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Item that may be reclassified to the Statement of Operations in future periods
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
March 30
,
2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from
to
Commission file number:
001-32635
BIRKS GROUP INC.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Canada
(Jurisdiction of incorporation or organization)
2020 Robert-Bourassa Blvd.
Montreal Quebec
Canada
H3A 2A5
(Address of principal executive offices)
Katia Fontana
,
514
-
397-2592
(telephone),
514-397-2537
(facsimile)
2020 Robert-Bourassa Blvd.
Suite 200
Montreal Quebec
Canada
H3A 2A5
(Name, Telephone, E-mail and/or Facsimile number and Address of Company
Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class Trading Name of each exchange
Symbol on which registered
Class A Voting Shares BGI NYSE
, without nominal or par value American LLC
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None.
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None.
The number of outstanding shares of each of the issuer's classes of capital or
common stock as of the close of the period covered by the Annual Report was:
11,447,999 Class A Voting Shares, without nominal or par value
7,717,970 Class B Multiple Voting Shares, without nominal or par value
0 Series A Preferred Shares, without nominal or par value, issuable in series
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes
No
If this report is an annual or transition report, indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934. Yes
No
Note: Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T ((s)232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or an emerging growth company. See
definition of "large accelerated filer", "accelerated filer", and "emerging
growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer Non-accelerated filer
Emerging Growth Company
If an emerging growth company that prepares its financial statements in
accordance with U.S. GAAP, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
The term "new or revised financial accounting standard" refers to any update issued by the
Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and
attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by
check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial
statements.
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive based compensation received by
any of the registrant's executive officers during the relevant recovery period
pursuant to (s)240.10D-1(b).
Indicate by check mark which basis of accounting the registrant has used to
prepare the financial statements included in this filing:
U.S. GAAP International Financial Reporting Standards as issued Other
by the International Accounting Standards Board
If "Other" has been checked in response to the previous question, indicate by
check mark which financial statement item the registrant has elected to
follow: Item 17Item 18
If this is an Annual Report, indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
Auditor Firm ID: Auditor Name : Auditor Location:
85 KPMG LLP Montreal, QC, Canada
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Part I
Item 1. Identity of Directors, Senior Management and Advisers 2
Item 2. Offer Statistics and Expected Timetable 2
Item 3. Key Information 2
Item 4. Information on the Company 15
Item 4A. Unresolved Staff Comments 25
Item 5. Operating and Financial Review and Prospects 25
Item 6. Directors, Senior Management and Employees 47
Item 7. Major Shareholders and Related Party Transactions 55
Item 8. Financial Information 58
Item 9. The Offer and Listing 58
Item 10. Additional Information 58
Item 11. Quantitative and Qualitative Disclosures About Market Risk 63
Item 12. Description of Securities Other than Equity Securities 63
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies 64
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 64
Item 15. Controls and Procedures 64
Item 16A. Audit Committee Financial Expert 64
Item 16B. Code of Ethics 65
Item 16C. Principal Accountant Fees and Services 65
Item 16D. Exemptions from the Listing Standards for Audit Committees 65
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 65
Item 16F. Change in Registrant's Certifying Accountant 65
Item 16G. Corporate Governance 65
Item 16H. Mine Safety Disclosure 66
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 66
Item 16J. Insider Trading Policies 66
Item 16K. Cybersecurity 66
Part III
Item 17. Financial Statements 67
Item 18. Financial Statements 67
Item 19. Exhibits 68
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INTRODUCTION
References
Unless the context otherwise requires, the terms "Birks Group," "the Company,"
"we," "us," and "our" are used in this Annual Report to refer to Birks Group
Inc., a Canadian corporation, and its subsidiaries on a consolidated basis. In
addition, (i) the term "Mayors" refers to Mayor's Jewelers, Inc., a Delaware
corporation, and its wholly-owned subsidiary, Mayor's Jewelers of Florida,
Inc., a Florida corporation, until October 23, 2017, upon which date it was
sold to a third party, and (ii) "the merger" refers to the merger of Mayors
with a wholly-owned subsidiary of the Company, as approved by the stockholders
on November 14, 2005. The term "Birks" refers to Henry Birks & Sons Inc., the
legal name of Birks Group prior to the merger.
Presentation of Financial and Other Information
Throughout this Annual Report, we refer to our fiscal year ending March 30,
2024, as fiscal 2024, and our fiscal years ended March 25, 2023, and March 26,
2022, as fiscal 2023 and 2022, respectively. Our fiscal year ends on the last
Saturday in March of each year. The fiscal years ended March 30, 2024
consisted of 53 weeks whereas fiscal years ended March 25, 2023, and March 26,
2022 each consisted of 52 weeks.
All figures presented in this Form 20-F are in Canadian dollars unless
otherwise specified.
Current developments
External risk factors
The Company believes recent general economic conditions, including high
inflation and interest rates, could lead to a slow-down in certain segments of
the global economy and affect the amount of discretionary income spent by
potential consumers to purchase the Company's products. If global economic and
financial market conditions persist or worsen, the Company's sales may
decrease, and the Company's financial condition and results of operations may
be adversely affected.
Forward-Looking Information
This Annual Report and other written reports and releases and oral statements
made from time to time by the Company contain forward-looking statements which
can be identified by their use of words like "plans," "expects," "believes,"
"will," "anticipates," "intends," "projects," "estimates," "could," "would,"
"may," "planned," "goal," and other words of similar meaning. All statements
that address expectations, possibilities or projections about the future,
including, without limitation, statements about our strategies for growth,
expansion plans, sources or adequacy of capital, expenditures and financial
results are forward-looking statements. These risks and uncertainties include,
but are not limited to the following: (i) heightened inflationary pressure, a
decline in consumer discretionary spending, and increased cost of borrowing or
deterioration in consumer financial position; (ii) economic, political and
market conditions, including the economies of Canada and the U.S., which could
adversely affect the Company's business, operating results or financial
condition, including its revenue and profitability, through the impact of
changes in the real estate markets, changes in the equity markets and
decreases in consumer confidence and the related changes in consumer spending
patterns, and the impact on store traffic, tourism and sales; (iii) the impact
of fluctuations in foreign exchange rates, increases in commodity prices and
borrowing costs and their related impact on the Company's costs and expenses;
(iv) the Company's ability to maintain and obtain sufficient sources of
liquidity to fund its operations, to achieve planned sales, gross margin and
net income, to keep costs low, to implement its business strategy, to maintain
relationships with its primary vendors, to source raw materials, to mitigate
fluctuations in the availability and prices of the Company's merchandise, to
compete with other jewelers, to succeed in its marketing initiatives
(including with respect to Birks branded products), and to have a successful
customer service program; (v) the Company's plan to evaluate the productivity
of existing stores, close unproductive stores and open new stores in new prime
retail locations, renovate existing stores and invest in its website and
e-commerce platform; (vi) the Company's ability to execute its strategic
vision; and (vii) the Company's ability to invest in and finance capital
expenditures.
One must carefully consider such statements and understand that many factors
could cause actual results to differ from the forward-looking statements, such
as inaccurate assumptions and other risks and uncertainties, some known and
some unknown. No forward-looking statement is guaranteed and actual results
may vary materially. Such statements are made as of the date provided, and we
assume no obligation to update any forward-looking statements to reflect
future developments or circumstances.
One should carefully evaluate such statements by referring to the factors
described in our filings with the Securities and Exchange Commission ("SEC"),
especially on this Form 20-F and our Forms 6-K. Particular review is to be
made of Items 3, 4 and 5 of this Form 20-F where we discuss in more detail
various important risks and uncertainties that could cause actual results to
differ from expected or historical results. All written or oral forward-looking
statements attributable to us are expressly qualified in their entirety by
these cautionary statements. Since it is not possible to predict or identify
all such factors, the identified items are not a complete statement of all
risks or uncertainties.
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PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. [Reserved]
B. Capitalization and Indebtedness.
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
RISK FACTORS
Risks Related to Global and Economic Conditions
Our business depends, in part, on factors affecting consumer spending that are
out of our control. A downturn in the global economy, including as a result of
general economic conditions, such as inflation or interest rate increases, can
significantly affect consumer purchases of discretionary items, which could
materially impact our sales, profitability and financial condition.
Our business, like other retailers, depends on consumer demand for our
products and our sales are affected by discretionary spending by consumers.
Consequently, our business is sensitive to a number of factors that are beyond
our control, and that influence consumer spending, including general economic
conditions, interest and tax rates, inflation, consumer confidence in future
economic conditions, domestic and international geopolitical conditions, the
availability of consumer credit, consumer indebtedness levels, tourism,
recession and fears of recession, disposable consumer income, level of
customer traffic in shopping malls and other retail centers, conditions in the
housing market, consumer perceptions of personal well-being and security, fuel
prices, inclement weather, foreign exchange rates, sales tax rate increases,
pandemics, such as the COVID-19 pandemic, epidemics, disease outbreaks, and
other public health crises, and war and fears of war. Jewelry and timepiece
purchases are discretionary for consumers and may be particularly and
disproportionately affected by adverse trends in the general economy and the
equity markets. Adverse changes in factors affecting discretionary consumer
spending could reduce consumer demand for our products, resulting in a
reduction in our sales and harming our business, operating results and cash
flows. Recent geopolitical events and general economic conditions, such as
rising inflation, could lead to a slow-down in certain segments of the global
economy and could affect the amount of discretionary income available for
certain consumers to purchase our products. If adverse global economic and
financial market conditions persist, our sales could decrease, and our
financial condition and results of operations could be adversely affected. The
risk of recession is growing, notably in light of the significant increase in
interest and inflation rates and could further have an adverse impact on our
business and results of operations.
A substantial portion of our customers use credit, either from our private
label and proprietary credit cards or another consumer credit source, to
purchase jewelry and timepieces. When there is a downturn in the general
economy, fewer people may use or be approved for credit, which could result in
a reduction in net sales and/or an increase in credit losses, which in turn,
could lead to an unfavorable impact on our overall profitability. The current
inflationary environment, high interest rates, and the increase in cost of
sales could negatively affect consumer spending and have adverse effects on
our business and our financial results. Any of these factors could have a
material adverse impact on our business, financial results, and the execution
of our strategic plan. We have seen decreases in consumer spending, and such
trends may continue. If periods of decreased consumer spending continue, our
sales could be negatively impacted, and our financial condition and results of
operations could be adversely affected. Consequently, our belief that we
currently have sufficient liquidity to fund our operations is based on certain
assumptions about the future state of the economy, the future availability of
borrowings to fund our operations and our future operating performance. To the
extent that the economy and other conditions affecting our business are
significantly worse than we anticipate, we may not achieve our projected level
of financial performance and we may determine that we do not have sufficient
capital to fund our operations.
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Our business, financial condition, results of operations and cash flows have
been and may continue to be adversely impacted by the COVID-19 pandemic or
other public health crisis, disease outbreak, epidemic or pandemic.
A public health crisis or disease outbreak, epidemic or pandemic, such as
COVID-19, or the threat or fear of such events, has adversely impacted and
could continue to adversely impact our business. COVID-19 significantly
impacted our retail stores, sales, foot traffic, and supply chain in fiscal
2020, fiscal 2021 and to a lesser extent fiscal 2022.
Consumer demand may be impacted amidst the uncertainty caused by a public
health crisis, disease outbreak, epidemic or pandemic which could negatively
impact our retail business as well as the businesses of our retail partners.
Our business is particularly sensitive to reductions in discretionary spending
by consumers. A public health crisis, disease outbreak, epidemic or pandemic
may cause significant uncertainty and disruption in the financial markets both
globally and in Canada, which may lead to a decline in discretionary spending
by consumers, and which in turn may impact, materially, our business, sales,
financial condition and results of operations. Our retail business is
sensitive to tourism and a public health crisis, disease outbreak, epidemic or
pandemic may impact tourism. A public health crisis, disease outbreak,
epidemic or pandemic may also disrupt our global supply chain network,
including shortages of certain products due to disruptions in manufacturing by
our suppliers, as well as costs of production and distribution.
Our business may be further impacted if the economy deteriorates due to the
long-term effects of the COVID-19 pandemic or other public health crises. To
the extent that COVID-19 has affected and continues to adversely affect the
Canadian and global economy, our business, results of operations, cash flows,
and/or financial condition, may continue to negatively be impacted.
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Financial and Liquidity Risks
The level of our indebtedness could adversely affect our operations, liquidity
and financial condition.
Our debt levels fluctuate from time to time based on seasonal working capital
needs. In fiscal 2024, the Company's total indebtedness increased by $8.1
million driven primarily by an increase in bank indebtedness as a result of
negative cash flows from operations. Along with the increase in bank
indebtedness, interest expense has also increased as a result of the rise in
interest rates. In fiscal 2023, the Company's total indebtedness increased by
$15.3 million driven primarily by an increase in bank indebtedness as a result
of negative cash flows from operations. The following table sets forth our
total indebtedness (including bank indebtedness and current and long-term
portion of debt), total stockholders' equity (deficiency), total capitalization
and ratio of total indebtedness to total capitalization as of (dollars in
thousands):
March 30, 2024 March 25, 2023
Total indebtedness (consisting of bank indebtedness $ 90,311 $ 82,203
and long-term debt, including current portion)
Total stockholders' $ (5,149 ) (603 )
equity (deficiency)
Total $ 85,162 $ 81,600
capitalization
Ratio of total indebtedness 106.0 % 100.7 %
to total capitalization
This level of leverage could adversely affect our results of operations,
liquidity and financial condition. Some examples of how high levels of
indebtedness could affect our results of operations, liquidity and financial
condition may include the following:
. make it difficult for us to satisfy our obligations with respect to our indebtedness;
. increase our vulnerability to adverse economic and industry conditions;
. increase our vulnerability to fluctuations in interest rates;
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. require us to dedicate a substantial portion of cash from operations to the payment of debt service, thereby reducing
the availability of cash to fund working capital, capital expenditures and other general corporate purposes;
. limit our ability to obtain additional financing for working capital,
capital expenditures, general corporate purposes or acquisitions;
. place us at a disadvantage compared to our competitors that have a lower degree of leverage; and
. negatively affect the price of our stock.
Consequently, our belief that we currently have sufficient liquidity to fund
our operations is based on certain assumptions about the future state of the
economy, the future availability of borrowings to fund our operations and our
future operating performance. To the extent that the economy and other
conditions affecting our business are significantly worse than we anticipate,
we may not achieve our projected level of financial performance and we may
determine that we do not have sufficient capital to fund our operations.
Significant restrictions on our borrowing capacity could result in our
inability to fund our cash flow requirements or maintain minimum excess
availability requirements under the terms of our secured asset-based credit
facility needed to support our day-to-day operations and our ability to
continue as a going concern.
Our ability to meet our cash flow requirements in order to fund our operations
is dependent upon our ability to attain profitable operations, adhere to the
terms of our committed financings, obtain favorable payment terms from
suppliers as well as to maintain positive excess availability levels under our
Amended Credit Facility (as defined below) and our Amended Term Loan (as
defined below). Under the Amended Credit Facility, our sole financial covenant
is to maintain minimum excess availability of not less than $8.5 million at
all times, except that we shall not be in breach of this covenant if excess
availability falls below $8.5 million for not more than two consecutive
business days once during any fiscal month.
Our Amended Credit Facility and Amended Term Loan are subject to cross default
provisions with all other loans pursuant to which if we are in default of any
other loan, we will immediately be in default of both the Amended Credit
Facility and the Amended Term Loan. In the event that excess availability
falls below $8.5 million for more than two consecutive business days once
during any fiscal month, this would be considered an event of default under
the Amended Credit Facility and Amended Term Loan agreements, that provides
the lenders the right to require the outstanding balances borrowed under our
Amended Credit Facility and Amended Term Loan to become due immediately, which
would result in cross defaults on our other borrowings. We expect to have
excess availability of at least $8.5 million for at least the next twelve
months.
On October 23, 2017, the Company entered into a credit facility with Wells
Fargo Canada Corporation for a maximum amount of $85.0 million and maturing in
October 2022. On December 24, 2021, the Company entered into an amended and
restated senior secured revolving credit facility ("Amended Credit Facility")
with Wells Fargo Canada Corporation. The Amended Credit Facility extended the
maturity date of the Company's pre-existing loan from October 2022 to December
2026. The Amended Credit Facility, also provides the Company with an option to
increase the total commitments thereunder by up to $5.0 million. The Company
will only have the ability to exercise this accordion option if it has the
required borrowing capacity at such time. The Amended Credit Facility bears
interest at a rate of the Canadian Dollar Offered Rate ("CDOR") plus a spread
ranging from 1.5% - 2.0% depending on the Company's excess availability
levels. Under the Amended Credit Facility, the sole financial covenant which
the Company is required to adhere to is to maintain minimum excess
availability of not less than $8.5 million at all times, except that the
Company shall not be in breach of this covenant if excess availability falls
below $8.5 million for not more than two consecutive business days once during
any fiscal month. The Company's excess availability was above $8.5 million
throughout fiscal 2024 and 2023. On June 26, 2024, the Company entered into an
amendment to the Amended Credit Facility with Wells Fargo Capital Finance
Corporation Canada. The amendment replaces the interest rate of CDOR plus a
spread ranging from 1.5% - 2% depending on the Company's excess availability
levels for the interest rate of the Canadian Overnight Repo Rate Average
("CORRA") plus a CORRA adjustment ranging from 0.30% to 0.32% and a spread
ranging from 1.5% - 2% depending on the Company's excess availability levels.
The adjustment was effective on June 26, 2024.
On June 29, 2018, the Company secured a $12.5 million Term Loan maturing in
October 2022 with Crystal Financial LLC (now known as SLR Credit Solutions)
("SLR"). On December 24, 2021, the Company entered into an amended and
restated senior secured term loan ("Amended Term Loan") with SLR. The Amended
Term Loan extended the maturity date of the Company's pre-existing loan from
October 2022 to December 2026. The Amended Term Loan is subordinated in lien
priority to the Amended Credit Facility and bears interest at a rate of CDOR
plus 7.75%. The Amended Term Loan also allows for periodic revisions of the
annual interest rate to CDOR plus 7.00% or CDOR plus 6.75% depending on the
Company complying with certain financial covenants. Under the Amended Term
Loan, the Company is required to adhere to the same financial covenant as
under the Amended Credit Facility (maintain minimum excess availability of not
less than $8.5 million at all times, except that the Company shall not be in
breach of this covenant if excess availability falls below $8.5 million for
not more than two consecutive business days once during any fiscal month). In
addition, the Amended Term Loan includes availability blocks at all times of
not less than the greater of $8.5 million and 10% of the borrowing base,
including additional seasonal availability blocks imposed from December 20th
to January 20th of each year of $5.0 million and from January 21st to January
31st of each year of $2.0 million. The Amended Term Loan is required to be
repaid upon maturity. On June 26, 2024, the Company entered into an amendment
to the Amended Term Loan with SLR. The amendment replaces the interest rate of
CDOR plus 7.75% (or CDOR plus 7.00% or CDOR plus 6.75% depending on the
Company complying with certain financial covenants) for the interest rate of
CORRA plus a CORRA adjustment of 0.32% and 7.75% (or CORRA plus a CORRA
adjustment of 0.32% plus 7.00% or CORRA plus a CORRA adjustment of 0.32% plus
6.75% depending on the Company complying with certain financial covenants).
The adjustment was effective on June 26, 2024.
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Our borrowing capacity under both the Amended Credit Facility and Amended Term
Loan is based upon the value of our inventory and accounts receivable, which
is periodically assessed by our lenders and based upon these reviews, our
borrowing capacity could be significantly increased or decreased.
Our lenders under our Amended Credit Facility and our Amended Term Loan may
impose, at any time, discretionary reserves, which would lower the level of
borrowing availability under our credit facilities (customary for asset-based
loans), at their reasonable discretion, to: i) ensure that we maintain
adequate liquidity for the operation of our business, ii) cover any
deterioration in the value of the collateral, and iii) reflect impediments to
the lenders to realize upon the collateral. There is no limit to the amount of
discretionary reserves that our lenders may impose at their reasonable
discretion.
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No discretionary reserves were imposed during fiscal 2024, fiscal 2023, and
fiscal 2022, by our current or former lenders.
For fiscal 2024 and 2023, the Company reported net losses of $4.6 million and
$7.4 million, respectively. The Company reported net income of $1.3 million
for fiscal 2022. The Company used cash from operating activities of $0.2
million and $6.9 million in fiscal 2024 and 2023, respectively, and generated
cash from operating activities of $18.6 million in fiscal 2022. The Company
had a negative working capital as at March 30, 2024 and March 25, 2023 and a
positive working capital as at March 26, 2022.
Maintenance of sufficient availability of funding through an adequate amount
of committed financing is necessary for the Company to fund its day-to-day
operations. If the Company does not generate profitable operations and
positive cash flows from operations in future periods, the Company may be
unable to realize its assets and discharge its liabilities and commitments in
the normal course of business. The Company's ability to make scheduled
payments of principal, or to pay the interest or additional interest, if any,
or to fund planned capital expenditures and operations will depend on its
ability to maintain adequate levels of available borrowing and its future
performance, may be subject to general economic, financial, competitive,
legislative and regulatory factors, as well as other events that are beyond
the Company's control.
On August 24, 2021, the Company entered into a new 10-year loan agreement with
Investissement Quebec, the sovereign fund of the province of Quebec, for an
amount of up to $4.3 million to be used specifically to finance the digital
transformation of the Company through the implementation of an omni-channel
e-commerce platform and enterprise resource planning system. As of March 30,
2024, the Company has $4.2 million outstanding on the loan. The term loan with
Investissement Quebec requires the Company on an annual basis to have a
working capital ratio (defined as current assets divided by current
liabilities excluding the current portion of operating lease liabilities) of
at least 1.01 at the end of the Company's fiscal year. During fiscal 2024, the
Company received a tolerance letter from Investissement Quebec that allowed
the Company, as at March 30, 2024 to tolerate a working capital ratio of 0.97.
The covenant as of March 30, 2024 was 0.96. On July 3, 2024, the Company
obtained a waiver from Investissement Quebec with respect to the requirement
to meet the working capital ratio at March 30, 2024. Furthermore, on July 12,
2024, the Company received a tolerance letter from Investissement Quebec that
allows the Company, as at March 29, 2025, to tolerate a working capital ratio
of 0.90.
On July 8, 2020, the Company secured a new six-year term loan with
Investissement Quebec, in the amount of $10.0 million, as amended. The secured
term loan was used to fund the working capital needs of the Company, of which
$4.9 million is outstanding at March 30, 2024. The term loan with
Investissement Quebec requires the Company on an annual basis to have a
working capital ratio (defined as current assets divided by current
liabilities excluding the current portion of operating lease liabilities) of
at least 1.01. During fiscal 2024, the Company received a tolerance letter
from Investissement Quebec that allowed the Company, as at March 30, 2024 to
tolerate a working capital ratio of 0.97. The covenant as of March 30, 2024
was 0.96. On July 3, 2024, the Company obtained a waiver from Investissement
Quebec with respect to the requirement to meet the working capital ratio at
March 30, 2024. Furthermore, on July 12, 2024, the Company received a
tolerance letter from Investissement Quebec that allows the Company, as at
March 29, 2025, to tolerate a working capital ratio of 0.90.
There is no assurance the Company will meet its covenant at March 29, 2025, or
future years, or that if not met, waivers would be available. If a waiver is
not obtained, cross defaults with our Amended Credit Facility and our Amended
Term Loan would arise.
On July 15, 2024, the Company obtained a support letter from one if its
shareholders, Mangrove Holding S.A., providing financial support in an amount
of up to $3.75 million, of which $1.0 million would be available after January
1, 2025. These amounts can be borrowed, if needed, when deemed necessary by
the Company, upon approval by the Company's Board of Directors, until at least
July 31, 2025, to assist the Company in satisfying its obligations and debt
service requirements as they come due in the normal course of operations, or
in meeting its financial covenant requirements of maintaining minimum excess
availability levels of $8.5 million at all times as required by its Amended
Credit Facility and Amended Term Loan. Amounts drawn under this support letter
will bear interest at an annual rate of 15%. However, there will be no
interest or principal repayments prior to July 31, 2025.
The going concern of presentation assumes that the Company will continue its
operations for the foreseeable future and be able to realize its assets and
discharge its liabilities and commitments in the normal course of business.
Additional financing or capital that may be required may not be available on
commercially reasonable terms, or may not be available at all.
If we are unable to meet our financial projections, in order to invest in
growth initiatives, we may need to raise additional funds through public or
private equity or debt financing, including funding from governmental sources,
which may not be possible as the success of raising additional funds is beyond
our control. The sale or issuance of additional equity securities could result
in significant dilution to our current shareholders, and the securities issued
in future financings may have rights, preferences and privileges that are
senior to those of our common stock. Failure to obtain such additional
financing or capital could have an adverse impact on our liquidity and
financial condition including our ability to continue as a going concern.
The terms of our Amended Credit Facility and Amended Term Loan expire in
December 2026, and as such, financing may be unavailable in amounts or on
terms similar to the current agreements or acceptable to us, if at all, which
could have a material adverse impact on our business, including our ability to
continue as a going concern.
The Company continues to be actively engaged in identifying alternative
sources of financing that may include raising additional funds through public
or private equity, the disposal of assets, and debt financing, including
funding from governmental sources which may not be possible as the success of
raising additional funds is beyond the Company's control. The incurrence of
additional indebtedness would result in increased debt service obligations and
could result in operating and financing covenants that could restrict the
Company's operations. Financing may be unavailable in amounts or on terms
acceptable to the Company if at all, which may have a material adverse impact
on its business, including its ability to continue as a going concern.
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Operational Risks
Our business could be adversely affected if we are unable to continue to lease
retail stores in prime locations and successfully negotiate favorable lease
terms.
Historically, we have generally been successful in negotiating and improving
leases for renewal as our current leases near expiration. As of May 31, 2024,
we had 22 leased retail stores. The leases are generally in prime retail
locations and generally have lease terms of ten years, with rent being a fixed
minimum base plus, for certain stores, a percentage of the store's sales
volume (subject to some adjustments) over a specified threshold. Many
uncontrollable factors can impact our ability to renew these leases, including
but not limited to, competition for key locations from other retailers. Only
three of the Company's store leases are renewable within the next two years
and such stores generated approximately 4.8% of our fiscal 2024 net sales. The
capital expenditures related to remodeling some of our retail stores are
estimated to be approximately $6.4 million during fiscal 2025. These planned
capital expenditures are at the discretion of the Company, are not required by
our landlords, and are not yet fully committed. We expect to be able to
finance these capital expenditures with internally generated funds and
existing financing arrangements. The Company also continues to be actively
engaged in identifying alternative sources of financing that may include
raising additional funds through public or private equity, the disposal of
assets, and debt financing, including funding from government sources.
However, in the future, if we are unsuccessful at negotiating favorable
renewal terms, locations or if more capital is required to meet landlord
requirements for remodeling or relocating retail stores and we are unable to
secure the necessary funds to complete these projects, our business, financial
condition, and operating results could be adversely affected. In addition, we
may not be able to locate suitable alternative sites in a timely manner. Our
sales, earnings and cash flows will decline if we fail to maintain existing
store locations, renew leases or relocate to alternative sites, in each case
on attractive terms.
Our business could be adversely affected if our relationships with any primary
vendors are terminated or if the delivery of their products is delayed or
interrupted.
We compete with other jewelry and timepiece retailers for access to vendors
that will provide us with the quality and quantity of merchandise necessary to
operate our business, and our merchandising strategy depends upon our ability
to maintain good relations with significant vendors. Certain brand name
timepiece and jewelry manufacturers have distribution agreements with our
Company that, among other things, provide for specific sales locations, yearly
renewal terms and early termination provisions at the manufacturer's
discretion. In fiscal 2024, merchandise supplied by our largest luxury
timepiece supplier and sold through our stores accounted for approximately 27%
of our total net sales (20% in fiscal 2023). Our relationships with primary
suppliers are generally not pursuant to long-term agreements. We obtain
materials and manufactured items from third-party suppliers. Any delay or
interruption in our suppliers' abilities to provide us with necessary
materials and components, may require us to seek alternative supply sources.
Any delay or interruption in receiving supplies could impair our ability to
supply products to our stores and, accordingly, could have a material adverse
effect on our business, results of operations and financial condition. The
abrupt loss of any of our significant third-party suppliers or a decline in
the quality or quantity of materials supplied by any third-party suppliers
could cause significant disruption in our business.
We may not successfully manage our inventory, which could have an adverse
effect on our net sales, profitability, cash flow and liquidity.
As a retail business, our results of operations are dependent on our ability
to manage our inventory. To properly manage our inventory, we must be able to
accurately estimate customer demand and supply requirements and purchase new
inventory accordingly. If we fail to sell our inventory, we may be required to
write-down our inventory or pay our vendors without new purchases, creating
additional vendor financing, which would have an adverse impact on our
earnings and cash flows. Additionally, a significant portion of the
merchandise we sell is carried on a consignment basis prior to sale or is
otherwise financed by vendors, which reduces our required capital investment
in inventory. Any significant change in these consignment or vendor financing
relationships could have a material adverse effect on our net sales, cash
flows and liquidity.
Fluctuations in the availability and prices of our raw materials and finished
goods may adversely affect our results of operations.
We offer a large selection of distinctive high-quality merchandise, including
diamond, gemstone and precious metal jewelry, rings, wedding bands, earrings,
bracelets, necklaces, timepieces and gifts. Accordingly, significant changes
in the availability or prices of diamonds, gemstones, and precious metals we
require for our products could adversely affect our earnings. We do not hedge
a material portion of the price of raw materials. A significant increase in
the price and availability of these materials could adversely affect our net
sales and gross margins.
We may not be able to adequately protect our intellectual property and may be
required to engage in costly litigation as a protective measure.
To establish and protect our intellectual property rights, we rely upon a
combination of trademark and trade secret laws, together with licenses,
exclusivity agreements and other contractual covenants. In particular, the
"Birks" trademarks are of significant value to our operations. The measures we
take to protect our intellectual property rights may prove inadequate to
prevent misappropriation of our intellectual property. Monitoring the
unauthorized use of our intellectual property is difficult. Litigation may be
necessary to enforce our intellectual property rights or to determine the
validity and scope of the proprietary rights of others. Litigation of this
type could result in substantial costs and diversion of resources, may result
in counterclaims or other claims against us and could significantly harm our
results of operations.
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A significant data privacy breach or security breach of our information
systems could disrupt or negatively affect our business.
The protection of customer, employee and company data is important to us, and
our customers expect that their personal information will be adequately
protected. The regulatory environment surrounding information security and
data privacy is becoming increasingly demanding, as requirements in respect of
personal data use and processing, including significant penalties for
non-compliance, continues to evolve in the various jurisdictions in which the
Company does business. Although we have developed and implemented systems and
processes that are designed to protect our information and prevent data loss
and other security breaches, such measures cannot provide absolute security
and our business could still be exposed to risks. Attacks may be targeted at
us, our vendors or customers, or others who have entrusted us with
information. Data and security breaches can also occur as a result of
non-technical issues including intentional or inadvertent breach by employees
or persons with whom we have commercial relationships that result in the
unauthorized release of personal or confidential information. We rely upon
information technology networks and systems, some of which are managed by
third parties, to process, transmit and store electronic information, and to
manage or support a variety of business processes and activities, including
e-commerce sales, supply chain, merchandise distribution, customer invoicing
and collection of payments. We use information technology systems to record,
process and summarize financial information and results of operations for
internal reporting purposes and to comply with regulatory financial reporting,
legal and tax requirements. Additionally, we collect and store sensitive data,
including intellectual property, proprietary business information, the
proprietary business information of our customers and suppliers, as well as
personally identifiable information of our customers and employees, in our
information technology systems. The secure operation of these information
technology networks, and the processing and maintenance of this information is
critical to our business operations and strategy. Cyber-attacks, security
breaches, and data breaches have become more prevalent and may occur in our
systems in the future. A significant breach of customer, employee or company
data could damage our reputation, our relationship with customers and the
Birks brand and could result in lost sales, sizable fines, violation of
applicable privacy and other laws, significant breach-notification costs and
lawsuits as well as adversely affect results of operations. In addition, it
could harm our ability to execute our business and adversely impact sales,
costs and earnings. Because of the rapidly evolving types of cyber-attacks and
the techniques used to obtain unauthorized access, disable or degrade service,
or sabotage systems change frequently and often are not recognized until
launched against a target, we may be unable to anticipate these techniques or
to implement adequate cost-effective preventative measures. We may need to
expend significant resources to protect against security breaches or to
address problems caused by breaches. We are currently operating under a hybrid
work policy whereby employees are able to work from home for a certain number
of days per week. Remote work could increase our cyber security risk, create
data accessibility concerns, and make us more susceptible to communication
disruptions, any of which could adversely impact our business operations.
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Failure to successfully implement or make changes to information systems could
disrupt or negatively impact our business.
In addition to regularly evaluating and making changes and upgrades to our
information systems, we started the implementation of a new enterprise
resource planning ("ERP") system with the Microsoft Dynamics D365 for Retail
platform in order to update our retail systems including point of sale (POS),
supply chain, warehouse management, wholesale, and finance. While we follow a
disciplined methodology when evaluating and making such changes, there can be
no assurances that we will successfully implement such changes, that such
changes will occur without disruptions to our operations, that the new or
upgraded systems will achieve the desired business objectives or that the
internal controls will be effective in preventing misstatements in financial
reporting. Any such disruptions, inadequate internal controls or the failure
to successfully implement new or upgraded systems such as those referenced
above, could have a material adverse effect on our results of operations and
could also affect our reputation, our relationship with customers and our
brands.
Our customer, employee and vendor relationships could be negatively affected
if we fail to maintain our corporate culture and reputation.
We believe we have a well-recognized culture and reputation that our consumers
associate with a high level of integrity, customer service and quality
merchandise, and it is one of the reasons customers shop with us and employees
choose us as a place of employment. Any significant damage to our reputation
could diminish customer trust, weaken our vendor relationships, reduce
employee morale and productivity and lead to difficulties in recruiting and
retaining qualified employees.
We believe that the customer experience we offer to our clients has a direct
impact on our sales and results from operations. Changes in the employment
market, and competition for qualified sales professionals could result in the
Company incurring higher labor costs. A shortage of qualified individuals and
higher labor costs could result in disruptions to the performance of sales
associates and an inability to recruit, train, motivate and retain suitably
qualified sales associates, which could adversely impact sales and earnings.
Inability to retain key employees and personnel may adversely affect our
results of operations.
The Company is dependent on key employees and having sufficient personnel and
could be materially adversely affected by a shortfall of personnel or by
substantial turnover. The Company is dependent on its ability to attract and
retain a variety of employees, including senior leadership, managers, store
personnel and other key employees having the necessary industry experience,
qualifications and knowledge in order to execute its business plan and operate
its business. If the Company were to experience a shortfall or a substantial
turnover in its key employees (including as a result of the more competitive
labor market), the Company, its business, results from operations and
financial condition could be materially adversely affected.
Failure to attract and retain qualified executive officers, managers and other
key employees could materially and adversely affect the Company's business,
results of operations or financial condition.
A few key employees are responsible for the management of the Company and the
loss of any one of these employees could have negative repercussions for the
Company. The Company's success is also dependent on its continuing ability to
identify, hire, train, retain and motivate highly qualified personnel. Failure
to attract and retain qualified executive officers, managers and other key
employees could materially and adversely affect the Company's business,
results of operations or financial condition.
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Risks Related to External Factors, including Regulations
We are exposed to currency exchange risks that could have a material adverse
effect on our results of operations and financial condition.
A portion of the purchases we make from our suppliers are denominated in U.S.
dollars. As a result, a depreciation of the Canadian dollar against the U.S.
dollar would increase the cost of acquiring those goods in Canadian dollars,
which would have a negative effect on our gross profit margin. In addition,
material fluctuations in foreign currency exchange rates could reduce our
borrowing availability under our Amended Credit Facility which is denominated
in Canadian dollars, and limit our ability to finance our operations.
We operate in a highly competitive and fragmented industry.
The retail jewelry and timepiece business is highly competitive and
fragmented, and we compete with nationally-recognized jewelry chains as well
as a large number of independent regional and local jewelry and timepiece
retailers and other types of retailers who sell jewelry, timepieces, and gift
items, such as department stores and mass merchandisers. We also compete with
e-commerce sellers of jewelry and timepieces. Because of the breadth and depth
of this competition, we are constantly under competitive pressure that both
constrains pricing and requires extensive merchandising and marketing efforts
in order for us to remain competitive.
We are controlled by a single shareholder whose interests may be different
from yours.
As of May 31, 2024, The Grande Rousse Trust ("Grande Rousse") beneficially
owns or controls 71.1% of all classes of our outstanding voting shares, which
are directly owned by Mangrove Holdings S.A ("Mangrove") and Montel Sarl
("Montel"), previously Montrovest B.V. Montel and Mangrove own 46.1% and 25.1%
of our outstanding voting shares respectively. The trustee of Grande Rousse is
Meritus Trust Company Limited (the "Trustee"). Confido Limited has the power
to remove the Trustee and as a result may be deemed to have beneficial
ownership of the Class A voting shares held by Montel and Mangrove. Under our
restated articles, Montel and Mangrove, as holders of the Class B multiple
voting shares, have the ability to control most actions requiring shareholder
approval, including electing the members of our Board of Directors and the
issuance of new equity.
Grande Rousse, Montel and Mangrove may have different interests than you have
and may make decisions that do not correspond to your interests. In addition,
the fact that we are controlled by one shareholder may have the effect of
delaying or preventing a change in our management or voting control.
Terrorist acts or other catastrophic events could have a material adverse
effect on our business and results of operations.
Terrorist acts, acts of war or hostility, natural disasters or other
catastrophic events could have an immediate disproportionate impact on
discretionary spending on luxury goods upon which our operations are
dependent, and could have a material adverse impact on our business and
results of operations. We have been, and may continue to be affected in the
future, by widespread protests such as the protests related to social
injustices that took place in various cities across Canada in February 2022.
Such protests can disrupt foot traffic at our stores, thereby negatively
impacting sales, cause temporary store closures, and lead to inventory
shrinkage, and property damage, all of which could adversely impact our sales
and results from operations.
Environmental and climate changes could affect the Company's business.
The Company recognizes that climate change is a serious risk to society and
therefore continues to take steps to reduce the Company's impact on the
environment. Adverse effects of climate change, such as extreme weather
events, particularly over a prolonged period of time, could negatively impact
the Company's business and results of operations if such conditions limit our
consumer's ability to access our stores, cause our consumers to limit
discretionary spending, or disrupt our supply chains or distribution channels.
Social, ethical and environmental matters influence the Company's reputation,
demand for merchandise by consumers, the ability to recruit staff, relations
with suppliers and standing in the financial markets. The Company's success is
dependent on the strength and effectiveness of its relationships with its
various stakeholders: customers, shareholders, employees and suppliers. In
recent years, stakeholder expectations have increased, as these stakeholders
expect businesses to consider social, ethical, and environmental impacts while
making business decisions, and the Company's success and reputation will
depend on its ability to meet these higher expectations. The Company's success
also depends upon its reputation for integrity in sourcing its merchandise,
which, if adversely affected could impact consumer sentiment and willingness
to purchase the Company's merchandise.
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Legal and Compliance Risks
Applicable laws and regulations related to consumer credit may adversely
affect our business.
The operation of our credit business subjects us to substantial regulation
relating to disclosure and other requirements upon origination, servicing,
debt collection and particularly upon the amount of finance charges we can
impose. Any adverse change in the regulation of consumer credit could
adversely affect our earnings. For example, new laws or regulations could
limit the amount of interest or fees we, or our banks, can charge on consumer
loan accounts, or restrict our ability to collect on account balances, which
could have a material adverse effect on our earnings. Compliance with existing
and future laws or regulations could require material expenditures or
otherwise adversely affect our business or financial results. Failure to
comply with these laws or regulations, even if inadvertent, could result in
negative publicity, and fines, either of which could have a material adverse
effect on our results of operations.
The Company conducts retail operations in Canada and conducts wholesale
operations in North America, the United Kingdom and the European Union. The
Company sources its inventory from several suppliers within and outside North
America, and has cross border financing arrangements. As a result, the Company
is subject to the risks of doing business in jurisdictions within and outside
North America.
The Company generates the majority of its net sales in Canada. The Company
also relies on certain foreign third-party vendors and suppliers. As a result,
the Company is subject to the risks of doing business in jurisdictions within
and outside North America, including:
. the laws, regulations and policies of governments relating to loans and
operations, the costs or desirability of complying with local practices
and customs and the impact of various anti-corruption, anti-money
laundering and other laws affecting the activities of the Company;
. potential negative consequences from changes in taxation policies or currency restructurings;
. potential negative consequences from the application of taxation
policies, including transfer pricing rules and sales tax matters;
. import and export licensing requirements and regulations, as well as unforeseen changes in regulatory requirements;
. economic instability in foreign countries;
. uncertainties as to enforcement of certain contract and other rights;
. the potential for rapid and unexpected changes in government, economic and political
policies, political or civil unrest, acts of terrorism or the threat of boycotts; and
. inventory risk exposures.
Changes in regulatory, political, economic, or monetary policies and other
factors could require the Company to significantly modify its current business
practices and may adversely affect its future financial results. For example,
the Company could be adversely impacted by U.S. trade policies, legislation,
treaties and tariffs, including trade policies and tariffs affecting China,
the E.U., Canada and Mexico, as well as retaliatory tariffs by such countries.
Such tariffs and, if enacted, any further legislation or actions taken by the
U.S. government that restrict trade, such as additional tariffs or trade
barriers, and other protectionist or retaliatory measures taken by governments
in Europe, Asia and elsewhere, could have a negative effect on the Company's
ability to sell products in those markets.
While these factors and the effect of these factors are difficult to predict,
any one or more of them could lower the Company's revenues, impact its cash
flow, increase its costs, reduce its earnings or disrupt its business.
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Risks Related to Class A Voting Shares
Our share price could be adversely affected if a large number of Class A
voting shares are offered for sale or sold.
Future issuances or sales of a substantial number of our Class A voting shares
by us, Montel, Mangrove, or another significant shareholder in the public
market could adversely affect the price of our Class A voting shares, which
may impair our ability to raise capital through future issuances of equity
securities. As of May 31, 2024, we had 11,472,999 Class A voting shares issued
and outstanding. Sales of restricted securities in the public market, or the
availability of these Class A voting shares for sale, could adversely affect
the market price of Class A voting shares.
As a retailer of jewelry and timepieces with a limited public float, the price
of our Class A voting shares may fluctuate substantially, which could
negatively affect the value of our Class A voting shares and could result in
securities class action claims against us.
The price of our Class A voting shares may fluctuate substantially due to,
among other things, the following factors: (1) fluctuations in the price of
the shares of a small number of public companies in the retail jewelry
business; (2) additions or departures of key personnel; (3) announcements of
legal proceedings or regulatory matters; and (4) general volatility in the
stock market. The market price of our Class A voting shares could also
fluctuate substantially if we fail to meet or exceed expectations for our
financial results or if there is a change in financial estimates or securities
analysts' recommendations.
Significant price and value fluctuations have occurred in the past with
respect to the securities of retail jewelry and related companies. In
addition, because the public float of our Class A voting shares is relatively
small, the market price of our Class A voting shares is likely to be volatile.
There is limited trading volume in our Class A voting shares, rendering them
subject to significant price volatility. In addition, the stock market has
experienced volatility that has affected the market prices of equity
securities of many companies, and that has often been unrelated to the
operating performance of such companies. A number of other factors, many of
which are beyond our control, could also cause the market price of our Class A
voting shares to fluctuate substantially. In the past, following periods of
downward volatility in the market price of a company's securities, class
action litigation has often been pursued. If our Class A voting shares were
similarly volatile and litigation was pursued against us, it could result in
substantial costs and a diversion of our management's attention and resources.
We are governed by the laws of Canada, and, as a result, it may not be
possible for shareholders to enforce civil liability provisions of the
securities laws of the U.S.
We are governed by the laws of Canada. Our assets are located outside the U.S.
and our directors and officers are residents outside of the U.S. As a result,
it may be difficult for investors to effect service within the U.S. upon us or
our directors and officers, or to realize in the U.S. upon judgments of courts
of the U.S. predicated upon civil liability of Birks Group and such directors
or officers under U.S. federal securities laws. There is doubt as to the
enforceability in Canada by a court in original actions, or in actions to
enforce judgments of U.S. courts, of the civil liabilities predicated upon
U.S. federal securities laws.
We are subject to the continued listing requirements of the NYSE American. If
we are unable to comply with such requirements, our common stock could be
delisted from the NYSE American, which would limit investors' ability to
effect transactions in our common stock and subject us to additional trading
restrictions.
Our common stock is currently listed on NYSE American. In order to maintain
our listing, we must maintain certain share prices, financial and share
distribution targets, including maintaining a minimum amount of stockholders'
equity and a minimum number of public shareholders. NYSE American may delist
the securities of any issuer for other reasons involving the judgment of NYSE
American.
On February 6, 2022, the Company was notified by NYSE American LLC ("NYSE
American") that it was back in compliance with all of the NYSE American's
continued listing standards set forth in Part 10 of the NYSE American Company
Guide ("Company Guide"). As previously reported, on August 13, 2020, the
Company was notified by NYSE American that it was not in compliance with the
continued listing standards set forth in Section 1003(a)(ii) of the Company
Guide. That section applies if a listed company has stockholders' equity of
less than U.S. $4.0 million and has reported losses and/or net losses in three
of its four most recent fiscal years. Furthermore, on December 9, 2020, the
Company was notified by NYSE American that it was not in compliance with the
continued listing standards set forth in Section 1003(a)(i) of the Company
Guide. That section applies if a listed company has stockholders' equity of
less than U.S.$2.0 million and has reported losses and/or net losses in two of
its three most recent fiscal years. Lastly, on June 25, 2021, the Company was
notified by NYSE American that it was not in compliance with the continued
listing standards as set forth in Section 1003(a)(iii) of the Company Guide
which applies if a listed company has stockholders' equity of less than U.S.
$6.0 million and has reported losses from operations and/or net losses in its
five most recent fiscal years.
In accordance with the procedures and requirements of Section 1009 of the
Company Guide, the Company submitted its plan of compliance on September 6,
2020 addressing how the Company intends to regain compliance with Section
1003(a)(ii) of the Company Guide. On October 22, 2020, NYSE American notified
the Company that it accepted the compliance plan and granted the Company an
extension for its continued listing until February 6, 2022 (the "Plan
Period"). During the Plan Period, the Company submitted quarterly plan updates
for review by the NYSE American, and all of the quarterly updates were all
accepted by the NYSE American. As of the end of the Plan Period, the Company's
stockholders' equity was U.S. $7.1 million, which is above the U.S. $6.0
million required to comply with Sections 1003(a)(i) through (iii) of the
Company Guide. As a result, the Company received a letter from the NYSE
American confirming that the Company regained compliance with Sections
1003(a)(i), (ii) and (iii) of the Company Guide.
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NYSE American does not normally consider suspending dealings with issuers that
are below standards (i) through (iii) of Section 1003(a) of the Company Guide
if the issuer has a total market capitalization of U.S. $50,000,000 or total
assets and revenue of U.S. $50,000,000 each in its last fiscal year or two of
its last three fiscal years, and the issuer has at least 1,100,000 shares
publicly held, 400 round lot shareholders, and a market value of publicly held
shares of at least U.S. $15,000,000. For the fiscal year ended March 30, 2024,
the Company reported total assets of $203.3 million (U.S. $150.0 million) and
revenues of $185.3 million (U.S. $137.5 million). As of July 15, 2024, the
Company had 5,371,320 publicly listed shares, more than 400 lot shareholders,
and a market value of publicly listed shares of U.S. $13.8 million.
It is possible that the Company may not be in compliance with the NYSE
American's continued listing standards in the future. If NYSE American delists
our common stock from trading on the exchange and we are not able to list our
securities on another national securities exchange, we expect our common stock
would qualify to be quoted on an over-the-counter market. If this were to
occur, we could experience a number of adverse consequences, including:
limited availability of market quotations for the common stock; reduced
liquidity for our securities; our common stock being categorized as a "penny
stock," which requires brokers trading in our common stock to adhere to more
stringent rules and possibly result in a reduced level of trading activity in
the secondary trading market for our common stock; and decreased ability to
issue additional securities or obtain additional financing in the future.
We expect to maintain our status as a "foreign private issuer" under the rules
and regulations of the SEC and, thus, are exempt from a number of rules under
the Exchange Act of 1934 and are permitted to file less information with the
SEC than a company incorporated in the U.S.
As a "foreign private issuer," we are exempt from rules under the Exchange Act
of 1934, as amended ("the Exchange Act") that impose certain disclosure and
procedural requirements for proxy solicitations under Section 14 of the
Exchange Act. In addition, our officers, directors and principal shareholders
are exempt from the reporting and "short-swing" profit recovery provisions of
Section 16 of the Exchange Act and the rules under the Exchange Act with
respect to their purchases and sales of our Class A voting shares. Moreover,
we are not required to file periodic reports and financial statements with the
SEC as frequently or as promptly as U.S. companies whose securities are
registered under the Exchange Act, nor are we required to comply with
Regulation Fair Disclosure, which restricts the selective disclosure of
material information. Accordingly, there may be less publicly available
information concerning us than there is for other U.S. public companies.
If we were treated as a passive foreign investment company ("PFIC") some
holders of our Class A voting shares would be subject to additional taxation,
which could cause the price of our Class A voting shares to decline.
We believe that our Class A voting shares should not be treated as stock of a
PFIC for U.S. federal income tax purposes, and we expect to continue
operations in such a manner that we will not be a PFIC. If, however, we are or
become a PFIC, some holders of our Class A voting shares could be subject to
additional U.S. federal income taxes on gains recognized with respect to our
Class A voting shares and on certain distributions, plus an interest charge on
certain taxes treated as having been deferred under the PFIC rules.
Our assessment of our internal control over financial reporting may identify
"material weaknesses" in the future which could reduce confidence in our
financial statements and negatively affect the price of our securities.
We are subject to reporting obligations under U.S. securities laws. Beginning
with our Annual Report on Form 20-F for fiscal 2008, Section 404 of the
Sarbanes-Oxley Act requires us to prepare a management report on the
effectiveness of our internal control over financial reporting. Our management
may conclude that our internal control over our financial reporting is not
effective. If at any time in the future, we are unable to assert that our
internal control over financial reporting is effective, market perception of
our financial condition and the trading price of our stock may be adversely
affected and customer perception of our business may suffer, all of which
could have a material adverse effect on our operations. Furthermore, our
auditors do not audit our internal controls over financial reporting due to
our market capitalization, and therefore, there has been no independent
attestation of our internal controls over financial reporting.
If the costs and burden of being a public company outweigh its benefits, we
may in the future decide to discontinue our status as a publicly traded
company.
As a public company, we currently incur significant legal, accounting and
other expenses. In addition, the Sarbanes-Oxley Act, as well as rules
subsequently implemented by the SEC and the NYSE American, have imposed
various requirements on public companies, including requiring establishment
and maintenance of effective disclosure and financial controls as well as
mandating certain corporate governance practices. Our management and other
personnel devote a substantial amount of time and financial resources to these
compliance initiatives. As such, if it is determined in the future that the
costs and efforts of being a public company outweigh the benefits of being a
public company, we may decide to discontinue our status as a publicly traded
or registered company.
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Item 4. Information on the Company
THE COMPANY
Corporate History and Overview
Birks Group is a leading designer of fine jewelry and operator of luxury
jewelry, timepieces and gifts retail stores in Canada, with wholesale
customers in North America, the E.U., the U.K. and the Middle East. As of May
31, 2024, Birks Group operated 18 retail stores under the Maison Birks brand
in most major metropolitan markets in Canada, one retail location in Calgary
operated under the Brinkhaus brand, two retail locations in Vancouver, one
operated under the Graff brand and the other operated under the Patek Philippe
brand, and one retail location in Laval, Quebec, operated under the Breitling
brand. Birks fine jewelry collections are also available through select SAKS
Fifth Avenue stores in Canada and the U.S., select Mappin & Webb and
Goldsmiths locations in the United Kingdom, in Mayors stores in the United
States as well as at certain jewelry retailers across North America and in
Europe. For fiscal 2024, we had net sales of $185.3 million.
Birks' predecessor company was founded in Montreal in 1879 and developed over
the years into Canada's premier designer, manufacturer and retailer of fine
jewelry, timepieces, sterling and plated silverware and gifts. In addition to
being a nationwide retailer with a strong brand identity, we are also highly
regarded in Canada as a jewelry designer. We believe that operating our stores
under the Maison Birks brand and the fact that we sell Birks branded jewelry
distinguishes us from many competitors because of our longstanding reputation
and heritage, our ability to offer distinctively designed, exclusive products,
and by placing a strong emphasis on providing a superior shopping experience
to our clients.
Birks was purchased by Borgosesia Acquisitions Corporation in 1993, a
predecessor company of Regaluxe Investment S.a.r.l., which is referred to in
this Annual Report as Regaluxe. Effective March 28, 2006, Regaluxe was
acquired through a merger with Iniziativa S.A. ("Iniziativa"). As of May 31,
2007 and June 4, 2007, respectively, following a reorganization, Iniziativa
and Montrolux S.A. transferred all of the shares they respectively held in the
Company to their parent company, Montrovest B.V. ("Montrovest" now known as
Montel). Following the 1993 acquisition of Birks, Birks' operations were
evaluated and a program of returning Birks to its historic core strength as
the leading Canadian prestige jeweler was initiated.
In August 2002, Birks invested $23.6 million to acquire approximately 72% of
the voting control in Mayors, which was experiencing an unsuccessful expansion
beyond its core markets and was incurring significant losses.
Between August 2002 and November 2005, it became apparent to both Mayors and
Birks management that it was in the best interests of the shareholders to
combine its operations. The Company believed that such combination would
create a stronger capital base, improve operating efficiencies, reduce the
impact of regional issues, simplify the corporate ownership of Mayors,
eliminate management and board of directors' inefficiencies with managing
intercompany issues, and possibly increase shareholder liquidity. Upon the
consummation of the merger on November 14, 2005, each outstanding share of
Mayors common stock not then owned by Birks was converted into 0.08695 Class A
voting shares of Birks. As a result of the merger, Mayors common stock ceased
trading on the American Stock Exchange ("AMEX") and Birks Group began trading
on the AMEX, which is now known as the NYSE American, under the trading symbol
"BGI." Following the merger, Birks Group worked very diligently to fully
integrate the Birks business with Mayors. As a result of the merger, we
believe Birks Group improved operational efficiencies and diversity and depth
of its products and distribution capabilities.
In December 2015, Montrovest (now known as Montel) transferred a portion of
its Class A and Class B voting shares to Mangrove and as a result Montel owned
49.2% of the voting shares of the Company and Mangrove owned 26.7%.
