Exhibit 10.13
EXECUTION COPY
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (this "Agreement") is entered into as
of September 7, 2004, by and between XXXXXXXX'X INC., a Delaware corporation
(the "Company"), and JEWELRY INVESTORS II, L.L.C., a Delaware limited liability
company (together with its successors and assigns, the "Investor").
WHEREAS, the Investor is participating in a restructuring (the
"Restructuring") of the Company's Amended and Restated Credit Agreement, dated
as of August 28, 2002, as amended, by and among the lending institutions
parties thereto (the "Existing Lenders"), The CIT Group/Business Credit, Inc.,
PNC Bank, N.A., Bank of America, N.A. (the "Agent"), the Company and certain of
its subsidiaries, pursuant to which it is providing to the Company a term loan
in the amount of $67,500,000;
WHEREAS, as a condition to the closing of the Restructuring (the
"Closing") and to induce the Investor to consummate the Restructuring, the
Company desires to provide Investor with certain rights to participate in any
offering of the Company's Equity Securities (as defined below) and any sale of
the Company's Receivables (as defined below) as more fully described herein.
NOW, THEREFORE, for and in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined
herein have the meanings set forth in this Section 1.
(a) "Affiliate" shall mean with respect to any Person, any other
Person that is directly or indirectly controlling, controlled
by or under common control with such Person and the term
"control" (including (with correlative meanings) the terms
"controlling," "controlled by" and "under common control
with") means having, directly or indirectly, the power to
direct or cause the direction of the management or policies of
a Person, whether through ownership of voting securities, by
contract or otherwise.
(b) "Closing" has the meaning set forth in the recitals of this
Agreement.
(c) "Class B Common Stock" shall mean the Class B Common Stock,
par value $0.01 per share, of the Company, and any other
securities issued in replacement of or exchange for such
shares in any reclassification, recapitalization,
reorganization, merger, consolidation, share exchange,
business combination or similar transaction.
(d) "Common Stock" shall mean the Class A Common Stock, par value
$0.01 per share, of the Company, and any other securities
issued in replacement of or exchange for such shares in any
reclassification, recapitalization, reorganization, merger,
consolidation, share exchange, business combination or similar
transaction.
(e) "Common Stock Equivalents" shall mean any options, warrants,
rights or convertible securities exercisable or exchangeable
for or convertible into shares of Common Stock, including,
without limitation, Class B Common Stock, but excluding rights
to acquire preferred stock issued pursuant to a Shareholders'
Rights Plan.
(f) "Equity Offering" shall mean any issuance, offer, sale,
assignment or other transfer by the Company (each, a
"Transfer") of Equity Securities to any Person other than the
issuance of (i) shares of Common Stock or Common Stock
Equivalents (A) as compensation to directors, officers,
employees and agents of and consultants to the Company or any
of its subsidiaries; (B) in connection with any merger,
reorganization, acquisition or similar business combination
transaction; (C) upon exercise, conversion or exchange of any
Common Stock Equivalent; or (D) in settlement of any claim or
cause of action against the Company or any of its
subsidiaries, or (ii) rights to acquire preferred stock of the
Company that are issued pro-rata to all holders of Common
Stock and Class B Common Stock pursuant to a shareholders'
rights plan (a "Shareholders' Rights Plan"); provided,
however, that the issuance of such shares of preferred stock
and shares of Common Stock or Common Stock Equivalents
issuable upon the conversion of or the exercise of rights
under such preferred stock shall be an Equity Offering.
(g) "Equity Securities" shall mean any (i) Common Stock, (ii)
Class B Common Stock, (iii) any Common Stock Equivalents, and
(iv) any other class of shares that is listed on any national
securities exchange, automated interdealer quotation system,
over-the-counter bulletin board or pink sheets or any similar
system after the date of the Closing.
(h) "Person" shall mean an individual, proprietorship, trust,
estate, personal, representative, partnership, limited
liability company, joint venture, association, company,
corporation, government agency or other legal entity.
