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EXHIBIT 10.1
Execution Copy
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") made as of this
15th day of October, 1996 by and between XXXXXXXX'X INC., a Delaware
corporation ("Lender"), 0 Xxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000, and
CRESCENT JEWELERS, a California corporation ("Borrower"), 000 00xx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000.
W I T N E S S E T H
WHEREAS, Borrower has requested that Lender make to Borrower a
$20,000,000 term loan, and Lender is willing to make such term loan to
Borrower, subject to the terms and conditions hereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Borrower, the parties agree as
follows:
1. DEFINITIONS.
(a) "ACCOUNT," "ACCOUNT DEBTOR," "CHATTEL PAPER," "DOCUMENTS,"
"EQUIPMENT," "GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS," "INVENTORY" and
"INVESTMENT PROPERTY" shall have the respective meanings assigned to such
terms, as of the date of this Agreement, in the Georgia Uniform Commercial
Code.
(b) "AFFILIATE" shall mean any Person directly or indirectly
controlling, controlled by or under common control with Borrower and shall in
any case include Xxxxxxxx'x Inc.
(c) "AGENT" shall mean LaSalle or its successor acting in its
capacity as agent under the LaSalle Loan Agreement.
(d) "BUSINESS DAY" shall mean (i) when used with respect to the
LIBOR Rate Loans, a day on which dealings may be effected in deposits of United
States Dollars in the London interbank foreign currency deposits market and on
which LaSalle is conducting and other banks may conduct business in London,
England and in the State of Illinois and (ii) when used with respect to any
other provision of this Agreement or Exhibit A, any day excluding Saturday,
Sunday and any day which is a legal holiday under the laws of the State of
Illinois or Georgia or is a day on which banking institutions located in either
such state are closed.
(e) "COLLATERAL" shall mean all of the property of Borrower
described in paragraph 4 hereof, together with all other real or personal
property of any Obligor or any other Person now or hereafter pledged to Lender,
to secure, either directly or indirectly, repayment of any of the Liabilities.
(f) "ENVIRONMENTAL LAWS" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous
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substances, pollution and environmental matters, as now or at any time
hereafter in effect, applicable to Borrower's business or facilities owned or
operated by Borrower, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contamination, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(g) "EVENT OF DEFAULT" shall have the meaning specified in
paragraph 12 hereof.
(h) "EXHIBIT A" shall mean the exhibit entitled Exhibit A -
Special Provisions which is attached hereto and made a part hereof.
(i) "EXHIBIT B" shall mean the exhibit entitled Exhibit B -
Business and Collateral Locations which is attached hereto and made a part
hereof, as amended from time to time in a manner consistent with this
Agreement.
(j) "EXHIBIT C" shall mean the exhibit entitled Exhibit C - List
of Contingent Liabilities which is attached hereto and made a part hereof.
(k) "EXHIBIT D" shall mean the exhibit entitled Exhibit D -
Existing Indebtedness which is attached hereto and made a part hereof.
(l) "EXHIBIT E" shall mean the exhibit entitled Exhibit E - Form
of Note which is attached hereto and made a part hereof.
(m) "EXHIBIT F" shall mean the exhibit entitled Exhibit F -
Permitted Liens which is attached hereto and made a part hereof.
(n) "EXISTING SUBORDINATED DEBT" shall have the meaning specified
in paragraph 7(c)(i) of Exhibit A.
(o) "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
dangerous substance, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous
or toxic under any Environmental Law).
(p) "INDEMNIFIED PARTY" shall have the meaning specified in
paragraph 14 hereof.
(q) "INTEREST PERIOD" shall have the meaning specified in
paragraph 2(b) of Exhibit A.
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(r) "LASALLE LOAN" shall mean a "Loan" under and as defined in
the LaSalle Loan Agreement.
(s) "LASALLE LOAN AGREEMENT" shall mean that certain Loan and
Security Agreement dated as of the date hereof by and among Borrower, the
financial institutions from time to time parties thereto as Lenders and Agent,
as amended, restated, supplemented or otherwise modified from time to time as
permitted under paragraph 11(s) hereof.
(y) "LENDER" shall mean Xxxxxxxx'x Inc. and any other Person
having an interest as a lender under this Agreement at such time pursuant to
paragraph 8 of Exhibit A or otherwise. All references to Lender shall mean
collectively each and all of such Persons and their respective successors and
assigns.
(u) "LENDERS" shall mean each financial institution from time to
time a "Lender" under the LaSalle Loan Agreement.
(v) "LIABILITIES" shall mean any and all obligations, liabilities
and indebtedness of Borrower hereunder and under the Other Agreements to Lender
or to any parent, affiliate or subsidiary of Lender of any and every kind and
nature, howsoever created, arising or evidenced and howsoever owned, held or
acquired, whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or otherwise
(including, without limitation, obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law. The term "Liabilities" shall not include
any of Borrower's indebtedness or other obligations owing under or in respect
of any of the Borrower's 10% Convertible Senior Subordinated Notes held by
Lender and which were issued pursuant to the terms of the Standby Purchase
Agreement dated as of the date hereof by and between Borrower and Lender, the
Note Purchase Agreement relating to such Notes or the Conversion Agreement
dated as of the date hereof by and among Borrower, Parent and Lender.
(w) "LIBOR" shall have the meaning specified in paragraph 2(b) of
Exhibit A to the LaSalle Loan Agreement.
(x) "LIBOR LOAN" shall mean that portion of the principal balance
of the Loan bearing interest at a rate based on LIBOR.
(y) "LOAN" shall mean the term loan made by or on behalf of Lender
to Borrower pursuant to paragraph 2 hereof and all other loans, advances and
financial accommodations made by or on behalf of Lender to or on behalf of
Borrower hereunder.
(z) LOCAL DEPOSITORY ACCOUNT" shall have the meaning specified in
paragraph 6 of Exhibit A.
(aa) "LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings
specified in paragraph 7 hereof.
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(bb) "MINIMUM TANGIBLE NET WORTH - COVENANT DEFINITION" shall have
the meaning specified in paragraph 11(p) hereof.
(cc) "OBLIGOR" shall mean Borrower and each other Person who is or
shall become primarily or secondarily liable for any of the Liabilities.
(dd) "OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, other than this Agreement, including, without limitation,
guaranties, mortgages, trust deeds, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases, financing
statements and all other writings heretofore, now or from time to time
hereafter executed by or on behalf of Borrower or any other Person and
delivered to Lender or to any parent, affiliate or subsidiary of Lender in
connection with the Liabilities or the transactions contemplated hereby.
(ee) "PARENT" shall mean any Person now or at any time or times
hereafter directly owning or controlling (alone or with any other Person) at
least a majority of the issued and outstanding stock of Borrower. As of the
date hereof, the "Parent" is Crescent Jewelers Inc., a Delaware corporation.
(ff) "PERMITTED LIENS" shall mean (i) statutory liens of landlords,
carriers, warehousemen, processors, mechanics, materialmen or suppliers
incurred in the ordinary course of business and securing amounts not yet due or
declared to be due by the claimant thereunder, (ii) liens or security interests
in favor of Lender (iii) liens or security interests in favor of Agent, for the
benefit of Agent and Lenders, to the extent permitted under the Subordination
Agreement, (iv) zoning restrictions and easements, licenses, covenants and
other restrictions affecting the use of real property that do not individually
or in the aggregate have a material adverse effect on Borrower's ability to use
such real property for its intended purpose in connection with Borrower's
business, and (v) liens specifically permitted by Lender in writing and liens
listed on Exhibit F hereto.
(gg) "PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.
(hh) "PRIME RATE" shall have the meaning specified in paragraph
2(a) of Exhibit A.
