EXHIBIT 10.7
EXECUTION COPY
PRENTICE CAPITAL MANAGEMENT, LP
Terms for Treatment of Trade Indebtedness Of Whitehall Jewelers, Inc.
This term sheet (the "Term Sheet") is intended to be and constitutes a legally
binding commitment or agreement of Whitehall Jewelers, Inc. (the "Company"),
Prentice Capital Management, LP, and the trade vendors signatory hereto in
connection with the treatment by the Company of its indebtedness to suppliers of
inventory in the event of consummation of the Investor's proposed investment in
the Company (the "Investment").
COMPANY: Whitehall Jewelers, Inc.
INVESTOR: Funds and accounts managed directly or
indirectly by, and other investors approved by,
Prentice Capital Management, LP.
SUPPLIERS: All suppliers of inventory to the Company.
PAYMENT TERMS: The Company's indebtedness to each Supplier, in
each case as of September 23, 2005 (the "Trade
Debt"), shall be satisfied as follows:
- Twenty-five (25%) of the Trade Debt due
and owing each Supplier shall be paid in
cash, and a Note shall be issued to the
Collateral Trustee (as defined below) for
the benefit of the Suppliers upon the
first funding of the Investment, which
payment and Note shall be released from
the Escrow Account (defined below) upon
delivery to the Company of 50% in the
aggregate of the asset merchandise to be
delivered to the Company in October 2005
(the "First Payment");
- Twelve and one-half percent (12.5%) of the
Trade Debt due and owing each Supplier
shall be paid in cash to such Supplier on
or about December 23, 2005;
- Twelve and one-half percent (12.5%) of the
Trade Debt due and owing each Supplier
shall be paid in cash to such Supplier on
or about January 16, 2006; and
- Fifty percent (50%) of the Trade Debt due
and owing each Supplier shall be paid in
cash to such Supplier on or about
September 30, 2007.
Upon consummation and funding of the Investment,
the Company shall deposit with the Collateral
Trustee (the "Escrow Account") that portion of
the proceeds of the Investment sufficient to pay
the cash component of the First Payment. If any
Supplier delivers either (i) the asset
merchandise scheduled to be delivered by such
Supplier to the Company in October 2005, or (ii)
the memo/consignment goods scheduled to be
delivered by such Supplier to the Company in
October 2005, such Supplier shall receive its
pro rata share of the cash component of the
First Payment from the Escrow Account,
regardless of whether or not 50% in the
aggregate of the asset merchandise scheduled to
be delivered to the Company in October 2005 has
been so delivered. The Escrow Account shall be
an interest bearing account, with all accrued
interest payable to the Company.
Upon the Company's completion of all of the
foregoing payments, (i) the Trade Debt of each
Supplier shall be deemed satisfied in full, and
(ii) each Supplier shall forgive any and all
other debts due or owing to them by the Company,
including any and all amounts in excess of such
Supplier's
CONFIDENTIAL
Trade Debt that could have or should have been
invoiced to the Company prior to or on September
23, 2005.
NOTE PRIORITY AND SECURITY: Each Note shall be secured by a perfected lien
on and security interest in those assets and
property in and on which the Company has granted
security interests and liens to the Investor.
Such lien and security interest will be
subordinate in all respects to the liens and
security interests of the Company's existing
senior secured lenders and the Investor.
NOTE MATURITY: Each Note shall mature on September 30, 2007
(the "Maturity Date"), with the principal
balance of the Note payable on the Maturity
Date.
INTEREST: Starting on January 17, 2006, each Note shall
accrue interest at the rate of six percent (6%)
per annum, payable on the Maturity Date.
MEMO GOODS: September 23, 2005 through January 15, 2006: One
week reporting and one day pay (by wire).
After January 15, 2006: One week reporting and
15-day payment (by wire).
On or about December 1, 2005, the Company shall
cause to be issued a standby letter of credit
(the "Letter of Credit") naming the Collateral
Trustee as beneficiary for the benefit of the
Suppliers, to be drawn upon only in the event
the Company fails to timely make required
payments for memo goods. The face amount of the
Letter of Credit shall be:
- $7 million from December 1, 2005 through
December 18, 2005;
- $10 million from December 19, 2005 until
the date of payment for all sales through
December 26, 2005 (expected to be December
27, 2005);
- $5 million from the day (expected to be
December 27, 2005) following the date of
payment for all sales through December 26,
2005 through January 15, 2006.
