowing, conversion or renewal, the Agent may act
45
without liability upon the basis of telephonic notice believed by the Agent in
good faith to be from an Authorized Representative of any Borrower or Borrower
Representative prior to receipt of written confirmation.
Section 2.18. MAXIMUM INTEREST. (a) No provision of this Agreement or
any Revolving Note shall require the payment to any Lender or permit the
collection by any Lender of interest in excess of the maximum rate permitted by
applicable law (the "Maximum Lawful Rate").
(b) If the amount of interest computed without giving effect to this
Section 2.18 and payable on any interest payment date in respect of the
preceding interest computation period would exceed the amount of interest
computed in respect of such period at the maximum rate of interest from time to
time permitted (after taking into account all consideration which constitutes
interest) by laws applicable to any Lender (such maximum rate being such
Lender's "Maximum Permissible Rate"), the amount of interest payable to such
Lender on such date in respect of such period shall be computed at such Lender's
Maximum Permissible Rate.
(c) If at any time and from time to time (i) the amount of interest
payable to any Lender on any interest payment date shall be computed at such
Lender's Maximum Permissible Rate pursuant to the preceding paragraph (b) and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at such Lender's Maximum Permissible
Rate, then the amount of interest payable to such Lender in respect of such
subsequent interest computation period shall continue to be computed at such
Lender's Maximum Permissible Rate until the amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to the preceding paragraph (b).
Section 2.19. RECEIPT OF PAYMENTS. (a) Each payment by any Borrower
under this Agreement shall be made without deduction, set-off, defense,
recoupment, claim or counterclaim, all of which are waived, not later than 12:00
noon (New York time) on the day when due in lawful money of the United States of
America in immediately available funds to the Payment Account of the Agent. The
Agent will, upon any such payment to the Payment Account, promptly thereafter
(and in any event on the same Business Day as the date when received if such
payment is received at or prior to 12:00 noon (New York time) (or, if sent by
wire transfer in immediately available funds, if such wire is initiated by such
time)), cause to be distributed like funds relating to the payment of principal
or interest ratably to the Lenders or as otherwise provided above, and like
funds relating to the payment of any other amount payable to any Lender to such
Lender, in each case to be applied in accordance with the terms of this
Agreement.
(b) Pursuant and subject to Section 8.22 hereof, the Borrowers have
agreed to cause all Proceeds to be deposited into Blocked Accounts, and to cause
all such Proceeds to be transferred to the Payment Account in accordance with
Section 8.22 and the Blocked Account Agreements. Subject to Section 2.20(a)
hereof, on each Business Day, the Agent shall apply to Obligations effective as
of such Business Day, all Proceeds credited in immediately available funds to
the Payment Account on such Business Day (and which shall not have theretofore
been credited to Obligations) to the Revolving Loan, until the Revolving Loan
shall have been paid in full and any remaining amount shall be turned over to
the Borrowers. In the event any Borrower (or any Affiliate of any Borrower or
any Person acting for or in concert with the Borrower) shall, notwithstanding
the existence of any cash management arrangement referred to in this Agreement,
receive any monies, checks, drafts or other similar negotiable items of payment
made with respect to Accounts (other than payments made to any Borrower in
respect of accommodation sales and other miscellaneous transactions which are
not store settlements so long as such monies, checks, drafts or similar items
are deposited as required by this sentence no less frequently than once every
week and in any event when the undeposited amount of such monies, checks, drafts
or similar items equals or exceeds $750,000 in the aggregate during November,
December or January of each year or $450,000 in the aggregate at any other
time), each Borrower shall no later than the first Business Day
46
following receipt thereof deposit or cause the same to be deposited, in kind, in
a Blocked Account or as otherwise directed by the Agent. Notwithstanding
anything to the contrary herein, all such items of payment shall, solely for
purposes of determining the occurrence of an Event of Default, be deemed
received upon actual deposit to the Payment Account, unless the same shall be
subsequently dishonored for any reason whatsoever in which case such payment
will not be deemed so received.
Section 2.20. APPLICATION OF PROCEEDS. (a) So long as no Event of
Default has occurred and is continuing and except as otherwise provided
hereunder, all payments applied to a particular Revolving Loan shall be applied
ratably to the portion thereof held by each Lender pro rata, first to any
portion of Revolving Loans which constitute Base Rate Advances and then to such
portion of the Revolving Loan comprising Eurodollar Rate Advances. On and after
an Event of Default and while such Event of Default continues, each Borrower
irrevocably (x) waives the right to direct the application of any and all
payments received at any time or times during such period by the Agent or any
Lender from or on behalf of the Borrowers pursuant to the terms of this
Agreement, and (y) agrees that the Agent and Lenders shall have the continuing
exclusive right to apply any and all such payments against any Obligations as
the Agent may deem advisable or as otherwise provided herein. Unless otherwise
provided herein (including, without limitation, under Section 2.19(b) hereof) or
in the absence of a specific determination by the Agent with respect thereto,
the same shall, when in the form of immediately available funds, be applied in
the following order: (i) then due and payable fees and expenses owing under the
Loan Documents; (ii) then due and payable interest and the principal outstanding
on the Swing Line Loan; (iii) then due and payable interest payments on the
Obligations; (iv) principal outstanding under the Revolving Loan until paid in
full; and (v) other Obligations then due and payable (including being held as
Letter of Credit Cash Collateral). Any amounts remaining after application of
all items in clauses (i) through (v) above shall be deposited in the account of
the Agent as provided in paragraph (b) below.
(b) Subject to paragraph (a) above, all amounts remaining after
application as provided in the last sentence of paragraph (a) above shall be
deposited into an account maintained by the Agent. So long as no Event of
Default or Default shall be continuing the Borrowers may direct in writing that
the Agent release any and all amounts (and earnings thereon) from such account.
Any amounts on deposit in such account may be, unless and until withdrawn by
Borrowers, applied by the Agent to the payment of Obligations under the Loan
Documents as provided in paragraph (a) above.
(c) The Agent is authorized to, and at its option may, make advances
on behalf of the Borrowers for payment of all fees, expenses, charges, costs,
principal and interest incurred by the Borrowers hereunder. Such advances shall
be made when and as any Borrower fails to promptly pay such fees, expenses,
charges, costs, principal and interest and, at the Agent's option and to the
extent permitted by law and within the Revolving Commitments of the Lenders,
shall be deemed Revolving Advances constituting part of the Revolving Loan
hereunder. Any advance made by the Agent under the paragraph (c) shall be deemed
an Advance to Finlay. Promptly following any advance made by the Agent under
this paragraph (c), the Agent shall deliver a notice of such advance to the
Borrower; provided, however, that the Agent shall have no liability to the
Borrowers as a result of the failure of the Agent to deliver such notice to the
Borrowers.
Section 2.21. ACCOUNTING. Agent, acting as agent for the Lenders and,
solely for purposes of Treasury Regulation Section 5f.103-1(c) under this
Section 2.21, each Borrower, shall maintain a loan account (the "Loan Account")
on its books to record: all Revolving Advances, all Loans, all Swing Line Loans,
all Letter of Credit Obligations, the amount of the reimbursement obligations of
the Borrower for each drawing made under a Letter of Credit, all payments made
by such Borrower, and all other debits and credits as provided in this Agreement
with respect to the Loans or any other Obligations, and Borrowers and Agent
shall treat each Person whose name is entered in the Loan Account as a Lender or
as an L/C Issuer, as the case may be, as such for all purposes hereunder, and
amounts due and owing to Agent, the Lenders and the L/C Issuers, as the case may
be, by any Borrower will be paid only to those
47
Persons entered in the Loan Account as such. The Agent will provide a monthly
accounting of transactions under the Revolving Loan to the Borrowers. Each and
every such accounting shall (absent manifest error) be deemed final, binding and
conclusive upon the Borrowers in all respects as to all matters reflected
therein, unless the Borrowers, within 30 days after the date any such accounting
is rendered, shall notify the Agent in writing of any objection which the
Borrowers may have to any such accounting, describing the basis for such
objection with specificity. In that event, only those items expressly objected
to in such notice shall be deemed to be disputed by the Borrowers. The Agent's
determination, based upon the facts available, of any item objected to by the
Borrowers in such notice shall (absent manifest error) be final, binding and
conclusive on the Borrowers, unless Borrowers shall commence a judicial
proceeding to resolve such objection within 90 days following the Agent's
notifying the Borrowers in writing of such determination.
Section 2.22. TAXES. Except as otherwise provided in Section
2.22(c)(v) below, (a) any and all payments by Borrowers or any other Credit
Party hereunder or under the Notes or any other Loan Document shall be made, in
accordance with this Section 2.22, free and clear of and without deduction for
or on the account of any and all present or future Taxes. If any Borrower or any
other Credit Party shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under the Notes or any other Loan
Document, (i) the sum payable shall be increased as much as shall be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.22) Agent, Lenders or L/C Issuers,
as applicable, receive an amount equal to the sum they would have received had
no such deductions been made, (ii) Borrowers or such other Credit Party shall
make such deductions, and (iii) Borrowers or such other Credit Party shall pay
the full amount deducted to the relevant taxing or other authority in accordance
with applicable law. Within 30 days after the date of any payment of Taxes,
Borrowers shall furnish to Agent the original or a certified copy of a receipt
evidencing payment thereof. Except as provided in Section 2.22(c)(vi), Agent,
Lenders and L/C Issuers shall not be obligated to return or refund any amounts
received pursuant to this Section.
In addition, each Borrower and each of the Credit Parties agree to pay
any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies by any state, county, city or other political
subdivision within the United States or by any applicable foreign jurisdiction,
and all liabilities with respect thereto, which arise in respect of this
Agreement, any Note, any other Loan Document, the Obligations, the Collateral or
any modification hereof or thereof (collectively, "Other Taxes"). Within thirty
(30) days after the date of any payment of Other Taxes, Borrowers shall furnish
to Agent the original or certified copy of a receipt evidencing payment thereof.
(b) Each of Borrowers and Parent shall jointly and severally indemnify
and, within 10 days of demand therefor, pay Agent and each Lender and each L/C
Issuer for the full amount of Taxes and Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.22) paid by Agent or such Lender or such L/C Issuer, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted.
(c) (i) Each Lender, each L/C Issuer and each Agent that is not a
United States person as defined in Section 7701(a)(30) of the Code (each a
"Foreign Lender") as to which payments to be made under this Agreement or under
the Notes are exempt from United States withholding tax under an applicable
statute or tax treaty shall provide to Borrowers and Agent a properly completed
and executed IRS Form W-8ECI or Form W-8BEN or other applicable form,
certificate or document prescribed by the IRS or the United States certifying as
to such Foreign Lender's entitlement to such exemption (a "Certificate of
Exemption"). Any Person that is not a United States person as defined in Section
7701(a)(30) of the Code that seeks to become a Lender or an L/C Issuer, as
applicable, under this Agreement shall provide a Certificate of Exemption to
Borrowers and Agent prior to becoming a Lender or an L/C Issuer, as applicable,
hereunder. No Person that is not a United States person as defined in Section
7701(a)(30) of the Code may become a Lender or an L/C Issuer, as applicable,
hereunder if such
48
Person fails to deliver a Certificate of Exemption in advance of becoming a
Lender or an L/C Issuer, as applicable.
(ii) Each U.S. Lender shall provide to Borrowers and Agent a
properly completed and executed IRS Form W-9 (certifying that such
U.S. Lender is entitled to an exemption from United States backup
withholding tax) or any successor form. Solely for purposes of this
section 2.22(c), a U.S. Lender shall not include a Lender, an L/C
Issuer or an Agent that may be treated as an exempt recipient based on
the indicators described in Treasury Regulation Section
1.6049-4(c)(1)(ii).
(iii) Each U.S. Lender and Foreign Lender, from time to time
after submitting the forms referred to above, shall submit to the
Borrowers and the Agent such additional duly completed and signed
copies of one or the other such forms (or such successor forms or
other documents as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (1) reasonably requested
in writing by the Borrowers or the Agent and (2) appropriate under
then current United States law or regulations to avoid United States
withholding taxes on payments in respect of any amounts to be received
by such Lender pursuant to this Agreement and/or the Notes.
(iv) If any Lender which is not a "United States person"
determines that it is unable to submit to the Borrowers or the Agent
any form or certificate that such Lender is requested to submit
pursuant to the preceding paragraph, or that it is required to
withdraw or cancel any such form or certificate, or that any such form
or certificate previously submitted has otherwise become ineffective
or inaccurate, such Lender shall promptly notify the Borrowers and the
Agent of such fact.
(v) No Credit Party shall be required to pay any additional
amount in respect of Taxes to any Lender if and only to the extent
that (A) such Lender becomes subject to Taxes subsequent to the date
this Agreement (or, if applicable, an Assignment Agreement) is
executed by such Lender above (or in the case of a Lender which is not
a "United States person," the first date on which it delivers the
appropriate form or certificate to the Borrowers and the Agent as
referred to in paragraph (c)(i) of this Section) as a result of any
change in the circumstances of such Lender, other than a change in
applicable law (including without limitation an increase in any
applicable tax rate), including without limitation a change in the
residence, place of incorporation or principal place of business of
the Lender, a change in the branch or lending office of the Lender
participating in the transactions set forth herein or as a result of
the sale by the Lender of participating interests in such Lender's
creditor position(s) hereunder; provided, however, that the Credit
Parties will be required to pay any additional amount in respect of
Taxes to any Lender to the extent that after a change in the
circumstances (as described above) of such Lender a subsequent change
in any applicable law results in an additional amount that such Lender
is subject to with respect to Taxes; or (B) such Taxes would not have
been incurred but for the failure of such Lender to file with the
appropriate tax authorities and/or provide to the Borrowers or the
Agent any form or certificate that it was required so to do pursuant
to paragraph (c) of this Section and entitled so to do under
applicable law.
(vi) Within thirty (30) days after the written reasonable request
of the Borrowers, each Lender shall execute and deliver to such
Borrower such certificates, forms or other documents which can be
furnished consistent with the facts and which are reasonably necessary
to assist such Borrower in applying for refunds of Taxes paid by such
Borrower hereunder or making payment of Taxes hereunder; provided,
however, that no Lender shall be required to furnish to the Borrowers
any financial information
49
with respect to itself or other information which it in its reasonable
discretion considers confidential. Upon the written request of the
Borrowers made to the Lender, and at the Borrowers' expense, such
Lender shall apply for a refund with respect to any Tax for which such
Lender has been indemnified by, and has received payment from, the
Borrowers pursuant to this Section 2.22, and for which such Lender
believes, in its reasonable discretion, that it is entitled to
receive. If the Lender receives such refund and in its reasonable
discretion determines that such refund is of Taxes for which it has
been indemnified by, and has received payment from, the Borrowers or
another Credit Party pursuant to this Section 2.22, such Lender shall
remit such refund to the Borrowers without interest (other than
interest, if any, included in such refund), net of all costs and
expenses of such Lender and any taxes payable with respect to the
receipt of such refund and interest. Lender shall be required to remit
such refund to Borrowers only after the expiration of the statue of
limitations applicable to the Taxes refunded.
(d) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.22 shall survive the payment in full of principal and interest
hereunder and under the Notes indefinitely.
SECTION 2A. LETTERS OF CREDIT.
Section 2A.1. ISSUANCE. (a) Subject to the terms and conditions of
this Agreement, Agent and Lenders agree to incur, from time to time prior to the
Maturity Date, upon the request of the Borrower Representative and on behalf of
the applicable Borrower, Letter of Credit Obligations by causing Letters of
Credit to be issued by GE Capital or a Subsidiary thereof or a bank or other
legally authorized Person selected by or acceptable to Agent in its sole
discretion (each, an "L/C Issuer") for the applicable Borrower's account and
guaranteed by Agent; provided, that if the L/C Issuer is a Lender, then such
Letters of Credit shall not be guaranteed by Agent but rather each Lender shall,
subject to the terms and conditions hereinafter set forth, purchase (or be
deemed to have purchased) risk participations in all such Letters of Credit
issued with the written consent of Agent, as more fully described in Section
2A.2(b) below. The aggregate amount of all such Letter of Credit Obligations
shall not at any time exceed the least of (i) Thirty Million Dollars
($30,000,000) (the "L/C Sublimit"), (ii) the Revolving Credit Facility
Commitment less the aggregate outstanding principal balance of the Revolving
Loan, and (iii) the Aggregate Borrowing Base less the aggregate outstanding
principal balance of the Revolving Loan. Moreover, the aggregate amount of all
Letter of Credit Obligations outstanding to any Borrower shall not at any time
exceed (x) in the case of Finlay, the Finlay Borrowing Base at such time and (y)
in the case of Carlyle, the Carlyle Borrowing Base at such time. Except as set
forth on Schedule 2A.1 (a) no such Letter of Credit shall have an expiry date
that is more than one year following the date of issuance thereof, unless
otherwise determined by Agent in its sole discretion, and neither Agent nor
Lenders shall be under any obligation to incur Letter of Credit Obligations in
respect of, or purchase risk participations in, any Letter of Credit having an
expiry date that is later than the Maturity Date.
(b) The letters of credit set forth on Schedule 2A.1(b) issued by Bank
of America, N.A. shall be deemed to be Letters of Credit issued under this
Agreement (the "BofA Letters of Credit") and shall represent Letter of Credit
Obligations under this Agreement, provided that such BofA Letters of Credit
shall be subject to the terms set forth in this Agreement; and provided,
further, that such BofA Letters of Credit shall not be amended, supplemented,
extended or otherwise modified.
Section 2A.2. ADVANCES AUTOMATIC; PARTICIPATIONS. (a) In the event
that Agent or any Lender shall make any payment on or pursuant to any Letter of
Credit Obligation, such payment shall then be deemed automatically to constitute
a Revolving Advance under Section 2.1(a) of this Agreement regardless of whether
a Default or Event of Default has occurred and is continuing and notwithstanding
any Borrower's failure to satisfy the conditions precedent set forth in Section
6, and each Lender shall be obligated to pay its pro rata share thereof in
accordance with this Agreement. The failure of any Lender to make available to
Agent for Agent's own account its pro rata share of any such
50
Revolving Advance or payment by Agent under or in respect of a Letter of Credit
shall not relieve any other Lender of its obligation hereunder to make available
to Agent its pro rata share thereof, but no Lender shall be responsible for the
failure of any other Lender to make available such other Lender's pro rata share
of any such payment.
(b) If it shall be illegal or unlawful for Borrowers to incur
Revolving Advances as contemplated by Section 2A.2(a) above because of an Event
of Default described in Sections 10.1(f) or (g) or otherwise or if it shall be
illegal or unlawful for any Lender to be deemed to have assumed a ratable share
of the reimbursement obligations owed to an L/C Issuer, or if the L/C Issuer is
a Lender, then (i) immediately and without further action whatsoever, each
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation equal to such Lender's pro rata share (based on the Revolving
Commitments) of the Letter of Credit Obligations in respect of all Letters of
Credit then outstanding and (ii) thereafter, immediately upon issuance of any
Letter of Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation in such Lender's pro rata share (based on
the Revolving Commitments) of the Letter of Credit Obligations with respect to
such Letter of Credit on the date of such issuance. Each Lender shall fund its
participation in all payments or disbursements made under the Letters of Credit
in the same manner as provided in the Agreement with respect to Revolving
Advances.
Section 2A.3. CASH COLLATERAL. (a) If Borrowers are required to
provide cash collateral for any Letter of Credit Obligations pursuant to the
Agreement prior to the Maturity Date, Borrowers will pay to Agent for the
ratable benefit of itself and Lenders cash or cash equivalents acceptable to
Agent ("Cash Equivalents") in an amount equal to 105% of the maximum amount then
available to be drawn under each applicable Letter of Credit outstanding. Such
funds or Cash Equivalents shall be held by Agent in a cash collateral account
(the "Cash Collateral Account") maintained at a bank or financial institution
acceptable to Agent. The Cash Collateral Account shall be in the name of
Borrowers and shall be pledged to, and subject to the control of, Agent, for the
benefit of Agent and Lenders, in a manner satisfactory to Agent. Borrowers
hereby pledge and grant to Agent, on behalf of itself and Lenders, a security
interest in all such funds and Cash Equivalents held in the Cash Collateral
Account from time to time and all proceeds thereof, as security for the payment
of all amounts due in respect of the Letter of Credit Obligations and other
Obligations, whether or not then due. This Agreement shall constitute a security
agreement under applicable law.
(b) If any Letter of Credit Obligations, whether or not then due and
payable, shall for any reason be outstanding on the Maturity Date, Borrowers
shall either (A) provide cash collateral therefor in the manner described above,
or (B) cause all such Letters of Credit and guaranties thereof, if any, to be
canceled and returned, or (C) deliver a stand-by letter (or letters) of credit
in guarantee of such Letter of Credit Obligations, which stand-by letter (or
letters) of credit shall be of like tenor and duration (plus 30 additional days)
as, and in an amount equal to 105% of the aggregate maximum amount then
available to be drawn under, the Letters of Credit to which such outstanding
Letter of Credit Obligations relate and shall be issued by a Person, and shall
be subject to such terms and conditions, as are be satisfactory to Agent in its
reasonable discretion.
(c) From time to time after funds are deposited in the Cash Collateral
Account by Borrowers, whether before or after the Maturity Date, Agent may apply
such funds or Cash Equivalents then held in the Cash Collateral Account to the
payment of any amounts, and in such order as Agent may elect, as shall be or
shall become due and payable by Borrowers to Agent and Lenders with respect to
such Letter of Credit Obligations of Borrowers and, upon the satisfaction in
full of all Letter of Credit Obligations of Borrowers, to any other Obligations
then due and payable.
(d) Neither Borrowers nor Parent nor any Person claiming on behalf of
or through Borrowers or Parent shall have any right to withdraw any of the funds
or Cash Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the
51
payment of all amounts payable by Borrowers to Agent and Lenders in respect
thereof, any funds remaining in the Cash Collateral Account shall be applied to
other Obligations then due and owing and upon payment in full of such
Obligations, any remaining amount shall be paid to Borrowers or as otherwise
required by law. Interest earned on deposits in the Cash Collateral Account
shall be for the account of Agent.
Section 2A.4. FEES AND EXPENSES. Borrowers agree to pay to Agent for
the benefit of Lenders, as compensation to Lenders for Letter of Credit
Obligations incurred hereunder, (i) all reasonable costs and expenses incurred
by Agent or any Lender on account of such Letter of Credit Obligations, and (ii)
for each month during which any Letter of Credit Obligation shall remain
outstanding, a fee (the "Letter of Credit Fee") in an amount equal to the
Applicable Eurodollar Margin from time to time in effect multiplied by the then
maximum amount available from time to time to be drawn under the applicable
Letter of Credit. Such fee shall be paid to Agent for the benefit of the Lenders
in arrears, on the first day of each month and on the Maturity Date. In
addition, Borrowers shall pay to any L/C Issuer, on demand, such reasonable fees
(including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.
Section 2A.5. REQUEST FOR INCURRENCE OF LETTER OF CREDIT OBLIGATIONS.
Borrower Representative shall give Agent at least three (3) Business Days' prior
written notice requesting the incurrence of any Letter of Credit Obligation for
the account of either Borrower. The notice shall be accompanied by the form of
the Letter of Credit (which shall be acceptable to the L/C Issuer).
Notwithstanding anything contained herein to the contrary, Letter of Credit
applications by Borrowers and approvals by Agent and the L/C Issuer may be made
and transmitted pursuant to electronic codes and security measures mutually
agreed upon and established by and among Borrowers, Agent and the L/C Issuer.
Section 2A.6. OBLIGATION ABSOLUTE. The obligation of Borrowers to
reimburse Agent and Lenders for payments made with respect to any Letter of
Credit Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Lender to make payments to Agent with respect to Letters of
Credit shall be unconditional and irrevocable. Such obligations of Borrowers and
Lenders shall be paid strictly in accordance with the terms hereof under all
circumstances including the following:
(i) any lack of validity or enforceability of any Letter of
Credit or the Agreement or the other Loan Documents or any other
agreement;
(ii) the existence of any claim, setoff, defense or other right
that each Borrower or any of its Affiliates or any Lender may at any
time have against a beneficiary or any transferee of any Letter of
Credit (or any Persons or entities for whom any such transferee may be
acting), Agent, any Lender, or any other Person, whether in connection
with the Agreement, the Letter of Credit, the transactions
contemplated herein or therein or any unrelated transaction (including
any underlying transaction between Borrowers or any of their
Affiliates and the beneficiary for which the Letter of Credit was
procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly provided in
Section 2A.7(b)(C) below) or any L/C Issuer under any Letter of Credit
or guaranty thereof against presentation of a demand, draft or
certificate or other document that does not comply with the terms of
such Letter of Credit or such guaranty;
52
(v) any other circumstance or event whatsoever, that is similar
to any of the foregoing; or
(vi) the fact that a Default or an Event of Default has occurred
and is continuing.
Section 2A.7. INDEMNIFICATION; NATURE OF LENDERS' DUTIES. (a) In
addition to amounts payable as elsewhere provided in the Agreement, each
Borrower hereby agrees to pay and to protect, indemnify, and save harmless Agent
and each Lender from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys'
fees and allocated costs of internal counsel) that Agent or any Lender may incur
or be subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or guaranty thereof, or (B) the failure of Agent or any
Lender seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, in each case other than (i) to the
extent as a result of the gross negligence or willful misconduct of Agent or
such Lender (as finally determined by a court of competent jurisdiction), and
(ii) with respect to taxes (and amounts relating thereto), the indemnification
for which shall be governed solely and exclusively by Section 2.22.
(b) As between Agent and any Lender and Borrowers, Borrowers assume
all risks of the acts and omissions of, or misuse of any Letter of Credit by
beneficiaries of any Letter of Credit. In furtherance and not in limitation of
the foregoing, to the fullest extent permitted by law neither Agent nor any
Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) failure of
the beneficiary of any Letter of Credit to comply fully with conditions required
in order to demand payment under such Letter of Credit; provided, that in the
case of any payment by Agent or L/C Issuer under any Letter of Credit or
guaranty thereof, Agent or L/C Issuer shall be liable to the extent such payment
was made solely as a result of its gross negligence or willful misconduct (as
finally determined by a court of competent jurisdiction) in determining that the
demand for payment under such Letter of Credit or guaranty thereof complies on
its face with any applicable requirements for a demand for payment under such
Letter of Credit or guaranty thereof; (D) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they may be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the transmission or
otherwise of any document required in order to make a payment under any Letter
of Credit or guaranty thereof or of the proceeds thereof; (G) the credit of the
proceeds of any drawing under any Letter of Credit or guaranty thereof; and (H)
any consequences arising from causes beyond the control of Agent or any Lender.
None of the above shall affect, impair, or prevent the vesting of any of Agent's
or any Lender's rights or powers hereunder or under the Agreement.
(c) Nothing contained herein shall be deemed to limit or to expand any
waivers, covenants or indemnities made by Borrowers in favor of any L/C Issuer
in any letter of credit application, reimbursement agreement or similar
document, instrument or agreement between any Borrower and such L/C Issuer,
including an Application and Agreement for Documentary Letter of Credit or a
Master Documentary Agreement and a Master Standby Agreement entered into with
Agent.
SECTION 3. PAYMENTS AND PREPAYMENTS.
Section 3.1. MANDATORY PAYMENTS. (a) If at any time the sum of (i) the
then outstanding principal amount of the Revolving Loan (including the Swing
Line Loan) plus (ii) the outstanding amount of Letter of Credit Obligations
exceeds the Borrowing Limit at such time, the
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Borrowers shall immediately eliminate such excess by prepaying the Revolving
Loan. In the event that reducing the Revolving Loan to zero will not eliminate
such excess, then the Borrowers shall provide to the Agent, cash collateral, on
terms and pursuant to documents and agreements (each of which shall constitute a
Security Document) satisfactory in all respects to the Agent, for all
outstanding Letter of Credit Obligations (hereinafter, "Letter of Credit Cash
Collateral") in an amount sufficient to eliminate such excess, the Letter of
Credit Obligations being deemed reduced by the amount of Letter of Credit Cash
Collateral so provided.
(b) In the event that for any reason the Letter of Credit Obligations
exceed $30,000,000 at any time, the Borrowers shall immediately provide Letter
of Credit Cash Collateral in an amount sufficient to eliminate such excess, the
Letter of Credit Obligations being deemed reduced by the amount of Letter of
Credit Cash Collateral so provided.
(c) The Borrowers shall cause for a period of at least 30 consecutive
days during each Clean Down Period (i) the aggregate outstanding principal
balance of the Revolving Loan to be reduced to an amount equal to $50,000,000 or
less and (ii) the Letter of Credit Obligations to be reduced to an amount equal
to $20,000,000 or less; provided, however, that in the event the Letter of
Credit Obligations exceed $20,000,000 at any time, the Borrowers may provide
Letter of Credit Cash Collateral in an amount sufficient to eliminate such
excess and the Letter of Credit Obligations shall be deemed reduced by the
amount of Letter of Credit Cash Collateral so provided.
(d) Any prepayment of principal of the Revolving Loan pursuant to this
Section 3.1 shall be made without premium or penalty but shall be subject to
payment of any applicable indemnity obligations pursuant to Section 2.12 hereof.
Each prepayment of principal of the Revolving Loan required under Section 3.1 or
Section 3.2 hereof shall be accompanied by the payment of interest and fees
accrued and unpaid on the amount of such prepayment through the date of
prepayment.
Section 3.2. CERTAIN PAYMENTS. (a) Upon receipt by either of the
Borrowers or Parent or any of their respective Subsidiaries or by the Agent of
any proceeds of any insurance or condemnation on any tangible property of the
Borrowers or any of their Subsidiaries, such Borrower shall immediately prepay
the principal of the Revolving Loan to such Borrower in the amount of such
proceeds.
(b) Upon the receipt by the Borrowers or any of their Domestic
Subsidiaries of any Net Cash Proceeds from the sale by the Borrowers or any of
their Domestic Subsidiaries of any property, other than sales of Inventory in
the ordinary course of business, such Borrower shall immediately prepay the
principal of the Revolving Loan to such Borrower in the amount of such Net Cash
Proceeds.
(c) Upon receipt by the Parent, the Borrowers or any of their Domestic
Subsidiaries of any Net Cash Proceeds from any source not referred to in
paragraphs (a), (b) or (f) of this Section 3.2 (other than sales of Inventory in
the ordinary course of business and other than proceeds of Accounts and, in the
case of Parent, dividends and distributions from Borrowers to the extent
permitted hereunder and to the extent used by the Parent as set forth
hereunder), such Borrower shall immediately prepay the principal of the
Revolving Loan to such Borrower in the amount of such Net Cash Proceeds.
(d) In the event that (i) the amount of proceeds or Net Cash Proceeds
in respect of which a prepayment is required to be paid under paragraph (a),
(b), (c) or (f) of this Section 3.2 exceeds the amount of outstanding principal
of the Revolving Loan, then such excess shall be immediately paid to the Agent
to be held as Letter of Credit Cash Collateral and (ii) the excess referred to
in clause (i) of this paragraph (d) exceeds the amount of Letter of Credit
Obligations, then the amount of such excess (whether such excess is created at
the time of establishment of the Letter of Credit Cash Collateral or occurs by
virtue of the reduction of Letter of Credit Obligations or otherwise) shall be
held by the Agent as cash collateral pursuant to the Cash Collateral Agreement
and released from time to time in accordance with paragraph (e) of this Section
3.2. Interest earned and paid on such cash collateral shall be for the
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account of the Borrowers or their Domestic Subsidiary as provided in the Cash
Collateral Agreement and until release as provided in paragraph (e) of this
Section 3.2 shall be added to such cash collateral.