(ii) "PRIME RATE LOAN" shall mean that portion of the principal
balance of the Loan bearing interest at a rate based on the Prime Rate.
(jj) "REGULATORY CHANGE" shall have the meaning specified in
paragraph 3(b) of Exhibit A.
(kk) "SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement dated as of the date hereof by and among Lender, Agent
and Lenders.
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(ll) "SUBSIDIARY" shall mean any corporation or other entity of
which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time stock of any other class of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned by
Borrower or by any partnership, joint venture or limited liability company of
which more than fifty percent (50%) of the outstanding equity interests are at
the time, directly or indirectly, owned by Borrower or of which Borrower is a
general partner.
(mm) "TANGIBLE NET WORTH" shall mean Borrower's shareholders'
equity (including retained earnings) less the book value of all intangible
assets as determined solely by Lender on a consistent basis plus the amount of
any LIFO reserve plus the amount of any debt subordinated to Agent and Lenders
all as determined under generally accepted accounting principles applied on a
basis consistent with the financial statement of Borrower dated July 31, 1996.
2. TERM LOAN. Subject to the terms and conditions of this
Agreement (including Exhibit A) and the Other Agreements, Lender agrees to make
to Borrower a term loan in the amount of $20,000,000. The unpaid principal of
the Loan outstanding shall bear interest at the rates set forth in Exhibit A.
The entire outstanding principal balance, together with all accrued and unpaid
interest, shall be due and payable in full on October 15, 1999 (the "Maturity
Date"). Borrower may request that Lender extend the Maturity Date by
successive one-year intervals by executing and delivering to Lender at least
180 days but no more than 210 days prior to the current Maturity Date a
written request. Borrower acknowledges that Lender has not promised (either
expressly or impliedly), nor has any obligation or commitment whatsoever, to
extend the Maturity Date at any time. Lender shall notify Borrower in writing
(with a copy to Agent at its address for notices provided for under the
Subordination Agreement) on or before the date which is 151 days prior to the
current Maturity Date whether it agrees to the requested extension of the
Maturity Date or whether it has declined such request. Borrower hereby
authorizes Lender, in its sole discretion, to advance amounts to make any
payments of principal, interest, fees, costs and expenses required by this
Agreement which amounts shall be included as principal of the Loan. The Loan
shall be evidenced by a promissory note delivered to Lender in the amount of
$20,000,000 in substantially the form attached hereto as Exhibit E. If made,
the initial proceeds of the Loan shall be made available to Borrower as
requested in a letter to Lender.
3. FEES AND CHARGES. Borrower shall pay to Lender , in addition
to all other amounts payable hereunder, the fees and charges set forth in
Exhibit A. It is the intent of the parties that the rate of interest and the
other charges to Borrower under this Agreement shall be lawful; therefore, if
for any reason the interest or other charges payable under this Agreement are
found by a court of competent jurisdiction, in a final determination, to exceed
the limit which Lender may lawfully charge Borrower, then the obligation to pay
interest and other charges shall automatically be reduced to such limit and, if
any amount in excess of such limit shall have been paid, then such amount shall
be refunded to Borrower. The parties hereto hereby agree and stipulate that
the only charge imposed upon Borrower for the use of money in connection with
this Agreement is and shall be the interest specifically described in
subsections (a) and (b) of paragraph 2 of Exhibit A. The parties hereto
further agree and stipulate that all facility fees, default charges, late
charges, funding or "breakage" charges, increased cost charges, attorneys'
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fees and reimbursement for costs and expenses paid by Lender to third parties
or for damages incurred by Lender, are charges made to compensate the Lender
for underwriting or administrative services and costs or losses performed or
incurred, and to be performed or incurred, by Lender in connection with this
Agreement and shall under no circumstances be deemed to be charges for the use
of money pursuant to Official Code of Georgia Annotated Sections 7-4-2 and
7-4-18. All charges other than charges for the use of money shall be fully
earned and nonrefundable when due.
4. GRANT OF SECURITY INTEREST TO LENDER. As security for the
payment of the Loan and for the payment or other satisfaction of all other
Liabilities, Borrower hereby assigns to Lender, and grants to Lender a
continuing security interest in, the following property of Borrower, whether
now or hereafter owned, existing, acquired or arising and wherever now or
hereafter located: (a) all Accounts and all Chattel Paper and all Goods whose
sale, lease or other disposition by Borrower has given rise to Accounts or
Chattel Paper and have been returned to, or repossessed or stopped in transit
by Borrower; (b) all Instruments, Documents and General Intangibles (including,
without limitation, all patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, goodwill, copyrights, copyright
applications, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to
indemnification); (c) all Inventory; (d) all Goods (other than Inventory),
including, without limitation, Equipment, vehicles and fixtures; (e) all
computer hardware and software, including without limitation, computer
terminals, processing units, display terminals, disk drives, cables, peripheral
devices, source code, object code and all related applications and data files,
together with all documentation with respect to any of the foregoing and all
rights with respect to any of the foregoing in the nature of warranties,
service contracts, support agreements and maintenance rights; (f) all
Investment Property; (g) all deposits and cash; (h) any other property of
Borrower now or hereafter in the possession, custody or control of Agent, any
of the Lenders, Lender or any agent or any parent, affiliate or subsidiary of
Agent, any of the Lenders, Lender or any participant with Lender in the Loan
for any purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); and (i) all additions and accessions to,
substitutions for, and replacements, products and proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of Borrower's books and records
relating to any of the foregoing and to Borrower's business.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN. Borrower shall, at Lender's request, at any time and from
time to time, execute and deliver to Lender such financing statements,
documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed necessary or desirable by
Lender) and do such other acts and things as Lender may deem necessary or
desirable in its sole discretion in order to establish and maintain a valid,
attached and perfected security interest in the Collateral in favor of Lender,
(free and clear of all other liens, claims, encumbrances and rights of third
parties whatsoever, whether voluntarily or involuntarily created, except
Permitted Liens) to secure payment of the Liabilities, and in order to
facilitate the collection of the Collateral. Each item of Chattel Paper shall,
at Lender's sole election, be delivered to Lender (or its designee) or be
conspicuously marked with a legend stating that such Chattel Paper is subject
to the security interest granted to Lender. All items of Inventory held by
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Borrower as consignee shall be clearly marked as such and shall be segregated
from Inventory owned by Borrower. Borrower irrevocably hereby makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney and agent-in-fact to execute
such financing statements, documents and other agreements and instruments and
do such other acts and things as may be necessary to preserve and perfect
Lender's security interest in the Collateral. Borrower further agrees that a
carbon, photographic, photostatic or other reproduction of this Agreement or of
a financing statement shall be sufficient as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Unless an
"Event of Default" has occurred and is continuing, Borrower shall have the
right, except as otherwise provided in this Agreement, in the ordinary course
of Borrower's business, to (a) sell, lease or furnish under contracts of
service any of Borrower's Inventory normally held by Borrower for any such
purpose, and (b) use and consume any raw materials, work in process or other
materials normally held by Borrower for such purpose; provided, however, that a
sale in the ordinary course of business shall not include any transfer or sale
in satisfaction, partial or complete, of a debt owed by Borrower.