- The letter of credit shall terminate on
January 15, 2006.
The Company, each of the senior secured lenders
and the Investor will recognize the valid and
perfected consignment/purchase money security
interests of the Suppliers in current and future
memo goods without regard to technical
perfection; provided, however, that each of the
Suppliers acknowledges that its respective
consignment/purchase money security interests in
the memo goods relate solely to such goods and
terminate once such goods are sold. Each of the
Suppliers will agree not to challenge the valid
and perfected security interests of the Investor
or the senior secured lenders in the Company's
assets. Each of the Suppliers will disclaim any
interest in the collateral of the senior secured
lenders, other than those security interests
provided for herein with respect to the Note.
All consigned/memo goods shall, in the event of
a store closing sale, remain in place and be
liquidated along with all other inventory. Each
Supplier will be paid for the consigned/memo
goods in the amount that would be owed by the
Company, as the proceeds of the liquidation sale
are received.
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CONFIDENTIAL
COMMERCIALLY REASONABLE Each Supplier shall use its commercially
EFFORTS: reasonable efforts to satisfy all shipping
deadlines set forth in the Company's outstanding
purchase orders, as amended and agreed to by the
Company and the respective Supplier, and in all
purchase orders placed on or after September 26,
2005, which are hereafter accepted by the
respective Supplier, in its discretion.
PAYMENT TERMS FOR 60-days for goods delivered between September
ASSET GOODS: 26, 2005 and December 15, 2005
90-days for goods delivered after December 15,
2005.
REPORTING: Financial reporting by the Company to the
Collateral Trustee for the benefit of the
Suppliers in form and substance to be agreed
upon by the parties.
COLLATERAL TRUSTEE: A trustee shall be appointed as the
representative of the Suppliers for purposes of
implementation of the transactions contemplated
by this Term Sheet, including, among others,
maintaining the Escrow Account, serving as
beneficiary of the Letter of Credit, receiving
financial reporting from the Company
implementation of the transactions contemplated
by this Term Sheet. The reasonable expenses of
the Collateral Trustee shall be paid by the
Company.
CONVERTIBLE NOTES INTEREST: Interest on convertible notes issued to Investor
to accrue for a period of not less than 12
months from date of issuance, after which,
interest to continue to accrue or be paid at any
time at Investor's option.
SENIOR BANK FACILITIES Only covenant in senior bank facilities to be
minimum excess availability covenant.
OTHER MATTERS:
REPRESENTATIONS, WARRANTIES, The definitive documentation shall contain
AND COVENANTS: representations, warranties, and covenants
customary for a transaction of this nature,
including default/acceleration provisions based
on, inter alia, (i) payment defaults, (ii)
failure to post the Letter of Credit, (iii) a
provision that a default under the Company's
credit agreements with the secured lenders and
the Investor shall cause a default under this
Term Sheet, and (iv) a provision that remedies
for a default under this Term Sheet shall be
limited to those contained in an inter-creditor
agreement to be entered into by the parties.
CONDITIONS PRECEDENT TO - Execution and delivery by Suppliers
PAYMENT OF SETTLEMENT AMOUNT holding not less than 90%, or such lesser
AND AGREEMENT OF THE SUPPLIERS: percentage as agreed to in writing by the
Investor, of the Company's total Trade
Debt of appropriate definitive
documentation, including, but not limited
to, an extension agreement and related
acceptance form, in form and substance
satisfactory to the Investor and including
customary closing conditions, and the
satisfaction of all such conditions.
- Consummation of the Investment.
- No law or injunction or other legal
restraint existing that prevents
consummation of payment of the Settlement
Amount or entry into the other
transactions contemplated hereby.
- The aggregate of all payables due to
Suppliers as of September 23,
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CONFIDENTIAL
2005 shall have been confirmed to the
satisfaction of the Company and the
Investor.
- Satisfaction of additional customary
closing conditions.
ALTERNATE TRANSACTIONS: This transaction has been negotiated by the
Company, the Investor and the Suppliers. The
Suppliers reserve the right not to enter into
the same transaction or any other transaction
with any other investor, except in their sole
and absolute discretion.