(i) "Receivables" shall mean (i) the indebtedness and payment
obligations of any Person (including, without limitation,
obligations constituting an account or general intangible or
evidenced by a note, instrument, contract, security agreement,
chattel paper or other evidence of indebtedness or security)
arising from a sale of merchandise or the provision of
services, including, without limitation, any right to payment
for goods sold or for services rendered, and including the
right to payment of any interest, sales taxes, finance
charges, returned check or late charges and other obligations
of such Person with respect thereto, or (ii) notes, trust
certificates, membership interests or other equity interests
of any special purpose vehicle that is formed to acquire and
does acquire Receivables in a securitization transaction.
(j) "Receivables Offering" shall mean the Transfer, in a private
placement, underwritten offering or other disposition of (i)
all or any portion of the Receivables of the Company or any
subsidiary of the Company to any Person, including, but not
limited to, a subsidiary of the Company, that results in, upon
completion of such Transfer, such Receivables being removed
from the consolidated balance sheet of the Company, or (ii)
notes, trust certificates, membership interests or other
equity interests of any special purpose vehicle that is formed
to acquire and does acquire Receivables in a securitization
transaction.
(k) "Shareholders' Rights Plan" has the meaning set forth in
Section 1(f)(ii).
(l) "Transfer" has the meaning set forth in Section 1(f), and the
term "Transferred" has a meaning correlative thereto.
2. Equity Offering Participation Interest.
(a) The Company agrees that, until the sixth (6th) anniversary of
the date of this Agreement, it shall not consummate any Equity Offering unless
the Investor is provided an opportunity to purchase up to twenty percent (20%)
of the Equity Securities offered pursuant to such Equity Offering and all of
the procedures, terms and conditions of this Section 2 are complied with.
(b) Commencing on the date of the Closing, if the Company desires
to commence an Equity Offering (a "Proposed Equity Offering"), then the Company
shall provide to Investor, at least thirty (30) days prior to the proposed
closing date of such Proposed Equity Offering, a notice (an "Equity Offering
Notice") which describes in reasonable detail the Proposed Equity Offering,
including, without limitation, (i) a description of the Equity Securities
proposed to be offered (the "Offered Securities"), (ii) the identity of the
prospective offeree(s) and (iii) the consideration and the material terms and
conditions upon which such Proposed Equity Offering is to be made. The Equity
Offering Notice shall also include a copy of any written proposal, term sheet
or letter of intent or other document or agreement relating to the Proposed
Equity Offering.
(c) Subject to Section 2(f), Investor shall have the right for a
period of twenty (20) days following receipt of an Equity Offering Notice to
deliver a notice to the Company (an "Equity Offering Exercise Notice")
specifying that Investor elects to participate in such Proposed Equity
Offering. The Equity Offering Exercise Notice shall set forth the number, up to
twenty percent (20%), of the aggregate number of Offered Securities to be
purchased by the Investor in such Proposed Equity Offering (the "Equity
Purchase Amount").
(d) If Investor delivers an Equity Offering Exercise Notice within
such twenty (20) day period, then the Investor shall, at the closing of such
Proposed Equity Offering, be entitled to purchase the number of Equity
Securities equal to the Equity Purchase Amount, such purchase to be on the same
terms and conditions as those applicable to the other purchasers in such
Proposed Equity Offering; provided, however, that such terms and conditions
shall be no less favorable to the Investor than the terms and conditions set
forth in the Equity Offering Notice.
(e) Subject to Section 2(f), if the Investor has not timely
delivered an Equity Offering Exercise Notice, the Company may, for a period of
ninety (90) days from the giving of the Equity Offering Notice, proceed with
the Proposed Equity Offering, provided that the terms and conditions are not
more favorable to the purchasers of Equity Securities than the terms and
conditions set forth in the Equity Offering Notice. In the event that (i) the
Proposed Equity Offering is not completed within such ninety (90) day period or
(ii) the terms and conditions of the Proposed Equity Offering are more
favorable to the purchasers of the Equity Securities than the terms and
conditions set forth in the Equity Offering Notice, then the Company may not
proceed with such Proposed Equity Offering without first complying again with
the provisions of this Agreement and delivery of a new Equity Offering Notice
to Investor.
(f) Notwithstanding the foregoing provisions of this Section 2,
upon the issuance of rights pursuant to a Shareholders' Rights Plan, the
Company shall make effective provision to permit the Investor or its successors
or permitted assigns to purchase, on the same terms and conditions as the
holders of Common Stock and Class B Common Stock, twenty percent (20%) of the
Equity Securities issued upon the conversion of or the exercise of any rights
under the preferred stock issued pursuant to such Shareholders' Rights Plan,
whether or not the Investor has complied with the notice provisions of Section
2(c).