7. COLLECTIONS.
(a) Subject to the provisions of paragraph 6 of Exhibit A,
Borrower shall direct all of its Account Debtors to make all payments on
Chattel Paper directly to a post office box (the "Lock Box") designated by, and
under the exclusive control of, LaSalle or another financial institution
acceptable to Lender. Borrower shall establish an account (the "Lock Box
Account") in Borrower's name with LaSalle or such other financial institution
acceptable to Lender, into which all payments received in the Lock Box shall be
deposited, and into which Borrower will immediately deposit all payments
received by Borrower for Inventory or services in the identical form in which
such payments were received, whether by cash or check. If Borrower, any
Affiliate or Subsidiary, or any shareholder, officer, director, employee or
agent of Borrower or any Affiliate or Subsidiary, or any other Person acting
for or in concert with Borrower shall receive any monies, checks, notes, drafts
or other payments relating to or as proceeds of Chattel Paper or other
Collateral, Borrower and each such Person shall receive all such items in trust
for Lender and, immediately upon receipt thereof, shall remit the same (or
cause the same to be remitted) in kind to the Lock Box Account. If the Lock
Box Account is not established with LaSalle, the financial institution with
which the Lock Box Account is established shall acknowledge and agree, in a
manner satisfactory to Lender, that such financial institution has no right to
setoff against the Lock Box Account or against any other account maintained by
such financial institution into which the contents of the Lock Box Account are
transferred, and that such financial institution shall wire, or otherwise
transfer in immediately available funds in a manner satisfactory to Lender,
funds deposited in the Lock Box Account on a daily basis as such funds are
collected. Borrower agrees that all payments made to such Lock Box Account or
otherwise received by Lender, whether in respect of Chattel Paper or as
proceeds of other Collateral or otherwise, will be applied on account of the
Liabilities in accordance with the terms of this Agreement. Borrower agrees to
pay all customary fees, costs and expenses which such financial institution
incurs in connection with opening and maintaining the Lock Box Account with
respect to Borrower and depositing for collection any check or other item of
payment received by Lender on account of
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the Liabilities. All of such fees, costs and expenses may, in Lender's sole
discretion, be paid by Lender on Borrower's behalf, and such payments by Lender
shall constitute principal of the Loan, shall be payable to Lender by Borrower
upon demand, and, until paid, shall bear interest at the highest rate then
applicable to the Loan hereunder. All checks, drafts, instruments and other
items of payment or proceeds of Chattel Paper or other Collateral shall be
endorsed by Borrower to Lender (or its designee), and, if that endorsement of
any such item shall not be made for any reason, Lender is hereby irrevocably
authorized to endorse the same on Borrower's behalf. For the purpose of this
paragraph, Borrower irrevocably hereby makes, constitutes and appoints Lender
(and all Persons designated by Lender for that purpose) as Borrower's true and
lawful attorney and agent-in-fact (i) to endorse Borrower's name upon said
items of payment and/or proceeds of Chattel Paper or other Collateral and upon
any Chattel Paper, Document, Instrument, invoice or similar document or
agreement relating to any amounts owed to Borrower or goods pertaining thereto;
(ii) to take control in any manner of any item of payment or proceeds thereof;
and (iii) to have access to any lock box or postal box into which any of
Borrower's mail is deposited, and open and process all mail addressed to
Borrower and deposited therein.
(b) Lender may, at any time and from time to time, whether before
or after notification to any Account Debtor and whether before or after the
maturity of any of the Liabilities, (i) enforce collection of any of Borrower's
Chattel Paper, Accounts or other amounts owed to Borrower by suit or otherwise;
(ii) exercise all of Borrower's rights and remedies with respect to proceedings
brought to collect any Chattel Paper, Accounts or other amounts owed to
Borrower; (iii) surrender, release or exchange all or any part of any amounts
owed to Borrower and evidenced by Chattel Paper, Accounts or other amounts owed
to Borrower, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder; (iv) sell or
assign any Chattel Paper, Account or other amounts owed to Borrower upon such
terms, for such amount and at such time or times as Lender deems advisable; (v)
prepare, file and sign Borrower's name on any proof of claim in bankruptcy or
other similar document against any Account Debtor or other Person obligated to
Borrower; and (vi) do all other acts and things which are necessary, in
Lender's sole discretion, to fulfill Borrower's obligations under this
Agreement and to allow Lender to collect the Chattel Paper or Accounts or other
amounts owed to Borrower. In addition to any other provision hereof, Lender
may at any time after the occurrence and during the continuance of an Event of
Default, at Borrower's expense, notify any parties obligated on any of the
Chattel Paper or Accounts to make payment directly to Lender (or its designee)
of any amounts due or to become due thereunder.
(c) Lender, in its sole discretion, without waiving or releasing
any obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Lender in respect thereof and all costs, fees
and expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Lender shall
constitute principal of the Loan, payable by Borrower to Lender on demand and,
until paid, shall bear interest at the highest rate then applicable to the Loan
hereunder.
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(d) Immediately upon Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document (other than
Chattel Paper, which shall be governed by paragraph 5 hereof), Borrower shall
deliver the original thereof to Lender (or its designee) together with an
appropriate endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender). If an endorsement or
assignment of any such items shall not be made for any reason, Lender is hereby
irrevocably authorized, as Borrower's attorney and agent-in-fact, to endorse or
assign the same on Borrower's behalf.
8. SCHEDULES AND REPORTS.
(a) At such times as may be required by Lender from time to time
hereafter, Borrower shall deliver to Lender (i) a schedule identifying each
item of Eligible Chattel Paper (as defined in the LaSalle Loan Agreement),
together with copies thereof when requested by Lender (with cash register point
of sale documentation attached) pertaining to each such Eligible Chattel Paper,
for the month (or other applicable period) immediately preceding; (ii) such
additional schedules, certificates, reports and information with respect to the
Collateral as Lender may from time to time require; and (iii) an assignment of
any or all items of Collateral to Lender if requested. Lender, through its
officers, employees or agents, shall have the right, at any time and from time
to time in Lender's name, in the name of a nominee of Lender or in Borrower's
name, to verify the validity, amount or any other matter relating to Borrower's
Chattel Paper and Accounts, by mail, telephone, telegraph or otherwise.
Borrower shall reimburse Lender, on demand, for all costs, fees and expenses
incurred by Lender in this regard.
(b) Without limiting the generality of the foregoing, Borrower
shall deliver to Lender if requested, at least twice a month, on the fifteenth
(15th) and the last days of each month (or more frequently when requested by
Lender), a report with respect to Borrower's Inventory and a report listing all
Inventory held by Borrower as consignee, indicating the identity of the
consignor and the value of the consigned Inventory. Borrower shall immediately
notify Lender of any event causing loss or depreciation in value of Borrower's
Inventory (other than normal depreciation occurring in the ordinary course of
business).
(c) If requested by Lender, Borrower shall furnish to Lender
copies of each schedule and report delivered to Agent or any of the Lenders
under paragraph 9 of the LaSalle Loan Agreement simultaneously with the
delivery thereof.
(d) All schedules, certificates, reports, assignments and other
items delivered by Borrower to Lender hereunder shall be executed by an
authorized representative of Borrower and shall be in such form and contain
such information as Lender shall reasonably specify.