(e) In the event that the Agent is holding cash collateral under
clause (ii) of Section 3.2(d) hereof or Letter of Credit Cash Collateral under
clause (i) of Section 3.2(d) hereof, the Agent shall release all or any portion
of same to the applicable Borrower to the extent requested by the Borrowers upon
Written Notice by Borrower Representative to the Agent, so long as, at the time
of such Written Notice by the Borrower, the Borrowers are in compliance with
clauses (i) and (ii) of Section 6.1 hereof and so certifies in its Written
Notice and so long as there is no requirement under any other provision of this
Agreement that the Letter of Credit Cash Collateral be maintained.
Notwithstanding the foregoing, the Borrowers shall request release of and
exhaust cash collateral held under clause (ii) of Section 3.2(d) hereof prior to
making any request for release of Letter of Credit Cash Collateral and,
notwithstanding anything to the contrary contained in Section 2 hereof, shall
give no notice of borrowing under Section 2.4 hereof while the Agent is holding
any Letter of Credit Cash Collateral or cash collateral under Section 3.2(d)
hereof; provided, however, that the Borrowers may give a notice of borrowing in
the event that Letter of Credit Cash Collateral is being held other than as
required under Section 3.2(d) hereof.
(f) Upon receipt by the Parent of any Net Cash Proceeds from any
issuance of Equity Interests permitted by Section 9.6(a), Parent shall
contribute such Net Cash Proceeds to Borrowers, and there shall become due and
payable on the date of such receipt a prepayment in respect of principal of the
Revolving Loan in the amount of such Net Cash Proceeds.
(g) None of the prepayments required under this Section 3.2 shall
result in a permanent reduction in the Revolving Credit Facility Commitment. Any
prepayment required under this Section 3.2 shall be deemed paid to the extent
that Proceeds from the transaction in respect of which the requirement for such
prepayment arose shall have been paid into the Payment Account pursuant to
Section 8.22 hereof.
Section 3.3. OPTIONAL PREPAYMENTS. (a) Upon not less than three (3)
Business Days' prior Written Notice to the Agent with respect to Revolving
Advances constituting Eurodollar Advances and Written Notice to the Agent on the
Business Day of prepayment in the case of Base Rate Advances, the Borrowers
shall have the right from time to time to prepay in whole or in part, without
premium, fee or charge (except as provided in Section 2.12 and Section
2.5(a)(iii) hereof), the Revolving Loan, so long as each such prepayment in part
is in the amount of $50,000 or an integral multiple of $50,000 in excess
thereof, and so long as, concurrently with the making of any such prepayment,
the Borrowers pay any fees, premiums, charges or costs provided for under
Section 2.12 hereof. The provisions of this Section 3.3 shall not apply to
mandatory payments made with respect to the Revolving Loan pursuant to Section
8.22 of this Agreement.
(b) Upon the giving of notice of prepayment, the amount therein
specified to be prepaid shall be due and payable on the date therein specified
for such prepayment, together with all accrued interest thereon to such date
plus any fees, premiums, charges or costs provided for under Section 2.12 or
Section 2.5(a)(iii) hereof. The Agent shall, promptly after receipt of any
notice of prepayment of any Loan as provided in this Section 3.3, notify each
Lender in writing or by telephone confirmed promptly in writing of the
Borrowers' intentions so to prepay all or part of such Loan.
Section 3.4. PROCEDURES FOR PAYMENT.
(a) Immediately upon receipt by a Borrower of Net Cash Proceeds
pursuant to paragraphs (a), (b), (c) or (d) of Section 3.2 repayments made by
such Borrower shall be applied to the Swing Line Loans and the Revolving
Advances of such Borrower.
(b) Notwithstanding anything contained in Section 3.2 hereof, the
Agent shall not, to the extent requested in writing by Borrowers, apply any
mandatory prepayment under such section to any
55
portion of the Revolving Loan which constitutes a Eurodollar Advance until the
last day of the respective Interest Period therefor or the earlier maturity of
such portion of such Revolving Loan by acceleration or otherwise, such mandatory
prepayment, until it can be so applied, to be applied to the prepayment of such
portion of the Revolving Loan comprising Base Rate Advances. If there shall
remain any portion of such mandatory prepayment after payment in full of such
portion of the Revolving Loan constituting Base Rate Advances, then until such
remaining portion of the mandatory prepayment can be applied to the Eurodollar
Advances as aforesaid, such remaining portion of such mandatory prepayment shall
be invested and reinvested by and in the name of the Agent in investments of the
type permitted under Section 9.4(b) hereof with the type and maturity of such
investments to be mutually agreed to by the Agent and the Borrowers. All
interest earned on such investments shall be for the account and risk of the
Borrowers. Interest earned on any portion of principal applied to the Eurodollar
Advance shall be, so long as no Default or Event of Default shall have occurred
and be continuing, and to the extent received by the Agent, turned over to the
Borrowers promptly following application of such principal to such Eurodollar
Advance, as the Agent shall determine. As additional collateral security for the
Obligations, the Borrowers hereby grant to the Agent a security interest in (x)
any such mandatory prepayments and any investments thereof, including, without
limitation, any certificates or instruments evidencing any such investments, and
all claims and choses in action in respect of the foregoing, (y) any interest or
other payment made in respect of such investments and (z) any and all proceeds
of any of the above and all claims and choses in action in respect of the
foregoing (all of the foregoing constituting part of the Collateral). To the
extent the Agent makes any such investments, the Borrowers hereby authorize the
Agent to hold any certificate or instrument evidencing such investments.
Section 3.5. UNUSED FACILITY FEE. The Borrowers shall pay to the Agent
for the account of each Lender on the first day of each month of each calendar
year, in arrears, until the date of the expiration, termination or cancellation
of the Revolving Credit Facility Commitment and on such date, an unused facility
fee for the calendar month or shorter period just ended of thirty-seven and
one-half basis points (37.5 b.p.) per annum on the amount equal to the excess of
(i) the daily average of the maximum dollar amount of the Revolving Credit
Facility Commitment (in any case determined without reference to the limitations
imposed by the Aggregate Borrowing Base) during such calendar month or longer
period over (ii) the sum of (A) the average daily outstanding principal balance
of the Revolving Loan during such calendar month or longer period and (B) the
average daily Letter of Credit Obligations during such calendar month or longer
period.
Section 3.6. FEES. The Borrowers shall pay to GE Capital,
individually, the fees specified in the Fee Letters at the times specified for
payment therein.
SECTION 4. SECURITY AND GUARANTIES.
As security for the full and timely payment and performance of the
Obligations, whether now existing or hereafter arising, and subject to Section
5.3:
Section 4.1. PLEDGE OF STOCK AND NOTES. Each of Finlay and its
Subsidiaries (other than the Sonab Entities) shall (to the extent of their
interest therein) duly execute and deliver to the Agent one or more pledge
agreements, substantially in the form of Exhibit 4.1(a) hereto (each as amended,
supplemented or otherwise modified from time to time in accordance with its
terms, a "Pledge Agreement"), covering, to the extent of such Person's interest
therein, (i) all Stock of all present and future Subsidiaries (direct and
indirect) of Finlay (other than the Sonab Entities), now or hereafter issued,
(ii) all Indebtedness evidenced by promissory notes and instruments held by
Finlay or any of its Subsidiaries (other than the Sonab Entities) and (iii) all
proceeds thereof, pursuant to which the Credit Parties (other than the Parent)
shall grant to the Agent for the benefit of the Agent and the Lenders a valid,
perfected and enforceable first priority Lien on all of the foregoing, together
with certificates representing the Stock referred to therein (to the extent,
with respect to any Foreign Subsidiaries, that certificates exist or
certificates representing Stock are customarily issued by corporations
incorporated or formed in the jurisdiction in which such Foreign Subsidiary is
incorporated or formed), accompanied by
56
undated stock powers or assignments thereof executed in blank. To the extent
that the Pledge Agreement may not be appropriate to create a Lien in favor of
the Agent on any Stock of any Foreign Subsidiary as determined by the Agent or
that certain actions as determined by the Agent which are not contemplated by
this Section 4.1 or by the Pledge Agreement shall be required to perfect a Lien
in favor of the Agent in the Stock of a Foreign Subsidiary, the relevant Credit
Party which has an interest in such Stock shall as soon as reasonably practical,
in addition to executing the Pledge Agreement as provided in this Section 4.1,
execute and deliver to the Agent and cause to be executed and delivered to the
Agent such documents and instruments, in form and substance satisfactory to the
Agent, and shall take such actions as reasonably requested by the Agent, in each
instance, in order to grant to the Agent for the benefit of the Agent and the
Lenders a valid, perfected and enforceable first priority Lien on the Stock of
such Foreign Subsidiary to be pledged to the Agent as provided in this Section
4.1.
Section 4.2. SECURITY AGREEMENT - TRADEMARK, PATENT AND COPYRIGHT.
Each of Finlay and its Domestic Subsidiaries (other than the Sonab Entities)
shall duly execute and deliver to the Agent one or more security agreements,
substantially in the form of Exhibit 4.2 hereto, covering the Trademarks,
Patents and Copyrights of such Credit Party (each as amended, supplemented or
otherwise modified from time to time in accordance with its terms, a "Trademark,
Patent and Copyright Security Agreement"), now owned and hereafter acquired,
together with notices of trademarks, patents and copyrights and other similar
documents in form suitable for filing with the United States Patent and
Trademark Office, the United States Copyright Office or any other applicable
governmental office or agency, as the case may be, and one or more special
powers of attorney and all other supplementary notices and instruments requested
by the Agent in connection therewith.
Section 4.3. SECURITY AGREEMENTS. (a) Each of Finlay and its Domestic
Subsidiaries (other than the Sonab Entities) shall duly execute and deliver to
the Agent one or more security agreements, substantially in the form of Exhibit
4.3(a) hereto (each, as amended, supplemented or modified from time to time in
accordance with its terms, a "Security Agreement", and, together with the Pledge
Agreements, Mortgages, Leasehold Mortgages, the Trademark, Patent and Copyright
Security Agreements, each Assignment of Life Insurance, each Assignment of
Business Interruption Insurance, the Cash Collateral Agreement, the Collecting
Bank Agreements, and any other agreement, now existing or hereafter created
providing collateral security for the payment or performance of any Obligations,
in each case, as amended, modified or supplemented from time to time,
collectively referred to as the "Security Documents"), and (except as provided
in Sections 8.19(a) and 8.27 hereof), all consents of third parties necessary to
permit the effective granting of the Liens created in such security agreements
(including, without limitation, a landlord's waiver and certificate (each a
"Landlord's Certificate") in respect of each property subject to a Lease), in
each case, in form and substance reasonably satisfactory to the Agent, together
with:
(A) evidence of the completion of all recordings and
filings of or with respect to the Security Documents that
the Agent may deem necessary or desirable in order to
perfect and protect the Liens created thereby,
(B) evidence of the insurance required by the terms of
any Security Document or this Agreement,
(C) to the extent requested in writing by the Agent on
or prior to the Closing Date, copies of each assigned
agreement referred to in any Security Document, together
with a consent to such assignment in form and substance
reasonably satisfactory to the Agent, duly executed by each
party to such assigned agreements other than the Borrower,
and
(D) evidence that all other action that the Agent may
deem necessary or desirable in order to perfect and protect
the Liens created by
57
the Security Documents (and the priority of such Liens
required hereunder) has been taken.
(b) The Agent shall have received (unless otherwise consented to in
writing by the Agent) acknowledgment copies or stamped receipt copies of proper
financing statements, duly filed on or before the Closing Date under the UCC of
all jurisdictions that the Agent may deem necessary or desirable in order to
perfect and protect the Liens created by the Security Documents, covering the
collateral described in the Security Documents.
Section 4.4. REAL PROPERTY; MORTGAGES; LEASEHOLD MORTGAGES; TITLE
INSURANCE. (a) Within sixty (60) days of the Closing Date, with respect to the
real property listed on Schedule 4.4 hereto and with respect to any other
property to the extent requested by the Agent:
(i) each of Finlay and its Domestic Subsidiaries shall duly
execute and deliver to the Agent mortgages or deeds of trust (each
such mortgage or deed of trust, as it may be amended, modified or
supplemented from time to time in accordance with its terms, a
"Mortgage") in respect of real property owned by such Credit Party so
as to create in the Agent's favor, for the benefit of the Agent and
the Lenders, upon recordation thereof, a valid, perfected and
enforceable first priority Lien on the real property and improvements
described therein (subject only to Liens specifically permitted under
Section 9.2 hereof), such Mortgages to be in form and substance
reasonably satisfactory to the Agent (with such changes thereto as may
be necessary to provide that such Mortgages secure Obligations not
covered by such exhibit);
(ii) upon Agent's request and except with respect to the Leases
listed on Schedule 4.4(a)(ii) hereto, each of Finlay and its Domestic
Subsidiaries shall duly execute and deliver to the Agent leasehold
mortgages or deeds of trust (each such leasehold mortgage or deed of
trust, as it may be amended, modified or supplemented from time to
time in accordance with its terms, a "Leasehold Mortgage") in respect
of real property leased under a Lease by such Credit Party so as to
create in the Agent's favor, for the benefit of the Agent and the
Lenders, upon recordation thereof, a valid, perfected and enforceable
first priority Lien on such Lease and the real property and
improvements thereon leased by such Credit Party (subject only to
Liens specifically permitted under Section 9.2 hereof), such Leasehold
Mortgages to be in form and substance reasonably satisfactory to the
Agent (with such changes thereto as may be necessary to provide that
such Leasehold Mortgages secure Obligations not covered by such
exhibit); and
(iii) each of Finlay and its Domestic Subsidiaries shall cause
the Mortgages and the Leasehold Mortgages executed and delivered by it
to be duly recorded in the appropriate recording office or offices and
shall pay all fees and taxes payable in connection therewith.
(b) Each of Finlay and its Domestic Subsidiaries shall cause to be
executed and delivered to the Agent such amendments to each of the Leases, such
consents of third parties to the Mortgages and the Leasehold Mortgages executed
and delivered by it, and such non-disturbance agreements, estoppel certificates
and waivers as the Agent shall reasonably request (in each case in form and
substance reasonably satisfactory to the Agent).
(c) Each of Finlay and its Domestic Subsidiaries shall furnish to the
Agent, in sufficient copies for each Lender, for the benefit of the Agent and
the Lenders, at the expense of the Borrowers or a Domestic Subsidiary, as
applicable, one or more policies of mortgagee title insurance, in form,
substance and amount satisfactory to the Agent, insuring that each of the
Mortgages and Leasehold Mortgages executed and delivered by it pursuant to
Section 4.4(a) hereof is a valid and perfected first
58
priority Lien in favor of the Agent on the fee or leasehold interest, as
applicable, of such Credit Party (subject only to Liens specifically permitted
under Section 9.2 hereof), in real property and improvements described therein,
and that such Credit Party has good and marketable title thereto, issued by a
title insurance company reasonably satisfactory to the Agent, together with
satisfactory evidence that all title insurance premiums have been fully paid.
Each Credit Party shall furnish to the Agent, in sufficient copies for each
Lender, certified surveys of real property to be subject to any Mortgage or
Leasehold Mortgage to be executed and delivered by it on or prior to the Closing
Date and such other certificates and documents as the Agent may reasonably
request. Each of Finlay and its Domestic Subsidiaries shall additionally provide
to each Lender with respect to any real property or leasehold interest to be
subject to a Mortgage or Leasehold Mortgage on or prior to the taking of such
Mortgage or Leasehold Mortgage such appraisals of such real property or
leasehold interest as shall be required under applicable law, including, without
limitation, FIRREA.
Section 4.5. ADDITIONAL COLLATERAL. Other than as set forth in any
Security Document, each of Finlay and its Domestic Subsidiaries (other than the
Sonab Entities) acknowledges that it is its intention to provide the Agent with
a Lien on all its property (personal, real and mixed), whether now owned or
hereafter acquired, subject only to Liens specifically permitted under Section
9.2 hereof. Without limitation of Section 4.4 hereof, each of Finlay and its
Domestic Subsidiaries (other than the Sonab Entities) shall from time to time
promptly notify the Agent of the acquisition by it of any material property in
which the Agent does not then hold a perfected Lien, or the creation or
existence of any such property (including, without limitation, the entering into
by the Borrower or any such Domestic Subsidiary of a Lease), and such Person
shall, upon request by the Agent, promptly execute and deliver to the Agent or
cause to be executed and delivered to the Agent pledge agreements, security
agreements, mortgages or other like agreements with respect to such property,
together with such other documents, certificates, title insurance, surveys,
consents of third parties, opinions of counsel and the like as the Agent shall
reasonably request in connection therewith, in form and substance reasonably
satisfactory to the Agent, such that the Agent shall receive valid and perfected
first priority Liens (subject only to Liens specifically permitted under Section
9.2 hereof) on all such property.
Section 4.6. FILING AND RECORDING. (a) Each of Finlay and its Domestic
Subsidiaries (other than the Sonab Entities) shall, at their cost and expense,
cause all instruments and documents given as security pursuant to this Agreement
to be duly recorded and/or filed or otherwise perfected in all places necessary,
in the opinion of the Agent, to perfect and protect the Lien of the Agent in the
property covered thereby.
(b) Each of Finlay and its Domestic Subsidiaries (other than the Sonab
Entities) hereby authorizes the Agent to file one or more financing statements
or continuation statements or amendments thereto or assignments thereof in
respect of any Lien created pursuant to this Agreement and the Security
Documents which may at any time be required or which, in the opinion of the
Agent, may at any time be desirable without the signature of such Credit Party
where permitted by law.
(c) In the event that any re-recording or refiling of any financing
statement (or the filing of any statements of continuation or amendment or
assignment of any financing statement) is required to protect and preserve such
Lien, each of Finlay and its Domestic Subsidiaries (other than the Sonab
Entities) shall, at their cost and expense, cause the same to be recorded and/or
refiled at the time and in the manner requested by the Agent.
Section 4.7. INTERPRETATION OF SECURITY DOCUMENTS. In the case of any
conflict between the terms and provisions of a Security Document and this
Agreement, the terms and provisions of this Agreement shall control, unless the
terms of such Security Document expressly provide otherwise.
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Section 4.8. GUARANTIES. (a) On or prior to the Closing Date, all
Subsidiaries of Finlay (other than the Sonab Entities) shall execute and deliver
to the Agent a guaranty, substantially in the form of Exhibit 4.8 hereto, of all
present and future Obligations incurred by the Borrowers.
(b) Upon the formation, after the Closing Date, of any Subsidiary of
the Borrowers, such Subsidiary shall execute and deliver to the Agent a
guaranty, substantially in the form of Exhibit 4.8 hereto (modified in form and
substance reasonably satisfactory to the Agent), of all then existing or
thereafter incurred Obligations and such other Security Documents and related
documents, instruments and certificates, in form and substance reasonably
satisfactory to the Agent, as the Agent shall request in order to grant to the
Agent for the benefit of the Agent and the Lenders a valid, perfected and
enforceable first priority Lien on all assets of such Subsidiary. Nothing
contained in this Section 4.8 shall permit the Borrowers or any Subsidiary of
any thereof to form any Subsidiary which is otherwise prohibited by this
Agreement.
Section 4.9. ASSIGNMENTS OF INSURANCE. (a) The Borrowers shall duly
execute and deliver to the Agent one or more assignments, substantially in the
form of Exhibit 4.9(a) hereto (each, as amended, supplemented or otherwise
modified from time to time in accordance with its terms, an "Assignment of Life
Insurance"), and such other instruments and documents, in each case, as may be
required by the Agent to grant to the Agent for the benefit of the Agent and the
Lenders a valid, perfected and enforceable first Lien, to the extent of such
Borrower's interest therein, on any key person life insurance policy required
pursuant to Section 8.3(g) hereof, and the issuer of such policy shall have
acknowledged such assignment.
(b) The Borrowers shall duly execute and deliver to the Agent one or
more assignments, substantially in the form of Exhibit 4.9(b) hereto (each, as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, an "Assignment of Business Interruption Insurance"), and such other
instruments and documents, in each case, as may be required by the Agent to
grant to the Agent, for the benefit of the Agent and the Lenders, a valid,
perfected and enforceable first Lien on any business interruption insurance
policy required pursuant to Section 8.3(e) hereof, and the issuer of such policy
shall have acknowledged such assignment.
Section 4.10. CASH COLLATERAL AGREEMENT. The Borrowers shall duly
execute and deliver to the Agent a cash collateral agreement, substantially in
form and substance satisfactory to the Agent (as amended, supplemented or
otherwise modified from time to time in accordance with its terms, the "Cash
Collateral Agreement"), and such other instruments and documents, in each case,
as may be required by the Agent to grant to the Agent for the benefit of the
Agent and the Lenders a valid, perfected and enforceable first Lien on the cash
covered thereby, all investments thereof, income thereon, claims, demands,
choses in action in respect thereof and all other proceeds thereof.
Section 4.11. CONCERNING THE COLLATERAL. Each of the Lenders and the
L/C Issuers hereby directs, in accordance with the terms hereof, the Agent to
release any Lien held by the Agent for the benefit of the Lenders and the L/C
Issuers against any part of the Collateral sold or disposed of by a Credit Party
if such sale or disposition is permitted by this Agreement and so long as no
Default or Event of Default has occurred and is continuing, the Agent agrees to
release such Collateral promptly after the Borrower Representative's request
therefor. Each of the Lenders and the L/C Issuers hereby directs the Agent to
execute and deliver or file such termination and partial release statements and
do such other things as are necessary to release Liens to be released pursuant
to this Section 4.11 promptly upon effectiveness of any such release and so long
as no Default or Event of Default has occurred and is continuing, the Agent
agrees to execute and deliver or file such termination and partial release
statements and do such other things as are necessary to release such Liens, at
the Borrower Representative's request, upon or promptly after the Borrower
Representative's request therefor.
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SECTION 5. CONDITIONS PRECEDENT TO AMENDMENT AND RESTATEMENT.
The effectiveness of this Agreement is subject to the following
conditions precedent being fulfilled to the satisfaction of the Agent in each
instance (or waived in writing by the Majority Lenders):
Section 5.1. OPINIONS OF COUNSEL. The Agent shall have received
favorable opinions of Blank Rome LLP, counsel to the Credit Parties,
substantially in the form attached hereto as Exhibit 5.1 (and such other
opinions of counsel, including, without limitation, of local counsel, each in
form and substance satisfactory to the Agent, as the Agent may request); it
being understood that to the extent that such opinions of counsel shall rely
upon any other opinion of counsel, each such other opinion shall be in form and
substance satisfactory to Agent and shall provide that the Agent and Lenders may
rely thereon.
Section 5.2. QUALIFICATION. Each Credit Party shall be duly qualified
and in good standing in each jurisdiction in which it owns or leases property or
in which the conduct of its business requires it to so qualify, except when the
failure to so qualify would not have a material adverse effect on its business,
operations, liabilities, assets, properties, prospects or condition (financial
or otherwise).
Section 5.3. SECURITY DOCUMENTS AND INSTRUMENTS. The Borrowers and
their respective Domestic Subsidiaries shall have complied with the provisions
of Section 4 hereof and delivered the documents required thereby (except as
relates to the period after the Closing Date). Such document delivery
requirements may be satisfied by (i) the delivery of such documents prior to the
Closing Date in connection with the closing under the Original Credit Agreement,
the First Amended and Restated Credit Agreement or the Second Amended and
Restated Credit Agreement or (ii) appropriate amendments to the documents
referred to in clause (i), all as determined by the Agent in its sole
discretion. The foregoing documents shall be in full force and effect and shall
grant or create the Liens, rights, powers, priorities, remedies and benefits
contemplated herein or therein, as the case may be. Further, the Agent shall
have received all necessary consents relating thereto from third parties so that
the same shall be valid and not result in any violation of any material
agreement running in favor of such third party.
Section 5.4. NOTES. Each Lender shall have received its Note, if
requested, each duly completed, executed and delivered in accordance with
Section 2.3 hereof and shall have marked the old notes as "cancelled."
Section 5.5. FEES AND EXPENSES. All fees payable to the Agent and the
Lenders with respect to the financing hereunder shall have been paid in full to
the persons entitled thereto in immediately available funds, including, but not
limited to, all fees to be paid by the Borrowers pursuant to the Original Credit
Agreement, the First Amended and Restated Credit Agreement, the Second Amended
and Restated Credit Agreement or the Fee Letter.
Section 5.6. LITIGATION. There shall be no litigation involving any
Credit Party or (relating to this transaction) any Lender, which in the judgment
of the Agent has a reasonable likelihood of being determined adversely to any
such Person, and if so adversely determined, would have a materially adverse
effect on the business, operations, liabilities, assets, properties, prospects
or condition, financial or otherwise, of the Parent and its Subsidiaries taken
as a whole or such Lender, or the ability of the Parent, the Borrowers or any
Guarantor to perform its obligations under the Loan Documents and no judgment,
order, injunction or other similar restraint prohibiting any of the other
transactions contemplated under this Agreement.
Section 5.7. COMPLIANCE WITH LAW. The Agent shall be satisfied that
(a) each Credit Party is in compliance with in all material respects, and shall
have obtained appropriate approvals pertaining to, all applicable governmental,
environmental, labor, ERISA and other requirements,
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regulations and laws; and (b) the credit facilities herein provided and all
other transactions contemplated herein shall be in compliance in all material
respects with all applicable laws and regulations and shall not contravene any
term or condition of any charter, bylaw, debt instrument or other agreement of
any Credit Party.
Section 5.8. PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite
corporate action and proceedings in connection with the borrowings, the issuance
of Letters of Credit and the execution and delivery of the Loan Documents shall
be satisfactory in form and substance to the Agent and the Agent shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings, which the
Agent may have requested in connection therewith, such documents where requested
by the Agent to be certified by appropriate corporate Persons or governmental
authorities. Without limiting the generality of the foregoing, the Agent shall
have received on or before the Closing Date the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the Agent
(unless otherwise specified) and in sufficient copies for each Lender:
(i) A copy of the certificate of incorporation of each Credit
Party, and all amendments thereto, certified (as of a date reasonably
near the Closing Date) by the Secretary of State or other applicable
official of each of their respective states or countries as being a
true and correct copy thereof.
(ii) Certified copies of the resolutions of the Board of
Directors of each Credit Party approving this Agreement, the Notes,
each other Loan Document to which it is a party or by which it is
bound, and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this
Agreement, the Notes and each other Loan Document.
(iii) A copy of a certificate of the Secretary of State of the
State where each Credit Party is organized dated a date reasonably
near the Closing Date, stating that each Credit Party, as the case may
be, is duly qualified and in good standing as a foreign entity in such
State.
(iv) A certificate of each Credit Party signed on behalf of such
Person by its chairman, president, any vice-president, treasurer,
secretary or assistant secretary, certifying as to (A) the absence of
any amendments to the charter of such Person since the date of the
Secretary of State's (or other official's) certificate for such Person
referred to above and (B) a true and correct copy of the bylaws of
such Person as in effect on the Closing Date.
(v) A certificate of the Secretary or an Assistant Secretary of
each Credit Party certifying the names and true signatures of the
officers of such Person authorized to sign, on behalf of such Person,
this Agreement, the Revolving Notes and each other Loan Document to
which such Person is a party or by which it is bound.
(vi) A fully executed Agreement and each Loan Document and such
documents, instruments, agreements as the Agent shall reasonably
request in connection with the transactions contemplated by this
Agreement and the other Loan Documents.
(vii) A fully executed Rolex Intercreditor Agreement and
Receivables Intercreditor Agreement, in each case on terms and
conditions acceptable to the Agent.
Section 5.9. EVIDENCE OF INSURANCE. The Agent shall have received, in
sufficient copies for each Lender, evidence, in form, scope and substance and
with such insurance carriers reasonably satisfactory to the Agent, of all
insurance policies required pursuant to Section 8.3 hereof.
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Such insurance coverage shall have been issued by responsible carriers
acceptable to the Agent and shall include, without limitation, loss payee and
additional insurance endorsements in form and substance satisfactory to the
Agent and in any event which require that at least thirty (30) days' prior
written notice be provided to the Agent in the event of cancellation, nonrenewal
or material change thereof.
Section 5.10. LOCKBOX. On or prior to the Closing Date, the Borrowers
and their respective Domestic Subsidiaries selected by the Agent shall have
established a lock box pursuant to a lock box agreement as required by Section
8.22 hereof, and which in any event provides to the Agent a perfected first
priority security interest in all Proceeds, now existing or hereafter acquired,
of the Borrowers and such Subsidiaries. Except as set forth in Section 8.22
hereof, all deposit accounts of the Borrowers and their respective Domestic
Subsidiaries shall be covered by Collecting Bank Agreements, which shall have
been executed and delivered to the Agent and shall constitute Blocked Accounts.
Section 5.11. REPAYMENT OF PRIOR LENDER OBLIGATIONS. SATISFACTION OF
OUTSTANDING LETTERS OF CREDIT. (a) The Agent shall have received a fully
executed original of a pay-off letter reasonably satisfactory to the Agent
confirming that all of the Prior Lender Obligations will be repaid in full from
the proceeds of the initial Revolving Loan and all Liens upon any of the
property of Carlyle or any of its Subsidiaries in favor of the Prior Lender
shall be terminated by the Prior Lender immediately upon such payment; and (b)
all letters of credit issued or guaranteed by the Prior Lender shall have been
cash collateralized, supported by a guaranty of the Agent or supported by a
Letter of Credit issued pursuant to this Agreement, as mutually agreed upon by
the Agent, the Borrowers and the Prior Lender.
Section 5.12. APPROVALS. The Agent shall have received (a)
satisfactory evidence that the Credit Parties have obtained all required
consents and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the consummation of the Related Transactions or (b)
an officer's certificate in form and substance reasonably satisfactory to the
Agent affirming that no such consents or approvals are required.
Section 5.13. CAPITAL STRUCTURE: OTHER INDEBTEDNE Section The capital
structure of each Credit Party and the terms and conditions of all Indebtedness
of each Credit Party shall be acceptable to the Agent in its sole discretion.
Section 5.14. DUE DILIGENCE. The Agent shall have completed its
business and legal due diligence, including a roll forward of its previous
Collateral audit, with results reasonably satisfactory to the Agent.
Section 5.15. CONSUMMATION OF RELATED TRANSACTIONS. The Agent shall
have received fully executed copies of the Acquisition Agreement and each of the
other Related Transactions Documents, each of which shall be in form and
substance reasonably satisfactory to the Agent and its counsel. The Acquisition
and the other Related Transactions shall have been consummated in accordance
with the terms of the Acquisition Agreement and the other Related Transactions
Documents.
SECTION 6. CONDITIONS PRECEDENT TO EACH BORROWING AND ISSUANCE OF
LETTERS OF CREDIT.