CONFIDENTIALITY: All parties agree to keep this proposal and all
conversations and exchanged information related
thereto strictly confidential, with the
exception of any disclosure required for
purposes of compliance with applicable law.
Notwithstanding the foregoing, any Supplier may
discuss the terms of this proposal with another
Supplier, but no Supplier shall, without the
prior written consent of the Company and the
Investor, disclose the existence or terms of
this proposal to any party other than a
Supplier.
BINDING EFFECT The signature below of an authorized
representative of a Supplier shall constitute an
acceptance by such Supplier (each, a
"Participating Supplier") of the terms set forth
in this Term Sheet. This Term Sheet shall bind
and benefit each of the Company, the Investor
and the Participating Suppliers and their
respective successors, assigns, executors,
administrators, and successors in interest;
provided, however, that Suppliers that have not
expressly accepted the terms herein by execution
of this Term Sheet, shall have no right to
enforce such terms against the Company or the
Investor.
Superseded by Definitive Documents: This agreement shall have no effect upon the
execution of definitive agreements regarding the subject matter hereof.
Counterparts: This Term Sheet may be signed in two or more original or
facsimiled counterparts, any one of which need not contain the signature of more
than one party, but all such counterparts taken together will constitute one and
the same agreement. The rights under this Term Sheet may not be assigned.
Amendments: This agreement may only be amended through a written instrument
executed by all of the parties hereto.
Whitehall Jewelers, INC. Prentice Capital Management, LP
By: /s/ Xxxx Xxxxxxxxxx By: /s/ Xxxxxxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxxx Name: Xxxxxxxx Xxxxxx
Title: Executive VP and CFO Title: Managing Director
Address for Notices: Address for Notices:
000 Xxxxx Xxxxxx Xxxxx, 5th Floor 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
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CONFIDENTIAL
ACKNOWLEDGED AND AGREED, WITH RESPECT TO "MEMO GOODS" AND "SENIOR BANK
FACILITIES":
lasalle national bank, as Agent
By: /s/ Xxxxxx Xxxxxxxx
-------------------
Name: Xxxxxx Xxxxxxxx
Title: Senior Vice President, Group Head
Address for Notices:
______________________
______________________
______________________
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
S.H.R. Ltd.
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Treasurer
Address for Notices:
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Clover Corporation
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Treasurer
Address for Notices:
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
[ ]
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President
Address for Notices:
000 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Xxxxx Xxxxxxx Corporation d/b/a Amikam
By: /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Vice President
Address for Notices:
000 Xxxxx Xxx., 0xx Xxxxx
Xxx Xxxx, XX 00000
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Aurafin LLC
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: CFO
Address for Notices:
0000 Xxx Xxxx Xxxx
Xxxxxxx, XX 00000
ACCEPTED AND AGREED TO:
Rharat Diamond Corp
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: President
Address for Notices:
Rharat Diamond Corp
00 Xxxx Xxxxxx #0000
Xxxxx Xxxxxx, XX 00000
ACCEPTED AND AGREED TO:
Basic Programs
Xxxx Xxxxxxx - Eurostar
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: President
Address for Notices:
000 Xxxx 00xx Xx. 00xx Xxxxx
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
B&M Imports, Inc.
By: /s/ Mois Medine
Name: Mois Medine
Title: President
Address for Notices:
00 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Color Craft
By: /s/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: President
Address for Notices:
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Combine International, Inc.
By: /s/ Xxxxxxxx Xxxxx
Name: Xxxxxxxx Xxxxx
Title: President/CEO
Address for Notices:
Combine International, Inc.
000 Xxxxxxx Xxxxx
Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
ACCEPTED AND AGREED TO:
Continental Jewellery (Mfg) Ltd.
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Managing Director
Address for Notices:
Flat M, 1/X. Xxxxxx Estate
Phase 0, xx Xxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxx Xxxx
ACCEPTED AND AGREED TO:
Xxxxx International
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: Controller
Address for Notices:
Xxxxx International
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Epoque Jewelry Inc.
By: /s/ Xxxx Xxxx
Name: Xxxx Xxxx
Title: Vice President
Address for Notices:
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Eyalrd Corp.