In August 2017, Birks entered into the Stock Purchase Agreement with Aurum,
the largest fine watch and jewelry retailer in the U.K., to sell its wholly-
owned subsidiary Mayors. The Aurum Transaction (as defined below) closed on
October 23, 2017 for total cash consideration of $135.0 million (U.S. $106.8
million). As part of the transaction, Birks entered into a 5-year distribution
agreement with Aurum to sell Birks fine jewelry in the U.K. at Mappin & Webb,
Goldsmiths stores and on their e-commerce websites.
In April of 2021, the Company entered into a joint venture with FWI LLC
("FWI") to form RMBG Retail Vancouver ULC ("RMBG"). During fiscal 2023, the
joint venture company became operational. RMBG operates a boutique in
Vancouver, retailing third party branded watches, sales of which were
historically recognized at the Company's Vancouver Flagship location and are
now recognized through the joint venture company. The Company and FWI both
contributed certain assets for a 49% and 51% equity interest respectively in
RMBG, the legal entity comprising the joint venture.
In the last three fiscal years, we invested a total of approximately $23.3
million in capital expenditures primarily associated with the remodeling of
our existing store network, as well as a digital transformation of the Company
including the transition to a new e-commerce platform. During fiscal 2024, we
invested a total capital expenditure of $7.2 million, including $1.5 million
of leasehold improvement to initiate the construction of a new store in
Montreal, planned to open in August 2024. In addition, we invested $3.2
million for the completion of renovations that started in fiscal 2023 and
other partial renovations in certain stores to accommodate brand movement.
$1.3 million was invested for various digital transformation initiatives
including improvement of our e-commerce platform and the on-going
implementation of our ERP system (included in intangible assets), as well as
$0.3 million towards various wholesale and visual merchandising projects.
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During fiscal 2023, total capital expenditures of $10.6 million included $4.8
million towards major store renovation and remodeling projects, including the
renovation of a store location in Calgary, the major renovation of a store in
Laval, and towards the partial remodeling of the Vancouver flagship location,
$0.7 million towards various renovations across the retail network, including
the addition of various new brand counters and shop-in-shops in certain
stores, $3.7 million towards various digital transformation initiatives
including the implementation of a new e-commerce platform and the on-going
implementation of our ERP system (included in intangible assets), as well as
$0.5 million towards various wholesale and visual merchandising projects.
We currently expect to continue to invest in capital expenditures to make
on-going strategic improvements to our retail network in fiscal 2025 and
fiscal 2026, all the while focusing on operations and on delivering a return
on our strategic investment spending during the last fiscal year. We expect to
finance these capital expenditures from operating cash flows, and existing
financing arrangements including tenant allowances from certain of our
landlords and capital lease financing.
The Company regularly reviews the locations of its retail network that leads
to decisions that impact the opening, relocation or closing of these
locations. During fiscal 2024, we launched the construction of a new store in
Montreal, which is planned to open in August 2024, we executed a partial
renovation of two stores in Toronto and one store in Calgary and we launched a
partial renovation of a store in Ottawa. During fiscal 2024, we also closed
three Maison Birks stores: one in Burlington, Ontario, one in Mississauga,
Ontario and one in Calgary, Alberta. During fiscal 2023, we executed a partial
renovation of our flagship location in Vancouver, British Columbia, we
renovated our Laval, Quebec Maison Birks store and opened an adjoining store
operated under the Breitling brand. We also relocated one Maison Birks store
in Calgary, Alberta and, in the process, upgraded its third-party timepieces
and jewelry brand distribution portfolio. During fiscal 2023, we also closed
two Maison Birks stores: one in Surrey, British Columbia and another in
Winnipeg, Manitoba. During fiscal 2022, we renovated our Brinkhaus store in
Calgary, Alberta, and remodeled a Maison Birks store in Calgary, Alberta.
During fiscal 2022, we also closed three Maison Birks stores: one in Oshawa,
Ontario, one in Saskatoon, Saskatchewan, and one in Victoria, British Colombia.
Our sales are divided into two principal product categories: (i) jewelry and
other, and (ii) timepieces. Jewelry and other also includes sales of other
product offerings we sell such as giftware, as well as repair and custom
design services.
The following table compares our sales of each product category for the last
three fiscal years (dollars in thousands):
Fiscal Year-Ended
March 30, 2024 March 25, 2023 March 26, 2022
Jewelry and other $ 85,226 46.0 % $ 85,798 52.7 % $ 90,522 49.9 %
Timepieces 100,049 54.0 % 77,152 47.3 % 90,820 50.1 %
Total $ 185,275 100 % $ 162,950 100 % $ 181,342 100 %
Jewelry and other product category sales have remained relatively stable in
fiscal 2024 as compared to fiscal 2023, and similarly to fiscal 2023, we
believe the Company's product assortment at lower price points continued to be
impacted by increased inflation and heightened interest rates all directly
impacting discretionary consumer spending. The decrease in sales from the
jewelry and other products categories in fiscal 2023 as compared to fiscal
2022 is driven primarily by lower Birks branded jewelry sales including both
Birks fine jewelry and Birks bridal jewelry, driven in part by the impact of
temporary store closures during renovations, as well as, we believe, by the
impact of heightened inflationary pressure on consumers' discretionary
spending, particularly on the Company's product assortments at lower price
points.
The increase in sales from the timepieces product category in fiscal 2024 as
compared to 2023 is attributable to growth in third-party timepiece brands
primarily resulting from the renovations and improved merchandising of two of
our key locations at the end of fiscal 2023. The decrease in sales from the
timepieces product category in fiscal 2023 as compared to fiscal 2022 is
attributable primarily to the exclusion of the sales of RMBG.
Birks Group is a Canadian corporation. Our corporate headquarters are located
at 2020 Robert-Bourassa Boulevard, Suite 200, Montreal, Quebec, Canada H3A
2A5. Our telephone number is (514) 397-2501. Our website is
www.birksgroup.com.
The U.S. Securities and Exchange Commission ("SEC") maintains a website that
contains reports, proxy and information statements, and other information
regarding issuers (including Birks Group) that file electronically with the
SEC at http://www.sec.gov. The Company also maintains a public website at
http://www.birks.com
and
http://www.maisonbirks.com.
Products
We offer distinctively designed, exclusive products and a large selection of
distinctive high quality merchandise at various price points. This merchandise
includes our own Birks branded designed jewelry, and designer jewelry, that
include diamonds, gemstones, and precious metals.
Our Birks brand consists of internally developed luxury fine jewelry and
bridal collections as well as gift items. Part of our strategy is to increase
our exclusive offering of internally designed goods sold to our customers,
consisting primarily of fine jewelry and bridal offerings, all of which
leverage the Birks brand loyalty in their respective markets and in order to
differentiate our products with unique and exclusive designs.
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Our stores, operating under the Maison Birks, Brinkhaus, Breitling, Graff and
Patek Philippe brands, carry a large selection of prestigious brand name
timepieces including timepieces made by Rolex, Tudor, Baume & Mercier,
Breitling, Cartier, Chaumet, Frederique Constant, Graff, Grand Seiko, IWC,
Jaeger Lecoultre, Longines, Montblanc, Panerai, Patek Philippe, and Tag Heuer.
We also carry an exclusive collection of high quality jewelry that we design.
We emphasize Birks brand jewelry offerings but also include other designer
jewelry made by Chaumet, Dinh Van Paris, Fred, Graff, Marco Bicego, Messika,
Roberto Coin, and Yoko London. We also offer a variety of high quality
giftware, including writing instruments made by Montblanc.
We have one primary channel of distribution, the retail division, which
accounts for approximately 94% of net sales during each of fiscal 2024 and
2023, and 93% in fiscal 2022, as well as three other channels of distribution,
namely e-commerce, wholesale, and gold exchange which combined accounted for
approximately 6% of net sales during each of fiscal 2024 and 2023 and 7% in
fiscal 2022.
Product Design, Development, Sourcing and Manufacturing
We established a product development process that supports our strategy to
further develop and enhance our product offering in support of the Birks brand
development. During fiscal 2024, 2023, and 2022, approximately 41%, 41%, and
49%, respectively, of our jewelry products acquired for sale were internally
designed and sourced. A significant portion of internally designed products
are associated with the Bridal segment, which is largely reliant on customized
special orders. Products that are not designed and manufactured for us, are
sourced from suppliers worldwide, enabling us to sell an assortment of fine
quality merchandise often not available from other jewelers in our markets.
Our staff of buyers procures distinctive high quality merchandise directly
from manufacturers, diamond cutters, and other suppliers worldwide. Our loose
stone acquisition team, product sourcing team and category managers specialize
in sourcing merchandise in categories such as diamonds, precious gemstones,
pearls, timepieces, gold jewelry, and giftware. Retail and merchandising
personnel frequently visit our stores and those of competitors to compare
value, selection, and service, as well as to observe client reaction to
merchandise selection and determine future needs and trends.
Availability of Products
Although purchases of several critical raw materials, notably platinum, gold,
silver, diamonds, pearls and gemstones, are made from a relatively limited
number of sources, we believe that there are numerous alternative sources for
all raw materials used in the manufacture of our finished jewelry, and that
the failure of any principal supplier would not have a material adverse effect
on our operations. Any material changes in foreign or domestic laws and
policies affecting international trade may have a material adverse effect on
the availability of the diamonds, other gemstones, precious metals and
non-jewelry products we purchase. Significant changes in the availability or
prices of diamonds, gemstones and precious metals we require for our products
could adversely affect our earnings. We do not maintain long-term inventories
or otherwise hedge a material portion of the price of raw materials. A
significant increase in the price of these materials could adversely affect
our net sales, gross margin and earnings. However, in the event of price
increases, we will generally attempt to pass along any price increases to our
customers.
In fiscal 2024, we purchased jewelry, timepieces and giftware for sale in our
stores and online from several suppliers. Many of these suppliers have
long-standing relationships with us. We compete with other jewelry and
timepiece retailers for access to vendors that will provide us with the
quality and quantity of merchandise necessary to operate our business. Our
relationships with primary suppliers are generally not pursuant to long-term
agreements. Although we believe that alternative sources of supply are
available, the abrupt loss of any of our key vendors, or a decline in the
quality or quantity of merchandise supplied by our vendors could cause
significant disruption in our business. In fiscal 2024, merchandise supplied
by our largest luxury timepiece supplier and sold through our stores accounted
for approximately 27% of our total net sales. If our largest luxury timepiece
supplier terminated its distribution agreements with us, such termination
would have a material adverse effect on our business, financial condition and
operating results.
Impact of inflation
We believe that in fiscal 2023 and 2024, inflation, interest rates, and the
volatility in the stock market may have had an impact on consumer
discretionary spending, and on our sales results and results from operations.
Luxury jewelry and timepiece purchases are considered discretionary spending.
As such, if inflation, interest rates, and volatility in the stock market
could negatively impact consumer discretionary spending, it could also
negatively impact our future sales results and operating performance.
The cost of gold and diamonds continued to fluctuate during fiscal 2024 with
an increase in the first months of the year, and a decrease in the summer
months before increasing once again during the holiday season. During fiscal
2023, diamond and gold costs increased throughout the year. As a result of
these fluctuations, we have increased retail prices on certain product
categories to offset such cost increases in fiscal 2023 but maintained retail
prices stable during fiscal 2024. Refer to Item 1A, Risk Factors, for further
information on the potential impacts and risk associated with inflation.
Seasonality
Our sales are highly seasonal, with the third fiscal quarter (which includes
the holiday shopping season) historically contributing significantly higher
net sales than any other quarter during the year. In addition to seasonality
trends, fiscal 2022 was also impacted by factors attributable to COVID-19,
such as widespread restrictions and temporary store closures, particularly in
the first quarter of fiscal 2022 which shifted net sales between quarters. Net
sales in the first, second, third and fourth quarters in fiscal 2024 were 24%,
24%, 33% and 20%, respectively, in fiscal 2023 were 26%, 22%, 33% and 19%,
respectively, and in fiscal 2022 were 22%, 25%, 34% and 19%, respectively.
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Retail Operations, Merchandising and Marketing
General
We believe we are differentiated from most of our competitors because we offer
distinctively designed, exclusive products and a selection of distinctive high
quality merchandise at a wide range of price points. We keep the majority of
our inventory on display in our stores rather than at our distribution
facility. Although each store stocks a representative selection of jewelry,
timepieces, and giftware, certain inventory is tailored to meet local tastes
and historical merchandise sales patterns of specific stores.
We believe that our stores' elegant surroundings and distinctive merchandise
displays play an important role in providing an atmosphere that encourages
sales. We pay careful attention to detail in the design and layout of each
store, particularly lighting, colors, choice of materials, and placement of
display cases. We also use window displays as a means of attracting walk-in
traffic and reinforcing our distinctive image. Our marketing department
designs and creates window and store merchandise case displays for all of our
stores. Window displays are frequently changed to provide variety and to
reflect seasonal events such as the November - December Holiday Season,
Valentine's Day, Mother's Day and Father's Day.
Personnel and Training
We place substantial emphasis on the professionalism of our sales force to
maintain our position as a leading prestige jeweler. We strive to hire only
highly motivated, professional and customer-oriented individuals. All new
sales professionals attend an intensive training program where they are
trained in technical areas of the jewelry and timepiece business, specific
sales and service techniques and our commitment to client service. Management
believes that attentive personal service and knowledgeable sales professionals
are key components to our success.
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As part of our commitment to continuous, on-the-job training, we have
established "Birks University", a formalized system of in-house training with
a primary focus on client service, selling skills and product knowledge that
involves extensive training, the use of detailed operational manuals, in-store
mentorship programs and a leading edge product knowledge program which
includes on-line quizzes. In addition, we conduct in-house training seminars
on a periodic basis and administer training modules with audits to (i) enhance
the quality and professionalism of all sales professionals, (ii) measure the
level of knowledge of each sales professional, (iii) update sales
professionals on changes to our credit programs available to customers and
changes to applicable laws, including anti-money laundering legislation, and
(iv) identify needs for additional training. We also provide all management
team members with more extensive training that emphasizes leadership skills,
general management skills, "on-the-job" coaching and training instruction
techniques.
Advertising and Promotion
One of our key marketing goals is to build on our reputation in our core
markets as a leading luxury jewelry brand offering high quality merchandise in
an elegant, sophisticated environment. For example, we frequently run
advertisements that associate the Birks brand with internationally recognized
brand names. Advertising and promotions for all stores are developed by our
personnel in conjunction with outside creative professionals.
Our advertising reinforces our role as a world-class luxury brand that aims to
deliver a total shopping experience that is as memorable as our merchandise.
Our marketing efforts consist of advertising campaigns on digital platforms
(including on our website and on social media), billboards, print, direct
mail, special events, media and public relations, distinctive store design,
elegant displays, partnerships with key suppliers and associations with
prestige institutions. The key goals of our marketing initiatives are to
enhance customer awareness and appreciation of our retail brand, Maison Birks,
as well as our Birks product brand, and to increase customer traffic, client
acquisition and retention and net sales.
Credit Operations
We have a private label credit card, which is administered by a third-party
financial institution that owns the credit card receivable balances. We also
have a Birks proprietary credit card, which we administer. Our credit programs
are intended to complement our overall merchandising and sales strategy by
encouraging larger and more frequent sales to a loyal customer base. Sales
under the Birks private label credit card and the Birks in-house credit card
accounted for approximately 18.9% of our net sales during fiscal 2024, 15.6%
of our net sales during fiscal 2023 and 14.7% during fiscal 2022. We have
continued to implement attractive term plans during fiscal 2024. Sales under
the Birks private label credit cards are generally made without credit
recourse to us.
Distribution
Our retail locations receive the majority of their merchandise directly from
our distribution warehouse located in Montreal, Quebec. Merchandise is shipped
from the distribution warehouse utilizing various air and ground carriers. We
also transfer merchandise between retail locations to balance inventory levels
and to fulfill client requests, and a portion of merchandise is delivered
directly to the retail locations from suppliers.
Competition
The North American retail jewelry industry is highly competitive and
fragmented, with a few very large national and international competitors and
many medium and small regional and local competitors. The market is also
fragmented by price and quality. Our competitors include national and
international jewelry chains as well as independent regional and local jewelry
and timepiece retailers. We also compete with other types of retailers such as
department stores and specialty stores and, to a lesser extent, catalog
showrooms, discounters, direct mail suppliers, televised home shopping
networks, and pure e-commerce players. Many of these competitors have greater
financial resources than we do. We believe that competition in our markets is
based primarily on the total brand experience including trust, quality
craftsmanship, product design and exclusivity, product selection, marketing
and branding elements (including web), service excellence, including
after-sales service, and, to a certain extent, price. With the on-going
consolidation of the retail industry, we believe that competition with other
general and specialty retailers and discounters will continue to increase. Our
success will depend on various factors, including general economic and
business conditions affecting consumer spending, the performance of national
and international retail operations, the acceptance by consumers of our
merchandising and marketing programs, store locations and our ability to
properly staff and manage our stores.
Regulation
Our operations are affected by numerous federal and provincial laws that
impose disclosure and other requirements upon the origination, servicing and
enforcement of credit accounts and limitations on the maximum amount of
finance charges that may be charged by a credit provider. In addition to our
private label and proprietary credit cards, credit to our clients is primarily
available through third-party credit cards such as American Express
(R)
, Discover
(R)
, MasterCard
(R)
, Union Pay
(R)
and Visa
(R)
, without recourse to us in the case of a client's failure to pay. Any change
in the regulation of credit that would materially limit the availability of
credit to our traditional customer base could adversely affect our results of
operations and financial condition.
We generally utilize the services of independent customs agents to comply with
U.S. and Canadian customs laws in connection with our purchases of gold,
diamond and other jewelry merchandise from foreign sources.
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Diamonds extracted from certain regions in Africa, including Zimbabwe, that
are believed to be used to fund terrorist activities, are considered conflict
diamonds. We have designed a conflict minerals compliance initiative to
implement a consistent, company-wide compliance process which includes:
. Educating our employees and suppliers about conflict minerals;
. Establishing a cross-functional management team with members of senior
management and subject-matter experts from relevant functions such as
supply chain, product development, merchandising, legal and finance
responsible for implementing our conflict minerals compliance strategy; and
. Reporting mechanisms for questions and concerns, including a toll-free confidential and anonymous hotline.
We support the Kimberley Process, an international initiative intended to
ensure diamonds are not illegally traded to fund conflict. As part of this
initiative, we require our diamond suppliers to acknowledge compliance with
the Kimberley Process and invoices received for diamonds purchased by us must
include certification from the vendor that the diamonds and diamond containing
jewelry are conflict free. Through this process and other efforts we believe
that the suppliers from whom we purchase diamonds exclude conflict diamonds
from their inventories.
Our compliance program has been designed to conform, in all material respects,
with the framework in The Organization of Economic Co-operation and
Development ("OECD") Due Diligence Guidance for Responsible Supply Chains of
Minerals from Conflict-Affected and High-Risk Areas (Second Edition), and the
related gold supplement for conflict minerals. In addition, we have adopted a
conflict minerals policy which has been communicated to our suppliers and is
included in our Merchandise Quality Manual and available under "Corporate
Governance" on the "Investor Relations" webpage of our website at
www.birks.com. Our conflict mineral policy indicates that suppliers who do not
comply with this policy will be reviewed and evaluated accordingly for future
business and sourcing decisions.
In August 2012, the SEC issued rules that require companies that manufacture
products using certain "conflict minerals", including gold, to determine
whether those minerals originated in the Democratic Republic of Congo or
adjoining countries ("DRC"). If the minerals originate in the DRC, or if
companies are not able to establish where they originated, extensive
disclosure regarding the sources of those minerals, and in some instances an
independent audit of the supply chain, is required. We filed our twelfth
disclosure report on May 31, 2024 for the calendar year ended December 31,
2023. We determined that we had no reason to believe that any conflict
minerals necessary to the functionality or production of our products may have
originated in the DRC.
Trademarks and Copyrights
The designations Birks, and the Birks logos, are our principal trademarks and
are essential to our ability to maintain our competitive position in the
prestige jewelry segment. We maintain a program to protect our trademarks and
will institute legal action where necessary to prevent others from either
registering or using marks that are considered to create a likelihood of
confusion with our trademarks. We are also the owner of the original jewelry
designs.
Organizational Structure
Not applicable.
Properties
We lease all of our store locations as well as our corporate head office which
includes a distribution center. We believe that all of our facilities are well
maintained and in good condition and are adequate for our current needs. We
actively review all leases that expire within the next 12 months to determine
whether to renew the leases. Over the past few years, we have also decreased
the number of stores we operate by closing certain underperforming stores.
Going forward, we plan to continue to evaluate the productivity of our
existing stores and close unproductive stores. In addition, we plan to
continue to review opportunities to open new stores in new prime retail
locations when the right opportunities exist.
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Following is a listing of all our properties as of March 30, 2024:
Size Expiration of Lease Location
(Square Feet)
Operating Stores
Bayshore Centre 1,099 September 2027 Ottawa, ON
Bloor Flagship Store 9,695 February 2034 Toronto, ON
Brinkhaus 3,221 March 2027 Calgary, AB
Breitling Laval 257 August 2032 Laval, QC
Carrefour Laval 2,288 August 2032 Laval, QC
Chinook Shopping Centre 4,186 October 2032 Calgary, AB
DIX-30 Mall 1,645 July 2033 Brossard, QC
Fairview Pointe-Claire 1,450 August 2030 Pointe-Claire, QC
First Canadian Place 2,243 August 2028 Toronto, ON
Graff Boutique 850 October 2028 Vancouver, BC
Montreal Flagship Store 7,714 April 2032 Montreal, QC
Park Royal 1,797 October 2024 West Vancouver, BC
Patek Philippe Boutique 850 October 2028 Vancouver, BC
Place Ste-Foy 1,472 September 2027 Ste-Foy, QC
Rideau Centre 2,745 May 2034 Ottawa, ON
Sherway Gardens 2,726 September 2025 Etobicoke, ON
Southgate Shopping Centre 1,300 April 2028 Edmonton, AB
Toronto Dominion Square 5,568 August 2030 Calgary, AB
Vancouver Flagship Store 20,221 August 2032 Vancouver, BC
West Edmonton Mall 2,244 August 2024 Edmonton, AB
Willowdale Fairview Mall 1,543 August 2029 North York, ON
Yorkdale 2,817 October 2026 Toronto, ON
Other Properties
Montreal corporate office 26,423 May 2033 Montreal, QC
Total annual base rent for the above locations for fiscal 2024 was
approximately $11.9 million.
Diversity, Equity and Inclusion Throughout the Company
We strive to embed diversity, equity and inclusion ("DE&I") in our corporate
culture and provide our employees across Canada with equal opportunities and a
sense of belonging, regardless of their background, experience or beliefs.
This creates a better work environment and fosters individual and team growth,
allowing us to better serve our customers and attract the best diverse talent.
We promote equal opportunity in recruitment, hiring, promotion, compensation,
employee development such as training, and all other terms and conditions of
employment. As such, all decisions regarding these matters are made without
bias relating to race, national or ethnic origin, color, religion, age,
gender, sex, sexual orientation, matrimonial status, civil status, physical or
mental ability, or thoughts and beliefs, in each case in accordance with the
laws of the jurisdictions in which we operate and as set out in our Code of
Conduct.
Some of the Company's tangible initiatives to promote DE&I and foster a more
inclusive culture where everyone feels they belong include:
. The establishment of a Diversity & Inclusion Task Force (the "Task Force") in July 2020, which has
expanded to 9 members spanning multiple functions, regions and levels within the Company and led by a
senior executive, namely Miranda Melfi. The Task Force has developed recommendations to create opportunities
that promote cultural awareness and open dialogue and facilitate inclusion at all levels of the
Company, which are being implemented by the relevant departments of the Company. Such recommendations
were developed based on an analysis of the valuable feedback received from survey results and team
lead interviews conducted with employees, department heads and team leads throughout the Company. The
Task Force has been renamed the Diversity, Equity and Inclusion Committee (the "DE&I Committee").
. A mandatory two-session training course on diversity, inclusion and unconscious bias was delivered by an external
consultant with subject matter expertise in DE&I, to all of the Company's employees as well as the Board of Directors. The
course, which emphasizes both the Company's and employee's responsibility to build an inclusive culture, has become a
part of the Company's training program, and all new employees must complete the course as part of their onboarding.
. A mandatory training course on anti-racism was also delivered by an external
consultant with subject matter expertise in DE&I, to all of the Company's employees.
. An annual calendar highlighting various societal, cultural and religious days of importance was developed in order to create
awareness and to publicly recognize the diversity of the Company's workforce and to foster a more inclusive environment.
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. Flexible work arrangements are offered to office employees, allowing
office employees (i) a flexible work schedule, (ii) the opportunity to
telework within a hybrid work model, and (iii) a summer schedule allowing
employees to take a few Friday afternoons off during the summer.
Environmental, Social and Governance Highlights
The Company is committed to enhancing its Environmental, Social and Governance
("ESG") practices and disclosure. We organize our ESG efforts around three
pillars: (1) Environmental, (2) Social, and (3) Governance. These pillars are
reflective of the integrity of the Birks brand and are embedded in our
operations and culture. They specifically focus on our employees, communities,
operations and products, and priorities are distributed across our value chain
from raw material sourcing and third-party manufacturing, our stores, head
office, distribution center and our watch and jewelry ateliers, through to our
products' use and end of life impacts. We believe this approach creates value
for all of our stakeholders, including our customers, employees, suppliers and
partners, and the communities we serve, in turn creating long-term value for
our shareholders.
Some of the highlights of our key initiatives and achievements are described
below.
Environmental
Our commitment to sustainable business operations spans from the products we
offer to our customers, to our store construction, maintenance and operations,
to our supply chain and packaging initiatives, and to an ethical sourcing
program. In addition, our Birks branded jewelry collections are inspired by
the Canadian nature which we believe contributes to keeping the environment in
the front and center.
Recycling and Waste Management
. Since 2014, we have been reporting verified conflict-free gold to the U.S. Securities and Exchange Commission;
. We have recovered over 1,575 troy ounces of gold and platinum in fiscal 2024 through our Maison Birks Gold Exchange Program;
. We have recovered approximately 11% of our diamonds in fiscal 2024 through
our diamond upgrade program- that were sold and made available for sale;
. Following the recommendations of our former paperless committee, we have implemented initiatives which led to the reduction
of our consumption of paper and ink by (i) reducing the number of documents being printed, (ii) reducing the number
of printers, (iii) providing two computer screens to employees which allow them to view documents on two screens thereby
reducing the need to print, and (iv) offering and encouraging our customers to use the option of electronic statements.
Sourcing and Quality Assurance
. We uphold high standards in quality and maintain a global sourcing program
to obtain high-quality products from our suppliers around the world.
. To ensure that suppliers adhere to our standards of social and environmental responsibility,
we also have a global responsible sourcing program and support the Kimberley
Process, which is an international certification initiative that regulates trade in
rough diamonds and is intended to ensure that diamonds are not illegally traded to fund
conflict thereby protecting human rights and the environment. As part of this initiative,
we require our diamond suppliers to acknowledge compliance with the Kimberley
Process and invoices received for diamonds purchased by us must include certification
from the vendor that the diamonds and diamond containing jewelry are conflict free.
. In addition, we maintain high standards of diamond traceability and in keeping with our commitment to responsible sourcing,
we provide a Birks Canadian Diamond Certificate for every newly sourced, individually registered Canadian diamond (of 0.18
carats and larger) that are set in our diamond engagement rings. The Certificate provides an individual Birks Canadian Diamond
Identification Number which allows for detailed traceability of the diamond from the mine to the Birks engagement ring.
S
ustainable Packaging
. We are currently working with suppliers to find ways to make our Birks bags more recyclable. We have set goals to lessen
the environmental impact of our Birks bags by prioritizing recycling and reuse, and selecting more sustainable materials.
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Bee Protection
. One of the Company's objectives is to spread awareness to ensure the longevity of
bees. The world population of bees is decreasing at an alarming rate due to climate
change, pesticides, insecticides, loss of habitat and new diseases. Bees play a
pivotal role in maintaining and protecting natural ecosystems and biodiversity
contributing to the overall wellbeing of our environment. To that end, the Company
has partnered with The Nature Conservancy of Canada, Alveole Urban Beekeeping and
University of Guelph, to ensure the longevity of Canada's world-renowned natural
environment. The Company is proud to home beehives in Montreal managed by Alveole.
Social
The Company is committed to corporate social responsibility. Our core values
are at the root of all of our human capital management programs, policies and
practices. We believe our focus on improving career paths for our employees
through training, competitive wages, new ways of working, and opportunities
for advancement empower our employees to provide an outstanding performance
and customer experience and position our employees to embody our core values.
Employee Engagement
. As discussed in this Circular under "Diversity, Equity and Inclusion Throughout the
Company" above, we created a DE&I Committee. We strive to create an inclusive and
respectful environment that encourages our employees to bring their whole selves to
work every day. We have a zero-tolerance policy for discrimination or harassment.
. We strive to maintain an open and ongoing dialogue with our employees, which helps us to make Birks Group a better,
more fulfilling place to work. Throughout the year, we engage our employees through a variety of remote and on-site
events, including training, and health and wellness activities. We also actively seek employee feedback through formal
and informal touchpoints. We use the feedback from these touchpoints to help improve the overall employee experience.
Employee Development
. We invest in the development of our employees to enable them to thrive in
our highly competitive industry. As such, we offer all of our employees the
opportunity to benefit from development opportunities. We invest in ongoing
growth and development by integrating our culture and values into our management
practices, providing leadership coaching and support, and empowering our
employees to learn new skills through diverse learning opportunities and
challenging work experiences. The Company continually refreshes its product
knowledge training to retain our competitive edge in the jewelry industry.
Our retail employees are highly skilled professionals as a result of our
continuous training and development of their skillsets. We equip our leaders
with the tools they need to develop themselves and their teams through several
programs designed to help them lead inclusively, empower their teams,
and serve as mentors for our employees. Employees in management positions
participate in courses or programs designed to build critical skills, grow
as effective leaders and strengthen our culture, such as training on
leadership skills, inclusiveness, employee engagement, and unconscious bias.
Commitment to Equitable and Competitive Compensation and Benefits
. We are committed to equal opportunity and treatment for all employees which includes equal
career advancement opportunities and equitable and competitive compensation and benefits.
. Consistent with our core values, we invest in our employees by offering competitive compensation including
bonuses based on Company performance and individual performance, as well as a broad range of benefits.
. We make compensation and benefits investments to ensure our compensation and
benefits packages reflect the evolving circumstances across our markets.
Subject to certain eligibility requirements, our employees can take advantage
of a range of benefits including a group insurance plan (health, dental and
life insurance and short-term and long-term disability insurance), virtual
care, a generous merchandise discount, vacation days and personal days, as
well as a flexible work schedule and hybrid work model for head office
employees.
Health and Safety as a Priority
. Birks Group is committed to the health and safety of its employees, every day and especially in times of
crisis. We provide safe and clean facilities, comply with all applicable workplace safety laws and have
safety policies and procedures to articulate our expectations with respect to managing the health and safety
aspects of our retail stores, head office, distribution center and our watch and jewelry ateliers. We are
dedicated to the overall wellbeing of our employees and hence we offer a comprehensive health and safety
program including an employee assistance program which offers confidential counseling and support services,
and virtual care which provides remote access to healthcare professionals. These programs ensure our
employees have the resources they need to support their physical and mental health and overall wellbeing.
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Digital Transformation and New Ways of Working
. To deliver a seamless customer and employee experience, we regularly invest in
digital tools to improve employee productivity, engagement, and performance.
As more customers shop digitally, we have adapted by adding more roles in
e-commerce fulfillment and our home office employees have accelerated tech-based
solutions that enhance the customer and employee experiences. The Company provided
greater flexibility and new options to customers with browsing, shopping,
and pickup and in particular implemented a concierge service during the
pandemic offering customers a safe option to buy online and pickup-at-store.
. During the pandemic, digital learning became very important, and the Company accelerated
the implementation of digital meeting platforms for collaboration. Our employees embraced
technology to connect, learn, and collaborate as they attained results. The Company provided
training sessions for retail employees on the technology and the ability of virtual selling.
. We have established an artificial intelligence ("AI") committee whose purpose is to explore and integrate AI
technologies in order to enhance our business processes and drive efficiencies throughout the organization.
Strengthen our Communities
One of our core values is giving back and we support our communities in a
number of ways. Since 2020, the Company has made and encouraged its employees
to make donations to First Assist, an Indigenous-led charitable organization
that provides education and sports integration programs to enhance the mental,
emotional and physical well-being of youth in Indigenous Communities across
Canada.
In May 2024, we published our first report under the
Fighting Against Forced Labour and Child Labour in Supply Chains Act
. (Canada), which describes, among other things, the policies and steps
implemented and taken by the Company with respect to forced labour and child
labour. This report is available on our website at www.birks.com.
Governance
Birks has a strong commitment to ethics and integrity, which serve as the
foundation of our business and the guiding principles behind the decisions we
make every day. As part of the governance pillar, we strive to continue to
make sound strategic decisions and maintain high ethical standards.
Supported by management, the Company's Board of Directors is the ultimate
steward of ESG matters. Management is responsible for the development and
implementation of ESG strategies and continues to work toward enhancing
disclosure in this regard. The leadership and execution of ESG priorities is
shared across a number of departments.
Together, the Board of Directors and management have full oversight and
accountability for the Company's ESG activities and performance. We believe
this allocation of responsibilities to be the most effective means at the
moment to drive accountability for ESG matters, and we will regularly
re-evaluate our approach to ensure its effectiveness.
As part of the Company's enterprise risk management framework, the committees
of the Board receive regular reports from management on the principal risks
and opportunities of the Company's business relating to the committee's
oversight responsibilities which are also discussed at the Board on a regular
basis, including key areas which are material to the business from an ESG
perspective.
Hence, ESG matters described herein are considered to mitigate risks and
maximize our positive impacts. We continue to identify and monitor relevant
risks and compliance expectations through ongoing assessments.
To date, the Company has implemented various programs, corporate policies and
other initiatives to support the execution of its ESG priorities. These
include but are not limited to the following:
. Our Board of Directors consists of a majority of independent directors. All of our directors, other
than Messrs. Rossi di Montelera and Bedos, have been affirmatively determined by the Board of
Directors to be independent in accordance with the NYSE American Company Guide (even though due
to the Company's controlled company status it may be exempted from the independence requirement).
. The Company's Code of Conduct for directors, officers and employees.
. An anonymous and confidential whistleblowing line hosted by a third-party.
. A responsible sourcing program.
. The Company's anti-money laundering program.
. Oversight of data privacy and security through the audit and corporate governance committee.
. An assessment process for the Chief Executive Officer, the Board, the committees and the directors, individually.
. Policy Regarding the Mandatory Recovery of Compensation (i.e., claw back policy) and incentive compensation
claw back policy in our Omnibus Long-Term Incentive Plan (for grants made after September 2016).
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Furthermore, the Board has incorporated consideration of DE&I matters into its
governance practices as provided in the Company's Board Diversity, Equity and
Inclusion Policy. This is achieved through ensuring that diversity
considerations are taken into account in Board of Directors vacancies.
Additionally, the compensation and nominating committee considers the Board's
diversity in its regular assessment of the Board's effectiveness, and its
periodic review of the composition of the Board. As part of the selection
process for new directors, a skills matrix is used to assess the overall
strengths of directors and to assist in the ongoing renewal process of the
Board of Directors, which skills matrix includes various ESG related skills.
Diversity considerations are also taken into account in senior management
succession planning, committing to retention and development to ensure that
our most talented employees are promoted from within the organization, and
ensuring that diversity is taken into account when identifying and fostering
the development of high-potential individuals within our Company.
Item 4A. Unresolved Staff Comments
Not applicable
Item 5. Operating and Financial Review and Prospects
The following discussion should be read in conjunction with our consolidated
financial statements and the notes thereto included elsewhere in this Annual
Report. The following discussion includes certain forward-looking statements.
For a discussion of important factors, including the continuing development of
our business, actions of regulatory authorities and competitors and other
factors which could cause actual results to differ materially from the results
referred to in the forward-looking statements, see Item 3., "Key Information"
under the heading "Risk Factors" and the discussion under the heading
"Forward-Looking Information" at the beginning of this Annual Report.
Throughout this Annual Report, we refer to our fiscal year ended March 30,
2024, as fiscal 2024, and our fiscal years ended March 25, 2023, and March 26,
2022, as fiscal 2023 and fiscal 2022, respectively. Our fiscal year ends on
the last Saturday in March of each year. The fiscal years ended March 30, 2024
and March 25, 2023 each consisted of 53 and 52 weeks, respectively.
Overview
Birks Group is a leading designer of fine jewelry and operator of luxury
jewelry stores in Canada, with wholesale customers in North America, the U.K.,
and the E.U. As of March 30, 2024, we have two reportable segments, "Retail"
and "Other." Retail consists of our retail operations whereby we operate 18
stores across Canada under the Maison Birks brand, one store under the
Brinkhaus brand, one store under the Breitling brand, one store under the
Graff brand, and one store under the Patek Phillippe brand. Other consists
primarily of our wholesale business, our e-commerce business and our gold
exchange business.
As of March 30, 2024, our retail operation's total square footage was 77,932.
The average square footage of our five Maison Birks flagship stores was
approximately 9,477 while the average square footage for all other Maison
Birks retail stores was approximately 2,225. The average square footage of the
Brinkhaus, Graff, and Patek Philippe locations was 1,640. The Breitling Laval
location was 257 square feet.
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Investment in RMBG Joint Venture
In April of 2021, the Company entered into a joint venture with FWI LLC
("FWI") to form RMBG Retail Vancouver ULC ("RMBG"). During fiscal 2023, the
joint venture became operational. RMBG operates a boutique in Vancouver,
retailing third party branded watches, sales of which were historically
recognized at the Company's Vancouver Flagship location and are now recognized
through the joint venture. The Company and FWI both contributed certain assets
for a 49% and 51% equity interest respectively in RMBG, the legal entity
comprising the joint venture. FWI has controlled the joint venture since its
inception. The Company has determined that it has significant influence but
not control over RMBG and therefore has applied the equity method of
accounting to account for its investment in RMBG. Such accounting treatment
has an impact on period-to-period comparisons of sales, gross profit,
operating expenses, and operating income, as the Company's share of RMBG's
profits are now recorded within Equity in earnings of joint venture, net of
taxes on the Company's condensed consolidated statements of operations.
Description of Operations
Our net sales are comprised of revenues, net of discounts, in each case,
excluding sales tax. Sales are recognized at the point of sale when
merchandise is taken or shipped. Sales of consignment merchandise are
recognized on a full retail basis at such time that the merchandise is sold.
Revenues for gift certificates and store credits are recognized upon
redemption. Customers use cash, debit cards, third-party credit cards, private
label credit cards and proprietary credit cards to make purchases. The level
of our sales is impacted by the number of transactions we generate and the
size of our average sales transaction.
Our operating costs and expenses are primarily comprised of cost of sales and
selling, general and administrative expenses ("SG&A"). Cost of sales includes
cost of merchandise, direct inbound freight and duties, direct labor related
to repair services, the costs of our design and creative departments,
inventory shrink, damage and inventory reserves, jewelry, watch and giftware
boxes, as well as product development costs. SG&A includes, among other
things, all non-production payroll and benefits (including non-cash
compensation expense), store and head office occupancy costs, overhead, credit
card fees, information systems, professional services, consulting fees,
repairs and maintenance, travel and entertainment, insurance, legal, human
resources and training expenses. Occupancy, overhead and depreciation are
generally less variable relative to net sales than other components of SG&A,
such as credit card fees and certain elements of payroll, such as commissions.
Another significant item in SG&A is marketing expenses, which include
marketing, public relations and advertising costs (net of amounts received
from vendors for cooperative advertising) incurred to increase customer
awareness of both the Birks product brand and our third party product brands.
Marketing has historically represented a significant portion of our SG&A. As a
percentage of net sales, marketing expenses represented 3.7 %, 5.0%, and 4.9%
of sales for fiscal 2024, fiscal 2023, and fiscal 2022, respectively.
Additionally, SG&A includes indirect costs such as freight, including
inter-store transfers, receiving costs, distribution costs, and warehousing
costs. Depreciation and amortization includes depreciation and amortization of
our stores and head office, including leasehold improvements, furniture and
fixtures, computer hardware and software and amortization of intangibles.
Our attention remains focused on the execution of our short-term and long-term
strategic plans.
Over the short-term, we will focus our efforts on those strategies and key
drivers of our performance that are necessary in the current business climate,
which include our ability to:
. grow sales, gross margin rate and gross profits;
. manage expenses and assets efficiently in order to optimize profitability and cash flow with the
objective of growing earnings before interest, tax, depreciation and amortization ("EBITDA");
. align our operations to effectively and efficiently deliver benefits to our shareholders; and
. maintain flexible and cost effective sources of borrowings to finance our operations and strategies.
Over the long-term, we believe that the key drivers of our performance will be
our ability to:
. continue to develop our Birks product brand through the expansion of all sales
channels including international channels of distribution and e-commerce;
. execute our merchandising strategy to increase net sales and maintain
and expand gross margin by lowering discounts, developing and
marketing higher margin exclusive and unique products, and further
developing our internal capability to develop and source products;
. execute our marketing strategy to enhance customer awareness and
appreciation of the Birks product brand as well as our third party product
brands with an objective of maintaining and eventually increasing
customer traffic, client acquisition and retention and net sales
through regional, national and international advertising campaigns
using digital channels (including our website), billboards, print,
direct mail, community relations, media and public relations, partnerships
with key suppliers, and associations with prestige institutions;
. provide a superior omni-channel client experience through consistently outstanding customer service that will ensure
customer satisfaction and promote frequent customer visits, customer loyalty, and strong customer relationships;
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. increase our retail stores' average retail transaction, conversion rate,
productivity of our store professionals, inventory and four-wall profitability; and
. recruit and retain top talent whose values are aligned with our omni-channel strategic visions.
Fiscal 2024 Summary
Total net sales for fiscal 2024 were $185.3 million compared to $163.0 million
in fiscal 2023, an increase of $22.3 million, or 13.7%. The increase in net
sales in fiscal 2024 was primarily driven by the results of the Company's
retail channel. Net retail sales were $20.4 million higher than fiscal 2023,
an increase primarily driven by the strong performance of third party branded
timepieces and jewelry throughout the retail network, including at the newly
renovated Chinook and Laval stores, partially offset by a decrease in Birks
product brand sales.
. Comparable store sales increased by 7.5% in fiscal 2024 compared to
fiscal 2023 mainly driven by strong third party branded timepieces
sales and by an increase in average sales transaction value,
partially offset by a decrease in the Birks product brand sales.
. Total gross profit for fiscal 2024 was $73.6 million, or 39.7% of net sales,
compared to $68.0 million, or 41.7% of net sales in fiscal 2023. This
increase in gross profit was primarily driven by the increased sales volume
experienced during fiscal 2024 due to strong third party branded timepieces
and jewelry sales, partially offset by higher product and packaging costs.
The decrease of 200 basis points in gross margin percentage resulted
primarily from the sales mix with increased sales from third party branded
timepieces and jewelry partially offset by lower promotions and discounts.
. SG&A expenses in fiscal 2024 were $65.7 million, or 35.5% of net sales, compared to $66.1 million, or 40.6%
of net sales in fiscal 2023, a decrease of $0.4 million. The main drivers of the decrease in SG&A expenses in
the period include lower marketing costs ($1.3 million) and lower non-cash stock based compensation expense
($2.0 million) due to the fluctuations in the Company's stock price during the fiscal year, offset by higher
compensation costs ($1.5 million) primarily due to longer store opening hours compared to fiscal 2023, higher
credit card costs ($1.1 million) due to higher cost on private label credit cards and proprietary credit cards,
higher occupancy costs ($0.4 million) and higher general operating costs and variable costs ($0.3 million). As
a percentage of sales, SG&A expenses in fiscal 2024 decreased by 510 basis points as compared to fiscal 2023.
. The Company's EBITDA
(1)
for fiscal 2024 was $10.0 million, an increase of $6.2 million, compared to EBITDA
(1)
of $3.8 million for fiscal 2023.
. The Company's reported operating income for fiscal 2024 was $1.2 million, an increase
of $5.0 million, compared to a reported operating loss of $3.8 million for fiscal 2023.
. The Company recognized interest and other financing costs of $8.0 million
in fiscal 2024, an increase of $2.4 million, compared to recognized
interest and other financing costs of $5.6 million in fiscal 2023. This
increase is due to an increase in our average borrowing rate on our debt,
an increase in the average amount outstanding on the amended credit
facility as well as additional borrowings, partially offset by a foreign
exchange gain of $0.2 million in fiscal 2024 versus a foreign exchange
loss of $0.5 million in fiscal 2023 on our U.S. dollar denominated debt.
. The Company recognized net loss for fiscal 2024 of $4.6 million, or $0.24 per
share, compared to a net loss for fiscal 2023 of $7.4 million, or $0.40 per share.
(1) This is a non-GAAP financial measure defined below under "Non-GAAP Measures" and
accompanied by a reconciliation to the most directly comparable GAAP financial measure.
Comparable Store Sales
We use comparable store sales as a key performance measure for our business.
Comparable store sales include stores open in the same period in both the
current and prior year. We include our e-commerce sales in comparable store
calculations. Stores enter the comparable store calculation in their
thirteenth full month of operation under our ownership. Stores that have been
resized and stores that are relocated are evaluated on a case-by-case basis to
determine if they are functionally the same store or a new store and then are
included or excluded from comparable store sales, accordingly. Comparable
store sales measures the percentage change in net sales for comparable stores
in a period compared to the corresponding period in the previous year. If a
comparable store is not open for the entirety of both periods, comparable
store sales measures the change in net sales for the portion of time that such
store was open in both periods. We believe that this measure provides
meaningful information on our performance and operating results. However,
readers should know that this financial metric has no standardized meaning and
may not be comparable to similar measures presented by other companies.
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The percentage increase (decrease) in comparable store sales for the periods
presented below is as follows:
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
Comparable store sales 7.5 % 2.9 % 32.4 %
The increase in comparable store sales of 7.5% during fiscal 2024 was driven
by strong third party branded timepiece sales. Furthermore, the comparable
store sales increase was influenced by an increase in average sales
transaction value, partially offset by a decrease in units sold.
The increase in comparable store sales of 2.9% during fiscal 2023 is in part
due to the reduced impact of COVID-19 (including government-mandated temporary
store closures, traffic declines and capacity limitations) experienced by the
Company in fiscal 2023 as compared to fiscal 2022. No shopping days were lost
due to temporary store closures in fiscal 2023, as compared to approximately
7% during fiscal 2022. The increase was experienced across both the branded
jewelry and branded timepieces categories, with such product categories
benefitting from the Company's continuously improving third party brand
portfolio and client offering. For fiscal 2023, the Company's Vancouver
Flagship store is excluded from the calculation of comparable store sales as a
result of the RMBG joint venture.
Fiscal 2024 Compared to Fiscal 2023
The following table sets forth, for fiscal 2024 and fiscal 2023, the amounts
in our consolidated statements of operations:
Fiscal Year Ended
March 30, 2024 March 25, 2023
(In thousands)
Net sales $ 185,275 $ 162,950
Cost of sales 111,720 94,990
Gross profit 73,555 67,960
Selling, general and administrative expenses 65,705 66,095
Depreciation and amortization 6,639 5,673
Total operating expenses 72,344 71,768
Operating income (loss) 1,211 (3,808 )
Interest and other financing costs 8,007 5,581
(Loss) income before taxes and equity in earnings of joint venture (6,796 ) (9,389 )
Income taxes (benefits) - -
Equity in earnings of joint venture, net of taxes of $0.8 million ($0.7 million in 2023) 2,165 1,957
Net (loss) income, net of tax $ (4,631 ) $ (7,432 )
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Net Sales
Fiscal Year Ended
March 30, 2024 March 25, 2023
(In thousands)
Net sales - Retail $ 173,872 $ 153,428
Net sales - Other 11,403 9,522
Total Net Sales $ 185,275 $ 162,950
Total net sales for fiscal 2024 were $185.3 million compared to $163.0 million
in fiscal 2023, which is an increase of $22.3 million, or 13.7%. Net retail
sales were $20.4 million higher than the comparable prior year period. The
increase in retail sales in fiscal 2024 was primarily driven by the strong
performance of third party branded timepieces and jewelry, including at the
newly renovated Chinook and Laval stores, partially offset by a decrease in
Birks product brand sales. The net retail sales increase was driven by an
increase in average sales transaction value, partially offset by a slight
decrease in units sold. The increase in Net Sales - Other of $1.9 million is
primarily due to an increase in sales of 26.8% from our e-commerce business
due to on-line exclusive product offerings and improved site functionalities.
Additionally, the increase in Net Sales - Other was further driven by an
increase of 34.4% from our gold exchange business, partially offset by a
decrease in our wholesale activity.
Gross Profit
Fiscal Year Ended
March 30, 2024 March 25, 2023
(In thousands)
Gross Profit - Retail $ 68,370 $ 64,031
Gross Profit - Other 5,185 3,929
Total Gross Profit $ 73,555 $ 67,960
Gross Margin (Total Gross Profit as a % of Total Net Sales) 39.7 % 41.7 %
Total gross profit for fiscal 2024 was $73.6 million, or 39.7% of net sales,
compared to $68.0 million, or 41.7% of net sales in fiscal 2023. This increase
in gross profit was primarily driven by the increased sales volume experienced
in the period driven by strong third party branded timepieces and jewelry,
partially offset by higher product, packaging and costs of sales. The decrease
of 200 basis points in gross margin percentage was primarily resulting from
the sales mix with increased sales from third party branded timepieces and
jewelry partially offset by lower promotions and discounting. Gross Profit -
Retail for fiscal 2024 was $68.4 million, or 39.3% of Net Sales - Retail,
compared to $64.0 million, or 41.7% of Net Sales - Retail for fiscal 2023.
Although there was an increase of $4.3 million in Gross Profit - Retail, Gross
Margin Percentage - Retail decreased by 240 basis points driven by the
above-mentioned factors. Gross Profit - Other for fiscal 2024 was $5.2
million, or 45.5% of Net Sales - Other compared to $3.9 million, or 41.3% of
Net Sales - Other for fiscal 2023, which is an increase of $1.3 million driven
by the increase in volume of e-commerce and gold exchange. The increase in
gross margin of 420 basis points is primarily driven by the sales mix in
e-commerce, gold exchange and wholesale business.
SG&A Expenses
SG&A expenses in fiscal 2024 were $65.7 million, or 35.5% of net sales,
compared to $66.1 million, or 40.6% of net sales in fiscal 2023, a decrease of
$0.4 million. The main drivers of the decrease in SG&A expenses in fiscal 2024
include lower marketing costs ($1.3 million) and lower non-cash stock based
compensation expense ($2.0 million) due to the fluctuations in the Company's
stock price during the fiscal year, offset by higher compensation costs ($1.5
million) primarily due to longer store opening hours compared to fiscal 2023,
higher credit card costs ($1.1 million) due to higher cost on private label
credit cards and proprietary credit cards, higher occupancy costs ($0.4
million) and higher general operating costs and variable costs ($0.3 million).
As a percentage of sales, SG&A expenses in fiscal 2024 decreased by 510 basis
points as compared to fiscal 2023.
Depreciation and Amortization
Depreciation and amortization expense in fiscal 2024 was $6.6 million compared
to $5.7 million in fiscal 2023. This increase was driven primarily by $0.5
million accelerated depreciation due to modified terms of a vendor agreement
as well as $0.4 million due to accelerated depreciation related to store
closures in fiscal 2024.
Interest and Other Financing Costs
Interest and other financing costs in fiscal 2024 were $8.0 million compared
to $5.6 million in fiscal 2023, an increase of $2.4 million, driven primarily
by an increase of 210 basis points of the weighted average interest rate of
the Amended Credit Facility (defined below) and Amended Term Loan (defined
below), as well as explained by an increase in the average amount outstanding
on the Amended Credit Facility (defined below) during fiscal 2024 compared to
fiscal 2023.
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Income Tax Expense
The Company recognizes interest and penalties related to uncertain tax
positions in income tax expense. As of March 30, 2024, the Company did not
have any accrued interest related to uncertain tax positions due to available
tax loss carry forwards. The tax years 2017 through 2024 remain open to
examination in the major tax jurisdictions in which the Company operates. We
have continued to record a 100% valuation allowance on the full value of the
deferred tax assets generated during these periods as the criteria for
recognition of these assets was not met on March 30, 2024.
Equity in earnings of joint venture, net of taxes
During fiscal 2024, the Company recognized $2.2 million of equity in earnings
of joint venture, net of taxes, compared to $2.0 million of equity in earnings
of joint venture, net of taxes in fiscal 2023 as a result of its investment in
the RMBG joint venture accounted for under the equity method of accounting.
Fiscal 2023 Compared to Fiscal 2022
The following table sets forth, for fiscal 2023 and fiscal 2022, the amounts
in our consolidated statements of operations:
Fiscal Year Ended
March 25, 2023 March 26, 2022
(In thousands)
Net sales $ 162,950 $ 181,342
Cost of sales 94,990 105,122
Gross profit 67,960 76,220
Selling, general and administrative expenses 66,095 65,942
Depreciation and amortization 5,673 5,809
Total operating expenses 71,768 71,751
Operating (loss) income (3,808 ) 4,469
Interest and other financing costs 5,581 3,182
(Loss) income before taxes and equity in earnings of joint venture (9,389 ) 1,287
Income taxes (benefits) - -
Equity in earnings of joint venture, net of taxes of $0.7 million. 1,957 -
Net income (loss), net of tax $ (7,432 ) $ 1,287
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Net Sales
Fiscal Year Ended
March 25, 2023 March 26, 2022
(In thousands)
Net sales - Retail $ 153,428 $ 167,819
Net sales - Other 9,522 13,523
Total Net Sales $ 162,950 $ 181,342
Total net sales for fiscal 2023 were $163.0 million compared to $181.3 million
in fiscal 2022, which is a decrease of $18.3 million, or 10.1%. Net retail
sales were $14.4 million lower than the comparable prior year period,
attributable primarily to the exclusion of the sales of RMBG, partially offset
by a 2.9% increase in comparable store sales. The net sales increase was
influenced by an increase in average sales transaction value, partially offset
by a slight decrease in volume. The decrease in Net Sales - Other of $4.0
million is primarily driven by a decrease in sales of approximatively 30% from
our e-commerce business driven by a normalization of online traffic and
reduction in conversion rates as consumer habits post COVID-19 shifted away
from online shopping and toward the in-store experience. Furthermore, we
believe the e-commerce business, which in large part caters to low and
mid-price point consumers, was impacted by the heightened inflationary
pressures on consumers' discretionary spending. Additionally, the decrease in
Net Sales - Other was further driven by a decrease of 41% from our gold
exchange business which was largely successful during periods impacted by
COVID-19 as customer demand for this service surged temporarily during the
pandemic. Furthermore, the decrease in Net Sales - Other also includes a
decrease in our wholesale activity.