The obligation of the Lenders to make any Revolving Advance (including
on the Closing Date) (other than any Revolving Advances under Sections 2.1(c)
and 2A.2 hereof) or incur any Letter of Credit Obligations is subject to the
following conditions precedent:
Section 6.1. CONDITIONS. No Lender shall have any obligation to make
any Revolving Advance to any Borrower (other than any Revolving Advances under
Section 2A.2 hereof) or to incur any
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Letter of Credit Obligation unless, in each instance, (x) with respect to a
Revolving Advance (other than a Revolving Advance under Section 2.1(c) and 2A.2
hereof), the Borrower Representative delivers to the Agent a Borrower's
Certificate dated the date of such Revolving Advance and (y) the following
conditions precedent are fulfilled to the satisfaction of the Agent (or waived
in writing by the Majority Lenders):
(i) all representations and warranties made by each of the Credit
Parties contained herein or otherwise made in any Loan Document
(including, without limitation, each Borrower's Certificate),
officer's certificate or any agreement, instrument, certificate,
document or other writing delivered to the Agent or any Lender in
connection herewith or therewith, shall be true and correct in all
material respects with the same effect as though such representations
and warranties had been made on and as of the date of such borrowing
or issuance of a Letter of Credit (unless any such representation or
warranty speaks as of a particular date, in which case it shall be
deemed repeated as of such date);
(ii) on the date of such borrowing or issuance of a Letter of
Credit there shall exist no Default or Event of Default (either
immediately before or after giving effect thereto);
(iii) the Borrowers shall have complied with all procedures and
given all certificates, notices and other documents required hereunder
for such advance or issuance; and
(iv) the Agent shall have received such other approvals of
Governmental Authorities or documents as the Agent may have reasonably
requested.
Section 6.2. WRITTEN NOTICE. Prior to the time of each Revolving
Advance or the renewal or conversion of any Revolving Advance, or portion
thereof, or of the issuance of a Letter of Credit, the Agent shall have received
Written Notice of such Revolving Advance or the renewal or conversion of such
Revolving Advance, or portion thereof, or of the issuance of such Letter of
Credit, as the case may be, in accordance with and to the extent required by
Section 2 or 2A hereof, as appropriate.
SECTION 7. USE OF PROCEEDS. From and after the Closing Date, proceeds
of Revolving Advances shall be used solely (i) to fund the Acquisition, (ii) to
refinance certain indebtedness of Carlyle, (iii) for the working capital and
general corporate purposes of the Borrowers and their Subsidiaries to the extent
such purposes are permitted hereunder, (iv) to repurchase, acquire or redeem
Senior Notes to the extent such purchases are permitted hereunder and (v) to pay
dividends to Parent to the extent such dividends are permitted hereunder.
SECTION 8. AFFIRMATIVE COVENANTS.
Each of the Borrowers, as applicable, and the Parent covenants and
agrees that, so long as any Revolving Advance or Letter of Credit is outstanding
or any Lender has any Revolving Commitment hereunder, unless specifically waived
by the Majority Lenders in writing:
Section 8.1. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower
Representative or, where applicable, the Parent shall furnish or cause to be
furnished to the Agent and each Lender:
(a) Within thirty (30) days after the end of each fiscal month of the
Parent, (i) a copy of the internally prepared unaudited consolidated balance
sheets of the Parent and its Subsidiaries and key financial information in form
and substance acceptable to Agent, prepared separately with respect of the
entities collectively constituting the Finlay Credit Parties and for the
entities collectively constituting the
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Carlyle Credit Parties, as of the end of such month and the related consolidated
statements of income for that portion of the Fiscal Year ending as of the end of
such month, and (ii) a copy of the unaudited consolidated statements of income
of the Parent and its Subsidiaries and key financial information in form and
substance acceptable to Agent, prepared separately with respect of the entities
collectively constituting the Finlay Credit Parties and for the entities
collectively constituting the Carlyle Credit Parties, for such month, setting
forth in comparative form in each case referred to in clauses (i) and (ii)
above, actual figures for such period as against budgeted figures (including
variances in dollars and percent) for such period in the current Fiscal Year and
actual figures as against actual figures (including variances in dollars and
percent) for the comparable period during the prior Fiscal Year and accompanied
by (A) management letters, if any, prepared by the Designated Officer of the
Parent or the Borrowers explaining any material variances from the corresponding
budgets and prior Fiscal Years' figures related to the foregoing, (B) a schedule
which shows, by License Agreement, each Account which is past due and, to the
extent not available to the Agent by computer on-line (as required by Section
8.7(b)), a schedule detailing write-offs and returns, and (C) upon Agent's
request, copies of any reports generated from the Borrowers' investigation into
discrepancies noted in any of the internal inventory control reporting.
(b) Within forty-five (45) days after the end of each fiscal month of
the Parent, (i) a copy of the unaudited consolidated balance sheets of the
Parent and its Subsidiaries and key financial information in form and substance
acceptable to Agent, prepared separately with respect of the entities
collectively constituting the Finlay Credit Parties and for the entities
collectively constituting the Carlyle Credit Parties, as of the end of such
month and the related consolidated statements of income and cash flows for that
portion of the Fiscal Year as of the end of such month, each prepared in
accordance with GAAP (subject to normal year end adjustments and without
footnotes) and (ii) a copy of the unaudited consolidated statements of income
and cash flows of the Parent and its Subsidiaries and key financial information
in form and substance acceptable to Agent, prepared separately with respect of
the entities collectively constituting the Finlay Credit Parties and for the
entities collectively constituting the Carlyle Credit Parties, for such month
prepared in accordance with GAAP (subject to normal year-end adjustments and
without footnotes) setting forth in comparative form in each case referred to in
clauses (i) and (ii) above, actual figures as against actual figures for the
comparable period during the prior Fiscal Year.
(c) Within 45 days after each fiscal quarter of the Parent or such
earlier time as may then be required under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, (i) a copy of
the unaudited consolidated and consolidating balance sheets of the Parent, the
Finlay Credit Parties and the Carlyle Credit Parties as of the end of such
quarter, the related consolidated and consolidating statements of income and the
related consolidated statement of cash flows for that portion of the Fiscal Year
ending as of such quarter, each prepared in accordance with GAAP (subject to
normal year end adjustments and without footnotes) and (ii) a copy of the
unaudited consolidated and consolidating statements of income and the related
consolidated statement of cash flows of the Parent, the Finlay Credit Parties
and the Carlyle Credit Parties for such quarter prepared in accordance with GAAP
(subject to normal year end adjustments and without footnotes) setting forth in
comparative form in each case referred to in clauses (i) and (ii) above for
consolidated information only, actual figures for such period as against actual
figures for the comparable period during the prior Fiscal Year.
(d) For each of (b) and (c) above, the certification of the Designated
Officer of the Parent or Borrowers, as applicable, shall accompany such
statements and shall certify that (i) all such statements are complete and
correct in all material respects and are presented fairly in accordance with
GAAP (subject to normal year end adjustments and without footnotes) and (ii) to
the best knowledge of such Designated Officer, no Default or Event of Default
exists as of such time or, if any Default or Event of Default then exists,
specifying the details and anticipated effect thereof.
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(e) Within 45 days after the end of each month for which a quarterly
reporting period ends for the Parent, a schedule showing in reasonable detail
the calculations used in determining compliance (for the fiscal quarter ending
on the last day of each such month) with the covenants contained in Section 9.1
and Section 8.17 hereof.
(f) Not later than March 30 in each year, a report detailing the
highest target shortage locations of the Borrowers and their Subsidiaries.
(g) Within 90 days after the close of each Fiscal Year or such earlier
time as may then be required under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, a copy of the annual
audited consolidated financial statements of each of the Parent, the Finlay
Credit Parties and the Carlyle Credit Parties, consisting of the annual
consolidated balance sheet, statement of income, cash flow and changes in
stockholders' equity, setting forth in comparative form, in each case,
consolidated figures for the prior Fiscal Year, which financial statements shall
be prepared in accordance with GAAP, certified without qualification (other than
a qualification approved by the Agent) by independent certified public
accountants of recognized national standing selected by the Parent and the
Borrowers respectively, and acceptable to the Agent (Deloitte & Touche being
acceptable to the Agent), and accompanied by (i) unaudited consolidating
financial statements of the Parent, the Finlay Credit Parties and the Carlyle
Credit Parties, consisting of the annual consolidating balance sheets and
statements of income, setting forth in comparative form, in each case,
consolidating figures for the prior Fiscal Year (which financial statements
shall be prepared in accordance with GAAP), (ii) a schedule prepared by the
Borrowers and certified by such independent accountants, showing in reasonable
detail the calculations used in determining compliance with the financial
covenants under Section 8.17 hereof, (iii) a report from such accountants to the
effect that in connection with their audit examination, nothing has come to
their attention to cause them to believe that a Default or Event of Default had
occurred or, if they believe a Default or Event of Default has occurred,
specifying the details thereof, and (iv) a certification of the Designated
Officer of the Parent and the Borrowers certifying that (A) all such financial
statements are complete and correct in all material respects and present fairly
in accordance with GAAP the consolidated and consolidating financial position
and the consolidated and consolidating results of operations and cash flows of
each of the Parent, the Finlay Credit Parties and the Carlyle Credit Parties as
at the end of such Fiscal Year and (B) to the best knowledge of such Designated
Officer, no Default or Event of Default exists as of such time or, if any
Default or Event of Default then exists, specifying the details and anticipated
effect thereof.
(h) As soon as practicable, but in any event not later than two (2)
Business Days after the Parent and/or any Borrower becomes aware of the
existence of any Default or Event of Default, or any development or other
information which might reasonably be expected to have a Material Adverse
Effect, telephonic or telegraphic notice specifying the nature of such Default
or Event of Default or development or information, including the anticipated
effect thereof, which notice shall be promptly confirmed in writing within five
(5) days.
(i) Not later than March 1 in each year, an annual operating plan for
the Parent and its Subsidiaries for such Fiscal Year (approved by the board of
directors of each of the Parent and the Borrowers), in form, scope and substance
reasonably satisfactory to the Agent, setting forth:
(i) projected consolidated balance sheets of the Parent, the
Finlay Credit Parties and the Carlyle Credit Parties for such Fiscal
Year, on a monthly basis;
(ii) projected consolidated and consolidating statements of
income of the Parent, the Finlay Credit Parties and the Carlyle Credit
Parties for such Fiscal Year, on a monthly and quarterly basis;
(iii) projected consolidated statements of cash flow of the
Parent, the Finlay Credit Parties and the Carlyle Credit Parties,
including summary details of cash disbursements, including Capital
Expenditures, and projected operating profit of the
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Parent, the Finlay Credit Parties and the Carlyle Credit Parties for
such Fiscal Year, on a monthly basis; and
(iv) projected Aggregate Borrowing Base for such Fiscal Year, on
a monthly basis;
together with (x) projections of the nature requested in clauses (i) through
(iv) above, computed on an annual basis for each Fiscal Year remaining until the
Maturity Date and (y) appropriate supporting details as reasonably requested by
any Lender (including, without limitation, same store growth assumptions). The
annual operating plan delivered in connection with this Section 8.1(i) shall be
accompanied by evidence satisfactory to the Agent that such plan shall have been
approved by the boards of directors of each of the Parent and the Borrowers.
(j) If requested by the Agent, copies of all federal, state, local and
foreign tax returns and reports in respect of income, franchise or other taxes
on or measured by income (excluding sales, use or like taxes) filed by the
Parent or any of its Subsidiaries.
(k) Concurrently with the delivery of the statements referred to in
Section 8.1(a) hereof, supplements or amendments to Schedules, if any, as
described in Section 8.20 hereof.
(l) As soon as available, but in any event not later than thirty (30)
days after the end of each Fiscal Year of the Parent, a report, in form and
substance satisfactory to the Agent, (i) updating the list of contracts,
agreements and documents of the Parent and its Subsidiaries in existence at the
end of such Fiscal Year which are required to be set forth on Schedule 11.24
hereto so that the representation and warranty made in Section 11.24 hereto
shall be true and correct as of such date and (ii) specifying which contracts,
agreements and documents included on such schedule at any time during the Fiscal
Year just ended have been terminated, entered into or materially modified during
such Fiscal Year, and, promptly after requested by the Agent, copies of any such
new contracts, agreements or other documents and material modifications.
(m) Promptly upon the filing thereof, copies of all reports, if any,
to or other documents filed by the Parent or any of its Subsidiaries with the
Securities and Exchange Commission under the Securities Act of 1933 or the
Securities Exchange Act of 1934 (other than on Form S-8 or 8-A or similar
forms), and all reports, notices or statements sent or received by the Parent or
any of its Subsidiaries to or from the holders of any equity interests of the
Parent or any such Subsidiary or of any Indebtedness for Borrowed Money of the
Parent or any such Subsidiary registered under the Securities Act of 1933 or to
or from the trustee under any indenture under which the same is issued.
(n) Promptly upon the commencement thereof, written notice of any
litigation, including arbitrations, and of any proceedings before any
governmental agency, affecting the Parent or any of its Subsidiaries (other than
any described in paragraph (r) below), which would, if successful, materially
adversely affect the Parent or any of its Subsidiaries or where the amount
involved in excess of available insurance, if successful, would reasonably be
expected to exceed $250,000.
(o) With reasonable promptness, such other information respecting the
business, operations and financial condition of the Parent or any of its
Subsidiaries as any Lender may from time to time reasonably request.
(p) (x) not later than 12:00 noon (New York time) five (5) Business
Days after the end of each fiscal month, and (y) within three (3) days following
the written request of the Agent, a certificate dated the last day of such
fiscal month (or with respect to a request made under clause (y) above, an
estimated certificate dated the date of delivery) from Borrower Representative
in each case substantially in the form of Exhibit 8.1(p) hereto, each such
certificate to be signed by the Designated Officer of Borrowers (each such
certificate, a "Borrowing Base Certificate"); provided that Borrowers
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shall provide weekly Borrowing Base Certificates not later than Wednesday, 12:00
noon (New York) of each week (i) upon Agent's request, if a Default or Event of
Default shall have occurred and be continuing or (ii) if Excess Availability is
less than $50,000,000 for five (5) consecutive Business Days. The delivery of
the Borrowing Base Certificate pursuant to clause (x) of this Section 8.1(p)
shall be accompanied by the following, each of which shall be in form, scope and
substance satisfactory to the Agent, (i) a copy of the receivables aging trial
balances of the Borrower and each of its Subsidiaries as of the end of the prior
month, together with an accounts receivable reconciliation to the Borrowing Base
Certificate date, and (ii) a schedule of Eligible Inventory, valued at the
lesser of cost (on a specific identification basis) or current market value and
setting forth the locations of all such Eligible Inventory (which may be done by
reference to the computer information to which the Agent has on-line access to
the extent required by Section 8.7(b) hereof), including, without limitation,
Domestic Inventory in transit and Domestic Inventory not in the possession of
Borrowers and the name of the Person in possession thereof.
(q) Within fifteen (15) days after receipt thereof but in no event
later than June 30 of each year, a copy of all management reports and management
letters, if issued, prepared for each of the Parent and its Subsidiaries and
Finlay and its Subsidiaries by independent certified public accountants of
recognized national standing selected by the Parent or the Borrowers, as
applicable and acceptable to the Agent together with any response by any of the
Parent or any of its Subsidiaries or Finlay or any of its Subsidiaries, as
applicable, to such management reports or management letters; it being
understood that the Parent and the Borrowers shall request from such independent
certified public accountants such management reports and/or management letters
with the delivery of any annual audited financial statements required to be
delivered to the Agent hereunder;
(r) Promptly, and in any event within ten (10) business days thereof,
notice:
(i) of any Environmental Claim or Adverse Environmental Condition
of which any Credit Party has knowledge or any written notice of an
allegation which may reasonably give rise to an Environmental Claim or
Adverse Environmental Condition, where such Environmental Claim or
Adverse Environmental Condition may reasonably be expected to result
in a liability to any Credit Party in excess of $50,000;
(ii) of the occurrence of a Release of a Hazardous Material upon,
under or affecting any Facilities, of which any Credit Party has
knowledge or Hazardous Materials at levels or in amounts that may have
to be reported, remedied or responded to under any Environmental Law,
of which any Credit Party has knowledge, or that have been detected on
or in the soil or groundwater, of which any Credit Party has
knowledge, provided the cost to the Parent or its Subsidiaries of
investigating, remedying, or responding to such Release may reasonably
be expected to exceed $50,000;
(iii) that a Credit Party is reasonably likely to be liable for
any costs of cleaning up or otherwise responding to a Release of
Hazardous Materials, provided the cost of cleanup or response may
reasonably be expected to exceed $50,000;
(iv) that written notice has been received that any part of the
Facilities is or may be subject to a Lien under any Environmental Law;
and
(v) that a Credit Party will undertake or has undertaken any
Remedial Action with respect to any Hazardous Material, provided the
cost of cleanup or response may reasonably be expected to exceed
$50,000.
(s) Within 30 days after the end of each Fiscal Year and at such other
times as the Agent may request, a list, in detail reasonably satisfactory to the
Agent, of all bank accounts maintained by the Parent, the Borrowers and each of
their respective Subsidiaries.
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(t) On February 15, May 15, August 15 and November 15 of each year, a
report of the Borrowers and their Subsidiaries detailing the amount of
"consigned" or "memo" inventory and owned inventory of the Borrowers and their
Subsidiaries in each of the following categories: (i) inventory under two years
old, (ii) inventory between two and three years old, (iii) inventory between
three and four years old and (iv) inventory more than four years old.
(u) On a monthly basis, copies of all Consignment Limit Reports (as
such term is defined in the Gold Consignment Agreement) provided by Finlay to
Sovereign Bank under or pursuant to the Gold Consignment Agreement.
(v) Commencing six (6) months after the Closing Date and every six (6)
months thereafter, Borrowers and each Guarantor shall, unless Agent shall
otherwise consent, provide to Agent a certificate of good standing from its
state of incorporation or organization.
SECTION 8A. CARLYLE COLLATERAL REPORTING.
Carlyle shall cause to be prepared at its expense and shall deliver
the following reports and other information to the Agent as of the times set
forth below:
(a) no later than thirty (30) days after the end of each month,
or more frequently if requested by the Agent, an inventory report as
of the end of such month, including a calculation of all Eligible
Inventory of the Carlyle Credit Parties and all Inventory of Carlyle
Credit Parties not constituting Eligible Inventory in form and detail
acceptable to the Agent.
(b) no later than thirty (30) days after the end of each month,
or more frequently if requested by the Agent, inventory reports as of
the end of such month by category and location, together with a
reconciliation to the corresponding Carlyle Borrowing Base and the
Carlyle Credit Parties' general ledger;
(c) upon request, but no more than once each year, inventory
appraisals on the Inventory of the Carlyle Credit Parties only
prepared by an independent appraisers satisfactory to the Agent;
provided, however, that the Agent may cause additional appraisals to
be undertaken as it in its reasonable discretion deems necessary or
appropriate, provided that the Carlyle Credit Parties shall not be
obligated to pay for any such additional appraisals unless (i) a
Default or Event of Default has occurred and is continuing, or (ii)
Excess Availability is at any time equal to or less than $30,000,000,
in which case all such additional appraisals shall be at the expense
of the Carlyle Credit Parties,
(d) upon request, copies of customer statements, credit memos,
remittance advices and reports, deposit slips, shipping and delivery
documents for Inventory and Equipment acquired by the Carlyle Credit
Parties, purchase orders and invoices;
(e) upon request, a statement of the balance of all assets and
liabilities, however arising, which are due to the Carlyle Credit
Parties from, or which are due from the Carlyle Credit Parties to, or
which otherwise arise from any transaction by the Carlyle Credit
Parties with, any Affiliate to a Carlyle Credit Party,
(f) such other reports as to the Collateral of the Carlyle Credit
Parties as the Agent shall reasonably request from time to time; and
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(g) with the delivery of each of the foregoing, a certificate of
Carlyle executed by an Authorized Representative certifying as to the
accuracy and completeness of the foregoing.
Section 8.2. TAXES AND CLAIMS. The Borrowers and the Parent shall and
shall cause their respective Subsidiaries to pay and discharge when due (a) all
taxes, assessments and governmental charges upon or against it or its properties
or assets prior to the date on which penalties attach thereto and (b) all lawful
claims, whether for labor, materials, supplies, services or anything else, which
might or could, if unpaid, become a Lien or charge upon its properties or
assets, unless, in each case, the validity or amount thereof is being contested
in good faith by appropriate proceedings, the Parent or any such Subsidiary has
established adequate reserves in accordance with GAAP with respect thereto,
Liens (other than Liens which, in the aggregate, are permitted under Section
9.2(i) hereof) arising from the non-payment thereof when due have not attached
to any of the property or assets of the Parent or any of its Subsidiaries in a
manner which could have priority over the Lien of the Agent thereon and there is
no imminent risk of the sale of or foreclosure on any property or assets of the
Parent or any of its Subsidiaries by the holder of any Liens arising from the
non-payment thereof when due.
Section 8.3. INSURANCE. (a) Schedule 8.3 lists all insurance of any
nature maintained by the Parent and its Subsidiaries, as well as a summary of
the terms of such insurance. The Borrowers or the Parent shall, at its sole cost
and expense, maintain "All Risk" physical damage insurance on all real and
personal property of the Parent and its Subsidiaries including, but not limited
to, fire and extended coverage, boiler and machinery coverage, flood,
earthquake, theft, explosion, collapse, and all other hazards and risks
ordinarily insured against by owners or users of such properties in similar
businesses. All policies of insurance on such real and personal property shall
contain an endorsement, in form and substance acceptable to the Agent, showing
loss payable to the Agent as its interest appears. Such endorsement, or an
independent instrument furnished to the Agent, shall provide that the insurance
companies add the Agent as an additional insured and give the Agent at least 30
days' prior written notice before any significant change in coverage provided by
or cancellation of such policy or policies of insurance and that no act,
omission or default of the Parent or any of its Subsidiaries or any other Person
shall affect the right of the Agent or any Lender to recover under such policy
or policies of insurance in case of loss or damages.
(b) The Borrowers or the Parent shall, at its sole cost and expense,
maintain commercial general liability insurance covering itself and its
Subsidiaries on an "occurrence basis" (unless such insurance cannot be
reasonably obtained at commercially reasonable rates, in which case such
insurance shall be on a "claims made" basis) against claims for personal injury,
bodily injury and property damage with a minimum limit of $1,000,000 per
occurrence and $1,000,000 in the aggregate. Such coverage shall include but not
be limited to premises/operations, broad form contractual liability,
underground, explosion and collapse hazard, independent contractors, broad form
property coverage, products and completed operations liability.
(c) The Borrowers or the Parent shall, at its sole cost and expense,
maintain workers' compensation insurance covering itself and its Subsidiaries
including employer's liability in the minimum amount of $1,000,000 for each
accident, $1,000,000 disease-policy limit, and $1,000,000 disease-each employee
with excess coverage under umbrella liability insurance policies with a minimum
limit of $20,000,000 per occurrence and $20,000,000 in the aggregate.
(d) The Borrowers or the Parent shall, at its sole cost and expense,
maintain automobile liability insurance covering itself and its Subsidiaries for
all owned, non-owned or hired automobiles against claims for personal injury,
bodily injury and property damage with a minimum combined single limit of
$1,000,000 per occurrence with excess coverage under umbrella liability
insurance policies with a minimum limit of $20,000,000 per occurrence and
$20,000,000 in the aggregate.
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(e) The Borrowers or the Parent shall, at its sole cost and expense,
maintain business interruption insurance covering itself and its Subsidiaries
with commercially reasonable policy limits.
(f) All policies of liability insurance required to be maintained
under this Agreement shall name the Agent and each Lender as an additional
insured, contain at least a 30-day notice of significant change in coverage or
cancellation and be in form and with insurers recognized as adequate by the
Agent and, except as required hereby, all such policies shall be in such amounts
as may be reasonably satisfactory to the Agent. Upon the request of the Agent,
the Parent and each of its Subsidiaries shall deliver to the Agent the original
(or certified copy) of each policy of insurance and evidence of payment of all
premiums therefor and of compliance with all provisions of this Agreement. In
addition, the Parent and each of its Subsidiaries shall notify the Agent
promptly of any occurrence causing a material loss or decline in value of any
real or personal property and the estimated (or actual, if available) amount of
such loss or decline. The Parent and each of its Subsidiaries each irrevocably
make, constitute and appoint the Agent (and all officers, employees or agents
designated by the Agent) as the Parent's and each such Subsidiary's true and
lawful attorney (and agent-in-fact), acting at any time after the occurrence and
during the continuance of an Event of Default, for the purpose of making,
settling and adjusting claims under such policies of insurance (provided that
the Agent shall consult with the Parent prior to finally making, settling or
adjusting claims under such policies of insurance), endorsing the name of the
Parent or any such Subsidiary on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance, and for making all
determinations and decisions with respect to such policies of insurance. In the
event the Parent or any Subsidiary at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, the Agent, without waiving or
releasing any obligations or default by the Parent or any of its Subsidiaries
hereunder, may at any time or times thereafter (but shall not be obligated to)
obtain and maintain such policies of insurance and pay such premium and take any
other action with respect thereto which the Agent deems advisable. All sums so
disbursed by the Agent, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable, on demand, by the
Parent or any of its Subsidiaries to the Agent and shall be Additional
Indebtedness hereunder secured by the Collateral.
(g) So long as ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is employed, directly or indirectly,
by Parent, Finlay or any of their Affiliates or Subsidiaries, Finlay shall
maintain a key person life insurance policy, with a responsible insurance
carrier and pursuant to an insurance policy reasonably acceptable to the Agent,
covering ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in an amount of not less than $5,000,000.
(h) The Agent reserves the right at any time, upon a change of the
Parent's or any of its Subsidiaries' risk profile or upon the occurrence of an
external event, to require additional forms and limits of insurance which, in
the Agent's reasonable opinion, will adequately protect any Lender's investment.
Section 8.4. BOOKS AND RESERVES. Each of the Borrowers and the Parent
shall and shall cause each of their respective Subsidiaries to:
(a) maintain, at all times, true and complete books, records and
accounts in which true and correct entries shall be made of its transactions in
accordance with GAAP; and
(b) by means of appropriate entries, reflect in its accounts and in
all financial statements furnished pursuant to Section 8.1 hereof proper
liabilities and reserves for all taxes and proper provision for depreciation and
amortization of its properties and bad debts, all in accordance with GAAP.
Section 8.5. PROPERTIES IN GOOD CONDITION. Except as permitted in
Section 9.5 hereof, each of the Borrowers and the Parent shall keep, and shall
cause each of their respective Subsidiaries to keep, its material properties in
good repair, working order and condition, ordinary wear and tear excepted, and,
from time to time, make all necessary and proper repairs, renewals,
replacements,
71
additions and improvements thereto, so that the business carried on may be
properly and advantageously conducted at all times in accordance with prudent
business management.
Section 8.6. MAINTENANCE OF EXISTENCE, ETC. Except as otherwise
provided in Section 9.5(e) or (h) hereof, each of the Borrowers and the Parent
shall preserve and maintain, and cause each of their respective Subsidiaries to
preserve and maintain, its statutory existence, rights and franchises.
Section 8.7. INSPECTION BY THE AGENT AND THE LENDERS. (a) Each of the
Borrowers and the Parent shall allow, and shall cause each of their respective
Subsidiaries to allow, any representative of any Lender or of the Agent, at the
Borrowers' expense, to visit and visually inspect any of its properties, to
examine its books of account and other records and files (including, without
limitation, computer records and files), to make copies thereof and to discuss
its affairs, business, finances and accounts with its officers and employees and
independent accountants (and each of the Borrowers and the Parent hereby
irrevocably authorizes its independent accountants to discuss with the Agent and
the Lenders the financial affairs of the Parent and its Subsidiaries), all at
such reasonable times and as often as any Lender or the Agent may reasonably
request and without any unnecessary interference with the business of the
Borrowers and the Parent or any of their respective Subsidiaries.
(b) At all times and upon the Agent's request, the Parent shall allow,
and cause each of its Subsidiaries to allow, the Agent or any representative of
the Agent direct continuous access (including, without limitation, by modem or
any other direct computer linkage means), without any ability to alter any such
records or change or enter any data, to all computer records or files concerning
the business or properties of the Borrowers or any of its Subsidiaries for the
purpose of monitoring, among other things, the Accounts, Inventory and Consigned
Inventory of the Borrowers and their Subsidiaries.
Section 8.8. PAY INDEBTEDNESS TO LENDERS AND PERFORM OTHER COVENANTS.
(a) Borrowers shall make full and timely payment of all payments required to be
made by the Borrowers in respect of the Obligations, including without
limitation, the Loan, whether now existing or hereafter arising, (b) Borrowers
and the Parent shall strictly comply, and cause each of the other Credit Parties
to strictly comply, with all the terms and covenants contained in each Loan
Document to which each such Credit Party is a party, all at the times and places
and in the manner set forth therein and (c) Borrowers shall, except for the
filing of continuation statements and the making of other filings by the Agent
as secured party or assignee, at all times take all action necessary to maintain
the Liens provided for under or pursuant to this Agreement or any Security
Document as valid and perfected Liens on the property intended to be covered
thereby (subject to no other Liens except those liens expressly permitted under
Section 9.2 hereof) and supply all information to the Agent or the Lenders
necessary for such maintenance.
Section 8.9. NOTICE OF DEFAULT. Each of the Borrowers and the Parent
shall promptly, and shall cause each of their respective Subsidiaries to
promptly (and in any event within five (5) days), notify the Agent in writing of
any Default or Event of Default or a default under any other agreement in
respect of Indebtedness for Borrowed Money to which Borrower or Parent or any of
their Subsidiaries is a party, in each case describing the nature thereof and
the action such party proposes to take with respect thereto.
Section 8.10. REPORTING OF MISREPRESENTATIONS. In the event that
Borrowers or Parent, or any of their respective Subsidiaries discovers that any
representation or warranty made in any Loan Document by any Credit Party was
incorrect in any material respect when made, such party shall promptly report,
or shall cause such Subsidiary promptly to report, the same to the Agent and
take, or cause to be taken, all available steps to correct such
misrepresentation or breach of warranty.
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Section 8.11. COMPLIANCE WITH LAW. Each of the Borrowers and the
Parent shall, and shall cause each of their respective Subsidiaries to, comply
with and duly observe in all material respects all laws and regulations and all
rules and orders, in each case, applicable to it and all legal requirements
imposed by any governmental authorities, including, without limitation, ERISA,
those regarding the collection, payment and deposit of employees' income,
unemployment and social security taxes, those relating to public and employee
health and safety, and those relating to environmental matters, except a
non-compliance or failure to observe which would not have a Material Adverse
Effect.
Section 8.12. ERISA. (a) Each of the Borrowers and the Parent shall
pay and discharge, and shall cause each other Credit Party and each ERISA
Affiliate to pay and discharge, when due (including any permissible extensions)
any material liability imposed upon it pursuant to the provisions of Title IV of
ERISA.
(b) Each of the Borrowers and the Parent shall deliver to the Agent
promptly, and in any event within ten (10) days, after
(i) such party knows, or has reason to know, of the occurrence of
any Reportable Event (as defined in Section 4043 of ERISA) with
respect to any Pension Benefit Plan subject to Title IV of ERISA
("Reportable Event"), a copy of the materials that are filed by the
applicable plan administrator with the PBGC, or the materials that
would have been filed if the PBGC had not waived the notice
requirements;
(ii) the receipt of notice by a Credit Party or any ERISA
Affiliate or any administrator of any Pension Benefit Plan who is an
employee of a Credit Party or any ERISA Affiliate from the PBGC of the
PBGC's intention to terminate any such Pension Benefit Plan or to
appoint a trustee to administer any such Pension Benefit Plan, a copy
of such notice;
(iii) the filing thereof with the Internal Revenue Service,
copies of each annual report that is filed on Treasury Form 5500 with
respect to any Pension Benefit Plan subject to Title IV, together with
any actuarial statements on Schedule B to such Form 5500;
(iv) a Credit Party or any ERISA Affiliate or any administrator
of any Pension Benefit Plan who is an employee of any Credit Party, or
any ERISA Affiliate files with participants, beneficiaries or the PBGC
a notice of intent to terminate any Pension Benefit Plan, a copy of
any such notice;
(v) a Credit Party or any ERISA Affiliate knows or has reason to
know of any event or condition which might constitute grounds under
the provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Benefit Plan, an
explanation of such event or condition;
(vi) an application has been made to the Secretary of the
Treasury for a waiver of the minimum funding standard under the
provisions of Section 412 of the Code with respect to any Pension
Benefit Plan, a copy of such application; and
(vii) the receipt by any Credit Party or any ERISA Affiliate of
an assessment of withdrawal liability under Section 4201 of ERISA from
a Multiemployer Plan, a copy of such assessment;
in each case described above, together with a statement signed by an appropriate
officer of such Credit Party or ERISA Affiliate setting forth details as to such
Reportable Event, filing, notice, event or condition, assessment or application
and the action that will be taken with respect thereto.