9. TERMINATION. This Agreement shall be in effect until the date
that the Liabilities are paid in full. At such time as Borrower has repaid all
of the Liabilities and this Agreement has terminated, Borrower and Lender shall
deliver to each other a mutual release, in form and substance reasonably
satisfactory to Lender, of all obligations and liabilities of Borrower and its
officers, directors, employees, agents, parents, subsidiaries and affiliates
(other than, in the case of Borrower, its indemnification obligations under
Section 14 hereof) to Lender and of Lender, and its officers, directors,
employees, agents, parents, subsidiaries and affiliates to
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Borrower. If, during the term of this Agreement, Borrower prepays all or any
portion of the Liabilities, and in connection therewith, either (a) permits any
security agreement, financing statement or analogous instrument to be executed
or filed with respect to the Collateral for the benefit of someone other than
Lender other than with respect to Permitted Liens, or (b) creates, incurs, or
assumes any liability for borrowed money (except for borrowings under the
LaSalle Loan Agreement and borrowings permitted pursuant to paragraph 10(p)
hereof), Borrower agrees to pay to Lender, as a prepayment fee, in addition to
the payment of all other Liabilities, an amount equal to three percent (3%) of
the outstanding principal balance of the Loan outstanding at the time of such
prepayment if such prepayment occurs on or before the first anniversary of the
date of this Agreement; and two percent (2%) of the outstanding principal
balance of the Loan outstanding at the time of such prepayment if such
prepayment occurs after the first anniversary of the date of this Agreement but
on or before the second anniversary of the date of this Agreement; provided,
however, that (i) if the Loan is paid down to zero in connection with either an
initial public offering of stock of Borrower or a merger by Borrower with and
into Lender or a subsidiary or affiliate of Lender, no prepayment fee shall be
assessed and (ii) if the Loan is prepaid in whole or in part as a result of the
exercise by Lender of its rights under the Conversion Agreement dated as of the
date hereof by and between Borrower, Parent and Lender, then no prepayment fee
shall be assessed in connection with such prepayment.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower hereby
represents, warrants and covenants that:
(a) the financial statements delivered or to be delivered by
Borrower to Lender at or prior to the date of this Agreement and at all times
subsequent thereto accurately reflect the financial condition of Borrower as of
the dates of such financial statements, and there has been no material adverse
change in the financial condition, the operations or any other status of
Borrower since the date of the financial statements delivered to Lender most
recently prior to the date of this Agreement;
(b) the office where Borrower keeps its books, records and
accounts (or copies thereof) concerning the Collateral, Borrower's principal
place of business and all of Borrower's other places of business, locations of
Collateral and post office boxes are as set forth in Exhibit B, as amended from
time to time with Lender's consent; Borrower shall promptly (but in no event
less than thirty (30) days prior thereto) advise Lender in writing of the
proposed opening of any new place of business, the closing of any existing
place of business, any change in the location of Borrower's books, records and
accounts (or copies thereof) or the opening or closing of any post office box
of Borrower;
(c) the Collateral, including, without limitation, the Equipment
(except any part thereof which prior to the date of this Agreement Borrower
shall have advised Lender in writing consists of Collateral normally used in
more than one state) is and shall be kept, or, in the case of vehicles, based,
only at the addresses set forth on the first page of this Agreement or on
Exhibit B, as amended from time to time with Lender's consent, and at other
locations within the continental United States of which Lender has been advised
by Borrower in writing;
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(d) if any of the Collateral consists of Goods of a type normally
used in more than one state, whether or not actually so used, Borrower shall
promptly give written notice to Lender of any use of any such Goods in any
state other than a state in which Borrower has previously advised Lender such
Goods shall be used, and such Goods shall not, unless Lender shall otherwise
consent in writing, be used outside of the continental United States;
(e) no security agreement, financing statement or analogous
instrument exists or shall exist with respect to any of the Collateral other
than any security agreement, financing statement or analogous instrument
evidencing security interests in favor of Lender or evidencing Permitted Liens;
(f) Borrower is and shall at all times while this Agreement
remains in effect be the lawful owner of all Collateral now purportedly owned
or hereafter purportedly acquired by Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than Permitted Liens;
(g) Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any material agreement, contract or other document
which may now or hereafter be binding on Borrower, and Borrower's execution,
delivery and performance of this Agreement and the Other Agreements shall not
result in the imposition of any lien or other encumbrance upon any of
Borrower's property under any existing indenture, mortgage, deed of trust, loan
or credit agreement or other agreement or instrument by which Borrower or any
of its property may be bound or affected;
(h) there are no actions or proceedings which are pending or, to
the best of Borrower's knowledge, threatened against Borrower which might
result in any material adverse change in its financial condition or materially
adversely affect the Collateral and Borrower shall, promptly upon becoming
aware of any such pending or threatened action or proceeding, give written
notice thereof to Lender;
(i) Borrower has obtained all licenses, authorizations, approvals
and permits the lack of which would have a material adverse effect on the
operation of its business, and Borrower is and shall remain in compliance in
all material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, statutes, orders, regulations, rules and ordinances relating to
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety or
environmental matters) the failure to comply with which would have a material
adverse effect on its business, property, assets, operations or condition,
financial or otherwise;
(j) all written information now, heretofore or hereafter furnished
by Borrower to Lender (other than projections, which shall be based on
reasonable assumptions) is and shall be true and correct in all material
respects as of the date with respect to which such information was or is
furnished;
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(k) Borrower is not conducting, permitting or suffering to be
conducted, and Borrower shall not conduct, permit or suffer to be conducted,
any activities pursuant to or in connection with which any of the Collateral is
now, or will (while any Liabilities remain outstanding) be owned by any
Affiliate; provided, however, that Borrower may enter into transactions with
Affiliates in the ordinary course of business pursuant to terms that are no
less favorable to Borrower than the terms upon which such transfers or
transactions would have been made had they been made to or with a Person that
is not an Affiliate and, in connection therewith, may transfer cash or property
to Affiliates for fair value;
(l) Borrower's name has always been as set forth on the first page
of this Agreement and, except for the trade name "X. Xxxxxx Jewelers," Borrower
does not use trade names or division names in the operation of its business,
except as otherwise disclosed in writing to Lender; Borrower shall notify
Lender in writing within ten (10) days of the change of its name or the use of
any trade names or division names not previously disclosed to Lender in
writing;
(m) with respect to Borrower's Equipment: (i) Borrower has good
and indefeasible and merchantable title to and ownership of all of its
Equipment (other than that which is leased), including, without limitation, the
Equipment described or listed on Schedule 1 hereof other than Equipment that
is disposed of in the ordinary course of business with all proceeds of such
dispositions being paid to Lender for application to the Liabilities; (ii)
Borrower shall keep and maintain the Equipment in good operating condition and
repair (ordinary wear and tear excepted) and shall make all necessary
replacements thereof and renewals thereto so that the value and operating
efficiency thereof shall at all times be preserved and maintained; (iii)
Borrower shall not permit any such items to become a fixture to real estate or
an accession to other personal property; and (iv) Borrower, immediately on
demand by Lender, shall deliver to Lender any and all evidence of ownership of,
including, without limitation, certificates of title and applications of title
to, any of the Equipment;
(n) this Agreement and the Other Agreements to which Borrower is a
party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms;
(o) Borrower is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business, now owns property
having a value both at fair valuation and at present fair saleable value
greater than the amount required to pay its debts, and will not be rendered
insolvent by the execution and delivery of this Agreement or any of the Other
Agreements or by completion of the transactions contemplated hereunder or
thereunder;
(p) Borrower is not now obligated, nor shall it create, incur,
assume or become obligated (directly or indirectly), for any loans or other
indebtedness for borrowed money other than the Loan, and the indebtedness and
obligations under the LaSalle Loan Agreement except that Borrower may (i)
borrow money from a Person other than Lender on an unsecured and subordinated
basis (including up to $5,000,000 of money borrowed from Lender and up to
$3,000,000 of money borrowed from another Person, in each case pursuant to the
terms of a Note Purchase Agreement in the form of Exhibit A to the Standby
Purchase Agreement dated as of the date hereof between Lender and Borrower) if
a subordination agreement in favor of Lender
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and in form and substance satisfactory to Lender is executed and delivered to
Lender relative thereto; (ii) maintain the Existing Subordinated Debt; (iii)
incur other unsecured indebtedness for borrowed money not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate at any time outstanding; and
(iv) incur unsecured indebtedness to trade creditors in the ordinary course of
Borrower's business;
(q) Borrower does not own any margin securities having a
marked-to-market value of more than Two Hundred Fifty Thousand Dollars
($250,000), and none of the proceeds of the Loan hereunder shall be used for
the purpose of purchasing or carrying any margin securities or for the purpose
of reducing or retiring any indebtedness which was originally incurred to
purchase any margin securities or for any other purpose not permitted by
Regulation G or Regulation U of the Board of Governors of the Federal Reserve
System as in effect from time to time;
(r) except as otherwise disclosed in writing to Lender, Borrower
has no Parents, Subsidiaries or divisions, except that Crescent Jewelers, Inc.,
a Delaware corporation, is the Parent of Borrower and Diamond Insurance Company
is a wholly-owned subsidiary of Borrower; and Borrower is not engaged in any
joint venture or partnership with any Person;
(s) Borrower is a corporation duly organized and in good standing
in the State of California and Borrower is duly qualified and in good standing
in all states where the nature and extent of the business transacted by it or
the ownership of its assets makes such qualification necessary, except where
the failure to so qualify would not have a material adverse effect on Borrower;
(t) Borrower is not in default under any material contract, lease
or commitment to which it is a party or by which it is bound (including any of
the documents, instruments and agreements set forth on Exhibit D), nor does
Borrower know of any dispute regarding any contract, lease or commitment which
is material to the continued financial success of Borrower, except where such
default or dispute would not have a material adverse effect on Borrower;
(u) there are no material controversies pending or, to the best of
Borrower's knowledge, threatened between Borrower and any of its employees,
other than employee grievances arising in the ordinary course of business which
are not, in the aggregate, material to the continued financial success and
well-being of Borrower, and Borrower is in compliance in all material respects
with all federal and state laws respecting employment and employment terms,
conditions and practices; and
(v) Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, trade styles and trade names to continue to conduct its
business as heretofore conducted by it.