Gross Profit
Fiscal Year Ended
March 25, 2023 March 26, 2022
(In thousands)
Gross Profit - Retail $ 64,031 $ 69,437
Gross Profit - Other 3,929 6,783
Total Gross Profit $ 67,960 $ 76,220
Gross Margin (Total Gross Profit as a % of Total Net Sales) 41.7 % 42.0 %
Total gross profit was $68.0 million, or 41.7% of net sales, for fiscal 2023
compared to $76.2 million, or 42.0% of net sales for fiscal 2022. This
decrease in gross profit is partially attributable to the exclusion of the
gross profit of RMBG as well as by an increase in foreign exchange losses
incurred during the period, partially offset by the impact of the 2.9%
increase in comparable store sales experienced during fiscal 2023. The
decrease of 30 basis points in gross margin percentage was mainly attributable
to product sales mix comprised of more third party branded watches and jewelry
than Birks branded products as well as by the impact of foreign exchange
losses incurred in the period, partially offset by the Company's adjusted
pricing strategy on the Birks branded products, and its strategic focus to
reduce sales promotions and discounting. Gross Profit - Retail for fiscal 2023
was $64.0 million, or 41.7% of Net Sales - Retail, compared to $69.4 million,
or 42% of Net Sales - Retail for fiscal 2022. Although there was a decrease of
$8.3 million in gross profit, gross margin percentage only decreased by 30
basis points driven by the above-mentioned factors. Gross Profit - Other for
fiscal 2023 was $3.9 million, or 41.3% of Net Sales - Other compared to $6.8
million, or 50.2% of net sales - Other for fiscal 2022, which is a decrease of
$2.9 million driven by the decrease in volume of e-commerce, gold exchange and
wholesale sales. The decrease in gross margin of 890 basis points is primarily
driven by a change in product sales mix in the e-commerce business (greater
sales of third party branded jewelry and timepiece products compared to Birks
branded products).
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SG&A Expenses
SG&A expenses in fiscal 2023 were $66.1 million, or 40.6% of net sales,
compared to $65.9 million, or 36.3% of net sales in fiscal 2022, an increase
of $0.2 million. This increase is primarily related to the reduced impact of
COVID-19 (including fewer mandated store closures, increased opening hours and
fewer government subsidies) experienced by the Company during fiscal 2023 as
compared to fiscal 2022, and therefore there were fewer opportunities for cost
containment initiatives available to management in response to the pandemic.
The drivers of the increase in SG&A expenses in the period include greater
occupancy costs ($1.0 million) as a result of the re-opening of stores and
expiring non-recurring rent abatements in fiscal 2022, higher general
operating costs and variable costs ($0.9 million), lower wage subsidies ($0.5
million) and rent subsidies ($0.4 million), partially offset by lower
marketing costs ($0.7 million), lower compensation costs ($0.9 million) driven
by primarily by management bonuses in fiscal 2022 which did not reoccur in
fiscal 2023, as well as lower stock-based compensation ($1.0 million) linked
to the conversion of the majority of RSUs and DSUs from cash settled awards to
equity-settled awards during fiscal 2022. As a percentage of sales, SG&A
expenses in fiscal 2023 increased by 430 basis points as compared to fiscal
2022.
Depreciation and Amortization
Depreciation and amortization expense in fiscal 2023 was $5.7 million compared
to $5.8 million in fiscal 2022. This decrease of $0.1 million was primarily
driven by higher depreciation due to the increase in capital expenditures
incurred by the Company over the last 12 months, offset in part by lower
accelerated depreciation of leasehold improvements due to modified terms of a
vendor agreement.
Interest and Other Financing Costs
Interest and other financing costs in fiscal 2023 were $5.6 million compared
to $3.2 million in fiscal 2022, an increase of $2.4 million, driven primarily
by an increase of 300 basis points of the weighted average interest rate of
the Amended Credit Facility (defined below) and Amended Term Loan (defined
below), as well as greater F/X losses of $0.6 million on U.S. denominated debt
during fiscal 2023 compared to fiscal 2022. The increase is also partially
explained by an increase in the average amount outstanding on the Amended
Credit Facility (defined below) during fiscal 2023 compared to fiscal 2022.
Income Tax Expense
The Company recognizes interest and penalties related to uncertain tax
positions in income tax expense. As of March 25, 2023, the Company did not
have any accrued interest related to uncertain tax positions due to available
tax loss carry forwards. The tax years 2016 through 2023 remain open to
examination in the major tax jurisdictions in which the Company operates. We
have continued to record a 100% valuation allowance on the full value of the
deferred tax assets generated during these periods as the criteria for
recognition of these assets was not met at March 25, 2023.
Equity in earnings of joint venture, net of taxes
During fiscal 2023, the Company recognized $2.0 million of equity in earnings
of joint venture, net of taxes as a result of its investment in the RMBG joint
venture accounted for under the equity method of accounting.
Selected Financial Data
The following income statement data and balance sheet data as of March 30,
2024 and March 25, 2023 and for the years ended March 30, 2024, March 25,
2023, and March 26, 2022 have been derived from our audited consolidated
financial statements, which are included elsewhere in this Annual Report. The
following financial data as of March 26, 2022, March 27, 2021 and March 28,
2020 and for the years ended March 27, 2021 and March 28, 2020 have been
derived starting with our audited consolidated financial statements not
included in this Annual Report. The EBITDA and Adjusted EBITDA data below are
non-GAAP measures. All fiscal years in the table below consisted of 52 weeks
except for the period ended March 30, 2024 which consists of 53 weeks. The
historical results included below and elsewhere in this Annual Report are not
necessarily indicative of our future performance.
The data presented below is only a summary and should be read in conjunction
with our audited consolidated financial statements, including the notes
thereto, included elsewhere in this Annual Report. You should also read the
following summary data in conjunction with Item 5, "Operating and Financial
Review and Prospects" included elsewhere in this Annual Report.
32
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Income Statement Data - from continuing operations:
Fiscal Year Ended
March March March March March
30, 25, 26, 27, 28,
2024 2023 2022 2021 2020
(In thousands, except
per share data)
Net $ 185,275 $ 162,950 $ 181,342 $ 143,068 $ 169,420
sales
Cost 111,720 94,990 105,122 86,718 104,943
of
sales
Gross 73,555 67,960 76,220 56,350 64,477
profit
Selling, 65,705 66,095 65,942 53,713 65,867
general and
administrative
expenses
Depreciation 6,639 5,673 5,809 5,458 4,845
and
amortization
Impairment - - - - 309
of
long-lived
assets
(1)
Total 72,344 71,768 71,751 59,171 71,021
operating
expenses
Operating 1,211 (3,808 ) 4,469 (2,821 ) (6,544 )
(loss)
income
Interest 8,007 5,581 3,182 3,017 5,683
and other
financial
costs
(Loss) income (6,796 ) (9,389 ) 1,287 (5,838 ) (12,227 )
from continuing
operations before
income taxes
Income - - - - -
tax
(recovery)
expense
Equity in earnings of joint 2,165 1,957 - - -
venture, net of taxes
of $0.8 million ($0.7
million in fiscal 2023)
Net (loss) $ (4,631 ) $ (7,432 ) $ 1,287 $ (5,838 ) $ (12,227 )
income from
continuing
operations
Discontinued operations:
(Loss) income - - - - (552 )
from discontinued
operations,
net of tax
Net (loss) $ - $ - $ - $ - $ (552 )
income from
discontinued
operations
Net (loss) income $ (4,631 ) $ (7,432 ) $ 1,287 $ (5,838 ) $ (12,779 )
attributable
to common
Shareholders
Net (loss) $ (0.24 ) $ (0.40 ) $ 0.07 $ (0.32 ) $ (0.71 )
income per
common
share, basic
Net (loss) $ (0.24 ) $ (0.40 ) $ 0.07 $ (0.32 ) $ (0.71 )
income per
common share,
diluted
Net (loss) income $ (0.24 ) $ (0.40 ) $ 0.07 $ (0.32 ) $ (0.68 )
from continuing
operations per
common share - basic
Net (loss) income $ (0.24 ) $ (0.40 ) $ 0.07 $ (0.32 ) $ (0.68 )
from continuing
operations per common
share - diluted
Weighted 19,058 18,692 18,346 18,005 17,968
average common
shares
outstanding
Weighted 19,058 18,692 18,794 18,005 17,968
average common
shares outstanding
- diluted
Dividends - - - - -
per
share
Non-GAAP Measures*:
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022 March 27, 2021 March 28, 2020
(In thousands)
EBITDA $ 10,015 $ 3,822 $ 10,278 $ 2,637 $ (1,699 )
Adjusted EBITDA $ 10,015 $ 3,822 $ 10,278 $ 2,637 $ (1,390 )
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Balance Sheet Data:
March 30, March 25, March 26, March 27, March 28,
2024 2023 2022 2021 2020
(In
thousands)
Working $ (11,059 ) $ (8,367 ) $ 1,899 $ (2,882 ) $ (6,275 )
capital
Total $ 203,268 $ 196,981 $ 183,261 $ 201,680 $ 210,652
assets
Bank $ 63,372 $ 57,890 $ 43,157 $ 53,387 $ 58,035
indebtedness
Long-term debt (including $ 26,939 $ 24,313 $ 23,500 $ 26,022 $ 16,281
current portion)
Operating lease liability $ 66,311 $ 69,747 $ 73,720 $ 73,011 $ 78,458
(including current portion)
Stockholders' $ (5,149 ) $ (603 ) $ 5,864 $ (1,422 ) $ 3,410
equity (deficiency)
Common Stock:
Value $ 98,480 $ 96,774 $ 95,638 $ 95,116 $ 93,368
Shares 19,058 18,692 18,516 18,329 17,971
* As described in the section Non-GAAP Measures.
(1) Non-cash impairment of long-lived assets in fiscal 2020 were associated
to store leases that had a possibility of early termination.
Significant Transaction in fiscal 2018 and impacting fiscal 2020 results
presented above
On August 11, 2017, the Company entered into a stock purchase agreement (the
"Stock Purchase Agreement") with Aurum Holdings Ltd., a company incorporated
under the laws of England and Wales, which assigned its rights and obligations
under the Stock Purchase Agreement to Aurum Group USA, Inc., a Delaware
corporation (now known as Watches of Switzerland) ("Aurum") to sell its
wholly-owned subsidiary, Mayors, which operated in Florida and Georgia and was
engaged primarily in luxury timepieces and jewelry retail activities. The sale
was completed on October 23, 2017 for total consideration of $135.0 million
(U.S. $106.8 million) (the "Aurum Transaction").
As part of the Aurum Transaction, Birks entered into a 5-year distribution
agreement with Aurum (the "Distribution Agreement") to sell Birks fine jewelry
collections in the U.K. at Mappin & Webb and Goldsmiths stores and on their
respective e-commerce platforms. Furthermore, pursuant to the Distribution
Agreement, the Birks brand collections continue to be sold in the United
States through Mayors stores in Florida and Georgia.
Proceeds from the Aurum Transaction were used to pay down outstanding debt
under the Company's previous senior secured credit facilities that included
term debt and working capital debt associated with Mayors. The Company did not
pay dividends as a result of the Aurum Transaction, but rather, the remaining
transaction proceeds were used by Birks to continue its strategic growth
initiatives, specifically to invest in its Canadian flagship stores and to
support its high-growth Birks brand wholesaling activities and e-commerce, as
part of the Company's omni-channel strategy.
As a result of the Aurum Transaction, the Company has presented Mayors'
results as a discontinued operation in the consolidated statements of
operations and cash flows for all periods presented.
34
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Dividends and Dividend Policy
We have not paid dividends since 1998 and do not currently intend to pay
dividends on our Class A voting shares or Class B multiple voting shares in
the foreseeable future. Our ability to pay dividends on our Class A voting
shares and Class B multiple voting shares are restricted by our credit
agreements. See Item 5, "Operating and Financial Review and Prospects -
Liquidity and Capital Resources." If dividends were declared by our Board of
Directors, shareholders would receive a dividend equal to the per share
dividend we would pay to holders of our Class A voting shares or holders of
Class B multiple voting shares. Dividends we would pay to U.S. holders would
generally be subject to withholding tax. See Item 10, "Additional Information
-Taxation."
NON-GAAP MEASURES
The Company reports financial information in accordance with U.S. Generally
Accepted Accounting Principles ("U.S. GAAP"), and accordingly provide GAAP
financial measures, including net income (loss). The Company's performance is
monitored and evaluated using various sales and earnings measures that are
adjusted to include or exclude amounts from the most directly comparable GAAP
measure ("non-GAAP measures"). The Company presents such non-GAAP measures in
reporting its financial results to assist in business decision making and to
provide key performance information to senior management. The Company believes
that this additional information provided to investors and other external
stakeholders will allow them to evaluate the Company's operating results using
the same financial measures and metrics used by the Company in evaluating
performance. The Company does not, nor does it suggest that investors and
other external stakeholders should, consider non-GAAP measures in isolation
from, or as a substitute for, financial information prepared in accordance
with U.S. GAAP. These non-GAAP measures may not be comparable to similarly
titled measures presented by other companies. In addition to our results
determined in accordance with U.S. GAAP, we use non-GAAP measures including:
"EBITDA", "adjusted operating expenses", "adjusted operating loss" and
"adjusted EBITDA".
35
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NET INCOME (LOSS) AND EBITDA
"EBITDA" is defined as net income (loss) before interest expense and other
financing costs, income taxes expense (recovery) and depreciation and
amortization.
Reconciliation of Total Operating Expenses, Operating Income (Loss) and Net
Income (Loss) to Adjusted Operating Expenses, Adjusted Operating Loss, EBITDA
and Adjusted EBITDA
The Company evaluates its operating earnings performance using financial
measures which exclude expenses associated with operational restructuring
plans and impairment losses. The Company believes that such measures provide
useful supplemental information with which to assess the Company's results
relative to the corresponding period in the prior year and can result in a
more meaningful comparison of the Company's performance between the periods
presented. There were no expenses associated with operational restructuring
plans and impairment losses in fiscal 2024 and fiscal 2023.The table below
provides a reconciliation of the non-GAAP measures presented to the most
directly comparable financial measures calculated with GAAP.
Total Adjusted Operating Expenses
For the fiscal year ended
($000's) March 30, March 25, March 26, March 27, March 28,
2024 2023 2022 2021 2020
Total operating $ 72,344 $ 71,768 $ 71,751 $ 59,171 $ 71,021
expenses (GAAP measure)
as a % of 39.0 % 44.0 % 39.6 % 41.4 % 41.9 %
net sales
Remove the impact of:
Impairment of - - - - -
long-lived assets (a)
Total adjusted 39.0 % 44.0 % 39.6 % 41.4 % 41.7 %
operating expenses
as a % of
net sales
Adjusted operating income (loss)
For the fiscal year ended
($000's) March 30, March 25, March 26, March 27, March 28,
2024 2023 2022 2021 2020
Operating income $ 1,211 $ (3,808 ) $ 4,469 $ (2,821 ) $ (6,544 )
(loss) (GAAP measure)
as a % of 0.7 % -2.3 % 2.5 % -2.0 % -3.9 %
net sales
Add the impact of:
Impairment of - - - - 309
long-lived assets (a)
Adjusted operating $ 1,211 $ (3,808 ) $ 4,469 $ (2,821 ) $ (6,235 )
income (loss)
(non-GAAP
measure)
as a % of 0.7 % -2.3 % 2.5 % -2.0 % -3.7 %
net sales
EBITDA & Adjusted EBITDA
For the fiscal year ended
($000's) March 30, March 25, March 26, March 27, March 28,
2024 2023 2022 2021 2020
Net income (loss) from continuing $ (4,631 ) $ (7,432 ) $ 1,287 $ (5,838 ) $ (12,227 )
operations (GAAP measure)
as a % of -2.5 % -4.6 % 0.7 % -4.1 % -7.2 %
net sales
Add the impact of:
Interest expense and 8,007 5,581 3,182 3,017 5,683
other financing costs
Income taxes - - - - -
expense (recovery)
Depreciation and 6,639 5,673 5,809 5,458 4,845
amortization
EBITDA (non-GAAP $ 10,015 $ 3,822 $ 10,278 $ 2,637 $ (1,699 )
measure)
as a % of 5.4 % 2.3 % 5.7 % 1.8 % -1.0 %
net sales
Add the impact of:
Impairment of - - - - 309
long-lived assets (a)
Adjusted EBITDA $ 10,015 $ 3,822 $ 10,278 $ 2,637 $ (1,390 )
(non-GAAP measure)
as a % of 5.4 % 2.3 % 5.7 % 1.8 % -0.8 %
net sales
(a) Non-cash impairment of long-lived assets in fiscal 2020 related to leasehold improvements
that are associated to store leases that have a possibility of early lease termination.
36
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Liquidity and Capital Resources
The Company's ability to fund its operations and meet its cash flow
requirements is dependent upon its ability to maintain positive excess
availability under the Company's Amended Credit Facility. As of March 30,
2024, bank indebtedness consisted solely of amounts owing under the Company's
Amended Credit Facility, which had an outstanding balance of $63.4 million
($63.7 million net of $0.3 million of deferred financing costs) on its maximum
$85.0 million credit facility, which is used to finance working capital and
capital expenditures, provide liquidity to fund the Company's day-to-day
operations and for other general corporate purposes. The sole financial
covenant which the Company is required to adhere to under both its Amended
Credit Facility and its Amended Term Loan is to maintain minimum excess
availability of not less than $8.5 million at all times, except that the
Company shall not be in breach of this covenant if excess availability falls
below $8.5 million for not more than two consecutive business days once during
any fiscal month. In the event that excess availability falls below the
minimum requirement, this would be considered an event of default under the
Amended Credit Facility and Amended Term Loan, that could result in the
outstanding balances borrowed under the Company's Amended Credit Facility and
Amended Term Loan becoming due immediately, which would also result in cross
defaults on the Company's other borrowings. Similarly, both the Company's
Amended Credit Facility and Amended Term Loan are subject to cross default
provisions with all other loans pursuant to which if the Company is in default
of any other loan, the Company will immediately be in default of both the
Amended Credit Facility and Amended Term Loan. The Company met its excess
availability requirements throughout fiscal 2024. In addition, the Company
expects to have excess availability of at least $8.5 million for at least the
next twelve months from the date of this Form 20-F.
On October 23, 2017, the Company entered into a credit facility with Wells
Fargo Canada Corporation for a maximum amount of $85.0 million and maturing in
October 2022. On December 24, 2021, the Company entered into the Amended
Credit Facility with Wells Fargo Canada Corporation. The Amended Credit
Facility extended the maturity date of the Company's pre-existing loan from
October 2022 to December 2026. The Amended Credit Facility, also provides the
Company with an option to increase the total commitments thereunder by up to
$5.0 million. The Company will only have the ability to exercise this
accordion option if it has the required borrowing capacity at such time. The
Amended Credit Facility bears interest at a rate of CDOR plus a spread ranging
from 1.5% - 2.0% depending on the Company's excess availability levels. Under
the Amended Credit Facility, the sole financial covenant which the Company is
required to adhere to is to maintain minimum excess availability of not less
than $8.5 million at all times, except that the Company shall not be in breach
of this covenant if excess availability falls below $8.5 million for not more
than two consecutive business days once during any fiscal month. The Company's
excess availability was above $8.5 million throughout fiscal 2024.
On June 26, 2024, the Company entered into an amendment to the Amended Credit
Facility with Wells Fargo Capital Finance Corporation Canada. The amendment
replaces the interest rate of CDOR plus a spread ranging from 1.5% - 2%
depending on the Company's excess availability levels for the interest rate of
CORRA plus a CORRA adjustment ranging from 0.30% to 0.32% and a spread ranging
from 1.5% - 2% depending on the Company's excess availability levels. The
adjustment is effective on June 26, 2024.
On June 29, 2018, the Company secured a $12.5 million term loan maturing in
October 2022 with SLR . On December 24, 2021, the Company entered into the
Amended Term Loan with SLR. The Amended Term Loan extended the maturity date
of the Company's pre-existing loan from October 2022 to December 2026. The
Amended Term Loan is subordinated in lien priority to the Amended Credit
Facility and bears interest at a rate of CDOR plus 7.75%. The Amended Term
Loan also allows for periodic revisions of the annual interest rate to CDOR
plus 7.00% or CDOR plus 6.75% depending on the Company complying with certain
financial covenants. Under the Amended Term Loan, the Company is required to
adhere to the same financial covenant as under the Amended Credit Facility
(maintain minimum excess availability of not less than $8.5 million at all
times, except that the Company shall not be in breach of this covenant if
excess availability falls below $8.5 million for not more than two consecutive
business days once during any fiscal month). In addition, the Amended Term
Loan includes availability blocks at all times of not less than the greater of
$8.5 million and 10% of the borrowing base, including additional seasonal
availability blocks imposed from December 20th to January 20th of each year of
$5.0 million and from January 21st to January 31st of each year of $2.0
million. The Term Loan is required to be repaid upon maturity.
On June 26 2024, the Company entered into an amendment to the Amended Term
Loan with SLR. The amendment replaces the interest rate of CDOR plus 7.75% (or
CDOR plus 7.00% or CDOR plus 6.75% depending on the Company complying with
certain financial covenants) for the interest rate of CORRA plus a CORRA
adjustment of 0.32% and 7.75% (or CORRA plus a CORRA adjustment of 0.32% plus
7.00% or CORRA plus a CORRA adjustment of 0.32% plus 6.75% depending on the
Company complying with certain financial covenants). The adjustment is
effective on June 26, 2024.
The Company's borrowing capacity under both the Amended Credit Facility and
the Amended Term Loan is based upon the value of the Company's inventory and
accounts receivable, which is periodically assessed by its lenders, and based
upon these reviews the Company's borrowing capacity could be significantly
increased or decreased.
The Company's Amended Credit Facility and its Amended Term Loan are subject to
cross default provisions with all other loans pursuant to which if the Company
is in default of any other loan, the Company will immediately be in default of
both its Amended Credit Facility and its Amended Term Loan. In the event that
excess availability falls below $8.5 million for more than two consecutive
business days once during any fiscal month, this would be considered an event
of default under the Company's Amended Credit Facility and its Amended Term
Loan, that provides the lenders the right to require the outstanding balances
borrowed under the Company's Amended Credit Facility and its Amended Term Loan
to become due immediately, which would result in cross defaults on the
Company's other borrowings. The Company expects to have excess availability of
at least $8.5 million for at least the next twelve months from the date of
issuance of these financial statements.
37
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The Amended Credit Facility and Amended Term Loan also contain limitations on
the Company's ability to pay dividends, more specifically, among other
limitations, the Company can pay dividends only at certain excess borrowing
capacity thresholds. The Company is required to either i) maintain excess
availability of at least 40% of the borrowing base in the month preceding
payment or ii) maintain excess availability of at least 25% of the borrowing
base and maintain a fixed charge coverage ratio of at least 1.10 to 1.00.
Other than these financial covenants related to paying dividends, the terms of
the Amended Credit Facility and Amended Term Loan provide that no financial
covenants are required to be met other than already described.
The Company's lenders under its Amended Credit Facility and Amended Term Loan
may impose, at any time, discretionary reserves, which would lower the level
of borrowing availability under the Company's credit facilities (customary for
asset-based loans), at their reasonable discretion, to: i) ensure that the
Company maintain adequate liquidity for the operation of its business, ii)
cover any deterioration in the value of the collateral, and iii) reflect
impediments to the lenders to realize upon the collateral. There is no limit
to the amount of discretionary reserves that the Company's lenders may impose
at their reasonable discretion. No discretionary reserves have been imposed by
the Company's senior secured lenders since the inception of the loans.
The Company's ability to make scheduled payments of principal, or to pay the
interest, or to fund planned capital expenditures will also depend on its
ability to maintain adequate levels of available borrowing, adhere to all
financial covenants with its lenders, obtain favorable payment terms from
suppliers and its future performance, which may be subject to general
economic, financial, competitive, legislative and regulatory factors, as well
as other events that are beyond the Company's control. See "Risk Factors" for
additional information.
38
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Borrowings under our Amended Credit Facility for the periods indicated in the
table below were as follows:
Fiscal Year Ended
March 30, 2024 March 25, 2023
(In thousands)
Credit facility availability $ 76,741 $ 70,758
Amount borrowed at year end $ 63,372 $ 57,890
Excess borrowing capacity at year end (before minimum threshold) $ 13,369 $ 12,868
Average outstanding balance during the year $ 61,507 $ 50,349
Average excess borrowing capacity during the year $ 13,484 $ 14,864
Maximum borrowing outstanding during the year $ 69,051 $ 59,367
Minimum excess borrowing capacity during the year $ 10,048 $ 9,466
Weighted average interest rate for the year 7.8 % 5.7 %
Investissement Quebec
On August 24, 2021, the Company entered into a new 10-year loan agreement with
Investissement Quebec, the sovereign fund of the province of Quebec, for an
amount of up to $4.3 million to be used specifically to finance the digital
transformation of the Company through the implementation of an omni-channel
e-commerce platform and enterprise resource planning system. As of March 30,
2024, the Company has $4.2 million outstanding on the loan. The term loan with
Investissement Quebec requires the Company on an annual basis to have a
working capital ratio (defined as current assets divided by current
liabilities excluding the current portion of operating lease liabilities) of
at least 1.01 at the end of the Company's fiscal year. During fiscal 2024, the
Company received a tolerance letter from Investissement Quebec that allowed
the Company, as at March 30, 2024 to tolerate a working capital ratio of 0.97.
On March 30, 2024, the working capital ratio was 0.96. On July 3, 2024, the
Company obtained a waiver from Investissement Quebec with respect to the
requirement to meet the working capital ratio at March 30, 2024. Furthermore,
on July 12, 2024, the Company received a tolerance letter from Investissement
Quebec that allows the Company, as at March 29, 2025, to tolerate a working
capital ratio of 0.90.
On July 8, 2020, the Company secured a new six-year term loan with
Investissement Quebec, in the amount of $10.0 million, as amended. The secured
term loan was used to fund the working capital needs of the Company, of which
$4.9 million is outstanding at March 30, 2024. On January 4, 2023, the Company
received a loan forgiveness in the amount of $0.2 million that is being
recognized over the term of the loan. The term loan with Investissement Quebec
requires the Company on an annual basis to have a working capital ratio
(defined as current assets divided by current liabilities excluding the
current portion of operating lease liabilities) of at least 1.01. During
fiscal 2024, the Company received a tolerance letter from Investissement
Quebec that allowed the Company, as at March 30, 2024 to tolerate a working
capital ratio of 0.97. On March 30, 2024, the working capital ratio was 0.96.
On July 3, 2024, the Company obtained a waiver from Investissement Quebec with
respect to the requirement to meet the working capital ratio at March 30,
2024. Furthermore, on July 12, 2024, the Company received a tolerance letter
from Investissement Quebec that allows the Company, as at March 29, 2025, to
tolerate a working capital ratio of 0.90.
Other Financing
As of March 30, 2024, the Company had a balance of $2.0 million (U.S. $1.5
million) outstanding from an original $6.7 million (U.S. $5.0 million) cash
advance from one of our controlling shareholders, Montel. This advance is
payable upon demand by Montel once conditions stipulated in our Amended Credit
Facility permit such a payment. The conditions that are required to be met are
the same as those that are required to be met for the Company to pay dividends
(outlined in above section). This advance bears an annual interest rate of
11%, net of any withholding taxes, representing an effective interest rate of
approximately 12.2%.
On July 14, 2023, the Company entered into a financing agreement for a capital
lease facility financing with Varilease Finance Inc. relating to certain
equipment consisting of leasehold improvements, furniture, security equipment
and related equipment for store construction and renovation. The maximum
borrowing amount under this facility is U.S $3.6 million (Cdn $4.7 million).
The capital lease financing bears interest at 16% and is repayable over 24
months. During fiscal 2024, the Company borrowed approximately U.S. $2.4
million (Cdn $3.3 million) against this facility. As of March 30, 2024, the
Company has U.S. $1.8 million (Cdn $2.4 million) outstanding under this
facility.
On February 1, 2024, the Company entered into a financing agreement for a
capital lease facility financing with Varilease Finance Inc. relating to
certain equipment consisting of leasehold improvements, furniture, security
equipment and related equipment for the construction of a new store. The
maximum borrowing amount under this facility is U.S. $2.5 million (Cdn $3.4
million). During fiscal 2024, the Company has drawn U.S. $0.6 million (Cdn.
$0.8 million). Payments will commence upon project completion, which is
expected to occur during fiscal 2025. The amounts drawn are interest bearing
at approximately 16% annually.
39
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On February 1, 2024, the Company entered into a financing agreement for a
capital lease facility financing with Varilease Finance. Inc relating to
certain equipment consisting of leasehold improvements, furniture, security
equipment and related equipment for the partial renovation of a store. The
maximum borrowing amount under this facility is U.S. $0.5 million (Cdn $0.7
million) and the balance as of March 30, 2024 is nil. The payments are
interest bearing at approximately 10% annually and commence upon project
completion.
On June 3, 2024, the Company entered into a financing agreement for a capital
lease facility financing with Varilease Finance. Inc relating to certain
equipment consisting of leasehold improvements, furniture, security equipment
and related equipment for the partial renovation of a store. The maximum
borrowing amount under this facility is U.S. $0.6 million (Cdn $0.8 million)
and the balance as of March 30, 2024 is nil. The payments are interest bearing
at approximately 10% annually and commence upon project completion.
On March 26, 2020, the Company secured a 6-year term loan with Business
Development Bank of Canada (BDC), as amended, for an amount of $0.4 million to
be used specifically to finance the renovations of the Company's Brinkhaus
store location in Calgary, Alberta. As of March 30, 2024, the Company has $0.2
million outstanding on the loan. The loan bears interest at a rate of 8.3% per
annum and is repayable in 72 monthly payments from June 26, 2021, the date of
the drawdown.
Cash Flows from Operating, Investing and Financing Activities
The following table summarizes cash flows from operating, investing and
financing activities:
(in thousands) Fiscal 2024 Fiscal 2023 Fiscal 2022
Net cash provided by (used in):
Operating activities $ (170 ) $ (6,925 ) $ 18,648
Investing activities (7,235 ) (9,414 ) (5,811 )
Financing activities 7,926 15,588 (12,631 )
Net increase (decrease) in cash and cash equivalents $ 521 $ (751 ) $ 206
40
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Net cash used in operating activities was $0.2 million in fiscal 2024 as
compared to net cash used in operating activities in fiscal 2023 of $6.9
million. The $6.7 million increase in cash flows from operating activities was
primarily the result of (i) a $2.8 million decrease in net loss in fiscal 2024
versus fiscal 2023, and (ii) a decrease of $3.5 million in net cash used by
changes in working capital, of which year over year changes included an
inventory increase of $10.7 million in fiscal 2024 compared to an increase of
$9.5 million in fiscal 2023 (reduced cash from operations by $1.3 million)
driven by lower turnover and higher purchases of inventory when compared to
fiscal 2023, a decrease in accounts receivable of $4.2 million in fiscal 2024
compared to an increase in accounts receivable of $0.3 million in fiscal 2023
(increased cash from operations of $4.4 million) driven by shorter-term credit
plans offered to clients compared to fiscal 2023, an increase in accounts
payable of $5.5 million in fiscal 2024 compared to an increase of $9.0 million
in fiscal 2023 (increase cash from operations by $3.5 million) driven in part
by the increase in inventory, an increase in Other long-term liabilities of
$2.3 million in fiscal 2024 compared to a decrease of $0.03 million in fiscal
2023 (increased cash from operations of $2.3 million) driven by an increase of
supplier financing agreements, and offset by a decrease in accrued liabilities
of $0.8 million in fiscal 2024 compared to an increase of $1.7 million in
fiscal 2023 (increase cash from operations of $0.9 million) driven by
repayments of rent deferrals.
Net cash used in operating activities was $6.9 million in fiscal 2023 as
compared to net cash provided by operating activities in fiscal 2022 of $18.6
million. The $25.6 million decrease in cash flows from operating activities
was primarily the result of (i) a $8.7 million decrease in net income in
fiscal 2023 versus fiscal 2022, and (ii) an increase of $15.3 million in net
cash used by changes in working capital, of which year over year changes
included an inventory increase of $9.5 million in fiscal 2023 compared to a
decrease of $18.9 million in fiscal 2022 (reduced cash from operations by
$28.3 million) driven by lower turnover and higher purchases of inventory when
compared to fiscal 2022, an increase in accounts receivable of $0.3 million in
fiscal 2023 compared to an increase in accounts receivable of $0.5 million in
fiscal 2022 (decreased cash from operations of $0.8 million) driven by lower
sales compared to fiscal 2022, an increase in accounts payable of $9.0 million
in fiscal 2023 compared to a decrease of $9.7 million in fiscal 2022
(increased cash from operations by $18.7 million) driven in part by a buildup
of inventory as required by the exhibition programs set up by certain brands,
partially offset by an accrued liabilities decrease of $1.8 million in fiscal
2023 compared to an increase of $1.9 million in fiscal 2022 (decreased cash
from operations of $3.7 million) driven by repayments of rent deferrals.
During fiscal 2024, net cash used in investing activities was $7.2 million
compared to $9.4 million used during fiscal 2024. The $2.2 million decrease in
net cash used in investing activities was primarily attributable to a decrease
in capital expenditures in fiscal 2024 compared to fiscal 2023.
During fiscal 2023, net cash used in investing activities was $9.4 million
compared to $5.8 million used during fiscal 2022. The $3.6 million increase in
net cash used in investing activities was primarily attributable to an
increase in capital expenditures in fiscal 2023 compared to fiscal 2022.
Net cash provided by financing activities was $7.9 million in fiscal 2024, as
compared to net cash provided by financing activities of $15.6 million during
fiscal 2023. The $7.7 million decrease in cash flows from financing activities
was primarily due to a $5.4 million increase in bank indebtedness in fiscal
2024 compared to a $14.6 million increase in bank indebtedness in fiscal 2023,
an increase in long-term debt of $1.6 million in fiscal 2024 compared to an
increase of $2.8 million in fiscal 2023 and an increase in Obligations under
capital leases of $4.2 million in fiscal 2024 compared to nil in fiscal 2023,
offset by an increase in repayment of Obligations under capital leases of $1.1
million in fiscal 2024 compared to $0.1 million in fiscal 2023. Debt increased
in fiscal 2024 versus fiscal 2023 to finance ongoing capital projects such as
store renovations and costs related to the digital transformation of the
Company, as well as to support the working capital needs.
Net cash provided by financing activities was $15.6 million in fiscal 2023, as
compared to net cash used by financing activities of $12.6 million during
fiscal 2022. The $28.2 million increase in cash flows from financing
activities was primarily due to $14.6 million increase in bank indebtedness in
fiscal 2023 compared to a $10.0 million decrease in bank indebtedness in
fiscal 2022, lower debt repayments of $2.1 million versus $2.8 million in
fiscal 2022, an increase in long-term debt of $2.7 million in fiscal 2023
compared to an increase of $0.4 million in fiscal 2022, and cash inflows
associated with exercised stock options and warrants of $0.4 million versus
$0.3 million in fiscal 2022. Debt increased in fiscal 2023 versus fiscal 2022
to finance ongoing capital projects such as store renovations and costs
related to the digital transformation of the Company.
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The following table details capital expenditures in fiscal 2024, 2023, and 2022:
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
(In thousands)
Leasehold improvements $ 3,883 $ 3,772 $ 2,451
Electronic equipment, computer hardware and software 1,120 2,919 1,482
Furniture and fixtures and equipment 1,279 2,019 351
Intangible assets 953 1,921 1,150
(1)
Total capital expenditures $ 7,235 $ 10,631 $ 5,434
(2)
(1) Relates to the new e-commerce platform system as well as the ERP system totaling $0.9
million in fiscal 2024, $1.9 million in fiscal 2023 and $1.2 million in fiscal 2022.
(2) Includes capital expenditures financed by finance leases of $4.2 million in fiscal
2024, nil in fiscal 2023, and nil in fiscal 2022 as well as capital expenditures
included in accounts payable and accrued liabilities of $1.5 million as of March 30,
2024, $2.3 million as of March 25, 2023, and $1.0 million as of March 26, 2022.
In the last three fiscal years, we invested a total of approximately $23.3
million in capital expenditures primarily associated with the remodeling of
our existing store network. In 2024, we launched the construction of a new
store in Montreal (opening in August 2024) and we completed the remodeling of
our Laval store and one of our Calgary stores that began in fiscal 2023.
During fiscal 2023, we also completed the partial renovation of our Vancouver
flagship store and two other stores in Calgary were renovated in fiscal 2022.
In the last three years, we also continued to improve our ERP system and
invested in a new e-commerce platform.
In fiscal 2025, the Company expects to spend up to $7.4 million in capital
expenditures, primarily related to the completion of the construction of a new
store in Montreal, store remodels, as well as on improvements to our
e-commerce platform. Of the $7.4 million, approximately $4.0 million has been
committed. We expect to finance these capital expenditures from operating cash
flows, and existing financing arrangements including tenant allowances from
our landlords and lease financing. The Company continues to be actively
engaged in identifying alternative sources of financing that may include
raising additional funds through public or private equity, the disposal of
assets, and debt financing, including funding from governmental sources.
Maintenance of sufficient availability of funding through an adequate amount
of committed financing is necessary for us to fund our
day-to-day
operations. Our ability to make scheduled payments of principal, or to pay the
interest or additional interest, if any, or to fund planned capital
expenditures and store operations will depend on our ability to maintain
adequate levels of available borrowing, obtain favorable payment terms from
suppliers and our future performance, which may be subject to general
economic, financial, competitive, legislative and regulatory factors, as well
as other events that are beyond our control. We believe that we currently have
sufficient working capital to fund our operations. This belief is based on
certain assumptions about the state of the economy, the availability of
borrowings to fund our operations and estimates of projected operating
performance. To the extent that the economy and other conditions affecting our
business are significantly worse than we anticipate, we may not achieve our
projected level of financial performance and we may determine that we do not
have sufficient capital to fund our operations. See "Risk Factors" for
additional information.
The Company believes that it will be able to adequately fund its operations
and meet its cash flow requirements for at least the next twelve months. The
going concern basis of presentation assumes that the Company will continue its
operations for the foreseeable future and be able to realize its assets and
discharge its liabilities and commitments in the normal course of business.
The financial statements do not reflect adjustments that would be necessary if
the going concern assumption was not appropriate.
Commitments and Contractual Obligations
The following table discloses aggregate information about our contractual cash
obligations as of March 30, 2024 and the periods in which payments are due:
Payments due by Period
Total Less Than 2-3 Years 4-5 Years More than
1 Year 5 Years
(In thousands)
Contractual Obligations
Debt maturities $ 90,622 $ 4,353 $ 79,918 $ 1,595 $ 4,756
(1)
Finance lease obligations 70 54 16 - -
Other long-term liabilities 4,841 2,287 2,329 66 159
(2)
Interest on long-term debt 5,795 2,194 2,713 619 269
(3)
Operating lease obligations 109,091 13,189 26,643 23,187 46,072
(4)
Total $ 210,419 $ 22,077 $ 111,619 $ 25,467 $ 51,256
The Company has commitments to maintain the appearance of stores and has
planned for capital expenditures in fiscal 2025 and beyond but has no minimum
commitment for these planned projects.
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(1) Includes bank indebtedness in the 2-3 years category to reflect the current expiration date of the Amended Credit Facility.
(2) The amount of less than one year is recorded within accrued liabilities and accounts payable.
(3) Excludes interest payments on amounts outstanding under our Amended Credit
Facility as the outstanding amounts fluctuate based on our working capital needs.
Interest charges associated to Amended Credit Facility, net of deferred financing
costs, were $4.7 million in fiscal 2024, $4.8 million in fiscal 2023, and $3.2
million in fiscal 2022. Interest expense on other variable rate long-term debt
was calculated assuming the rates in effect at March 30, 2024. Interest charges
associated to long-term debt, net of deferred financing costs, were $2.3 million
in fiscal 2024, $4.6 million in fiscal 2023, and $1.8 million in fiscal 2022.
(4) The operating lease obligations do not include insurance, taxes and common area maintenance (CAM) charges to which we are
obligated. CAM charges were $2.4 million in fiscal 2024, $2.2 million in fiscal 2023, and $2.2 million in fiscal 2022.
In addition to the above and as of March 30, 2024, we had $0.2 million of
outstanding letters of credit.
Research and Development, Patents and Licenses, etc.
None.
Trend Information
During fiscal 2024, we were faced with several challenges impacting our
results, including the temporary impact on sales of store closures during
renovations at three key stores in fiscal 2023. These stores gradually
reopened during the first quarter of fiscal 2024 and were fully operational
during the second quarter of fiscal 2024. During fiscal 2024, we were also
impacted by the partial renovations at two stores. Although these two stores
remained opened during partial renovations, store traffic, customer experience
and sales were negatively affected. We also believe that heightened
inflationary pressure on consumers' discretionary spending, particularly on
the Company's product assortments at lower and mid-price points, and the
continuous impact of the increased cost of borrowing in fiscal 2024 affected
our results. During fiscal 2023, we were also faced with similar challenges
impacting our results, including the temporary effect on sales of store
closures during renovations at those three key stores and, we believe the
impact of heightened inflationary pressure on consumers' discretionary
spending, particularly on the Company's product assortments at lower and
mid-price points, and the impact of the increased cost of borrowing in fiscal
2023. We were still able to benefit from the positive impacts of the major
renovations made to our flagship locations in Montreal, Toronto and Vancouver
in prior years, on customer experience, customer acquisition and retention,
and on sales during the fiscal year. We also benefited from our improved
assortment of third party branded watches across our retail network and
e-commerce channel. Increased competition for space in Canada continued to put
pressure on occupancy costs and space retention for key locations. During
fiscal 2024 and fiscal 2023, we completed the remodeling and renovations of
stores in Vancouver, Calgary and Laval, Quebec.
We continue to successfully pursue our strategy to develop the Birks product
brand, and in fiscal 2024, we launched several new collections under the Birks
brand. In addition, we continued to pursue our strategies to enhance our
customers' in-store experience which includes the remodeling of our retail
network with the goal of providing our clients with an engaging buying
experience.
Our gross profit margin decreased in fiscal 2024 driven primarily by a slight
shift in product sales mix favoring third party branded watches and jewelry.
Going forward, we believe that our gross profit margin will stabilize and
begin to increase as we continue to promote the development of the Birks
product brand which we expect will provide us with higher gross profit
margins. Furthermore, we also intend to continue to execute our merchandising
strategy to expand gross margins by developing and marketing exclusive and
unique third-party branded products with higher margins.
Our SG&A expenses as a percentage of sales decreased to 35.5% in fiscal 2024
from 40.6% in fiscal 2023. The main drivers of the decrease in SG&A expenses
in fiscal 2024 include lower marketing costs ($1.3 million) and lower non-cash
stock based compensation expense ($2.0 million) due to the fluctuations in the
Company's stock price during the fiscal year, offset by higher compensation
costs ($1.5 million) primarily due to longer store opening hours compared to
fiscal 2023, higher credit card costs ($1.1 million) due to higher cost on
private label credit cards and proprietary credit cards, higher occupancy
costs ($0.4 million) and higher general operating costs and variable costs
($0.3 million). As a percentage of sales, SG&A expenses in fiscal 2024
decreased by 510 basis points as compared to fiscal 2023. We intend to
continue to look for cost containment initiatives and saving opportunities
when feasible.
In the past, we have also decreased the number of stores we operate through
the closure of underperforming stores. Going forward we plan to continue to
evaluate the productivity of our existing stores and close unproductive
stores. In addition, we plan to continue to review opportunities to open new
stores in new prime retail locations when the right opportunities exist.
Moreover, we plan to continue to invest in our website and e-commerce platform
to bolster our online distribution channel which represents an area of focus
for us going forward.
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Leases
The Company leases office, distribution, and retail facilities. Certain retail
store leases may require the payment of minimum rent and contingent rent based
on a percentage of sales exceeding a stipulated amount. The Company's lease
agreements expire at various dates through 2034, are subject, in many cases,
to renewal options and provide for the payment of taxes, insurance and
maintenance. Certain leases contain escalation clauses resulting from the pass
through of increases in operating costs, property taxes and the effect on
costs from changes in consumer price indices, which are considered as variable
costs.
The Company determines its lease payments based on predetermined rent
escalations, rent-free periods and other incentives. The Company recognizes
rent expense on a straight-line basis over the related terms of such leases,
including any rent-free period and beginning from when the Company takes
possession of the leased facility. Variable operating lease expenses,
including contingent rent based on a percentage of sales, CAM charges, rent
related taxes, mall advertising and adjustments to consumer price indices, are
recorded in the period such amounts and adjustments are determined. Lease
terms occasionally include renewal options for additional periods of up to 6
years. The Company uses judgment when assessing the renewal options in the
leases and assesses whether or not it is reasonably certain to exercise these
renewal options if they are within the control of the Company. Any renewal
options not reasonably certain to be exercised are excluded from the lease
term. There is generally no readily determinable discount rate implicit in the
Company's leases. Accordingly, the Company uses its incremental borrowing rate
for a term that corresponds to the applicable lease term in order to measure
its lease liabilities and has elected to use such rates based on lease terms
remaining as of March 30, 2024 and any new leases entered into thereafter.
The amounts of the Company's operating lease right-of-use ("ROU") asset and
current operating lease liabilities are presented separately on the
Consolidated Balance Sheet as of March 30, 2024. Most of the Company's leases
are operating leases as of March 30, 2024. The Company records lease expenses
within selling, general and administrative expenses. The Company monitors for
events or changes in circumstances that require a reassessment of one of its
leases. ROU assets, as part of the group of assets, are periodically reviewed
for impairment.
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The Company uses the long-lived assets impairment guidance in ASC Subtopic
360-10, Property, Plant and Equipment - Overall, to determine whether an ROU
asset is impaired, and if so, the amount of the impairment loss to recognize.
Payments arising from operating lease activity, as well as variable and
short-term lease payments not included within the operating lease liability,
are included as operating activities on the Company's consolidated statement
of cash flows. Operating lease payments representing costs to ready an asset
for its intended use (i.e. leasehold improvements) are represented within
investing activities within the Company's consolidated statements of cash flow.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires
us to make estimates and assumptions about future events and their impact on
amounts reported in the financial statements and related notes. Since future
events and their impact cannot be determined with certainty, the actual
results may differ from those estimates. These estimates and assumptions are
evaluated on an on-going basis and are based on historical experience and on
various factors that are believed to be reasonable. We have identified certain
critical accounting policies as noted below.
Going concern assumption
Our consolidated financial statements have been prepared on a going concern
basis in accordance with generally accepted accounting principles in the U.S.
The going concern basis of presentation assumes that the Company will continue
its operations for the foreseeable future and be able to realize its assets
and discharge its liabilities and commitments in the normal course of
business. In evaluating our ability to continue as a going concern, we are
required to determine whether we have the ability to fund our operations and
meet our cash flow requirements. This evaluation requires us to estimate and
forecast our cash flows and excess availability levels under various scenarios
for at least twelve months from the date the financial statements were
authorized for issuance. Significant estimates that have the greatest impact
on our analysis include our estimate of sales, gross margins and operating
costs, capital expenditures, estimates of collateral values of inventory and
accounts receivable performed by our lenders throughout the year which could
increase or decrease our availability under our senior secured credit
facility, estimates of forecasted working capital levels, timing of inventory
acquisitions, vendor terms and payments, interest rate and foreign exchange
rate assumptions and forecasted excess availability levels under the senior
secured credit facility and senior secured term loan. Furthermore, we have
also made judgments on whether any reserves would be imposed by our senior
secured lenders. Significant variances from our assumptions used in preparing
our going concern analysis could significantly impact our ability to meet our
projected cash flows. Our ability to meet our projected cash flows could also
be impacted if our senior secured lenders impose additional restrictions on
our ability to borrow on our collateral or if we do not adhere to the
applicable financial covenant under our Amended Credit Facility and Amended
Term Loan, which would be considered an event of default.
The Company funds its operations primarily through committed financing under
its Amended Credit Facility and Amended Term Loan described in Note 6 of our
consolidated financial statements included elsewhere in this 20-F. The Amended
Credit Facility along with the Amended Term Loan are used to finance working
capital, finance capital expenditures, provide liquidity to fund the Company's
day-to-day operations and for other general corporate purposes. The Company's
ability to meet its cash flow requirements in order to fund its operations is
dependent upon its ability to attain profitable operations, obtain favorable
payment terms from suppliers, as well as to maintain specified excess
availability levels under its Amended Credit Facility and its Amended Term
Loan. The sole financial covenant which the Company is required to adhere to
under both its Amended Credit Facility and its Amended Term Loan is to
maintain minimum excess availability of not less than $8.5 million at all
times, except that the Company shall not be in breach of this covenant if
excess availability falls below $8.5 million for not more than two consecutive
business days once during any fiscal month. In the event that excess
availability falls below the minimum requirement, this would be considered an
event of default under the Amended Credit Facility and under the Amended Term
Loan, that could result in the outstanding balances borrowed under the
Company's Amended Credit Facility and Amended Term Loan becoming due
immediately, which would result in cross defaults on the Company's other
borrowings. The Company met its excess availability requirement as of and
throughout the year ended March 30, 2024 and as of the date the financial
statements were authorized for issuance, and expects to have excess
availability of at least $8.5 million for at least the next twelve months.
45
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The term loans with Investissement Quebec requires the Company to maintain on
an annual basis a working capital ratio (defined as current assets divided by
current liabilities excluding the current portion of operating lease
liabilities) of at least 1.01. The working capital ratio of 1.01 may be lower
in any given year if a tolerance letter accepting a lower working capital
ratio is received from Investissement Quebec. During fiscal 2024, the Company
received a tolerance letter from Investissement Quebec that allowed the
Company, as at March 30, 2024 to tolerate a working capital ratio of 0.97. As
at March 30, 2024 the Company had a working capital ratio (defined as current
assets divided by current liabilities excluding the current portion of
operating lease liabilities) of 0.96. On July 3, 2024, the Company obtained a
waiver from Investissement Quebec with respect to the requirement to meet the
working capital ratio at March 30, 2024. Refer to Note 1 to the consolidated
financial statements for additional information. Furthermore, on July 12,
2024, the Company received a tolerance letter from Investissement Quebec that
allows the Company, as at March 29, 2025, to tolerate a working capital ratio
of 0.90.
Reserves for slow-moving finished goods inventories
We reserve inventory for estimated slow-moving finished goods inventory equal
to the difference between the cost of inventory and net realizable value,
which is based on assumptions about future demand and market conditions. The
allowance for slow-moving finished goods inventory is equal to the difference
between the cost of inventories and the estimated selling prices. There is
estimation uncertainty in relation to the identification of slow-moving
finished goods inventories which are based on certain criteria established by
the Company's management. The criteria includes consideration of operational
decisions by management to discontinue ordering the inventory based on sales
trends, market conditions, and the aging of inventories. Estimation
uncertainty also exists in determining the expected selling prices and
associated gross margins through normal sales channels based on assumptions
about future demand and market conditions for those slow-moving inventories.
Recent Accounting Pronouncements
See Note 2 (s) to the consolidated financial statements included in this Form
20-F.
Safe Harbor
See section entitled "Forward-Looking Information" at the beginning of this
Annual Report on Form 20-F.
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Item 6. Directors, Senior Management and Employees
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information about our executive officers and
directors, and their respective ages and positions as of May 31, 2024. During
fiscal 2024, the Company had four executive officers.
Name Age Position
Niccolo Rossi di Montelera 51 Executive Chairman of the Board & Director
Jean-Christophe Bedos 59 President, Chief Executive Officer & Director
Davide Barberis Canonico 58 Director
Maria Eugenia Giron 60 Director
Emilio B. Imbriglio 64 Director
Louis-Philippe Maurice 42 Director
Deborah Shannon Trudeau 68 Director
Joseph F.X. Zahra 68 Director
Katia Fontana 54 Vice President and Chief Financial Officer
Maryame El Bouwab 46 Vice President Merchandising, Planning and Supply Chain
Miranda Melfi 60 Vice President, Human Resources, Chief Legal Officer & Corporate Secretary
47
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Directors
Niccolo Rossi di Montelera,
age 51, was elected to the Company's Board of Directors on September 23, 2010
and served as Vice-Chairman of the Company's Board of Directors from June 2015
until being appointed Executive Chairman of the Board effective January 1,
2017. Mr. Rossi di Montelera's term as a director of Birks Group expires in
2024. Mr. Rossi di Montelera was a consultant for Gestofi from August 2009
until December 31, 2016 and provided consulting services to the Company in the
areas of new product and brand development in addition to being involved with
the Company's business development activities and strategic initiatives. From
2007 to 2009, he served as the Company's Group Divisional Vice President
responsible for product development, wholesale and e-commerce. From 2005 to
2006, he served as the Company's Group Director responsible for product
development. From 2002 to 2003, he worked at Regaluxe Investments SA and was
responsible for the North American business development for Royale de
Champagne and from 1999 to 2002 he was a Project Leader for Ferrero Group. He
was a member of the Supervisory Board of Directors of Montrovest until June
30, 2012. Mr. Rossi di Montelera is the son of Dr. Rossi di Montelera, who was
the Company's Chairman of the Board until December 31, 2016, and is the
brother-in-law of Mr. Carlo Coda-Nunziante who was the Company's Vice
President, Strategy until March 31, 2018.
Jean-Christophe Bedos,
age 59, was appointed to the Company's Board of Directors on April 19, 2012.
He was the Company's Chief Operating Officer from January 2012 to March 2012
and became the Company's President and Chief Executive Officer on April 1,
2012. He became a director of Birks Group on April 19, 2012 and his term as a
director expires in 2024. He has over 25 years of experience in merchandising,
marketing, branding and product development in the global retail luxury
sector. Mr. Bedos was President and Chief Executive Officer of French jeweler
Boucheron from May 2004 to September 2011. Prior to that, he was the Managing
Director of Cartier France from 2002 to 2004, and International Executive
Manager alongside the President and Chief Executive Officer of Richemont
International from 2000 to 2002. Mr. Bedos started his career in the jewelry
industry at Cartier in 1988. He also serves as a director and Vice-Chairman of
the Board of The Montreal General Hospital Foundation.
Davide Barberis Canonico,
age 58, was elected to the Company's Board of Directors on September 12, 2013.
Mr. Canonico's term as a director of Birks Group expires in 2024. From January
1, 2016 until April 2018, Mr. Canonico was also the Chief Executive Officer of
Autofil Yarn Ltd., a company in the textile industry supplying yarn to the
automotive industry with manufacturing facilities in the United Kingdom and
Bulgaria and was the Group Strategy Director from June 2015 to December 2015.