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: President
Address for Notices:
ACCEPTED AND AGREED TO:
X. Xxxxxxxxx & Sons
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Treasurer
Address for Notices:
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Xxxxxxxxx - Xxxx International Ltd. /f/k/a Leer Gem Ltd.
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Treasurer
Address for Notices:
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Fine Facet Diamonds, Inc.
By: /s/ Xxxxxxx Xxxxxx X.
Name: Xxxxxxx Xxxxxx X.
Title: President
Address for Notices:
Fine Facet Diamonds, Inc.
00 X. 00xx Xxxxxx, 00xx Xxxxx, #0000
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Xxxxxxxxx Xxxxxxx Inc.
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: President
Address for Notices:
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ACCEPTED AND AGREED TO:
Xxxxxx Xxxxxxx & Co. Ltd.
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Vice -President
Address for Notices:
Xxxxxx Xxxxxxx & Co. Ltd.
0 Xxxxxxx Xxxx
Xxxxxxx Xxxxxxx X0X0X0
ACCEPTED AND AGREED TO:
Jewelex New York, Ltd.
By: /s/ Xxxxxxx Xxxxx (Xxxx)
Name: Xxxxxxx Xxxxx (Xxxx)
Title: CFO
Address for Notices:
00 Xxxx 00xx Xx.
Xxx Xxxx, XX 00000
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
JC Trading, Inc.
By: /s/Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Vice President
Address for Notices:
JC Trading, Inc.
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxx, XX 00000
ACCEPTED AND AGREED TO:
Xxxxx Xxxx Inc.
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: President
Address for Notices:
000 0xx Xxx. #000
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Legend Jewelry Co. Ltd. (Macao Commercial Offshore)
By: /s/ Xxxxxxx Xxx
Name: Xxxxxxx Xxx
Title: Managing Director
Address for Notices:
Legend Jewelry Co. Ltd (Macao Commercial Offshore)
Xxxxxxx Xxxx Xxxx Xxx, X/X Xxx.
Xxx Xxxx C.C., 13 Andar K. NAPE Macau
ACCEPTED AND AGREED TO:
Xxxxxxx Xxxxxxx Inc.
By: /s/ Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: President
Address for Notices:
0000 0xx Xxx. S
Seattle, WA 98108
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Merit Diamond Corporation
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: CFO
Address for Notices:
00 Xxxx 00xx Xx.
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
Rosy Blue, Inc.
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: Controller
Address for Notices:
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
with a copy to:
Xxxxxxxx X. Xxxxxxxx, Esq.
Xxxxx & Singer LLP
The Chrysler Building
ACCEPTED AND AGREED TO:
Xxxxxxxx & Xxxxxxxx Corp.
By: /s/ Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
Title: Secretary & Treasurer
Address for Notices:
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Xxx Xxxxxxxxx Diamonds, LLC
By: /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Partner
Address for Notices:
000 0xx Xxx.
New York, NY 10017
ACCEPTED AND AGREED TO:
SDC Designs
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President
Address for Notices:
0 Xxxx 00xx Xx., Xxxxx #000
Xxx Xxxx, XX 00000
ACCEPTED AND AGREED TO:
STS Jewels Inc.
By: /s/ Xxxxxxxxx Xxxxx
Name: Xxxxxxxxx Xxxxx
Title: Chief Operating Officer
Address for Notices:
30-00 LIC Center - I
5th Floor
Long Island City, NY 11101
ACCEPTED AND AGREED TO:
Suberi Bros. LLC
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Chairman & CEO
Address for Notices:
000 Xxxxxxxx
Xxx Xxxx, XX 00000
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CONFIDENTIAL
ACCEPTED AND AGREED TO:
Xxxxx Xxxxxxx Corp.
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President
Address for Notices:
000 0xx Xxx.
New York, NY 10036
ACCEPTED AND AGREED TO:
Thien Po Jewelry Ltd.
By: /s/ Xxxxxxx Xx
Name: Xxxxxxx Xx
Title: Managing Director
Address for Notices:
00/00 X000, Xxxxxxxxxx 0 Xxxx
Xxxxxx, Xxxxxx
Xxxxxxx 00000, Xxxxxxxx
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