73
Section 8.13. FURTHER ASSURANCES. Each of the Borrowers and the Parent
shall, and shall cause each of their respective Subsidiaries to, at its cost and
expense, upon request of the Agent, duly execute and deliver, or cause to be
duly executed and delivered, to the Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Agent to carry out more effectually the provisions and
purposes of this Agreement or any other Loan Document.
Section 8.14. CONSIGNMENT AGREEMENTS. (a) Subject to the terms of
clause (b) below, Borrowers shall deliver to the Agent Consignor Letters duly
executed by consignors of "consigned" or "memo" inventory (pursuant to any
written consignment agreement or otherwise) representing at least ninety percent
(90%) of the "memo" or "consigned" inventory (based on book value) of such
Borrower and at no time following the Closing Date shall any Borrower suffer or
permit more than ten percent (10%) of its "memo" or "consigned" inventory (based
on book value) to be on consignment from consignors who have not executed and
delivered to the Agent Consignor Letters. Each Borrower further agrees to use
its best efforts to deliver to the Agent Consignor Letters from each of its
consignors of "memo" or "consigned" inventory and each Borrower further agrees
that it shall not from and after the Closing Date enter into any consignment
agreement or arrangement with any consignor who has not delivered to the Agent a
Consignor Letter. Notwithstanding the foregoing, no Consignor Letter shall be
required to be executed and delivered by Sovereign Bank (its successors and
assigns) in connection with the Gold Consignment Documents so long as the
Sovereign Intercreditor Agreement is in full force and effect.
(b) Within ninety (90) days of the Closing Date, Carlyle shall deliver
such Consignor Letters set forth in clause (a) above to the Agent with respect
to Consignment Inventory of any Carlyle Credit Party.
Section 8.15. AUDITS. Each of the Borrowers and the Parent shall
allow, and shall cause each of their respective Subsidiaries to allow, the Agent
or its designee to perform such audits of the Parent and its Subsidiaries, at
the Borrowers' expense as to reasonable out-of-pocket expenses of the Agent or
its designee, as the Agent may request.
Section 8.16. ENVIRONMENTAL MATTERS, ETC. (a) Each of the Borrowers
and the Parent shall, and shall cause each of their respective Subsidiaries to,
(i) comply in all material respects with the Environmental Laws applicable to
it, and (ii) promptly forward to the Agent a copy of any order, notice, Permit,
or any other written communication or report received by the Parent or any of
its Subsidiaries in connection with any Adverse Environmental Condition or
Environmental Claim or any written allegation which may reasonably be expected
to give rise to an Adverse Environmental Condition or Environmental Claim.
(b) The Borrowers shall fully and promptly pay, perform, discharge, if
requested, defend, indemnify and hold harmless each Indemnified Party from and
against any action, claim, loss, liability, damage, cost, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorneys' fees,
disbursements, investigation, removal, cleanup and remedial costs and reasonable
Equipment modification costs incurred to permit continued or resumed normal
operation of the Facilities) suffered or incurred by such Indemnified Party,
whether as mortgagee pursuant to any Mortgage or Leasehold Mortgage, as
mortgagee in possession, or as successor in interest to Finlay or any of its
Subsidiaries as owner, operator or lessee of any Facilities by virtue of
foreclosure or acceptance in lieu of foreclosure or otherwise: (i) under or on
account of the Environmental Laws as they may apply to the Parent, any of its
Subsidiaries or the Facilities, including the assertion of any Lien thereunder;
(ii) with respect to any Environmental Claim, Release or Hazardous Material
affecting such Facilities, whether or not the same originates or emanates from
such Facilities or any contiguous real estate, including any loss of value of
such Facilities as a result of a Release or Hazardous Material; and (iii) with
respect to any other matter affecting such Facilities within the jurisdiction of
any federal, state, or municipal authority administering the Environmental Laws.
The foregoing indemnity shall survive the expiration or earlier
74
termination of this Agreement and the satisfaction of the Obligations under the
Loan Documents. Further, the foregoing indemnity shall not be available with
respect to matters arising solely out of the gross negligence or willful
misconduct of an Indemnified Party or such Person's employees, successors or
assigns. The indemnification rights provided by this Section 8.16(b) shall
constitute the sole indemnity available to Indemnified Parties with respect to
the matters addressed under this Section.
(c) The Agent and each Lender agree that in the event any
investigation, litigation or proceeding is asserted or threatened in writing or
instituted against it or any Indemnified Party, or any Remedial Action is
requested of it or any Indemnified Party, for which indemnity is available under
Section 8.16(b) and the Agent or any Lender may desire indemnity or defense
hereunder, the Agent or such Lender shall promptly notify the Borrower
Representative in writing, setting forth a description of those elements of
which it has knowledge, but any failure to so notify the Borrower Representative
shall not relieve the Borrowers of any of their obligations hereunder, except to
the extent such failure materially interferes with the Borrowers' ability to
defend the investigation, litigation, proceeding or requested Remedial Action.
The Borrowers at the request of the Agent or any Lender shall have the
obligation to defend against such investigation, litigation or proceeding or
requested Remedial Action, and the Borrower in any event may participate in the
defense or settlement thereof with legal counsel of its choice; provided,
however, that the Borrowers shall not be entitled to control the defense
described above in the event that the Borrowers shall not have admitted in
writing to the Agent and the Lenders that as between the Borrowers, on the one
hand, and the Agent and the Lenders on the other hand, the Borrowers are liable
to the Agent and Lenders as to such investigation, litigation, proceeding or
Remedial Action or there are defenses available to the Indemnified Party which
are not available to the Borrowers. In the event that the Agent or any Lender
requests the Borrowers to defend against such investigation, litigation or
proceeding or requested Remedial Action, such party shall promptly do so and the
Agent or the affected Lender shall have the right to participate in such
defense, at such party's expense, with legal counsel of its choice, and shall
cooperate with the Borrowers in the conduct of such defense. No Indemnified
Party shall settle any such investigation, litigation or proceeding or requested
Remedial Action as to which it is controlling the defense without the consent of
the Borrowers, which consent shall not be unreasonably withheld or delayed. In
the event that the Borrowers control such defense, the Borrowers and the
Indemnified Party or Parties shall cooperate in the conduct of such defense, and
the Borrowers shall not settle any such investigation, litigation or proceeding
or requested Remedial Action without the consent of the Indemnified Party or
Parties, which consent shall not be unreasonably withheld. No action taken by
legal counsel chosen by the Agent or any Lender in defending against any such
investigation, litigation or proceeding or requested Remedial Action shall
vitiate or impair the Borrowers' obligations and duties hereunder to indemnify
and hold harmless the Indemnified Parties. Any and all amounts payable by the
Borrowers as indemnification under this Section 8.16(c) shall be due and payable
within thirty (30) days of receipt of written notice to the Borrower
Representative and, after such thirty (30) day period, shall be added, together
with interest thereon at the rate set forth in Section 2.6(c) hereof, to the
Obligations.
(d) In the event of any Adverse Environmental Condition affecting any
Facilities, whether or not the same originates or emanates from such Facilities
or any contiguous real estate, and if the Parent or any Subsidiary shall fail to
comply in all respects with any of the requirements of the applicable
Environmental Laws, or, in the case of a leasehold, if required to do so under
the applicable lease, the Agent (at its option or at the direction of the
Majority Lenders) may, but shall not be obligated to, cause such work to be
performed or take actions reasonably necessary to remedy such Adverse
Environmental Condition or cure such failure to comply after providing written
notice to the Borrower Representative of an intent to do so, allowing a
reasonable time after receipt of such notice for the Borrowers to cure such
failure. Any amounts paid by the Agent as a result thereof, together with
interest thereon at the rate set forth in Section 2.6(c) hereof, shall be due
and payable by the Borrowers within thirty (30) days of receipt of an invoice
and supporting documentation and, after such thirty day period, shall be added
to the Obligations. Nothing in this Agreement shall be construed as limiting or
impeding the Parent's or any of its Subsidiary's rights or obligations to take
any and all actions necessary or
75
desirable to remedy any Adverse Environmental Condition. Any partial exercise by
the Agent of the remedies hereinabove set forth or any partial undertaking on
the part of the Agent to cure the Parent's failure or the failure of any
Subsidiary thereof to comply with the Environmental Laws, shall not obligate the
Agent to complete the actions taken or require the Agent to expend further sums
to cure the Parent's or any such Subsidiary's noncompliance; neither shall the
exercise of any such remedy operate to place upon the Agent or any Lender any
additional responsibility for the operation, control, care, management or repair
of the Real Estate or make the Agent or any Lender the "owner" or "operator" of
the Real Estate or "owner" or "generator" of Hazardous Materials within the
meaning of the Environmental Laws.
(e) If an Event of Default occurs and is continuing, or if an Adverse
Environmental Condition should arise which would reasonably be expected to
result in a Material Adverse Effect, the Agent (at its option or at the
direction of the Majority Lenders) in the reasonable exercise of its discretion
and with reasonable notice under the circumstances, may at any time, and at the
Borrower's sole cost and expense (which shall be added to the Obligations), take
any action to incur any reasonable expense, including without limitation, to
cause one or more environmental assessments of the Real Estate to be undertaken.
Environmental assessments may include a detailed visual inspection of the Real
Estate, including, without limiting the generality of the foregoing, all storage
areas, storage tanks, drains, dry ▇▇▇▇▇, and leaching areas, as well as the
taking of soil samples, surface water samples, and ground water samples, and
such other investigation or analysis as is reasonably necessary or appropriate
for a complete assessment of the compliance of the Real Estate and the use and
operation thereof with all Environmental Laws; provided, however, any such
inspection and sampling shall be performed by a qualified, and if necessary
licensed, environmental consultant, retained by Agent and provided, further,
that no such inspection and sampling shall take place on any real property
leased to the Parent or any of its Subsidiaries that requires the consent of the
landlord for such inspection and sampling without first obtaining such consent
(the Borrowers agreeing to use their best efforts to obtain such consent). The
Borrowers shall be given the opportunity to review and comment upon the scope of
work and work plan developed by the consultant for the environmental assessment
prior to such assessment; provided that such review and comments shall not be
unreasonably withheld or delayed. The Agent shall give the Borrower
Representative three (3) Business Days' advance notice that the consultant
intends to enter the Real Estate for the purpose of conducting an environmental
assessment. A representative of the Borrowers shall have the right to accompany
the consultant as the consultant performs any portion of the environmental
assessment, provided such representative is reasonably available, and the
consultant shall provide split samples to the Borrowers' representative upon
request. The consultant shall take all reasonable measures to restore the
property to the condition in which the property was found prior to the
environmental assessment.
The Agent promptly shall provide the Borrower Representative with a
copy of any reports (including draft reports) and analytical data prepared or
gathered by the consultant relating to the environmental assessment of the Real
Estate.
(f) The Borrowers shall, and shall cause each of their Domestic
Subsidiaries to, without regard to whether any Credit Party is in default, and
at such party's sole cost and expense, cause one or more "phase I" environmental
assessments to be undertaken by an environmental consultant satisfactory to the
Agent (and in any event, in form and substance sufficient to entitle the Agent
and the Lenders to an exemption under any applicable state or federal law for
lenders or financial institutions holding a lien or security interest) before
any such party shall (i) enter into a contract for the purchase of any real
property or (ii) enter into any lease with a term in excess of six months;
provided, however, that no such "phase I" environmental assessments shall be
required prior to entry into a lease of real property to be used solely for
retail or office purposes. If any such "phase I" environmental assessment shall
identify any Adverse Environmental Condition or Environmental Claim with respect
to such real property, such party shall refrain from entering into such contract
or lease, as the case may be, unless such party shall ensure to the satisfaction
of the Agent that such further Remedial Action as any Lender may reasonably
request is undertaken at the sole expense of such party or a third party.
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Section 8.17. FINANCIAL COVENANTS. (a) Leverage Ratio. The Parent
shall maintain, or cause to be maintained, a Leverage Ratio, as of the end of
each period of four consecutive quarters of the Parent ending on or about the
dates set forth below, of not more than the ratio set forth below opposite such
date:
Four Fiscal Quarters
Ending On or About Ratio
-------------------- -----
April 30, 2005 3.70
July 31, 2005 4.80
October 31, 2005 5.50
January 31, 2006 3.00
April 30, 2006 3.80
July 31, 2006 4.20
October 31, 2006 4.50
January 31, 2007 2.60
April 30, 2007 3.50
July 31, 2007 3.50
October 31, 2007 3.50
(b) Fixed Charge Coverage Ratio. The Parent shall maintain, or cause
to be maintained, as of the end of each period of four consecutive fiscal
quarters of the Parent ending on or about the dates set forth below, a Fixed
Charge Coverage Ratio of not less than:
Four Fiscal Quarters
Ending On or About Ratio
-------------------- -----
April 30, 2005 1.65
July 31, 2005 1.65
October 31, 2005 1.60
January 31, 2006 1.70
April 30, 2006 1.70
July 31, 2006 1.70
October 31, 2006 1.70
January 31, 2007 1.80
April 30, 2007 1.70
July 31, 2007 1.70
October 31, 2007 1.70
(c) EBITDA. The Parent shall maintain, or cause to be maintained,
EBITDA for each period of four consecutive fiscal quarters of the Parent ending
on or about the dates set forth below of not less than the amount set forth
below opposite such date:
Four Fiscal Quarters
Ending On or About Amount
-------------------- -----------
77
April 30, 2005 $68,000,000
July 31, 2005 $64,500,000
October 31, 2005 $64,500,000
January 31, 2006 $72,000,000
April 30, 2006 $73,000,000
July 31, 2006 $73,000,000
October 31, 2006 $74,000,000
January 31, 2007 $77,000,000
April 30, 2007 $78,000,000
July 31, 2007 $78,000,000
October 31, 2007 $78,000,000
Section 8.18. LEASES; NEW REAL ESTATE. Within five (5) Business Days
after becoming a party thereto, the Borrowers shall provide, or shall cause the
applicable Subsidiary to provide, the Agent with copies of all Leases of real
property or similar agreements (and all amendments thereto) entered into by the
Borrowers or any Domestic Subsidiary of any Borrower after the Closing Date,
whether as lessor or lessee. Except as disclosed on Schedule 8.18 hereto, the
Borrowers shall comply and shall cause each of their Domestic Subsidiaries to
comply in all material respects with all of its and their material obligations
under all Leases now existing or hereafter entered into by it or them with
respect to real property including, without limitation, all Leases listed on
Schedule 11.5 hereto. The Borrowers shall, or shall cause the appropriate
Subsidiary to, (i) provide the Agent with a copy of each notice of default
received by such Borrower or such Subsidiary under any such lease immediately
upon receipt of any such notice and deliver to the Agent a copy of each notice
of default sent by such Borrower or such Subsidiary under any such lease
simultaneously with its delivery of such notice under such lease; (ii) notify
the Agent at least 14 days prior to the date such Borrower or such Subsidiary
takes possession of any new leased premises or becomes liable under any Lease
having a term of greater than six months, whichever is earlier; and (iii) if
requested by the Agent, obtain and deliver to the Agent a Landlord's
Certificate, and with respect to any leasehold in which the Agent has obtained
or expects to obtain a Leasehold Mortgage, such consents and other agreements
from landlords relating to, among other things, mortgageability and such
non-disturbance agreements from mortgagees of the landlord, as the Agent may
request, each in form and substance reasonably satisfactory to the Agent, prior
to entering into any new lease.
Section 8.19. LICENSE AGREEMENTS. (a) If a Specified Default occurs
and is continuing, Finlay shall, upon the request of the Agent, use its best
efforts to grant to the Agent for the benefit of the Agent and the Lenders
pursuant to security agreements and/or collateral assignments each in form and
substance satisfactory to the Agent, a valid, perfected and enforceable first
priority Lien on all right, title and interest of Finlay in, to and under all
Unapproved License Agreements and License Agreements as to which the Agent shall
have not heretofore received such a valid, perfected and enforceable first
priority Lien (together with any legal opinions reasonably requested by the
Agent as to the validity, enforceability and perfection of such Liens). In
connection therewith, Finlay shall use its best efforts to obtain all consents
of third parties (including, without limitation, any licensor consents)
necessary to permit the effective granting of such Liens. In the event such
security agreements or collateral assignments (together any legal opinions
requested by the Agent and third party consents deemed necessary by the Agent to
permit the granting of such Liens) are not delivered to the Agent within 45 days
after the Agent's request therefor and the Agent has not otherwise received a
valid, perfected and enforceable first priority security interest in such
Unapproved License Agreements and License
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Agreements, such failure on the part of any Credit Party shall constitute an
Event of Default hereunder in addition to any other Default or Event of Default
existing at such time.
(b) The Borrowers shall promptly (i) upon entering into any Unapproved
License Agreement or License Agreement provide the Agent with copies of same (or
if such Unapproved License Agreement or License Agreement is not in writing a
written description thereof), (ii) upon entering into any amendment to any
Unapproved License Agreement or License Agreement provide the Agent with a copy
of same, it being understood that the Borrowers shall not need the approval of
the Agent or any Lender to enter into or terminate any Unapproved License
Agreement or License Agreement, (iii) promptly upon entering into any Unapproved
License Agreement or License Agreement after the Closing Date, provide to the
Agent an internally generated projection of gross revenues for any such
Unapproved License Agreement or License Agreement for the twelve month period
following the first date of operation under such Unapproved License Agreement or
License Agreement, (iv) comply in all material respects with all Unapproved
License Agreements or License Agreements now existing or hereafter entered into
by it (including, without limitation, those License Agreements listed on
Schedule 11.25 hereof), and (v) provide the Agent with Written Notice of any
default under any Unapproved License Agreement or License Agreement immediately
upon becoming aware of any default thereunder and of any termination of an
Unapproved License Agreement or License Agreement.
Section 8.20. SUPPLEMENTAL DISCLOSURE. From time to time as may be
necessary (in the event that such information is not otherwise delivered by the
Parent or the Borrowers to the Lenders pursuant to this Agreement), the
Borrowers and the Parent will promptly supplement or amend each Schedule or
representation herein with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedule or as an exception to such
representation or which is necessary to correct any information in such Schedule
or representation which has been rendered inaccurate thereby in any material
respect. No such supplement shall cure any Default arising from any
misrepresentation being corrected, unless such supplement has been approved by
the Majority Lenders.
Section 8.21. AGREEMENTS. Each of the Borrowers and the Parent shall,
and shall cause each of their respective Subsidiaries to, perform, within all
required time periods (after giving effect to any applicable grace periods), all
of its obligations and enforce all of its rights under each agreement to which
it is a party, including, without limitation, any leases to which any such
company is a party, where the failure to so perform and enforce is reasonably
likely to have a Material Adverse Effect. The Parent shall not, and shall not
suffer or permit any of its Subsidiaries to, terminate or modify in any manner
adverse to any such party any provision of any agreement to which it is a party
which termination or modification is reasonably likely to have a Material
Adverse Effect.
Section 8.22. CASH MANAGEMENT. (a) Each Borrower shall enter into, and
shall cause its Domestic Subsidiaries to enter into, Blocked Account Agreements
with each Collecting Bank where such Borrower or Domestic Subsidiary holds a
deposit account (other than a Disbursement Account); provided that the Carlyle
Credit Parties shall have sixty (60) days after the Closing Date to deliver such
fully executed Blocked Account Agreements to the Agent with respect to the
individual Carlyle store deposit accounts identified on Schedule 8.22. Each
Borrower shall enter into, and shall cause its Domestic Subsidiaries to enter
into, Control Agreements with each securities intermediary or commodity
intermediary where such Borrower or Domestic Subsidiary holds a securities or
commodity account. The Borrowers shall not nor shall the Borrowers suffer or
permit any Domestic Subsidiary to terminate, alter or suffer or permit to be
terminated or to lapse any such Blocked Account Agreement or Control Agreement.
Each Borrower shall, and shall cause its Domestic Subsidiaries to, deposit all
Proceeds in a Blocked Account and (ii) deposit all of its Cash Equivalents in a
Controlled Securities Account. If the Agent has not received one or more Blocked
Account Agreements as set forth in this Agreement, the Agent may establish
reserves against the applicable Borrowing Base in its reasonable credit
judgment.
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(b) Pursuant to the Blocked Account Agreements with respect to the
Carlyle Blocked Accounts, the Carlyle Credit Parties shall cause the Collecting
Bank to sweep, on each Business Day, all amounts in such Carlyle Blocked Account
(other than a Disbursement Account) into the Carlyle Concentration Account.
Pursuant to the Carlyle Concentration Account Agreement, the Carlyle Credit
Parties shall cause the Concentration Account Bank to sweep, on each Business
Day, all amounts in the Carlyle Concentration Account into the Payment Account.
The Carlyle Credit Parties shall instruct the Receivables Purchaser to make all
payments directly to a Blocked Account.
(c) Pursuant to the Blocked Account Agreements with respect to the
Finlay Blocked Accounts, the Finlay Credit Parties shall cause the Collecting
Bank to continue to sweep on each Business Day, all amounts in such Finlay
Blocked Account (other than a Disbursement Account) into the Payment Account.
(d) All items and all cash in the lock box and all funds, deposits,
earnings and claims in respect thereof in the Blocked Accounts shall be the sole
and exclusive property of the Agent, subject to the sole dominion and control of
the Agent, in accordance with the provisions of Section 2.19(b) hereof and of
the Blocked Account Agreements.
(e) The Borrowers shall pay to the Agent all fees, costs and expenses
which the Agent pays or incurs in connection with maintaining or opening the
Blocked Accounts, collecting and depositing for collection all checks and items
of payment received or delivered to any Collecting Bank for deposit in the
Blocked Accounts and shall reimburse the Agent for all amounts which the Agent
may pay to any Collecting Bank arising from obligations undertaken by the Agent
under the Collecting Bank Agreements.
(f) Within sixty (60) days of the Closing Date, the Borrowers shall
deliver to the Agent, notification, executed on behalf of each Credit Party, to
each of such Credit Party's credit card clearinghouses and processors, written
notice in form and substance acceptable to the Agent, which provides that
payment of all credit card charges submitted by such Credit Party to the
clearinghouse or processor and any other amount payable to such Credit Party by
such clearinghouse or processor shall be directed to a Blocked Account or as
otherwise designated from time to time by the Agent. No Credit Party shall
change such direction or designation except upon and with the prior written
consent of the Agent.
(g) Upon the occurrence of a Default or Event of Default, the Agent
may send an activation notice under the Blocked Account Agreements and exercise
control over all such Blocked Accounts as set forth in the Blocked Account
Agreements.
(h) In the event that Excess Availability is at any time equal to or
less than $30,000,000, the Agent may send an activation notice under the Blocked
Account Agreements and exercise control over all such Blocked Accounts (other
than the Master Disbursement Accounts) as set forth in the Blocked Account
Agreements.
Notwithstanding clauses (a) through (g) above, so long as the Gold
Consignment Documents and Sovereign Intercreditor Agreement are in full force
and effect, the deposit account established and maintained by the Borrowers with
Sovereign Bank (referred to as the "Cash Collateral Account" in the Cash
Collateral Agreement, as such term is defined in the Gold Consignment Agreement)
holding the Cash Deposits (as defined in the Gold Consignment Agreement) and the
investments of funds in such account in Time Deposits (as such term is defined
in the Cash Collateral Agreement), in each instance, pursuant to the Cash
Collateral Agreement shall not be subject to the collection and payment
arrangements required by this Section 8.22.
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Section 8.23. EMPLOYMENT AGREEMENTS. After the Closing Date, the
Borrowers and the Parent shall obtain the written approval of the Agent prior to
entering into any Employment Agreement with an Affiliate of the Parent, the
Borrowers or any of their respective Subsidiaries.
Section 8.24. ASSIGNMENT OF FACTORING CREDIT BALANCES AGREEMENTS.
Contemporaneously with the execution of any future Factor Guaranties, Borrowers
shall obtain duly executed Assignment of Factoring Credit Balances Agreements,
in form and substance satisfactory to the Agent.
Section 8.25. MORTGAGE. Within sixty (60) days of the Closing Date,
the Borrowers shall deliver to the Agent executed Mortgages with respect to the
real property identified on Schedule 4.4.
Section 8.26. NEW STORES. The Borrowers shall deliver written notice
to the Agent at least five (5) Business Days (or such shorter period as the
Agent may agree) prior to the Borrowers or any of their Subsidiaries opening or
operating any new fine jewelry department or new store, which notice shall
specify the exact location and whether such new location is a store or
department store; provided, however, that the Borrowers shall provide the Agent
with a list of projected fine jewelry department or store openings on a biweekly
basis.
Section 8.27. LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE
LETTERS. Each Credit Party shall obtain a landlord's agreement, mortgagee
agreement or bailee letter, as applicable, from the lessor of each leased
property, mortgagee of owned property or bailee with respect to any warehouse,
processor or converter facility or other location where Collateral is stored or
located, which agreement or letter shall contain a waiver or subordination of
all Liens or claims that the landlord, mortgagee or bailee may assert against
the Collateral at that location, and shall otherwise be reasonably satisfactory
in form and substance to Agent; provided that the Carlyle Credit Parties shall
have ninety (90) days from the Closing Date to deliver such executed third party
agreements to the Agent. With respect to such locations or warehouse space
leased or owned as of the Closing Date and thereafter, if Agent has not received
a landlord or mortgagee agreement or bailee letter as of the Closing Date (or,
if later, as of the date such location is acquired or leased), any Borrower's
Eligible Inventory at that location shall, in Agent's discretion, be excluded
from the applicable Borrowing Base or be subject to such reserves as may be
established by Agent in its reasonable credit judgment. After the Closing Date,
no real property or warehouse space shall be leased by any Credit Party and no
Inventory shall be shipped to a processor or converter under arrangements
established after the Closing Date without the prior written consent of Agent
(which consent, in Agent's discretion, may be conditioned upon the exclusion
from the applicable Borrowing Base of Eligible Inventory at that location or the
establishment of reserves acceptable to Agent) or, unless and until a reasonably
satisfactory landlord agreement or bailee letter, as appropriate, shall first
have been obtained with respect to such location. Except as disclosed on
Schedule 8.18 hereto, each Credit Party shall timely and fully pay and perform
its obligations under all leases and other agreements with respect to each
leased location or public warehouse where any Collateral is or may be located.
Section 8.28. INTERCOMPANY CHARGES AND MANDATORY DIVIDENDS RELATING TO
FINLAY MERCHANDISING. Finlay shall cause all payments (net of amounts (which may
be paid in cash) equal to the reasonable, ordinary course operating expenses of
Finlay Merchandising including, without limitation, payroll expenses for
employees of Finlay Merchandising) to be made by Finlay to Finlay Merchandising
in respect of amounts owed under the Finlay License Agreement and the Services
Agreement to be made by means of appropriate intercompany charges. Finlay
Merchandising shall within thirty days (30) following the end of each fiscal
quarter during which payments to Finlay Merchandising are made by Finlay by
means of intercompany charges, declare and distribute to Finlay as a dividend an
amount equal to the amount of such payments (net of reasonable operating
expenses for the then current and immediately succeeding calendar month (which
may be paid in cash) of Finlay Merchandising including, without limitation,
payroll expenses for employees of Finlay Merchandising).
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Section 8.29. INTERCOMPANY CHARGES AND MANDATORY DIVIDENDS RELATING TO
eFINLAY. Each of Finlay and Finlay Merchandising, as the case may be, shall
account for all charges, fees, rent and other amounts owing to it by eFinlay
pursuant to the eFinlay Agreements (the "eFinlay Agreement Expenses") as an
intercompany receivable and eFinlay shall pay the outstanding amount of the
eFinlay Agreement Expenses to Finlay and Finlay Merchandising, as the case may
be, on a monthly basis to the extent cash is available (net of reasonable
operating expenses of eFinlay for the then current and immediately succeeding
calendar month (which may be paid in cash) including, without limitation,
payroll expenses for employees of eFinlay) (and any amounts not paid shall be
paid as soon as cash becomes available). eFinlay shall, within thirty days (30)
following the end of each fiscal quarter, declare and distribute to Finlay as a
dividend any excess amounts retained by eFinlay after payment of the eFinlay
Agreement Expenses (net of reasonable operating expenses of eFinlay for the then
current and immediately succeeding calendar month (which may be paid in cash)
including, without limitation, payroll expenses for employees of eFinlay).
SECTION 9 . NEGATIVE COVENANTS. Each of the Borrowers and the Parent
covenant and agree that, so long as any Revolving Loan or Letter of Credit
Obligation is outstanding or any Lender has any Revolving Commitment hereunder,
they shall not, and shall not suffer or permit any of their Subsidiaries (and
with respect to Section 9.11, shall not suffer or permit any ERISA Affiliate)
to, without the prior written consent of the Majority Lenders:
Section 9.1. CAPITAL EXPENDITURES. Make Capital Expenditures in any
Fiscal Year of the Parent ending on or about the dates set forth below in excess
of the corresponding amount set forth below:
Fiscal Year
Ending On or About Amount
------------------ -----------
January 31, 2005 $17,000,000
January 31, 2006 $17,000,000
January 31, 2007 $18,000,000
January 31, 2008 $18,000,000
Section 9.2. LIENS. Create, incur, assume or suffer to exist any Lien
upon or defect in title to or restriction upon the use of any of its properties
or assets of any character, whether owned at the date hereof or hereafter
acquired, or hold or acquire any property or assets of any character under
conditional sales, finance lease or other title retention agreements, other
than:
(a) Liens in favor of the Agent or the Lenders pursuant to this
Agreement or the Security Documents;
(b) (i) Liens for taxes, assessments or governmental charges or
levies, provided payment thereof shall not at the time be required in accordance
with the provisions of Section 8.2 hereof;
(ii) deposits, Liens or pledges to secure payments of workmen's
compensation and other payments, unemployment and other insurance,
old-age pensions or other social security obligations, or the
performance of bids, tenders, leases, contracts (other than contracts
for the payment of money), public or statutory obligations, surety,
stay or appeal bonds, or other similar obligations arising in the
ordinary course of business;
(iii) mechanics', workmen's, repairmen's, warehousemen's,
vendors', suppliers', materialmen's or carriers' Liens, or other
similar Liens arising in the ordinary
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course of business and securing sums which are not past due or which
are being contested in good faith (and there shall be no material risk
of forfeiture of the property subject to such Lien or foreclosure of
such Lien), or deposits or pledges to obtain the release of any such
Liens;
(iv) zoning restrictions, easements, rights of way, licenses and
restrictions on the use of real property or minor irregularities in
title thereto, which do not materially impair the use of such property
in the normal operation of the business of the Parent or any of its
Subsidiaries or the value of such property for the purpose of such
business;
(c) existing Liens set forth in Schedule 9.2 hereof and any renewals
thereof, but not any increase in amount thereof and not any extension thereof to
other property;
(d) purchase money mortgages or other purchase money Liens (including,
without limitation, Capital Leases), or any refinancing of any thereof, in favor
of non-Affiliates of the Parent and its Subsidiaries upon any fixed or capital
assets hereafter acquired by the Borrowers or any of their Subsidiaries
constituting real property interests or machinery and Equipment, or purchase
money mortgages (including, without limitation, Capital Leases) on any such
assets hereafter acquired or existing at the time of acquisition of such assets
by the Borrowers or any of their Subsidiaries, whether or not assumed, so long
as (i) any such Lien does not extend to or cover any other asset of the
Borrowers or any of their Subsidiaries, (ii) such Lien secures the obligation to
pay the purchase price of such asset (or the obligation under such Capital
Leases), interest thereon and other customary incidental obligations relating
thereto only, and (iii) the original principal amount (or in the case of Capital
Leases, notional principal amount) of the aggregate Indebtedness secured by all
such purchase money Liens (and Capital Leases) shall not exceed $4,000,000 at
any time;
(e) [Intentionally Deleted]
(f) Liens on Consignment Inventory in favor of any Person who retains
title to such Consignment Inventory;
(g) Liens granted to lessors or licensors of store locations with
respect to Fixtures and Equipment at store locations leased or licensed from
such lessors or licensors not to exceed $2,000,000 in the aggregate at any time;
(h) Liens for judgments, attachments, seizures or levies not to exceed
$500,000 in the aggregate outstanding at any time;
(i) Liens on property other than Inventory, Accounts or Proceeds of
either, not exceeding $100,000 in the aggregate outstanding at any time;
(j) Liens in favor of Sovereign Bank (or any successor or assignee
thereof) pursuant to the Gold Consignment Documents, subject to the provisions
of the Intercreditor Agreement and subject to there being no filings of
financing statements under the Uniform Commercial Code with respect thereto
other than financing statements containing collateral descriptions in the form
of Exhibit 9.2(j) hereto;
(k) Liens in favor of the credit insurance provider on certain account
receivables pursuant to the Factor Guaranties;
(l) Liens on funds deposited in the Credit Card Services Account in
connection with the Credit Card Services Agreement; and
(m) Liens in favor of the Receivables Purchaser upon Purchased
Accounts granted pursuant to the Receivables Purchase Agreements.