From 1998 to March 2016, he was President and Chief Executive Officer of
Manifattura di Ponzone S.p.A., an Italian family-owned company in the textile
industry. From 2001 to 2015, he was also a member of the board of Sinterama
S.p.A., a company in the textile industry with manufacturing facilities
worldwide. He was a member of the Supervisory Board of Montrovest B.V. until
April 2018. He also serves as a director of a number of other corporate boards.
Maria Eugenia Giron
, age 60, was elected to the Company's Board of Directors on September 14,
2023. Ms. Gir
o
n's term as a director of Birks Group expires in 2024. She is a corporate
director. She serves as director of several private and publicly-listed
companies operating in the following industries: asset management, automotive,
confectionery and footwear. Since 2018, she is European Innovation Council
Expert and Jury Member of the Executive Agency for Small and Medium-size
Enterprises of the European Commission. She was the Founder and Executive
Director of IE Premium & Prestige Business Observatory (IE Business School), a
centre that conducts applied research on luxury and premium consumption, from
2010 to 2019, and an advisor and partner of Silvercloud, an investment vehicle
of Marwyn Management Partners investing in companies in the premium and luxury
industry from 2010 to 2013. From 1997 to 2006, Ms. Giron was the Chief
Executive Officer of Carrera Y Carrera, a Spanish high-end jewellery brand and
from 1992 to 1997, she held several senior management positions with Loewe, a
luxury goods company. She is also a director of a number of non-profit
organizations including IC-A, Instituto de Consejeros y Administradores (the
Spanish association of independent directors dedicated to the creation and
dissemination of good corporate governance practices), Royal Tapestry
Manufacturing and IE University.
Emilio B. Imbriglio
, age 64, was elected to the Company's Board of Directors on September 22,
2022. Mr. Imbriglio's term as a director of Birks Group expires in 2024. He is
a corporate director. Mr. Imbriglio has been a Chartered Professional
Accountant since 1982. From 2002 to 2013, Mr. Imbriglio lead Raymond Chabot
Grant Thornton LLP's ("RCGT") corporate finance unit which included M&A,
financing, business valuation and public-private partnerships. He was also the
Chair of the Board of RCGT from 2011 to 2013. In 2013, Mr. Imbriglio was named
President and Chief Executive Officer of RCGT and served in that capacity
until he retired in 2021. Mr. Imbriglio also has been and currently is a
director of a number of other private companies, non-profit organizations as
well as public company corporate boards.
Louis-Philippe Maurice
, age 42, was elected to the Company's Board of Directors on September 14,
2023. Mr. Maurice's term as a director of Birks Group expires in 2024. Since
2011, he has been the CEO & Co-founder and a member of the board of directors
of Busbud Inc., a global mobility and travel group offering a leading platform
for booking bus, train and ridesharing tickets in over 80 countries worldwide,
since 2011. He is an entrepreneur with over 20 years of experience leading
technology start-ups and developing innovative e-commerce & consumer web
products on a global scale. From 2007 to 2009, he worked in Silicon Valley at
Yahoo and LinkedIn in product management, marketing and business development.
From 2017 until 2023, Mr. Maurice was a member of the board directors of
Raymond Chabot Grant Thornton LLP, a leading professional services firm in
Canada in the areas of assurance, tax, advisory services and business recovery
and reorganization.
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Deborah Shannon Trudeau
, age 68, was elected to the Company's Board of Directors on September 22,
2022. Ms. Trudeau's term as a director of Birks Group expires in 2024. She is
a corporate director. Since 1987, she has been a member of the Advisory Board
of Trudeau Corporation, a Canadian family-owned company founded in 1889 that
distributes high-end European crystal and glassware products and is a global
leader in the design, creation, marketing and distribution of its own
Trudeau-branded lifestyle kitchenware and tableware products. From 1987 until
2018, Ms. Trudeau was Senior Vice-President, International Business and
Licensing of Trudeau Corporation overseeing its growth and market expansion.
In addition, from 2017 to 2023, Ms. Trudeau has been Vice-Chair of the Board
of Royal Canadian Mint, a for-profit crown corporation and a producer of
circulation coins for Canada and other countries and of numismatic coins and
gold and silver bullion. She has been and currently is a director of a number
of other private companies, non-profit organizations as well as public company
corporate boards including Crescita Therapeutics Inc.
Joseph F.X. Zahra,
age 68, was appointed to the Company's Board of Directors on November 9, 2016.
Mr. Zahra's term as a director of Birks Group expires in 2024. Mr. Zahra is a
founding partner and director of SurgeAdvisory Limited, an advisory firm which
focuses on strategy and transformation management, succession planning and
boardroom coaching operating in Malta, since January 1, 2017. Prior thereto,
he was a founding partner and managing director of MISCO, an independent
consulting group operating in Malta, Cyprus and Italy from 1983 to 2016. Mr.
Zahra also serves as director of several private, publicly-listed and
regulated companies operating in the following industries: financial services
(insurance and investment services), oil services, transportation, retail and
hospitality. Mr. Zahra is also chairman of the board of directors of Vodafone
Holdings and chairman of the audit committee of CPHCL Ltd., and member of the
audit committee of United Finance plc and of Vodafone Insurance Ltd. He also
serves as chairman of the investment committee of Pendergardens Developments
plc and is a member of the investment committee of Chasophie Group Limited and
the underwriting committee of Vodafone Insurance Ltd. Mr. Zahra was director
of the Central Bank of Malta from 1992 to 1996 and served as executive
chairman of Bank of Valletta Plc from 1998 to 2004, Maltacom Plc in 2003 and
Middlesea Insurance Plc from 2010 to 2012. Mr. Zahra was appointed as one of
the five international auditors at the Prefettura per gli Affari Economici of
the Holy See from 2010 to 2014 and was the president of the economic and
administrative reform commission (COSEA) from 2013 to 2014 as well as Vice
Coordinator of the Council for the Economy of the Holy See from 2014 to 2020.
Other Executive Officers
Katia Fontana,
age 54, is our Vice President, Chief Financial Officer and has been with Birks
Group since January 13, 2020. Prior to joining us, she was Chief Financial
Officer at Avenir Global, a holding company for communications and public
relations firms. Prior thereto, she was with Groupe Dynamite Inc., an apparel
retailer, from 2004 to 2018 in various positions, including Chief Financial
Officer, Vice President, Finance and Administration and Director, Finance.
From 1993 to 2004, Ms. Fontana was with Deloitte in its audit and assurance
practice.
Maryame El Bouwab
, age 46, is our Vice President, Merchandising, Planning and Supply Chain. She
has been with the Company since March 2013. Prior to her current position, she
was the Company's Vice President, Planning and Supply Chain from June 1, 2018
to September 30, 2018 and Vice President, Merchandise Planning from February
1, 2017 to May 31, 2018. From March 2013 to February 2017, she was the
Company's Director of Merchandise Planning. Prior to joining the Company, Ms.
El Bouwab was, from 2005 to 2012, with Mexx Canada and Lucky Brand Jeans and
held the position of Merchandising and Planning Manager.
Miranda Melfi,
age 60, is our Vice President, Human Resources, Chief Legal Officer and
Corporate Secretary and has been with Birks Group since April 2006. Prior to
her current position, she was our Vice President, Legal Affairs and Corporate
Secretary from April 2006 to September 2018. Prior to joining us, Ms. Melfi
was with Cascades Inc., a publicly-traded pulp and paper company for eight
years and held the position of Vice President, Legal Affairs, Boxboard Group.
From 1994 to 1998, Ms. Melfi was Vice President, Legal Affairs and Corporate
Secretary at Stella- Jones Inc., a publicly-traded wood products company, and
from 1991 to 1994, practiced corporate, commercial and securities law with
Fasken Martineau DuMoulin LLP.
COMPENSATION OF DIRECTORS AND OFFICERS
Director Compensation
Until September 30, 2022, each director who was not an employee of the Company
was entitled to receive an annual fee of U.S. $25,000 (approximately $33,700
in Canadian dollars) for serving on our Board of Directors, U.S. $1,500
(approximately $2,000 in Canadian dollars) for each Board meeting attended in
person or by video conference and U.S. $750 (approximately $1,000 in Canadian
dollars) for each Board meeting lasting over one (1) hour attended by phone or
by video conference. The chairperson of each of the audit and corporate
governance committee, and the compensation and nominating committee received
an additional annual fee of U.S. $10,000 and U.S. $8,000 (approximately
$13,500 and $10,800 in Canadian dollars) respectively. The members of the
audit and corporate governance committee, and the compensation and nominating
committee received an additional annual fee of U.S. $5,000, and U.S. $4,000
(approximately $6,700 and $5,400 in Canadian dollars), respectively, and the
independent member of the executive committee received an additional annual
fee of U.S. $4,000 (approximately $5,400 in Canadian dollars). The chairperson
and any other members of any special independent committee of directors that
may be established from time to time is entitled to receive compensation as
may be determined by the Board of Directors for his or her service on such
committee.
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Since October 1, 2022, each director who is not an employee of the Company is
entitled to receive an annual fee of US$45,000 (approximately $60,600 in
Canadian dollars) for serving on the Company's Board of Directors. The
chairperson of each of the audit and corporate governance committee, and the
compensation and nominating committee received an additional annual fee of
US$15,000 and US$12,000 (approximately $20,200 and $16,200 in Canadian
dollars) respectively. The members of the audit and corporate governance
committee, and the compensation and nominating committee received an
additional annual fee of US$8,000 and US$6,000 (approximately $10,800 and
$8,100 in Canadian dollars), respectively, and the independent member of the
executive committee received an additional annual fee of US$4,000
(approximately $5,400 in Canadian dollars). The chairperson and any other
members of any special independent committee of directors that may be
established from time to time is entitled to receive compensation as may be
determined by the Board of Directors for his or her service on such committee.
Since September 2018 and every September thereafter until September 2022, each
director who is not an employee of the Company is entitled to receive deferred
stock units equal to a value of U.S. $25,000 (approximately $33,700 in
Canadian dollars). All directors were reimbursed for reasonable travel
expenses incurred in connection with the performance of their duties as
directors.
From and including September 2023 and every September thereafter, each
director who is not an employee of the Company is entitled to receive deferred
stock units equal to a value of US$45,000 (approximately $60,600 in Canadian
dollars).
On November 15, 2016, the Company's Board of Directors approved annual
payments of 200,000 (approximately $310,000 in Canadian dollars) and 50,000
(approximately $78,000 in Canadian dollars) to Mr. Niccolo Rossi di Montelera
for his role as Executive Chairman of the Board and Chairman of the Executive
Committee, respectively, effective January 1, 2017.
Executive Compensation
We are a "foreign private issuer" under U.S. securities laws and not a
reporting issuer under Canadian securities laws and are therefore not required
to publicly disclose detailed individual information about executive
compensation under U.S. securities laws to the extent that we comply with the
rules of our home jurisdiction. As such, the executive compensation of our
Chief Executive Officer, Chief Financial Officer and three other most highly
compensated executive officers are detailed in our Management Proxy Circular
described below. Under the
Canada Business Corporations Act
, being the statute under which we were incorporated, we are required to
provide certain information on executive compensation. The aggregate
compensation paid by us to our four executive officers was approximately
$1,770,000 (annual salary).
The summary compensation table regarding our Chief Executive Officer, Chief
Financial Officer and three other most highly compensated executive officers
and the option/RSU grants and exercise of options/RSU tables in our Management
Proxy Circular will be filed on Form 6-K with the SEC in connection with our
2024 Annual Meeting of Shareholders.
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Birks Group Incentive Plans
The following plan makes reference to stock prices; since BGI trades publicly
on the NYSE American, all stock prices are denominated in U.S. dollars.
Long-Term Incentive Plan
In 2006, Birks Group adopted a Long-Term Incentive Plan to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to employees and consultants and to promote the
success of Birks Group's business. As of May 31, 2024, there were 15,000
cash-based stock appreciation rights granted to members of the Company's Board
of Directors and outstanding stock options to purchase 20,000 shares of the
Company's Class A voting shares granted to members of the Company's senior
management team under the Long-Term Incentive Plan. The stock options
outstanding as of May 31, 2024, under the Long-Term Incentive Plan have a
weighted average exercise price of $0.78.
In general, the Long-Term Incentive Plan is administered by Birks Group's
Board of Directors or a committee designated by the Board of Directors (the
"Administrator"). Any employee or consultant selected by the Administrator is
eligible for any type of award provided for under the Long-Term Incentive
Plan, except that incentive stock options may not be granted to consultants.
The selection of the grantees and the nature and size of grants and awards are
wholly within the discretion of the Administrator.
In the event of a change in control of Birks Group, the Administrator, at its
sole discretion, may determine that all outstanding awards shall become fully
and immediately exercisable and vested. In the event of dissolution or
liquidation of Birks Group, the Administrator may, at its sole discretion,
declare that any stock option or stock appreciation right shall terminate as
of a date fixed by the Administrator and give the grantee the right to
exercise such option or stock option right.
In the event of a merger or asset sale or other change in control, as defined
by the Long-Term Incentive Plan, the Administrator may, in its sole
discretion, take any of the following actions or any other action the
Administrator deems to be fair to the holders of the awards:
. Provide that all outstanding awards upon the consummation of such a merger or sale shall be assumed by, or an equivalent
option or right shall be substituted by, the successor corporation or parent or subsidiary of such successor corporation;
. Prior to the occurrence of the change in control, provide that all outstanding awards to the extent they are
exercisable and vested shall be terminated in exchange for a cash payment equal to the change in control price; or
. Prior to the occurrence of the change in control, provide for the grantee
to have the right to exercise the award as to all or a portion of the
covered stock, including, if so determined by the Administrator, in its
sole discretion, shares as to which it would not otherwise be exercisable.
The Long-Term Incentive Plan authorized the issuance of 900,000 Class A voting
shares, which consisted of authorized but unissued Class A voting shares. The
Long-term Incentive Plan expired on February 10, 2016 and no further awards
will be granted under this plan. However, this plan will remain effective
until the outstanding awards issued thereunder terminate or expire by their
terms.
Omnibus Long-Term Incentive Plan
On August 15, 2016, the Board of Directors adopted the Company's Omnibus
Long-Term Incentive Plan (the "Omnibus LTIP"), and same was approved by the
Company's shareholders on September 21, 2016. Under the Omnibus LTIP, the
Company's directors, officers, senior executives and other employees of the
Company or one of its subsidiaries, consultants and service providers
providing ongoing services to the Company and its affiliates may from
time-to-time be granted various types of compensation awards, as same are
further described below. The Omnibus LTIP is meant to replace the Company's
former equity awards plans. A total of 1,000,000 shares of the Company's Class
A voting shares are reserved for issuance under the Omnibus LTIP. On January
11, 2022 and September 22, 2022, the Board of Directors and a majority of
shareholders, respectively, approved the increase to the maximum number of
Class A voting shares reserved for issuance under the Omnibus LTIP from
1,000,000 to 1,500,000. In no event shall the Company issue Class A voting
shares, or awards requiring the Company to issue Class A voting shares,
pursuant to the Omnibus LTIP if such issuance, when combined with the Class A
voting shares issuable upon the exercise of awards granted under the Company's
former plan or any other equity awards plan of the Company, would exceed
1,796,088 Class A voting shares, unless such issuance of Class A voting shares
or awards is approved by the shareholders of the Company. This limit shall not
restrict however, the Company's ability to issue awards under the Omnibus LTIP
that are payable other than in shares. As of May 31, 2024, the only awards
outstanding under the Omnibus LTIP were 715,482 deferred stock units granted
to members of the Company's Board of Directors which were converted from
cash-settled to share-settled awards on December 20, 2021, 96,688 cash-settled
deferred stock units granted to members of the Company's Board of Directors,
and 12,000 Class A voting shares underlying options granted to members of the
Company's senior management team. The stock options outstanding as of May 31,
2024, under the Omnibus Long-Term Incentive Plan, have a weighted average
exercise price of $1.43.
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BOARD PRACTICES
Our by-laws state that the Board of Directors will meet immediately following
the election of directors at any annual or special meeting of the shareholders
and as the directors may from time to time determine. See "Item 10. Additional
Information-Articles of Incorporation and By-laws."
Under our Restated Articles of Incorporation, our directors serve one-year
terms although they will continue in office until successors are appointed.
None of the members of our Board has service agreements providing for benefits
upon termination of employment, except for Mr. Bedos, our President and Chief
Executive Officer. See "Item 10. Additional Information-Material Contracts-Emplo
yment Agreements."
Our Board of Directors has determined that six of our eight directors (Davide
Barberis Canonico, Maria Eugenia Giron, Emilio B. Imbriglio, Louis-Philippe
Maurice, Deborah Shannon Trudeau and Joseph F.X Zahra) qualify as independent
directors within the meaning of Section 803A of the NYSE American Company
Guide.
All of the directors on our compensation and audit committees were independent
as well as the corporate governance committee until it was eliminated in
September 2019. As a consequence of the elimination of the corporate
governance and nominating committee, the audit and corporate governance
committee as well as the compensation and nominating committee were formed.
The corporate governance responsibilities of the committee were transferred to
the audit committee and the nomination responsibilities were transferred to
the compensation committee.
We are a "controlled company" (one in which more than 50% of the voting power
is held by an individual, a group or another company) within the meaning of
the rules of the NYSE American. Accordingly, we are not required under the
NYSE American rules to have a majority of independent directors, a nominating
and corporate governance committee and a compensation committee (each of
which, under the NYSE American rules, would otherwise be required to be
comprised entirely of independent directors). Since November 2005, our Board
of Directors has been comprised of a majority of independent directors, except
for (i) fiscal year 2013 following the appointment of Mr. Bedos, our President
and Chief Executive Officer, as an additional director of the Company, during
which period our Board of Directors was comprised of 50% independent
directors, (ii) part of fiscal year 2015 following the 2014 annual shareholder
meeting where four of the Company's eight directors qualified as independent
directors, (iii) part of fiscal year 2016 following the resignation of Mr.
Guthrie J. Stewart in December 2015 until the appointment of Mr. Louis L.
Roquet in May 2016, and (iv) part of fiscal year 2017 until the appointment of
Mr. Joseph F.X. Zahra, during which period our Board of Directors was
comprised of a majority of non-independent directors.
Notwithstanding the fact that we qualify for the "controlled company"
exemption, we maintain an audit and corporate governance committee and a
compensation and nominating committee comprised solely of independent
directors.
In relation to fiscal year 2024, the Company's Board of Directors held a total
of nine board meetings and fourteen committee meetings. With respect to such
period, all of the directors attended 100% of the meetings of the Board of
Directors, except for three directors who attended 80% of the board meetings.
Our Board of Directors is supported by committees, which are working groups
that analyze issues and provide recommendations to the Board of Directors
regarding their respective areas of focus. The executive officers interact
periodically with the committees to address management issues. During fiscal
2024, our Board of Directors was composed of the three main committees below.
The Board of Directors may from time to time also create special committees of
the Board as needed.
1.
Audit and Corporate Governance Committee
. We have a separately designated standing audit and corporate governance
committee established in accordance with Section 3(a)(58)(A) of the Exchange
Act. The audit and corporate governance committee operates under a written
charter adopted by the Board of Directors. The audit and corporate governance
committee reviews the scope and results of the annual audit of our
consolidated financial statements conducted by our independent auditors, the
scope of other services provided by our independent auditors, proposed changes
in our financial accounting standards and principles, and our policies and
procedures with respect to its internal accounting, auditing and financial
controls. The audit and corporate governance committee also examines and
considers other matters relating to our financial affairs and accounting
methods, including selection and retention of our independent auditors. The
audit and corporate governance committee is also responsible for overseeing
the Company's major risk exposures, cybersecurity and data privacy risks and
protocols. In addition, the audit and corporate governance committee has
oversight responsibility on all aspects of the Company's corporate governance
policies as well as the oversight and review of all related party
transactions. In relation to fiscal 2024, the audit and corporate governance
committee held four meetings. With respect to such period, all the members of
the audit and corporate governance committee attended 100% of these meetings.
During fiscal 2024, the audit and corporate governance committee was comprised
of Frank Di Tomaso (Chair and member until September 14, 2023), Emilio B.
Imbriglio (Chair since September 14, 2023), Davide Barberis Canonico, Maria
Eugenia Giron (since September 14, 2023) and Joseph F.X. Zahra (until
September 14, 2023), each of whom was financially literate and an independent
(as defined by the NYSE American listing standards and SEC rules),
non-employee director of the Company. We have determined that both Frank Di
Tomaso and Emilio B. Imbriglio are "audit committee financial experts" as this
term is defined under SEC rules. Neither the SEC nor the NYSE American
requires us to designate an "audit committee financial expert". A copy of the
audit committee charter is available on the Company's website at
www.birks.com
.
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2.
Compensation and Nominating Committee
. We have a standing compensation committee. The compensation and nominating
committee operates under a written charter adopted by the Board of Directors.
The purpose of the compensation and nominating committee is to recommend to
the Board of Directors (i) director compensation and (ii) executive
compensation, including base salaries, bonuses and long-term incentive awards
for the Chief Executive Officer and certain other executive officers of Birks
Group. The compensation and nominating committee also establishes criteria for
goals and objectives for variable compensation, evaluates the performance of
the Chief Executive Officer on an annual basis and provides recommendations to
the Board of Directors regarding Chief Executive Officer and senior management
succession plans. Certain decisions regarding compensation of certain other
executive officers are reviewed by the compensation committee. In relation to
fiscal year 2024, the compensation and nominating committee held four meetings
and all members of the compensation and nominating committee attended 100% of
these meetings with respect to that period, except for one member who attended
80% of the meetings. During fiscal year 2024, the compensation and nominating
committee was comprised of Shirley A. Dawe (Chain and member until September
13, 2023), Deborah Shannon Trudeau (Chair since September 14, 2023), Davide
Barberis Canonico, Louis-Philippe Maurice (since September 14, 2023) and
Joseph F.X. Zahra. Each member of the compensation and nominating committee is
an independent (as defined by the NYSE American listing standards),
non-employee director of the Company.
The compensation and nominating committee is also responsible for nominating
potential nominees to the Board of Directors. The Company's policy with regard
to the consideration of any director candidates recommended by a shareholder
is that it will consider such candidates and evaluate such candidates by the
same process as candidates identified by the compensation and nominating
committee. The Company has adopted a policy requiring that a director nominee,
whether such candidate was recommended by the compensation and nominating
committee or a shareholder, should possess, at least, integrity and commitment
to service on the board. In addition to those minimum qualifications, the
compensation and nominating committee will consider the following qualities or
skills, which the Board as a whole should possess: business judgment,
financial literacy, public company experience, accounting and finance
experience, industry knowledge, diversity and the ability to provide strategic
insight and direction. A detailed discussion of each of these attributes can
be found in the compensation and nominating committee charter, which is
available on the Company's website at
www.birks.com.
3.
Executive Committee.
We have a standing executive committee. The executive committee operates under
a written charter adopted by the Board of Directors. The purpose of the
executive committee is to provide a simplified review and approval process in
between meetings of the Board of Directors for certain corporate actions. The
intent of the executive committee is to facilitate our efficient operation
with guidance and direction from the Board of Directors. The goal is to
provide a mechanism that can assist in our operations, including but not
limited to monitoring the implementation of policies, strategies and programs.
In addition, the executive committee's mandate is to assist the Board with
respect to the development, continuing assessment and execution of the
Company's strategic plan. The executive committee is comprised of at least
three members of the Board of Directors. Vacancies on the committee are filled
by majority vote of the Board of Directors at the next meeting of the Board of
Directors following the occurrence of the vacancy. During fiscal year 2024,
the executive committee consisted of Niccolo Rossi di Montelera (Chair),
Jean-Christophe Bedos, Davide Barberis Canonico, Maria Eugenia Giron (since
September 14, 2023) and Joseph F.X. Zahra (until September 14, 2023). In
relation to fiscal year 2024, the executive committee held five meetings. All
of the members of the executive committee attended 100% of these meetings with
respect to such period, except for one member who attended approximately 67%
of the meetings. Messrs. Barberis Canonico and Zahra and Mrs. Giron are
independent, non-employee directors of the Company.
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EMPLOYEES
As of March 30, 2024, we employed approximately 290 persons, including 12
employees on temporary leave. None of our employees are governed by a
collective bargaining agreement with a labor union. We believe our relations
with our employees are good and we intend to continue to place an emphasis on
recruiting, training, retraining and developing the best people in our
industry.
Retail employees include only those employees within our retail selling
locations, while administration includes all other activities including
corporate office, merchandising, supply chain operations, e-commerce sales and
support, wholesale sales and gold exchange. The table below sets forth
headcount by category in the periods indicated.
Total
As of March 30, 2024:
Administration and operating support 123
Retail 167
Total 290
As of March 25, 2023:
Administration and operating support 142
Retail 171
Total 313
As of March 26, 2022:
Administration and operating support 130
Retail 166
Total 296
SHARE OWNERSHIP
The following table sets forth information regarding the beneficial ownership
of our Class A voting shares as of May 31, 2024, based on 11,472,999 Class A
voting shares, by each executive officer and each director:
Name of Beneficial Owner Number of Class A Options/DSUs Percentage of
Voting Shares to Purchase Beneficially Owned
Beneficially Owned Shares
Niccolo Rossi di Montelera - 110,588 (1) *
Jean-Christophe Bedos 92,633 - *
Davide Barberis Canonico - 110,588 (1) *
Maria Eugenia Giron - - -
Emilio B. Imbriglio - - -
Louis-Philippe Maurice - - -
Deborah Shannon Trudeau - - -
Joseph F.X. Zahra - 110,588 (1) *
Katia Fontana 30,700 - *
Maryame El Bouwab 50,000 - *
Miranda Melfi 48,624 - *
* Less than 1%.
(1) Includes deferred stock units to acquire an equivalent amount of Class A voting shares
upon exercise following the departure of the director at a price of $0 per share. The
deferred stock units are redeemable during the period commencing on the day immediately
following the departure of the director and ending on December 31 of the following year.
For arrangements involving the issuance or grant of options or shares of the
Company to such named executive officers and other employees, see above under
the heading "Compensation of Directors and Officers" and Item 10. "Additional
Information-Material Contracts-Employment Agreements."
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DISCLOSURE OF REGISTRANT'S ACTIONS TO RECOVER ERRONEOUSLY AWARDED COMPENSATION
Not applicable.
Item 7. Major Shareholders and Related Party Transactions
MAJOR SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership
of our Class A voting shares as of May 31, 2024 by each person or entity who
beneficially owns 5% or more of outstanding voting securities, including the
Class A voting shares and/or Class B multiple voting shares. The major
shareholders listed with Class B multiple voting shares are entitled to ten
votes for each Class B multiple voting share held, whereas holders of Class A
voting shares are entitled to one vote per Class A voting share held. Unless
otherwise indicated in the table, each of the individuals named below, to the
Company's knowledge, has sole voting and investment power with respect to the
voting shares beneficially owned by them. The calculation of the percentage of
outstanding shares is based on 11,472,999 Class A voting shares and 7,717,970
Class B multiple voting shares outstanding on May 31, 2024, adjusted where
appropriate, for shares of stock beneficially owned but not yet issued.
Beneficial ownership is determined under rules issued by the SEC. Under these
rules, beneficial ownership includes any of the Class A voting shares or Class
B multiple voting shares as to which the individual or entity has sole or
shared voting power or investment power and includes any shares as to which
the individual or entity has the right to acquire beneficial ownership within
60 days through the exercise of any warrant, stock option or other right. The
inclusion in this Annual Report of such voting shares, however, does not
constitute an admission that the named individual is a direct or indirect
beneficial owner of such voting shares. The voting shares that a person has
the right to acquire within 60 days of May 31, 2024 are deemed outstanding for
the purpose of calculating the percentage ownership of such person, but are
not deemed outstanding for the purpose of calculating the percentage owned by
any other person listed. For information regarding entities or persons that
directly or indirectly control us, see "Item 3. Key Information - Risk Factors
- Risks Related to the Company."
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Name of Beneficial Owner Number of Class A Percentage of Beneficially
(1) Voting Shares Owned
Beneficially Owned
The Grande Rousse Trust 13,646,692 71.11 %
(2)
Meritus Trust Company Limited 13,646,692 71.11 %
(3)
Montel S.a.r.l 8,846,692 58.24 %
(4)
Mangrove Holding S.A. 4,800,000 31.02 %
(5)
Jason Edward Maynard 2,720,556 23.17 %
(6)
(1) Unless otherwise noted, each person has sole voting and investment power over the shares listed opposite its name.
(2) Includes 13,646,692 Class A voting shares, of which 7,717,970 Class
A voting shares to which Montel S.a.r.l ("Montel") and Mangrove
Holding S.A. ("Mangrove") collectively would be entitled upon
conversion of the Class B multiple voting shares held by Montel
and Mangrove collectively. The Class B multiple voting shares
entitle the holder to ten votes for each Class B multiple voting
share held and each Class B multiple voting share is convertible
into one Class A voting share. The shares held by Montel and
Mangrove collectively are beneficially owned by The Grande Rousse
Trust. Montrovest B.V. ("Montrovest") merged with its parent
company, Montel, on August 3, 2018 (the "Montrovest Merger"), and
as such, all of the shares held by Montrovest at the time of
the Montrovest Merger are now held by Montel. Confido Limited has
the power to remove the trustee of The Grande Rousse Trust. As
a result, Confido Limited may be deemed to have beneficial
ownership of the Class A voting shares held by Montel or Mangrove.
(3) Trustee of The Grande Rousse Trust. Includes 13,646,692 Class A voting
shares, of which 7,717,970 Class A voting shares to which Montel and
Mangrove collectively would be entitled upon conversion of the Class B
multiple voting shares held by Montel and Mangrove collectively. The Class B
multiple voting shares entitle the holder to ten votes for each Class B
multiple voting share held and each Class B multiple voting share is
convertible into one Class A voting share. The shares held by Montel and
Mangrove collectively are beneficially owned by The Grande Rousse Trust.
(4) Comprised of 8,846,692 Class A voting shares, of which 3,717,970 Class A voting shares, to which Montel
would be entitled upon conversion of the Class B multiple voting shares held by Montel and Mangrove
collectively. The Class B multiple voting shares entitle the holder to ten votes for each Class B multiple
voting share held and each Class B multiple voting share is convertible into one Class A voting share.
(5) Includes 4,800,000 Class A voting shares, of which 4,000,000 Class A voting shares to which Mangrove would be
entitled upon conversion of the Class B multiple voting shares held by Mangrove. The Class B multiple voting shares
entitle the holder to ten votes for each Class B multiple voting share held and each Class B multiple voting
share is convertible into one Class A voting share. The Grande Rousse Trust is the sole shareholder of Mangrove.
(6) Based on information received from Jason E. Maynard as at May 31, 2024.
As of May 31, 2024, there were a total of 205 holders of record of our Class A
voting shares, of which 161 were registered with addresses in the United
States. Such United States record holders were, as of such date, the holders
of record of approximately 45% of our outstanding Class A voting shares. The
number of record holders in the United States is not representative of the
number of beneficial holders nor is it representative of where such beneficial
holders are resident since many of these Class A shares were held of record by
brokers or other nominees. None of our Class B multiple voting shares are held
in the United States. Each Class B multiple voting share entitles the holder
to ten (10) votes at all meetings of our shareholders (except meetings at
which only holders of another specified class of shares are entitled to vote
pursuant to the provisions of our restated articles or the
Canada Business Corporations Act
).
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RELATED PARTY TRANSACTIONS
Management Consulting Services Agreement
Effective January 1, 2016, the Company entered into a management consulting
services agreement with Gestofi S.A. ("Gestofi"), all in accordance with the
Company's Code of Conduct relating to related party transactions. Under the
management consulting services agreement, Gestofi provides the Company with
services related to the obtaining of financing, mergers and acquisitions,
international expansion projects, and such other services as the Company may
request. Under the agreement, the Company paid an annual retainer of 140,000
(approximately $202,000 in Canadian dollars). The original term of the
agreement was until December 31, 2016 and the agreement was automatically
extended for successive terms of one year as neither party gave a 60 days'
notice of its intention not to renew. The yearly renewal of the agreement was
subject to the review and approval of the Company's corporate governance and
nominating committee (and now is subject to the review and approval of the
Company's audit and corporate governance committee) and the Board of Directors
in accordance with the Company's Code of Conduct relating to related party
transactions. In November 2018, the agreement was renewed on the same terms
and conditions except that the retainer was reduced to 40,000 (approximately
$61,000 in Canadian dollars). In March 2019, the agreement was amended to (i)
waive the yearly retainer and reimburse only the out-of-pocket expenses
related to the services, and (ii) allow for a success fee to be mutually
agreed upon between the Company and Gestofi in the event that financing or a
capital raise is achieved. The agreement has been renewed annually since
November 2019 and was renewed in November 2023 for an additional one-year term
on the same terms and conditions. In fiscal 2024, 2023, and 2022, the Company
incurred expenses of 28,000 (approximately $41,000 in Canadian dollars) nil,
and nil respectively under this agreement to Gestofi.
Cash Advance Agreements
The Company has a cash advance outstanding from the Company's controlling
shareholder, Montel (formerly Montrovest), of U.S. $1.5 million (approximately
$2.0 million in Canadian dollars) originally received in May 2009 from
Montrovest. This cash advance was provided to the Company by Montrovest to
finance working capital needs and for general corporate purposes. This advance
and any interest thereon is subordinated to the indebtedness of the Company's
Amended Credit Facility and Amended Term Loan. This cash advance bears an
annual interest rate of 11%, net of withholding taxes, representing an
effective interest rate of approximately 12%, and is repayable upon demand by
Montel once conditions stipulated in the Company's Amended Credit Facility
permit such a payment. At March 30, 2024 and March 25, 2023, advances payable
to Montel amounted to U.S. $1.5 million (approximately $2.0 million and $2.1
million in Canadian dollars, respectively).
On July 28, 2017, the Company received a U.S. $2.5 million (approximately $3.3
million in Canadian dollars) loan from Montel, to finance its working capital
needs. The loan bears interest at an annual rate of 11%, net of withholding
taxes, representing an effective interest rate of approximately 12%, and is
due and payable in two equal payments of U.S. $1.25 million (approximately
$1.55 million in Canadian dollars) in each of July 2018 and July 2019. During
fiscal year 2019, U.S. $1.25 million (approximately $1.55 million in Canadian
dollars) was repaid. In May 2019, Montel granted the Company a one-year
extension of the term of the outstanding balance of U.S. $1.25 million ($1.8
million in Canadian dollars) which was scheduled to be fully repaid in July
2019. In December 2019, the Company obtained a new one-year moratorium on
principal repayments and as such the loan will become due in December 2020. In
June 2020, the Company obtained a new moratorium on principal repayments and
as such the loan will become due at the earliest of August 31, 2021 or 10 days
following a recapitalization. During fiscal 2022, the remaining principal
balance on the loan of approximately U.S. $1.25 million ($1.6 million in
Canadian dollars) was repaid. At March 30, 2024 and March 25, 2023, loans
payable to Montel amounted to nil and nil.
Due to the Montrovest Merger, Montrovest's separate legal existence ceased and
as a result of such merger, the cash advance agreements as well as the loan
agreement have been assumed by Montel.
Reimbursement Letter Agreement
In accordance with the Company's Code of Conduct related to related party
transactions, in April 2011, the Company's corporate governance and nominating
committee and Board of Directors approved the reimbursement to Regaluxe Srl,
of certain expenses, such as rent, communication, administrative support and
analytical service costs, incurred in supporting the office of Dr. Lorenzo
Rossi di Montelera, the Company's then Chairman, and of Mr. Niccolo Rossi di
Montelera, the Company's Chairman of the Executive Committee and the Company's
current Executive Chairman of the Board, for the work performed on behalf of
the Company, up to a yearly maximum of U.S. $260,000 (approximately $340,000
in Canadian dollars). The yearly maximum was reduced to U.S. $130,000
(approximately $170,000 in Canadian dollars). This agreement has been renewed
annually and was renewed in March 2019 for an additional one-year term, except
that the only services being reimbursed are for administrative support and
analytical services costs and in March 2020, for an additional one-year,
except expenses were as of then being charged in Euro (). During fiscal 2024,
2023, and 2022, the Company incurred expenses of 17,000, 24,000, and 24,000,
(approximately $25,000, $35,000, and $35,000 in Canadian dollars) respectively
to Regaluxe Srl under this agreement.
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Distribution Agreement
In April 2011, our corporate governance and nominating committee and Board of
Directors approved the Company's entering in a Wholesale and Distribution
Agreement with Regaluxe Srl. Under the agreement, Regaluxe Srl is to provide
services to the Company to support the distribution of the Company's products
in Italy through authorized dealers. The initial one-year term of the
agreement began on April 1, 2011. Under this agreement, the Company pays
Regaluxe Srl a net price for the Company's products equivalent to the price,
net of taxes, for the products paid by retailers to Regaluxe Srl less a
discount factor of 3.5%. The agreement's initial term was until March 31,
2012, and may be renewed by mutual agreement for additional one year terms.
This agreement has been renewed annually and in March 2023, the agreement was
renewed for an additional one-year term. This agreement was not renewed in
March 2024. During fiscal year 2024, fiscal 2023 and fiscal 2022, the Company
did not make any payments to Regaluxe Srl under this agreement.
Consulting Agreement
On March 28, 2018, the Company's Board of Directors approved the Company's
entry into a consulting services agreement with Carlo Coda Nunziante effective
April 1, 2018. Under the agreement, Carlo Coda Nunziante, the Company's former
Vice President, Strategy, and brother-in-law to the Executive Chairman of the
Board, is providing advice and assistance on the Company's strategic planning
and business strategies for a total annual fee, including reimbursement of
out-of-pocket expenses of 146,801 (approximately $222,000 in Canadian
dollars), net of applicable taxes. During fiscal 2024, 2023 and 2022, the
Company incurred charges of 149,000, 149,000 and 162,000 (approximately
$217,000, $205,000 and $237,000 in Canadian dollars), including applicable
taxes, respectively. This agreement was extended for a six-month period until
September 30, 2024.
Retail Support and Administrative Service Fee
The Company provides RMBG with retail support and administrative services, and
charges RMBG for these related services. During fiscal 2024, the Company
charged $612,500 to RMBG and nil during fiscal 2023.
Shareholder Support Letter
On July 15, 2024, the Company obtained a support letter from one if its
shareholders, Mangrove Holding S.A., providing financial support in an amount
of up to $3.75 million, of which $1.0 million would be available after January
1, 2025. These amounts can be borrowed, if needed, when deemed necessary by
the Company, upon approval by the Company's Board of Directors, until at least
July 31, 2025, to assist the Company in satisfying its obligations and debt
service requirements as they come due in the normal course of operations, or
in meeting its financial covenant requirements of maintaining minimum excess
availability levels of $8.5 million at all times as required by its Amended
Credit Facility and Amended Term Loan. Amounts drawn under this support letter
will bear interest at an annual rate of 15%. However, there will be no
interest or principal repayments prior to July 31, 2025.
Item 8. Financial Information
Consolidated Financial Statements
See Item 18. "Financial Statements."
Dividend Policy
For a discussion of our dividend policy, see Item 3. "Key Information-Dividends
and Dividend Policy."
Legal Proceedings
We are from time to time involved in litigation incident to the conduct of our
business. Although such litigation is normally routine and incidental, it is
possible that future litigation can result in large monetary awards for
compensatory or punitive damages. We believe that no litigation that is
currently pending or threatened will have a material adverse effect on our
financial condition.
Significant Changes
No significant changes have occurred since the date of the annual financial
statements included in this Annual Report.
Item 9. The Offer and Listing
TRADING MARKET
Effective November 15, 2005, our Class A voting shares were listed and began
to trade on the NYSE American and are currently trading under the symbol "BGI."
Item 10. Additional Information
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ARTICLES OF INCORPORATION AND BY-LAWS
Our Restated Articles of Incorporation do not restrict the type of business
that we may carry on. A copy of our Restated Articles of Incorporation were
set out in the F-4 registration statement (File No. 333-126936) that was filed
with the SEC on July 27, 2005 and subsequently amended on September 8, 2005,
September 21, 2005 and September 29, 2005, and which we incorporate by
reference. A copy of our By-law No. One is contained as an exhibit to the Form
20-F that we filed with the SEC on July 3, 2012, and which we incorporate by
reference. Additionally, certain rights of our shareholders pursuant to our
Restated Articles of Incorporation, our By-laws and the
Canada Business Corporations Act
were set out in the F-4 registration statement (File No. 333-126936) that was
filed with the SEC on July 27, 2005, and which we incorporate by reference
herein and we refer you to the headings therein entitled "Description of Birks
Capital Stock" and "Comparison of Stockholder Rights."
On April 19, 2012, our Board of Directors approved an amendment to our By-laws
to, among other things, add the title and description of the Vice Chairman
position, revise the declaration of dividends section of the By-laws, and add
a banking and borrowing arrangements section to the By-laws. Under Canadian
law, the amendment to our By-laws had to be ratified by the shareholders of
the Company. At our 2012 Annual and Special Meeting of Shareholders, our
shareholders ratified the amendment to our By-laws.
On September 12, 2013, at our Annual Meeting of Shareholders, our shareholders
approved articles of amendment to our Restated Articles of Incorporation to
change our corporate name to Birks Group Inc. A copy of the articles of
amendment is filed with our Annual Report on Form 20-F filed with the SEC on
July 25, 2014.
On September 24, 2014, at our Annual Meeting of Shareholders, our shareholders
approved articles of amendment to our Restated Articles of Incorporation to
allow our board of directors, at any time and from time to time, to issue
preferred shares for an aggregate consideration to be received by the Company
of up to five million Canadian dollars ($5,000,000) which shall be subject to
a 5% dividend limitation as contained in the Restated Articles of
Incorporation. A copy of the articles of amendment is filed with our Annual
Report on Form 20-F filed with the SEC on June 26, 2015.
MATERIAL CONTRACTS
We have not entered into any material contract other than in the ordinary
course of business and other than those described below or in Items 4, 5, 7
and 19 of this Annual Report on Form 20-F.
Employment Agreements
Jean-Christophe Bedos
On January 4, 2012, we entered into an employment agreement, or the
"Agreement", with Jean-Christophe Bedos, who became the President & Chief
Executive Officer effective April 1, 2012, and prior to that was our Chief
Operating Officer. The Agreement provides Mr. Bedos with a base salary of
$700,000 an annual cash bonus set at a minimum of $282,500 for fiscal year
ended March 30, 2013, of which $141,250 was paid during fiscal 2012 and
$141,250 was paid in fiscal 2014, an annual target cash bonus of 85% of base
salary based on achievement of a targeted level of performance and performance
criteria set by the Company, an option to purchase 150,000 shares of the
Company's Class A voting shares which vested over three years and other health
and retirement benefits. Mr. Bedos' base salary was increased to $730,000,
$750,000 and $770,000, effective October 1, 2015, November 1, 2016 and October
1, 2021, respectively. If Mr. Bedos is terminated without "cause" or resigns
for "good reason," as these terms are defined in the Agreement, the Agreement
provides that Mr. Bedos will receive (i) any earned and accrued but unpaid
base salary, (ii) up to 12 months of salary in lieu of further salary or
severance payments, which may be increased by one additional month after five
years of service for each additional year of service thereafter, up to a
maximum of eighteen months after ten years of service, (iii) certain health
benefits for the period that the severance will be payable in, and (iv) his
bonus through the date of termination and up to twelve months average annual
cash bonus (based on the average annual cash bonus paid to him over the
previous three fiscal years). Mr. Bedos is prohibited from competing with us
during his employment and for a period of twelve-months thereafter.
EXCHANGE CONTROLS
There are currently no laws, decrees, regulations or other legislation in
Canada that restricts the export or import of capital or that affects the
remittance of dividends, interest or other payments to non-resident holders of
our securities other than withholding tax requirements. There is no limitation
imposed by Canadian law or by our Restated Articles of Incorporation or our
other organizational documents on the right of a non-resident of Canada to
hold or vote our Class A voting shares, other than as provided in Investment
Canada Act.
The Investment Canada Act requires notification and, in certain cases, advance
review and approval by the federal minister of Innovation, Science and
Economic Development of the acquisition by a "non-Canadian" of "control of a
Canadian business", all as defined in the Investment Canada Act. Generally,
the threshold for review will be higher in monetary terms, and in certain
cases an exemption will apply, for an investor ultimately controlled by
persons who are WTO investors or trade agreement investors, in each case
within the meaning of the Investment Canada Act. The Investment Canada Act
also provides for review of investments in Canada, including by acquisition of
the whole or part of any entity with operations in Canada, if the
aforementioned Minister determines that such an investment may be injurious to
national security.
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TAXATION
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING AND DISPOSING OF BIRKS
CLASS A VOTING SHARES
The following discussion is based on the U.S. Internal Revenue Code of 1986,
as amended (the Code), applicable Treasury regulations, administrative rulings
and pronouncements and judicial decisions currently in effect, all of which
could change. Any change, which may be retroactive, could result in U.S.
federal income tax consequences different from those discussed below. The
discussion is not binding on the Internal Revenue Service, and there can be no
assurance that the Internal Revenue Service will not disagree with or
challenge any of the conclusions described below.
Except where specifically noted, the discussion below does not address the
effects of any state, local or non-U.S. tax laws (or other tax consequences
such as estate or gift tax consequences). The discussion below relates to
persons who hold Birks Group Class A voting shares as capital assets within
the meaning of Section 1221 of the Code. The tax treatment of those persons
may vary depending upon the holder's particular situation, and some holders
may be subject to special rules not discussed below. Those holders would
include, for example:
. banks, insurance companies, trustees and mutual funds;
. tax-exempt organizations;
. financial institutions;
. pass-through entities and investors in pass-through entities;
. traders in securities who elect to apply a mark-to-market method of accounting;
. broker-dealers;
. holders who are not U.S. Holders (as defined below);
. persons whose "functional currency" is not the U.S. dollar;
. holders who are subject to the alternative minimum tax; and
. holders of Birks Group Class A voting shares who own 5% or more of either the total
voting power or the total value of the outstanding Class A voting shares of Birks Group.
Holders should consult their own tax advisors concerning the U.S. federal
income tax consequences of the ownership of Birks Group Class A voting shares
in light of their particular situations, as well as any consequences arising
under the laws of any other taxing jurisdiction.
As used in this document, the term "U.S. Holder" means a beneficial holder of
Birks Group Class A voting shares that is (1) an individual who is a U.S.
citizen or U.S. resident alien, (2) a corporation, or other entity taxable as
a corporation, created or organized in or under the laws of the U.S. or any
political subdivision of the U.S., (3) an estate which is subject to U.S.
federal income tax on its worldwide income regardless of its source or (4) a
trust (x) that is subject to primary supervision of a court within the U.S.
and the control of one or more U.S. persons as described in Section
7701(a)(30) of the Code or (y) that has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S. person.
If a partnership holds Birks Group Class A voting shares, the U.S. federal
income tax treatment of a partner will generally depend upon the status of the
partner and the activities of the partnership. Partners of partnerships that
hold Birks Group Class A voting shares should consult their tax advisors
regarding the U.S. federal income tax consequences to them.
Dividends and Distributions
Subject to the passive foreign investment company (PFIC) rules discussed
below, the gross amount of dividends paid to U.S. Holders of our Class A
voting shares, including amounts withheld to reflect Canadian withholding
taxes, will be treated as dividend income to these U.S. Holders, to the extent
paid out of current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. This income will be includable in the
gross income of a U.S. Holder on the day actually or constructively received
by the U.S. Holder. Dividends generally will not be eligible for the dividends
received deduction allowed to corporations upon the receipt of dividends
distributed by U.S. corporations.
Subject to certain conditions and limitations, Canadian withholding taxes on
dividends may be treated as foreign taxes eligible for credit against a U.S.
Holder's U.S. federal income tax liability. For purposes of calculating the
foreign tax credit, dividends paid on our Class A voting shares will be
treated as income from sources outside the U.S. and generally will constitute
"passive income." Special rules apply to certain individuals whose foreign
source income during the taxable year consists entirely of "qualified passive
income" and whose creditable foreign taxes paid or accrued during the taxable
year do not exceed $300 ($600 in the case of a joint return). U.S. Holders
should consult their tax advisors to determine their eligibility to use
foreign tax credits.
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To the extent that the amount of any distribution exceeds our current and
accumulated earnings and profits for a taxable year, the distribution first
will be treated as a tax-free return of capital, causing a reduction in the
adjusted basis of our Class A voting shares (thereby increasing the amount of
gain, or decreasing the amount of loss, to be recognized by the U.S. Holder on
a subsequent disposition of the Class A voting shares), and the balance in
excess of adjusted basis will be taxed as capital gain recognized on a sale or
exchange.
With respect to certain U.S. Holders who are not corporations, including
individuals, certain dividends received from a qualified foreign corporation
may be subject to reduced rates of taxation. A "qualified foreign corporation"
includes a foreign corporation that is eligible for the benefits of a
comprehensive income tax treaty with the United States which the U.S. Treasury
determines to be satisfactory for these purposes and which includes an
exchange of information program. U.S. Treasury guidance indicates that the
current income tax treaty between Canada and the U.S. meets these
requirements, and we believe we are eligible for the benefits of that treaty.
In addition, a foreign corporation is treated as a qualified foreign
corporation with respect to dividends received from that corporation on shares
that are readily tradable on an established securities market in the U.S. Our
Class A voting shares, which are listed on the NYSE American, should be
considered readily tradable on an established securities market in the U.S.
Individuals that do not meet a minimum holding period requirement during which
they are not protected from the risk of loss or that elect to treat the
dividend income as "investment income" pursuant to Section 163(d)(4) of the
Code will not be eligible for the reduced rates of taxation regardless of the
trading status of our Class A voting shares. In addition, the rate reduction
will not apply to dividends if the recipient of a dividend is obligated to
make related payments with respect to positions in substantially similar or
related property. This disallowance applies even if the minimum holding period
has been met. U.S. Holders should consult their own tax advisors regarding the
application of these rules given their particular circumstances. The rules
governing the foreign tax credit are complex. Certain U.S. Holders of our
Class A voting shares may not be able to claim a foreign tax credit with
respect to amounts withheld for Canadian withholding taxes. U.S. Holders are
urged to consult their tax advisors regarding the availability of the foreign
tax credit under their particular circumstances.
Sale or Exchange of Class A Voting Shares
For U.S. federal income tax purposes, subject to the rules relating to PFICs
described below, a U.S. Holder generally will recognize taxable gain or loss
on any sale or exchange of our Class A voting shares in an amount equal to the
difference between the amount realized for our Class A voting shares and the
U.S. Holder's tax basis in such shares. This gain or loss will be capital gain
or loss and generally will be treated as U.S. source gain or loss. Long-term
capital gains recognized by certain U.S. Holders who are not corporations,
including individuals, generally will be subject to a maximum rate of U.S.
federal income tax of currently 23.8%, which includes the 3.8% Medicare surtax
imposed by Section 1411 of the Code. The deductibility of capital losses is
subject to limitations.
Passive Foreign Investment Company
We believe that our Class A voting shares should not be treated as stock of a
PFIC for U.S. federal income tax purposes, and we expect to continue our
operations in such a manner that we will not be a PFIC. In general, a company
is considered a PFIC for any taxable year if either (i) at least 75% of its
gross income is passive income or (ii) at least 50% of the value of its assets
is attributable to assets that produce or are held for the production of
passive income. The 50% of value test is based on the average of the value of
our assets for each quarter during the taxable year. If we own at least 25% by
value of another company's stock, we will be treated, for purposes of the PFIC
rules, as owning our proportionate share of the assets and receiving our
proportionate share of income of the other company. Based on the nature of our
income, assets and activities, and the manner in which we plan to operate our
business in future years, we do not expect that we will be classified as a
PFIC for any taxable year.
If, however, we are or become a PFIC, U.S. Holders could be subject to
additional U.S. federal income taxes on gain recognized with respect to our
Class A voting shares and on certain distributions, plus an interest charge on
certain taxes treated as having been deferred by the U.S. Holder under the
PFIC rules.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividends in
respect of our Class A voting shares or the proceeds received on the sale,
exchange, or redemption of our Class A voting shares paid within the United
States (and in certain cases, outside of the U.S.) to U.S. Holders other than
certain exempt recipients (such as corporations), and a 24% backup withholding
tax may apply to these amounts if the U.S. Holder fails to provide an accurate
taxpayer identification number, to report dividends required to be shown on
its U.S. federal income tax returns or, in certain circumstances, to comply
with applicable certification requirements. The amount of any backup
withholding from a payment to a U.S. Holder will be allowed as a refund or
credit against the U.S. Holder's U.S. federal income tax liability, provided
that the required information or appropriate claim for refund is furnished to
the Internal Revenue Service in a timely manner.
Certain Information Reporting Obligations
Certain U.S. Holders are required to report their ownership of specified
foreign financial assets, including stock or securities issued by non-U.S.
entities, subject to exceptions, by including a completed IRS Form 8938,
Statement of Specified Foreign Financial Assets, with their tax return for
each year in which they own such assets. U.S. Holders are urged to consult
their own tax advisors regarding information reporting requirements relating
to the ownership of Class A voting shares.
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MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND
DISPOSITION OF OUR CLASS A VOTING SHARES
The following discussion is a summary of the material Canadian federal income
tax considerations under the Income Tax Act (Canada) and the regulations
adopted thereunder (referred to in this Form 20-F as the "Canadian Tax Act")
of the ownership of our Class A voting shares, generally applicable to holders
of our Class A voting shares who, for purposes of the Canadian Tax Act and at
all relevant times, are not (and are not deemed to be) resident in Canada, are
the beneficial owners of our Class A voting shares, hold our Class A voting
shares as capital property, deal at arm's length and are not affiliated with
Birks Group, and who do not use or hold (and are not deemed to use or hold)
Class A voting shares in connection with carrying on business or part of a
business in Canada (referred to in this Form 20-F as "Non-resident Holders").
This discussion does not apply to Non-resident Holders that are insurers that
carry on an insurance business in Canada and elsewhere or an "authorized
foreign bank" (as defined under the Canadian Tax Act).
This summary is based upon the current provisions of the Canadian Tax Act, the
current provisions of the Canada-United States Income Tax Convention (1980),
as amended, if applicable (referred to in this Form 20-F as the "Convention"),
all specific proposals to amend the Canadian Tax Act publicly announced by the
Minister of Finance of Canada prior to the date hereof (referred to in this
Form 20-F as the "Tax Proposals") and the current published administrative and
assessing practices of the Canada Revenue Agency. This summary assumes that
the Tax Proposals will be enacted substantially as proposed and does not
otherwise take into account or anticipate any change in law or administrative
and assessing practices, whether by legislative, governmental or judicial
action, although no assurance can be given in these respects. This summary
does not take into account or consider any provincial, territorial or foreign
income tax legislation or considerations. For purposes of the Canadian Tax
Act, all amounts relevant in computing a Non-resident Holder's liability under
the Canadian Tax Act must be computed in Canadian dollars. Amounts denominated
in a currency other than Canadian dollars (including adjusted cost base and
proceeds of disposition) must be converted into Canadian dollars based on the
prevailing exchange rate at the relevant time.