Borrower represents, warrants and covenants to Lender that all representations
and warranties of Borrower contained in this Agreement (whether appearing in
paragraphs 10 or 11 hereof or elsewhere) shall be true at the time of
Borrower's execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full of all of the
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Liabilities and termination of this Agreement, and shall be deemed remade by
Borrower at the time any LaSalle Loan is made under the LaSalle Loan Agreement.
11. ADDITIONAL COVENANTS OF BORROWER. Until payment or
satisfaction in full of all Liabilities and termination of this Agreement,
unless Borrower obtains the prior written consent of the Lender waiving or
modifying any of Borrower's covenants hereunder in any specific instance,
Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of Borrower's business activities, in
accordance with generally accepted accounting principles consistently applied,
and shall keep such books, records and accounts, and any copies thereof, only
at the addresses indicated for such purpose on Exhibit B;
(b) Borrower agrees to deliver to Lender the following financial
information, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied: (i) no later than twenty-
five (25) days after each calendar month, copies of internally prepared
financial statements, including, without limitation, balance sheets and
statements of income, retained earnings and cash flow of Borrower, on a
consolidated basis, certified by the Chief Financial Officer of Borrower; (ii)
no later than forty-five (45) days after the end of each of the first three
quarters of Borrower's fiscal year a balance sheet, operating statement and
reconciliation of surplus of Borrower, each on a consolidated and consolidating
basis, which quarterly financial statements may be unaudited but shall be
certified by the Chief Financial Officer of Borrower; (iii) together with each
financial statement delivered pursuant to clauses (i) and (ii) of this
subparagraph 11(b), a certificate executed by the Chief Financial Officer of
Borrower stating that no Event of Default or event which with notice or the
passage of time or both would become an Event of Default has occurred (or, if
an Event of Default or any such other event has occurred, describing such event
and stating what actions Borrower has taken or intends to take as a result
thereof) and showing the calculations made to demonstrate that Borrower has
complied with all financial covenants contained in this Agreement and Exhibit
A; (iv) no later than ninety (90) days after the end of each of Borrower's
fiscal years (including the fiscal year ended July 31, 1996), annual financial
statements on a consolidated and consolidating basis with an unqualified
opinion by independent certified public accountants selected by Borrower and
reasonably satisfactory to Lender; and (v) a copy of any management letters
sent to Borrower by such accountants;
(c) Borrower shall promptly advise Lender in writing of any
material adverse change in the business, assets or condition, financial or
otherwise, of Borrower, the occurrence of any Event of Default hereunder or the
occurrence of any event which, if incurred, will become an Event of Default
hereunder after notice or lapse of time (or both);
(d) Lender, or any Persons designated by it, shall have the right,
at any time, to call at Borrower's places of business at any reasonable times,
and, without hindrance or delay, to inspect the Collateral and to inspect,
audit, check and make extracts from Borrower's books, records, journals,
orders, receipts and any correspondence and other data relating to Borrower's
business, the Collateral or any transactions between the parties hereto, and
shall have the right to make such verification concerning Borrower's business
as Lender may consider reasonable under the
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circumstances. Borrower shall furnish to Lender such information relevant to
Lender's rights under this Agreement as Lender shall at any time and from time
to time request. Borrower authorizes Lender to discuss the affairs, finances
and business of Borrower with any officers, employees or directors of Borrower
or with any Affiliate or the officers, employees or directors of any Affiliate,
and to discuss the financial condition of Borrower with Borrower's independent
public accountants. Any such discussions shall be without liability to Lender.
Borrower shall pay to Lender all customary fees and out-of-pocket expenses
incurred by Lender in the exercise of its rights hereunder, and all of such
fees and expenses shall constitute principal of the Loan hereunder, shall be
payable on demand and, until paid, shall bear interest at the highest rate then
applicable to the Loan hereunder;
(e) Borrower shall:
(i) keep the Collateral properly housed and insured for
the full insurable value thereof against loss or damage by fire,
theft, explosion, sprinklers, collision (in the case of motor
vehicles) and such other risks as are customarily insured against by
Persons engaged in businesses similar to that of Borrower, with such
companies, in such amounts, with such deductibles and under policies
in such form as shall be reasonably satisfactory to Lender. If
requested by Lender, original (or certified) copies of such policies
of insurance shall be delivered to Lender promptly upon request,
together with evidence of payment of all premiums therefor. Borrower
shall deliver to Lender upon its request a copy of an endorsement to
such insurance policies, in form and substance acceptable to Lender,
showing loss under such insurance policies payable to Lender as its
interest may appear. Such endorsement, or an independent instrument
furnished to Lender, shall provide that the insurance company shall
give Lender at least thirty (30) days written notice before any such
policy of insurance is altered or canceled and that no act, whether
willful or negligent, or default of Borrower or any other Person shall
affect the right of Lender to recover under such policy of insurance
in case of loss or damage. In addition, Borrower shall cause to be
executed and delivered to Lender an assignment of proceeds of its
business interruption insurance policies. Borrower hereby directs all
insurers under all policies of insurance to pay all proceeds payable
thereunder directly to Lender (or its designee). Borrower
irrevocably, makes, constitutes and appoints Lender (and all officers,
employees or agents designated by Lender) as Borrower's true and
lawful attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of insurance,
endorsing the name of Borrower on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance
and making all determinations and decisions with respect to such
policies of insurance; and
(ii) maintain, at its expense, such public liability and
third party property damage insurance as is customary for Persons
engaged in businesses similar to that of Borrower with such companies
and in such amounts, with such deductibles and under policies in such
form as shall be reasonably satisfactory to Lender. Borrower shall
deliver original (or certified) copies of such policies to Lender
promptly upon Lender's request, together with evidence of payment of
all premiums therefor; each such policy shall contain an endorsement
showing Lender as additional insured thereunder and providing that the
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insurance company shall give Lender at least thirty (30) days written
notice before any such policy shall be altered or canceled.