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(n) Liens in favor of Rolex Watch U.S.A., Inc. granted pursuant to the
Rolex Security Agreement.
Section 9.3. INDEBTEDNESS. Create, incur, assume or suffer to exist
contingently or otherwise, any Indebtedness (including, without limitation, any
intercompany Indebtedness), other than:
(a) Indebtedness under the Loan Documents;
(b) unsecured Current Liabilities incurred in the ordinary course of
business other than unsecured Current Liabilities for Indebtedness for Borrowed
Money;
(c) Indebtedness of Finlay or any of its Subsidiaries secured by Liens
permitted by Sections 9.2(b), (c) and (d) hereof;
(d) Indebtedness to the extent expressly permitted by Sections 9.4 and
9.16 hereof;
(e) Indebtedness of Finlay evidenced by the Senior Notes;
(f) existing Indebtedness of Finlay and the Parent and their
respective Subsidiaries listed on Schedule 9.3 hereof (but not any increase
thereof or any refinancings, renewals, extensions, replacements or exchanges of
any thereof except refinancings, renewals, extensions, replacements or exchanges
on terms no less favorable to Finlay or any Subsidiary thereof than that being
refinanced, renewed, extended, replaced or exchanged);
(g) Indebtedness of the Borrower and the Parent arising under the Tax
Allocation Agreement;
(h) [Intentionally Deleted];
(i) [Intentionally Deleted];
(j) Indebtedness of the Borrowers under (i) any Hedge Agreement of the
Borrowers which is not speculative in nature, which is designed to hedge against
fluctuations in the price of gold, and which is in the ordinary course of
business in keeping with the Borrowers' past practices and (ii) any Hedge
Agreement which is designed to hedge against fluctuations in interest rates;
provided, however, that in the case of any Hedge Agreement constituting an
interest rate swap for which a Credit Party has swapped away exposure on a fixed
rate in exchange for taking on exposure on a floating rate, such Hedge Agreement
covers a notional principal amount of not more than $50,000,000;
(k) Indebtedness of Finlay or any Subsidiary thereof to lessors or
licensors of store locations with respect to fixtures and equipment located at
such store location not to exceed $2,000,000 in the aggregate outstanding at any
time;
(l) Indebtedness of Finlay or any Subsidiary thereof to lessors or
licensors of store location with respect to Inventory purchased from such
lessors or licensors not to exceed $2,000,000 in the aggregate outstanding at
any time;
(m) Indebtedness of Finlay or any Subsidiary thereof for judgments,
attachments, seizures or levies not to exceed $500,000 in the aggregate
outstanding at any time;
(n) Indebtedness consisting of intercompany loans and advances made by
a Borrower to the other Borrower; provided, that: (A) each Borrower shall have
executed and delivered to the other Borrower, on the Closing Date, a demand note
(collectively, the "Intercompany Notes") to evidence any such intercompany
Indebtedness owing at any time by such Borrower to such other
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Borrower which Intercompany Notes shall be in form and substance reasonably
satisfactory to Agent and shall be pledged and delivered to Agent pursuant to
the Security Agreement as additional collateral security for the Obligations;
(B) each Borrower shall record all intercompany transactions on its books and
records in a manner reasonably satisfactory to Agent; (C) the obligations of
each Borrower under any such Intercompany Notes shall be subordinated to the
Obligations of such Borrower hereunder in a manner reasonably satisfactory to
Agent; (D) at the time any such intercompany loan or advance is made by any
Borrower to the other Borrower and after giving effect thereto, each such
Borrower shall be Solvent; (E) no Default or Event of Default would occur and be
continuing after giving effect to any such proposed intercompany loan; and (F)
(i) in the case of Finlay making an intercompany loan or advance to Carlyle,
Finlay shall have Borrowing Availability under the Finlay Borrowing Base of not
less than $20,000,000 after giving effect to such intercompany loan, (ii) in the
case of Carlyle making an intercompany loan or advance to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ shall
have Borrowing Availability under the Carlyle Borrowing Base of not less than
$0; provided that, Finlay may at any time make intercompany loans and advances
to Carlyle as the result of the payment by Finlay of any fees, expenses,
charges, costs, principal or interest incurred by Borrowers under this Agreement
and allocable to Carlyle (including without limitation all payments of interest
on the Revolving Loans made to Carlyle) pursuant to any Advance deemed to have
been made to Finlay pursuant to the provisions of Section 2.20(c) above
regardless of whether the conditions in the preceding clause (E) or (F) shall
have been complied with or exist at such time.
(o) Indebtedness of Finlay and its Subsidiaries not to exceed
$1,500,000 in the aggregate outstanding at any time;
(p) subject to Section 9.6(a)(ii) hereof, (i) Indebtedness of the
Parent under the Shareholders Agreement and the ▇▇▇▇▇▇ Employment Agreement (or
under any option agreement executed pursuant to the Long Term Incentive Plan)
and (ii) Indebtedness of Carlyle under the Carlyle Executives Employment
Agreements;
(q) current trade Indebtedness owing to Rolex Watch U.S.A., Inc.
secured by liens created under the Rolex Security Agreement and subject to the
Rolex Intercreditor Agreement;
(r) Indebtedness of Finlay under the Gold Consignment Documents not to
exceed $50,000,000 at any time in respect of the aggregate outstanding amount of
Consigned Precious Metal (as such term is defined in the Gold Consignment
Agreement);
(s) Indebtedness, if any, of the Carlyle Credit Parties under the
Receivables Purchase Agreements;
(t) Indebtedness, if any, of the Carlyle Credit Parties under the
Credit Card Services Agreement; and
(u) intercompany Indebtedness consisting of intercompany loans and
advances made by (i) a Finlay Credit Party to another Finlay Credit Party or
(ii) a Carlyle Credit Party to another Carlyle Credit Party; provided that: (A)
such Credit Party shall have executed and delivered to the other Credit Party,
on the Closing Date, a demand note (collectively, the "Intercompany Notes") to
evidence any such intercompany Indebtedness owing at any time by such Credit
Party to such other Credit Party which Intercompany Notes shall be in form and
substance reasonably satisfactory to Agent and shall be pledged and delivered to
Agent pursuant to the Security Agreement as additional collateral security for
the Obligations; (B) such Credit Party shall record all intercompany
transactions on its books and records in a manner reasonably satisfactory to
Agent; (C) the obligations of such Credit Party under any Intercompany Notes
shall be subordinated to the Obligations of such Credit Party hereunder in a
manner reasonably satisfactory to Agent; and (D) at the time any such
intercompany loan or advance is made by any Credit Party to the other Credit
Party and after giving effect thereto, each such Credit Party shall be Solvent;
85
Nothing contained in this Section 9.3 shall be deemed to permit Finlay or any of
its Subsidiaries to incur, create or suffer or permit to be outstanding any
Indebtedness for Borrowed Money owing by any Borrower to the Parent. For the
avoidance of doubt, Carlyle shall be permitted to honor its pledge to Hospice
and Pallative Care of Greensboro to donate $25,000 in amounts of $5,000 per year
for each fiscal year from 2006 to 2011.
Section 9.4. LOANS, INVESTMENTS AND GUARANTEES. Lend or advance money
or credit to any Person, or invest in (by capital contribution, creation of
Subsidiaries or otherwise), or purchase or repurchase the stock or Indebtedness,
or all or a substantial part of the assets or properties, of any Person, or
enter into any exchange of securities with any Person, or guarantee, assume,
endorse or otherwise become responsible for (directly or indirectly or by any
instrument having the effect of assuring any Person's payment or performance or
capability) the Indebtedness, performance, obligations, stock or dividends of
any Person (each of the foregoing, an "Investment"), or agree to do any of the
foregoing, other than:
(a) endorsement of negotiable instruments for deposit or collection in
the ordinary course of business;
(b) Investments, subject to Control Letters in favor of Agent for the
benefit of Lenders or otherwise subject to a perfected security interest in
favor of Agent for the benefit of Lenders, in (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof maturing within one year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Ratings Group or ▇▇▇▇▇'▇ Investors Service, Inc., (iii) certificates of
deposit maturing no more than one year from the date of creation thereof issued
by commercial banks incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of not less than
$300,000,000 and having a senior unsecured rating of "A" or better by a
nationally recognized rating agency (an "A Rated Bank"), (iv) time deposits
maturing no more than 30 days from the date of creation thereof with A Rated
Banks and (v) mutual funds that invest solely in one or more of the investments
described in clauses (i) through (iv) above;
(c) Investments representing stock or obligations issued to the Parent
or any of its Subsidiaries in settlement of claims against any other Person by
reason of a composition or readjustment of debt or a reorganization of any
debtor of the Parent or such Subsidiary;
(d) Investments representing the Indebtedness of any Person owing as a
result of the sale by Finlay or any of its Subsidiaries in the ordinary course
of business of products or services (on customary trade terms);
(e) Investments in the stock of (i) any Subsidiary existing on the
Closing Date (other than the Sonab Entities, Investments in which are expressly
prohibited, except for existing investments) or (ii) any other Subsidiary
created with the prior written consent of the Majority Lenders, but for each of
the foregoing, not any additional investments therein other than additional
Investments approved in writing by the Majority Lenders and increases in
Investments solely by reason of increases in the retained earnings of such
Subsidiary; provided that, notwithstanding anything to the contrary contained in
the foregoing, Carlyle may make capital contributions to ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇ may make capital contributions to ▇.▇. ▇▇▇▇▇▇▇▇ and Park Promenade,
in either case from time to time as Borrowers shall determine are appropriate
and desirable in the operation of the businesses conducted by the Carlyle Credit
Parties, including for the purposes of providing for the repayment of any
intercompany loans and advances owing from ▇.▇. ▇▇▇▇▇▇▇▇ or Park Promenade to
▇▇▇▇▇▇▇▇▇▇ or from ▇▇▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ or to provide any of ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇ or Park Promenade with access to and the benefit of any Revolving Loans
made to Carlyle on the basis of Inventory owned by any of such subsidiaries of
Carlyle;
(f) the Guaranties;
86
(g) Investments outstanding on the date hereof and described on
Schedule 9.4 hereto, but not any additional investments therein;
(h) Investments represented by the Blocked Accounts and the other bank
accounts, if any, permitted hereunder;
(i) Investments by any Borrower with respect to its officers,
directors or employees not to exceed at any time $20,000 in the aggregate to any
one individual or $150,000 in the aggregate outstanding at any time, plus (i)
advances to employees for travel and entertainment in the ordinary course of
business, (ii) advances to employees for relocation expenses not to exceed at
any time $50,000 in the aggregate to any one individual or $200,000 in the
aggregate at any one time outstanding, and (iii) advances to employees in
respect of bonuses actually earned by such employees so long as a Designated
Officer has certified in writing to the Agent that such bonuses were actually
earned by such employees and that at the time of each such advance or advances
no Default or Event of Default was continuing and (iv) the "split-dollar' life
insurance benefits/arrangements provided for under the Carlyle Executives
Employment Agreements; provided, in each case, that such Investments do not
violate the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002;
(j) payments required pursuant to the Tax Allocation Agreement;
(k) advances to consignment vendors in the ordinary course of business
consistent with past practices (net of interim sales of such vendor's consigned
inventory) not to exceed $25,000,000 outstanding at any one time provided that
(i) the amount of such advances made to any one Person and its Affiliates does
not exceed (x) $10,000,000 (net of interim sales of such vendor's consigned
inventory) at any one time outstanding and (y) the amount outstanding at any
time will not exceed 50% of the book value at such time of such Person's (or
Affiliate's) "memo" or "consigned" inventory as shown on the Borrowers' books or
computer records, (ii) within thirty (30) days following the end of each month,
at Agent's request, the Borrowers shall deliver to the Agent a detailed Schedule
showing all outstanding advances under this Section 9.4(k) in form and content
satisfactory to the Agent and (iii) the Borrowers shall put in place a system
satisfactory to the Agent to set appropriate credit limits, track its credit
experience and obtain financial information from Persons to whom advances are
made under this Section 9.4(k);
(l) Investments constituting Initial License Expense or advance
payments of rent or security deposits made under any real estate lease for any
Independent Retail Store not exceeding $1,500,000 in the aggregate in any Fiscal
Year of the Parent;
(m) Investments as a result of any transaction permitted pursuant to
Section 9.6 hereof;
(n) Investments of the Borrowers as a result of any Hedge Agreement
which is not speculative in nature, which is designed to hedge against
fluctuations in the price of gold and which is in the ordinary course of
business in keeping with the Borrowers' past practices;
(o) Investments of the Borrowers as a result of any other Hedge
Agreement which is not prohibited under the terms of this Agreement;
(p) guarantees by any Finlay Credit Party of any obligations of any
other Finlay Credit Party and guarantees by any Carlyle Credit Party of any
obligations of any other Carlyle Credit Party, so long as, in either such case,
the obligations of the other Finlay Credit Party or Carlyle Credit Party, as
applicable, are otherwise permitted hereunder;
87
(q) guarantees by Finlay and/or Parent of any of the rental
obligations of any Carlyle Credit Party under any real estate lease for any
Independent Retail Store, so long as such rental obligations are permitted under
Section 9.16 below; and
(r) guarantees by the Carlyle Credit Parties of the Senior Notes to
the extent required under the Senior Note Indenture.
Section 9.5. MERGER, SALE OF ASSETS, DISSOLUTION, ETC. Enter into any
transaction of merger or consolidation, change its name, acquire all or a
substantial portion of the assets of any Person, or transfer, sell, assign,
lease, or otherwise dispose of (other than sales by Finlay or any of its
Subsidiaries of Inventory in the ordinary course of business) all or any part of
its properties or assets, or any of its notes or Accounts (including, without
limitation, Eligible Receivables), or any stock or Indebtedness of Finlay or any
of its Subsidiaries, or wind up, liquidate or dissolve, or agree to do any of
the foregoing, except:
(a) sales in the ordinary course of business of assets and properties
of Finlay and its Subsidiaries no longer necessary for the proper conduct of
their respective businesses having a value, together with the value of all other
such property of Finlay and its Subsidiaries so sold in the same Fiscal Year of
the Parent, of not greater than $350,000 in the aggregate;
(b) sales by Finlay and its Subsidiaries of worn out or obsolete
personal property of Finlay or such Subsidiary having a value, together with the
value of all other such property of Finlay and its Subsidiaries so sold in the
same Fiscal Year of the Parent, of not greater than $350,000 plus sales of
obsolete jewelry, watches or other merchandise which Finlay believes cannot be
advantageously sold in the ordinary course of business;
(c) sales of Inventory, Equipment and Fixtures in connection with (i)
the termination of License Agreements (or similar agreements or arrangements
regarding the operation of jewelry departments or stores by the Borrowers) or
(ii) the closing of any Independent Retail Store; as to any one or more
locations, or Independent Retail Stores to the extent such Inventory, Equipment
and Fixtures were used or retained at such locations or Independent Retail
Stores in the ordinary course of business;
(d) the abandonment of any assets and properties of Finlay or any of
its Subsidiaries which are no longer useful in its business and cannot be sold;
(e) the merger of a wholly-owned direct or indirect Domestic
Subsidiary of a Borrower with the Borrower (so long as Borrower is the sole
survivor of such merger) or with another wholly owned direct or indirect
Domestic Subsidiary of such Borrower or the transfer or sale of any assets from
any Finlay Credit Party to any other Finlay Credit Party or from any Carlyle
Credit Party to any other Carlyle Credit Party;
(f) upon thirty (30) days prior written notice to the Agent, Finlay
and any of its Subsidiaries may change its name provided that such entity
executes all documentation reasonably requested by the Agent (including, without
limitation, UCC financing statements) in order to protect the Agent's interest
in the Collateral or any other interest of the Agent under the Loan Documents;
(g) [Intentionally Deleted.]
(h) the winding down and dissolution of Sonab Holdings and Sonab
International;
(i) assignments under, and in accordance with, the Factor Guaranties;
(j) the sale, transfer and assignment by any Carlyle Credit Party to
Finlay Merchandising of any Trademarks of such Carlyle Credit Party; provided
that (i) any such transfer shall
88
be duly registered with the United States Patent and Trademark Office and (ii)
Borrowers shall cause the Trademark, Patent and Copyright Security Agreement
executed by Finlay Merchandising to be amended to include such transferred
Trademarks; provided, further, that upon such transfer permitted under this
clause (j), Finlay Merchandising and any one or more of the Carlyle Credit
Parties may enter into an appropriate Carlyle License Agreement;
(k) the sale of the Purchased Accounts under the Receivables Purchase
Program; and
(l) the transfers and assignments on the Closing Date of the life
insurance policies previously maintained by Carlyle on the lives of ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ to the respective beneficiaries
thereof as provided for in the Acquisition Agreement.
Section 9.6. DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS. (a) Declare or
make any dividend payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any of its capital stock, or
purchase, redeem, retire, defease or otherwise acquire for value any capital
stock of the Parent, the Borrowers or such Subsidiaries or any other equity
securities or any warrants, rights or options to acquire any such capital stock
or other securities, whether now or hereafter outstanding, except that (and with
respect to the Parent, subject to Section 3.2(f)):
(i) any wholly-owned Subsidiary of a Borrower may declare or pay
cash dividends to such Borrower or to any other wholly-owned
Subsidiary of such Borrower which is its shareholder;
(ii) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (A) Finlay may
declare or pay dividends to the Parent on an annual basis to pay
expenses of the Parent incurred in the ordinary course of business of
the Parent not to exceed in the aggregate in any Fiscal Year of the
Parent 0.25% of Finlay's net sales as indicated in Finlay's audited
annual financial statements for the immediately preceding Fiscal Year
and (B) Finlay and/or the Parent may purchase, repurchase, redeem,
retire or acquire Equity Interests from former employees, officers and
directors pursuant to the Long Term Incentive Plan, Employment
Agreements, the Shareholders Agreement or other written agreements
permitted hereby and may make payments in respect of promissory notes
or other Indebtedness or evidence thereof issued or incurred in
connection with any such purchase, repurchase, redemption, retirement
or acquisition, and Finlay may pay dividends to the Parent in an
amount sufficient to make such purchases, repurchases, redemptions,
retirements and acquisitions so long as the amount of such purchases,
repurchases, redemptions, retirements and acquisitions (including,
without limitation, amounts paid in respect of promissory notes or
other Indebtedness or evidence thereof issued or incurred in
connection with any such purchase, repurchase, redemption, retirement
or acquisition) does not exceed in the aggregate in any Fiscal Year
the sum of $1,000,000 plus the amount of cash received by the Parent
from employees, officers and directors in respect of purchases of
stock during such Fiscal Year; provided, however, that the portion, if
any, of such sum which is not applied to such purchases, repurchases,
redemptions, retirements or acquisitions (or to the payment of
dividends by Finlay to the Parent therefor) in any Fiscal Year may be
applied to purchases, repurchases, redemptions, retirements or
acquisitions of Equity Interests from former employees of Finlay whose
employment was terminated in such Fiscal Year (and for the payment of
dividends by Finlay to Parent therefor) so long as such application
(and payment) is made during the first three months of the immediately
succeeding Fiscal Year, and any such portion so paid during such first
three months as permitted by this proviso shall not be included in
calculating the sum for such succeeding Fiscal Year;
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(iii) the Parent may redeem, repurchase, retire or otherwise
acquire any Equity Interest of the Parent in exchange for, or out of
net proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Parent) of, other Equity Interests (other than
Disqualified Stock) of the Parent;
(iv) so long as no Default or Event of Default is continuing, on
any tax payment date, Finlay may make payments to the Parent of
amounts required to be paid on such tax payment date under sections
4(c) and 5 of the Tax Allocation Agreement; provided, however, that
(x) no payment on any tax payment date made by Finlay to the Parent
shall exceed the amount payable by the Parent to any taxing authority
on such tax payment date, and (y) in any taxable year (or portion
thereof), the aggregate amount payable by Finlay to the Parent under
this Section 9.6(a)(iv) in respect of federal, state and local income
taxes shall not exceed the lesser of (A) the federal, state and local
income tax liability that would have been payable by Finlay for such
taxable year (or portion thereof) determined as if the Borrower had
filed separate federal, state and local income tax returns for such
taxable year (or portion thereof) and for all previous taxable years
beginning after October 31, 1992, computed in accordance with actual
elections, conventions and other determinations with respect to Finlay
reflected in the consolidated or combined returns of the Parent and
including any carryforwards of tax attributes from all prior taxable
years (as limited under the Code) and (B) the consolidated or combined
federal, state and local income tax liability of the consolidated or
combined group that includes Finlay and the Parent. For purposes of
subsection (y) above the provisions relating to state and local income
taxes shall only apply if and to the extent Finlay and the Parent file
consolidated or combined income tax returns in such jurisdictions;
(v) [Intentionally Deleted]
(vi) so long as no Default or Event of Default shall have
occurred and be continuing, Finlay may pay dividends to the Parent for
the repurchase, acquisition or redemption by the Parent of up to
$12,600,000 of its common stock in open market or privately negotiated
transactions (which may be with Affiliates of the Parent), during the
period from the Closing Date through and including September 30, 2005;
provided, that immediately after giving effect to any stock repurchase
Finlay shall have the ability to draw an additional Revolving Advance
in the amount of at least $30,000,000; provided, further that the
Parent shall give the Agent quarterly notice, in arrears, of each
repurchase made by it pursuant to this clause (vi), specifying the
amount of aggregate repurchases and the source from which Finlay
obtained the funds to be used to effectuate such repurchases; and
(vii) Finlay may pay dividends to the Parent for the payment of
cash dividends by the Parent of up to $5,000,000 plus 25% of net
income (without giving effect to extraordinary gains or losses or
gains or losses resulting from the repurchase, acquisition or
redemption of Senior Notes), of Finlay and its subsidiaries after
January 31, 2005; provided, that immediately after giving effect to
any cash dividend Finlay shall have the ability to draw an additional
Revolving Advance in the amount of at least $30,000,000; provided,
further that the Parent shall give the Agent quarterly notice, in
arrears, of cash dividends made by it pursuant to this clause (vii),
specifying the amount of aggregate cash dividends and the source from
which Finlay obtained the funds to be used to effectuate such cash
dividends.
(b) Make any payment or prepayment of principal or interest on account
of, or purchase, defease, acquire or redeem, any Indebtedness for Borrowed Money
(or give any notice thereof or establish a sinking fund, reserve or like set
aside of funds or other property therefor) other than (i) the Obligations, (ii)
regular, scheduled payments by Finlay and the Parent, respectively of interest
on, and
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required payments of principal of (in each case to the extent due and payable),
the Senior Notes and (iii) payments of Indebtedness of the Borrowers permitted
under paragraphs (b), (c), (d), (f), and (g) of Section 9.3, in each case, to
the extent due and payable and except that:
(i) [Intentionally Omitted];
(ii) Finlay may, from time to time, repurchase, acquire or redeem
Senior Notes; provided, that such Senior Notes are repurchased at
prices deemed favorable by Finlay's board of directors; provided,
further, that the amount of such Senior Notes repurchased under this
clause (ii) shall not exceed the Repurchase Basket; and
(iii) any of the Finlay Credit Parties or the Carlyle Credit
Parties (as applicable) may, from time to time, repay and/or prepay
any intercompany Indebtedness outstanding and permitted under Sections
9.3(n) or 9.3(u), including payments of principal and/or interest, as
they may elect in their discretion;
(iv) Finlay may at any time and from time to time make payments
and prepayments under the Gold Consignment Documents.
Section 9.7. TRANSACTIONS WITH AFFILIATES. (a) Except for transactions
specifically required or permitted by the terms of this Agreement (including,
without limitation, the transactions contemplated pursuant to the Tax Allocation
Agreement, the Shareholders Agreement, the Registration Rights Agreement, the
Stock Purchase Agreement, the Trade Name License Agreements and the Services
Agreement, the Parent's Restated Certificate of Incorporation, the
Indemnification Agreements, in each case, as in effect on the Closing Date or as
amended in accordance with Section 9.12 hereof), enter into or perform any
transaction, including, without limitation, the purchase, leasing, sale or
exchange of property or assets or the rendering of any service, with any
Affiliate of the ▇▇▇ Group or the Parent, except (i) for any transaction which
is in the ordinary course of business of Finlay and any Subsidiary thereof, and
which transaction is upon fair and reasonable terms no less favorable to the
Borrowers and such Subsidiary than each party to such transaction could obtain
in a comparable arm's length transaction with a Person not an Affiliate of such
Person, (ii) with respect to any transaction between Finlay and any of its
Subsidiaries which is on terms more favorable to the Borrowers than the
Borrowers could obtain in a comparable arm's-length transaction with a Person
not an Affiliate of the Borrowers, (iii) for the eFinlay Agreements or (iv) the
Carlyle Credit Party Management, Services and Allocation Agreements and any
Carlyle Intercompany Services and Allocation Agreements or Carlyle/Finlay Lease
that may exist from time to time.
(b) Notwithstanding anything to the contrary contained in this
Agreement,
(i) at all times from and after the Closing Date, the
Subsidiaries of Carlyle may continue to incur and make payments to
Carlyle in respect of management and other services provided by
Carlyle to its Subsidiaries (and Carlyle may continue to provide such
services) and the Subsidiaries of Carlyle may continue to incur
obligations and make payments to Carlyle in respect of any interest,
tax, expense or similar allocation arrangements among Carlyle and its
Subsidiaries pursuant to the unwritten management, services and
allocation agreement and practices existing among Carlyle and its
Subsidiaries as of the Closing Date consistent with the past practices
of Carlyle and its Subsidiaries and/or pursuant to any written
agreement(s) entered into by Carlyle and its Subsidiaries after the
Closing Date to document and evidence any such unwritten management,
services and allocation agreements and practices existing among
Carlyle and its Subsidiaries as of the Closing Date (such agreements
and practices, whether unwritten as of the Closing Date or
subsequently reduced to written agreements, collectively, the "Carlyle
Credit Party Management, Services and Allocation Agreements"),
provided that, no material term of any such Carlyle Credit Party
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Management, Services and Allocation Agreements may be changed, amended
or modified except in accordance with Section 9.12(b) below,
(ii) at any time after the Closing Date, Carlyle and/or its
Subsidiaries may enter into such written management and other services
agreements with Finlay or Finlay Merchandising and/or such interest
tax, expense or similar allocation agreements with Finlay as Finlay
and Carlyle shall determine in their discretion are appropriate in the
conduct of their respective and collective business so long as (x)
such agreements are on terms reasonably acceptable to the Agent and
(y) the terms of any such management or other services agreements
and/or allocation agreements are reasonable and, if applicable, are
substantially similar to the terms of any similar agreements existing
between or among Finlay, Finlay Merchandising and/ or eFinlay,
including without limitation (if applicable) the Services Agreement,
the eFinlay FFJC Services Agreement and/or the eFinlay FMBI Services
Agreement (any such management or other services agreements and/or
allocation agreements, collectively, the "Carlyle Intercompany
Services and Allocation Agreements"); provided that, no material term
of any such Carlyle Intercompany Services and Allocation Agreements
may be changed, amended or modified after the execution thereof except
in accordance with Section 9.12(b) below,
(iii) at any time after the Closing Date, Carlyle and/or its
Subsidiaries may enter into a lease with Finlay pursuant to which
Finlay leases any space in its Connecticut distribution center to
Carlyle and/or any of its Subsidiaries on terms that are reasonable
and substantially similar to the terms of the eFinlay Lease Agreement
(any such lease, the "Carlyle/Finlay Lease"); provided that, no
material term of any such Carlyle Intercompany Services and Allocation
Agreements may be changed, amended or modified after the execution
thereof except in accordance with Section 9.12(b) below.
Section 9.8. BLOCKED ACCOUNTS. Suffer or permit (a) without the prior
written consent of the Agent, any Blocked Account to be closed or terminated, or
the Collecting Bank Agreement relating thereto to be terminated or no longer in
full force and effect, or (b) any deposit, checking or other account to be
maintained at any bank, savings and loan association or other financial
institution which accepts deposits, other than (i) Blocked Accounts, (ii)
payroll, disbursement and health benefit accounts, (iii) the Sovereign Cash
Collateral Account and (iv) the other accounts set forth on Schedule 11.19 which
such other accounts described in this clause (iv) shall not have an aggregate
balance at any time in excess of $500,000.
Section 9.9. MANAGEMENT COMPENSATION AND OTHER PAYMENTS. Except as
specifically permitted under Section 9.6 and 9.7 hereof, pay, directly or
indirectly, any management, consulting or similar fees, make any other payments
of any kind in respect of employment, management, consulting, servicing or
similar services or in respect of any non-competition or similar agreement or
make any other kind of payment of any nature to, any Affiliate of the Parent or
to any officer, director, member of management, stockholder or partner of the
Parent or any Subsidiary of the Parent or any Affiliate of any thereof, other
than (i) payments of salary and ordinary course of business compensation
(excluding bonuses and incentive compensation other than sales commission) to
full time employees of the Borrowers in the ordinary course of business and
consistent with past practices and severance payments which have accrued and
become payable in the ordinary course of business of the Borrowers and the
Parent, (ii) payments of bonuses and incentive compensation to full time
employees of Finlay and its Domestic Subsidiaries so long as such bonuses and
incentive compensation (x) are consistent with the Borrowers' historical
practices, and (y) are paid in accordance with Finlay Employment Agreements,
Carlyle Employment Agreement or the Long Term Incentive Plan or, if not paid
under a Finlay Employment Agreement, Carlyle Employment Agreement or the Long
Term Incentive Plan, are paid in accordance with other policies a description of
which is attached as Schedule 9.9 hereto, as such policies may be amended,
supplemented or replaced from time to time with the approval of the Board of
Directors
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of the Borrowers or Parent so long as no such amendment, supplement or
replacement represents a material increase in bonus levels or calculations,
(iii) so long as there shall be continuing no Default or Event of Default in the
payment of principal of any Revolving Advance or any interest thereon, amounts
payable by the Parent or the Borrowers under the Registration Rights Agreement
and to the extent permitted by Section 9.6 hereof, under the Shareholders
Agreement in each case, as such payments are required pursuant to such documents
as in effect on the Closing Date, (iv) payments of fees, expense reimbursements
or other amounts to independent directors or consultants (which are not
Affiliates of the Parent or the Borrower) in the ordinary course of business,
(v) amounts payable by the Borrowers and the Parent under the Indemnification
Agreements and (vi) to the extent permitted under any applicable laws, payments
of indemnities to members of Carlyle's board of directors as set forth in the
Acquisition Agreement.