This summary is of a general nature only and is not intended to be, nor should
it be construed to be, legal or tax advice to Non-resident Holders of our
Class A voting shares. Accordingly, Non-resident Holders of our Class A voting
shares should consult their own tax advisors with respect to their particular
circumstances.
DIVIDENDS
Dividends on Our Class A Voting Shares
Dividends paid or credited (or deemed to have been paid or credited) on our
Class A voting shares to a Non-resident Holder will be subject to Canadian
withholding tax of 25% of the gross amount of those dividends (subject to
reduction in accordance with an applicable income tax convention between
Canada and the Non-resident Holder's country of residence). In the case of a
Non-resident Holder who is a resident of the U.S. for purposes of the
Convention, is entitled to the benefits of the Convention (referred to in this
Form 20-F as a "U.S. Holder") and is the beneficial owner of the dividend, the
rate of withholding tax will generally be reduced to 15% or, if the
Non-resident Holder is a corporation that owns at least 10% of our voting
shares, to 5%. Non-resident Holders are advised to consult their tax advisors
for advice having regard to their particular circumstances.
Disposition of Our Class A Voting Shares
A Non-resident Holder will not be subject to tax under the Canadian Tax Act in
respect of any capital gain realized by that Non-resident Holder on a
disposition (or deemed disposition) of a Class A voting share, unless the
Class A voting share constitutes "taxable Canadian property" (as defined in
the Canadian Tax Act) of the Non-resident Holder at the time of disposition
and the Non-resident Holder is not entitled to relief under an applicable
income tax convention between Canada and the Non-resident Holder's country of
residence. If at the time of such disposition the Class A voting shares are
listed on a "designated stock exchange" (which includes the NYSE American),
the Class A voting shares will generally not constitute taxable Canadian
property of a Non-resident Holder unless (A) at any time during the 60-month
period that ends at the time the Class A voting shares are disposed of, both
(i) 25% or more of the issued shares of any class of the capital stock of the
Corporation were owned by or belonged to one or any combination of (a) the
Non-resident Holder, (b) persons with whom the Non-resident Holder did not
deal at arm's length, and (c) partnerships in which the Non-resident Holder or
a person referred to in (b) holds a membership interest, directly or
indirectly, through one or more partnerships, and (ii) more than 50% of the
fair market value of the Class A voting shares was derived, directly or
indirectly, from one or any combination of real or immovable property situated
in Canada, "Canadian resource properties", "timber resource properties" (as
such terms are defined under the Canadian Tax Act) or options in respect of,
interests in, or civil law rights in, any such properties (whether or not such
properties exist), or (B) the Class A voting shares are otherwise deemed to be
taxable Canadian property. Generally, to the extent that the Class A voting
share are no longer listed on a "designated stock exchange" at the time of
their disposition, the above- listed criteria (with the exception of (i)) will
apply to determine if the Class A voting shares are "taxable Canadian
property".
Non-resident Holders whose Class A voting shares are, or may be, taxable
Canadian property should consult their tax advisors for advice having regard
to their particular circumstances.
STATEMENTS BY EXPERTS
Not applicable.
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DOCUMENTS ON DISPLAY
We file reports, including Annual Reports on Form 20-F, and other information
with the SEC pursuant to the rules and regulations of the SEC that apply to
foreign private issuers. Filings we make electronically with the SEC are also
available to the public on the Internet at the SEC's website at
http://www.sec.gov
.
SUBSIDIARY INFORMATION
Not applicable.
ANNUAL REPORT TO SECURITY HOLDERS
Not applicable.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks. Market risk is the potential loss
arising from adverse changes in market prices and rates. We have not entered
into derivative or other financial instruments for trading or speculative
purposes.
Interest Rate Risk
We are exposed to market risk from fluctuations in interest rates. Borrowing
under the Amended Credit Facility and the Amended Term Loan bear interest at
floating rates, which are based on CDOR plus a fixed additional interest rate.
As of March 30, 2024, we have not hedged these interest rate risks. As of
March 30, 2024, we had approximately $75.7 million of floating-rate debt.
Accordingly, our net income will be affected by changes in interest rates.
Assuming a 100 basis point increase or decrease in the interest rate under our
floating rate debt, our interest expense on an annualized basis would have
increased or decreased, respectively, by approximately $0.8 million. On June
26, 2024, the Company entered into an amendment to the Amended Credit Facility
and an amendment to the Amended Term Loan to replace the interest rate of CDOR
with CORRA. Please refer to Note 19 Subsequent Events for further information
on the impact of this change for both facilities, respectively.
Currency Risk
The Company has changed its reporting currency in fiscal 2019 from U.S.
dollars to Canadian dollars for the period commencing April 1, 2018 in order
to better reflect the fact that subsequent to the Company's divestiture of its
former wholly-owned subsidiary, Mayor's Jewelers Inc. on October 23, 2017, its
business is primarily conducted in Canada, and a substantial portion of its
revenues, expenses, assets, and liabilities are denominated in $CAD. The
Company's functional currency remains $CAD.
To mitigate the impact of foreign exchange volatility on our earnings, from
time to time we may enter into agreements to fix the exchange rate of U.S.
dollars to Canadian dollars. For example, we may enter into agreements to fix
the exchange rate to protect the principal and interest payments on our U.S.
dollar denominated debt and other liabilities held in our Canadian operation.
If we do so, we will not benefit from any increase in the value of the
Canadian dollar compared to the U.S. dollar when these payments become due. As
of March 30, 2024, we had not hedged these foreign exchange rate risks. As of
March 30, 2024, we had approximately $37.8 million of net liabilities subject
to foreign exchange rate risk related to changes in the exchange rate between
the U.S. dollar and Canadian dollar, which would impact the level of our
earnings if there were fluctuations in U.S. and Canadian dollar exchange rate.
Assuming a 100 basis point strengthening or weakening of the Canadian dollar
in relationship to the U.S. dollar, as of March 30, 2024, our earnings would
have increased or decreased, respectively, by approximately $0.4 million. This
analysis does not consider the impact of fluctuations in U.S. and Canadian
dollar exchange rates on the translation of Canadian dollar results into U.S.
dollars. Changes in the exchange rates of Canadian dollars to U.S. dollars
could also impact our Canadian sales and gross margin if the Canadian dollar
strengthens significantly and impacts our Canadian consumers' behavior.
Commodity Risk
The nature of our operations results in exposure to fluctuations in commodity
prices, specifically diamonds, platinum, gold and silver. We do not currently
use derivatives to hedge these risks. Our retail sales and gross margin could
be materially impacted if prices of diamonds, platinum, gold or silver rise so
significantly that our consumers' behavior changes or if price increases
cannot be passed onto our customers.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
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PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our Chief Executive Officer and Chief Financial Officer to
allow timely decisions regarding required disclosure. Our management,
including our Chief Executive Officer and Chief Financial Officer, conducted
an evaluation of our disclosure controls and procedures, as defined under
Exchange Act Rule 13a-15(e), as of the end of the period covered by this
Annual Report on Form 20-F. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of March 30, 2024,
our disclosure controls and procedures, as defined under Exchange Act Rule
13a-15(e), were effective.
Management's Annual Report on Internal Control over Financial Reporting
Our management, including our Chief Executive Officer and Chief Financial
Officer, is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined under Exchange Act Rules
13a-15(f) and 15d-15(f). Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
U.S. Internal control over financial reporting includes those policies and
procedures that: (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of our
assets; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorizations of our
management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements on a timely basis. Therefore, even
those systems determined to be effective can provide only reasonable assurance
with respect to consolidated financial statements preparation and
presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Our Chief Executive Officer and Chief Financial Officer assessed the
effectiveness of our internal control over financial reporting as of the end
of the period covered by this Annual Report based on the criteria established
in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Management's assessment
included an evaluation of the design of our internal control over financial
reporting and testing of the operational effectiveness of our internal control
over financial reporting. Based on that assessment, our Chief Executive
Officer and Chief Financial Officer concluded that as of March 30, 2024, our
internal control over financial reporting was effective.
This Annual Report does not include an attestation report of our independent
registered public accounting firm regarding internal controls over financial
reporting. As a non-accelerated filer, our report was not subject to
attestation by our independent registered public accounting firm pursuant to
rules of the SEC that permit us to provide only our report on internal
controls over financial reporting in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that
occurred during the period covered by this Annual Report that materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Item 16A. Audit Committee Financial Expert
The Board of Directors determined that Emilio B. Imbriglio, an independent
director meets the requirements to be designated an "audit committee financial
expert" as such term is defined by the SEC. See "Item 6. Directors, Senior
Management and Employees-Board Practices."
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Item 16B. Code of Ethics
We have adopted a code of ethics, within the meaning of this Item 16B of Form
20-F under the Exchange Act. Our code of ethics applies to our Chief Executive
Officer, Chief Financial Officer, Senior Director of Finance, and Controller.
Our code of ethics is available on our website at
www.birks.com.
If we amend the provisions of our code of ethics that apply to our Chief
Executive Officer, Chief Financial Officer and persons performing similar
functions, or if we grant any waiver of such provisions, we will disclose such
amendment or waiver on our website at the same address within five business
days following the date of such amendment or waiver. We also have a similar
code of ethics that applies to our financial directors. The Company has also
adopted a Code of Conduct that applies to all employees of the Company.
Item 16C. Principal Accountant Fees and Services
During fiscal 2024 and fiscal 2023, we retained KPMG LLP, our independent
registered public accountant, to provide services in the following categories
and amounts:
Audit Fees
The aggregate fees for professional services rendered by KPMG LLP for the
audit and interim review of our consolidated financial statements and
auditor's involvement in a registration statement was $760,350 in fiscal 2024
and $696,006 in fiscal 2023.
Audit Related Fees
During fiscal 2024 and fiscal 2023, KPMG LLP provided audit related services
for a total amount of nil and nil, respectively.
Tax Fees
During fiscal 2024 and fiscal 2023, KPMG LLP provided tax advisory services
for a total amount of $22,753 and $35,373, respectively.
All Other Fees
During fiscal 2024 and fiscal 2023, KPMG LLP provided other services for a
total amount of $23,005 and $41,730, respectively, related to assurance
reports.
Pre-Approval Policies and Procedures
The audit and corporate governance committee has established a pre-approval
policy as described in Rule 2-01(c)(7)(i) of Regulation S-X. The audit and
corporate governance committee approves in writing, in advance, any audit or
non-audit services provided to Birks Group by the independent accountants that
are not specifically disallowed by the Sarbanes-Oxley Act of 2002. None of the
services described in Item 16C were approved by the audit and corporate
governance committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not, nor did any affiliated purchaser, purchase any of our equity
securities during fiscal 2024.
Item 16F. Change in Registrant's Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
Our securities are listed on the NYSE American. There are no significant ways
in which our corporate governance practices differ from those followed by
domestic companies under the listing standards of that exchange except for
proxy delivery requirements. The NYSE American requires the solicitation of
proxies and delivery of proxy statements for all shareholder meetings and
requires that these proxies be solicited pursuant to a proxy statement that
conforms to the proxy rules of the U.S. Securities and Exchange Commission. As
a foreign private issuer, the Company is exempt from the proxy rules set forth
in Sections 14(a), 14(b), 14(c) and 14(f) of the Act. The Company solicits
proxies in accordance with applicable rules and regulations in Canada.
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Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J. Insider Trading Policies
We have
adopted
an
insider trading policy, which governs the purchase, sale and other
dispositions of our securities by our directors, officers and other employees.
This policy promotes compliance with applicable securities laws and
regulations, including those that prohibit insider trading. A copy of our
Insider Trading Policy is filed as an exhibit to this annual report on Form
20-F.
Item 16K. Cybersecurity Risk Management Strategy
The safety and security of our customers' and employees' personal information
is of utmost importance to us. This includes working to put in place
appropriate administrative, physical and technical cybersecurity safeguards to
help protect the confidentiality, integrity, and availability of the data
assets that keep our operation running and securely store the information in
our care. We have developed and implemented a cybersecurity risk management
program intended to protect the Company and its customers from data loss,
unauthorized access, use or disclosure of data as well as to prevent service
interruptions.
Our cybersecurity team assesses, identifies and manages risks related to
cybersecurity threats and is responsible for:
. proactive detection and assessment of threats and vulnerabilities through
vulnerability testing, penetration testing and attack simulation;
. development of risk-based action plans to manage identified vulnerabilities
and implementation of new protocols and infrastructure improvements;
. cybersecurity incident investigations, with the assistance of third-party experts as required;
. monitoring threats to sensitive data and unauthorized access to Company systems, with assistance
of third-party data loss prevention software and a third-party security operations center;
. developing and executing protocols to ensure that information regarding cybersecurity
incidents is promptly shared with our executive officers, audit and corporate
governance committee and Board of Directors, as appropriate, to allow for risk
and materiality assessments and to consider disclosure and notice requirements;
. developing and implementing periodic training on cybersecurity, information security and threat awareness; and
. collaborating with law enforcement and other companies on cybersecurity incidents and best practices.
There were no cybersecurity incidents during the fiscal year 2024 that
resulted in an interruption to our operations, known losses of any critical
data or otherwise had a material impact on the Company's strategy, financial
condition or results of operations. However, the scope and impact of any
future incident cannot be predicted. See "Item 3D-Risk Factors" for more
information on how material cybersecurity attacks may impact our business.
Governance
Our cybersecurity risk management program is overseen by our Chief Financial
Officer ("CFO") and Chief Privacy Officer ("CPO"). The CFO assists the Board
of Directors and our executive officers in fulfilling their responsibilities
for cybersecurity governance, approval and oversight through the periodic
reporting and review of security strategy and risk management practices. Our
current CFO has over 15 years of experience in information security, and her
background includes technical experience, strategy and architecture focused
roles, cyber and threat experience, and various leadership roles. Our current
CPO has over 20 years of experience in information security, and his
background includes technical experience, strategy and architecture focused
roles, cyber and threat experience, and various leadership roles. Our
cybersecurity risk management program is integrated into our overall risk
management processes and shares common reporting channels and governance
processes that apply across the enterprise to other legal, compliance,
strategic, operational, and financial risk governance programs.
Our Board of Directors recognizes the importance of robust cybersecurity
management programs and is actively engaged in overseeing and reviewing the
Company's cybersecurity risk profile and exposures. Our Board of Directors has
delegated the oversight of our process for assessing, identifying and managing
material risks related to cybersecurity threats to the audit and corporate
governance committee.
The responsibilities of the audit and corporate governance committee include
reviewing the cybersecurity threat landscape facing the Company, as well as
our strategy, policies and procedures to mitigate cybersecurity risks and any
significant cybersecurity incidents. The audit and corporate governance
committee also considers the impact of emerging cybersecurity developments and
regulations that may affect the Company.
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The audit and corporate governance committee meet periodically with relevant
members of management who provide reports on cybersecurity matters including,
among others: recent external cybersecurity threats and attack trends; updates
to threat monitoring processes; cybersecurity awareness training and stress
testing; cybersecurity plan; and cybersecurity programs. The audit and
corporate governance committee has also directed management to inform the
committee promptly and, when appropriate, the Board of Directors, of any
investigation of a material cybersecurity incident. Where an update has not
been provided directly to the Board of Directors, the audit and corporate
governance committee provides the full Board of Directors with updates on
cybersecurity risks and incidents and other matters as needed, and reports to
the Board of Directors on an ad hoc basis with respect to material incidents
and other developments that the audit and corporate governance committee
believes should have the Board of Directors' consideration. The audit and
corporate governance committee and the Board of Directors may engage third
party advisors and experts and meet with the Company's external advisors on
cybersecurity matters, as appropriate.
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
The financial statements required by this item are found at the end of this
Annual Report beginning on page F-1.
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PART III
Item 19. Exhibits
The following exhibits are part of this Annual Report on Form 20-F.
68
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Exhibit Description of Document
Number
1.1 Restated Articles of Incorporation of Birks Group Inc., effective as of November
14, 2005. Incorporated by reference from the Henry Birks & Sons Inc. Registration
Statement on Form F-4 originally filed with the SEC on July 27, 2005 and as
subsequently amended on September 8, 2005, September 21, 2005 and September 29, 2005.
1.2 Articles of Amendment of Birks Group
Inc., effective as of October
1, 2013. Incorporated by reference
from the Birks Group Inc.'s
Form 20-F
filed with the SEC on July 25, 2014.
1.3 Articles of Amendment of Birks
Group Inc. effective as of October
3, 2014. Incorporated by
referenced from Birks Group Inc.'s
Form 20-F
filed with the SEC on June 26, 2015.
1.4 By-law No. One of Birks Group Inc. adopted on
December 28, 1998 and amended on April 9, 2012.
Incorporated by reference from the Birks Group
Inc.'s Form 20-F filed with the SEC on July 3, 2012.
2.1 Form of Birks Class A voting share certificate
as amended as of October 1, 2013. Incorporated
by reference from the Birks Group Inc.'s Form
20-F filed with the SEC on July 25, 2014.
2.2 Description of Capital Stock.
Incorporated by reference from the Birks
Group Inc. Annual report on Form 20-F
filed with the SEC on July 8, 2020.
4.1 Agreement and Plan of Merger and Reorganization, dated as of April 18, 2005, as amended as of July 27, 2005, among Henry
Birks & Sons Inc., Mayor's, Inc. and Birks Merger Corporation, a wholly-owned subsidiary of Henry Birks & Sons Inc.
Incorporated by reference from the Henry Birks & Sons Inc. Registration Statement on Form F-4 originally filed with
the SEC on July 27, 2005 and as subsequently amended on September 8, 2005, September 21, 2005 and September 29, 2005.
4.2 Form of Directors and Officers Indemnity
Agreement. Incorporated by reference
from the Birks Group Inc.'s Form 20-F
filed with the SEC on June 23, 2023.
4.3 Agreement of Principal Lease between 7739907 Canada
Inc. and Birks Group Inc. executed on March 17, 2017.
Incorporated by reference from the Birks Group
Inc.`s Form 6-K filed with the SEC on May 12, 2017.
4.4 Employment Agreement between Miranda Melfi and
Birks Group dated February 24, 2006. Incorporated
by reference from the Birks Group Inc.'s Form
20-F filed with the SEC on July 19, 2006.
4.5 Management Consulting Services Agreement between Birks
Group Inc. and Gestofi S.A. entered into as of November
20, 2015. Incorporated by reference from the Birks Group
Inc.'s Form 20-F filed with the SEC on June 30, 2016.
4.6 Birks Group Inc. Long-Term Incentive
Plan. Incorporated by reference from
the Birks Group Inc.'s Form 20-F
filed with the SEC on July 19, 2006.
4.7 Birks Group Inc. Omnibus Long-Term Incentive Plan
as amended on January 11, 2022. Incorporated by
reference from the Birks Group Inc. Annual report
on Form 20-F filed with the SEC on June 24, 2022
4.8 Form of Stock Appreciation Rights Agreement.
Incorporated by reference from the
Birks Group Inc. Annual Report on Form
20-F filed with the SEC on June 18, 2007.
4.9 Loan Agreement between Birks Group Inc. and Investissement
Quebec entered into on July 8, 2020. Incorporated
by reference from the Birks Group Inc. Annual Report
on Form 20-F filed with the SEC on July 8, 2020.
4.10 Amendment dated February 18, 2021, to the Loan Agreement between
Birks Group Inc. and Investissement Quebec entered into on July
8, 2020. Incorporated by reference from the Birks Group Inc.
Annual Report on Form 20-F filed with the SEC on June 17, 2021.
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4.11 Amended and Restated Cash Advance Agreement between Birks
Group Inc. and Montrovest B.V., dated June 8, 2011.
Incorporated by reference from the Birks Group Inc. Annual
Report on Form 20-F filed with the SEC on July 8, 2011.
4.12+ Employment Agreement between Birks Group Inc. and
Jean-Christophe Bedos, dated January 4, 2012.
Incorporated by reference from the Birks Group Inc.'s
Form 20-F filed with the SEC on June 23, 2023.
4.13+ Amendment Letter to Employment Agreement between Birks
Group Inc. and Jean-Christophe Bedos dated April 18,
2013. Incorporated by reference from the Birks Group
Inc.'s Form 20-F filed with the SEC on June 23, 2023.
4.14+ Amendment Letter to Employment Agreement between Birks
Group Inc. and Jean-Christophe Bedos effective October
1, 2015. Incorporated by reference from the Birks Group
Inc.'s Form 20-F filed with the SEC on June 23, 2023.
4.15 Canadian Offering Memorandum, dated as of April
27, 2012. Incorporated by reference from the
Birks Group Inc. Registration Statement on
Form F-1 filed with the SEC on April 27, 2012.
4.16 Form of Subscription Rights Certificate.
Incorporated by reference from the Birks
Group Inc. Registration Statement on Form
F-1 filed with the SEC on May 24, 2012.
4.17 Consulting Services Agreement between Carlo Coda
Nunziante and Birks Group Inc., dated March 31, 2018.
Incorporated by reference from the Birks Group Inc. Annual
report on Form 20-F filed with the SEC on July 3, 2018.
4.18 Credit Agreement by and among Crystal Financial LLC, as Agent, the lenders
that are parties thereto as the Lenders, and Birks Group Inc. dated
as of June 29, 2018. Incorporated by reference from the Birks Group
Inc. Annual report on Form 20-F filed with the SEC on July 3, 2018.
4.19 Amendment No.1 to the Credit Agreement by and among by and among the lenders
thereto as lenders, Crystal Financial LLC, as agent, and Birks Group
Inc. dated as of April 18, 2019. Incorporated by reference from the Birks
Group Inc. Annual report on Form 20-F filed with the SEC on July 8, 2020.
4.20 Amendment No.2 to the Credit Agreement by and among by and among the lenders
thereto as lenders, Crystal Financial LLC, as agent, and Birks Group
Inc. dated as of July 3, 2020. Incorporated by reference from the Birks
Group Inc. Annual Report on Form 20-F filed with the SEC on June 17, 2021.
4.21 Amendment No.3 to the Credit Agreement by and among the lenders thereto as
lenders, Crystal Financial LLC, as administrative agent and Birks Group
Inc. dated as of August 31, 2021. Incorporated by reference from the Birks
Group Inc. Annual Report on Form 20-F filed with the SEC on June 24, 2022.
4.22 Amendment No.4 to the Credit Agreement by and among the lenders thereto as
lenders, Crystal Financial LLC, as administrative agent and Birks Group Inc.
dated as of December 15, 2021. Incorporated by reference from the Birks
Group Inc. Annual Report on Form 20-F filed with the SEC on June 24, 2022.
4.23 Amendment No.5 to the Credit Agreement by and among the lenders thereto as
lenders, Crystal Financial LLC, as administrative agent and Birks Group Inc.
dated as of December 24, 2021. Incorporated by reference from the Birks
Group Inc. Annual Report on Form 20-F filed with the SEC on June 24, 2022.
4.23* Amendment No.6 to the Credit Agreement by and
among the lenders thereto as lenders, Crystal
Financial LLC, as administrative agent and
Birks Group Inc. dated as of June 26, 2024.
4.24 Employment Agreement dated June 29, 2018 entered
into between Birks Group Inc. and Maryame El Bouwab.
Incorporated by reference from the Birks Group
Inc. Form 6-K filed with the SEC on July 13, 2018.
4.25 Employment Agreement dated December 18, 2019 entered into
between Birks Group Inc. and Katia Fontana. Incorporated
by reference from the Birks Group Inc. Annual report
on Form 20-F filed with the SEC on July 8, 2020.
4.26 Loan Agreement between Birks Group Inc. and
Investissement Quebec entered into on August 24, 2021.
Incorporated by reference from the Birks Group Inc.
Form 6-K filed with the SEC on November 18, 2021.
4.27 Amended and Restated 2021 Credit Agreement by and among Wells Fargo Capital Finance Corporation
Canada, as Administrative Agent, the Lenders that are parties thereto as the Lenders,
and Birks Group Inc., as Borrower, dated as of December 24, 2021. Incorporated by reference
from the Birks Group Inc. Annual Report on Form 20-F filed with the SEC on June 24, 2022.
4.28* First Amendment to Amended and Restated Credit Agreement by and among Birks Group
Inc., as Borrower, Cash, Gold & Silver Inc. and Birks Investments Inc. as Guarantors,
Wells Fargo Capital Finance Corporation Canada, as Administrative Agent, and the
Lenders that are parties thereto as the Lenders, dated as of June 26, 2024.
4.29* Master Lease Agreement between
Varilease Finance, Inc. and Birks
Group Inc. made as of July 14,
2023 ("Master Lease Agreement").
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4.30* Schedule No. 01 to the Master Lease Agreement entered into between
Varilease Finance, Inc. and Birks Group Inc. dated July 14, 2023.
4.31* Schedule No. 02 to the Master Lease Agreement entered into between
Varilease Finance, Inc. and Birks Group Inc. dated February 1, 2024.
4.32* Schedule No. 03 to the Master Lease Agreement entered into between
Varilease Finance, Inc. and Birks Group Inc. dated February 1, 2024.
4.33* Schedule No. 04 to the Master Lease Agreement entered into between
Varilease Finance, Inc. and Birks Group Inc. dated June 3, 2024.
4.34* Letter of support agreement between Mangrove Holdings
S.A. and Birks Group Inc. dated July 15, 2024.
8.1* Subsidiaries of Birks Group Inc.
11.1*++ Birks Group Inc. Policy, Procedures and Guidelines
Governing Insider Trading and Disclosure.
12.1* Certification of President and Chief Executive Officer
pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).
12.2* Certification of Chief Financial Officer pursuant
to Exchange Act Rules 13a-14(a) and 15d-14(a).
13.1* Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1* Consent of KPMG LLP.
97.1* Birks Group Inc. Policy Regarding the
Mandatory Recovery of Compensation.
101.INS* Inline XBRL Instance Document*
101.SCH* Inline XBRL Taxonomy
Extension Schema Document*
101.CAL* Inline XBRL Taxonomy Extension
Calculation Linkbase Document*
101.DEF* Inline XBRL Taxonomy Extension
Definition Linkbase Document*
101.LAB* Inline XBRL Taxonomy Extension
Label Linkbase Document*
101.PRE* Inline XBRL Taxonomy Extension
Presentation Linkbase Document*
104.1* The cover page for the Company's Annual Report on Form 20-F for the year ended
March 30, 2024, has been formatted in Inline XBRL and is contained in Exhibit 101.
* Filed herewith.
+ Certain identified information has been excluded from this exhibit because the Company does not believe it is material and
is the type that the Company customarily treats as private and confidential. Redacted information is indicated by [***].
++ Schedules and other similar attachments to this exhibit have been omitted pursuant to the Instructions As To Exhibits
of Form 20-F. The Registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this Annual Report on its behalf.
BIRKS GROUP INC.
Date: July 16, 2024 /s/ Katia Fontana
Katia Fontana,
Vice President and Chief Financial Officer
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2026-12-31
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http://fasb.org/us-gaap/2023#FinanceLeaseLiability
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered F-2
Public Accounting Firm
Consolidated Balance Sheets as of F-4
March 30, 2024 and March 25, 2023
Consolidated Statements of Operations for the Fiscal Years F-5
Ended March 30, 2024, March 25, 2023, and March 26, 2022
Consolidated Statements of Other Comprehensive Income (loss) for the F-6
Fiscal Years Ended March 30, 2024, March 25, 2023, and March 26, 2022
Consolidated Statements of Changes in Stockholders' Equity (deficiency) for F-7
the Fiscal Years Ended March 30, 2024, March 25, 2023, and March 26, 2022
Consolidated Statements of Cash Flows for the Fiscal Years F-8
Ended March 30, 2024, March 25, 2023, and March 26, 2022
Notes to Consolidated F-9
Financial Statements
F-1
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Birks Group Inc.:
Opinion on the
Consolidated
Financial Statements
We have audited the accompanying consolidated balance sheets of Birks Group
Inc. (the "Company") as of March 30, 2024 and March 25, 2023, the related
consolidated statements of operations, other comprehensive income (loss),
changes in stockholders' equity (deficiency), and cash flows for each of the
years ended March 30, 2024, March 25, 2023 and March 26, 2022, and the related
notes (collectively, the consolidated financial statements). In our opinion,
the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of March 30, 2024 and March
25, 2023, and the results of its operations and its cash flows for each of the
years ended March 30, 2024, March 25, 2023 and March 26, 2022, in conformity
with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the
current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that:
(1) relate to accounts or disclosures that are material to the consolidated
financial statements; and (2) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.
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Assessment of the Company's ability to continue as a going concern
As discussed in Note 1 to the consolidated financial statements, the Company
prepares its consolidated financial statements on a going concern basis. The
Company believes that it will be able to adequately fund its operations and
meet its cash flow requirements for at least twelve months from the date of
issuance of these financial statements. The Company funds its operations
primarily through committed financing under its senior secured credit facility
and its senior secured term loan. The Company's ability to meet its cash flow
requirements in order to fund its operations is dependent upon its ability to
attain profitable operations, adhere to the terms of its committed financings,
obtain favorable payment terms from suppliers, as well as to maintain
specified excess availability levels under its senior secured credit facility
and its senior secured term loan. In addition to the covenant to adhere to a
daily minimum excess availability of $8.5 million under both its senior
secured credit facility and its senior secured term loan, other loans have a
covenant to adhere to a working capital ratio of 1.01 at the end of each year.
The working capital ratio of 1.01 may be lower in any given year if a
tolerance letter accepting a lower working capital ratio is received.
Management estimated and forecasted cash flows and excess availability levels
under various scenarios for at least the next twelve months from the date the
financial statements were authorized for issuance.
We identified the assessment of the Company's ability to continue as a going
concern and related disclosures as a critical audit matter. There was
uncertainty associated with the future outcome of events and circumstances
underlying significant assumptions. In addition, there was significant auditor
judgment involved in assessing management's cash flow forecast under various
scenarios, specifically forecasted sales and gross margins, operating costs,
favorable payment terms from suppliers, excess availability levels and working
capital ratio.
The following are the primary procedures we performed to address this critical
audit matter. We evaluated the design of the internal control related to
management's going concern assessment. We assessed management's ability to
forecast by comparing prior year forecasts to actual results and excess
availability achieved. We assessed management's estimated forecasted sales,
gross margins and operating costs used in management's forecasted cash flows,
excess availability levels and working capital ratio and adherence to the
terms of its committed financings under various scenarios. We assessed waivers
received by management for the breach of the working capital ratio. We
assessed the tolerance letter received by management related to the working
capital ratio for the upcoming year end. We assessed the shareholder support
letter received by management. We evaluated the assumptions in the forecasted
cash flows and the various scenarios, related to cost reductions and obtaining
favorable payment terms from suppliers by understanding the nature of
management's plans and whether they were probable. We examined the results of
operations and excess availability levels after year-end, up to the date of
our auditor's report, and compared them to management's forecasted excess
availability levels. We assessed the adequacy of the disclosures related to
the application of the going concern assessment.
Evaluation of the reserve for slow-moving finished goods inventories
As discussed in Note 4 to the consolidated financial statements, the
inventories reserve balance as of March 30, 2024 is $2,196 thousands, which
includes the reserve for slow-moving finished goods inventories. As discussed
in Note 2(e), inventories are stated at the lower of average cost and net
realizable value, which is the estimated selling price in the ordinary course
of business. The reserve for slow-moving finished goods inventories is equal
to the difference between the cost of inventories and the estimated selling
prices, resulting in the expected gross margin There is estimation uncertainty
in relation to the identification of slow-moving finished goods inventories
which are based on certain criteria established by the Company's management.
The criteria includes consideration of operational decisions by Management to
discontinue ordering the inventory based on sales trends, market conditions,
and the aging of the inventories. Estimation uncertainty also exists in
determining the expected selling prices and associated gross margins through
normal sales channels, which are based on assumptions about future demand and
market conditions for those slow-moving inventories
We identified the evaluation of the reserve for slow-moving finished goods
inventories as a critical audit matter. A higher degree of auditor judgement
and increased audit effort was required to evaluate the identification of the
slow-moving finished goods inventories based on the Company's established
criteria, and the expected selling prices for those slow-moving finished goods
inventories.
The following are the primary procedures we performed to address this critical
audit matter. We evaluated the design and tested the operating effectiveness
of certain internal controls related to the slow-moving inventory reserve,
including the control related to the identification of the slow-moving
finished goods inventories based on the Company's established criteria and the
estimated reserve percentage. We evaluated the criteria used by the Company to
identify slow-moving finished goods inventories by considering the aging of
finished goods inventories on-hand, historic inventory turnover, historic
sales trends and historic gross margin analysis. We evaluated the Company's
criteria and assumptions used in the reserve for slow-moving finished goods
inventories by analyzing the reserve trends, movements of the specific
inventory status year-over-year and business plans, and the impact of changes
on the reserve. We compared the estimated selling price and the associated
gross margins utilized in the prior year to the actual gross margins in the
current year to evaluate the Company's ability to accurately estimate the
reserve. We developed an expectation of the slow-moving reserve using historic
inventory activity and gross margin rates and compared our expectation to the
amount recorded by the Company. We assessed the sufficiency of the reserves at
year-end by analyzing sales and gross margins subsequent to year-end.
We have served as the Company's auditor since 2000.
Montreal, Canada
July 16, 2024
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BIRKS GROUP INC.
Consolidated Balance Sheets
As of
March 30, 2024 March 25, 2023
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 1,783 $ 1,262
Accounts receivable and other receivables 8,455 11,377
Inventories 99,067 88,357
Prepaids and other current assets 2,913 2,694
Total current assets 112,218 103,690
Long-term receivables 1,571 2,000
Equity investment in joint venture 4,122 1,957
Property and equipment 25,717 26,837
Operating lease 51,753 55,498
right-of-use
asset
Intangible assets and other assets 7,887 6,999
Total 91,050 93,291
non-current
assets
Total assets $ 203,268 $ 196,981
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
Bank indebtedness $ 63,372 $ 57,890
Accounts payable 43,011 37,645
Accrued liabilities 6,112 7,631
Current portion of long-term debt 4,352 2,133
Current portion of operating lease liabilities 6,430 6,758
Total current liabilities 123,277 112,057
Long-term debt 22,587 22,180
Long-term portion of operating lease liabilities 59,881 62,989
Other long-term liabilities 2,672 358
Total long-term liabilities 85,140 85,527
Stockholders' equity (deficiency):
Class A common stock - 40,725 39,019
no
par value, unlimited shares authorized, issued and outstanding
11,447,999
(
11,112,999
as of March 25, 2023)
Class B common stock - 57,755 57,755
no
par value, unlimited shares authorized, issued and outstanding
7,717,970
Preferred stock - - -
no
par value,
unlimited
shares authorized,
no
ne issued
Additional 21,825 23,504
paid-in
capital
Accumulated deficit ( ) ( )
125,476 120,845
Accumulated other comprehensive income (loss) 22 ( )
36
Total stockholders' equity (deficiency) ( ) ( )
5,149 603
Total liabilities and stockholders' equity (deficiency) $ 203,268 $ 196,981
See accompanying notes to consolidated financial statements
On behalf of the Board of Directors:
/s/ Jean-Christophe Bedos /s/ Emilio B. Imbriglio
Jean-Christophe Bedos, Director Emilio B. Imbriglio
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BIRKS GROUP INC.
Consolidated Statements of Operations
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
Net sales $ 185,275 $ 162,950 $ 181,342
Cost of sales 111,720 94,990 105,122
Gross profit 73,555 67,960 76,220
Selling, general and administrative expenses 65,705 66,095 65,942
Depreciation and amortization 6,639 5,673 5,809
Total operating expenses 72,344 71,768 71,751
Operating income (loss) 1,211 ( ) 4,469
3,808
Interest and other financial costs 8,007 5,581 3,182
(Loss) income before taxes and equity in earnings of joint venture ( ) ( ) 1,287
6,796 9,389
Income taxes (benefits) - - -
Equity in earnings of joint venture, net of taxes of $ 2,165 1,957 -
0.8
million
($
0.7
million in fiscal 2023)
Net (loss) income, net of tax $ ( ) $ ( ) $ 1,287
4,631 7,432
Weighted average common shares outstanding:
Basic 19,058 18,692 18,346
Diluted 19,058 18,692 18,794
Net (loss) income per common share:
Basic $ ( ) $ ( ) $ 0.07
0.24 0.40
Diluted ( ) ( ) 0.07
0.24 0.40
See accompanying notes to consolidated financial statements
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BIRKS GROUP INC.
Consolidated Statements of Other Comprehensive Income (loss)
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
(In thousands)
Net (loss) income $ ( ) $ ( ) $ 1,287
4,631 7,432
Other comprehensive (loss) income:
Foreign currency translation adjustments 58 ( ) 67
(1) 6
Total other comprehensive (loss) income $ ( ) $ ( ) $ 1,354
4,573 7,438
(1) Item that may be reclassified to the Statement of Operations in future periods
See accompanying notes to consolidated financial statements.
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BIRKS GROUP INC.
Consolidated Statements of Changes in Stockholders' Equity (deficiency)
(In thousands of dollars except shares amounts)
Voting Voting Additional Accumulated Accumulated Total
common common paid-in deficit other
stock stock capital comprehensive
outstanding loss
Balance 18,328,943 $ 95,116 $ 18,259 $ ( ) $ ( ) $ ( )
at 114,700 97 1,422
March 27,
2021
Net - - - 1,287 - 1,287
income
Cumulative - - - - 67 67
translation
adjustment
(1)
Total - - - - - 1,354
comprehensive
income
Modification of - - 5,495 - - 5,495
certain awards from
cash settled to
equity settled
Compensation expense resulting - 263 - - 263
from equity settled
deferred stock units
granted to Management
Exercise 186,970 522 ( ) - - 174
of stock 348
options and
warrants
Balance 18,515,913 95,638 23,669 ( ) ( ) 5,864
at 113,413 30
March
26,
2022
Net - - - ( ) - ( )
loss 7,432 7,432
Cumulative - - - - ( ) ( )
translation 6 6
adjustment
(1)
Total - - - - - ( )
comprehensive 7,438
loss
Compensation expense resulting - - 549 - - 549
from equity settled
restricted stock units
granted to Management
Exercise 315,056 1,136 ( ) - - 422
of stock 714
options and
warrants
Balance 18,830,969 96,774 23,504 ( ) ( ) ( )
at 120,845 36 603
March
25,
2023
Net - - - ( ) - ( )
loss 4,631 4,631
Cumulative - - - - 58 58
translation
adjustment
(1)
Total - - - - - ( )
comprehensive 4,573
loss
Compensation expense resulting - - 27 - - 27
from equity settled
restricted stock units
granted to Management
Settlement 335,000 1,706 ( ) - - -
of 1,706
stock
units
Balance 19,165,969 $ 98,480 $ 21,825 $ ( ) $ 22 $ ( )
at 125,476 5,149
March
3
0
,
2024
(1) The change in cumulative translation adjustments is not due to
reclassifications out of accumulated other comprehensive income (loss).
See accompanying notes to consolidated financial statements.
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BIRKS GROUP INC.
Consolidated Statements of Cash Flows
Fiscal Year Ended
March 30, March 25, March 26,
2024 2023 2022
In thousands
Cash flows from (used in)
operating activities:
Net income $ ( ) $ ( ) $ 1,287
(loss) 4,631 7,432
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and 6,639 5,673 5,809
amortization
Net change of operating lease ( ) ( ) ( )
right-of-use assets and liabilities 1,372 1,544 702
Leasehold inducements 825 661 ( )
received 464
Early lease 31 - -
termination
Amortization 214 190 250
of debt costs
Compensation expenses resulting from 27 549 88
equity settled restricted stock units
Equity in earnings ( ) ( ) -
of joint venture 2,165 1,957
Other operating 26 232 359
activities, net
(Increase) decrease in:
Accounts receivable, other receivables 4,176 ( ) 820
and long-term receivables 260
Inventories ( ) ( ) 18,882
10,710 9,450
Prepaids and other ( ) ( ) 222
current assets 219 872
Increase (decrease) in:
Accounts 5,521 9,044 ( )
payable 9,663
Accrued liabilities and 1,468 ( ) 1,760
other long-term liabilities 1,759
Net cash (used in) provided ( ) ( ) 18,648
by operating activities 170 6,925
Cash flows (used in) provided
by investing activities:
Additions to property ( ) ( ) ( )
and equipment 6,282 8,378 4,612
Additions to intangible ( ) ( ) ( )
assets and other assets 953 1,036 1,199
Net cash used in ( ) ( ) ( )
investing activities 7,235 9,414 5,811
Cash flows provided by (used
in) financing activities:
Increase (decrease) 5,372 14,642 ( )
in bank indebtedness 10,017
Drawdown on capital 4,208 - -
lease funding
Increase in 1,552 2,748 428
long-term debt
Repayment of ( ) ( ) ( )
long-term debt 2,012 2,095 2,800
Repayment of obligations ( ) ( ) -
under finance lease 1,091 72
Payment of loan origination ( ) ( ) ( )
fees and costs 103 57 590
Exercise of stock - 422 348
options and warrants
Net cash provided by (used 7,926 15,588 ( )
in) financing activities 12,631
Net (decrease) increase in 521 ( ) 206
cash and cash equivalents 751
Cash and cash equivalents, 1,262 2,013 1,807
beginning of year
Cash and cash $ 1,783 $ 1,262 $ 2,013
equivalents, end of year
Supplemental disclosure
of cash flow information:
Interest $ 7,802 $ 5,087 $ 3,470
paid
Non-cash transactions:
Property and equipment and intangible assets additions $ 1,455 $ 2,283 $ 950
included in accounts payable and accrued liabilities
Conversion of cash-settled RSUs $ - $ - $ 5,495
and DSUs to equity-settled awards
See accompanying notes to consolidated financial statements.
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BIRKS GROUP INC.
Notes to Consolidated Financial Statements
Years ended March 30, 2024, March 25, 2023 and March 26, 2022
Birks Group Inc. ("Birks Group" or "Birks" or "the Company") is incorporated
under the Canada Business Corporations Act. The principal business activities
of the Company and its subsidiaries are the design of fine jewelry and the
operation of retail sale of luxury jewelry, timepieces and gifts. The
Company's consolidated financial statements are prepared using a fiscal year
which consists of 52 or 53 weeks and ends on the last Saturday in March of
each year. The fiscal year ended March 30, 2024 consists of fifty-three week
periods whereas March 25, 2023 and March 26, 2022 each consist of fifty-two
week periods.
1. Basis of presentation:
Throughout these consolidated financial statements, the Company refers to the
fiscal year ending March 30, 2024, as fiscal 2024, and the fiscal years ended
March 25, 2023, and March 26, 2022, as fiscal 2023 and 2022, respectively. Our
fiscal year ends on the last Saturday in March of each year.
These consolidated financial statements, which include the accounts of Birks
Group for all periods presented for the fiscal years ended March 30, 2024,
March 25, 2023, and March 26, 2022, are reported in accordance with accounting
principles generally accepted in the U.S. These principles require management
to make certain estimates and assumptions that affect amounts reported and
disclosed in the financial statements and related notes.
The most significant estimates and judgments include the assessment of the
going concern assumption, the valuation of inventories and, accounts
receivable, deferred tax assets, and the recoverability of long-lived assets
and right of use assets. Actual results could differ from these estimates.
Periodically, the Company reviews all significant estimates and assumptions
affecting the financial statements relative to current conditions and records
the effect of any necessary adjustments. All significant intercompany accounts
and transactions have been eliminated upon consolidation.
The consolidated financial statements are presented in Canadian dollars, the
Company's functional and reporting currency.
Future operations
These financial statements have been prepared on a going concern basis in
accordance with generally accepted accounting principles in the U.S. The going
concern basis of presentation assumes that the Company will continue its
operations for the foreseeable future and be able to realize its assets and
discharge its liabilities and commitments in the normal course of business.
The Company funds its operations primarily through committed financing under
its senior secured credit facility and its senior secured term loan described
in Note 6. The senior secured credit facility along with the senior secured
term loan are used to finance working capital, finance capital expenditures,
provide liquidity to fund the Company's
day-to-day
operations and for other general corporate purposes.
The Company believes recent general economic conditions
and
business and retail climates, which includes rising inflation and interest
rates as well as stock market volatility, could lead to a slow-down in certain
segments of the global economy and affect customer behaviour and the amount of
discretionary income spent by potential customers to purchase the Company's
products. If global economic and financial market conditions persist or
worsen, the Company's sales may decrease, and the Company's financial
condition and results of operations may be adversely affected.
The Company continues to and expects to continue to operate through its senior
secured credit facility
and senior secured term loan
.
For
fiscal 2024, the Company recorded a net loss of $
4.6
million. The Company recorded
a
net loss of $
7.4
million in fiscal 2023, and a net income of $
1.3
million
in
fiscal 2022. The Company used net cash flows from operations of $
0.2
million in fiscal 2024, used net cash
flows from operations of $
6.9
million in fiscal 2023 and had net cash provided by operating activities of $
18.6
million in fiscal 2022. The Company had a negative working capital (defined as
current assets less current liabilities) as at March 30, 2024 and March 25,
2023
.
On
December 24, 2021, the Company entered into an amended and restated senior
secured revolving credit facility ("Amended Credit Facility") with Wells Fargo
Capital Finance Corporation Canada and an amended and restated senior secured
term loan ("Amended Term Loan") with Crystal Financial LLC (dba SLR Credit
Solutions
) ("SLR").
The Amended Credit Facility and Amended Term Loan extended the maturity date
of the Company's
pre-existing
loans from
October 2022
to
December 2026
.
On August 24, 2021, the Company entered into a 10
-
year loan agreement with Investissement Quebec, the sovereign fund of the
province of Quebec, for an amount of up to $
4.3
million to be used specifically to finance the digital transformation of the
Company through the implementation of an omni-channel e-commerce platform and
enterprise resource planning system. As of March 30, 2024, the Company has $
4.2
million
outstanding on the loan. The term loan with Investissement Quebec requires the
Company on an annual basis to have a working capital ratio (defined as current
assets divided by current liabilities excluding the current portion of
operating lease liabilities) of at least 1.01 at the end of the Company's
fiscal year. The working capital ratio of
1.01
may be lower in any given year if a tolerance letter accepting a lower working
capital ratio is received from Investissement Quebec. During fiscal 2024, the
Company received a tolerance letter from Investissement Quebec that allowed
the Company, as at March 30, 2024 to tolerate a working capital ratio
of
0.97
.
As at March 30, 2024, the working capital ratio was
0.96
. On Ju
ly
3
, 2024, the Company obtained a waiver from Investissement Quebec with respect
to the requirement to meet the working capital ratio at March 30, 2024.
Furthermore, on July
12
, 2024, the Company received a tolerance letter from Investissement Quebec
that allows the Company, as at March 29, 2025, to tolerate a working capital
ratio of
0.90
.
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On
July 8, 2020, the Company secured a
six-year
term loan with Investissement Quebec, in the amount of $
10.0
million, as amended. The secured term loan was used to fund the working
capital needs of the Company, of which $
4.9
million is outstanding at March 30, 2024. The term loan with Investissement
Quebec requires the Company on an annual basis to have a working capital ratio
(defined as current assets divided by current liabilities excluding the
current portion of operating lease liabilities) of at least 1.01
.
The working capital ratio of 1.01 may be lower in any given year if a
tolerance letter accepting a lower working capital ratio is received from
Investissement Quebec.
During fiscal 2024, the Company received a tolerance letter from Investissement
Quebec that allowed the Company, as at March 30, 2024 to tolerate a working
capital ratio of
0.97
.
As at March 30, 2024, the working capital ratio (defined as current assets
divided by current liabilities excluding the current portion of operating
lease liabilities) was
0.96
. On Ju
ly
3
, 2024
, the Company obtained a waiver from Investissement Quebec with respect to the
requirement to meet the working capital ratio at March 30, 2024.
Furthermore, on July
12
, 2024, the Company received a tolerance letter from Investissement Quebec
that allows the Company, as at March 29, 2025, to tolerate a working capital
ratio of
0.90
.
There is no assurance the Company will meet its covenant at March 29, 2025 or
for future years, or that if not met, waivers would be available. If a waiver
is not obtained, cross defaults with our Amended Credit Facility and our
Amended Term Loan would arise.
On July 15, 2024, the Company obtained a support letter from one if its
shareholders, Mangrove Holding S.A., providing financial support in an amount
of up to $
3.75
million, of which
$
1.0
million would be available after January 1, 2025. These amounts can be
borrowed, if needed, when deemed necessary by the Company, upon approval by
the Company's Board of Directors, until at least
July 31, 2025
,
to
assist the Company in satisfying its obligations and debt service requirements
as they come due in the normal course of operations, or in meeting its
financial covenant requirements of maintaining minimum excess availability
levels
of $
8.5
million
at all times as required by its Amended Credit Facility and Amended Term Loan.
Amounts drawn under this support letter will bear interest at an annual rate of
15
%. However, there will be no interest or principal repayments prior to July
31, 2025.
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The Company's ability to meet its cash flow requirements in order to fund its
operations is dependent upon its ability to attain profitable operations,
adhere to the terms of its committed financings, obtain favorable payment
terms from suppliers as well as to maintain specified excess availability
levels under its Amended Credit Facility and its Amended Term Loan. In
addition to the covenant
under both its Amended Credit Facility and its Amended Term Loan
to adhere to a daily minimum excess availability of
not less than
$
8.5
million at all times, except that the Company will not be in breach of this
covenant if excess availability falls below $
8.5
million for not more than two consecutive business days once during any fiscal
month, other loans have a covenant to adhere to a working capital ratio of
1.01
at the end of each fiscal year. In the event that excess availability falls
below the minimum requirement, this would be considered an event of default
under the Amended Credit Facility and under the Amended Term Loan, that would
result in the outstanding balances borrowed under the Company's Amended Credit
facility and its Amended Term Loan becoming due immediately, which would also
result in cross defaults on the Company's other borrowings. Similarly, both
the Company's Amended Credit Facility and its Amended Term Loan are subject to
cross default provisions with all other loans pursuant to which the Company is
in default of any other loan, the Company will immediately be in default of
both the Amended Credit Facility and the Amended Term Loan. The Company met
its excess availability requirements as of and throughout the fiscal year
ended March 30, 2024 and as of the date these financial statements were
authorized for issuance. In addition, the Company expects to have excess
availability of at least $
8.5
million for at least the next twelve months from the date of issuance of these
financial statements.
The Company's ability to make scheduled payments of principal, or to pay the
interest, or to fund planned capital expenditures and store operations will
also depend on its ability to maintain adequate levels of available borrowing,
obtain favorable payment terms from suppliers and its future performance,
which to a certain extent, is subject to general economic, financial,
competitive, legislative and regulatory factors, as well as other events that
are beyond the Company's control.
The Company continues to be actively engaged in identifying alternative
sources of financing that may include raising additional funds through public
or private equity, the disposal of assets, and debt financing, including
funding from government sources. The incurrence of additional indebtedness
would result in increased debt service obligations and could result in
operating and financing covenants that could restrict the Company's
operations. Financing may be unavailable in amounts or on terms acceptable to
the Company if at all, which may have a material adverse impact on its
business, including its ability to continue as a going concern.
The Company's lenders under its Amended Credit Facility and its Amended Term
Loan may impose, at any time, discretionary reserves, which would lower the
level of borrowing availability under the Company's credit facilities
(customary for asset-based loans), at their reasonable discretion, to: (i)
ensure that the Company maintains adequate liquidity for the operation of its
business, (ii) cover any deterioration in the amount of value of the
collateral, and (iii) reflect impediments to the lenders to realize upon the
collateral. There is no limit to the amount of discretionary reserves that the
Company's lenders may impose at their reasonable discretion. No discretionary
reserves were imposed during fiscal 2024, fiscal 2023 and fiscal 2022 by the
Company's lenders.
Certain adverse conditions and events outlined above require consideration of
management's plans, which management believes mitigate the effect of such
conditions and events. Management plans include continuing to manage liquidity
actively which allows for adherence to excess availability requirements, and
cost reductions, which include reducing future purchases,
reducing
marketing and general operating expenses, postponement of certain capital
expenditures and obtaining favorable payment terms from suppliers.
Notwithstanding, the Company believes that it will be able to adequately fund
its operations and meet its cash flow requirements for at least the next
twelve months from the date of issuance of these financial statements.
2. Significant accounting policies:
(a) Revenue recognition:
Sales are recognized at the point of sale when merchandise is picked up by the
customer or delivered to a customer. Sales to our wholesale customers are
recognized when the Company has agreed to terms with its customers, the
contractual rights and payment terms have been identified, the contract has
commercial substance, it is probable that consideration will be collected by
the Company and when control of the goods has been transferred to the
customer. Shipping and handling fees billed to customers are included in net
sales.
Revenues for gift certificate sales and store credits are recognized upon
redemption. Prior to recognition as a sale, gift certificates are recorded as
accounts payable on the balance sheet. Based on historical redemption rates,
the Company estimates the portion of outstanding gift certificates (not
subject to unclaimed property laws) that will ultimately not be redeemed and
records this amount as breakage income. The Company recognizes such breakage
income in proportion to redemption rates of the overall population of gift
certificates and store credits. Gift certificates and store credits
outstanding are subject to unclaimed property laws and are maintained as
accounts payable until remitted in accordance with local ordinances.
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Sales of consignment merchandise are recognized at such time as the
merchandise is sold, and are recorded on a gross basis because the Company is
the primary obligor of the transaction, has general latitude on setting the
price, has discretion as to the suppliers, is involved in the selection of the
product and has inventory loss risk.
Sales are reported net of returns and sales taxes. The Company generally gives
its customers the right to return merchandise purchased by them within
10
to
90
days, depending on the product sold and records a provision at the time of
sale for the effect of the estimated returns which is determined based on
historical experience.
Revenues for repair services are recognized when the service is delivered to
and accepted by the customer.
(b) Cost of sales:
Cost of sales includes direct inbound freight and duties, direct labor related
to repair services, design and creative costs (labor and overhead) inventory
shrink, inventory thefts, and boxes (jewelry, watch and giftware). Indirect
freight including inter-store transfers, purchasing and receiving costs,
distribution costs and warehousing costs are included in selling, general and
administrative expenses. Mark down dollars received from vendors are recorded
as a reduction of inventory costs to the specific items to which they apply
and are recognized in cost of sales once the items are sold.
(c) Cash and cash equivalents:
The Company utilizes a cash management system under which a book cash
overdraft may exist in its primary disbursement account. These overdrafts,
when applicable, represent uncleared checks in excess of cash balances in the
bank account at the end of a reporting period and have been reclassified to
accounts payable on the consolidated balance sheets.