If Borrower 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
relating thereto, then Lender, without waiving or releasing any obligation or
default by Borrower hereunder, may (but shall be under no obligation to) obtain
and maintain such policies of insurance and pay such premiums and take such
other actions with respect thereto as Lender reasonably deems advisable. All
sums disbursed by Lender in connection with any such actions, including,
without limitation, court costs, expenses, other charges relating thereto and
reasonable attorneys' fees, shall constitute principal of the Loan hereunder,
and shall be payable on demand by Borrower to Lender and, until paid, shall
bear interest at the highest rate then applicable to the loan hereunder. As of
the date hereof, Lender is satisfied that Borrower is in compliance with this
Section 11(e);
(f) Borrower shall not use the Collateral, or any part thereof, in
any unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a material violation of any applicable environmental laws, rules
or regulations; Borrower shall keep the Collateral in good condition, repair
and order (ordinary wear and tear excepted); shall permit Lender to examine any
of the Collateral at any time and wherever the Collateral may be located; shall
not permit the Collateral, or any part thereof, to be levied upon under
execution, attachment, distraint or other legal process; shall not sell, lease,
grant a security interest in or otherwise dispose of any of the Collateral
except as expressly permitted by this Agreement; shall not, following the
occurrence of an Event of Default, settle or adjust any amounts due with
respect to any Chattel Paper without the consent of Lender (except for
adjustments in the ordinary course that are reported to Lender within two (2)
Business Days); and shall not secrete or abandon any of the Collateral, or
remove or permit removal of any of the Collateral from any of the locations
listed on Exhibit B, except for the removal of Inventory sold in the ordinary
course of Borrower's business as permitted herein;
(g) all monies and other property obtained by Borrower from Lender
pursuant to this Agreement will be used solely for business purposes of
Borrower;
(h) Borrower shall, at the request of Lender, indicate on its
records concerning the Collateral a notation, in form satisfactory to Lender,
of the security interest of Lender hereunder;
(i) Borrower shall file all required tax returns and pay all of
its taxes when due, including, without limitation, taxes imposed by federal,
state or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the payment
of such taxes in good faith by appropriate proceedings so long as (i) the
amount so contested is reserved for on Borrower's financial statements, (ii)
the contesting of any such payment does not give rise to a lien for taxes,
(iii) Borrower keeps on deposit with Lender (or its designee) (such deposit to
be held without interest) an amount of money which, in the sole judgment of
Lender, is sufficient to pay such taxes and any interest or penalties that may
accrue thereon, and (iv) if Borrower fails to prosecute such contest with
reasonable diligence, Lender may apply the money so deposited in payment of
such taxes. If Borrower fails to pay any such taxes and in the absence of any
such contest by Borrower, Lender may (but shall be under no
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obligation to) advance and pay any sums required to pay any such taxes and/or
to secure the release of any lien therefor, and any sums so advanced by Lender
shall constitute principal of the Loan hereunder, shall be payable by Borrower
to Lender on demand, and, until paid, shall bear interest at the highest rate
then applicable to the Loan hereunder;
(j) Except for those items listed on Exhibit C hereto, Borrower
shall not assume, guarantee or endorse, or otherwise become liable in
connection with, the obligations of any Person, except by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business;
(k) Borrower shall not (i) enter into any merger or consolidation
(ii) sell, lease or otherwise dispose of any of its assets except in the
ordinary course of business; (iii) purchase all or substantially all of the
assets of any Person or any division of any Person, or (iv) enter into any
other transaction outside the ordinary course of Borrower's business,
including, without limitation, any purchase, redemption or retirement of any
shares of any class of its stock or any other equity interest, and any issuance
of any shares of, or warrants or other rights to receive or purchase any shares
of, any class of its stock or any other equity interest;
(l) Borrower shall not declare or pay any dividend or other
distribution (whether in cash or in kind) on any class of its stock (if
Borrower is a corporation) or on account of any equity interest in Borrower (if
Borrower is a partnership, limited liability company or other type of entity)
and Borrower shall not make any additional investments in or make or suffer to
exist any loans or intercompany obligations owing to or by Borrower from or to
its Parent or any subsidiary, or affiliate of Borrower except indebtedness
under a note payable to Subsidiary in the amount of $10,581,000, as increased
from time to time hereafter;
(m) Borrower shall not purchase or otherwise acquire, or contract
to purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States;
(n) Borrower shall not amend its organizational documents or
change its fiscal year or enter into a new line of business materially
different from Borrower's current business;
(o) Borrower's Tangible Net Worth shall at no time be less than
the "Minimum Tangible Net Worth - Covenant Definition"; "Minimum Tangible Net
Worth - Covenant Definition" for any period means the amount set forth opposite
said period below:
Period Amount
------ ------
August 31 through November 30, 1996 $16,300,000.00
December 1, 1996 through November 30, 1997 $19,000,000.00
December 1, 1997 through November 30, 1998 $22,300,000.00
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December 1, 1998 through November 30, 1999 $27,800,000.00
(p) Borrower shall reimburse Lender for all costs and expenses,
including, without limitation, legal expenses and reasonable attorneys' fees,
incurred by Lender in connection with documentation and consummation of this
transaction and any other transactions between Borrower and Lender, including,
without limitation, Uniform Commercial Code and other public record searches,
and filings, overnight courier or other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs; (ii) collection, protection or enforcement of any rights in or to the
Collateral; (iii) collection of any Liabilities and (iv) administration and
enforcement of any of Lender's rights under this Agreement. Following the
occurrence of an Event of Default, Borrower shall reimburse Lender for all
costs and expenses, including, without limitation, legal expenses and
reasonable attorneys' fees, incurred by Lender in seeking to collect any
Liabilities owing to Lender and to enforce any of Lender's rights under this
Agreement or under any of the Other Agreements. All such costs, expenses and
charges shall constitute principal of the Loan hereunder, shall be payable by
Borrower to Lender on demand, and, until paid, shall bear interest at the
highest rate then applicable to the Loan hereunder;
(q) Borrower shall not purchase or otherwise acquire (including,
without limitation, acquisition by way of capitalized lease), or commit to
purchase or acquire, any fixed asset if, after giving effect to such purchase
or other acquisition, the aggregate cost of all such fixed assets purchased or
otherwise acquired would, during any fiscal year, exceed the amount set forth
opposite such fiscal year below;
Fiscal Year Amount
----------- ------
1997 $3,500,000.00
1998 $4,400,000.00
1999 $5,300,000.00
(r) Borrower shall deliver to Lender promptly upon Borrower's
receipt a copy of any notice or other communication received by Borrower from
Agent, any of the Lenders or any other Person under or in any way relating to
the LaSalle Loan Agreement where such notice or other communication states or
claims the existence or occurrence of any default or event of default under the
terms of the LaSalle Loan Agreement or any Other Agreement (as defined in the
LaSalle Loan Agreement); and
(s) Borrower shall not amend any of the terms and conditions of
any document evidencing or relating to any of the Existing Subordinated Debt.
12. DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default" by Borrower hereunder:
(a) the failure of any Obligor to pay when due, declared due, or
demanded by Lender, in accordance with the terms of this Agreement, any of the
Liabilities;
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(b) the failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under this Agreement or any of the Other Agreements;
(c) An Obligor shall fail to pay when due and payable the
principal of, or interest on, any indebtedness for money borrowed (other than
the Loan) having an aggregate outstanding principal amount of Five Hundred
Thousand Dollars ($500,000) or more; or the maturity of any such indebtedness
shall have (x) been accelerated in accordance with the provisions of any
indenture, contract or instrument evidencing, providing for the creation of or
otherwise concerning such indebtedness or (y) been required to be prepaid prior
to the stated maturity thereof; or any other event shall have occurred and be
continuing which, with or without the passage of time, the giving of notice or
otherwise, would permit any holder or holders of such indebtedness, or any
other Person, to accelerate the maturity of any such indebtedness or require
any such indebtedness to be prepaid prior to its stated maturity.