Section 9.10. COMPROMISE OF RECEIVABLES. Compromise or adjust any of
the Receivables or other accounts (or extend the time for payment thereof) or
grant any discounts, allowances or credits thereon other than, so long as there
exists no Default or Event of Default, discounts, adjustments, allowances and
credits granted with respect to accounts in the ordinary course of business
provided that, nothing contained in the foregoing shall be deemed to prohibit
the sale of any Accounts of any Carlyle Credit Party under the Receivables
Purchase Agreements or any transaction contemplated by the Credit Card Services
Agreement.
Section 9.11. NONCOMPLIANCE WITH ERISA. (a) Engage in any transaction
in connection with which a Credit Party or any ERISA Affiliate could be
reasonably expected to be subject to either a material civil penalty assessed
pursuant to the provisions of Section 502(i) of ERISA or a material tax imposed
under the provisions of Section 4975 of the Code;
(b) adopt an amendment to any Pension Benefit Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code;
(c) terminate any Pension Benefit Plan under Section 4041(c) of ERISA
without the prior consent of the Agent;
(d) fail in any material respect to make payment when due (including
permissible extensions) of all amounts which, under the provisions of any
Employee Plan or Multiemployer Plan, it is required to pay as contributions
thereto or as premiums to the PBGC, or, with respect to any Pension Benefit
Plan, permit to exist any material "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA and Section 412 of the Code); or
(e) enter into a new agreement or agreements that would obligate a
Credit Party or any ERISA Affiliate to make contributions to a Multiemployer
Plan subject to subtitle (e) of Title IV of ERISA in excess of $50,000 per year
or $250,000 in the aggregate during the term of this Agreement, or to create,
extend or increase an obligation to provide health or medical benefits for
retirees (other than at retiree's sole expense) of a Credit Party or an ERISA
Affiliate.
Section 9.12. AMENDMENT AND MODIFICATION OF CERTAIN DOCUMENTS. (a)
Directly or indirectly, amend, modify, supplement, waive compliance with, seek a
waiver under, or assent to noncompliance with, any term, provision or condition
of the Senior Note Indenture or any Senior Note, the Tax Allocation Agreement,
the articles or certificate of incorporation or by-laws (other than to increase
the number of authorized shares of common stock of the Parent) of the Parent,
Finlay or any Subsidiary thereof or any certificate of designation of preferred
stock of any thereof or, in a manner adverse to the Agent or any Lender, any
material term or provision of (i) any Employment Agreement with any Person who
is, without regard to such Employment Agreement or duties or roles thereunder,
an Affiliate of the Parent, the Borrowers or any of their respective
Subsidiaries, (ii) the Shareholders Agreement, (iii) the Registration Rights
Agreement, (iv) the Indemnification Agreements, or (v) any one or more of the
Gold Consignment Documents (other than modifying the advance rate percentages
set
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forth in the definition of "Consignment Limit" and modifying the percentage in
clause (b) of the definition of "Consignment Fixed Rate" to a percentage not
exceeding three percent (3%)), provided that, at any time Finlay and Parent may
terminate the Tax Allocation Agreement in the exercise of their discretion.
(b) Directly or indirectly, amend, modify, supplement, waive
compliance with, seek a waiver under, or assent to noncompliance with, any
material term or provision of any other agreement, instrument or document to
which the Parent or any of its Subsidiaries is a party (including, without
limitation, the Long Term Incentive Plan) in a manner that will have a Material
Adverse Effect.
(c) Notwithstanding anything to the contrary provided for in this
Section 9.12 or elsewhere in this Agreement, (i) the Carlyle Credit Parties and
Finlay may execute and deliver the First Supplemental Indenture supplementing
the Senior Indenture and (ii) Finlay and eFinlay may execute and deliver the
Consent and Agreement dated as of the date hereof required under the Gold
Consignment Agreement consenting to the Acquisition.
Section 9.13. FISCAL YEAR. Change its Fiscal Year; provided that
Carlyle may change its Fiscal Year to Finlay's Fiscal Year.
Section 9.14. CHANGE OF BUSINESS. Alter the nature of its business in
any material respect (it being understood that Finlay and eFinlay shall be
permitted to engage in the business of selling inventory through websites) or
except as provided in Sections 9.5(a), (b) and (c) hereof, sell any Inventory
other than Inventory sold under a License Agreement and Unapproved License
Agreements or Inventory sold at an Independent Retail Store. For the avoidance
of doubt, the Carlyle Credit Parties may continue to conduct their businesses as
conducted by them immediately prior to the Acquisition, including the leasing
and operation of Independent Retail Stores.
Section 9.15. NO NEGATIVE PLEDGES. Enter into or become subject to,
directly or indirectly, including, without limitation, as a non-party Subsidiary
of a party to any agreement, any agreement other than agreements entered into on
or before the Closing Date (including, without limitation, the Restated
Certificate of Incorporation of the Parent and the Gold Consignment Documents)
(a) prohibiting or restricting, in any manner (including, without limitation, by
way of covenant, representation or event of default), (i) the incurrence,
creation or assumption of any Indebtedness, or any Lien upon any property of any
Credit Party, except restrictions in a Capital Lease or other purchase money
financing agreement permitted hereunder relating to the asset financed and
except restrictions in any software or other intellectual property license
agreement pertaining to such licensed software or intellectual property
thereunder, (ii) the sale, disposition or pledge of any asset of any Credit
Party, except restrictions in a Capital Lease or other purchase money financing
agreement permitted hereunder relating to the asset financed thereunder, (iii)
any investments of any Credit Party, (iv) any Capital Expenditures by any Credit
Party, (v) any acquisition, merger or consolidation involving any Credit Party,
(vi) any change in control of any Credit Party, or (vii) any amendment or
supplement to or waiver under this Agreement or any other Loan Document or other
document relating to the Obligations, or (b) which provides that any default by
any Credit Party which is not a party to such agreement of any obligation not
arising under such agreement is a default under such agreement.
Section 9.16. RENTAL OBLIGATIONS. Incur, create, assume or permit to
exist, in respect of leases of real or personal property, (a) obligations in any
amount in respect of percentage rentals, except under the License Agreements or
real estate leases for any Independent Retail Store, or (b) rental obligations
or other commitments thereunder (other than Capitalized Lease Obligations) to
make any direct or indirect payment, whether as rent or otherwise, for fixed or
minimum rentals (including minimum payments (and excluding all other payments)
under the License Agreements) in excess of $15,000,000 for the Parent and its
Subsidiaries for any Fiscal Year.
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Section 9.17. LEASE-BACKS. Enter into any arrangements, directly or
indirectly, with any Person, whereby the Parent or any Subsidiary thereof shall
sell or transfer any property, whether now owned or hereafter acquired, used or
useful in its business, in connection with the rental or lease of the property
so sold or transferred or of other property which the Parent or any Subsidiary
thereof intends to use for substantially the same purpose or purposes as the
property so sold or transferred.
Section 9.18. CAPITAL STOCK. Issue or sell, or permit any of its
Subsidiaries to issue or sell, any of its capital stock or any rights, warrants
or options to acquire any of its capital stock, or sell or otherwise dispose of,
or permit any of its Subsidiaries to sell or otherwise dispose of, any capital
stock of any of its Subsidiaries other than, subject to Section 10.1(j) hereof,
issuances or sales by the Parent of common stock or warrants or other rights to
purchase common stock of the Parent.
Section 9.19. DEBT INCURRENCE AND PAYMENTS TO THE PARENT. Incur, agree
to incur or suffer to exist the incurrence of any obligation to or for the
account of the Parent or any Subsidiary thereof or make, agree to make or suffer
to exist the making of any (i) payment, (ii) distribution or (iii) transfer or
other disposition of assets or property, in each instance of any kind (whether
in cash, assets, stock or otherwise), to or for the account of the Parent or any
Subsidiary thereof (whether in the form of a dividend, loan, return of capital,
management or consulting fee or otherwise), other than as expressly permitted
under this Agreement.
Section 9.20. THE PARENT. Except as permitted under Section 9.6
hereof, the Parent shall engage in no business other than ownership of stock of
Finlay, and shall not own, acquire or lease any property, other than such stock.
Section 9.21. INDENTURE GUARANTEES. Other than as set forth on
Schedule 9.21 hereto, engage in any transaction (or series of related
transactions) which would cause any Subsidiary of the Parent to be obligated to
guarantee the obligations of Finlay under the Senior Notes.
SECTION 10. DEFAULTS AND REMEDIES.
Section 10.1. EVENTS OF DEFAULT. If any one or more of the following
events (herein called "Events of Default") shall occur for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come about or
be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default shall be made in the due and punctual payment of the
principal of the Revolving Loan or in the due and punctual reimbursement of any
payments made by any L/C Issuer under any Letter of Credit or of any payments
made by any Agent or any Lender to such L/C Issuer in respect of indemnity or
guaranty obligations of such Agent or Lender to such L/C Issuer with respect to
a Letter of Credit, when and as the same shall become due and payable whether
pursuant to Section 2 or 2A, at maturity, by acceleration or otherwise; or
(b) default shall be made in the due and punctual payment of any
amount of interest on the Loan or of any fee or other amount owing to any
Lender, any L/C Issuer, or the Agent pursuant to any of the Loan Documents, when
and as such amount of interest, fee or other amount shall become due and payable
and such default shall continue unremedied for three (3) days; or
(c) default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision (other than as described
in clause (a) or (b) above) contained in this Agreement or any other Loan
Document or in any instrument or document evidencing or creating any obligation,
guaranty or Lien in favor of the Agent or delivered to the Lenders, any L/C
Issuer or the Agent in connection with or pursuant to this Agreement or any
Obligations, and, except in the case of the
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agreements and covenants contained in Sections 8.1, 8.2, 8.3, 8.6 through and
including 8.14, 8.16, 8.17 and 8.19 through and including 8.22 and Section 9 (as
to each of which Sections no notice or grace period shall apply), continuance of
such default for a period of thirty (30) days following Written Notice to the
Borrowers, or if this Agreement or any other Loan Document or any such other
instrument or document shall terminate or be terminated or become void or
unenforceable for any reason whatsoever or any Lien created under any Security
Document shall cease to be a valid and perfected first priority Lien (except as
otherwise permitted by this Agreement) in any of the Collateral purported to be
covered thereby; or
(d) (i) one or more defaults shall occur in the payment of any
principal, interest or premium with respect to any Indebtedness for Borrowed
Money or any obligation which is the substantive equivalent of Indebtedness for
Borrowed Money (including, without limitation, obligations under conditional
sales contracts, Capital Leases and the like) of which any Credit Party is
principal, guarantor or other surety, and such default shall continue for more
than the period of grace, if any, specified therefor in the documents governing
same, or (ii) one or more defaults shall occur under any agreement or instrument
under or pursuant to which any such Indebtedness for Borrowed Money or
obligation may have been issued, created, assumed, guaranteed or secured by any
Credit Party and, in the case of clause (ii) of this Subsection 10.1(d), such
default shall continue for more than the period of grace, if any, therein
specified, or (iii) any such Indebtedness for Borrowed Money or obligation shall
be declared due and payable prior to the stated maturity thereof; and the
aggregate principal amount of all such Indebtedness for Borrowed Money and
obligations as to which any such matters under clauses (i), (ii) or (iii) occur
shall exceed $500,000; or
(e) any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect, or any representation, warranty or other
statement of fact given herein or in any writing, certificate, report or
statement at any time furnished to any Lender, any L/C Issuer or the Agent
pursuant to or in connection with this Agreement, any other Loan Document, or
any other document or instrument furnished to any Lender, any L/C Issuer or the
Agent relating to the transactions contemplated by this Agreement (other than a
Borrowing Base Certificate, and otherwise including, without limitation, a
Borrower's Certificate), shall be false in any material respect when given or
deemed given; or
(f) any Credit Party shall (i) be unable to pay its debts generally as
they become due or admit in writing its inability to pay its debts generally;
(ii) file a petition to take advantage of any insolvency act; (iii) make an
assignment for the benefit of its creditors; (iv) commence a proceeding for the
appointment of a receiver, trustee, liquidator or conservator of itself or of
the whole or any substantial part of its property; (v) file a petition or answer
seeking reorganization or arrangement or similar relief under the Federal
Bankruptcy Code or any other applicable law or statute of the United States of
America, any state or commonwealth thereof or otherwise; or (vi) by appropriate
proceedings of the board of directors of any Credit Party or other governing
body, authorize the filing of any such petition, making of such assignment or
commencement of such a proceeding; or
(g) a court of competent jurisdiction shall enter an order, judgment
or decree appointing a custodian, receiver, trustee, liquidator or conservator
of any Credit Party or of the whole or any substantial part of its properties,
or approve a petition filed against any Credit Party seeking reorganization or
arrangement or similar relief under the Federal Bankruptcy Code or any other
applicable law or statute of the United States of America, any state or
commonwealth thereof or otherwise; or if, under the provisions of any other law
for the relief or aid of debtors, a court of competent jurisdiction shall assume
custody or control of any Credit Party or of the whole or any substantial part
of its properties; or if there is commenced against any Credit Party any
proceeding for any of the foregoing relief and such proceeding or petition
remains undismissed for a period of thirty (30) days; or if any Credit Party by
any act indicates its consent to or approval of any such proceeding or petition;
or
(h) (i) a final judgment shall be rendered against a Credit Party
which, by itself or with other outstanding final judgments against such Credit
Party, exceeds in the aggregate $500,000 and if, within thirty (30) days after
entry thereof, such judgment shall not have been discharged or
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execution thereof stayed pending appeal, or if, within thirty (30) days after
the expiration of any such stay, such judgment shall not have been discharged;
or (ii) any of the assets of a Credit Party shall be attached, seized, levied
upon or subject to an injunction, execution, writ or distress warrant and shall
remain unstayed or undismissed for a period of thirty (30) days, which by itself
or together with all other attachments, seizures, levies, injunctions,
executions, writs or distress warrants against properties of such Credit Party
remaining unstayed or undismissed for a period of thirty (30) days, is for an
amount in excess of $500,000; or (iii) any final non-monetary judgment or order
shall be rendered against a Credit Party that might reasonably be expected to
have a Material Adverse Effect and if, within thirty (30) days after entry
thereof, such non-monetary judgment or order shall not have been discharged or
execution thereof stayed pending appeal, or if, within thirty (30) days after
the expiration of any such stay, such judgment or order shall not have been
discharged; or
(i) (i) a Reportable Event shall have occurred with respect to a
Pension Benefit Plan other than a Reportable Event as to which the provision of
30 days notice to the PBGC is waived under applicable provisions;
(ii) any Credit Party or any ERISA Affiliate or an administrator
of any Pension Benefit Plan shall have filed a notice of intent to
terminate a Pension Benefit Plan in a "distress termination" under the
provisions of Section 4041(c) of ERISA;
(iii) any Credit Party or any ERISA Affiliate or an administrator
of a Pension Benefit Plan shall have received a notice that the PBGC
has instituted proceedings to terminate (or appoint a trustee to
administer) a Pension Benefit Plan;
(iv) any other event or condition exists which might reasonably
be expected, in the reasonable opinion of the Majority Lenders, to
constitute grounds under the provisions of Section 4042(a)(1) or (2)
of ERISA for the termination of (or the appointment of a trustee to
administer) any Pension Benefit Plan by the PBGC;
(v) any Credit Party or any ERISA Affiliate has incurred or is
likely to incur a liability under the provisions of Section 4063, 4064
or 4201 of ERISA;
(vi) any Person shall engage in any transaction in connection
with which any Credit Party or any ERISA Affiliate could be subject to
either a civil penalty assessed pursuant to the provisions of Section
502(i) of ERISA or a tax imposed under the provisions of Section 4975
of the Code; or
(vii) any Credit Party or any ERISA Affiliate fails to pay the
full amount of any installment due under Section 412(m) of the Code or
any "accumulated funding deficiency" (within the meaning of Section
302 of ERISA and Section 412 of the Code) shall exist with respect to
any Pension Benefit Plan;
and in each case in clauses (i) through (vii) above, in the opinion of the
Majority Lenders, such event or condition, together with all other such events
or conditions, could reasonably be expected to subject a Credit Party or any
ERISA Affiliate to any tax, penalty or other liabilities which in the aggregate
would be material in relation to the business, operations, liabilities, assets,
properties, prospects or condition (financial or otherwise) of such Credit Party
or such ERISA Affiliate; or
(j) a Change of Control shall occur; or
(k) Any Borrower or Parent shall suspend the operation of a material
portion of its business as presently conducted or there shall occur the loss,
theft, substantial damage to, condemnation of, exercise of right of eminent
domain with respect to or destruction of, any Collateral not fully covered by
insurance (except for deductibles), which by itself or with other such losses,
thefts, damage,
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condemnation or destruction of, or exercise of right of eminent domain with
respect to, Collateral, shall constitute a Material Adverse Effect; or
(l) (A) (i) any Unapproved License Agreement or License Agreement
shall be cancelled, terminated (other than termination at the end of the
originally scheduled or renewed or extended term of an Unapproved License
Agreement or License Agreement) or no longer in full force or effect (excluding
any License Agreement which continues to be an arrangement approved in writing
by the Agent, whether or not such approval has been rescinded) or the licensor
or licensors under such Unapproved License Agreement or License Agreement shall
be debtors under any Chapter of the Federal Bankruptcy Code (any of the
foregoing events, a "License Termination Event"), (ii) as of the date three (3)
months following such License Termination Event, the excess of (x) the amount of
the gross revenues of Finlay arising from such Unapproved License Agreement or
License Agreement plus the gross revenues arising from Unapproved License
Agreements and License Agreements as to which previous License Termination
Events shall have occurred during the period beginning on the Closing Date and
ending on the date of determination (gross revenues being calculated by the
Agent, in the case of any Unapproved License Agreement or License Agreement
which had been in effect for at least twelve (12) calendar months as of the end
of such period, for such period of twelve calendar months, and, in the case of
any Unapproved License Agreement or License Agreement which had been in effect
for less than twelve (12) calendar months as of the end of such period, on a
seasonally adjusted twelve (12) month pro forma basis based upon results for the
number of full calendar months during which such Unapproved License Agreement or
License Agreement was in effect), over (y) the amount of gross revenues of
Finlay arising from any Unapproved License Agreements and License Agreements
entered into within the period beginning on the Closing Date and ending on such
date of determination, and remaining in full force and effect as of such date of
determination (gross revenues being calculated by the Agent, in the case of any
Unapproved License Agreements or License Agreements which have been in effect
for at least twelve months, on a seasonally adjusted twelve month pro forma
basis based upon results for the number of full calendar months during which
such Unapproved License Agreement or License Agreement was in effect, and, in
the case of any Unapproved License Agreement or License Agreement which has been
in effect for less than twelve (12) months, based upon Finlay's internally
generated projection of gross revenues for such Unapproved License Agreement or
License Agreement for the twelve (12) month period following the first date of
operation under such Unapproved License Agreement or License Agreement as
delivered to the Agent under Section 8.19(b) hereof) shall equal or exceed 10%
of the gross revenues of Finlay for the period of twelve (12) consecutive full
calendar months (treating the month ending on the last Saturday of January as a
full calendar month) ending on or nearest preceding such date of determination
and (iii) such License Termination Event shall represent a Material Adverse
Effect or (B) there shall occur a License Termination Event with respect to an
Unapproved License Agreement or License Agreement that accounted for, in any
fiscal period of twelve consecutive full calendar months (treating the month
ending on the last Saturday of January as a full calendar month), more than 20%
of the gross revenues of Finlay;
(m) any "Event of Default" under and as defined in the Gold
Consignment Agreement shall occur; or
(n) a default by a Carlyle Credit Party shall occur under the
Receivables Purchase Agreements and such default shall continue for more than
the period of grace, if any, therein specified or any notice of the termination
thereof shall be given by the Receivables Purchaser as a result of any such
default by a Carlyle Credit Party under the Receivable Purchase Agreements;
then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing:
(A) either or both of the following actions may be
taken: (i) the Agent may, at its option, or, the Agent
shall, upon the direction of the Majority Lenders, declare
any obligation to lend or issue or cause the
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issuance of Letters of Credit hereunder terminated,
whereupon such obligation to make further loans or issue or
cause the issuance of Letters of Credit hereunder, as the
case may be, shall terminate immediately, and (ii) the Agent
may, at its option, or, the Agent shall, upon the direction
of the Majority Lenders, declare any or all of the
Obligations to be due and payable, and the same, all
interest accrued thereon and all other obligations of the
Borrowers to the Agent, each L/C Issuer and the Lenders
under or in connection with the Loan Documents shall
forthwith become due and payable without presentment,
demand, protest or notice of any kind, all of which are
hereby expressly waived, anything contained herein or in any
instrument evidencing the Obligations to the contrary
notwithstanding; provided, however, that notwithstanding the
above, if there shall occur an Event of Default under
paragraph (f) or (g) above (other than under clause (i) of
paragraph (f)), then the obligation of the Lenders to lend
and of any L/C Issuer to issue or cause the issuance of any
Letters of Credit hereunder shall automatically terminate
and any and all of the Obligations shall be immediately due
and payable without any action by the Agent, any L/C Issuer
or any Lender;
(B) the Agent shall have and may exercise all rights
and remedies of a mortgagee or a secured party under the UCC
in effect in the State of New York at such time, whether or
not applicable to the affected Collateral, and otherwise,
including, without limitation, the right to foreclose the
Liens granted herein or in any of the Security Documents by
any available judicial procedure and/or to take possession
of any or all of the Collateral, the other security for the
Obligations and the books and records relating thereto, with
or without judicial process; for the purposes of the
preceding sentence, the Agent may enter upon any or all of
the premises where any of the Collateral, such other
security or books or records may be situated and take
possession and remove the same therefrom; and
(C) the Agent shall have the right, in its sole
discretion, to determine which rights, Liens or remedies it
shall at any time pursue, relinquish, subordinate, modify or
take any other action with respect thereto, without in any
way modifying or affecting any of them or any of the
Lenders' or any L/C Issuer's rights hereunder; and any
moneys, deposits, Accounts (including, without limitation,
Eligible Receivables), balances or other property which may
come into any Lender's, any L/C Issuer's or the Agent's
hands at any time or in any manner, may be retained by such
Lender, any L/C Issuer or the Agent and applied to any of
the Indebtedness of the Credit Parties to the Agent any L/C
Issuer and the Lenders hereunder.
Section 10.2. SUITS FOR ENFORCEMENT. In case any one or more Events of
Default shall occur and be continuing, the Agent on behalf of the Agent, each
L/C Issuer and the Lenders may proceed to protect and enforce their rights or
remedies either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, agreement or other provision contained
herein or in any document or instrument delivered in connection with or pursuant
to this Agreement or any other Loan Document, or to enforce the payment of the
Obligations or any other legal or equitable right or remedy.
Section 10.3. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon the Lenders, any Issuer Lender or the Agent is intended to
be exclusive of any other right
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or remedy contained herein or in any instrument or document delivered in
connection with or pursuant to this Agreement or any other Loan Document, and
every such right or remedy shall be cumulative and shall be in addition to every
other such right or remedy contained herein and therein or now or hereafter
existing at law or in equity or by statute, or otherwise.
Section 10.4. RIGHTS AND REMEDIES NOT WAIVED. No course of dealing
between any of the Credit Parties and any Lender, any L/C Issuer or the Agent or
any failure or delay on the part of any Lender, any L/C Issuer or the Agent in
exercising any rights or remedies hereunder shall operate as a waiver of any
rights or remedies of the Lenders, any L/C Issuer or the Agent and no single or
partial exercise of any rights or remedies hereunder shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder or of the
same right or remedy on a future occasion.
Section 10.5. APPLICATION OF PROCEEDS. After the occurrence of an
Event of Default and acceleration of the Obligations as herein provided, the
proceeds of the Collateral and of property of Persons other than the Credit
Parties securing the Obligations and collections from each Guaranty shall be
applied by the Agent to payment of the Obligations in the following order,
unless a court of competent jurisdiction shall otherwise direct:
(i) FIRST, to payment of all costs and expenses of the Agent,
each L/C Issuer and the Lenders incurred in connection with the
preservation, collection and enforcement of the Obligations or any
Guaranties, or of any of the Liens granted to the Agent pursuant to
the Security Documents or otherwise, including, without limitation,
any amounts advanced by the Agent or the Lenders to protect or
preserve the Collateral;
(ii) SECOND, to payment of that portion of the Obligations
constituting accrued and unpaid interest and fees and indemnities
payable under Sections 2, 2A and 3 hereof, ratably amongst the Agent,
each L/C Issuer and the Lenders in accordance with the proportion
which the accrued interest and fees and indemnities payable under
Sections 2, 2A and 3 hereof constituting the Obligations owing to the
Agent, each L/C Issuer and each such Lender at such time bears to the
aggregate amount of accrued interest and fees and indemnities payable
under Sections 2, 2A and 3 hereof constituting the Obligations owing
to the Agent, each L/C Issuer and all of the Lenders at such time
until such interest, fees and indemnities shall be paid in full;
(iii) THIRD, to the Agent in an amount equal to the then
aggregate contingent Letter of Credit Obligations (to the extent that
such obligations exceed Letter of Credit Cash Collateral securing the
payment of same) to be held by the Agent for the payment of such
Letter of Credit Obligations when and if due and payable;
(iv) FOURTH, to payment of the principal of the Obligations
(which shall exclude all contingent Letter of Credit Obligations and
shall include all the other unpaid Letter of Credit Obligations),
ratably amongst the Lenders and each L/C Issuer in accordance with the
proportion which the principal amount of such Obligations owing to
each such Lender and L/C Issuer bears to the aggregate principal
amount of such Obligations owing to all of such Lenders and L/C
Issuers until such principal of such Obligations shall be paid in
full;
(v) FIFTH, to the payment of all other Obligations, ratably
amongst the Lenders in accordance with the proportion which the amount
of such other Obligations owing to each such Lender bears to the
aggregate principal amount of such other Obligations owing to all of
the Lenders until such other Obligations shall be paid in full; and
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(vi) SIXTH, the balance, if any, after all of the Obligations has
been satisfied, shall, except as otherwise provided in the Security
Documents, be deposited by the Agent in an operating account of the
Borrowers with the Agent designated by the Borrowers, or paid over to
such other Person or Persons as may be required by law.
In the event that the amount of monies received by the Agent under
clause (iii) above with respect to a Letter of Credit for which there are
contingent Letter of Credit Obligations at the time of the Agent's receipt of
such monies shall, together with any Letter of Credit Cash Collateral securing
such contingent Letter of Credit Obligations which is not securing other Lenders
Debt, exceed the amount of actual payments the applicable L/C Issuer shall have
made with respect to such Letter of Credit after the Agent's receipt of such
monies, which determination shall be made after such Letter of Credit has been
terminated or has expired, then the Agent shall apply such excess monies and
Letter of Credit Cash Collateral in accordance with this Section 10.5.
SECTION 11. REPRESENTATIONS AND WARRANTIES.
Each of the Parent and the Borrowers hereby represents and warrants as
follows (which representations and warranties shall survive the execution and
delivery of this Agreement and the making of each Revolving Advance and shall be
deemed to be incorporated in each Borrowers' Certificate submitted to the Agent
pursuant to Section 2.4 hereof, and shall be deemed repeated and confirmed with
respect to, and as of the date of (except that a representation or warranty
expressly made as of a specific date shall be deemed repeated and confirmed as
of such date), each borrowing hereunder (whether requested by Borrower
Representative or deemed requested by Borrower Representative) and of each
issuance of a Letter of Credit):
Section 11.1. CORPORATE STATUS. (a) Each Credit Party is a duly
organized and validly existing corporation in good standing under the laws of
the state of its incorporation with perpetual corporate existence, and has the
corporate power and authority to own its properties and to transact the business
in which it is engaged or presently proposes to engage.
(b) Each Credit Party is qualified as a foreign corporation and in
good standing in each other jurisdiction in which it owns or leases property of
a nature, or transacts business of a type, that would make such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect.
(c) The capital stock of the Borrowers and their Subsidiaries is owned
free and clear of all Liens, except (i) Liens in favor of the Agent for the
benefit of the Lenders and (ii) with respect to the capital stock of Finlay.
(d) None of the Credit Parties has any Subsidiaries except as set
forth on Schedule 11.1 hereto, which Schedule 11.1 correctly sets forth the name
of each such Subsidiary, its jurisdiction of incorporation and a statement of
the outstanding capitalization and ownership of capital stock of each such
Subsidiary as of the date of delivery of such Schedule 11.1. Except as set forth
on Schedule 11.1, other than the Carlyle Credit Parties, Finlay Jewelry, Inc.,
Finlay Merchandising and eFinlay, no Subsidiary of any Borrower engages in any
business operations or owns any real or personal property.
Section 11.2. POWER AND AUTHORITY. Each of the Credit Parties has the
corporate power and authority to execute, deliver and perform the terms and
provisions of this Agreement and the other Loan Documents to which it is a party
and all instruments and documents delivered by it pursuant hereto and thereto
and each of the Credit Parties has duly taken or caused to be duly taken all
necessary corporate action (including, without limitation, the obtaining of any
consent of stockholders required by law or its certificate of incorporation or
by-laws), to authorize the execution, delivery and performance of this Agreement
and each other Loan Document, in each case to which it is a party, and the
instruments
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and documents delivered by it pursuant hereto and thereto. Each of this
Agreement, the other Loan Documents, and each of the other instruments and
documents executed and delivered by any of the Credit Parties pursuant hereto
and thereto to which it is a party constitutes a legal, valid and binding
obligation of such Person, and is enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and by general equity principles.
Section 11.3. NO VIOLATION OF AGREEMENTS. None of the Credit Parties
is in violation of any provision of its certificate or articles of
incorporation, as the case may be, or its by-laws or is in default under any
indenture, mortgage, deed of trust, agreement or other instrument to which any
of them is a party or by which any of them may be bound, which default is
reasonably likely to have a Material Adverse Effect. Neither the execution and
delivery of this Agreement, the other Loan Documents, or any of the instruments
and documents to be delivered pursuant hereto or thereto, the consummation of
the transactions herein and therein contemplated nor the compliance with any of
the provisions hereof or thereof, will violate any provision of the certificate
or articles of incorporation, as the case may be, or by-laws of any Credit Party
or any law or regulation, or any order or decree of any court or governmental
instrumentality, or will (i) conflict with, or result in the breach of, or
constitute a default or permit termination under, any material lease, indenture,
mortgage, deed of trust, agreement or other instrument to which any Credit Party
is a party or by which any of them or their respective properties may be bound,
or (ii) except for (x) Liens in favor of the Agent for the benefit of the
Lenders and (y) Liens in favor of HSBC Bank USA pursuant to the Security and
Pledge Agreement covering the capital stock of Finlay, result in the creation or
imposition of any Lien on any property of any Credit Party.