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Amounts receivable
from credit card issuers are included in cash and cash equivalents and are
typically converted to cash within 2 to 4 days of the original sales
transaction. These amounts totaled $
0.9
million at March 30, 2024 and $
0.5
million at March 25, 2023.
(d) Accounts receivable:
Accounts receivable arise primarily from customers' use of our private label
and proprietary credit cards and wholesale sales and are initially recognized
at fair value and subsequently measured at amortized cost using the effective
interest method, less expected credit losses. Several installment sales plans
are offered to our private label credit card holders and proprietary credit
card holders which vary as to repayment terms and finance charges. Finance
charges on the Company's consumer credit receivables, when applicable, accrue
at rates ranging from
0
% to
9.99
% per annum for financing plans. The Company maintains allowances for expected
credit losses associated with the accounts receivable recorded on the balance
sheet for estimated losses resulting from the inability of its customers to
make required payments. The allowance for credit losses is an estimate of
expected credit losses, measured on a collective basis over the estimated life
of the Company's customer
in-house
receivables and wholesale receivables. In determining expected credit losses,
the Company considers historical level of credit losses, current economic
trends and reasonable and supportable forecasts that affect the collectability
of future cash flows. The Company also incorporates qualitative adjustments
for certain factors such as Company specific risks, changes in current
economic conditions that may not be captured in the quantitatively derived
results, or other relevant factors to ensure the allowance for credit losses
reflects the Company's best estimate of current expected credit losses. Other
relevant factors include, but are not limited to, the length of time that the
receivables are past due, the Company's knowledge of the customer, and
historical
write-off
experiences. Management considered and applied qualitative factors such as the
unfavorable macroeconomic conditions caused by the current uncertainty
resulting from rising inflation and interest rates, and its potential effects.
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The Company classifies a receivable account as past due if a required payment
amount has not been received within the allotted time frame (generally
30
days), after which internal collection efforts commence. Once all internal
collection efforts have been exhausted and management has reviewed the
account, the account is sent for external collection or legal action. Upon the
suspension of the accrual of interest, interest income is recognized to the
extent cash payments received exceed the balance of the principal amount owed
on the account. After all collection efforts have been exhausted, including
internal and external collection efforts, an account is written off.
The Company guarantees a portion of its private label credit card sales to its
credit card vendor. The Company maintains a liability associated with these
outstanding amounts. Similar to the allowance for expected credit losses, the
liability related to these guaranteed sales amounts are based on a combination
of factors including the length of time the receivables are past due to the
Company's credit card vendor, the Company's knowledge of the customer,
economic and market conditions and historical write-off experiences of similar
credits. If the financial conditions of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
The allowance for credit losses includes an estimate for uncollectible
principal as well as unpaid interest. Accrued interest is included within the
same line item as the respective principal amount of the customer
in-house
receivables in the condensed consolidated balance sheets. The accrual of
interest is discontinued at the time the receivable is determined to be
uncollectible and
written-off.
Accrued interest during the fiscal years-ending March 30, 2024 and March 25,
2023 were immaterial.
(e) Inventories:
Finished goods inventories and inventories of raw materials are
stated
at the lower of average cost (which includes material, labor and overhead
costs) and net realizable value, which is the estimated selling price in the
ordinary course of business. The Company records inventory reserves for lower
of cost or net realizable value, which includes slow-moving finished goods
inventory, damaged goods, and shrink. The cost of inbound freight and duties
are included in the carrying value of the inventories.
The reserve for slow-moving finished goods inventories is equal to the
difference between the cost of inventories and the estimated selling prices,
resulting in the expected gross margin. There is estimation uncertainty in
relation to the identification of slow-moving finished goods inventories which
are based on certain criteria established by management. The criteria includes
consideration of operational decisions by management to discontinue ordering
the inventories based on sales trends, market conditions, and the aging of the
inventories. Estimation uncertainty also exists in determining the expected
selling prices and associated gross margins through normal sales channels,
which are based on assumptions about future demand and market conditions for
those slow-moving inventories. If actual market conditions are less favorable
than those projected by management, additional inventory reserves may be
required.
The reserve for inventory shrink is estimated for the period from the last
physical inventory date to the end of the reporting period on a store by store
basis and at our distribution centers. The shrink rate from the most recent
physical inventory, in combination with historical experience, is the basis
for providing a shrink reserve.
(f) Property and equipment:
Property and equipment are recorded at cost less any impairment charges.
Maintenance and repair costs are charged to selling, general and administrative
expenses as incurred, while expenditures for major renewals and improvements
are capitalized.
Depreciation and amortization are computed using the straight-line method
based on the estimated useful lives of the assets as follows:
Asset Period
Leasehold improvements Lesser of term of the lease or the economic life
Software and electronic equipment 1
-
6
years
Furniture and fixtures 5
-
8
years
Equipment 3
-
8
years
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(g) Intangible assets and other assets:
Eligible costs incurred during the development stage of information systems
projects are capitalized and amortized over the estimated useful life of the
related project and presented as part of intangible assets and other assets on
the Company's balance sheet. Eligible costs include those related to the
purchase, development, and installation of the related software. The costs
related to the implementation of the ERP system and the
e-commerce
platform are amortized over a period of
5
years.
Intangible assets and other assets also consist of trademarks and tradenames,
which are amortized using the straight-line method over a period of
15
to
20
years. The Company had $
7.9
million and $
7.0
million of
net book value related to
intangible assets
and other assets
at March 30, 2024 and March 25, 2023, respectively. The Company had $
1.2
million and $
1.0
million of accumulated amortization of intangibles at March 30, 2024 and March
25, 2023, respectively.
(h) Leases:
The Company accounts for leases in accordance with Topic 842 and recognizes a
right-of-use
asset and a corresponding lease liability on the balance sheet for long-term
lease agreements. We determine if an arrangement is a lease at inception. The
amounts of the Company's operating lease
right-of-use
("ROU") assets and current and long-term portion of operating lease
liabilities are presented separately on the balance sheet. Finance leases are
included in property and equipment and long-term debt on the balance sheet.
ROU assets represent our right to use an underlying asset for the lease term
and lease liabilities represent our obligation to make lease payments arising
from the lease. Operating lease ROU assets and operating lease liabilities are
recognized at commencement date based on the present value of lease payments
over the lease term. As most of our leases do not provide an implicit rate,
the Company uses its incremental borrowing rate based on the estimated rate of
interest for collateralized borrowing over a similar term of the lease
payments in order to measure its lease liabilities at commencement date. The
operating lease ROU asset also includes any lease payments made and excludes
lease incentives.
The Company leases office, distribution, and retail facilities. Certain retail
store leases may require the payment of minimum rentals and contingent rent
based on a percentage of sales exceeding a stipulated amount. The Company's
lease agreements expire at various dates through 2034, are subject, in many
cases, to renewal options and provide for the payment of taxes, insurance and
maintenance. Certain leases contain escalation clauses resulting from the pass
-
through of increases in operating costs, property taxes and the effect on
costs from changes in consumer price indices, which are considered as variable
costs.
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The Company determines its lease payments based on predetermined rent
escalations,
rent-free
periods and other incentives. The Company recognizes lease expense on a
straight-line basis over the related terms of such leases, including any
rent-free period and beginning from when the Company takes possession of the
leased facility. Variable operating lease expenses, including contingent rent
based on a percentage of sales, CAM charges, rent related taxes, mall
advertising and adjustments to consumer price indices, are recorded in the
period such amounts and adjustments are determined. Lease expense is recorded
within selling, general and administrative expenses in the statement of
operations.
Lease arrangements occasionally include renewal options. The Company uses
judgment when assessing the renewal options in the leases and assesses whether
or not it is reasonably certain to exercise these renewal options if they are
within the control of the Company. Any renewal options not reasonably certain
to be exercised are excluded from the lease term.
The Company monitors for events or changes in circumstances that require a
reassessment of one of its leases. ROU assets, as part of the group of assets,
are periodically reviewed for impairment. The Company uses the long-lived
assets impairment guidance in ASC Subtopic
360-10,
Property, Plant and Equipment, overall, to determine whether an ROU asset is
impaired, and if so, the amount of the impairment loss to recognize.
(i) Deferred financing costs:
The Company amortizes deferred financing costs incurred in connection with its
financing agreements using the effective interest method over the term of the
related financing. Such deferred costs are presented as a reduction to bank
indebtedness and long-term debt in the accompanying consolidated balance
sheets.
(j) Warranty accrual:
The Company provides warranties on its Birks branded jewelry for periods
extending up to five years
.
The Company accrues a liability based on its historical repair costs for such
warranties.
(k) Income taxes:
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial statement
reporting purposes and the bases for income tax purposes, and (b) operating
losses and tax credit carryforwards. Deferred income tax assets are evaluated
and, if realization is not considered to be
more-likely-than-not,
a valuation allowance is provided (see Note 11(a)).
(l) Foreign exchange:
Monetary assets and liabilities denominated in foreign currencies are
translated at the rates of exchange in effect at the balance sheet date.
Non-monetary
assets and liabilities denominated in foreign currencies are translated at the
rates prevailing at the respective transaction dates. Revenue and expenses
denominated in foreign currencies are translated at average rates prevailing
during the year. Foreign exchange gains (losses) of ($
0.2
) million, ($
1.4
) million, and ($
0.2
) million were recorded in cost of goods sold for the years ended March 30,
2024, March 25, 2023, and March 26, 2022, respectively and $
0.2
million, ($
0.5
) million,
a
n
d
$
0.1
million of gains (losses) on foreign exchange were recorded in interest and
other financial costs related to U.S. dollar denominated debts for the years
ended March 30, 2024, March 25, 2023, and March 26, 2022, respectively.
(m) Impairment of long-lived assets:
The Company periodically reviews the estimated useful lives of its depreciable
assets and changes in useful lives are made on a prospective basis unless
factors indicate the carrying amounts of the assets may not be recoverable and
an impairment write-down is necessary. However, the Company will review its
long-lived assets for impairment once events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. An
impairment loss would be recognized when the estimated undiscounted future
cash flows expected to result from the use of an asset and its eventual
disposition is less than its carrying value. Measurement of an impairment loss
for such long-lived assets would be based on the difference between the
carrying value and the fair value of the asset, with fair value being
determined based upon discounted cash flows or appraised values, depending on
the nature of the asset.
Long-lived
assets to be disposed of are reported at the lower of the carrying amount or
fair value less cost to sell. The Company did
no
t record any
non-cash
impairment charges of long-lived assets during fiscal 2024, fiscal 2023 and
fiscal 2022.
(n) Advertising and marketing costs:
Advertising and marketing costs are generally charged to expense as incurred
and are included in selling, general and administrative expenses in the
consolidated statements of operations. The Company and its vendors participate
in cooperative advertising programs in which the vendors reimburse the Company
for a portion of certain specific advertising costs which are netted against
advertising expense in selling, general and administrative expenses, and
amounted to $
0.6
million, $
1.1
million, and $
1.0
million for each of the years ended March 30, 2024, March 25, 2023, and March
26, 2022, respectively. Advertising and marketing expense, net of vendor
cooperative advertising allowances, amounted to $
6.8
million, $
8.1
million, and $
8.8
million, in the years ended March 30, 2024, March 25, 2023, and March 26,
2022, respectively.
(o) Government grants:
The Company recognizes a government grant when there is reasonable assurance
that it will comply with the conditions required to qualify for the grant, and
that the grant will be received. The Company recognizes government grants as a
reduction to the expense that the grant is intended to offset.
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(p) Principles of consolidation and equity method of accounting:
The consolidated financial statements include the accounts of Birks Group and
its subsidiaries. All intercompany transactions and balances have been
eliminated.
The Company consolidates entities in which it has a controlling financial
interest based on either the variable interest entity (VIE) or voting interest
model. The Company is required to first apply the VIE model to determine
whether it holds a variable interest in an entity, and if so, whether the
entity is a VIE. If the Company determines it does not hold a variable
interest in a VIE, it then applies the voting interest model. Under the voting
interest model, the Company consolidates an entity when it holds a majority
voting interest in an entity.
The Company accounts for investments in which it has significant influence but
not a controlling financial interest using the equity method of accounting.
On April 16, 2021, the Company entered into a joint venture with FWI LLC
("FWI") to form RMBG Retail Vancouver ULC ("RMBG") to operate a retail
location in Vancouver, British Columbia. The Company originally contributed
nominal cash amounts as well as $
1.6
million of certain assets in the form of a shareholder advance for
49
% equity interest in RMBG, the legal entity comprising the joint venture.
Likewise, FWI contributed certain assets in exchange for its
51
% equity interest in RMBG, and controls the joint venture from the date of its
inception. The Company has significant influence but not control over RMBG and
therefore has applied the equity method of accounting to account for its
investment in RMBG. The Company has recorded an equity method investment on
the consolidated balance sheet and an equity
pick-up
on the consolidated statement of operations.
In addition, as of March 30, 2023 and March 26, 2022, the Company had a
non-interest bearing shareholder advance in the amount of
$
1.8
million
and
$
1.5
mi
llion
,
respectively, which is presented in Accounts receivable and other receivables
on the consolidated balance sheet. This receivable was fully reimbursed in
fiscal 2024. Please refer to note 16 for additional details. The receivable is
reimbursed from the actual profits of the business. Dividends are only paid to
the shareholders after the repayment of the shareholder's loans. The Company
expects profits will be distributed annually or as approved by the directors
at their annual meetings in accordance with their respective shareholdings.
(q) Earnings per common share:
Basic earnings per share ("EPS") is computed as net earnings divided by the
weighted-average number of common shares outstanding for the period. Diluted
EPS includes the dilutive effect of the assumed exercise of stock options and
warrants except in years where the Company has a net loss.
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The following table sets forth the computation of basic and diluted earnings
(loss) per common share for the years ended March 30, 2024, March 25, 2023,
and March 26, 2022:
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
(In thousands, except per share data)
Basic income (loss) per common share computation:
Numerator:
Net income (loss) $ ( ) $ ( ) $ 1,287
4,631 7,432
Denominator:
Weighted-average common shares outstanding 19,058 18,692 18,346
Income (loss) per common share $ ( ) $ ( ) $ 0.07
0.24 0.40
Diluted (loss) income per common share computation:
Numerator:
Net income (loss) $ ( ) $ ( ) $ 1,287
4,631 7,432
Denominator:
Weighted-average common shares outstanding 19,058 18,692 18,346
Dilutive effect of stock options and warrants - - 448
Weighted-average common shares outstanding - diluted 19,058 18,692 18,794
Diluted income (loss) per common share $ ( ) $ ( ) $ 0.07
0.24 0.40
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(r) For the year ended March 30, 2024, all Class A voting shares underlying outstanding option awards were excluded from the
computation of diluted earnings per share due to the Company reporting a net loss. For the year ended March 25, 2023, all
Class A voting shares underlying outstanding option awards were excluded from the computation of diluted earnings per
share due to the Company reporting a net loss. For the year ended March 26, 2022, the effect from the assumed exercise of
nil Class A
voting shares underlying outstanding option awards
and
10,932
Class A voting shares underlying
outstanding warrants was excluded from the
computation of diluted earnings per
share due to their antidilutive effect.
(s) Recent Accounting Pronouncements adopted during the year
There were no new accounting pronouncements adopted during the fiscal year
that have a material impact on the Company's financial position or results of
operations.
Recent Accounting Pronouncements not yet adopted:
On March 12, 2020
,
the FASB issued ASU
2020-04
Reference rate reform (Topic 848). On December 21, 2022, the FASB issued an
amendment to this reform, ASU
2022-06
Reference rate reform (Topic 848):
Facilitation of the effects of reference rate reform on financial reporting
and related amendments
. The ASU provides optional expedients and exceptions for applying generally
accepted accounting principles to transactions affected by reference rate
reform if certain criteria are met. These transactions include contract
modifications, hedging relationships, and sale or transfer of debt securities
classified as
held-to-maturity.
The ASU was effective starting on March 12, 2020, and is available to be
adopted on a prospective basis no later than December 31, 2024, following the
amendments of ASU
2022-06.
The Canadian Dollar Offered Rate (CDOR) is a benchmark interest rate
referenced in a variety of agreements. The publication of certain CDOR rates
were discontinued in May 2021, and the remaining rates are expected to be
discontinued on June 30, 2024. The Amended Credit Facility bears interest at a
rate of CDOR plus a spread ranging
from
1.5
% -
2
%
depending on the Company's excess availability levels. The
Amended Term Loan
bears interest at a rate of CDOR plus
7.75
%. The
Amended Term Loan also allows for periodic revisions of the annual interest
rate to CDOR
plus
7.00
% or CDOR plus
6.75
% depending
on the Company complying with certain financial covenants. On June
26
2024,
the Amended Credit Facility and the Amended Term Loan
were amended to replace CDOR by
the Canadian Overnight Repo Rate Average ("
CORRA
")
and these amendments are not expected to materially impact the Company's
results. Refer to note 19 - Subsequent events.
On November 27, 2023, the FASB issued ASU
2023-07:
Segment Reporting (Topic 280):
Improvements to reportable segment disclosures
, which enhances segment disclosures and requires additional disclosures of
segment expenses. The ASU is effective for annual periods beginning after
December 15, 2023, and interim periods thereafter. Early adoption is
permitted. Management continues to evaluate the impact of this ASU on the
consolidated financial statements.
On December 14, 2023, the FASB issued ASU
2023-09:
Income Taxes (Topic 740):
Improvements to income tax disclosures
, which primarily enhances the annual income tax disclosures for the effective
tax rate reconciliation and income taxes paid. The ASU is effective for annual
periods beginning after December 15, 2024. Early adoption is permitted for
annual financial statements that have not yet been issued or made available
for issuance. The ASU should be applied prospectively however, retrospective
application in all prior periods is permitted. Management continues to
evaluate the impact of this ASU on the consolidated financial statements.
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3. Accounts receivable and other receivabl
es:
Accounts receivable, net of allowance for credit losses, at March 30, 2024 and
March 25, 2023 consist of the following:
As of
March 30, 2024 March 25, 2023
(In thousands)
Customer trade receivables $ 4,992 $ 6,237
Other receivables 3,463 5,140
$ 8,455 $ 11,377
Continuity of the allowance for doubtful accounts is as follows (in thousands):
Balance March 27, 2021 $ 1,249
Provision for credit losses 303
Net write offs ( )
343
Balance March 26, 2022 $ 1,209
Provision for credit losses 538
Net write offs ( )
493
Balance March 25, 2023 $ 1,254
Provision for credit losses 555
Net write offs ( )
433
Balance March 30, 2024 $ 1,376
Other receivables mainly relate to receivables from wholesale revenue, tenant
allowances receivable from certain landlords, and the receivable from the
joint venture (see Note 16).
Certain
sales plans relating to customers' use of Birks credit cards provide for
revolving lines of credit and/or installment plans under which the payment
terms exceed one year
. The receivables repayable within a timeframe exceeding one year included
under such plans amounted to approximately $
1.6
million and $
2.0
million at March 30, 2024 and March 25, 2023, respectively, which are not
included in customer trade receivables outlined above, and are included in
long-term receivables on the Company's balance
sheet.
The
following table disaggregates the Company's accounts receivables and other
receivables and long-term receivables as at March 30, 2024:
Current 1 - 30 days 31 - 60 61 - 90 Greater Total
past due days days than 90 days
past due past due past due
Customer $ 5,555 $ 486 $ 83 $ 101 $ 1,550 $ 7,775
in-house
receivables
Other receivables 872 1,369 363 226 797 3,627
$ 6,427 $ 1,855 $ 446 $ 327 $ 2,347 $ 11,402
The following table disaggregates the Company's accounts receivables and other
receivables and long-term receivables as at March 25, 2023:
Current 1 - 30 days 31 - 60 61 - 90 Greater Total
past due days days than 90 days
past due past due past due
Customer $ 7,400 $ $ 129 $ 161 $ 957 $ 9,192
in-house 545
receivables
Other receivables 4,630 106 228 55 420 5,439
$ 12,030 $ 651 $ 357 $ 216 $ 1,377 $ 14,631
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4. Inventories:
Inventories, net of reserves, are summarized as follows:
As of
March 30, 2024 March 25, 2023
(In thousands)
Raw materials and work in progress $ 5,151 $ 2,650 (1)
Finished goods 93,916 85,707 (1)
$ 99,067 $ 88,357
(1) The amount presented has been corrected in these financial statements from amounts previously disclosed
to increase raw materials and work in progress and decrease finished goods by an amount of $
1.8
million. The total inventory as of March 25, 2023 remains
unchanged
as previously disclosed.
Continuity of the inventory reserves are as follows (in thousands):
Balance March 27, 2021 $ 1,938
Additional charges 85
Deductions ( )
248
Balance March 26, 2022 1,775
Additional charges 330
Deductions ( )
230
Balance March 25, 2023 1,875
Additional charges 688
Deductions ( )
367
Balance March 30, 2024 $ 2,196
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5. Property and equipment:
The components of property and equipment are as follows:
As of
March 30, 2024 March 25, 2023
(In thousands)
Leasehold improvements 36,285 35,973
Furniture, fixtures and equipment 14,853 13,866
Software and electronic equipment 16,201 14,864
67,339 64,703
Accumulated depreciation and impairment charges ( ) ( )
41,622 37,866
$ 25,717 $ 26,837
The Company wrote off $
2.8
million of gross fixed assets that were fully
depreciated
during the year ended March 30, 2024 (March 25, 2023 - $
1.7
million), mostly related to leasehold improvements. Property and equipment,
having a cost of $
4.5
million and net book value of $
3.8
million at March 30, 2024, and a cost of $
0.3
million and a net book value of $
0.3
million at March 25, 2023, are under finance leasing arrangements.
6. Bank indebtedness:
As of March 30, 2024 and March 25, 2023, bank indebtedness consisted solely of
amounts owing under the Company's Amended Credit Facility (defined below),
which had an outstanding balance of $
63.4
million ($
63.7
million net of $
0.3
million of deferred financing costs)
and $
57.9
million ($
58.3
million net of $
0.4
million of deferred financing costs), respectively. The Company's Amended
Credit Facility is collateralized by substantially all of the Company's
assets. The Company's excess borrowing capacity was $
13.4
million as of March 30, 2024 and $
12.9
million as of March 25, 2023. The Company met its excess availability
requirements throughout fiscal 2024, and as of the date of these financial
statements.
The Company's ability to fund its operations and meet its cash flow
requirements is dependent upon its ability to maintain positive excess
availability under its $
85.0
million Amended Credit Facility with Wells Fargo Canada Corporation. On
October 23, 2017, the Company entered into a credit facility with Wells Fargo
Capital Finance Corporation Canada for a maximum amount of $
85.0
million and maturing in
October 2022
. On December 24, 2021, the Company entered into an amended and restated
senior secured revolving credit facility ("Amended Credit Facility") with
Wells Fargo Capital Finance Corporation Canada. The Amended Credit Facility
extended the maturity date of the Company's
pre-existing
loan from October 2022 to
December 2026
. The Amended Credit Facility also provides the Company with an option to
increase the total commitments thereunder by up to $
5.0
million. The Company will only have the ability to exercise this accordion
option if it has the required borrowing capacity at such time. The Amended
Credit Facility bears interest at a rate of
CDOR
plus a spread ranging from
1.5
% -
2.0
% depending on the Company's excess availability levels. Under the Amended
Credit Facility, the sole financial covenant
that
the Company is required to adhere to is to maintain minimum excess
availability of not less than $
8.5
million
at all times
, except that the Company shall not be in breach of this covenant if excess
availability falls below $
8.5
million for not more than two consecutive business days
once
during any fiscal month
throughout 2024
. The Company's excess availability was above $8.5 million throughout fiscal
2024.
On June 29, 2018, the Company secured a $
12.5
million
t
erm
l
oan maturing in October 2022 with SLR. On December 24, 2021, the Company
entered into an amended and restated senior secured term loan ("Amended Term
Loan") with SLR. The Amended Term Loan extended the maturity date of the
Company's
pre-existing
loan from October 2022 to
December 2026
. The Amended Term Loan is subordinated in lien priority to the Amended Credit
Facility and bears interest at a rate of
CDOR
plus
7.75
%. The Amended Term Loan also allows for periodic revisions of the annual
interest rate to
CDOR
plus
7.00
% or
CDOR
plus
6.75
% depending on the Company complying with certain financial covenants. Under
the Amended Term Loan, the Company is required to adhere to the same financial
covenant as under the Amended Credit Facility (maintain minimum excess
availability of not less than $
8.5
million
at all times
, except that the Company shall not be in breach of this covenant if excess
availability falls below $
8.5
million for not more than two consecutive business days once during any fiscal
month). In addition, the Amended Term Loan includes
availability blocks at all times of not less than the greater of $
8.5
million and
10
% of the borrowing base, including additional
seasonal availability blocks imposed from December 20th to January 20th of
each year of $
5.0
million and from January 21st to January 31st of each year of $
2.0
million. The Term Loan is required to be repaid upon maturity.
The Company's borrowing capacity under both its Amended Credit Facility and
its Amended Term Loan is based upon the value of the Company's inventory and
accounts receivable, which is periodically assessed by its lenders and based
upon these reviews the Company's borrowing capacity could be significantly
increased or decreased.
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The
Company's Amended Credit Facility and its Amended Term Loan are subject to
cross default provisions with all other loans pursuant to which if the Company
is in default of any other loan, the Company will immediately be in default of
both its Amended Credit Facility and its Amended Term Loan.
In the event that excess availability falls below $8.5 million for more than
two consecutive business days once during any fiscal month, this would be
considered an event of default under the Company's Amended Credit Facility and
its Amended Term Loan, that provides the lenders the right to require the
outstanding balances borrowed under the Company's Amended Credit Facility and
its Amended Term Loan become due immediately, which would result in cross
defaults on the Company's other borrowings. The Company expects to have excess
availability of at least $
8.5
million for at least the next twelve months from the date of issuance of these
financial statements.
The Company's Amended Credit Facility and its Amended Term Loan also contain
limitations on the Company's ability to pay dividends, more specifically,
among other limitations; the Company can pay dividends only at certain excess
borrowing capacity thresholds. The Company is required to either i) maintain
excess availability of at least
40
% of the borrowing base in the month preceding payment or ii) maintain excess
availably of at least
25
% of the line cap and maintain a fixed charge coverage ratio of at least
1.10
to
1.00
. Other than these financial covenants related to paying dividends, the terms
of the Company's Amended Credit Facility and its Amended Term Loan provide
that no financial covenants are required to be met other than already
described.
The Company's lenders under its Amended Credit Facility and its Amended Term
Loan may impose, at any time, discretionary reserves, which would lower the
level of borrowing availability under its credit facilities (customary for
asset-based loans), at their reasonable discretion, to: i) ensure that the
Company maintains adequate liquidity for the operations of its business, ii)
cover any deterioration in the value of the collateral, and iii) reflect
impediments to the lenders to realize upon the collateral. There is no limit
to the amount of discretionary reserves that the Company's lenders may impose
at their reasonable discretion. No discretionary reserves were imposed during
fiscal year 2024 by the Company's lenders.
Th
e
information concerning the Company's bank indebtedness is as follows:
Fiscal Year Ended
March 30, 2024 March 25, 2023
(In thousands)
Maximum borrowing outstanding during the year $ 69,051 $ 59,367
Average outstanding balance during the year $ 61,507 $ 50,349
Weighted average interest rate for the year 7.8 % 5.7 %
Effective interest rate at 7.7 % 6.9 %
year-
end
As security for the bank indebtedness, the Company has provided some of its
lenders the following: (i) general assignment of all accounts receivable,
other receivables and trademarks; (ii) general security agreements on all of
the Company's assets; (iii) insurance on physical assets in a minimum amount
equivalent to the indebtedness, assigned to the lenders; (iv) a mortgage on
moveable property (general) under the Civil Code (Quebec) of $
200.0
million; (v) lien on machinery,
equipment
and molds and dies; and (vi) a pledge of trademarks and stock of the Company's
subsidiaries.
7. Accrued Liabilities
The components of accrued liabilities are as follows:
As of
March 30, 2024 March 25, 2023
(In thousands)
Compensation related accruals $ 2,274 $ 2,371
Interest and bank fees 702 604
Accrued property and equipment additions 902 1,575
Sales return provision 363 75
Professional and other service fees 814 1,160
Other 1,057 1,846
Total accrued liabilities $ 6,112 $ 7,631
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8. Long-term debt:
(a) Long-term
debt consists of the following:
As of
March 30, 2024 March 25, 2023
(In thousands)
Term loan from SLR Credit Solutions, $ 12,319 $ 12,253
bearing interest at an annual rate of C
DOR
plus
7.75
%, repayable at maturity in December 2026, secured by the
assets of the Company (net of deferred financing costs of $
181
and $
247
,
respectively). Refer to Note 6
for additional information.
$ 4,891 6,825
10
million term loan from Investissement Quebec,
bearing interest at an annual rate of
3.14
%, repayable
in
60
equal payments beginning in July 2021
(net of deferred financing costs of $
2
and $
8
,
respectively)
$ 231 303
0.4
million term loan from Business Development Bank of
Canada, bearing bearing interest at an annual rate of
8.3
% repayable in
72
monthly
payments
beginning
in
July 2021
.
U 2,033 2,064
.
S
.
$
1.5
million cash advance owing to the Company's controlling
shareholder, Montel, bearing interest at an annual rate of
11
%, net of withholding
taxes (Note 1
6
(c))
Obligations under finance leases, 3,251 176
at annual interest rates between
0.9
% and
16
%, s
ecured
by leasehold improvements, furniture, and equipment, maturing at
various dates to April 2026 (net of deferred financing costs of $
42
and
nil
,
respectively)
Eligible borrowing 4,214 2,692
amount of up to $
4.3
million loan from Investissement Quebec,
bearing interest at an annual rate of
1.41
%, repayable
in
60
equal payments
beginning in
June 2027
(net of deferred
financing costs of $
86
and $
56
,
respectively)
26,939 24,313
Current portion 4,352 2,133
of long-term debt
$ 22,587 $ 22,180
(b) On July 8, 2020, the Company secured a
six-year
term loan with Investissement Quebec in the amount of $
10.0
million, as amended. The secured term loan was used to fund the working
capital needs of the Company. The loan bears interest at a rate of
3.14
% per annum and is repayable in
60
equal payments beginning in July 2021.
On January 4, 2023, the Company received
a loan forgiveness in the amount of $
0.2
million that is being recognized over the term of the loan.
The term loan with Investissement Quebec requires the Company on an annual basis to have a working capital ratio (defined
as current assets divided by current liabilities excluding the current portion of operating lease liabilities) of at least
1.01
.
During fiscal 2024, the Company received a tolerance letter from
Investissement Quebec that allowed the Company, as at March 30, 2024
,
to tolerate a working capital ratio of
0.97
.
As at March 30, 2024, the working capital ratio (defined as current assets divided by
current liabilities excluding the current portion of operating lease liabilities) was
0.96
. On July 3
, 2024
, the Company obtained a waiver from Investissement Quebec with respect to the requirement to meet the
working capital ratio at March 30, 2024 and therefore the debt has been presented as long-term at year end.
Furthermore, on July
12
, 2024, the Company received a tolerance letter from Investissement Quebec that
allows the Company, as at March 29, 2025, to tolerate a working capital ratio of
0.90
.
( On
c) March 26, 2020
, the Company secured a
6
-year
term loan with
Business Development Bank of Canada (
BDC
), as amended,
for an
amount of $
0.4
million to be used specifically to finance the renovations of the Company's Brinkhaus
store location in Calgary, Alberta. As of March 30, 2024, the Company has $
0.2
million outstanding on the loan ($
0.3
million as of March 25, 2023). The
loan bears interest at a rate of
8.3
% per annum and is repayable in
72
monthly payments
from
June 26,
2021, the date of the drawdown
.
( On July 14, 2023, the Company entered into a financing agreement for a capital lease
d) facility financing with Varilease Finance Inc. relating to certain equipment consisting of
leasehold improvements, furniture, security equipment and related equipment for store
construction and renovation. The maximum borrowing amount under this facility is U.S $
3.6
million (Cdn $
4.7
million). The capital lease financing bears interest at
16
% and is repayable over 24 months. During fiscal
2024, the Company borrowed approximately U.S. $
2.4
million (Cdn $
3.3
million) against this facility. As of
March 30, 2024, the Company has U.S. $
1.8
million (Cdn $
2.4
million) outstanding under this facility.
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On February 1, 2024, the Company entered into a financing agreement for a
capital lease facility financing with Varilease Finance Inc. relating to
certain equipment consisting of leasehold improvements, furniture, security
equipment and related equipment for the construction of a new store. The
maximum borrowing amount under this facility is U.S. $
2.5
million (Cdn $
3.4
million). During fiscal 2024, the Company has drawn U.S. $
0.6
million (Cdn. $
0.8
million). Payments will commence upon project completion, which is expected to
occur during fiscal 2025. The amounts drawn are interest bearing
at approximately
16
%
annually
.
On February 1, 2024, the Company entered into a financing agreement for a
capital lease facility financing with Varilease Finance. Inc relating to
certain equipment consisting of leasehold improvements, furniture, security
equipment and related equipment for
the partial renovation of
a
store. The maximum borrowing amount under this facility is
U.S.
$
0.5
million
(Cdn $
0.7
million)
and the balance as of March 30, 2024 is
nil
.
The payments are interest bearing at approximately
10
%
annually
and commence upon project completion.
( On August 24, 2021, the Company entered into a
e) 10
-
year loan agreement with Investissement
Quebec for an amount of up to $
4.3
million to be used specifically to finance the digital transformation
of the Company through the implementation of an omni-channel
e-commerce
platform and enterprise resource planning system. In order to obtain the financing, the Company has agreed to
maintain a certain number of employees in Quebec. As of March 30, 2024, the Company has fully drawn on the loan
($
4.3
million outstanding as of March 30,2024 and
$
2.7
million outstanding as of March 25, 2023).
The loan bears interest at a rate of
1.41
% per annum and is repayable in
60
equal payments beginning 60 months
after the date of the first draw
in
July 2022.
The term loan with Investissement Quebec requires the
Company on an annual basis to have a working capital ratio
(defined as current assets divided by current liabilities
excluding the current portion of operating lease liabilities)
of at least
1.01
at the end of the Company's fiscal year.
During fiscal 2024, the Company received a tolerance letter from Investissement Quebec
that allowed the Company, as at March 30, 2024, to tolerate a working capital ratio of
0.97
.
As at March 30, 2024, the working capital ratio was
0.96
.
On July 3, 2024, the Company obtained a
waiver from Investissement Quebec with respect to the requirement to meet the working capital
ratio at March 30, 2024 and therefore the debt has been presented as long-term at year end.
Furthermore, on July
12
, 2024, the Company received a tolerance letter from Investissement Quebec that
allows the Company, as at March 29, 2025, to tolerate a working capital ratio of
0.90
.
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( Future minimum lease payments for finance leases required in the following five years
f are
) as
follows
(in thousands):
Year ending March:
2025 $ 2,630
2026 912
2027 94
2028 -
2029 -
3,636
Less imputed interest ( )
385
$ 3,251
( Principal payments on long-term debt required in the following five years and
g thereafter, including obligations under finance leases, are as follows (in thousands):
)
Year ending March:
2025 $ 4,243
2026 2,785
2027 13,615
2028 724
2029 850
Thereafter 4,722
$ 26,939
( As of March 30, 2024 and March 25, 2023, the Company had $
h 0.2
) million, and $
0.4
million
, respectively,
of outstanding letters of credit
.
9. Other long-term liabilities:
On
August 31, 2023, the Company entered into an inventory supplier agreement
relating to
inventory
purchases. The agreement requires a
20
% payment within 30 days upon receipt of inventory and the balance is
repayable over
34 monthly payments
bearing interest at
6
%. As of March 30, 2024, the Company has
U.S. $
2.1
million
(Cdn $
2.8
million
)
outstanding on the loan of which
U.S.
$
1.1
million (
Cdn
$
1.5
million) is presented in
other
long-term liabilities
and the balance as accounts payable
.
On
February 14, 2024, the Company entered into
an
inventory supplier agreement relating to
inventory
purchases. The agreement requires a
25
% payment within 30 days upon receipt of inventory and the balance is
repayable over
26 monthly payments
and is interest-free. As of March 30, 2024, the Company has
U.S.
$
1.3
million
(Cdn $
1.7
million
) outstanding on the loan of which
U.S.
$
0.5
million
(Cdn $
0.7
million
) is presented
in
other
long-term liabilities
and the balance as accounts payable
.
The cash flows related to inventory supplier agreements are presented in
operating cash flows.
10. Benefit plans and
stock-based
compensation:
(a) Stock option plans and arrangements:
(i) The Company can issue stock options, stock appreciation rights, deferred share units and restricted stock units to
executive management, key employees and directors under the stock-based compensation plans discussed below. The
Company's
stock trades on the NYSE American and is valued in USD,
as such all prices in Note 10 are denominated in USD.
The
Compan
y has a
Long-Term
Incentive Plan under which awards may be made in order to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to employees and to promote the success of the
Company. Any employee or consultant selected by the administrator is eligible
for any type of award provided for under the Long-Term Incentive Plan, except
that incentive stock options may not be granted to consultants. The Long-Term
Incentive Plan provided for the grant of units and performance units or share
awards. As of March 30, 2024, there were
25,000
cash-based stock appreciation rights that were exercisable under the Long-Term
Incentive Plan. The stock appreciation rights outstanding under the Long-Term
Incentive Plan have a weighted average exercise price of $
1.18
as of March 30, 2024.
The Company has
no
t made any grants under this incentive plan in the past three years. As at
March 30, 2024, the Company has recognized a liability of $
0.1
million in relation to these stock appreciation rights ($
0.4
million as at March 25, 2023).
As
of
March 30, 2024, there were stock options to purchase
20,000
Class A voting shares outstanding under the Long-Term Incentive Plan. During
fiscal 2024, 2023, and 2022, no stock options were granted under the Long-Term
Incentive Plan. As of March 30, 2024,
100
% of the outstanding stock options were fully vested. Total compensation cost
for options recognized in expenses was
nil
in each of fiscal 2024, 2023, and 2022. This
Long-Tern Incentive Plan
expired in February 2016 and no further awards will be granted under this
plan. However, the Long-Term Incentive Plan will remain in effect until the
outstanding awards issued under the plan terminate or expire by their terms.
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On August 15, 2016, the Board of Directors adopted the Company's Omnibus
Long-Term Incentive Plan (the "Omnibus LTIP"), and same was approved by the
Company's shareholders on September 21, 2016. Further to the Omnibus LTIP, the
Company's directors, officers, senior executives and other employees of the
Company or one of its subsidiaries, consultants and service providers
providing ongoing services to the Company and its affiliates may from
time-to-time
be granted various types of compensation awards, as same are further described
below. The Omnibus LTIP is meant to replace the Company's former equity awards
plans. As of March 26, 2021, there were a total of
1,000,000
shares of the Company's Class A voting shares reserved for issuance under the
Omnibus LTIP. On January 11, 2022, the Omnibus LTIP was amended to increase
the number of the Company's Class A voting shares reserved for issuance under
the Omnibus LTIP from
1,000,000
to
1,500,000
. This increase was ratified by a majority of shareholders in September 2022.
In no event shall the Company issue Class A voting shares, or awards requiring
the Company to issue Class A voting shares, pursuant to the Omnibus LTIP if
such issuance, when combined with the Class A voting shares issuable upon the
exercise of awards granted under the Company's former plan or any other equity
awards plan of the Company, would exceed
1,796,088
Class A voting shares, unless such issuance of Class A voting shares or awards
is approved by the shareholders of the Company. This limit shall not restrict
however, the Company's ability to issue awards under the Omnibus LTIP that are
payable other than in shares. As of March 30, 2024, there were stock options
to purchase
12,000
Class A voting shares outstanding under the Omnibus LTIP, all of which were
granted during fiscal 2017, with a three
-
year vesting period, an average exercise price of $
1.43
and an expiration date of
10
years after the grant date. No additional stock options were granted under
this plan since then. As of March 30, 2024, 100% of the outstanding stock
options were fully vested. Total compensation cost for options recognized in
expenses was
nil
in each of fiscal 2024, 2023, and 2022.
The following is a summary of the activity of Birks' stock option plans and
arrangements.
Options Weighted average
exercise price
Outstanding March 27, 2021 395,147 $ 1.13
Exercised ( ) 0.94
138,147
Forfeited - -
Outstanding March 26, 2022 257,000 1.09
Exercised ( ) 1.10
225,000
Forfeited - -
Outstanding March 25, 2023 32,000 1.02
Exercised - -
Forfeited - -
Outstanding March 30, 2024 32,000 $ 1.02
A summary of the status of Birks' stock options at March 30, 2024 is presented
below:
Options outstanding Options exercisable
Exercise price Number Weighted Weighted Number Weighted
outstanding average average exercisable average
remaining exercise exercise
life price price
(years)
$ 20,000 1.5 $ 0.78 20,000 $ 0.78
0.78
$ 12,000 2.6 1.43 12,000 1.43
1.43
32,000 1.9 $ 1.02 32,000 $ 1.02
(b) As of March 30, 2024, the Company
no
longer has any outstanding warrants exercisable into shares of the Company's Class A voting shares (
nil
as of March 25, 2023 and
202,661
as of March 26, 2022). These awards were fully vested and
no
additional compensation expense was recognized. In fiscal 2024,
nil
(
90,056
and
48,823
in fiscal 2023 and 2022) warrants were exercised for a total of
nil
(
90,056
and
48,823
in fiscal 2023 and 2022, respectively) class A common shares, for total proceeds of
nil
(
U.S.
$
149,000
and
U.S.
$
163,000
in fiscal 2023 and 2022, respectively) (approximately
Cdn
$
205,000
and
Cdn
$
210,000
in fiscal 2023 and 2022, respectively). These warrants expired on
August 20, 2022
, and all remaining warrants have been forfeited.
(c) Restricted stock units and deferred share unit plans:
On September 17, 2020
,
the Company issued
375,000
cash
-
settled restricted stock units ("RSUs") to members of senior management under
the Omnibus LTIP. These units vest after three years and expire within two
months following the vesting date. Compensation expense is based on the fair
value of the RSU and the liability is
re-measured
at each reporting period. On December 20, 2021, the Company converted
325,000
of the outstanding cash-settled RSUs to equity
-
settled awards and as a result, the liability outstanding at that date of $
0.9
million was reclassified to additional paid
-
in capital. At March 30, 2024, there were
nil
outstanding cash-settled RSUs
as
all remaining cash
-
settled RSUs were exercised in fiscal 2024
(
50,000
outstanding at each of
March 25, 2023
and
March 26, 2022) and
nil
outstanding equity-settled RSUs
as all remaining equity-settled RSUs were exercised in fiscal 2024 (
325,000
outstanding at each of
March 25, 2023
and
March 26, 2022
)
.
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6
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The Company issued cash
-
settled deferred share units ("DSUs") to members of the board of directors on
October 1, 2023 (
70,000
DSUs
)
and September 21, 2022 (
35,584
un
its
). In the prior years, the Company issued cash-settled DSU's on September 16,
2021 (
61,470
units), September 17, 2020 (
223,878
units), October 7, 2019 (
157,890
units) and June 20, 2019 (
86,954
units). On December 20, 2021, the Company converted all of the
750,482
outstanding cash-settled DSUs to equity
-
settled awards and as a result, the liability outstanding at that date of $
4.6
million was reclassified to additional paid
-
in capital. During fiscal 2024,
8,896
cash-settled and
10,000
equity
-
settled
DSUs were exercised (
nil
for fiscal 2023 and fiscal 2022). At March 30, 2024,
96,688
cash-settled DSUs were outstanding (March 25, 2023 -
35,584
and
March 26, 2022
-
nil
) and
740,482
equity-settled DSUs were outstanding (March 25, 2023 -
750,482
and
March 26, 2022 -
750,482
). These units are exercisable immediately upon the date the member ceases
being a director and expire on December 31 of the following year.
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A summary of the status of the Company's cash-settled RSUs and cash
-
settled DSUs at March 30, 2024 is presented below:
DSU
Outstanding March 27, 2021 689,012
Grants of new units 61,470
Converted to equity-settled awards ( )
750,482
Outstanding March 26, 2022 -
Grants of new units 35,584
Outstanding March 25, 2023 35,584
Grants of new units 70,000
Exercised ( )
8,896
Outstanding March 30, 2024 96,688
The fair value of cash
-
settled DSUs is measured based on the Company's share price at each period
end. As at March 30, 2024, the liability for all cash
-
settled DSU's was $
0.4
million (March 25, 2023 - $
0.4
million
and
March 26, 2022 -
nil
). The closing stock price used to determine the liability for fiscal 2024 was $
3.34
($
8.18
as at March 26, 2023).
Total compensation cost (gain) for DSUs recognized in expense was ($
0.3
) million, $
0.4
million, and $
1.5
million in fiscal 2024, 2023, and 2022
, respectively
.
RSU
Outstanding March 27, 2021 375,000
Converted to equity-settled awards ( )
325,000
Outstanding March 26, 2022 50,000
Exercised -
Outstanding March 25, 2023 50,000
Exercised ( )
50,000
Outstanding March 30, 2024 -
The fair value of cash
-
settled RSUs is measured based on the Company's share price at each period
end. As at March 30, 2024, the liability for all vested cash
-
settled RSUs was
nil
(March 25, 2023 - $
0.5
million
and
March 26, 2022 - $
0.2
million). The closing stock price used to determine the liability was $
8.18
for fiscal 2023 and $
5.12
for fiscal 2022. Total compensation cost (gain) for cash-settled RSU's
recognized in expense was $(
0.2
) million, $
0.3
million, and $
0.8
million in fiscal 2024, 2023, and 2022
, respectively.
Total compensation cost for equity-settled RSU's recognized in expense was $
0.03
million, $
0.5
million, and $
0.2
million in fiscal 2024, 2023, and 2022
, respectively
.
A summary of the status of the Company's equity-settled
DSUs
at March 30, 2024 is presented below:
DSU
Outstanding March 25, 2023 and March 26, 2022 750,482
Exercised ( )
10,000
Outstanding March 30, 2024 740,482
A summary of the status of the Company's equity-settled
RSUs
at March 30, 2024 is presented below:
RSU
Outstanding March 26, 2022 and March 25, 2023 325,000
Exercised ( )
325,000
Outstanding March 30, 2024 -
The equity
-
settled RSUs and DSUs are recorded at fair value at grant or modification date
and not subsequently
re-measured.
11 Income taxes:
.
(a) The Company recognizes interest and penalties related to uncertain tax
positions in income tax expense. As of March 30, 2024, the Company
did not have any accrued interest or penalties related to uncertain
tax positions due to available tax loss carry forwards. The tax years
2017
through
2024
remain open to examination by the major taxing
jurisdictions to which the Company is subject.
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The Company evaluates its deferred tax assets to determine if any adjustments
to its valuation allowances are required. As part of this analysis, the
Company could not reach the required conclusion that it would be able to more
likely than not realize the value of net deferred tax assets in the future. As
a result, the Company has a
non-cash
valuation allowance of $
26.1
million
(March 25, 2023 - $
24.8
million)
against the majority of the Company's net deferred tax assets.
The significant items comprising the Company's net deferred tax assets at
March 30, 2024 and March 25, 2023 are as follows:
Fiscal Year Ended
March 30, 2024 March 25, 2023
(In thousands)
Deferred tax assets:
Loss and tax credit carry forwards $ 14,481 $ 13,282
Difference between book and tax basis of property and equipment 7,228 7,396
and intangible
assets
Operating lease 3,536 3,690
right-of-use
asset
Other reserves not currently deductible 1,196 1,195
Other ( ) ( )
292 743
Net deferred tax asset before valuation allowance 26,149 24,820
Valuation allowance ( ) ( )
26,149 24,820
Net deferred tax asset $ - $ -
The Company's income tax expense (benefit) consists of the following components:
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
(In thousands)
Income tax expense (benefit):
Current $ - $ - $ -
Deferred ( ) ( ) 1,781
1,329 1,860
Valuation allowance 1,329 1,860 ( )
1,781
Income tax expense $ - $ - $ -
The Company's current tax payable was
nil
at March 30, 2024, March 25, 2023 and March 26, 2022.
The Company's provision for income taxes varies from the amount computed by
applying the statutory income tax rates for the reasons summarized below:
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
Canadian statutory rate 25.7 % 25.9 % 26.1 %
Utilization of unrecognized losses and other tax attributes ( %) ( %) ( %)
28.6 25.0 130.8
Permanent differences and other 2.9 % ( %) 104.7 %
0.9
Total 0.0 % 0.0 % 0.0 %
(b) At March 30, 2024, the Company had federal
non-capital
losses of $
51.2
million available to reduce future Canadian federal taxable
income and investment tax credits ("ITC's") in Canada of $
0.2
million available to reduce future Canadian federal income taxes payable which will expire in
accordance with their respective terms between 2024 and 2032. The Company also has capital losses of $
1.5
million available to reduce future Canadian capital gains.
These capital losses do not have an expiration date.
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The following table outlines the maturity of the federal non-capital losses by
fiscal year-ends.
Non Capital losses as
of March
30, 2024
(in thousands)
Year ending March: Operating
Expiring in 2025 -
Expiring in 2026 -
Expiring in 2027 -
Expiring in 2028 -
Expiring in 2029 -
Expiring in 2030 3,390
Expiring in 2031 -
Expiring in 2032 -
Expiring after 2032 47,773
Total 51,163
non-capital
losses as of March 30, 2024
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12. Capital stock:
Authorized capital
stock of the Company consists of an unlimited number of
no
par value preferred shares and
two
classes of common stock outstanding: Class A and Class B. Class A voting
shares receive
one
vote per share. The Class B multiple voting shares have substantially the same
rights as the Class A voting shares except that each share of Class B multiple
voting shares receives
10
votes per share.
The issued and outstanding shares are as follows:
Class A common stock Class B common stock Total common stock
Number of Amount Number of Amount Number of Amount
Shares Shares Shares
Balance as of March 26, 2022 10,797,943 $ 37,883 7,717,970 $ 57,755 18,515,913 $ 95,638
Exercise of stock options and warrants 315,056 1,136 - - 315,056 1,136
Balance as of March 25, 2023 11,112,999 39,019 7,717,970 $ 57,755 18,830,969 $ 96,774
Settlement of stock units 335,000 1,706 - - 335,000 1,706
Balance as of March 30, 2024 11,447,999 $ 40,725 7,717,970 $ 57,755 19,165,969 $ 98,480
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13. Leases:
Amounts recognized in the consolidated statement of operations were as follows:
March 30, 2024 March 25, 2023 March 26, 2022
(In thousands)
Fixed operating lease expense $ 11,874 $ 12,053 $ 12,155
Variable operating lease expense 5,569 5,007 3,482
(1)
Total lease expense $ 17,443 $ 17,060 $ 15,637
(1) In May 2020, the FASB issued guidance to Topic 842,
Leases, exempting lessees from determining whether
COVID-19
related rent concessions are lease modifications when certain conditions are
met. In accordance with the guidance issued, the Company adopted the amendment
effective March 29, 2020 and elected not to treat COVID-19 related rent
concessions as lease modifications. As such, for the period ended March 30, 2024,
no
rent concessions (March 25, 2023 of $
0.2
million
and
March 26, 2022 of $
1.5
million) were recognized in the consolidated statement
of operations as a negative variable rent expense.
Variable operating lease expense includes percentage rent, taxes, mall
advertising and common area maintenance charges.
The
weighted average remaining operating lease term was
5.7
years and the weighted average discount rate was
10.0
% for all of the Company's operating leases as of March 30, 2024.
The following table provides supplemental cash flow information related to the
Company's operating leases:
March 30, 2024 March 25, 2023 March 26, 2022
(In thousands)
Cash outflows from operating activities attributable to operating leases $ 13,422 $ 14,235 $ 11,954
(1)
Right-of-use assets obtained in exchange for Operating lease liabilities $ 1,503 $ 2,579 $ 5,612
(2)
(1) There were
no
rent concessions associated to base rent for the period ended March 30, 2024
. Net
of $
0.2
million and $
1.5
million rent concessions associated to base rent for the periods ended March 25, 2023 and March 26, 2022, respectively.
(2) Right-of-use
assets obtained are recognized net of leasehold inducements. For
the period ending March 30, 2024, leasehold inducements totaled $
1.7
million of which $
0.8
million is included in Accounts Receivable
and other receivables.
For the period ending March 25, 2023,
leasehold inducements totaled $
0.1
million of which $
0.1
million is included in Accounts Receivable
and other receivables
.
The following table reconciles the undiscounted cash flows expected to be paid
in each of the next five fiscal years and thereafter to the operating lease
liability recorded on the Consolidated Balance Sheet for operating leases and
finance leases which is included in long-term debt as of March 30, 2024.
Minimum Lease Payments
as of March 30, 2024
(in thousands)
Year ending March: Operating
2025 13,189
2026 13,499
2027 13,144
2028 12,388
2029 10,799
Thereafter 46,072
Total minimum lease payments 109,091
Less: amount of total minimum lease payments representing ( )
interest 42,780
Present value of future total minimum lease payments 66,311
Less: current portion of lease liabilities ( )
6,430
Long-term lease liabilities $ 59,881
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14. Contingencies:
The Company and its subsidiaries, in the normal course of business, become
involved from time to time in litigation and are subject to claims. While the
final outcome with respect to claims and legal proceedings pending at March
30, 2024 cannot be predicted with certainty, management believes that adequate
provisions have been recorded in the accounts where required and that the
financial impact, if any, from claims related to normal business activities
will not be material.
1 Segmented information:
5
.
The Compa
ny has
two
reportable segments
,
Retail and Other. As of March 30, 2024, Retail operated
18
stores across Canada under the Maison Birks brand, one retail location in
Calgary under the Brinkhaus brand, two retail locations in Vancouver under the
Graff and Patek Philippe brands, and one retail location in Laval under the
Breitling brand. During fiscal 2024, the Company closed
three
stores (
two
stores in fiscal 2023
and
three stores in fiscal 2022
)
operating under the Maison Birks banner and did
no
t open any new stores. Other consists primarily of our
e-commerce
business, wholesale business and gold exchange program. The two reportable
segments are managed and evaluated separately based on unadjusted gross
profit. The accounting policies used for each of the segments are the same as
those used for the consolidated financial statements. Inter-segment sales are
made at amounts of consideration agreed upon between the
two
segments and intercompany profit is eliminated if not yet earned on a
consolidated basis. The Company does not evaluate the performance of the
Company's assets on a segment basis for internal management reporting and,
therefore, such information is not presented.