(d) the failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under any other agreement with any Person if such failure is reasonably likely
to have a material adverse effect on such Obligor's business, property, assets,
operations or condition, financial or otherwise;
(e) the making or furnishing by any Obligor to Lender of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and Lender, which is
untrue or misleading in any material respect;
(f) the loss, theft, damage or destruction (except where insurance
coverage conforming to the requirements of this Agreement exists and the
insurer has admitted liability) of, or (except as permitted hereby) sale, lease
or furnishing under a contract of service of, any of the Collateral, in each
case with respect to Collateral having a value in the aggregate; in excess of
the lesser of One Million Dollars ($1,000,000) or Borrower's shrinkage reserve
from time to time;
(g) the creation (whether voluntary or involuntary) of any lien or
other encumbrance upon any of the Collateral, other than the Permitted Liens,
or the making or any attempt to make any levy, seizure or attachment thereof;
(h) the commencement of any proceedings in bankruptcy by or
against any Obligor or for the liquidation or reorganization of any Obligor, or
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or for the readjustment or arrangement of any Obligor's debts, whether
under the United States Bankruptcy Code or under any other law, whether state
or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings
against such Obligor is involuntary, such action shall not constitute an Event
of Default unless such proceedings are not dismissed within thirty (30) days
after the commencement of such proceedings;
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(i) the appointment of a receiver or trustee for any Obligor, for
any of the Collateral or for any substantial part of any Obligor's assets or
the institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or partnership; provided, however, that
if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed or stayed
within thirty (30) days after the commencement of such proceedings;
(j) the entry of any judgment or order against any Obligor in an
amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate for all such judgments and orders, which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution;
(k) the dissolution of any Obligor which is a partnership, limited
liability company or corporation;
(l) the cessation of employment of Xxxxxxx Xxxxx in the position
of Chief Executive Officer (or his failure to continue to perform the duties of
Chief Executive Officer) of Borrower for any reason other than death or
permanent disability, or the failure of Xxxxxx Xxxxxx & Co., Inc. to own,
directly and beneficially, sufficient shares of the Borrower's stock to
exercise at least fifty-one percent (51%) of the voting control of Parent or
Parent ceases to own, directly and beneficially, one hundred percent (100%) of
the outstanding stock of Borrower;
(m) the occurrence of an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by any Person to Lender pursuant to which such Person has guaranteed to Lender
the payment of all or any of the Liabilities or has granted Lender a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities; and
(n) the institution in any court of a criminal proceeding against
any Obligor, or the indictment of any Obligor for any crime.
13. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in
paragraph 12(h) hereof, all of Borrower's Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all Liabilities may, at the option of
the Lender, and without demand, notice or legal process of any kind, be
declared, and immediately shall become, due and payable.
(b) Upon the occurrence and during the continuation of an Event of
Default, Lender may exercise from time to time any rights and remedies
available to it under the Uniform Commercial Code and any other applicable law
in addition to, and not in lieu of, any rights and remedies expressly granted
in this Agreement or in any of the Other Agreements and all of Lender's rights
and remedies shall be cumulative and non-exclusive to the extent permitted by
law.
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In particular, but not by way of limitation of the foregoing, Lender may,
without notice, demand or legal process of any kind, take possession of any or
all of the Collateral, including, without limitation, Borrower's computer
hardware and software (in addition to Collateral of which it already has
possession), wherever it may be found, and for that purpose may pursue the same
wherever it may be found, and may enter into any of Borrower's premises where
any of the Collateral may be, and search for, take possession of, remove, keep
and store any of the Collateral until the same shall be sold or otherwise
disposed of, and Lender shall have the right to store the same at any of
Borrower's premises without cost to Lender. At Lender's request, Borrower
shall, at Borrower's expense, assemble the Collateral and make it available to
Lender at one or more places to be designated by Lender and reasonably
convenient to Lender and Borrower. Borrower recognizes that if Borrower fails
to perform, observe or discharge any of its Liabilities under this Agreement or
the Other Agreements, no remedy at law will provide adequate relief to Lender,
and agrees that Lender shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages. Any
notification of intended disposition of any of the Collateral required by law
will be deemed reasonably and properly given if given at least five (5)
calendar days before such disposition. Any proceeds of any disposition by
Lender of any of the Collateral may be applied by Lender to the payment of
expenses in connection with the Collateral, including, without limitation,
legal expenses and reasonable attorneys' fees, and any balance of such proceeds
may be applied by Lender toward the payment of such of the Liabilities, and in
such order of application, as Lender may from time to time elect.
14. INDEMNIFICATION. Borrower agrees to defend, protect,
indemnify and hold harmless Lender, each affiliate or subsidiary of Lender
(with counsel reasonably satisfactory to Lender), and each of their respective
officers, directors, employees, attorneys and agents (each an "Indemnified
Party") from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature (including, without limitation, the disbursements and the
reasonable fees of counsel for each Indemnified Party in connection with any
investigative, administrative or judicial proceeding, whether or not the
Indemnified Party shall be designated a party thereto), which may be imposed
on, incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations, including, without limitation, securities laws, Environmental
Laws and commercial laws and regulations, under common law or in equity, or
based on contract or otherwise) in any manner relating to or arising out of
this Agreement or any Other Agreement, or any act, event or transaction related
or attendant thereto, the making and management of the Loan or the use or
intended use of the proceeds of the Loan; provided, however, that Borrower
shall have no obligation hereunder to any Indemnified Party with respect to
matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnified Party. To the extent that the undertaking to indemnify set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Borrower shall satisfy such undertaking to the
maximum extent permitted by applicable law. Any liability, obligation, loss,
damage, penalty, cost or expense covered by this indemnity shall be paid to
each Indemnified Party on demand, and, failing prompt payment, shall, together
with interest thereon at the highest rate then applicable to the Loan hereunder
from the date incurred by each Indemnified Party until paid by Borrower, be
added to the Liabilities of
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Borrower and be secured by the Collateral. The provisions of this paragraph 14
shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.
15. NOTICE. All written notices and other written communications
with respect to this Agreement shall be sent by ordinary, certified or
overnight mail, by telecopy or delivered in person, and (i) in the case of
Lender shall be sent to it at 0 Xxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000,
Attention: Chief Financial Officer and (ii) in the case of Borrower, shall be
sent to it at its principal place of business set forth on the first page of
this Agreement.
16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This
Agreement and the Other Agreements are submitted by Borrower to Lender for
Lender's acceptance or rejection at Lender's principal place of business as an
offer by Borrower to borrow monies from Lender now and from time to time
hereafter, and shall not be binding upon Lender or become effective until
accepted by Lender, in writing, at said place of business. If so accepted by
Lender, this Agreement and the Other Agreements shall be deemed to have been
made at said place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL
BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER
RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL
LOCATED OUTSIDE OF THE STATE OF GEORGIA, WHICH SHALL BE GOVERNED AND CONTROLLED
BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED.
If any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
To induce Lender to accept this Agreement, Borrower irrevocably agrees
that, subject to Lender's sole and absolute election, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT ARISING OUT OF OR FROM OR RELATED TO
THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN
COURTS HAVING SITUS WITHIN THE CITY OF ATLANTA OR SAVANNAH, STATE OF GEORGIA.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. Borrower hereby irrevocably
appoints and designates the Secretary of State of Georgia (or any other person
having and maintaining a place of business in such state whom Borrower may from
time to time hereafter designate upon ten (10) days written notice to Lender
and who Lender has agreed in its reasonable discretion in writing is
satisfactory and who has executed an agreement in form and substance
satisfactory to Lender agreeing to act as such attorney and agent), as
Borrower's true and lawful attorney and duly authorized agent for acceptance of
service of legal process. Borrower agrees that service of such process upon
such person shall constitute personal service of such process upon Borrower.