Section 11.4. NO LITIGATION. (a) There are no actions, suits or
proceedings pending, or, to the best knowledge of the Parent or the Borrowers
threatened, against any of the Credit Parties or any of their respective
Subsidiaries before any court, arbitrator or governmental or administrative body
or agency which challenge the validity or propriety of the transactions
contemplated under this Agreement, the other Loan Documents, or the documents,
instruments and agreements executed or delivered in connection herewith,
therewith or related thereto, and which, if adversely determined, might
reasonably be expected to have a Material Adverse Effect.
(b) No Credit Party or any Subsidiary thereof is in default in any
material respect under any applicable statute, rule, order, decree or regulation
of any court, arbitrator or governmental body or agency having jurisdiction over
such Credit Party or Subsidiary.
(c) No judgment, order, injunction or other similar restraint with
respect to any Credit Party or any Subsidiary thereof exists which prohibits any
of the other transactions contemplated hereby or in connection therewith or
herewith.
Section 11.5. GOOD TITLE TO PROPERTIES. (a) Except as set forth on
Schedule 11.5 hereto, neither the Credit Parties nor any of their respective
Subsidiaries own title to any real estate. Schedule 11.5 hereto correctly
identifies, categorized by Borrower or Subsidiary of any Borrower, each parcel
of real estate leased or owned by or to Borrowers or any Subsidiary of the
Borrowers, together in each case with an accurate street address and description
of the use of such parcel, and each other interest in real property owned,
leased or granted to or held by the Borrowers or any Subsidiary of the
Borrowers. All real property leased or owned by the Borrowers and their
Subsidiaries is set forth on Schedule 11.5. Neither the Borrowers nor their
Subsidiaries is lessor under any leases other than as set forth on Schedule
11.5. With respect to each such leased property (it being understood that the
provisions of clauses (i) and (iii) below shall only apply to leases covering
entire facilities or structures and not space leases) except as set forth on
Schedule 11.5:
(i) no structure owned or leased by the Borrowers or any
Subsidiary of the Borrowers fails to conform in any material respect
with applicable ordinances, regulations, zoning laws and restrictive
covenants (including in any such case and
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without limitation those relating to environmental protection) nor
encroaches upon property of others, nor is any such real property
encroached upon by structures of others in any case in any manner that
would reasonably likely have a Material Adverse Effect;
(ii) no charges or violations have been filed, served, made or
threatened, to the knowledge of the Borrowers and their Subsidiaries,
against or relating to any such property or structure or any of the
operations conducted at any such property or structure, as a result of
any violation or alleged violation of any applicable ordinances,
requirements, regulations, zoning laws or restrictive covenants
(including in any such case and without limitation those relating to
environmental protection) or as a result of any encroachment on the
property of others where the effect of same is reasonably likely to
have a Material Adverse Effect;
(iii) other than pursuant to applicable laws, rules, regulations
or ordinances, covenants that run with the land or provisions in the
applicable leases or matters described on Schedule 11.5, there exists
no restriction on the use, transfer or mortgaging of any such
property;
(iv) the Borrowers and each of their Subsidiaries have adequate
permanent rights of ingress to and egress from any such property used
by it for the operations conducted thereon;
(v) except as disclosed on Schedule 8.18 hereto, there are no
developments affecting any of the real property or interests therein
identified on Schedule 11.5 pending or threatened which might
reasonably be expected to curtail or interfere in any material respect
with the use of such property for the purposes for which it is now
used;
(vi) neither the Borrowers nor any of their Subsidiaries has any
option (other than under any lease disclosed on Schedule 11.5) in, or
any right or obligation to acquire any interest in, any real property;
(vii) all permits, licenses and approvals from governmental
bodies, agencies or authorities having jurisdiction over each such
property which are necessary and required to be obtained by the tenant
to permit the use and occupancy of such property for the purposes for
which it is now used have been duly and validly issued and are in full
force and effect, except for permits, licenses or approvals which, if
not in full force and effect would not have a Material Adverse Effect;
(viii) the Borrowers or their Subsidiaries have all the right,
title and interest of the lessee in each such lease and presently
occupy the property leased by them as lessee under each such lease to
the extent not subleased; except as disclosed on Schedule 8.18 hereto,
no consent under any such lease is necessary for the consummation of
the transactions contemplated hereby; no event has occurred which
(with the giving of notice or passage of time or both) would impair
any right of such party to exercise and obtain the benefits of any
options contained in any such lease; and there is no default under or
any reasonable basis for acceleration or termination of, nor has any
event occurred which (with the giving of notice or passage of time or
both) would constitute a default under, any such lease, except for any
such default which would not have a Material Adverse Effect; and
(ix) municipal water service, storm sewer, sanitary sewer
facilities, and telephone, electric and/or gas service are available
to serve all parcels of real property identified on Schedule 11.5 at
the lot lines of such parcels, except where the failure to have such
availability would not have a Material Adverse Effect.
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(b) The buildings, improvements and fixtures, if any, of the Borrowers
and their Subsidiaries are in all material respects structurally sound with no
known material defects and are in good operating condition and repair, normal
wear and tear excepted.
(c) Neither the whole nor any portion of the property or leaseholds of
the Borrowers or any of their Subsidiaries described on Schedule 11.5 is subject
to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any governmental body or other entity with or
without payment of compensation therefor, nor has any such condemnation,
expropriation or taking been proposed to Finlay or any of its Subsidiaries.
(d) Each of Finlay and its Subsidiaries owns good and marketable title
to, or valid leasehold interests in or license rights in, all of the property
and assets necessary to properly conduct its business subject to no Liens except
the Liens permitted pursuant to Section 9.2 hereof.
(e) As to any fee simple title any of the Credit Parties and their
respective Subsidiaries shall hereafter acquire, each of them shall be deemed,
as of the date of such acquisition and as of the date of each Revolving Advance
thereafter to have repeated the representations and warranties contained in (a)
through (d) above with respect to such property.
Section 11.6. FINANCIAL STATEMENTS AND CONDITION. (a) Each of the
Financial Statements presents fairly in accordance with GAAP (i) the financial
position of the Parent and its Subsidiaries as of the date of such financial
statements and (ii) the results of operations of the Parent and its Subsidiaries
for such period. Neither the Parent nor its Subsidiaries had any material direct
or indirect contingent liabilities as of the date of the Financial Statements
which are not reserved for therein or which in accordance with GAAP would have
to be included in footnotes thereto. Each of the Financial Statements has been
prepared in accordance with GAAP applied on a basis consistently maintained
throughout the period involved (except as described therein). There has been no
material adverse change in the business, operations, liabilities, assets,
properties, prospects or condition (financial or otherwise) of the Parent and
its Subsidiaries, taken as a whole, since the Reference Date.
(b) The Agent has been furnished projections of the future performance
of the Parent and its Subsidiaries. The projections and pro forma financial
information contained in such materials are based upon good faith estimates and
assumptions believed by the Parent and the Borrowers to be reasonable at the
time made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by such projections may differ from the projected results. No
fact is known to any Credit Party as of the Closing Date which would have a
Material Adverse Effect, that has not been set forth in the financial statements
referred to in this Section 11.6 or disclosed herein or otherwise disclosed to
the Agent in writing prior to the Closing Date.
Section 11.7. TRADEMARKS, PATENTS, ETC. Except as set forth on
Schedule 11.7, each of the Credit Parties owns or possesses all the Intellectual
Property adequate for the conduct of its business, without, to the best of its
knowledge, conflict with the rights or claimed rights of others.
Section 11.8. TAX LIABILITY. All federal income tax returns required
to be filed by the Parent and its Subsidiaries (and each Affiliate with which
the Parent or its Subsidiaries files consolidated, combined or unitary returns)
and all other material tax returns, reports and statements, domestic or foreign,
have been filed with the appropriate governmental agencies in all jurisdictions
in which such returns, reports and statements are required to be filed, and all
Charges and other impositions shown thereon to be due and payable have been paid
prior to the date in which any fine, penalty, interest, of late charge or loss
may be added thereto for nonpayment thereof, or any such fine, penalty,
interest, late charge or loss has been paid. Each of the Parent and its
Subsidiaries (and each such Affiliate) has paid when due and payable all
material Charges required to be paid by it. Proper and accurate amounts have
been withheld by the Parent and its Subsidiaries (and each such Affiliate) from
their respective employees
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for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies. Schedule 11.8 sets forth, for each of the Parent and its
Subsidiaries (and each such Affiliate), those taxable years for which its tax
returns have been filed for all periods after December 1, 1994 or are being
audited as of the date hereof by the Internal Revenue Service or any other
applicable Governmental Authority. No issue has been raised in writing or, if
not in writing, to the Borrowers' knowledge in any such examination that, by
application of similar principles, reasonably may be expected to result in
assertion of a material deficiency for any other taxable year not so examined
that has not been accrued on the Financial Statements that would be required to
be so accrued in accordance with GAAP. Except as set forth in Schedule 11.8
hereto, neither the Parent nor any of its Subsidiaries has, as of the date
hereof, executed or filed with the Internal Revenue Service or, to its
knowledge, any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. Except as set forth on Schedule 11.8 hereto, neither
the Parent nor any of its Subsidiaries has agreed or has been requested to make
any adjustment under Code Section 481(a) by reason of a change in accounting
method initiated by the Borrowers or any of their Subsidiaries. Except for the
Tax Allocation Agreement, neither the Parent nor any of its Subsidiaries has any
obligation under any tax sharing agreement.
Section 11.9. GOVERNMENTAL ACTION. No action of, or filing with, any
governmental or public body or authority (other than normal reporting
requirements or filing as to Collateral under the provisions of Section 4
hereof) is required to authorize, or is otherwise required in connection with,
the execution, delivery or performance by the Borrowers and the Parent or any of
their respective Subsidiaries of this Agreement, the Security Documents, any
Guaranty, the Notes, the other Loan Documents or any of the instruments or
documents to be delivered pursuant hereto or thereto, except such as have been
made or will be made as contemplated by such agreements.
Section 11.10. DISCLOSURE. Neither the Schedules hereto, nor the
Financial Statements, nor the certificates, statements, reports or other
documents furnished to any Lender or the Agent by or on behalf of any of the
Credit Parties in connection herewith or in connection with any transaction
contemplated hereby, nor this Agreement or any other Loan Document, contains, at
the time furnished, any untrue statement of a material fact or omits to state
any material fact (known to any such Person in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made.
Section 11.11. REGULATION U. None of the Credit Parties or any of
their respective Subsidiaries owns any "margin stock" as such term is defined in
Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of the
borrowings made hereunder will be used only for the purposes set forth in
Section 7 hereof. None of the proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin stock or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry margin stock or for any other purpose which might constitute the Loan
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. None of the Credit Parties or
any of their respective Subsidiaries or any agent acting in its behalf has taken
or will take any action which might cause this Agreement or any of the documents
or instruments delivered pursuant hereto to violate any regulation of the Board
or to violate the Securities Exchange Act of 1934 or any applicable state
securities laws.
Section 11.12. INVESTMENT COMPANY. None of the Credit Parties or any
of their respective Subsidiaries is an "investment company," or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended (15 U.S.C. Sections 80a-1, et seq.). None of the transactions
contemplated by this Agreement or the other Loan Documents shall violate the
Investment Company Act of 1940, as amended.
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Section 11.13. EMPLOYEE BENEFIT PLANS. Neither any Credit Party nor
any ERISA Affiliate maintains or contributes to any Employee Plan or any
Multiemployer Plan other than those listed on Schedule 11.13 hereto. Each plan
of any Credit Party or any ERISA Affiliate which is not a Multiemployer Plan and
which is intended to be tax qualified under Code Section 401(a), has been
determined by the Internal Revenue Service to qualify under Code Section 401(a),
and the trusts created thereunder have been determined to be exempt from tax
under the provisions of Code Section 501(a). Nothing has occurred with regard to
any such plan which would cause the loss of such qualification or the imposition
of any Code or ERISA tax liability or penalty to any Credit Party, or any ERISA
Affiliate. Except as set forth on Schedule 11.13 hereto, with respect to each
Employee Plan, all material reports required under ERISA or any other applicable
law or regulation to be filed by any Credit Party or any ERISA Affiliate with
the relevant Governmental Authority have been duly filed and all such reports
are true and correct in all material respects as of the date given. Neither any
Credit Party nor any ERISA Affiliate has engaged in a "prohibited transaction,"
as such term is defined in Code Section 4975 and Title I of ERISA, in connection
with any Employee Plan which would subject any Credit Party or any ERISA
Affiliate (after giving effect to any exemption) to a tax or penalty on
prohibited transactions imposed by Code Section 4975 or Section 502 of ERISA
which is either material or is attributable to a knowing violation of either of
such sections. No Pension Benefit Plan has incurred an ERISA Event, nor has any
material accumulated funding deficiency (as defined in Code Section 412(a)) been
incurred (without regard to any waiver granted under Code Section 412), nor has
any funding waiver from the Internal Revenue Service been received or requested
with respect to any Pension Benefit Plan. The value of the assets of each
Pension Benefit Plan subject to Title IV of ERISA equalled or exceeded the
present value of the "benefit liabilities," as defined in Title IV of ERISA of
such plan as of the end of the preceding plan year using plan actuarial
assumptions as in effect for such plan year. The funding methods used in
connection with each Pension Benefit Plan are acceptable under ERISA and the
actuarial assumptions and methods used in connection with such funding are
reasonable. There are no claims (other than claims for benefits in the normal
course), actions or lawsuits asserted in writing or instituted against, and
neither any Credit Party nor any ERISA Affiliate has knowledge of any threatened
litigation or claims (other than claims for benefits in the ordinary course),
which would result in material liability against (i) the assets of any Pension
Benefit Plan or against any fiduciary of such Plan with respect to the operation
of such Plan or (ii) the assets of any employee welfare benefit plan (other than
a Multiemployer Plan) within the meaning of ERISA Section 3(l) or against any
fiduciary thereof with respect to the operation of any such plan. Neither any
Credit Party nor any ERISA Affiliate has incurred (a) any material liability to
the PBGC (other than routine claims and premium payments), (b) any material
withdrawal liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such material liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal (within
the meaning of Section 4203 or 4205 of ERISA) from a Multiemployer Plan or (c)
any material liability under ERISA Section 4062 to the PBGC, or to a trustee
appointed under ERISA Section 4042. No Credit Party or ERISA Affiliate has been
notified or otherwise has knowledge that any Multiemployer Plan is insolvent or
in reorganization within the meanings of Sections 4245 and 4241 of ERISA.
Neither any Credit Party nor any ERISA Affiliate nor any organization to which
any Credit Party or any such ERISA Affiliate is a successor or parent
corporation within the meaning of ERISA Section 4069(b) has engaged in a
transaction within the meaning of ERISA Section 4069(a). Neither any Credit
Party nor any ERISA Affiliate maintains an established welfare benefit plan
within the meaning of Section 3(1) of ERISA, other than those listed on Schedule
11.13 hereto, which provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment except as may be required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), and the regulations
thereunder or by applicable federal or other statutory law or regulation
(whether domestic or foreign). Each Credit Party and each ERISA Affiliate
maintaining a welfare benefit plan (other than a Multiemployer Plan) within the
meaning of Section 3(1) of ERISA has complied with the notice and continuation
coverage requirements of COBRA and the regulations thereunder so as not to
result in any material loss of deduction under Section 162 of the Code or any
material tax, penalty or liability to any such Credit Party or any such ERISA
Affiliate.
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Section 11.14. [Intentionally Deleted]
Section 11.15. PERMITS, ETC. (a) Each Credit Party and each Subsidiary
thereof possesses all material permits, licenses, approvals and consents of
Federal, state and local governments and regulatory authorities required to
conduct its business as presently conducted and proposed to be conducted;
(b) Each such permit, license, approval and consent is and will be in
full force and effect, and no event has occurred which permits the revocation or
termination of any such permit, license, approval or consent or the imposition
of any restriction thereon of such nature as may materially limit the operation
of the business covered thereby;
(c) All approvals, applications, filings, registrations, consents or
other actions required of any local, state or Federal authority to enable each
Credit Party and the Subsidiaries thereof to use any such permit, license,
approval or consent has been obtained or made;
(d) No Credit Party nor any Subsidiary of any Credit Party (i) is in
violation of any duty or obligation required by law or any rule or regulation
applicable to the operation of any of its businesses, or (ii) has received any
written notice from the granting body or any other Governmental Authority with
respect to any material breach of any covenant under, or any material default
with respect to, any such permit, license, approval or consent;
(e) Before and upon giving effect to this Agreement, the Notes and the
other Loan Documents, no material default shall have occurred and be continuing
under any such permit, license, approval or consent;
(f) All consents and approvals of, filings and registrations with, and
all other actions in respect of, all governmental agencies, authorities or
instrumentalities required to maintain any such permit, license, approval or
consent in full force and effect prior to the scheduled date of expiration
thereof has been, or, prior to the time when required, will have been, obtained,
given, filed or taken and are or will be in full force and effect;
(g) There is not pending or threatened, any action to revoke, cancel,
suspend, modify or refuse to renew any such permit, license, approval or consent
and each business covered by each such permit, license, approval or consent is
being operated in substantial compliance with such permit, license, approval or
consent;
(h) There is not now issued or outstanding or threatened any notice of
any hearing, violation or complaint against such Credit Party or Subsidiary
thereof with respect to any such permit, license, approval or consent and no
Credit Party or Subsidiary thereof has any knowledge that any Person intends to
contest the renewal of any such permit, license, approval or consent;
and in the case of clauses (a) through (h) of this Section 11.15, the breach of
which will not reasonably be expected to have a Material Adverse Effect.
Section 11.16. ENVIRONMENTAL STATUS. Except as disclosed on Schedule
11.16 hereto, (i) the operations of the Borrowers and each of their Subsidiaries
comply in all material respects with all applicable Environmental Laws; (ii) the
Borrowers and each of their Subsidiaries have no environmental, health and
safety Permits and to the best of the Borrowers' knowledge, no such permits are
necessary for its operation; (iii) the Borrowers and each of their Subsidiaries
and all of their present Facilities or operations, as well as to the knowledge
of the Borrowers and their Subsidiaries their past Facilities or operations, are
not subject to any outstanding written order or agreement with any Governmental
Authority or private party respecting (a) any Environmental Laws, (b) any
Remedial Action, or (c) any Environmental Claims arising from the Release of a
Hazardous Material into the
107
environment; (iv) none of the operations of the Borrowers or any of their
Subsidiaries is subject to any judicial or administrative proceeding under any
Environmental Law; (v) to the best of the knowledge of the Borrowers and their
Subsidiaries, none of the operations of the Borrowers or any of their
Subsidiaries is the subject of any Federal or state investigation evaluating
whether any Remedial Action is needed to respond to a Release of any Hazardous
Material into the environment in violation of any Environmental Law; (vi)
neither the Borrowers nor any of their Subsidiaries or to the knowledge of the
Borrowers and their Subsidiaries any predecessor of the Borrowers or any
Subsidiary has filed any notice under Environmental Law indicating past or
present treatment, storage, or disposal of a hazardous waste in violation of any
Environmental Law or reporting a Release of a Hazardous Material into the
environment; (vii) to the best of the knowledge of the Borrowers and their
Subsidiaries, neither the Borrowers nor any of their Subsidiaries has any
contingent liability in connection with any Release of any Hazardous Material
into the environment; (viii) none of the Borrowers' or any Subsidiary's
operations involve the generation, transportation, treatment or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any applicable
state equivalent; (ix) neither the Borrowers nor any of their Subsidiaries has
disposed of any Hazardous Material by placing it in or on the ground or waters
of any premises owned, leased or used by such Borrower or such Subsidiary and to
the knowledge of the Borrowers and their Subsidiaries neither has any lessee,
prior owner, or other person; (x) to the best knowledge of the Borrowers no
underground storage tanks or surface impoundments, as referred to in the
Environmental Laws, are on the Borrowers' or any of its Subsidiaries'
Facilities; and (xi) to the best knowledge of the Borrowers no Lien in favor of
any Governmental Authority for (A) any liability under Environmental Laws or
regulations, or (B) damages arising from or costs incurred by such Governmental
Authority in response to a Release of a Hazardous Material into the environment,
has been filed or attached to the Borrowers' or any of their Subsidiaries'
Facilities; provided that a breach of a representation under this Section 11.16
by the Borrower or any of their Subsidiaries shall not constitute an Event of
Default under Section 10.1 unless such breach may reasonably be expected to
result in liability to the Borrowers or any of their Subsidiaries in excess of
$100,000 or result in a Material Adverse Effect. The foregoing representations
and warranties shall survive the expiration or earlier termination of this
Agreement until such time as the environmental indemnity referred to in Section
8.16 hereof is terminated.
Section 11.17. SOLVENCY. The Borrowers are Solvent.
Section 11.18. PROJECTIONS. The Parent's or the Borrowers', as
applicable, (i) monthly forecasts on a consolidated basis for each Fiscal Year
and (ii) annual forecasts on a consolidated basis, consolidated results of
operations and cash flows and balance sheets for each Fiscal Year, copies of
which have been delivered to Agent on or prior to the Closing Date, disclose all
material assumptions expressly made in formulating such projections. No facts
exist on the Closing Date which would result in any material change in any of
such projections. The projections are based upon reasonable estimates and
assumptions, all of which are reasonable in light of the conditions which
existed at the time the projections were made, have been prepared on the basis
of the assumptions stated therein, and reflect as of the date thereof the
reasonable estimate of each of the Borrowers and the Parent of the results of
operations and other information projected therein, it being recognized that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by such projections may
differ from the projections.
Section 11.19. BANK ACCOUNTS. The names and addresses of all the banks
holding one or more Blocked Accounts, together with the account numbers of the
Blocked Accounts at such banks, are specified in Schedule 11.19 hereto. The
Credit Parties have no bank accounts other than as set forth on Schedule 11.19
hereto.
Section 11.20. EMPLOYMENT AGREEMENTS. Except as set forth on Schedule
11.20 hereto, the Employment Agreements constitute all executive employment
agreements and compensation arrangements (including without limitation bonus and
stock options), employee or management incentive
108
plans and consulting or management arrangements (including without limitation
the fees payable in connection therewith) and executive or management
confidentiality agreements and non-compete agreements, between any Credit Party
and any such executive, member of management or employee, as applicable, a true
and complete copy of each of which has been furnished to the Agent.
Section 11.21. LABOR MATTERS. There are no strikes or other labor
disputes against the Borrowers or any of their Subsidiaries pending or
threatened which would have a Material Adverse Effect. Hours worked by and
payment made to employees of the Borrowers and their Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters the violation of which would have a Material Adverse Effect.
All payments due from the Borrowers or any of their Subsidiaries on account of
employee health and welfare insurance which would have a Material Adverse Effect
if not paid have been paid or accrued as a liability on the books of such
Borrower or such Subsidiary. Except as set forth on Schedule 11.21 hereto, there
are no collective bargaining or other labor agreements covering any employees of
the Borrowers or any of their Subsidiaries.
Section 11.22. OTHER VENTURES. Except as set forth on Schedule 11.22,
neither the Parent nor any Subsidiary thereof is engaged in any joint venture or
partnership with any other Person.
Section 11.23. BROKERS AND CONSULTANTS. No broker, finder or
consultant acting on behalf of the Parent or any of its Subsidiaries brought
about the obtaining, making or closing of the loans made pursuant to this
Agreement, and neither the Parent nor any Subsidiary thereof has any obligation
to any Person in respect of any finder's, consulting or brokerage fees in
connection with the Loan contemplated by this Agreement.
Section 11.24. MATERIAL CONTRACTS. Schedule 11.24 sets forth all the
contracts, agreements and documents (other than those set forth on any other
Schedule hereto or constituting an Exhibit hereto) that materially affect or
relate to the business or operations of the Parent and its Subsidiaries.
Section 11.25. LICENSE AGREEMENTS. Schedule 11.25 sets forth all the
License Agreements of the Borrowers, and each of the License Agreements listed
thereon is in full force and effect (or have been approved in writing (which
approval has not been rescinded in writing) as an acceptable arrangement by the
Agent), and except as disclosed by the Borrowers in writing to the Agent from
time to time, the Borrowers are in compliance with the material terms thereof
and there exists no default on the part of the Borrowers under any of the
License Agreements.
Section 11.26. UNWRITTEN AGREEMENTS. Neither the Borrowers nor any of
their Subsidiaries is party to any arrangement which, if approved by the Agent
would constitute a License Agreement or Consignment Agreement and which is not
evidenced by a written agreement other than those previously disclosed to the
Agent.
Section 11.27. UCC FINANCING STATEMENTS. Any documents (including,
without limitation, financing statements) required to be filed (if any) in order
to create in favor of the Agent for the benefit of the Lenders, a perfected
security interest in the Collateral with respect to which a security interest
may be perfected by a filing under the UCC have been duly executed and delivered
by the Borrowers on or prior to the Closing Date and have been or will be
(immediately after the Closing Date) properly filed in each jurisdiction
required in order to create in favor of the Agent for the benefit of the Lenders
a perfected Lien on the Collateral immediately following the Closing Date.
SECTION 12. MISCELLANEOUS
Section 12.1. COLLECTION COSTS. If an Event of Default occurs, the
Borrowers shall pay all court costs and costs of collection paid or incurred by
the Agent and Lenders in connection with
109
the Obligations, the Collateral and the Loan Documents, including, without
limitation, reasonable fees, expenses and disbursements of counsel employed in
connection with any and all collection efforts. The attorney's fees arising from
such services, including those of any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel in any way or with
respect to or arising out of or in connection with or relating to any of the
events or actions described in this Section 12.1 shall be payable by the
Borrowers to the Agent, each L/C Issuer and each Lender, as the case may be, on
demand, and shall be additional obligations under this Agreement. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include: recording costs, appraisal costs, paralegal fees, costs and
expenses; accountants' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
telecopier charges; secretarial overtime charges; and expenses for travel,
lodging and food paid or incurred in connection with any of the foregoing.
Section 12.2. AMENDMENT, MODIFICATION AND WAIVER. (a) No amendment,
modification or waiver of any provision of the Loan Documents and no consent by
the Agent, any L/C Issuer or any Lender to any departure therefrom by any of the
Credit Parties shall be effective unless such amendment, modification or waiver
shall be in writing and signed by a duly authorized officer of the appropriate
Credit Parties, the Agent, the Lenders, each L/C Issuer or the Majority Lenders,
as the case may be (as more fully described below), and the same shall then be
effective only for the period and on the conditions and for the specific
instances and purposes specified in such writing.
(b) No notice to or demand on any of the Credit Parties in any case
shall entitle any of the Credit Parties to any other or further notice or demand
in similar or other circumstances.
(c) Any term or provision of any Loan Document may be amended or
modified and the observance of any provision of any Loan Document may be waived
with the written consent of the Credit Parties being a party to such Loan
Document and the Majority Lenders; provided, however, that no such amendment,
modification or waiver shall, without the prior written consent of the Agent,
amend or waive any of the provisions of Section 3.6, 12.13 or 12.15 of this
Agreement, or otherwise change any of the rights or obligations of the Agent
under any of the Loan Documents; provided, further, that no such amendment,
modification or waiver shall, without the prior written consent of each L/C
Issuer which has any Letters of Credit, or any Commitment to issue Letters of
Credit, outstanding, amend or waive any of the provisions of Section 2A of this
Agreement or otherwise materially adversely affect any of the rights or
obligations of such L/C Issuer under any of the Loan Documents; and provided,
further, that no such amendment, modification or waiver shall, without the prior
written consent of all of the Lenders:
(i) extend the due date of any principal of any Loan, or portion
thereof, extend the final scheduled maturity of any Loan or the
Revolving Credit Facility Commitment, reduce the rate of interest on
any Loan, or portion thereof, reduce the amount of any principal or
accrued interest payable on any Loan, or portion thereof, or reduce
the fees payable to any Lender hereunder;
(ii) except as set forth in Section 4.11 hereof, substitute,
discharge, release or surrender any Collateral (which defined term for
purposes of this clause (ii) shall include any Guaranties of any or
all the Obligations) with a value exceeding $5,000,000 in the
aggregate; provided, that any substitution, discharge, release or
surrender of Collateral with a value not exceeding $5,000,000 in the
aggregate or under Section 9.6 shall be subject solely to the prior
written consent of the Agent.
(iii) except as provided in Sections 2.14(e) and 12.15 hereof,
change the proportion of any Lender's Revolving Commitment to the
aggregate Revolving Commitments of all Lenders or the amount of any
Lender's Revolving Commitment;
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(iv) modify any provision of this Section 12.2 or any other
provision which expressly requires the consent of all Lenders;
(v) amend the definition of "Majority Lenders"; or
(vi) amend the last sentence of Section 4.4(c) hereof or amend
Section 10.5 hereof.
(d) From and after the Closing Date, "Obligations" arising under or in
connection with the Original Credit Agreement or the First Amended and Restated
Credit Agreement shall continue to be "Obligations" arising under or in
connection with this Agreement.
(e) If, in connection with any proposed amendment, modification,
waiver or termination requiring the consent of all Lenders, the consent of
Majority Lenders is obtained, but the consent of other Lenders whose consent is
required is not obtained (any such Lender whose consent is not obtained as
described in this clause (e) being referred to as "Non Consenting Lender"),
then, so long as Agent is not a Non Consenting Lender, at Borrowers' request
Agent, or a Person reasonably acceptable to Agent, shall have the right with
Agent's consent and in Agent's sole discretion (but shall have no obligation) to
purchase from such Non Consenting Lenders, and such Non Consenting Lenders agree
that they shall, upon Agent's request, sell and assign to Agent or such Person,
all of the Revolving Commitments of such Non Consenting Lenders for an amount
equal to the principal balance of all Loans held by the Non Consenting Lenders
and all accrued interest and fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
Section 12.3. NEW YORK LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Section 12.4. NOTICES. All notices, requests, demands or other
communications provided for herein shall be in writing (unless otherwise
expressly provided herein) and shall be deemed to have been given (a) if by
registered or certified mail, return receipt requested, four (4) Business Days
following the date when sent, (b) if by telex, when sent and answerback
received, (c) if by overnight courier, when received, (d) if by telecopier, when
sent, or (e) if personally delivered or delivered by messenger, when receipted
for, in each case, addressed to the appropriate Credit Party or to the Agent,
any L/C Issuer or any Lender, at its respective office under its name on the
signature pages of this Agreement and to the attention of the Person so
designated, or to such Person or address as any party hereto shall designate to
the other from time to time in writing forwarded in like manner. All notices,
requests, demands or other communications given or deemed given to either of
Borrowers or Parent shall be deemed given to both Borrowers and Parent.
Section 12.5. FEES AND EXPENSES. The Borrowers shall pay all
reasonable out-of-pocket costs and expenses paid or incurred by the Agent or GE
Capital in connection with the Loan Documents and the financing contemplated
thereunder, including but not limited to appraisal fees, reasonable syndication
fees (excluding fees payable to any syndicate member taking an assignment from
GE Capital of any portion of the Loan or Commitment of GE Capital hereunder),
title insurance fees, audit fees, recording fees, travel and transportation
fees, search and filing fees, and the reasonable fees and expenses of Weil,
Gotshal & ▇▇▇▇▇▇ LLP, special counsel, and all local counsel to the Agent or GE
Capital and of any industry, environmental, tax, accounting and other
consultants retained by the Agent or GE Capital. Such expenses shall also
include, without limitation, any costs paid or incurred by the Agent or GE
Capital in connection with the administration of the financial accommodations
herein provided (including of any Collateral), any waivers, amendments,
modifications, extensions, renewals, renegotiations or "work-outs" of this
Agreement or any instrument or document delivered in connection herewith and any
consents or approvals provided hereunder or otherwise requested by any Credit
Party. Without limiting the generality of the foregoing, such expenses, costs,
charges and fees may include, to
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the extent they are out-of-pocket as to the Agent or GE Capital: recording
costs, appraisal costs, paralegal fees, costs and expenses; accountants' fees,
costs and expenses; photocopying and duplicating expenses; long distance
telephone charges; air express charges; telegram charges; telecopier charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with any of the foregoing.