Certain information relating to the Company's segments for the years ended
March 30, 2024, March 25, 2023, and March 26, 2022, respectively, is set forth
below:
Retail Other Total
2024 2023 2022 2024 2023 2022 2024 2023 2022
(In thousands)
Sales to external $ 173,872 $ 153,428 $ 167,819 $ 11,403 $ 9,522 $ 13,523 $ 185,275 $ 162,950 $ 181,342
customers
Inter-segment - - - 605 493 574 605 493 574
sales
Unadjusted $ 71,665 $ 67,184 $ 72,061 $ 5,352 $ 4,740 (1) $ 6,961 $ 77,017 $ 71,924 $ 79,022
Gross profit
(1) The amount presented has been corrected by $
2.2
million in these financial statements from
the
amount
previously disclosed to reflect the accurate unadjusted gross profit. The
total unadjusted gross profit for the year ended March 25, 2023 remains
unchanged
as previously disclosed.
The following sets forth reconciliations of the segment's gross profits and
certain unallocated costs to the Company's consolidated gross profits for the
years ended March 30, 2024, March 25, 2023, and March 26, 2022:
Fiscal Year Ended
March 30, 2024 March 25, 2023 March 26, 2022
(In thousands)
Unadjusted gross profit $ 77,017 $ 71,924 $ 79,022
Inventory provisions ( ) ( ) ( )
1,207 849 383
Other unallocated costs ( ) ( ) ( )
2,278 3,153 2,445
Adjustment of intercompany profit 23 38 26
Gross profit $ 73,555 $ 67,960 $ 76,220
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Sales by classes of similar products and by channel were as follows:
Retail Other Total
2024 2023 2022 2024 2023 2022 2024
(In thousands)
Jewelry $ 75,401 $ 77,611 $ 78,586 $ 9,825 $ 8,187 $ 11,936 $ 85,226
and
other
Timepieces 98,471 75,817 89,233 1,578 1,335 1,587 100,049
$ 173,872 $ 153,428 $ 167,819 $ 11,403 $ 9,522 $ 13,523 $ 185,275
2023 2022
$ 85,798 $ 90,522
77,152 90,820
$ 162,950 $ 181,342
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16. Related party transactions:
(a) The Company is party to certain related party transactions. Balances related to these related
parties are disclosed in the consolidated financial statements except the following:
Fiscal Year Ended
March 30, March 25, March 26,
2024 2023 2022
(In thousands)
Expenses
incurred:
Management fees to 41 - -
related parties (b)
Consultant fees to a 217 205 237
related party (f)
Expense reimbursement 25 35 36
to a related party (d)
Interest expense on cash advance received 226 218 297
from controlling shareholder (c)
Compensation paid to 366 344 364
a related party (e)
Fees charged to RMBG in exchange for retail ( ) - -
support and administrative services (g) 613
Balances:
Accounts payable 117 117 75
to related parties
Interest payable on cash advance received 18 16 15
from controlling shareholder (c)
Receivable from 214 1,815 1,543
joint venture (g)
(b) Effective January 1, 2016, the Company entered into a management
consulting services agreement with Gestofi S.A. ("Gestofi")
all in accordance with the Company's Code of Conduct relating to related party transactions. Under
the management consulting services agreement, Gestofi provides the Company with services related to
the obtaining of financing, mergers and acquisitions, international expansion projects, and such other
services as the Company may request. Under the agreement, the Company paid an annual retainer of
140,000
(approximately $
202,000
in Canadian dollars). The original term
of the agreement was until December
31, 2016 and the agreement was automatically
extended for successive terms of
one year
as neither party gave a
60
days' notice of its intention not to renew. The yearly renewal of the agreement was subject to the review
and approval of the Company's corporate governance and nominating committee and the Board of Directors
in accordance with the Company's Code of Conduct relating to related party transactions. In November
2018, the agreement was renewed on the same terms and conditions except that the retainer was reduced to
40,000
(approximately $
61,000
in Canadian dollars). In March 2019, the agreement was amended
to (i) waive the yearly retainer and reimburse only the
out-of-pocket
expenses related to the services, and (ii) allow for
a success fee to be mutually agreed upon between
the Company and Gestofi in the event that financing
or a capital raise is achieved. This agreement
was
renewed in November 2023 until December 31, 2024. In fiscal
2024, 2023, and 2022, the Company incurred expenses of
28,000
(approximately
$
41,000
in Canadian dollars),
nil
, and
nil
respectively, under this agreement to Gestofi.
(c) The Company has a cash advance outstanding from its controlling
shareholder, Montel S.a.r.l. ("Montel", formerly Montrovest), of
U.S.
$
1.5
million (approximately $
2.0
million in Canadian dollars) originally received in May 2009 from Montrovest.
This cash advance was provided to the Company by Montrovest to finance
working capital needs and for general corporate purposes. This advance and
any interest thereon is subordinated to the indebtedness of the Company's
Amended
Credit Facility and
Amended
Term Loan. This cash advance bears an annual interest rate of
11
%, net of withholding taxes, representing
an effective interest rate of approximately
12
%, and is repayable upon demand by Montel
once conditions stipulated in the Company's
Amended
Credit Facility permit such a payment.
At March 30, 2024 and March 25,
2023 advances payable to the Company's
controlling shareholder amounted to
U.S.
$
1.5
million (approximately
$
2.0
million and
$
2.1
million in Canadian dollars), respectively.
On July 28, 2017, the Company received a U.S. $
2.5
million (approximately $
3.3
million in Canadian dollars) loan from Montel, to finance its working capital
needs. The loan bears interest at an annual rate of
11
%, net of withholding taxes, representing an effective interest rate of
approximately
12
%. During fiscal year 2019, U.S. $
1.25
million (approximately $
1.55
million in Canadian dollars) was repaid. During fiscal 2022, the remaining
principal balance on the loan of approximately U.S. $
1.25
million ($
1.6
million in Canadian dollars) was fully repaid.
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5
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(d) In accordance with the Company's Code of Conduct related to related party transactions,
in April 2011, the Company's corporate governance and nominating committee
and Board of Directors approved the reimbursement to Regaluxe Srl of certain
expenses, such as rent, communication, administrative support and analytical service
costs, incurred in supporting the office of Dr. Lorenzo Rossi di Montelera, the
Company's then Chairman, and of Mr. Niccolo Rossi di Montelera, the Company's Chairman
of the Executive Committee and the Company's current Executive Chairman of the
Board, for the work performed on behalf of the Company, up to a yearly maximum of
U.S.
$
260,000
(approximately $
340,000
in Canadian dollars). The yearly maximum was reduced to
U.S.
$
130,000
(approximately $
170,000
in Canadian dollars), and in fiscal 2019 the
terms were amended so that only administrative
support and analytical service costs can
be reimbursed. This agreement was further
renewed in March 2020 on the same terms and
conditions except that the expenses would
be invoiced in Euros. In March 2024, the
agreement was renewed for an additional
one-year
term on the same terms and conditions. During fiscal
2024, 2023, and 2022, the Company incurred expenses of
17,000
,
24,000
, and
24,000
(approximately $
25,000
, $
35,000
, and $
35,000
in Canadian dollars)
,
respectively to Regaluxe Srl under this agreement.
(e) Effective January 1, 2017, the Company
agreed to total annual compensation of
250,000
(approximately $
388,000
in Canadian dollars),
with Mr. Niccolo Rossi di Montelera in connection with his appointment as Executive Chairman of the Board
and Chairman of the Executive Committee. In fiscal 2024, 2023, and 2022, the Company incurred costs of
250,000
,
250,000
and
250,000
(approximately $
366,000
, $
344,000
, and $
364,000
in Canadian dollars), respectively
in connection with this agreement.
(f) On March 28, 2018, the Company's Board of Directors approved the Company's entry into a consulting
services agreement with Carlo Coda Nunziante effective April 1, 2018. Under the agreement, Carlo
Coda-Nunziante,
the Company's former Vice President, Strategy,
and brother-law to the Executive Chairman of the Board,
is providing advice and assistance on the Company's strategic planning and
business strategies for a total annual fee, including reimbursement of
out-of-pocket
expenses of
146,801
(
a
pproximately $
222,000
in Canadian dollars), net of applicable taxes. In fiscal
2024, 2023 and 2022, the Company incurred charges of
149,000
,
149,000
and
162,000
(approximately $
217,000
, $
205,000
and $
237,000
in Canadian dollars), including applicable
taxes, respectively. This agreement
was
extended
for an additional 6-month period ending on
September 30
th
, 2024 upon the same terms and conditions.
(g) On April 16, 2021, the Company entered into a joint venture with FWI LLC (FWI) to form RMBG
Retail Vancouver ULC (RMBG). The Company originally contributed nominal cash amounts as well as $
1.6
million of certain assets in the form of a shareholder advance for
49
% of the legal entity comprising the joint venture. The advance is reimbursed from the actual profits of the business and
was non-interest bearing. As at March 25, 2023 and March 26, 2022, the Company had an outstanding shareholder advance of $
1.8
million and $
1.5
million, respectively, which was presented in accounts receivable and other receivables on the
consolidated balance sheet. This shareholder advance was fully reimbursed in fiscal 2024.
The Company provides RMBG with retail support and administrative services, and
charges RMBG for these related services. During fiscal 2024, the Company
charged $
612,500
to RMBG (
nil
in both fiscal years 2023 and 2022). These fees are reflected as a reduction
of selling, general and administrative expenses in the consolidated statement
of operations. As of March 30, 2024, the Company has $
0.2
million (
nil
as at March 25, 2023 and March 26, 2022 respectively) as a receivable related
to these related services, and is presented in accounts receivable and other
receivables on the consolidated balance sheet.
(h) In April 2011, the Company entered into a Wholesale and Distribution
Agreement with Regaluxe Srl. Under the agreement, Regaluxe Srl
is to provide services to the Company to support the distribution
of the Company's products in Italy through authorized dealers. The
initial one-year term of the agreement began on April 1, 2011. Under
this agreement, the Company pays Regaluxe Srl a net price for the
Company's products equivalent to the price, net of taxes, for the
products paid by retailers to Regaluxe Srl less a discount factor of
3.5
%.
The agreement's initial term was until March 31, 2012, and
may be renewed by mutual agreement for additional one
year terms. This agreement has been renewed annually and
in March 2023, the agreement was renewed for an additional
one-year
term.
This agreement was not renewed in March 2024.
During fiscal year 2024, fiscal 2023 and
fiscal 2022, the Company did not make any
payments to Regaluxe Srl under this agreement.
(i) On July
15
, 2024, the
Company obtained a support letter from one if its shareholders, Mangrove
Holding S.A., providing financial support in an amount of up to
$
3.75
million, of which $
1.0
million would be available after January 1, 2025. These amounts can be borrowed, if needed, when
deemed necessary by the Company, upon approval by the Company's Board of Directors, until at least
July 31, 2025
, to
assist the Company in satisfying its obligations and debt service requirements as they come due in the normal course
of operations, or in meeting its financial covenant requirements of maintaining minimum excess availability levels of
$
8.5
million
at all times as required by its Amended Credit Facility and Amended Term Loan.
Amounts drawn under this support letter will bear interest at an annual rate of
15
%. However, there will be no interest or
principal repayments prior to July 31, 2025.
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17. Financial instruments:
Fair value of financial instruments:
Fair value is defined as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. U.S. GAAP establishes a
fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. U.S. GAAP prescribes three levels of inputs that may be used to
measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 1 inputs are considered to carry the most weight within the fair value
hierarchy due to the low levels of judgment required in determining fair
values.
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7
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Level 2 - Observable market-based inputs or unobservable inputs that are
corroborated by market data.
Level 3 - Unobservable inputs reflecting the reporting entity's own
assumptions. Level 3 inputs are considered to carry the least weight within
the fair value hierarchy due to substantial levels of judgment required in
determining fair values.
The Company has determined that the carrying value of its cash and cash
equivalents, accounts receivable, long-term receivables, accounts payable and
accrued liabilities approximates fair values as at the balance sheet date. As
of March 30, 2024 and March 25, 2023, for the $
63.4
million and $
57.9
million, respectively, of bank indebtedness and the $
12.3
million and $
12.3
million, respectively of
long-term
debt bearing interest at variable rates, the fair value is considered to
approximate the carrying value.
As of March 30, 2024 and March 25, 2023, the fair value of the remaining $
14.6
million and $
12.1
million, respectively of fixed-rate long-term debt is estimated to be
approximately $
14.6
million and $
12.0
million, respectively. The fair value was determined by discounting the future
cash flows of each instrument at the current market interest rates for the
same or similar debt instruments with the same remaining maturities adjusted
for all necessary risks, including its own credit risk. In determining an
appropriate spread to reflect its credit standing, the Company considered
interest rates currently offered to the Company for similar debt instruments
of comparable maturities by the Company's lenders. As a result, the Company
has determined that the inputs used to value these long-term debts fall within
Level 3 of the fair value hierarchy.
1 Government grants
8
.
In response to the COVID-19 pandemic, various government programs were
announced to provide financial relief for affected businesses such as the
Canada Emergency Wage Subsidy ("CEWS") program in April 2020 and the Canada
Emergency Rent Subsidy ("CERS") program in October 2020.
CEWS provide
d
a wage subsidy on eligible paid compensation, subject to limits per employee,
to eligible employers based on certain criteria, including demonstration of
certain revenue declines as a result of COVID-19. During fiscal 2024 and 2023,
the Company did
no
t recognize any CEWS
funding. In fiscal 2022
,
$
0.5
million
was
recorded as a reduction to the eligible employee compensation expense incurred
by the Company during
such
period (within selling, general, and administrative expenses). As at March 30,
2024 and March 25, 2023
,
nil
is included within Account Receivable
and other receivables
on the consolidated balance sheet.
CERS provide
d
a rent subsidy for eligible property expenses, such as occupancy costs, based
on certain criteria and is proportional to revenue declines as a result of
COVID-19. For the fiscal year ended March 30, 2024, the Company did
no
t recognize any CERS
funding. In
fiscal 2023 and
fiscal 2022
,
nil
and
$
0.5
million
,
respectively was
recorded as a reduction to the eligible occupancy expense incurred by the
Company during
s
uch
period (within selling, general and administrative expenses). As at March 30,
2024 and March 25, 2023,
nil
is included within Account Receivable
and other receivables
on the consolidated balance sheet.
19. Subsequent events
On June
26
, 2024, the Company entered into an amendment to the Amended Credit Facility
with Wells Fargo Capital Finance Corporation Canada. The amendment replaces
the interest rate of CDOR plus a spread ranging from 1.5%
-
2% depending on the Company's excess availability levels for the interest rate
of CORRA plus a CORRA adjustment ranging from
0.30
% to
0.32
% and a spread ranging from
1.5
%
-
2
% depending on the Company's excess availability levels. The adjustment is
effective on June
26
, 2024.
On June
26
, 2024, the Company entered into an amendment to the Amended Term Loan with
SLR.
The amendment replaces the interest rate of CDOR plus 7.75% (or CDOR plus
7.00% or CDOR plus 6.75% depending on the Company complying with certain
financial covenants) for the interest rate of CORRA plus a CORRA adjustment of
0.32
% and
7.75
% (or CORRA plus a CORRA adjustment of
0.32
% plus
7.00
% or CORRA plus a CORRA adjustment of
0.32
% plus
6.75
% depending on the Company complying with certain financial covenants). The
adjustment is effective on June
26
, 2024.
On June 3, 2024, the Company entered into a financing agreement
for a capital lease facility
financing
with Varilease Finance. Inc
.
relating to
certain equipment consisting of leasehold improvements, furniture, security
equipment and related equipment for
the
partial
renovation of a store. The maximum borrowing amount under this facility is
U.S
.
$
0.6
million
(Cdn $
0.8
million
) and the balance as of March 30, 2024 is
nil
. The payments are interest bearing at approximately
10
%
annually
and commence upon project completion
.
On June 20, 2024, the Company entered into an early termination lease
agreement for one of its retail stores, that modifies the lease term to
January 31, 2025
.
The lease termination results in a termination payment that is to be
repaid over a period of time up to April 2026
.
On July
15
, 2024, the
Company obtained a support letter from one if its shareholders, Mangrove
Holding S.A., providing financial support in an amount of up to
$
3.75
million, of which $
1.0
million would be available after January 1, 2025. These amounts can be
borrowed, if needed, when deemed necessary by the Company, upon approval by
the Company's Board of Directors, until at least
July 31, 2025
, to
assist the Company in satisfying its obligations and debt service requirements
as they come due in the normal course of operations, or in meeting its
financial covenant requirements of maintaining minimum excess availability
levels of
$
8.5
million at all times as required by its Amended Credit Facility and Amended
Term Loan. Amounts drawn under this support letter will bear interest at an
annual rate of
15
%. However, there will be
no
interest or principal repayment
s
prior to July 31, 2025.
F-3
8
Exhibit 4.23
Execution Version
AMENDMENT NO. 6 TO THE CREDIT AGREEMENT
THIS AMENDMENT NO. 6 TO THE CREDIT AGREEMENT
is made as of June 26, 2024, by and among the lenders identified onthe
signature pages hereof (each of such lenders, together with its successors and
permitted assigns, is referred to hereinafter as a "
Lender
"),
CRYSTAL FINANCIAL LLC
(DBA SLR Credit Solutions), as administrative agent foreach member of the
Lender Group (in such capacity, together with its successors and assigns in
such capacity, "
Agent
") and
BIRKS GROUP INC.
and together with each other Person organized under the laws of Canada or a
provincethereof that joins under the Credit Agreement as a "Borrower" in
accordance with the terms of the Credit Agreement after the date hereof (each,
a "
Borrower
" and all references herein to "Borrower" shall includeeach such additional
Borrower who so joins).
WHEREAS
the Borrower and the Agent are parties to a Credit Agreementdated as of June
29, 2018, Amendment No. 1 to the Credit Agreement dated as of April 18, 2019,
Amendment No. 2 to the Credit Agreement dated as of July 2, 2020, Amendment
No. 3 to the Credit Agreement dated as ofAugust 31, 2021, Amendment No. 4 to
the Credit Agreement dated as of December 15, 2021 and Amendment No. 5 to the
Credit Agreement dated as of December 24, 2021 (as amended, supplemented,
restated or otherwise modified fromtime to time, the "
Credit Agreement
");
AND WHEREAS
the Borrower has requested certain amendmentsto the Credit Agreement;
AND WHEREAS
in connection with the foregoing, the parties hereto agreed to make
thefollowing amendments to the Credit Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES
that, in consideration of themutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed by the parties
hereto as follows:
ARTICLE 1
DEFINITIONSAND INTERPRETATION
1.1Definitions
. All capitalized terms used in this Agreement that are defined in the
CreditAgreement have the meanings ascribed to them in the Credit Agreement,
except to the extent that such terms are defined or modified in this
Agreement, or the context otherwise requires. In addition, the following terms
have the following meanings:
"
Credit Agreement
" has the meaning specified therefor in the recitals hereto.
"
this Agreement
" means this Amendment No. 6 to the Credit Agreement, as it may be amended,
supplemented,restated or otherwise modified from time to time.
-------------------------------------------------------------------------------
- 2 -
ARTICLE 2
AMENDMENTS TO CREDIT AGREEMENT
2.1
Effective as of the Sixth Amendment Effective Date (as defined below), the
Credit Agreement is hereby amended to(i) delete the red stricken text
(indicated textually in the same manner as the following example:
stricken red text
) in the conformed copy of the Credit Agreement attached as
Exhibit A
hereto, (ii) add the blue double-underlined text (indicated textually in the
same manner as the following example:
double-underlined blue text
) in the conformed copy of the CreditAgreement attached as
Exhibit A
hereto, and (iii) move the green stricken text (indicated textually in the
same manner as the following example:
stricken green text
) in the conformed copy of the Credit Agreement attached as
Exhibit A
heretoto where shown in the green
double-underlined
text (indicated textually in the same manner as the following example:
double underlined green text
) in the conformed copy of theCredit Agreement attached as
Exhibit A
hereto.
ARTICLE 3
MISCELLANEOUS PROVISIONS
3.1Conditions to Effectiveness
. This Agreement shall become effective as of the date upon which all of the
followingconditions have been satisfied (the "
Sixth Amendment Effective Date
"):
(a) Agent shall have received this Agreement or counterparts hereof duly executed and delivered by
the Borrower,the Agent and Lenders, all in accordance with Section 14.1 of the Credit Agreement;
(b) Agent shall have received a copy of the First Amendment to Amended and Restated Revolving Credit Agreementduly
executed and delivered by the Borrower, the Revolving Agent and the Revolving Lender party thereto;
(c) no Default or Event of Default shall have occurred and be continuing on the Sixth Amendment
Effective Date,nor shall result from giving effect to the terms of this Agreement;
(d) the representations and warranties of the Loan Parties or their respective Subsidiaries contained in thisAgreement and in the
other Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not
be applicable to any portion of any representation and warranty that is already qualified or modified bymateriality in the
text thereof) on such date (except to the extent that such representations and warranties relate solely to an earlier date);
(e) all action on the part of the Loan Parties necessary for the valid execution, delivery and
performance bythe Borrower of this Agreement shall have been duly and effectively taken;
(f) Borrower shall have paid all reasonable and documented Lender Group Expenses incurred in
connection with thetransactions evidenced by this Agreement and the other Loan Documents; and
-------------------------------------------------------------------------------
- 3 -
(g) all other documents reasonably requested by the Agent in connection with the transactions contemplated bythis
Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Agent.
3.2Representations and Warranties
. The Borrower represents and warrants to the Lender Group and the Agent that,
as of thedate hereof, this Agreement has been duly authorized, executed and
delivered by the Borrower and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability thereof may belimited by bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws affecting creditors'
rights generally and general principles of equity (regardless of whether such
enforceability is considered in aproceeding at law or in equity).
3.3Continuance of the Loan Documents and the Credit Agreement
. The Credit Agreementand the other Loan Documents, as changed, altered,
amended or modified by this Agreement, shall be and continue in full force and
effect and is hereby confirmed and the rights and obligations of all parties
thereunder shall not be affected orprejudiced in any manner except as
specifically provided for in this Agreement.
3.4Confirmation of ExistingSecurity.
Borrower acknowledges and confirms that notwithstanding the execution of this
Agreement, each of the existing security documents that Borrower has executed
in favour of Agent for each member of the Lender Group (i) remains in
fullforce and effect and has not been terminated, discharged or released, (ii)
constitutes legal valid and binding obligation of Borrower enforceable against
Borrower under the laws of the Province of Ontario (or other governing law
specifiedtherein) and the laws of Canada applicable therein in accordance with
its terms, subject to applicable bankruptcy, insolvency and other laws of
general application limiting the enforceability of creditors rights, and (iii)
continues to stand asvalid and enforceable security subject to the
qualifications set forth above for the Obligations.
3.5Reservation ofRights.
Agent and Lender Group hereby expressly reserve all of their available rights,
remedies and claims in their entirety, any of which may be exercised or
otherwise pursued at any time, and from time to time, in the sole and
absolutediscretion of Agent or Lender Group in accordance with the Credit
Agreement, the other Loan Documents, or at law or in equity.
3.6Reference to and Effect on the Credit Agreement
. On and after the Sixth Amendment Effective Date, each reference inthe Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein", "hereto",
"hereby" and similar expressions, and each reference to "the Credit Agreement"
and "theAgreement" in any Schedule to the Credit Agreement and, unless the
context otherwise requires, any Loan Documents shall mean and refer to the
Credit Agreement, as amended by this Agreement.
3.7Cost and Expenses
. Borrower agrees to pay on demand all reasonable costs and expenses of the
Agent or any Lender inconnection with the preparation, negotiation, execution,
delivery, and administration of this Agreement and related documents
including, without limitation, the reasonable fees and out-of-pocket expenses
of Proskauer Rose LLP, counsel for the Agentor any Lender with respect thereto
and with respect to advising the Agent or any Lender as to its rights and
responsibilities hereunder.
-------------------------------------------------------------------------------
- 4 -
3.8Section Headings.
Headings and numbers have been set forth herein forconvenience only. Unless
the contrary is compelled by the context, everything contained in each Section
applies equally to this entire Agreement.
3.9Interpretation.
To the fullest extent permitted by applicable law, neither this Agreement nor
any uncertainty orambiguity herein shall be construed against the Agent, the
Lender Group or the Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all parties
and shall be construed and interpretedaccording to the ordinary meaning of the
words used so as to accomplish fairly the purposes and intentions of all
parties hereto.
3.10Severability of Provisions.
Each provision of this Agreement shall be severable from every other provision
of thisAgreement for the purpose of determining the legal enforceability of
any specific provision.
3.11Counterparts;Electronic Execution.
This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when takentogether, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile, e-mail or other electronic method of
transmission shall be equally as effective as delivery of an original
executedcounterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile, e-mail or other electronic
method of transmission also shall deliver an original executed counterpart of
this Agreement but the failureto deliver an original executed counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement. The foregoing shall apply to each other Loan Document
mutatis mutandis
.
3.12Governing Law
.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OFSUCH OTHER LOAN
DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND
THEREOF, THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL
MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, AND ANY
CLAIMS,CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF
CANADA APPLICABLE THEREIN.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIEDAND LITIGATED ONLY
IN THE PROVINCE OF ONTARIO;
PROVIDED
, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY
MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE
AGENT ELECTS TO BRING SUCHACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY
MAY BE FOUND. BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE
EXTENT PERMITTED UNDER
-------------------------------------------------------------------------------
- 5 -
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TOOBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 3.12.
TO THE MAXIMUM EXTENT PERMITTED BYAPPLICABLE LAW, BORROWER AND EACH MEMBER OF
THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL
OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY
BASED UPON OR ARISING OUT OF ANY OF THE LOANDOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A "
CLAIM
"). BORROWER AND EACH MEMBER OF THE LENDER GROUPREPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIALBY THE
COURT.
BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS LOCATED IN THE PROVINCEOF ONTARIO, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVEAND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDINGRELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY
LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
NOCLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST AGENT, ANY SWING LENDER, ANY
OTHER LENDER, ANY ISSUING LENDER, OR ANY AFFILIATE, DIRECTOR, OFFICER,
EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM
FOR ANY SPECIAL, INDIRECT,CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OR
LOSSES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF
LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANYACT, OMISSION, OR EVENT OCCURRING
IN CONNECTION THEREWITH, AND EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND
AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
3.13Release
.
EACHLOAN PARTY HEREBY ACKNOWLEDGES THAT, AS OF THE DATE HEREOF, IT HAS NO
DEFENSE, RECOUPMENT, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT,
-------------------------------------------------------------------------------
- 6 -
CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO
REDUCE OR ELIMINATEALL, OR ANY PART OF, ITS LIABILITY TO REPAY THE OBLIGATIONS
ARISING UNDER THE CREDIT AGREEMENT, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM THE AGENT,
THE LENDERS AND THEIR RESPECTIVEAFFILIATES AND APPROVED FUNDS, IN EACH CASE IN
WHATEVER CAPACITY (EACH, A "LENDER PARTY") (OR ANY LENDER PARTY) ARISING UNDER
OR IN CONNECTION WITH THE CREDIT AGREEMENT, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT. EACH LOAN PARTY HEREBYVOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER
DISCHARGES EACH LENDER PARTY AND EACH OF THEIR RESPECTIVE RELATED PARTIES, IN
EACH CASE IN WHATEVER CAPACITY (COLLECTIVELY, THE "RELEASED PARTIES"), FROM
ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,CAUSES OF ACTION, DAMAGES, COSTS,
EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT
LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORETHE DATE THIS
AGREEMENT IS ORIGINATED, TAKEN OR EXECUTED, WHICH SUCH LOAN PARTY MAY NOW OR
HEREAFTER HAVE AGAINST ANY RELEASED PARTY, IF ANY, AND IRRESPECTIVE OF WHETHER
ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS,OR
OTHERWISE, AND ARISING FROM OR ARISING IN CONNECTION WITH OR RELATING TO ANY
LOANS, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT,
THIS AGREEMENT OR OTHER LOAN DOCUMENTS, AND/OR NEGOTIATION OF, OR EXECUTION
OF, THISAGREEMENT. EACH LOAN PARTY HEREBY COVENANTS AND AGREES NEVER TO
INSTITUTE ANY ACTION OR SUIT AT LAW OR IN EQUITY, NOR INSTITUTE, PROSECUTE, OR
IN ANY WAY AID IN THE INSTITUTION OR PROSECUTION OF, ANY CLAIM, ACTION OR
CAUSE OF ACTION, RIGHTS TORECOVER DEBTS OR DEMANDS OF ANY NATURE AGAINST ANY
OF THE RELEASED PARTIES ARISING OUT OF OR RELATED TO A RELEASED PARTY'S
ACTIONS, OMISSIONS, STATEMENTS, REQUESTS OR DEMANDS AND OCCURRING PRIOR TO
EFFECTIVENESS OF THIS AGREEMENT RELATING TOTHIS AGREEMENT, THE CREDIT
AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH LOAN PARTY AGREES TO INDEMNIFY AND
HOLD EACH LENDER PARTY AND EACH OTHER RELEASED PARTY HARMLESS FROM ANY AND ALL
MATTERS RELEASED PURSUANT TO THIS SECTION. EACH LOAN PARTYREPRESENTS AND
WARRANTS TO LENDER PARTIES THAT IT HAS NOT PURPORTED TO TRANSFER, ASSIGN OR
OTHERWISE CONVEY ANY RIGHT, TITLE OR INTEREST OF SUCH LOAN PARTY IN ANY
RELEASED MATTER TO ANY OTHER PERSON AND THAT THE FOREGOING CONSTITUTES A FULL
ANDCOMPLETE RELEASE OF SUCH LOAN PARTY'S CLAIMS WITH RESPECT TO ALL SUCH
MATTERS. THE PROVISIONS OF THIS RELEASE AND THE REPRESENTATIONS, WARRANTIES,
RELEASES, WAIVERS, ACQUITTANCES, DISCHARGES, COVENANTS, AGREEMENTS AND
INDEMNIFICATIONS CONTAINEDHEREIN (A) CONSTITUTE A MATERIAL CONSIDERATION FOR
AND INDUCEMENT TO LENDER PARTIES ENTERING INTO THIS AGREEMENT, (B) DO NOT
CONSTITUTE AN ADMISSION OF OR BASIS FOR ESTABLISHING ANY DUTY, OBLIGATION OR
LIABILITY OF ANY LENDER PARTY TO
-------------------------------------------------------------------------------
- 7 -
ANY LOAN PARTY OR ANY OTHER PERSON, (C) DO NOT CONSTITUTE AN ADMISSION OF OR
BASIS FORESTABLISHING ANY LIABILITY, WRONGDOING; OR VIOLATION OF ANY
OBLIGATION, DUTY OR AGREEMENT OF ANY LENDER PARTY TO ANY LOAN PARTY OR ANY
OTHER PERSON, AND (D) SHALL NOT BE USED AS EVIDENCE AGAINST ANY LENDER PARTY
BY ANY LOAN PARTY OR ANY OTHERPERSON FOR ANY PURPOSE.
-------------------------------------------------------------------------------
IN WITNESS WHEREOF
, the parties hereto have caused this Agreement tobe executed and delivered as
of the date first above written.
BIRKS GROUP INC.
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: Vice-President, Human Resources,
Chief Legal Officer and Corporate
Secretary
By: /s/ Katia Fontana
Name: Katia Fontana
Title: Vice-President and Chief Financial
Officer
[Signature Page toAmendment No. 6 to the Credit Agreement]
-------------------------------------------------------------------------------
CRYSTAL FINANCIAL LLC (DBA SLR
Credit Solutions)
, as Agent
By: /s/ Rebecca Tarby
Name: Rebecca Tarby
Title: Senior Managing Director
CRYSTAL FINANCIAL SPV LLC,
as a Lender
By: /s/ Rebecca Tarby
Name:
Title: Senior Management Director
[Signature Page toAmendment No. 6 to the Credit Agreement]
-------------------------------------------------------------------------------
AGREED TO AND ACKNOWLEDGED
by the undersigned as of the date firstindicated above.
CASH, GOLD & SILVER INC.
, as guarantor
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: Vice-President, Human Resources,
Chief Legal Officer and Corporate
Secretary
By: /s/ Katia Fontana
Name: Katia Fontana
Title: Vice-President and Chief Financial Officer
BIRKS INVESTMENTS INC.
, as guarantor
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: Vice-President, Human Resources,
Chief Legal Officer and Corporate
Secretary
By: /s/ Katia Fontana
Name: Katia Fontana
Title: Vice-President and Chief Financial
Officer
[Signature Page toAmendment No. 6 to the Credit Agreement]
-------------------------------------------------------------------------------
Exhibit A
Conformed Credit Agreement
[Attached]
-------------------------------------------------------------------------------
Exhibit A to
Fifth
Sixth
Amendment
ExecutionVersion
CREDIT AGREEMENT
by and among
CRYSTALFINANCIAL LLC(d/b/a SLR Credit Solutions),
as Agent,
THE LENDERS THAT ARE PARTIES HERETO
as the Lenders,
and
BIRKS GROUP INC.,
as Borrower
Dated as ofJune 29, 2018
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION 1
1.1. Definitions 1
Accounting Terms 1
1.3. PPSA 2
1.4. Construction 2
1.5. Time References 3
1.6. Schedules and Exhibits 3
1.7. Exchange Rates; Currency Equivalents 3
1.8. Quebec Interpretation 4
1.9. Rates 4
2. TERM LOAN AND TERMS OF PAYMENT 5
2.1. Term Loan Facility 5
2.2. Borrowing Base 4
5
2.3. Payments; Apportionment and Application; Use of Proceeds; Repayments; Prepayments 7
8
2.4. Interest Rates; Payment of Interest 11
12
2.5. Fees and Expenses 13
2.6. Reimbursement Obligations 13
14
2.7. Capital Adequacy; Increased Costs 13
14
2.8. Currencies 15
16
2.9. Interest Act 15
(Canada); Criminal Rate of Interest; Nominal Rate of Interest 16
2.10. Tax Treatment 18
2.11. CDOR Rate 17
Benchmark 18
Replacement
Setting
2.12. Inability to Determine Rates 19
2.13. Illegality 22
3. CONDITIONS; TERM OF AGREEMENT 20
22
3.1. Conditions Precedent to Effectiveness of Agreement 20
22
3.2. [Reserved] 23
25
3.3. Maturity 23
25
3.4. Effect of Maturity 23
25
3.5. Post-Closing Covenants 23
26
4. REPRESENTATIONS AND WARRANTIES 24
26
4.1. Due Organization and Qualification; Subsidiaries 24
26
4.2. Due Authorization; No Conflict 25
27
4.3. Governmental Consents 25
27
4.4. Binding Obligations; Perfected Liens 25
27
4.5. Title to Assets; No Encumbrances 26
28
4.6. Litigation 26
28
4.7. Compliance with Laws 26
28
4.8. Financial Statements; No Material Adverse Effect 26
29
-i-
-------------------------------------------------------------------------------
TABLE OF CONTENTS
(cont'd)
Page
4.9. Solvency 27
29
4.10. Canadian Pension Plan 27
29
4.11. Environmental Condition 27
29
4.12. Complete Disclosure 27
29
4.13. Patriot Act 28
; Canadian AML and Anti-Terrorism Laws 30
4.14. Indebtedness 28
30
4.15. Payment of Taxes 28
30
4.16. Margin Stock 29
31
4.17. Governmental Regulation 29
31
4.18. OFAC 29
31
4.19. Employee and Labor Matters 29
31
4.20. Intellectual Property 30
32
4.21. Eligible Accounts 30
32
4.22. Eligible Inventory 30
32
4.23. Location of Inventory and Equipment 30
32
4.24. Inventory Records 30
33
4.25. Credit Card Arrangements 30
33
4.26. No Defaults; Material Contracts 30
33
4.27. Operations of Certain Subsidiaries 31
33
4.28. Trade Relations 31
33
5. AFFIRMATIVE COVENANTS 31
33
5.1. Financial Statements, Reports, Certificates 31
33
5.2. Reporting 31
34
5.3. Existence 32
34
5.4. Maintenance of Properties 32
34
5.5. Taxes 32
34
5.6. Insurance 32
34
5.7. [Reserved] 33
35
5.8. [Reserved] 33
35
5.9. [Reserved] 33
35
5.10. Inspection 33
35
5.11. Compliance with Laws and Material Contracts 33
36
5.12. Environmental 33
36
5.13. Disclosure Updates 34
36
5.14. Formation of Subsidiaries 34
37
5.15. Further Assurances 35
37
5.16. Location of Inventory; Chief Executive Office, Etc. 35
38
5.17. Canadian Compliance 36
38
5.18. Credit Card Notifications 36
39
5.19. Sales Taxes 36
39
5.20. [Reserved] 36
39
5.21. Lenders' Meetings 37
39
-ii-
-------------------------------------------------------------------------------
TABLE OF CONTENTS
(cont'd)
Page
6. NEGATIVE COVENANTS 37
39
6.1. Indebtedness 37
39
6.2. Liens 37
39
6.3. Restrictions on Fundamental Changes 37
39
6.4. Disposal of Assets 38
40
6.5. Nature of Business 38
40
6.6. Prepayments and Amendments 38
40
6.7. Restricted Payments 39
42
6.8. Accounting Methods 40
43
6.9. Investments 40
43
6.10. Transactions with Affiliates 40
43
6.11. Use of Proceeds 41
43
6.12. Limitation on Issuance of Equity Interests 41
43
6.13. Canadian Employee Benefits 41
44
6.14. Sale and Leaseback Transactions 42
44
6.15. Negative Pledges 42
44
6.16. Restrictions on Subsidiary Distributions 43
45
6.17. Business Activities; Permitted Store Closings 44
46
6.18. Margin Regulations 44
46
6.19. No Speculative Transactions 44
47
6.20. Amendment of Rolex Canada Documents 44
47
6.21. [Reserved] 44
47
6.22. Anti-layering 44
47
7. [RESERVED] 44
47
8. EVENTS OF DEFAULT 44
47
8.1. Payments 44
47
8.2. Covenants 45
47
8.3. Judgments 45
48
8.4. Voluntary Bankruptcy, etc. 45
48
8.5. Involuntary Bankruptcy, etc. 45
48
8.6. Default Under Other Agreements 46
48
8.7. Default under Revolving Loan Documents 46
48
8.8. Default Under Damiani Purchase Documents 46
49
8.9. Subordinated Debt Documents 46
49
8.10. Compliance Certificate; Borrowing Base Certificate 47
49
8.11. Guarantee 47
50
8.12. Security Documents 47
50
8.13. Loan Documents 47
50
8.14. Change of Control 47
50
8.15. Material Damage or Loss 47
50
-iii-
-------------------------------------------------------------------------------
TABLE OF CONTENTS
(cont'd)
Page
9. RIGHTS AND REMEDIES 48
50
9.1. Rights and Remedies 48
50
9.2. Remedies Cumulative 48
51
10. WAIVERS; INDEMNIFICATION 48
51
10.1. Demand; Protest; etc. 48
51
10.2. The Lender Group's Liability for Collateral 48
51
10.3. Indemnification 49
51
10.4. Subordination; Subrogation 50
52
11. NOTICES 50
53
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIALREFERENCE PROVISION 51
54
13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS 53
56
13.1. Assignments and Participations 53
56
13.2. Successors 57
60
14. AMENDMENTS; WAIVERS 57
60
14.1. Amendments and Waivers 57
60
14.2. Replacement of Certain Lenders 59
62
14.3. No Waivers; Cumulative Remedies 60
63
15. AGENT; THE LENDER GROUP 60
63
15.1. Appointment and Authorization of Agent 60
63
15.2. Liability of Agent 61
64
15.3. Reliance by Agent 61
64
15.4. Notice of Default or Event of Default 65
15.5. Credit Decision 62
65
15.6. Costs and Expenses; Indemnification 65
15.7. SLR Credit Solutions in Individual Capacity 63
66
15.8. Successor Agent 63
66
15.9. Lender in Individual Capacity 64
67
15.10. Collateral Matters 64
67
15.11. Restrictions on Actions by Lenders; Sharing of Payments 66
69
15.12. Agency for Perfection 70
15.13. Payments by Agent to the Lenders 67
70
15.14. Concerning the Collateral and Related Loan Documents 67
70
15.15. Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information 67
70
15.16. Several Obligations; No Liability 68
71
15.17. Quebec Security 68
71
-iv-
-------------------------------------------------------------------------------
TABLE OF CONTENTS
(cont'd)
Page
16. WITHHOLDING TAXES 69
72
16.1. Payments 69
72
16.2. Exemptions 69
72
16.3. Reductions 70
73
16.4. Refunds 74
17. GENERAL PROVISIONS 71
74
17.1. Effectiveness 71
74
17.2. Section Headings 71
74
17.3. Interpretation 71
74
17.4. Severability of Provisions 71
74
17.5. Debtor-Creditor Relationship. 71
75
17.6. Counterparts; Electronic Execution 72
75
17.7. Revival and Reinstatement of Obligations; Certain Waivers 72
75
17.8. Confidentiality 72
75
17.9. Survival 74
77
17.10. Patriot Act 74
; Canadian Anti-Money Laundering & Anti-Terrorism Legislation 77
17.11. Integration 75
78
17.12. Birks Group Inc. as Agent for Borrower 75
78
17.13. Judgment Currency 76
79
17.14. Intercreditor Agreement 76
80
17.15. No Setoff 77
80
-v-
-------------------------------------------------------------------------------
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit B-4 [Reserved]
Exhibit C-1 Form of Compliance Certificate
Exhibit C-2 Form of Credit Card Notification
Exhibit I-1 [Reserved]
Schedule A-1 Agent's Loan Account
Schedule A-2 [Reserved]
Schedule A-3 Authorized Persons
Schedule C-1 Commitments
Schedule D-1 [Reserved]
Schedule D-2 [Reserved]
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Investments
Schedule P-2 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 1.1 Definitions
Schedule 3.5 Post-Closing Covenants
Schedule 4.1 Capitalization of Borrower and its Subsidiaries
Schedule 4.6(b) Litigation
Schedule 4.11 Environmental Matters
Schedule 4.14 Permitted Indebtedness
Schedule 4.19 Employee and Labor Matters
Schedule 4.20 Intellectual Property
Schedule 4.23 Location of Inventory; Chief Executive Office
Schedule 4.25 Credit Card Arrangements
Schedule 4.26 Material Contracts
Schedule 5.1 Financial Statements, Reports, Certificates
Schedule 5.2 Collateral Reporting
Schedule 6.5 Nature of Business
-vi-
-------------------------------------------------------------------------------
CREDIT AGREEMENT
THIS CREDIT AGREEMENT
(this "
Agreement
"), is entered into as of June 29, 2018, by and among thelenders identified on
the signature pages hereof (each of such lenders, together with its successors
and permitted assigns, is referred to hereinafter as a "
Lender
", as that term is hereinafter further defined), CRYSTAL FINANCIALLLC (d/b/a
SLR Credit Solutions) as administrative agent for each member of the Lender
Group (in such capacity, together with its successors and assigns in such
capacity, "
Agent
"),
BIRKS GROUP INC
. and together with eachother Person organized under the laws of Canada or a
province thereof that joins hereunder as a "Borrower" after the Closing Date
in accordance with the terms hereof (each, a "
Borrower
" and all references herein to"Borrower" shall include each such additional
Borrower who so joins).
The parties agree as follows:
1.
DEFINITIONS AND CONSTRUCTION.
1.1.
Definitions
. Capitalized terms used in this Agreement shall have the meanings
specifiedtherefor on
Schedule 1.1
.
Accounting Terms
. All accounting terms not specifically defined herein shall beconstrued in
accordance with GAAP;
provided
, that if Administrative Borrower notifies Agent that Borrower requests an
amendment to any provision hereof to eliminate the effect of any Accounting
Change occurring after the Closing Date or inthe application thereof on the
operation of such provision (or if Agent notifies Administrative Borrower that
the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given beforeor after such
Accounting Change or in the application thereof, then Agent and Borrower
agrees that they will negotiate in good faith amendments to the provisions of
this Agreement that are directly affected by such Accounting Change with the
intentof having the respective positions of the Lenders and Borrower after
such Accounting Change conform as nearly as possible to their respective
positions before such Accounting Change and, until any such amendments have
been agreed upon and agreed toby the Required Lenders, the provisions in this
Agreement shall be calculated as if no such Accounting Change had occurred.
When used herein, the term "financial statements" shall include the notes and
schedules thereto. Whenever the term"Borrower" is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Borrower and its Subsidiaries on a consolidated basis, unless the context
clearly requires otherwise. Notwithstanding anything tothe contrary contained
herein, (a) all financial statements delivered hereunder shall be prepared,
and all financial covenants contained herein shall be calculated, without
giving effect to any election under the Statement of FinancialAccounting
Standards No. 159 (or any similar accounting principle) permitting a Person to
value its financial liabilities or Indebtedness at the fair value thereof and
(b) the term "unqualified opinion" as used herein to refer toopinions or
reports provided by accountants shall mean an opinion or report that is (i)
unqualified, and (ii) does not include any qualification as to scope, going
concern or similar items.
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1.3.
PPSA
. Any terms used in this Agreement thatare defined in the PPSA shall be
construed and defined as set forth in the PPSA unless otherwise defined
herein. Notwithstanding the foregoing, and where the context so requires, (i)
any term defined in this Agreement by reference to the PPSAshall also have any
extended, alternative or analogous meaning given to such term in the Code, in
all cases for the extension, preservation or betterment of the security
granted by a Loan Party formed in the United States and rights of
theCollateral located in the United States, (ii) all references to Canada or
to any subdivision, department, agency or instrumentality thereof shall be
deemed to refer also to the United States of America or to any subdivision,
department, agencyor instrumentality thereof, and (iii) all references to
federal or state securities law of the United States shall be deemed to refer
also to analogous applicable federal and provincial securities laws in Canada.
1.4.
Construction
. Unless the context of this Agreement or any other Loan Document clearly
requiresotherwise, references to the plural include the singular, references
to the singular include the plural, the terms "includes" and "including" are
not limiting, and the term "or" has, except where otherwise indicated,the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreementor such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement
or such other Loan Document, as the case may be. Unless the context of this
Agreement or any other Loan Document clearly requiresotherwise, references to
"law" means all international, foreign, federal, provincial, state and local
statutes, treaties, rules, guidelines, regulations, by-laws, ordinances,
decrees, codes and administrative or judicial or arbitral oradministrative or
ministerial or departmental or regulatory precedents or authorities, including
the interpretation or administration thereof by any Governmental Authority
charged with the enforcement, interpretation or administration thereof, andall
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of any Governmental Authority. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwisespecified. Any reference in this Agreement or in any other Loan
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, andsupplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). The words"asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties. All references to
"province" or like terms shall include"territory" and like terms. Any
reference herein or in any other Loan Document to the satisfaction, repayment,
or payment in full of the Obligations shall mean (a) the payment or repayment
in full in immediately available funds inCanadian Dollars of (i) the principal
amount of, and interest accrued and unpaid with respect to, all outstanding
Loans, together with the payment of any premium applicable to the repayment of
the Loans, (ii) all Lender Group Expenses thathave accrued and are unpaid
regardless of whether demand has been made therefor, (iii) all fees or charges
that have accrued hereunder or under any other Loan Document and are unpaid,
(b) the receipt by Agent of cash collateral in CanadianDollars in order to
secure any other contingent Obligations for which a claim or demand for
payment has been made on or prior to such time or in respect of matters or
circumstances known to Agent or a Lender at such time that
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are reasonably expected to result in any loss, cost, damage, or expense
(including legal expenses to the extent payable pursuant to Section 10.3),
such cash collateral to be in such amountas Agent reasonably determines is
appropriate to secure such contingent Obligations, but in no event greater
than 103% of the face amount of such claim or demand to the extent a specific
amount has been claimed or demanded, and (c) thetermination of all of the
Commitments of the Lenders. Any reference herein to any Person shall be
construed to include such Person's successors and assigns. Any requirement of
a writing contained herein or in any other Loan Document shall besatisfied by
the transmission of a Record.
1.5.
Time References
. Unless the context of thisAgreement or any other Loan Document clearly
requires otherwise, all references to time of day refer to Eastern standard
time or Eastern daylight saving time, as in effect in Montreal, Quebec on such
day. For purposes of the computation of a periodof time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to and including";
provided
that, with respect toa computation of fees or interest payable to Agent or any
Lender, such period shall in any event consist of at least one full day.
1.6.
Schedules and Exhibits
. All of the schedules and exhibits attached to this Agreement shall bedeemed
incorporated herein by reference.
1.7.
Exchange Rates; Currency Equivalents
.
(a)All references to "Dollars" or "$" shall mean Canadian Dollars unless
otherwisespecified herein. For purposes of this Agreement and the other Loan
Documents, the Canadian Dollar Equivalent of the Term Loan and other
Obligations and other references to amounts denominated in a currency other
than Canadian Dollars shall bedetermined in accordance with the terms of this
Agreement. Except as otherwise expressly provided herein or in the applicable
other Loan Document, the applicable amount of any currency for purposes of
this Agreement and the other Loan Documents(including all calculations in
connection with the covenants, including the financial covenants) shall be the
Canadian Dollar Equivalent thereof, and for the purpose of such calculations,
comparisons, measurements or determinations, amountsdenominated in currencies
other than Canadian Dollars shall be converted into the Canadian Dollar
Equivalent of such amount on the date of calculation, comparison, measurement
or determination. Notwithstanding the foregoing, for the purposes offinancial
statements prepared by Borrower, the Canadian Dollar Equivalent of each amount
in a currency other than Canadian Dollars shall be determined in accordance
with GAAP. Furthermore, the Agent shall determine the Canadian Dollar
Equivalent ofany foreign currency amount as required hereby, and a
determination thereof by the Agent shall be conclusive absent manifest error.
The Agent may, but shall not be obligated to, rely on any determination made
by any Loan Party in any documentdelivered to the Agent. The Agent may
determine or redetermine the Canadian Dollar Equivalent of any foreign
currency amount on any date either in its own discretion or upon the request
of any Lender. The Agent may set up appropriate rounding offmechanisms or
otherwise round-off amounts hereunder to the nearest higher or lower amount in
whole Canadian Dollars or cents to ensure amounts owing by any party hereunder
or that otherwise need to be calculated or converted hereunder are expressedin
whole Canadian Dollars or in whole cents, as may be necessary or appropriate.
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1.8.
Quebec Interpretation
. For all purposes ofany assets, liabilities or entities located in the
Province of Quebec and for all purposes pursuant to which the interpretation
or construction of this Agreement may be subject to the laws of the Province
of Quebec or a court or tribunal exercisingjurisdiction in the Province of
Quebec, (a) "personal property" shall include "movable property", (b) "real
property" shall include "immovable property", (c) "tangible property"
shallinclude "corporeal property", (d) "intangible property" shall include
"incorporeal property", (e) "security interest", "mortgage" and "lien" shall
include a "hypothec","prior claim" and a "resolutory clause", (f) all
references to filing, registering or recording under the PPSA shall include
publication under the Civil Code of Quebec, (g) all references to "perfection"
of or"perfected" liens or security interest shall include a reference to an
"opposable" or "set up" lien or security interest as against third parties,
(h) any "right of offset", "right of setoff' orsimilar expression shall
include a "right of compensation", (i) "goods" shall include "corporeal
movable property" other than chattel paper, documents of title, instruments,
money and securities, (j) an"agent" shall include a "mandatary", (k)
"construction liens" shall include "legal hypothecs", (l) "joint and several"
shall include "solidary", (m) "gross negligence orwillful misconduct" shall be
deemed to be "intentional or gross fault", (n) "beneficial ownership" shall
include "ownership on behalf of another as mandatary", (o) "easement" shall
include"servitude", (p) "priority" shall include "prior claim", (q) "survey"
shall include "certificate of location and plan", and (r) "fee simple title"
shall include"absolute ownership".
1.9.
Rates
. Agent does not warrant or accept
any
responsibility for, and shall not have any liability with respect to
(a) the continuation of, administration of, submission of, calculation of
or any other matter relatedto
any
rates in the definitionof
any Benchmark, including the Term CORRA Reference Rate, Term CORRA, Adjusted
Term CORRA or any otherBenchmark, or any component definition thereof or rates
referenced in the definition thereof,
or withrespect to any
alternative, successor or replacement rate thereto (including any Benchmark
Replacement),including whether the composition or characteristics of any such
alternative, successor or replacement rate (including any then-current
Benchmark or any Benchmark Replacement) as it may or may not be adjusted
pursuant to Section 2.11(c), willbe similar to, or produce the same value or
economic equivalence of, or have the same volume or liquidity as, the Term
CORRA Reference Rate, Term CORRA, Adjusted Term CORRA, such Benchmark or any
other Benchmark prior to its discontinuance orunavailability, or (b) the
effect, implementation or composition of any Conforming Changes. Agent and its
affiliates or other related entities may engage in transactions that affect
the calculation of any Benchmark, any alternative, successoror replacement
rate (including any Benchmark Replacement) or
any relevant adjustments thereto and such transactions may be adverse to the
Borrower. Agent may select information sourcesor services in its reasonable
discretion to ascertain any Benchmark, any component definition thereof or
rates referenced in the definition thereof, in each case pursuant to the terms
of this Agreement, and shall have no liability to the Borrower,any Lender or
any other person or entity for damages of any kind, including direct or
indirect, special, punitive, incidental or consequential damages, costs,
losses or expenses (whether in tort, contract or otherwise and whether at law
or inequity), for any error or calculation of any such rate (or component
thereof) provided by any such information source or service. Each
determination of any Benchmark (or any Benchmark Replacement) shall
be made by Agent and shall be conclusive in the absence of manifest error.
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2.
TERM LOAN AND TERMS OF PAYMENT.
2.1.
Term Loan Facility
.
Subject to the terms and conditions set forth in this Agreement, on theClosing
Date, each Lender shall make the Borrower a term loan in the principal amount
equal to its Pro Rata Share of Twelve Million Five Hundred Thousand Dollars
($12,500,000) (the "
Term Loan
"),
provided
that, in noevent shall the Term Loan made by any Lender exceed such Lender's
Commitment. The Term Loan is not a revolving credit facility and may not be
repaid and redrawn and any repayments or prepayments of principal on a Term
Loan shall permanentlyreduce such Term Loan. The obligations of the Lenders
hereunder are several and not joint, joint and several or solidary. The
Borrower irrevocably authorizes the Agent and the Lenders to disburse the
proceeds of the Term Loan on the Closing Date inaccordance with the terms of
this Agreement. The entire unpaid principal balance of the Term Loan shall be
due and payable on the Termination Date.
(b)On the Termination Date, all Obligations shall be immediately due and
payable. All undertakings of the Borrowercontained in the Loan Documents shall
survive any termination, and the Agent shall retain its Liens in the
Collateral (subject to the Intercreditor Agreement) and all of its rights and
remedies under the Loan Documents until payment in full of theObligations
(including all accrued and unpaid principal, interest and fees, and any other
Obligations then due and owing, and any appropriate collateral deposits in
connection therewith).