3. Receivables Offering Participation Interest.
(a) The Company agrees that, until the fifth (5th) anniversary of
the date of this Agreement, it shall not consummate any Receivables Offering
unless the Investor is provided an opportunity to purchase up to fifty percent
(50%) of the Receivables offered in such Receivables Offering and all of the
procedures, terms and conditions of this Section 3 are complied with.
(b) Commencing on the date of the Closing, if the Company, or any
subsidiary of the Company, desires to commence a Receivables Offering (a
"Proposed Receivables Offering"), then the Company shall provide to Investor,
at least thirty (30) days prior to the proposed closing date of such Proposed
Receivables Offering, a notice (a "Receivables Offering Notice") which
describes in reasonable detail the Proposed Receivables Offering, including,
without limitation, (i) a description of the Receivables proposed to be
Transferred (the "Offered Receivables"), (ii) the identity of the prospective
transferee(s) and (iii) the consideration and the material terms and conditions
upon which such Proposed Receivables Offering is to be made. The Receivables
Offering Notice shall also include a copy of any written proposal, term sheet
or letter of intent or other document or agreement relating to the Proposed
Receivables Offering.
(c) Investor shall have the right for a period of twenty (20) days
following receipt of a Receivables Offering Notice to deliver a notice to the
Company (a "Receivables Offering Exercise Notice") specifying that Investor
elects to participate in such Proposed Receivables Offering. The Receivables
Offering Exercise Notice shall set forth the amount, up to fifty percent (50%),
of the Offered Receivables to be purchased by the Investor in such Proposed
Receivables Offering (the "Receivables Purchase Amount").
(d) If Investor delivers a Receivables Offering Exercise Notice
within such twenty (20) day period, then the Investor shall, at the closing of
such Proposed Receivables Offering, be entitled to purchase the amount of
Offered Receivables equal to the Receivables Purchase Amount, such purchase to
be on the same terms and conditions as those applicable to the other purchasers
in such Proposed Receivables Offering; provided, however, that such terms and
conditions shall be no less favorable to the Investor than the terms and
conditions set forth in the Receivables Offering Notice; provided further, that
in the event the Offered Receivables are described in clause (ii) of Section
1(j) and are Transferred in an underwritten offering, such terms and conditions
shall be no less favorable to the Investor than the terms and conditions,
including purchase price, on which the underwriter purchases the Offered
Receivables; and provided further, that if the Offered Receivables are not
Receivables described in clause (ii) of Section 1(j), such terms and conditions
shall provide that the Investor, on the one hand, and the other purchasers of
such Offered Receivables, on the other hand, shall each purchase fifty percent
(50%) of the total Receivables of each account debtor that comprise the Offered
Receivables, or the Offered Receivables shall be allocated among the Investor
and such other purchases as may otherwise be agreed among them.
(e) If the Investor has not timely delivered a Receivables Offering
Exercise Notice, the Company may, for a period of ninety (90) days from the
giving of the Receivables Offering Notice, proceed with the Proposed
Receivables Offering, provided that the terms and conditions are not more
favorable to the purchasers of Receivables than the terms and conditions set
forth in the Receivables Offering Notice. In the event that (i) the Proposed
Receivables Offering is not completed within such ninety (90) day period or
(ii) the terms and conditions of the Proposed Receivables Offering are more
favorable to the purchasers of Receivables than the terms and conditions set
forth in the Receivables Offering Notice, then the Company may not proceed with
such Proposed Receivables Offering without first complying again with the
provisions of this Agreement and delivery of a new Receivables Offering Notice
to Investor.
4. Remedies. The parties hereto each expressly acknowledge and
understand that the provisions of this Agreement are of a special and unique
nature, the loss of which cannot be adequately compensated for in damages by
an action at law, and that the breach or threatened breach of the provisions
of Section 2 or 3 would cause Investor irreparable harm. In the event of any
such breach or threatened breach by the Company or an Affiliate of the
Company, Investor shall be entitled to equitable remedies, including, without
limitation, injunctive and declaratory relief without proving that damages
would be inadequate and without posting any bond. Nothing herein contained
shall be construed as prohibiting or otherwise restricting Investor from
pursuing any other remedies available at law, in equity or otherwise for any
breach or threatened breach of Section 2 or 3 and pursuit of the foregoing
remedies shall not be an exclusive election of such a remedy.
5. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
contracts made and to be performed entirely in such State.
6. Entire Agreement. This Agreement supersedes and terminates all
prior agreements between the parties hereto with respect to the subject matter
contained herein, and this Agreement embodies the entire understanding between
the parties relating to such subject matter, and any and all prior
correspondence, conversations and memoranda are merged herein and shall be
without effect hereon.
7. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of and be binding upon, the
successors and assigns of the parties hereto. Notwithstanding the foregoing,
the Company shall not assign any of its rights or obligations hereunder except
by operation of law. The Investor shall have the right to assign its rights
hereunder to any of its Affiliates, including, without limitation, Farallon
Capital Management, LLC, a Delaware limited liability company, except that
Investor shall have the right to assign its rights under Section 3 to any
Person, provided, however, that an assignment of such rights to a Person other
than an Affiliate of Investor shall be subject to the Company's consent, which
consent shall not be unreasonably withheld or delayed.
8. Notices, etc. All notices given pursuant to this Agreement shall
be in writing and shall be made by hand-delivery, first-class mail (registered
or certified, return receipt requested), facsimile or overnight air courier
guaranteeing next business day delivery:
(a) if to the Company:
Xxxxxxxx'x Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
and General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Four Times Square
New York, New York
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
or such other address or facsimile number
(or person's attention) as the Company may
designate in a notice to the Investor.
(b) if to the Investor:
Jewelry Investors II, L.L.C.
c/o Farallon Capital Management, LLC
Xxx Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
with a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
or such other address or facsimile number
(or person's attention) as the Investor
may designate in a notice to the Company.
9. Amendments or Waivers. This Agreement and any provision hereof may
only be amended, waived, discharged or terminated by written instrument signed
by the Company and the Investor.
10. Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and to consummate
the transactions contemplated hereby.
11. Non-Waiver. No delay on the part of any party in exercising any
right hereunder shall operate as a waiver thereof, nor shall any waiver,
express or implied, by any party of any right hereunder or of any failure to
perform or breach hereof by any other party constitute or be deemed a waiver
of any other right hereunder or of any other failure to perform or breach
hereof, whether of a similar or dissimilar nature.
12. Consent to Jurisdiction. All actions and proceedings arising out
of, or relating to, this Agreement may be heard and determined in any state or
federal court sitting in the county of Los Angeles in the State of California,
and by execution and delivery of this Agreement, each of the parties hereto
consent to the non-exclusive jurisdiction of those courts. The undersigned, by
execution and delivery of this Agreement, expressly and irrevocably (a)
consent and submit to the personal jurisdiction of any of such courts in any
such action or proceeding; (b) consent to the service of any complaint,
summons, notice or other process relating to any such action or proceeding by
delivery thereof to such party by hand or by certified mail, delivered or
addressed as set forth in Section 8; and (c) waive any claim or defense in any
such action or proceeding based on any alleged lack of personal jurisdiction,
improper venue or forum non conveniens or any similar basis.
13. WAIVER OF JURY TRIAL. THE COMPANY AND INVESTOR HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER IN CONTRACT, STATUE, TORT
(SUCH AS NEGLIGENCE) OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
14. Severability. If any provision of this Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to the other parties or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
applicable law.
15. Miscellaneous.
(a) Section headings are for convenience of reference only and
shall not be used to construe the meaning of any provision of this Agreement.
(b) This Agreement may be executed in counterparts, each of which
shall be an original, and which shall together constitute one agreement.
(c) Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires.
The words "herein," "hereof";" "hereby" or "hereto" shall refer to this
Agreement as a whole unless otherwise expressly provided. Any reference herein
to a Section shall be a reference to a Section of this Agreement unless the
context otherwise requires.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
XXXXXXXX'X INC.
By: /s/ Xxx Xxxxxx
--------------------------------------
Name: Xxx Xxxxxx
Title: Chief Executive Officer
JEWELRY INVESTORS II, L.L.C.
By: Farallon Capital Management, LLC, its member
By: /s/ Xxxxx Xxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxx
Title: Managing Member