Section 12.6. [Intentionally Deleted]
Section 12.7. WAIVER OF JURY TRIAL AND SET-OFF. In any litigation in
any court with respect to, in connection with, or arising out of this Agreement,
any of the Revolving Advances, any of the Notes or other Loan Documents, the
Collateral, or any instrument or document delivered pursuant to this Agreement,
or the validity, protection, interpretation, collection or enforcement thereof,
or any other claim or dispute howsoever arising, between any Credit Parties and
any of the Lenders, any L/C Issuer party hereto or the Agent, (a) EACH OF THE
CREDIT PARTIES HEREBY, to the fullest extent it may effectively do so, waives
the right to interpose any set-off, recoupment, counterclaim or cross-claim in
connection with any such litigation, irrespective of the nature of such set-off,
recoupment, counterclaim or cross-claim, unless such set-off, recoupment,
counterclaim or cross-claim could not, by reason of any applicable Federal or
State procedural laws, be interposed, pleaded or alleged in any other action and
(b) EACH OF THE CREDIT PARTIES AND THE LENDERS, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
EACH OF THE CREDIT PARTIES AGREES THAT THIS SECTION 12.7 IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT NONE OF THE LENDERS
WOULD EXTEND TO THE COMPANY ANY FINANCIAL ACCOMMODATIONS HEREUNDER IF THIS
SECTION 12.7 WERE NOT PART OF THIS AGREEMENT.
Section 12.8. TERMINATION OF AGREEMENT. (a) The financing arrangements
contemplated hereby shall be in effect until the Maturity Date, and the Loans
and all other Obligations shall be automatically due and payable in full, and
this Agreement shall be terminated, on such date. The Agent on behalf of the
Lenders shall have the right to, or the Agent upon the direction of the Majority
Lenders shall, terminate this Agreement immediately, at any time, during the
continuance of an Event of Default under Section 10 hereof.
(b) The termination of this Agreement shall not affect any rights of
the Credit Parties, any Lender, any L/C Issuer or the Agent or any obligation of
any of the Credit Parties, any Lender, any L/C Issuer or the Agent to the
others, arising on or prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all Obligations and
obligations of the Credit Parties hereunder incurred on or prior to such
termination have been paid and performed in full.
(c) Upon the giving of notice of termination of this Agreement, all
Obligations (including, without limitation, the Revolving Loan and amounts in
respect of Letters of Credit) shall be due and payable on the date of
termination specified in such notice.
(d) The Liens and rights granted to the Agent on behalf of the Agent
and the Lenders hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid (or in the case of Letter of Credit Obligations, cash
collateralized in accordance with Section 2A.3) in full or the Credit Parties
have furnished the Lenders, each L/C Issuer and the Agent with an
indemnification satisfactory to the Lenders, such L/C Issuers and the Agent;
provided that notwithstanding anything herein or in any other Loan Document to
the contrary in the event that all Obligations are paid (or in the case of
Letters of Credit Obligations, cash collateralized in accordance with Section
2A.3) in full (or such satisfactory indemnification is provided) and this
Agreement is terminated, the Liens in favor of the Agent shall terminate (and
the Agent shall authorize in accordance with the requirements of the UCC, the
filing of appropriate UCC-3 termination statements and
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execute and deliver such other lien termination documents as may be reasonably
requested by the Borrower).
(e) All representations, warranties, covenants, waivers and agreements
contained herein shall survive termination hereof unless otherwise provided.
(f) Notwithstanding the foregoing, if after receipt of any payment of
all or any part of the Obligations, the Agent, any L/C Issuer or any Lender is
for any reason compelled to surrender such payment to any Person or entity
because such payment is determined to be void or voidable as a preference, an
impermissible set-off, a diversion of trust funds or for any other reason, this
Agreement shall continue in full force, and the Credit Parties, as appropriate,
shall be liable to, and shall indemnify and hold such Lender, such L/C Issuer or
the Agent, as the case may be, harmless for, the amount of such payment
surrendered until such Lender, such L/C Issuer or the Agent, as the case may be,
shall have been finally and irrevocably paid in full. The provisions of the
foregoing sentence shall be and remain effective notwithstanding any contrary
action which may have been taken by the Lenders, such L/C Issuer or the Agent in
reliance upon such payment, and any such contrary action so taken shall be
without prejudice to the Lenders', such L/C Issuer's or the Agent's rights under
this Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable. For the avoidance of doubt, this Section
12.8(f) shall not apply to any taxes and amounts relating thereto (payment with
respect to which shall be governed by Section 2.22).
(g) All indemnities provided for under this Agreement and the other
Loan Documents, including, without limitation, under Sections 2.12 and 12.5
hereof and this Section 12.8, shall survive the termination of this Agreement
and the payment in full of the Obligations.
Section 12.9. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
Section 12.10. LIEN; SET-OFF BY LENDERS. Each of the Credit Parties
hereby grants to each Lender and the Agent a continuing Lien for all Obligations
upon any and all monies, securities and other property of such Credit Party and
the proceeds thereof, now or hereafter held or received by, or in transit to,
such Lender or the Agent from or for such Credit Party, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of such Credit Party with, and any
and all claims of such Credit Party against, any Lender or the Agent, at any
time existing (which shall constitute part of the Collateral). Upon the
occurrence and during the continuance of an Event of Default, each Lender and
the Agent is hereby authorized at any time and from time to time, without notice
to such Credit Party, to set-off, appropriate and apply any or all items
hereinabove referred to against all Obligations under the Loan Documents;
provided that no Lender may exercise such set-off rights without the Agent's
consent.
Section 12.11. PAYMENT DUE ON NON-BUSINESS DAY. Whenever any payment
to be made hereunder or under any other Loan Document or on any Revolving
Advance shall be stated to be due and payable, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a Business Day,
such payment shall be made and the last day of such Interest Period shall occur
on the next succeeding Business Day and such extension of time shall in such
case be included in computing interest on such payment; provided, however, if
such extension would cause a payment of a Eurodollar Advance to be made, or the
last day of such Interest Period for a Eurodollar Advance to occur, in the next
following calendar month, such payment shall be made and the last day of such
Interest Period shall occur on the next preceding Business Day.
Section 12.12. SERVICE OF PROCESS. Each of the Credit Parties hereby
irrevocably consents to the jurisdiction of the courts of the State of New York
and of any Federal Court located in the
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City of New York in connection with any action or proceeding arising out of or
relating to this Agreement, any Guaranty, any of the Security Documents, all or
any of the Obligations, the Collateral, all or any of the Notes, any other Loan
Document or any document or instrument delivered pursuant to this Agreement. In
any such litigation, each of the Credit Parties waives, to the fullest extent it
may effectively do so, personal service of any summons, complaint or other
process and agrees that the service thereof may be made by certified or
registered mail directed to any Credit Party at its address set forth in Section
12.4 hereof. Each of the Credit Parties hereby waives, to the fullest extent it
may effectively do so, the defenses of forum non conveniens and improper venue.
Section 12.13. GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT. (a)
Each Lender hereby irrevocably designates and appoints GE Capital as the agent
of such Lender under each of the Loan Documents in which GE Capital is named as
agent, and each such Lender hereby irrevocably authorizes GE Capital, as the
agent for such Lender to take such action on behalf of each Lender under the
provisions of the Loan Documents and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in the Loan Documents,
the Agent shall not have any duties or responsibilities except those expressly
set forth in the Loan Documents, nor any fiduciary relationship with any Lender
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Loan Documents or otherwise exist against the
Agent.
(b) The Agent may execute any of its duties under the Loan Documents
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except for its or such Person's own gross
negligence or wilful misconduct), or (ii) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by any
of the Credit Parties or any of their respective Subsidiaries or any officer
thereof contained in the Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent under
or in connection with the Loan Documents, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the Loan Documents
or for any failure of any of the Credit Parties or any of their respective
Subsidiaries to perform its obligations under the Loan Documents. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, the Loan Documents, or to inspect the properties, books or
records of any of the Credit Parties or any of their respective Subsidiaries.
(d) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation reasonably believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Credit Parties), independent accountants and
other experts selected by the Agent.
(e) The Agent shall be fully justified in failing or refusing to take
any action under the Loan Documents unless it shall first receive such advice or
concurrence of the Majority Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under the Loan Documents in accordance with a request
of the Majority Lenders (or where required by the terms of
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this Agreement, the Lenders), and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes.
(f) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent shall
have received notice from a Lender or one of the Credit Parties referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Majority Lenders; provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
(g) Each Lender expressly acknowledges that neither the Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the Agent
hereafter taken, including any review of the affairs of any of the Credit
Parties or any of their respective Subsidiaries, shall be deemed to constitute
any representation or warranty by the Agent to any Lender. Each Lender
represents to the Agent that it has, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of each of the Credit Parties and their respective
Subsidiaries, and made its own decision to make its loans and other financial
accommodations hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, liabilities, assets, properties and condition (financial or
otherwise) and creditworthiness of each of the Credit Parties and their
respective Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of any of the Credit Parties
or any of their respective Subsidiaries which may come into the possession of
the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
(h) Each Lender agrees to indemnify the Agent in its capacity as such
(to the extent not reimbursed by the Credit Parties and without limiting the
obligation of the Credit Parties to do so), ratably according to the total loan
percentages set forth opposite its name on Exhibit A hereto from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including without limitation at any time following the payment
of the Notes) be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of the Loan Documents, the financing thereunder
or any of the transactions contemplated thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct. The agreements in this Section 12.13(h) shall survive the payment of
the Notes and the Obligations.
(i) The Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Credit Parties as
though the Agent were not the Agent hereunder. With respect to its pro rata
share of the Revolving Advances made or renewed by it and any Note issued to it,
the Agent shall have the same rights and powers under this Agreement as any
Lender
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and may exercise the same as though it were not the Agent. The terms "Lender"
and "Lenders" shall include the Agent in its individual capacity.
(j) The Agent may resign as Agent upon thirty (30) days' written
notice to the Lenders. In the event that the Agent shall enter receivership or a
proceeding in bankruptcy or insolvency shall be commenced by or against the
Agent, then the Lenders (other than the Lender which is the acting as Agent, if
applicable) may by unanimous consent of such Lenders, remove the Agent under
this Agreement. If the Agent shall give a notice of its intention to resign as
Agent under this Agreement or the Agent shall be removed, then the Majority
Lenders shall appoint a successor agent for the Lenders, whereupon such
successor agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall mean such successor agent effective upon its appointment,
and the former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation hereunder as Agent or any Agent's removal, the provisions of
this Section 12.13 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
(k) Each Lender agrees that (i) all obligations of the Credit Parties
to each Lender under this Agreement and under the Notes rank pari passu in all
respects with each other, and (ii) if any Lender shall, through the exercise of
a right of banker's lien, set-off, counterclaim or otherwise, obtain payment
with respect to its Revolving Commitment which results in its receiving more
than its pro rata share of the aggregate payments in respect of the Aggregate
Revolving Commitments, then (A) such Lender shall be deemed to have
simultaneously purchased from each of the other Lenders a share in its Revolving
Advances so that the amount of the Revolving Advances of all Lenders shall be
pro rata and (B) such other adjustments shall be made from time to time as shall
be equitable to insure that all Lenders share such payments ratably. If all or
any portion of any such excess payment is thereafter recovered from the Lender
which received the same, the purchase provided in this Section 12.13(k) shall be
deemed to have been rescinded to the extent of such recovery, without interest.
Each of the Credit Parties expressly consents to the foregoing arrangements and
agrees that each Lender so purchasing a portion of another Lender's loan may
exercise all rights of payment (including, without limitation, all rights of
set-off, banker's lien or counterclaim) with respect to such portion as fully as
if such Lender were the direct holder of such portion.
(l) The Agent agrees that it shall promptly deliver to each Lender
copies of all notices, demands, statements and communications which the Agent
gives to the Credit Parties, except for routine notices of payments due under
the Loan Documents and other miscellaneous notices, demands, statements and
communications, which are not material to the interests of any Lender. The Agent
shall have no liability to any Lender, nor shall a cause of action arise against
the Agent, as a result of the failure of the Agent to deliver to any Lender any
such notice, demand, statement or communication.
(m) The Agent shall endeavor to exercise the same care in
administering the Loan Documents as it exercises with respect to similar
transactions in which it is involved and where no other co-lenders or
participants are involved; provided that the liability of the Agent for failing
to do so shall be limited as provided in the preceding paragraphs of this
Section 12.13.
(n) (i) If at any time or times it shall be necessary or prudent in
order to conform to any law of any jurisdiction in which any of the Collateral
shall be located, or the Agent shall be advised by counsel, that it is so
necessary or prudent in the interest of the Lenders, or the Agent shall deem it
necessary for its own protection in the performance of its duties hereunder, the
Agent and (to the extent required by the Agent) each Credit Party shall execute
and deliver all instruments and agreements reasonably necessary or proper to
constitute another bank or trust company, or one or more individuals approved by
the Agent (to the extent necessary or requested by the Agent) (each an "Approved
Delegate"), either to act as co-agent or co-agents or trustee of all or
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any of the Collateral, jointly with the Agent originally named herein or any
successor, or to act as separate agent or agents or trustee of any such
Collateral. In the event that any of the Credit Parties shall not have joined in
the execution of such instruments or agreements with any Approved Delegate
within thirty (30) Business Days after the receipt of a written request from the
Agent to do so, or in case an Event of Default shall have occurred and be
continuing, each of the Credit Parties hereby irrevocably appoints the Agent as
its agent and attorney to act for it under the foregoing provisions of this
Section 12.13(n) in such contingency.
(ii) Every separate agent and every co-agent and every trustee,
other than any agent which may be appointed as successor to the Agent,
shall, to the extent permitted by applicable law, be appointed to act
and be such, subject to the following provisions and conditions,
namely:
(A) except as otherwise provided herein, all rights,
remedies, powers, duties and obligations conferred upon,
reserved or imposed upon the Agent in respect of the
custody, control and management of moneys, paper or
securities shall be exercised solely by the Agent hereunder;
(B) all rights, remedies, powers, duties and
obligations conferred upon, reserved to or imposed upon the
Agent hereunder shall be conferred, reserved or imposed and
exercised or performed by the Agent except to the extent
that the instrument appointing such separate agent or
separate agents or co-agent or co-agents or trustee shall
otherwise provide, and except to the extent that under any
law of any jurisdiction in which any particular act or acts
are to be performed, the Agent shall be incompetent or
unqualified to perform such act or acts, in which event such
rights, remedies, powers, duties and obligations shall be
exercised and performed by such separate agents or co-agent
or co-agents to the extent specifically directed in writing
by the Agent;
(C) no power given hereby to, or which it is provided
hereby may be exercised by, any such separate agent or
separate agents or co-agent or co-agents or trustee shall be
exercised hereunder by such separate agent or separate
agents or co-agent or co-agents or trustee except jointly
with, or with the consent in writing of, the Agent, anything
herein contained to the contrary notwithstanding;
(D) no separate agent or co-agent or trustee
constituted under this Section 12.13(n) shall be personally
liable by reason of any act or omission of any other agent,
separate agent, co-agent or trustee hereunder; and
(E) the Agent, at any time by an instrument in writing,
executed by it, may accept the resignation of or remove any
such separate agent or co-agent or trustee, and in that
case, by an instrument in writing executed by the Agent and
the Credit Parties (to the extent necessary or requested by
the Agent) jointly, may appoint a successor to such separate
agent or co-agent or trustee, as the case may be, anything
herein contained to the contrary notwithstanding. In the
event that any of the Credit Parties shall not have joined
in the execution of any such instrument with a Person or
entity within ten (10) days after the receipt of a written
request from the Agent to do so, or in the case an Event of
Default shall have occurred and be continuing, the Agent,
acting alone,
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may appoint a successor and may execute any instrument in
connection therewith, and the Credit Parties hereby
irrevocably appoint the Agent its agent and attorney to act
for it in such connection in either or such contingencies.
Section 12.14. NON-RECOURSE TO PARENT. Notwithstanding the fact that
the Parent is a signatory to this Agreement and is referred to in this Agreement
and the other Loan Documents, neither the Agent nor any Lender shall have any
recourse to the Parent or any of its directly owned assets for the payment or
performance of any Obligations of any Credit Party (other than the Parent) nor
shall the Parent have any personal liability therefor; provided, however, that
the Loans shall be fully recourse to the Borrower, the Guarantors and their
respective assets.
Section 12.15. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS.
(a) This Agreement shall be binding upon and inure to the benefit of the parties
hereto, and their respective successors and assigns, except that the obligation
of the Lenders and any L/C Issuer hereto to make Revolving Advances and other
financial accommodations hereunder shall not inure to the benefit of any
successors and assigns of the Borrowers.
(b) Neither Borrowers nor Parent may assign or transfer any of its
interest hereunder without the prior written consent of the Lenders. Each of the
Lenders may make, carry or transfer its pro rata share of the Revolving Advances
at, to or for the account of any of its branch offices or the office of one or
more of its Affiliates.
(c) Subject to the terms of this Section 12.15, any Lender may make an
assignment to a Qualified Assignee of, or sale of participations in, at any time
or times, the Loan Documents, Revolving Advances, Letter of Credit Obligations
and any Revolving Commitment or any portion thereof or interest therein,
including any Lender's rights, title, interests, remedies, powers or duties
thereunder. Any assignment by a Lender shall: (i) require the consent of Agent
(which consent shall not be unreasonably withheld or delayed with respect to a
Qualified Assignee) and the execution of an assignment agreement (an "Assignment
Agreement") substantially in the form attached hereto as Exhibit 12.15(c) and
otherwise in form and substance reasonably satisfactory to, and acknowledged by,
Agent; (ii) be conditioned on such assignee Lender representing to the assigning
Lender and Agent that it is purchasing the applicable Revolving Advances to be
assigned to it for its own account, for investment purposes and not with a view
to the distribution thereof; (iii) after giving effect to any such partial
assignment, the assignee Lender shall have a Revolving Commitment in an amount
at least equal to $5,000,000 and the assigning Lender shall have retained a
Revolving Commitment in an amount at least equal to $5,000,000; (iv) include a
payment to Agent of an assignment fee of $3,500 and (v) so long as no Event of
Default has occurred and is continuing, require the consent of Borrowers as to
the identity of the Qualified Assignee Lender of the type described in clause
(b) of the definition of "Qualified Assignee", which shall not be unreasonably
withheld or delayed; provided that no such consent shall be required for an
assignment to a Qualified Assignee of the type described in clause (a) of the
definition of "Qualified Assignee"; and provided further that an assignment will
not be effective unless it is recorded by Agent in the Loan Account. In the case
of an assignment by a Lender under this Section 12.15, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
all other Lenders hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Revolving Commitment or assigned
portion thereof from and after the date of such assignment. Each Borrower hereby
acknowledges and agrees that any assignment shall give rise to a direct
obligation of Borrowers to the assignee and that the assignee shall be
considered to be a "Lender". In all instances, each Lender's liability to make
Revolving Advances hereunder shall be several and not joint and shall be limited
to such Lender's pro rata share of the aggregate Revolving Commitment. In the
event Agent or any Lender assigns or otherwise transfers all or any part of the
Obligations, Agent or any such Lender shall so notify Borrowers and Borrowers
shall, upon the request of Agent or such Lender, execute new Notes in exchange
for the Notes, if any, being assigned. Notwithstanding the foregoing provisions
of this
118
Section 12.15(c), (i) any Lender may at any time pledge the Obligations held by
it and such Lender's rights under this Agreement and the other Loan Documents to
a Federal Reserve Bank provided, that no such pledge to a Federal Reserve Bank
shall release such Lender from such Lender's obligations hereunder or under any
other Loan Document, and (ii) any Lender that is an investment fund may assign
the Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor, provided that such Lender shall notify Agent of any such assignment for
purposes of maintaining the Loan Account in accordance with Section 2.21 hereof,
and such assignment will become effective only if such assignment is recorded in
the Loan Account.
(d) Any participation by a Lender of all or any part of its Revolving
Commitment shall be made with the understanding that all amounts payable by
Borrowers hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or fees payable with respect to, any Revolving Advance in which
such holder participates, (ii) any extension of the scheduled amortization of
the principal amount of any Revolving Advance in which such holder participates
or the final maturity date thereof, and (iii) any release of all or
substantially all of the Collateral (other than in accordance with the terms of
this Agreement, the Security Documents or the other Loan Documents). Solely for
purposes of Sections 2.9, 2.10, 2.11, 2.12, 2.15 and 2.22, each Borrower
acknowledges and agrees that a participation shall give rise to a direct
obligation of Borrowers to the participant and the participant shall be
considered to be a "Lender". Except as set forth in the preceding sentence
neither Borrower nor any other Credit Party shall have any obligation or duty to
any participant. Neither Agent nor any Lender (other than the Lender selling a
participation) shall have any duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had occurred.
In addition, each Lender granting a participation under this Section 12.15(d)
shall keep a register, meeting the requirements of Treasury Regulation Section
5f.103-1(c), of each participant, specifying such participant's entitlement to
payments of principal and interest with respect to such participation, and for
the avoidance of doubt, each participant shall be obligated to comply with
Section 2.22 as if it were a "Lender."
(e) Except as expressly provided in this Section 12.15, no Lender
shall, as between Borrower and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Revolving Advances, the Notes or other Obligations owed to such
Lender.
(f) Each Credit Party executing this Agreement shall assist any Lender
permitted to sell assignments or participations under this Section 12.15 as
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be reasonably
requested and the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their respective affairs contained in any selling materials provided by it
and all other information provided by it and included in such materials, except
that any projections delivered by Borrowers shall only be certified by Borrowers
as having been prepared by Borrowers in compliance with the representations
contained in Section 11.18.
(g) A Lender may furnish any information concerning Credit Parties in
the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 12.18.
(h) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender"), may grant to a special purpose funding vehicle (an
"SPC"), identified as such in
119
writing by the Granting Lender to Agent and Borrowers, the option to provide to
Borrowers all or any part of any Revolving Advance that such Granting Lender
would otherwise be obligated to make to Borrowers pursuant to this Agreement;
provided that (i) nothing herein shall constitute a commitment by any SPC to
make any Revolving Advance; and (ii) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Revolving Advance,
the Granting Lender shall be obligated to make such Revolving Advance pursuant
to the terms hereof. The making of a Revolving Advance by an SPC hereunder shall
utilize the Revolving Commitment of the Granting Lender to the same extent, and
as if such Revolving Advance were made by such Granting Lender. No SPC shall be
liable for any indemnity or similar payment obligation under this Agreement (all
liability for which shall remain with the Granting Lender). Any SPC may (i) with
notice to, but without the prior written consent of, Borrowers and Agent and
without paying any processing fee therefor assign all or a portion of its
interests in any Revolving Advances to the Granting Lender or to any financial
institutions (consented to by Borrower and Agent) providing liquidity and/or
credit support to or for the account of such SPC to support the funding or
maintenance of Revolving Advances and (ii) disclose on a confidential basis any
non-public information relating to its Revolving Advances to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or
liquidity enhancement to such SPC. This Section 12.15(h) may not be amended
without the prior written consent of each Granting Lender, all or any of whose
Revolving Advances are being funded by an SPC at the time of such amendment. For
the avoidance of doubt, the Granting Lender shall for all purposes, including
without limitation, the approval of any amendment or waiver of any provision of
any Loan Document or the obligation to pay any amount otherwise payable by the
Granting Lender under the Loan Documents, continue to be the Lender of record
hereunder. In addition, each Granting Lender (i) shall keep a register, meeting
the requirements of Treasury Regulation Section 5f.103-1(c), of each SPC which
has funded all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to Borrowers pursuant to this Agreement, specifying such
SPC's entitlement to payments of principal and interest with respect to such
Loan and (ii) shall collect, prior to the time such SPC receives payments with
respect to such funded Loan, from each such SPC the appropriate forms,
certificates and statements described in Section 2.22(c) as if such SPC were a
Lender under Section 2.22(c).
(i) For purposes of this Section 12.15, with respect to each Letter of
Credit, if an L/C Issuer transfers its rights with respect to the Borrowers'
reimbursement obligation with respect to a Letter of Credit, (i) such L/C Issuer
shall give notice of such transfer to the Agent for notation in the Loan
Account, (ii) each such transfer shall be notated in the Loan Account, and (iii)
no such transfer will be effective for purposes of this Agreement unless it has
been recorded in the Loan Account.
Section 12.16. COUNTERPARTS; FACSIMILE SIGNATURE. (a) This Agreement
may be executed by the parties hereto individually or in any combination, in one
or more counterparts, each of which shall be an original and all of which shall
together constitute one and the same agreement.
(b) Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 12.17. INVALIDITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation, it
shall be deemed modified to conform to the minimum requirements of such law or
regulation, or, if for any reason it is not deemed so modified, it shall be
ineffective and invalid only to the extent of such prohibition or invalidity
without the remainder thereof or any of the remaining provisions of this
Agreement being prohibited or invalid.
Section 12.18. DISCLOSURE OF FINANCIAL INFORMATION. The Agent and each
Lender are each hereby authorized to deliver a copy of any financial statement
or any other information relating to the business, operations or financial
condition of the Parent and each of its Subsidiaries which may be furnished to
it hereunder or otherwise, to any Affiliate of such Lender, any other Lender,
any
120
court, regulatory body or agency having jurisdiction over the Agent or such
Lender, to any Person which shall, or shall have any right or obligation to,
succeed to all or any part of the Agent's or such Lender's interest in any of
the Revolving Advances, this Agreement and any Collateral or to any actual or
prospective participant therein or assignee thereof. Subject to the foregoing,
the Agent and each Lender (i) agree to take all reasonable precautions and to
exercise due care to maintain the confidentiality of all information provided to
it by the Parent and its Subsidiaries in connection with this Agreement, (ii)
agree and undertake that neither it nor any of its Affiliates shall use any such
information other than for the purpose of the financing contemplated by the
Agreement or as otherwise permitted above, and (iii) shall treat all such
information confidentially and shall cause each prospective participant or
assignee of the type described in this Section 12.18 or participant or assignee
of such Lender to agree in writing to treat such information confidentially and
to abide by the provisions of this sentence. Information that is available to
the public shall not be subject to the confidentiality requirements of this
Section 12.18. In no event shall the Agent or any Lender be liable under this
Section 12.18 for any direct, indirect, consequential or punitive damages
resulting from disclosure permitted under this Section 12.18. Notwithstanding
anything to the contrary set forth herein or in any other express or implied
agreement or understanding, the obligations of confidentiality contained herein
or therein (the "Confidentiality Obligations") as they relate to the transaction
or transactions contemplated herein, shall not apply to the "structure or the
tax aspects," as that phrase is used in Section 1.6011-4T(b)(3) (or any
successor provision) of the U.S. Treasury Regulations (the "Confidentiality
Regulation") promulgated under Section 6011 of the Code, of such transaction or
transactions; provided, however, that the Confidentiality Obligations
nevertheless shall apply to any and all items of information not required to be
freely disclosable in order for the transaction or transactions not to be
treated as "offered under conditions of confidentiality" within the meaning of
the Confidentiality Regulation.
121
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
FINLAY FINE JEWELRY CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: SVP, CFO & Treasurer
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
CARLYLE & CO. JEWELERS
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: SVP, CFO & Treasurer
Address:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
FINLAY ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: SVP, CFO & Treasurer
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies of all notices and other communications to be sent to:
Finlay Fine Jewelry Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
- and -
Blank Rome LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
GENERAL ELECTRIC CAPITAL
CORPORATION, Individually and
as Administrative Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Duly Authorized Signatory
Address:
▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Account Manager - Finlay
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies of all notices and other communications to be sent to:
General Electric Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Commercial Finance Legal Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
-and-
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
GE BUSINESS CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Duly Authorized Signatory
Address:
▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Commercial Finance Legal Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
BANK OF AMERICA N.A.
Individually and as Documentation Agent
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Director
Address:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Director
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
ABN AMRO BANK N.V.
By: /s/ ▇▇▇▇▇▇ ▇. Spurga
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. Spurga
Title: Vice President
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Spurga
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
▇▇ ▇▇▇▇▇▇ CHASE BANK, NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Address:
1166 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
▇▇▇▇▇ FARGO FOOTHILL, LLC
By: /s/ ▇▇▇ ▇▇▇▇
---------------------------------------
Name: ▇▇▇ ▇▇▇▇
Title: Vice President
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
Pursuant to Item 601(b)(2) of Regulation S-K, the following is a list of omitted
schedules and exhibits to the Third Amended and Restated Credit Agreement.
Finlay agrees to furnish supplementally a copy of any omitted schedule or
exhibit to the Securities and Exchange Commission upon request.
<TABLE>
Schedule 2A.1(a) - Letters of Credit
Schedule 2A.1(b) - Bank of America Letters of Credit
Schedule 4.3(b)(B) - Jurisdictions
Schedule 4.4(a)(ii) - Excluded Leases
Schedule 8.3 - Insurance
Schedule 8.18 - Lease Obligations
Schedule 8.22 - Lockbox Accounts
Schedule 9.2 - Existing Liens
Schedule 9.3 - Indebtedness
Schedule 9.4 - Outstanding Investments
Schedule 9.9 - Compensation Policies
Schedule 9.21 - Indenture Guarantees
Schedule 11.1 - Subsidiaries
Schedule 11.5 - Real Property
Schedule 11.7 - Trademarks, Patents, Etc.
Schedule 11.8 - Taxes
Schedule 11.13 - ERISA
Schedule 11.16 - Environmental Matters
Schedule 11.19 - Collection, Concentration and Special Accounts
Schedule 11.20 - Employment Agreements
Schedule 11.21 - Labor Matters
Schedule 11.22 - Other Ventures
Schedule 11.24 - Material Contracts
Schedule 11.25 - License Agreements
Exhibit A - Lenders, Commitments and Initial Eurodollar Offices
Exhibit B - Form of Indemnification Agreement
Exhibit C - Form of Master Agreement for Documentary Letters of
Credit
Exhibit D - Form of Master Agreement for Standby Letters of Credit
Exhibit 2.1(c)(ii) - Form of Swing Line Note
Exhibit 2.3(a) - Form of Revolving Note
Exhibit 2.4 - Form of Borrower's Certificate
Exhibit 4.1(a) - Form of Pledge Agreement
Exhibit 4.2 - Form of Trademark, Patent and Copyright Security Agreement
Exhibit 4.3(a) - Form of Security Agreement
Exhibit 4.8 - Form of Guaranty
Exhibit 4.9(a) - Assignment of Life Insurance
Exhibit 4.9(b) - Assignment of Business Interruption Insurance
Exhibit 5.1 - Form of Opinion of Counsel for the Credit Parties
Exhibit 8.1(p) - Form of Borrowing Base Certificate
</TABLE>
<TABLE>
Exhibit 8.14 - Form of Consignor Letter
Exhibit 9.2(j) - Form of Collateral Description Regarding Gold Consignment Documents
Exhibit 12.15(c) - Form of Assignment
</TABLE>