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS
PARAGRAPH.
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17. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the
Other Agreements may not be modified, altered or amended except by an agreement
in writing signed by Borrower or such other person who is a party to such Other
Agreement, and Lender. Borrower may not sell, assign or transfer this
Agreement or the Other Agreements or any portion thereof, including, without
limitation, Borrower's rights, titles, interest, remedies, powers or duties
hereunder and thereunder. Borrower hereby consents to Lender's sale,
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement or the Other Agreements, or of any portion
thereof, or participations therein, including, without limitation, Lender's
rights, titles, interest, remedies, powers and/or duties and agrees that it
shall execute and deliver such documents as Lender may reasonably request in
connection with any such sale, assignment, transfer or other disposition.
18. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in
this Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
19. POWER OF ATTORNEY. Borrower acknowledges and agrees that its
appointment of Lender as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and
shall be irrevocable until all of the Liabilities are satisfied and paid in
full and this Agreement is terminated.
20. CONFIDENTIALITY. Borrower and Lender hereby agree and
acknowledge that any and all information relating to Borrower which is (i)
furnished by Borrower to Lender (or to any affiliate of Lender) and (ii)
non-public, confidential or proprietary in nature, shall be kept confidential
by Lender or such affiliate in accordance with applicable law, provided,
however, that such information and other credit information relating to
Borrower may be distributed by Lender or such affiliate to Lender's or such
affiliate's directors, officers, employees, attorneys, affiliates, assignees,
participants, auditors and regulators, and upon the order of a court or other
governmental agency having jurisdiction over Lender or such affiliate, or in
response to any summons or subpoena, to any other party. Borrower and Lender
further agree that this provision shall survive the termination of this
Agreement.
21. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT BY BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY
OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER
AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER
SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Borrower hereby waives demand, presentment, protest and notice
of nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
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(c) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL
OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL.
(d) Lender's failure, at any time or times hereafter, to require
strict performance by Borrower of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default under this Agreement or
any default under any of the Other Agreements shall not suspend, waive or
affect any other Event of Default under this Agreement or any other default
under any of the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different kind or character. No delay
on the part of Lender in the exercise of any right or remedy under this
Agreement or any Other Agreement shall preclude other or further exercise
thereof or the exercise of any right or remedy. None of the undertakings,
agreements, warranties, covenants and representations of Borrower contained in
this Agreement or any of the Other Agreements and no Event of Default under
this Agreement or default under any of the Other Agreements shall be deemed to
have been suspended or waived by Lender unless such suspension or waiver is in
writing, signed by a duly authorized officer of Lender and directed to Borrower
specifying such suspension or waiver.
22. SUBORDINATION AGREEMENT. THE RIGHTS AND REMEDIES OF LENDER
HEREUNDER AND UNDER THE OTHER AGREEMENTS ARE SUBJECT TO THE TERMS AND
CONDITIONS OF THE SUBORDINATION AGREEMENT.
23. CONVERSION RIGHTS. Lender may, subject to the terms and
conditions of the Conversion Agreement, cause the Loan and the other
Liabilities to be converted to certain equity interests in Borrower's Parent.
24. LASALLE LOAN AGREEMENT. Any definitions or other terms or
provisions of the LaSalle Loan Agreement incorporated herein by reference will
be deemed to continue in effect for the benefit of the Lender until this
Agreement has terminated and all Liabilities have been indefeasibly paid in
full, including, without limitation, whether or not the LaSalle Loan Agreement
remains in effect or whether or not the LaSalle Loan Agreement is amended,
restated or terminated after the date hereof.
25. CERTAIN DETERMINATIONS BY LENDER. (a) So long as the LaSalle
Loan Agreement remains in effect, Lender agrees that the following provisions
shall apply with respect to the indicated paragraphs of this Agreement or the
Security Agreement of the Parent or of Diamond Insurance Company (the
"Guarantors") executed and delivered on the date hereof (each a "Security
Agreement", and together the "Security Agreements"), as applicable:
(i) For purposes of the definition of the term "Tangible
Net Worth" herein, the book value of Borrower's intangible assets
shall be the same amount as determined by the
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Agent for purposes of the definition of the term "Tangible Net Worth"
in the LaSalle Loan Agreement;
(ii) Borrower shall be deemed to have satisfied any
requirement of delivery to Lender of Chattel Paper under paragraph 5
or of Collateral evidenced by an agreement, Instrument or Document
under paragraph 7(d), if Borrower shall have delivered such property
to Agent;
(iii) For purposes of paragraph 7(a), Lender agrees that
any financial institution having control over a Lock Box or at which a
Lock Box Account is maintained and which is acceptable to Agent, shall
be deemed acceptable to Lender;
(iv) For purposes of paragraph 7(a), Lender agrees that
any acknowledgment and agreement from a financial institution
regarding ownership of amounts on deposit in a Lock Box Account, such
financial institution's right of setoff and such financial
institution's agreement to transfer periodically such amounts on
deposit to Lender (or its designee), and which acknowledgment and
agreement is acceptable to Agent, shall be deemed acceptable to
Lender; and
(v) Borrower may deliver a copy of any insurance policy
the original of which is otherwise required to be provided to Lender
under paragraph 11(e) if such original has been or is being delivered
to Agent;
(b) so long as the LaSalle Loan Agreement remains in effect and no
Event of Default shall have or occurred and be continuing, Lender agrees that
the following provisions shall apply with respect to the indicated paragraphs
of this Agreement or the Security Agreements of each of the Guarantors, as
applicable:
(i) Lender agrees that it will not verify any matter
relating to Borrower's Chattel Paper and Accounts as permitted under
paragraph 8(a);
(ii) Lender agrees that any schedule of Chattel Paper
required to be delivered under paragraph 8(a), any Inventory report
required to be delivered under paragraph 8(b), and any financial
report required to be delivered under 11(b), which is in form
satisfactory to Agent shall be deemed acceptable to Lender;
(ii) For purposes of paragraph 11(b), Lender agrees that
any independent certified public accountants acceptable to Agent,
shall be deemed acceptable to Lender;
(iv) For purposes of paragraph 11(e), Lender agrees that
any insurance form acceptable to Agent, shall be deemed acceptable to
Lender;
(v) Each Guarantor may deliver a copy of any insurance
policy the original of which is otherwise required to be provided to
Lender under paragraph 8(d) of each Security Agreement if such
original has been or is being delivered to Agent;
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(vi) Lender agrees that it will not verify any matter
relating to any Guarantor's Chattel Paper and Accounts as permitted
under paragraph 5(a) of each Security Agreement;
(vii) Lender agrees that any schedule of Chattel Paper
required to be delivered under paragraph 5(a) of each Security
Agreement and any Inventory report required to be delivered under
paragraph 5(b) of each Security Agreement, which is in form
satisfactory to Agent shall be deemed acceptable to Lender;
(viii) For purposes of paragraph 8(d) of each Security
Agreement, Lender agrees that any insurance form acceptable to Agent,
shall be deemed acceptable to Lender; and
(ix) For purposes of paragraph 7(a) Lender agrees that any
appointment by Borrower or Lender as Borrower's attorney and
agent-in-fact shall be exercised by Lender consistent with Agent's
rights.
[Signatures On Next Page]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 15th day of October, 1996.
CRESCENT JEWELERS XXXXXXXX'X INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Call
----------------------------------- ----------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