2.2.
Borrowing Base
.
(a)
The Combined Total Outstandings shall not exceed the lesser of the Borrowing
Base or the Combined Loan Cap. Until the payment in full of the Revolving Loan
Debt and the terminationof the "Commitments" (as defined in the Revolving
Credit Agreement), the Borrowing Base shall be determined by reference to the
most recent Borrowing Base Certificate delivered by the Borrower.
(b)
Anything to the contrary in this
Section 2.2
notwithstanding, Agent shall have the right (but not the obligation), in the
exercise of its Permitted Discretion, toestablish and increase or decrease
Receivable Reserves, Bank Product Reserves (as defined in the Revolving Credit
Agreement), Loan to Value Reserves, Inventory Reserves, Canadian Priority
Payable Reserves and other Reserves against the BorrowingBase;
provided
, that Agent shall notify Borrower at least 5 Business Days prior to the date
on which any such reserve is to be established or increased;
provided
further
, that (A) no such prior notice shall be required forchanges to any reserves
established under this Agreement resulting solely by virtue of mathematical
calculations of the amount of the Reserve in accordance with the methodology
of calculation set forth in this Agreement or previously utilized;(B) no such
prior notice shall be required during the continuance of any Event of Default
and (C) no such prior notice shall be required with respect to any Reserve
established in respect of any consensual Lien that has priority overAgent's
Liens on the Collateral. The amount of any Receivable Reserve, Loan to Value
Reserves, Inventory Reserve, Canadian Priority Payables Reserve or other
Reserve shall be established by Agent in its Permitted Discretion and shall
have areasonable relationship to the event, condition, other circumstance, or
fact that is the basis for such reserve and shall not be duplicative of any
other Reserve established
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and currently maintained. No reserve shall be implemented with respect to
matters which are already specifically reflected as ineligible Accounts or
Inventory or Credit Card Receivables.
(c)
Protective Advances
.
(i)Any contrary provision of this Agreement or any otherLoan Document
notwithstanding, but subject to
Section 2.2(c)(iii)
, at any time after the occurrence and during the continuance of a Default or
an Event of Default, Agent hereby is authorized by Borrower and the Lenders,
from time totime, in Agent's sole discretion, to make advances to, or for the
benefit of, Borrower, in each case, on behalf of the Lenders, that Agent, in
its Permitted Discretion, deems necessary or desirable (1) to preserve or
protect theCollateral, or any portion thereof, or (2) to enhance the
likelihood of repayment of the Obligations (the advances described in this
Section 2.2(c)(i)
shall be referred to as "
Protective Advances
". The ProtectiveAdvances shall be made in Canadian Dollars or US Dollars, as
determined by the Agent. Notwithstanding the foregoing, the aggregate Canadian
Dollar Equivalent amount of all Protective Advances outstanding at any one
time shall not exceed 10% of theCommitment (unless Required Lenders otherwise
agree to a higher amount).
(ii)Each Protective Advance shallbe deemed to form part of the Obligations
hereunder. All payments on the Protective Advances, including interest
thereon, shall be payable to Agent solely for its own account. The Protective
Advances shall be repayable on demand, constituteObligations hereunder, and
bear interest at the rate applicable from time to time to the Term Loan
hereunder. The provisions of this
Section 2.2(c)
are for the exclusive benefit of Agent and the Lenders, and are not intended
to benefitBorrower (or any other Loan Party) in any way.
(iii)Notwithstanding anything contained in this Agreementor any other Loan
Document to the contrary, no Protective Advances may be made by Agent if such
Protective Advances would cause the aggregate Canadian Dollar Equivalent
principal amount of Protective Advances outstanding to exceed an amount equal
to10% of the Commitments (unless Required Lenders otherwise agree to a higher
amount). For the avoidance of doubt, nothing in this
Section 2.2(c)
shall require any Lender to advance amounts in excess of such Lender's
Commitment. EachLender shall reimburse the Agent, on demand, its Pro Rata
Share of any Protective Advances.
(d)
Notation
. Agent, as a non-fiduciary agentfor Borrower, shall maintain a register
showing the principal amount of the Term Loan, owing to each Lender and
Protective Advances owing to Agent, and the interests therein of each Lender,
from time to time and such register shall, absent manifesterror, conclusively
be presumed to be correct and accurate.
(e)
Defaulting Lenders
.
(i)Notwithstanding any provision to the contrary in this Agreement, Agent
shall not be obligated to transfer toa Defaulting Lender any payments made by
or on behalf of any Loan Party to Agent for the Defaulting Lender's benefit or
any proceeds of Collateral that would otherwise be remitted hereunder to the
Defaulting Lender, and, in the absence of suchtransfer to the Defaulting
Lender, Agent shall transfer any such proceeds of Collateral or payments
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pertaining to or securing Obligations, (i) first, to Agent, to the extent of
any Protective Advances that were made by Agent and that were required to be,
but were not, paid by theDefaulting Lender, (ii) second, to each Non-Defaulting
Lender ratably in accordance with its Commitment (but, in each case, only to
the extent that such Defaulting Lender's portion of a Term Loan (or other
funding obligation) was funded by suchother Non-Defaulting Lender), (iii)
third, at Borrower's request (so long as no Event of Default exists and the
conditions set forth on
Section 3.1
are satisfied), the funding of the Term Loan in respect of which suchDefaulting
Lender has failed to fund its portion thereof as required by this Agreement,
or reasonably determined by the Agent, (iv) fourth, from and after the date on
which all other Obligations have been paid in full, to such Defaulting
Lender.Subject to the foregoing, Agent may hold for the account of such
Defaulting Lender the amount of all such payments received and retained by
Agent for the account of such Defaulting Lender. Solely for the purposes of
voting or consenting to matterswith respect to the Loan Documents (including
the calculation of Pro Rata Share in connection therewith) and for the purpose
of calculating the fees payable under
Section 2.5
, such Defaulting Lender shall be deemed not to be a"Lender" and such Lender's
Commitment shall be deemed to be zero;
provided
, that the foregoing shall not apply to any of the matters governed by
Section 14.1(a)(i)
through (iii). The provisions of this
Section 2.2(e)
shall remain effective with respect to such Defaulting Lender until the
earlier of (y) the date on which all of the Non-Defaulting Lenders, Agent and
Borrower shall have waived, in writing, the application of this
Section 2.2(e)
to such Defaulting Lender, or (z) the date on which such Defaulting Lender
makes payment of all amounts that it was obligated to fund hereunder, pays to
Agent all amounts owing by Defaulting Lender in respect of theamounts that it
was obligated to fund hereunder, and, if requested by Agent, provides adequate
assurance of its ability to perform its future obligations hereunder (on which
earlier date, so long as no Event of Default has occurred and iscontinuing,
any remaining cash collateral held by Agent pursuant to this
Section 2.2(e)
shall be released to Borrower). The operation of this
Section 2.2(e)
shall not be construed to increase or otherwise affect theCommitment of any
Lender, to relieve or excuse the performance by such Defaulting Lender or any
other Lender of its duties and obligations hereunder, or to relieve or excuse
the performance by Borrower of its duties and obligations hereunder toAgent,
or to the Lenders other than such Defaulting Lender. Any failure by a
Defaulting Lender to fund amounts that it was obligated to fund hereunder
shall constitute a material breach by such Defaulting Lender of this Agreement
and shall entitleBorrower, at their option, upon written notice by
Administrative Borrower to Agent, to arrange for a substitute Lender to assume
the Commitments and Loans of such Defaulting Lender and the Commitments and
Loans of any Affiliate of such DefaultingLender, such substitute Lender to be
reasonably acceptable to Agent. In connection with the arrangement of such a
substitute Lender, the Defaulting Lenders shall have no right to refuse to be
replaced hereunder, and agree to execute and deliver acompleted form of
Assignment and Acceptance in favor of the substitute Lender (and agree that
they shall be deemed to have executed and delivered such document if they fail
to do so) subject only to being paid its share of the outstandingObligations
(including all interest, fees, and other amounts that may be due and payable
in respect thereof;
provided
, that any such assumption of the Commitments and Loans of such Defaulting
Lenders shall not be deemed to constitute a waiverof any of the Lender Groups'
or Borrower's rights or remedies against any such Defaulting Lender arising
out of or in relation to such failure to fund. In the event of a direct
conflict between the priority provisions of this
Section 2.2(e)
and any other provision contained in this Agreement or any other Loan
Document, it is the intention of the parties hereto that such
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provisions be read together and construed, to the fullest extent possible, to
be in concert with each other. In the event of any actual, irreconcilable
conflict that cannot be resolved asaforesaid, the terms and provisions of this
Section 2.2(e)
shall control and govern.
(f)
Replacement of Lenders
. In the event thatany Lender is a Defaulting Lender (each an "
Affected Lender
"), then the Borrower may, at its option, notify the Agent and such Affected
Lender of its intention to replace the Affected Lender. So long as no Default
or Event ofDefault shall have occurred and be continuing, the Borrower, with
the consent of the Agent, may obtain, at the Borrower's expense, a replacement
Lender ("
Replacement Lender
") for the Affected Lender, which Replacement Lendermust be (i) an Eligible
Transferee and (ii) satisfactory to the Agent. If the Borrower obtains a
Replacement Lender within ninety (90) days following notice of their intention
to do so, the Affected Lender must sell and assign its ProRata Share of the
Term Loan to such Replacement Lender for an amount equal to the principal
balance of its Pro Rata Share of the Term Loan held by the Affected Lender and
all accrued interest and fees with respect thereto through the date of
suchsale;
provided
that the Borrower shall have reimbursed such Affected Lender for the
additional amounts or increased costs that it is entitled to receive under
this Agreement through the date of such sale and assignment. Furthermore, if
theBorrower gives a notice of intention to replace and does not so replace
such Affected Lender within ninety (90) days thereafter, the Borrower's rights
under this paragraph as to such noticed replacement and in connection with
such AffectedLender shall terminate.
(g)
Independent Obligations
. The Term Loan shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) noLender
shall be responsible for any failure by any other Lender to perform its
obligation to make its Pro Rata Share of the Term Loan (or other extension of
credit) hereunder, nor shall any Commitment of any Lender be increased or
decreased as aresult of any failure by any other Lender to perform its
obligations hereunder, and (ii) no failure by any Lender to perform its
obligations hereunder shall excuse any other Lender from its obligations
hereunder.
2.3.
Payments; Apportionment and Application; Use of Proceeds; Repayments;
Prepayments
.
(a)
Payments by Borrower
.
(i)Except as otherwise expressly provided herein, all payments by Borrower
shall be made to Agent's LoanAccount for the account of the Lender Group and
shall be made in immediately available funds in Canadian Dollars, no later
than 1:30 p.m. on the date specified herein. Any payment received by Agent
later than 1:30 p.m. shall be deemed to have beenreceived (unless Agent, in
its sole discretion, elects to credit it on the date received) on the
following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day.
(ii)Unless Agent receives notice from Administrative Borrower prior to the
date on which any payment is due tothe Lenders that Borrower will not make
such payment in full as and when required, Agent may assume that Borrower has
made (or will make) such payment in full to Agent on such date in immediately
available funds and Agent may (but shall
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not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent Borrower does not makesuch payment in full to Agent on the
date when due, each Lender severally shall repay to Agent on demand such
amount distributed to such Lender, together with interest thereon at the
interest rate applicable to the Term Loan for each day from thedate such
amount is distributed to such Lender until the date repaid.
(b)
Apportionment and Application
.
(i)Notwithstanding anything herein to the contrary (but subject to the
Intercreditor Agreement), atany time after the occurrence and continuance of
an Event of Default, all funds received by the Agent or any Lender and for
which the Borrower has received credit for such payment, together with all
payments to be initially applied to theObligations, whether arising from
payments by the Loan Parties, realization on Collateral, setoff or otherwise,
shall be applied to the Obligations as follows:
(A)
first
, to all costs and expenses, including Lender Group Expenses, owing to the
Agent;
(B)
second
, to all Obligations constituting fees (other than the Early Termination Fee)
and Lender GroupExpenses owing to the Lenders;
(C)
third
, to all Obligations constituting interest on the Term Loan;
(D)
fourth
, to all Obligations constituting the Early Termination Fee;
(E)
fifth
, to all other Obligations owing to the Lenders; and
(F)
sixth
, to the Borrower or such other person entitled thereto under the applicable
law.
(ii) Amounts shall be applied to each category of Obligations set forth above
until payment in full thereof and then to thenext category. If amounts are
insufficient to satisfy a category, they shall be applied on a pro rata basis
among the Obligations in the category. The allocations set forth in this
Section 2.3(b)(ii) are solely to determine the rights andpriorities of the
Agent and the Lenders as among themselves, and may be changed by agreement
among them without the consent of any Loan Party. Any amounts applied to the
categories described in clauses 2.3(b)(i)(B), (C), (D) and (E) shallbe so
applied in accordance with each Lender's Pro Rata Share of the Term Loan.
(iii) Agent shall promptlydistribute to each Lender, pursuant to the
applicable wire instructions received from each Lender in writing, such funds
as it may be entitled to receive.
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(iv)In each instance, so long as no Application Event hasoccurred and is
continuing,
Section 2.3(b)(i)(A)
shall not apply to any payment made by Borrower to Agent and specified by
Administrative Borrower to be for the payment of specific Obligations then due
and payable (or prepayable) underany provision of this Agreement or any other
Loan Document.
(v)For purposes of
Section 2.3(b)(i)(A)
, "paid in full" of a type of Obligation means payment in cash or immediately
available funds of all amounts owing on account of such type of Obligation,
including interest accrued after the commencement ofany Insolvency Proceeding,
default interest, interest on interest, and expense reimbursements,
irrespective of whether any of the foregoing would be or is allowed or
disallowed in whole or in part in any Insolvency Proceeding.
(vi)In the event of a direct conflict between the priority provisions of this
Section 2.3
and anyother provision contained in this Agreement or any other Loan Document,
it is the intention of the parties hereto that such provisions be read
together and construed, to the fullest extent possible, to be in concert with
each other. In the event ofany actual, irreconcilable conflict that cannot be
resolved as aforesaid, if the conflict relates to the provisions of
Section 2.2(e)
and this
Section 2.3
, then the provisions of
Section 2.2(e)
shall control andgovern, and if otherwise, then the terms and provisions of this
Section 2.3
shall control and govern. The Agent shall not be liable for any application of
amounts made by it in error (unless it has been determined in a final,non-appeal
able judgment by a court of competent jurisdiction that such error was a
result of the gross negligence or willful misconduct of the Agent) and if any
such application is subsequently determined to have been made in error, the
solerecourse of any Lender or other Person to which such amount should have
been made (unless it has been determined in a final, non-appealable judgment
by a court of competent jurisdiction that such error was a result of the gross
negligence or willfulmisconduct of the Agent) shall be to recover the amount
from the Person that actually received it (and, if such amount was received by
any Lender, such Lender hereby agrees to return it).
(c)
Use of Proceeds
. The proceeds of the Term Loan shall be used by the Borrower solely (a) to
pay fees and transaction expenses associated with the closing of thiscredit
facility; and (b) to reduce the Revolving Loan Debt to create availability
under the Revolving Borrowing Capacity for use by the Borrower for working
capital, Capital Expenditures and other lawful corporate purposes of the
Borrower andits Subsidiaries in accordance with this Agreement and the
Revolving Credit Agreement.
(d)
Repayment of the Term Loan
.
TheTerm Loan and all other Obligations shall be due and payable in full on the
Maturity Date, unless payment is sooner required hereunder pursuant to Section
9. The Borrower promises to pay on the Maturity Date, or on such earlier date
as paymentis required hereunder pursuant to Section 9, and there shall become
absolutely due and payable on such date, the Total Outstandings, together with
any and all accrued and unpaid interest thereon and all other fees and other
amounts then accruedand outstanding with respect thereto. The Term Loan may be
prepaid in accordance with Section 2.3(h).
(e)
Payment of Other Obligations
.
Obligations other than the Term Loan, including Lender Group Expenses, shall
be paid by the Borrower as provided in the Loan
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Documents or, if no payment date is specified, promptly upon receipt by the
Borrower of notice of the amounts due in connection therewith.
(f)
Marshaling; Payments Set Aside
. Neither of the Agent nor the Lenders shall be under any obligation to
marshal any assets in favor of any Loan Party or against anyObligations. If
any Loan Party makes a payment to the Agent or the Lenders, or if the Agent or
any Lender receives payment from the proceeds of Collateral, exercise of
setoff or otherwise, and such payment is subsequently invalidated or required
tobe repaid to a trustee, receiver or any other Person, then the Obligations
originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not beenreceived and any enforcement or setoff had not occurred.
(g)
Mandatory Prepayments
.
If at anytime the Combined Total Outstandings exceed the Borrowing Base then
in effect, then (i) until the payment in full of the Revolving Loan Debt, the
Borrower shall immediately prepay the Revolving Loan Debt, and (ii)
thereafter, the Borrowershall immediately prepay (subject to Section 2.3(b))
the Obligations, for the respective accounts of the Lenders in accordance with
their Pro Rata Share thereof, in each case in an amount necessary to eliminate
such excess. Each prepayment ofthe Obligations made pursuant to this Section
shall be accompanied by the payment of (i) accrued interest to the date of
such payment on the amount prepaid and (ii) whether before or after an Event
of Default or acceleration, the EarlyTermination Fee, if any, payable pursuant
to Section 2.5(d) in connection with such prepayment of the Term Loan.
(h)
Optional Prepayments
. The Borrower may prepay the principal of the Term Loan at any time in whole
or in part. Each such prepayment shall be irrevocable and beaccompanied by a
notice specifying the proposed date of such prepayment and the principal
amount of the Term Loan or portion thereof to be prepaid. Each prepayment made
pursuant to this Section shall be accompanied by the payment of (i)
accruedinterest to the date of such payment on the amount prepaid and (ii)
whether before or after an Event of Default or acceleration, the Early
Termination Fee, if any, payable pursuant to Section 2.5(d) in connection with
such prepayment ofthe Term Loan. Each such prepayment shall be applied
(subject to Section 2.3(b)) to the Obligations, for the respective accounts of
the Lenders in accordance with their Pro Rata Share thereof.
(i)
Crediting Payments
. The receipt of any payment item by Agent shall not be required to be
considered a payment on account unless such payment item is a wire transfer
ofimmediately available funds in Canadian Dollars made to Agent's Loan Account
or unless and until such payment item is honored when presented for payment.
Should any payment item not be honored when presented for payment, then
Borrower shall bedeemed not to have made such payment and interest shall be
calculated accordingly. Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into Agent's Loan Account ona Business Day on or before 1:30 p.m.
If any payment item is received into Agent's Loan Account on a non-Business
Day or after 1:30 p.m. on a Business Day (unless Agent, in its sole
discretion, elects to credit it on the date received), itshall be deemed to
have been received by Agent as of the opening of business on the immediately
following Business Day.
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(j)
Maintenance of Loan Account; Statements of Obligations
. Agent shall maintain accounts on its books in the name of Borrower, the "
Loan Account
" on whichBorrower will be charged with the Term Loan (including Protective
Advances) made by Agent or the Lenders to Borrower or for Borrower's account
and all other payment Obligations hereunder or under the other Loan Documents,
including accruedinterest, fees and expenses, and Lender Group Expenses of
Borrower with respect thereto. Upon request, Agent shall make available to
Administrative Borrower monthly statements regarding the Loan Account,
including the principal amount of the TermLoan, interest accrued hereunder,
fees accrued or charged hereunder or under the other Loan Documents, and a
summary itemization of all charges and expenses constituting Lender Group
Expenses accrued hereunder or under the other Loan Documents, andeach such
statement, absent manifest error, shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrower and the Lender
Group unless, within 60 days after Agent first makes such a statement
available toAdministrative Borrower, Administrative Borrower shall deliver to
Agent written objection thereto describing the error or errors contained in
such statement.
2.4.
Interest Rates; Payment of Interest
.
(a)
Interest Rate
.
Subject toSection 2.4(b)
and Section 2.12
, the Obligationsunder the Term Loan shall bear interest at a rate equal to
Adjusted
CDOR
TermCORRA
plus the Applicable Margin.
(b)
Default Rate
. Upon the occurrence andduring the continuation of an Event of Default and at
the option of the Agent (or upon the direction of the Required Lenders), all
Loans, and all Obligations that have been charged to the Loan Account pursuant
to the terms hereof, shall bearinterest, from the original date of the
occurrence of such Event of Default, at a per annum rate equal to two
percentage points (2.0%) above the per annum rate otherwise applicable
thereunder.
(c)
Payment of Interest
. Interest accrued on the Obligations shall be due and payable in arrears, and
the Borrower promises to pay interest to the Lenders (i) on eachInterest
Payment Date, (ii) on any date of prepayment, with respect to the principal
amount of the Term Loan being prepaid, and (iii) on the Termination Date.
Interest accrued on any other Obligations shall be due and payable as
providedin the Loan Documents and, if no payment date is specified, shall be
due and payable
on demand
. Notwithstanding the foregoing, interest accrued at the Default Rate shall be
due and payable
on demand.
(d)
Computation of Interest
.
All computation of interest, as well as fees and other charges calculated on a
per annum basis, shall be computed for the actual dayselapsed, based on a year
of 365/366 days. Each determination by the Agent of any interest, fees or
interest rate hereunder shall be final, conclusive and binding for all
purposes, absent manifest error. All fees shall be fully earned when due
andshall not be subject to rebate or refund, nor subject to proration except
as specifically provided herein.
(e)
Intent to Limit Charges to Maximum LawfulRate
. In no event shall the interest rate or rates payable under this Agreement,
plus any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction
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shall, in a final determination, deem applicable. Subject to
Section 2.1
, Borrower and the Lender Group, in executing and delivering this Agreement,
intend legally to agree upon therate or rates of interest and manner of
payment stated within it;
provided
, that, anything contained herein to the contrary notwithstanding, if such
rate or rates of interest or manner of payment exceeds the maximum allowable
under applicablelaw, then, ipso facto, as of the date of this Agreement,
Borrower is and shall be liable only for the payment of such maximum amount as
is allowed by law, and payment received from Borrower in excess of such legal
maximum, whenever received, shallbe applied to reduce the principal balance of
the applicable Obligations to the extent of such excess.
2.5. Fees and Expenses
.
(a)
Agent's Fee
. Borrower shall pay to Agent, for the account of Agent, unless otherwise
indicated, as and when due and payable under the terms of the Fee Letter,
thefees set forth in the Fee Letter.
(b)
Field Examination and Other Fees
. Borrower shall pay to Agent, field examination, appraisal, and valuation
fees and charges, as and when incurred or chargeable, asfollows (i) reasonable
and documented out-of-pocket expenses (including travel, meals, and lodging))
if it elects to employ the services of one or more third Persons to perform
field examinations of Borrower or its Subsidiaries, to establishelectronic
collateral reporting systems, to appraise the Collateral (including Eligible
Accounts), or any portion thereof, or to assess Borrower's or its
Subsidiaries' business valuation;
provided
, that so long as no Event ofDefault shall have occurred and be continuing,
Borrower shall not be obligated to reimburse Agent for more than 2 field
examinations of each Loan Party during any calendar year, or more than 2
appraisals of Inventory of each Loan Party during any12-month period;
provided further
,
however
, that if Excess Availability is less than 15% of the Combined Loan Cap for a
period of 5 consecutive Business Days at any time during any 12-month period,
then Borrower shall be obligated toreimburse Agent for an additional field
examination of each Loan Party during such 12-month period and for an
additional appraisal of Inventory of each Loan Party during such 12-month
period. Notwithstanding the foregoing or anything to the contrarycontained
herein, unless an Event of Default has occurred and is continuing, Agent shall
not require that any such field examinations be conducted at Borrower's
expense so long as the Revolving Agent has conducted two (2) such
fieldexaminations (and a third (3
rd
) field exam if Excess Availability is less than 15% of the Combined Loan Cap
for a period of 5 consecutive Business Days at any time during any 12-
monthperiod) in each calendar year and has shared the Reports (as defined in
the Revolving Credit Agreement) prepared in connection therewith Agent
pursuant to the terms of the Intercreditor Agreement.
(c)
Early Termination Fee
. Upon the occurrence of an Applicable Premium Trigger Event, the Borrower
shall pay to the Agent, for the ratable benefit of the Lenders, theEarly
Termination Fee. Notwithstanding anything to the contrary in this Agreement or
any other Loan Document, it is understood and agreed that if the Obligations
are accelerated as a result of the occurrence and continuance of any Event of
Default(including by operation of law or otherwise), the Early Termination
Fee, if any, determined as of the date of acceleration, will also be due and
payable and will be treated and deemed as though the Term Loan was prepaid as
of such date and
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shall constitute part of the Obligations for all purposes herein. Any Early
Termination Fee payable in accordance with this Section 2.5(d) shall be
presumed to be equal to the liquidateddamages sustained by the Lenders as the
result of the occurrence of the Applicable Premium Trigger Event, and the Loan
Parties agree that it is reasonable under the circumstances currently
existing. The Early Termination Fee, if any, shall also bepayable in the event
the Obligations (and/or this Agreement) are satisfied or released by
foreclosure (whether by power of judicial proceeding), deed in lieu of
foreclosure or by any other means. THE LOAN PARTIES EXPRESSLY WAIVE THE
PROVISIONS OFANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY
PROHIBIT THE COLLECTION OF THE FOREGOING EARLY TERMINATION FEE IN CONNECTION
WITH ANY SUCH ACCELERATION. The Loan Parties expressly agree that (A) the
Early Termination Fee isreasonable and is the product of an arm's length
transaction between sophisticated business people, ably represented by
counsel, (B) the Early Termination Fee shall be payable notwithstanding the
then prevailing market rates at the timepayment is made, (C) there has been a
course of conduct between Lenders and the Loan Parties giving specific
consideration in this transaction for such agreement to pay the Early
Termination Fee, (D) the Loan Parties shall be estoppedhereafter from claiming
differently than as agreed to in this Section 2.5(d), (E) their agreement to
pay the Early Termination Fee is a material inducement to the Lenders to make
the Term Loan, and (F) the Early Termination Feerepresents a good faith,
reasonable estimate and calculation of the lost profits or damages of the
Lenders and that it would be impractical and extremely difficult to ascertain
the actual amount of damages to the Lenders or profits lost by theLenders as a
result of such Applicable Premium Trigger Event.
2.6.
Reimbursement Obligations
.
The Borrower shall reimburse the Agent and the Lenders for all Lender Group
Expenses. Without duplication, the Borrower shall also reimburse the Agent and
the Lenders for all reasonable and documented legal, accounting, appraisal,
consulting, andother out-of-pocket fees, costs and expenses incurred by it in
connection with (a) negotiation, preparation, execution and delivery of any
Loan Documents, including any amendment or other modification thereof (whether
or not the transactionscontemplated hereby or thereby shall be consummated);
(b) administration of and actions relating to any Collateral, Loan Documents
and transactions contemplated thereby, including any actions taken to perfect
or maintain priority of theAgent's Liens on any Collateral, to maintain any
insurance required hereunder or to verify Collateral; and (c) subject to the
limits of Section 2.5(c) each inspection, audit or appraisal with respect to
any Loan Party or Collateral,whether prepared by the Agent's or any Lender's
personnel or a third party. The Borrower shall also reimburse the Agent and
the Lenders for all reasonable and documented out-of-pocket costs and expenses
incurred by them (whether during anEvent of Default or otherwise) in
connection with the enforcement or preservation of any rights under this
Agreement or any of the other Loan Documents (including during any workout,
restructuring or negotiations in respect of the Term Loan, LoanDocuments or
the transactions contemplated thereby). All amounts reimbursable by the
Borrower under this Section 2.6 shall constitute Obligations secured by the
Collateral and shall be payable within twenty Business Days after presentation
bythe Agent or the applicable Lender to the Borrower of a reasonably detailed
itemization of such amounts.
2.7.
Capital Adequacy; Increased Costs
.
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(a)
If a Lender determines that any introduction of or any change in a Capital
Adequacy Regulation, any change in the interpretation or administration of a
Capital Adequacy Regulation bya Governmental Authority charged with
interpretation or administration thereof, or any compliance by such Lender or
any Person controlling such Lender with a Capital Adequacy Regulation, in each
case made after the date hereof, increases the amountof capital or liquidity
required or expected to be maintained by such Lender or Person (taking into
consideration its capital adequacy and liquidity policies and desired return
on capital) as a consequence of such Lender's Pro Rata Share of theTerm Loan
or other obligations under the Loan Documents, then the Borrower shall, within
thirty days following demand therefor, pay such Lender an amount sufficient to
compensate for such increase. A Lender's demand for payment shall set forththe
nature of the occurrence giving rise to such compensation and a calculation of
the amount to be paid. In determining such amount, the Lender may use any
reasonable averaging and attribution method.
(b)
If any Change in Law shall subject the Agent or any Lender to any Taxes (other
than Excluded Taxes and Indemnified Taxes) on its loans, loan principal,
letters of credit,commitments, or other obligations, or its deposits,
reserves, other liabilities or capital attributable thereto and the result of
any of the foregoing shall be to increase the cost to such Lender or the Agent
of making, converting to, continuing ormaintaining any loan or of maintaining
its obligation to make any such Loan, or to increase the cost to such Lender
or the Agent of participating in, or to reduce the amount of any sum received
or receivable by such Lender or the Agent hereunder(whether of principal,
interest or any other amount) then, upon request of such Lender or the Agent,
the Borrower will, no later than 30 days following such request, pay to such
Lender or the Agent, as the case may be, such additional amount oramounts as
will compensate such Lender or the Agent, as the case may be, for such
additional costs incurred or reduction suffered.
(c)
If any Lender requests additional or increased costs referred to in this
Section 2.7
(such Lender, an "
Affected Lender
"), then such Affected Lender shalluse reasonable efforts to promptly
designate a different one of its lending offices or to assign its rights and
obligations hereunder to another of its offices or branches, if (i) in the
reasonable judgment of such Affected Lender, suchdesignation or assignment
would eliminate or reduce amounts payable pursuant to this
Section 2.7
, or would eliminate the illegality or impracticality of funding or
maintaining the Term Loan and (ii) in the reasonable judgment ofsuch Affected
Lender, such designation or assignment would not subject it to any material
unreimbursed cost or expense and would not otherwise be materially
disadvantageous to it. Borrower agrees to pay all reasonable out-of-pocket
costs andexpenses incurred by such Affected Lender in connection with any such
designation or assignment. If, after such reasonable efforts, such Affected
Lender does not so designate a different one of its lending offices or assign
its rights to another ofits offices or branches so as to eliminate Borrower's
obligation to pay any future amounts to such Affected Lender pursuant to this
Section 2.7
, as applicable, or to enable Borrower to continue to obtain the Term Loan,
thenAdministrative Borrower (without prejudice to any amounts then due to such
Affected Lender hereunder) may, unless prior to the effective date of any such
assignment the Affected Lender withdraws its request for such additional
amounts under this
Section 2.7
, or indicates that it is no longer unlawful or impractical to continue to
fund or maintain the Term Loan, may designate a substitute a Lender, in each
case, reasonably acceptable to Agent, to purchase the Obligations owed tosuch
Affected Lender (and its Affiliates) and such Affected Lender's (and its
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Affiliates') commitments hereunder (a "
Replacement Lender
"), and if such Replacement Lender agrees to such purchase, such Affected
Lender (and its Affiliates) shall assignto the Replacement Lender its
Obligations and commitments and upon such purchase by the Replacement Lender,
such Replacement Lender shall be deemed to be "a "Lender" for purposes of this
Agreement and such Affected Lender shall ceaseto be a "Lender" (as the case
may be) for purposes of this Agreement (in which circumstances the Affected
Lender shall not receive any Early Termination Fee).
(d)
Notwithstanding anything herein to the contrary, the protection of this
Section 2.7
shall be available to each Lender regardless of any possible contention of
theinvalidity or inapplicability of the law, rule, regulation, judicial
ruling, judgment, guideline, treaty or other change or condition which shall
have occurred or been imposed, so long as it shall be customary for Lenders
affected thereby to complytherewith. Notwithstanding any other provision
herein, Lender shall demand compensation pursuant to this
Section 2.7
if it shall not at the time be the general policy or practice of such to
demand such compensation in similarcircumstances under comparable provisions
of other credit agreements, if any.
(e)
Dodd-Frank Act
. Notwithstanding anythingherein to the contrary, (x) the Dodd-Frank Wall
Street Reform and Consumer Protection Act, and all regulations, rules,
guidelines and directives promulgated thereunder and (y) all rules, guidelines
or directives promulgated by the Bank forInternational settlements, the Basel
Committee on Banking Supervision (or any successor or similar authority) or
the United States or foreign regulatory authorities, in each case pursuant to
Basel III, shall, in each case, be deemed to have beenadopted after the date
hereof, regardless of the date enacted, adopted or issued.
2.8.
Currencies
. The Term Loan and other Obligations (unless such other Obligations
expresslyprovide otherwise) shall be made and repaid in Canadian Dollars. The
Term Loan shall be denominated in Canadian Dollars except that Protective
Advances made by Agent shall be denominated in Canadian Dollars or US Dollars
(as selected by Agent). AllObligations denominated in Canadian Dollars shall
be repaid in Canadian Dollars and all Obligations denominated in US Dollars
shall be repaid in Canadian Dollars. Payments made in a currency other than
the currency in which the applicableObligations are denominated may be
accepted by the Agent in its sole discretion and, if so accepted, Borrower
agrees that the Agent may convert the payment made to the currency of the
applicable Obligations at the applicable Spot Rate in accordancewith its
normal practices.
2.9.
Interest Act
(Canada); Criminal Rate of Interest;Nominal Rate of Interest
.
Notwithstanding anything to the contrary contained in this Agreement or in any
other Loan Document:
(a)
whenever interest payable by Borrower is calculated on the basis of a period
which is less than the actual number of days in a calendar year, each rate of
interest determinedpursuant to such calculation is, for the purposes of the
Interest Act
(Canada), equivalent to such rate multiplied by the actual number of days in
the calendar year in which such rate is to be ascertained and divided by the
number of daysused as the basis of such calculation.
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(b)
the Borrower confirms that it fully understands and is able to calculate the
rate of interest applicable to the Loans based on the methodology for
calculating annual rates providedfor in this Agreement. The Borrower hereby
irrevocably agrees not to plead or assert, whether by way of defense or
otherwise, in any proceeding relating to this Agreement or any other Loan
Documents, that the interest payable under this Agreementand the calculation
thereof has not been adequately disclosed to the Borrower as required pursuant
to Section 4 of the
Interest Act
(Canada).
(c)
in no event shall the aggregate "interest" (as defined in Section 347 of the
Criminal Code
(Canada), as the same shall be amended, replaced or re-enacted fromtime to
time (the "
Criminal Code Section
")) payable (whether by way of payment, collection or demand) by Borrower to
Agent or any Lender under this Agreement or any other Loan Document exceed the
effective annual rate of interest onthe "credit advanced" (as defined in that
section) under this Agreement or such other Loan Document lawfully permitted
under that section and, if any payment, collection or demand pursuant to this
Agreement or any other Loan Document inrespect of "interest" (as defined in
that section) is determined to be contrary to the provisions of that section
and the amount of such payment or collection shall be refunded by Agent and
Lenders to Borrower with such"interest" deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by the Criminal Code Section to result in a
receipt by Agent or such Lender ofinterest at a rate not in contravention of
the Criminal Code Section, such adjustment to be effected, to the extent
necessary, as follows: firstly, by reducing the amounts or rates of interest
required to be paid to Agent or that Lender; and then,by reducing any fees,
charges, expenses and other amounts required to be paid to the affected Agent
or Lender which would constitute "interest". Notwithstanding the foregoing,
and after giving effect to all such adjustments, if Agent orany Lender shall
have received an amount in excess of the maximum permitted by the Criminal
Code Section, then Borrower shall be entitled, by notice in writing to the
Agent or affected Lender, to obtain reimbursement from Agent or that Lender in
anamount equal to such excess. For the purposes of this Agreement and each
other Loan Document to which Borrower is a party, the effective annual rate of
interest payable by Borrower shall be determined in accordance with generally
accepted actuarialpractices and principles over the term of the loans on the
basis of annual compounding for the lawfully permitted rate of interest and,
in the event of dispute, a certificate of a Fellow of the Institute of
Actuaries appointed by Agent for theaccount of Borrower will be conclusive for
the purpose of such determination in the absence of evidence to the contrary,
(d)
all calculations of interest payable by Borrower under this Agreement or any
other Loan Document are to be made on the basis of the nominal interest rate
described herein and thereinand not on the basis of effective yearly rates or
on any other basis which gives effect to the principle of deemed reinvestment
of interest. The parties acknowledge that there is a material difference
between the stated nominal interest rates andthe effective yearly rates of
interest and that they are capable of making the calculations required to
determine such effective yearly rates of interest,
(e)
any provision of this Agreement that would oblige Borrower to pay any fine,
penalty or rate of interest on any arrears of principal or interest secured by
a mortgage on real propertyor hypothec on immovables that has the effect of
increasing the charge on arrears beyond
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the rate of interest payable on principal money not in arrears shall not apply
to Borrower, which shall be required to pay interest on money in arrears at
the same rate of interest payable onprincipal money not in arrears, and
(f)
if there is a conflict, inconsistency, ambiguity or difference between any
provision of this
Section 2.9
and any other Section of this Agreement or any other LoanDocument with respect
to Borrower then the provisions of this
Section 2.9
shall prevail and be paramount.
2.10.
Tax Treatment
. The Borrower and the Lenders agree (i) that the Term Loan is debt forfederal
income tax purposes, (ii) that the "issue price" of the Term Loan is 100% and
that the Term Loan is not governed by the rules set out in Treasury
Regulations Section 1.1275-4, and (iii) to adhere to this Agreementfor federal
income tax purposes and not to file any tax return, report or declaration
inconsistent herewith unless otherwise required due to a Change in Law. The
inclusion of this Section 2.10 is not an admission by any Lender that it
issubject to United States taxation.
2.11.
CDOR Rate
Benchmark
Replacement
Setting
.
(a)
Benchmark Replacement
. Notwithstanding anything to the contrary herein or in any other Loan
Document, upon the occurrence of a Benchmark Transition Event
or an Early Opt-in Election, asapplicable
, with respect to any Benchmark
, Agentand
the
Administrative Borrower may amend this Agreement to replace
the Adjusted CDOR
suchBenchmark
with a Benchmark Replacement. Any such amendment with respect to a Benchmark
Transition Event will become effective at 5:00 p.m. on the fifth (5th)
Business Day after Agent hasposted such proposed amendment to all Lenders and
the
Administrative Borrower so long as Agent has notreceived, by such time,
written notice of objection to such amendment from Lenders comprising the
Required Lenders.
Any such amendment with respect to an EarlyOpt-in Election will become
effective on the date that Lenders comprising the Required Lenders have
delivered to Agent written notice that such Required Lenders accept such
amendment.
Noreplacement of
the AdjustedCDOR
a Benchmark
with a Benchmark Replacementpursuant to this
Section
2.11
2.11
will occur prior to the applicable Benchmark Transition Start Date.
(b)
Benchmark Replacement
Conforming Changes
.In connection with the
use, administration, adoption or
implementation of a Benchmark Replacement, Agent will have the right to make
Benchmark Replacement
Conforming Changes from time to time and, notwithstanding anything to the
contrary herein or in any other Loan Document, any amendments implementing such
Benchmark Replacement
Conforming Changes will become effective without any further action or consent
of any otherparty to this Agreement
or any other Loan Document
.
(c)
Notices; Standards for Decisions and Determinations
. Agent will promptly notify
the
Administrative Borrower and the Lenders of
:
(i)
(1)
any occurrence of aBenchmark Transition Event or an Early Opt-in Election, as
applicable, and its related Benchmark Replacement Date and Benchmark
Transition Start Date;
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(ii)
the implementation of any Benchmark Replacement
;
(iii)
and (2) the effectiveness of any Conforming Changes in connection with the
use, administration, adoption orimplementation of a Benchmark Replacement.
Agent will promptly notify the Administrative Borrower of the commencement
of any Benchmark Unavailability Period.
the effectiveness of any Benchmark Replacement Conforming Changes; and
(iv) the commencement or conclusion
of any Benchmark Unavailability Period.
Any determination, decision or election that may be made by Agent or,
if applicable any Lender (or group of
Lenders
)
pursuant to this
Section
2.11,
2.11(c)
including any determination with respect to a tenor, rate or adjustment or of
the occurrence or non-occurrence of an event, circumstance or date and any
decision to take or refrain from taking any action
or any selection
, will be conclusive and binding absent manifest errorand may be made in its
or their sole discretion and without consent from any other party hereto
or any otherLoan Document
, except, in each case, as expressly required pursuant to this
Section
2.11
2.11(c)
.
(d)
Benchmark Unavailability Period
. Upon theAdministrative Borrower's receipt of notice of the commencement of a
Benchmark Unavailability Period
, the Administrative Borrower
will be deemed to have
converted any request for a borrowing of, conversionto or continuation of Term
Loans into a request for a borrowing of or conversion to a loan bearing
withrespect to a given Benchmark, the obligations under the Term Loan shall,
as of the next Interest Payment Date, bear
interest at a rate equal to the Adjusted Canadian Prime Rate plus the
ApplicableMargin
less one hundred twenty five (125) basis points
.
2.12.
Inability to Determine
Rates.
(a)
Subject to Section 2.11, if, on or prior to each Interest Payment Date, the
Agent determines (which determination shallbe conclusive and binding absent
manifest error) that "Adjusted Term CORRA" cannot be determined pursuant to
the definition thereof, for reasons other than a Benchmark Transition Event,
the Administrative Agent will promptly so notify theAdministrative Borrower
and each Lender.
(e)
No Liability
. Agent does not warrant or accept responsibilityfor, and shall not have any
liability with respect to
, the administration, submission
or any other matter related to
the
rates in the definition of
"Adjusted CDOR"
or with respect to any
rate that is an alternative or replacement for orsuccessor to any such
rate (including any Benchmark Replacement) or
the effect of any of the foregoing, or of any Benchmark Replacement Conforming
Changes.
(f) Certain Defined Terms. As used in thisSection 2.11.
"
Adjusted
Canadian Prime Rate
" means, for any day,a rate per annum equal to the "prime rate" for Canadian
Dollar commercial loans made in Canada as reported by Thomson Reuters under
Reuters Instrument Code <CAPRIME=> on the "CA Prime Rate (Domestic
Interest Rate) -Composite Display" page to the extent such page is available
(or any successor page or such other commercially available service or
source(including the Canadian Dollar
-19-
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"prime rate" announced by a Schedule I bank under the
Bank Act
(Canada)) as Agent may designatefrom time to time) (and, if any such reported
rate is below one percent, then Adjusted Canadian Prime Rate shall be deemed
to be one percent). Each determination of
the Adjusted Canadian Prime Rate shall
be made by Agent and shall beconclusive in the absence of manifest error.
"
Benchmark Replacement"
means the
sum of: (a) thealternate benchmark rate that has
been selected by Agent giving due consideration to (i) any selection or
recommendation of a
replacement rate or the mechanism for determining such a rate by the
relevant Governmental Authority
or (ii) any evolving or then-prevailing market convention for determining a
rate of
interest as a replacement to the Adjusted CDOR for Canadiandollar-denominated
syndicated
credit facilities and (b) the
Benchmark Replacement Adjustment;
provided
that,
ifthe Benchmark
Replacement as so determined would be less than
one percent (1%), the Benchmark Replacement will be deemed to be one percent
(1%)
for the purposes of this Agreement
.
"
Benchmark ReplacementAdjustment"
means, with respect to any replacement of the Adjusted CDOR with an Unadjusted
Benchmark Replacement for a ninety (90) day period
,the spread adjustment, or method for calculating or determining such spread
adjustment,
(which may be a positive or negative value or zero) that hasbeen selected by
Agent
giving due consideration to(i
) any selection or recommendation of a spread adjustment, or method for
calculating or determining such spread adjustment, for the replacementof
the Adjusted CDOR
with the applicable UnadjustedBenchmark Replacement by the
relevant Governmental Authority, or (ii)
any evolving or then-prevailing market convention for
determining a spreadadjustment, or method for calculating or determining such
spread
adjustment, for the replacement of
the Adjusted CDOR
with the applicable Unadjusted Benchmark Replacement for
Canadian dollar denominated syndicated credit facilities at such time.
"Benchmark Replacement ConformingChanges"
means, with respect to
any Benchmark Replacement, any technical, administrative or operational
changes that Agent decides may beappropriate to reflect the adoption and
implementation of
such Benchmark Replacement and to permit the
administration thereof by Agent in a manner substantially consistent with
market practice (or, if Agent decides that adoption of any portion of such
market practice is notadministratively feasible or if Agent determines that no
market practice for the administration of
the
Benchmark Replacement exists, in such other manner of administration as Agent
decides is reasonably necessary in connection with the administration of
thisAgreement
).
"Benchmark ReplacementDate"
means the earlier
to occur of the following events with respect to the
Adjusted CDOR:
(a)
in the case of clause (a) or (b) of the definition of "Benchmark Transition
Event," the later of (i) the date of the public statement or publication of
information
referenced therein and (ii) the date on which the administrator of
theAdjusted CDOR
permanently or indefinitely ceases to provide
the Adjusted CDOR; or
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(b)
in the case of clause (c) of the definition of "BenchmarkTransition Event
," the date of the public statement or publication of information referenced
therein.
"Benchmark TransitionEvent"
means the occurrence of one or more of the following
events with respect to the
Adjusted CDOR:
(a)
a public statement or publication of information by or on behalf of
theadministrator of
the Adjusted CDOR
announcing thatsuch administrator has ceased or will cease to provide
the Adjusted CDOR , permanently or indefinitely,
provided that, at the time
of such statement or publication, there is nosuccessor administrator that will
continue to
provide
the Adjusted CDOR;
(b) a public statement orpublication of information by the regulatory
supervisor for the administrator of the Adjusted CDOR
, an insolvency official with jurisdiction over theadministrator for
the Adjusted CDOR
, a resolutionauthority with jurisdiction over the administrator for
the Adjusted CDOR
or a court or an entity with similar insolvency or resolution authority over
the administrator for
the Adjusted CDOR
, which states that the administrator of
the Adjusted CDOR
has ceased or will cease to provide
the Adjusted CDOR permanently or indefinitely,
provided that, at the timeof such statement or publication, there is no
successor administrator that will continue to provide
the Adjusted CDOR; or
(c)
a public statement or publication of information by the regulatorysupervisor
for the administrator of
the Adjusted CDOR announcing that the Adjusted CDOR is no longer representative.
"Benchmark Transition StartDate"
means (a) in the case of a Benchmark Transition Event, the earlier of (i) the
applicable Benchmark Replacement Date and (ii) if such Benchmark Transition
Event is
a public statement or publication of information
of a prospective event,the 90
th
day prior to the expected date of such event as of such public statement or
publication of information (or if the expected date of such prospective event
is fewer than 90 days after suchstatement or publication, the date of such
statement or publication) and (b) in the case of an Early Opt-in Election, the
date specified by Agent or the Required Lenders, as applicable, by notice to
the Administrative Borrower, Agent (in thecase of such notice by the Required
Lenders) and the Lenders.
"Benchmark UnavailabilityPeriod"
means, if a Benchmark Transition Event and its related Benchmark Replacement
Date have occurred with respect to the Adjusted CDOR andsolely to the extent
that the Adjusted CDOR has not been replaced with a Benchmark
Replacement, the period (i) beginning at the time that suchBenchmark Replacement
Date has occurred if, at such time, no Benchmark Replacement has replaced
the Adjusted CDOR for all purposes hereunder in accordance with Section
2.11
, and (ii
) ending at the time that a Benchmark Replacement has replaced
theAdjusted CDOR for all purposes hereunder pursuant to Section
2.11.
"
Early Opt-in Election
"means the occurrence of:
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(a) (i) a determination by Agent or (ii) a notification by the Required Lenders
to Agent (with a copy to the Administrative Borrower) that the Required
Lenders have determined that Canadian dollar-denominated syndicated credit
facilities being executedat such time, or that include language similar to
that contained in this Section 2.11 are being executed or amended, as
applicable, to incorporate or adopt a new benchmark interest rate to
replace the Adjusted CDOR; and
(b)
the election
Upon delivery of such notice
by Agent
and
to
the Administrative Borrower
that an Early Opt-in Election has occurred and the provision by Agent of
written notice of suchelection to the Lenders of written notice of such
election to Agent.
under Section 2.11(a), theobligations under the Term Loan shall, as of the
next Interest Payment Date, bear interest at a rate equal to the Adjusted
Canadian Prime Rate Plus the Applicable Margin until such time as the Agent
revokes such notice.
"
Unadjusted BenchmarkReplacement
" means the
Benchmark Replacement excluding the Benchmark Replacement Adjustment.
2.13.
Illegality.
If any Lender determines that any law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender to
make, maintain or fund loans whose interest is determined by reference to
AdjustedTerm CORRA or to determine or charge interest rates based upon
Adjusted Term CORRA, then, on notice thereof by such Lender to the
Administrative Borrower through the Agent, the obligations under the Term Loan
to such Lender shall, as of the nextInterest Payment Date if it would not be
unlawful for such Lender to do so to such day, and otherwise immediately, bear
interest at a rate equal to the Adjusted Canadian Prime Rate Plus the
Applicable Margin until such time as the Agent revokes suchnotice unless
3.
CONDITIONS; TERM OF AGREEMENT.
3.1.
Conditions Precedent to Effectiveness of Agreement
.
This Agreement shall not be effective andthe Lenders shall not be required to
fund their respective portions of the Term Loan hereunder until the date that
each of the following conditions has been satisfied (in each case, in form and
substance satisfactory to the Agent and each of theLenders):
(a)
This Agreement and each other Loan Document shall have been duly executed and
delivered to the Agent by each of the signatories thereto, and each Loan Party
shall be in compliancewith all terms thereof.
(b)
Notes shall have been executed by the Borrower and delivered to each Lender
that requests issuance of a Note.
(c)
The Agent shall be satisfied that the Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable security interest
in and Lien upon theCollateral (subject only to the first priority security
interest and Lien in favor of the Revolving Agent and other Permitted Liens)
and shall have received (i) to the extent not previously delivered to the
Agent prior to the date hereof,evidence that all filings, recordings,
deliveries of instruments and other actions necessary or desirable in the
commercially reasonable opinion of the Agent to
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protect and preserve such security interests shall have been duly effected,
(ii) RPMRR, UCC, PPSA and Lien searches (and the equivalent thereof in all
applicable foreign jurisdictions) andother evidence reasonably satisfactory to
the Agent that such Liens are the only Liens upon the Collateral, except
Permitted Liens, (iii) to the extent not previously delivered to the Agent
prior to the date hereof, evidence that the payment(or evidence of provision
for payment) of all filing and recording fees and taxes due and payable in
respect thereof has been made in form and substance reasonably satisfactory to
the Agent and (iv) to the extent not previously delivered to theAgent prior to
the date hereof, all Lien Waivers and Lien Priority Agreements necessary or
desirable in the reasonable opinion of the Agent.
(d)
To the extent not previously delivered to the Agent prior to the date hereof,
the Agent shall have received (i) duly executed copies of the Revolving Credit
Agreement, theMontrovest Debt Documents, the Management Agreement and the
Rolex Canada Documents, certified by a Senior Officer of the Borrower as
complete and correct (with such certification to be in such Person's capacity
as a Senior Officer of theBorrower and not in such Person's individual
capacity), and the Agent shall be satisfied with the terms and conditions and
provisions thereof, which documents shall be in full force and effect and
without amendment except attached thereto; and(ii) duly executed estoppel
letters with respect to consignment filings on record in any province in
Canada to the extent that the collateral description in such consignment
filings is not sufficiently limited as determined by the Agent in
itscommercially reasonable discretion.
(e)
The Agent shall have received a certificate, in form and substance reasonably
satisfactory to it, from a Senior Officer of the Borrower (with such
certification to be in suchPerson's capacity as a Senior Officer of the
Borrower and not in such Person's individual capacity) certifying that:
(i)after giving effect to the Term Loan and transactions hereunder, (A) each
Loan Party is Solvent;(B) no Default or Event of Default exists; (C) the
representations and warranties set forth in Section 4 are true and correct in
all material respects; and (D) each Loan Party has complied in all material
respects with allagreements and conditions to be satisfied by it under the
Loan Documents;
(ii)there is no action, suit,investigation or proceeding pending or, to the
knowledge of the Loan Parties, threatened in any court or before any
arbitrator or governmental authority that could reasonably be expected to have
a Material Adverse Effect;
(iii)no law or regulation to which any Loan Party is subject is applicable to
the transactions contemplatedhereby which could reasonably be expected to have
a Material Adverse Effect on any Loan Party or a Material Adverse Effect on
the transactions contemplated hereby;
(iv)no Material Adverse Effect shall have occurred since October 23, 2017;
(v)the Revolving Loan Documents shall be in full force and effect and no
default or event of default shallexist thereunder on the Closing Date;
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(vi)all accounts payable, leases, payments due under otherIndebtedness and
Taxes are not past due, excluding any good faith disputes; and
(vii)there is no defaultin existence under any Material Contract by a Loan
Party.
(f)
The Agent shall have received a certificate of a dulyauthorized officer of
each Loan Party (with such certification to be in such Person's capacity as an
officer of such Loan Party and not in such Person's individual capacity),
certifying (i) that the attached copy of such LoanParty's Organizational
Documents (including, without limitation, such Loan Party's charter documents)
are true and complete and in full force and effect, and remain in full force
and effect, (ii) that an attached copy of resolutionsauthorizing execution and
delivery of the Loan Documents is true and complete, and that such resolutions
are in full force and effect, were duly adopted, have not been amended,
modified or revoked, and constitute all resolutions adopted with respectto
this credit facility, (iii) to the title, name and signature of each Person
authorized to sign the Loan Documents, and (iv) that either (a) the attached
copies are all of the consents, licenses and approvals required in
connectionwith the execution, delivery and performance by such Loan Party and
the validity against such Loan Party of the Loan Documents to which it is a
party, and such consents, licenses and approvals shall be in full force and
effect, or (v) that nosuch consents, licenses or approvals are so required.
The Agent may conclusively rely on this certificate until it is otherwise
notified by the applicable Loan Party in writing.
(g)
Each of the Lenders and the Agent shall have received favorable legal opinions
addressed to the Lenders and the Agents, dated as of the Closing Date, in form
and substance reasonablysatisfactory to the Lenders and the Agents, from (i)
Stikeman Elliott LLP, Canadian counsel to the Borrower and their Subsidiaries;
and (ii) local Canadian counsel to the Borrower and their Subsidiaries with
respect to filing andperfection matters in the applicable provinces and
territories of Canada.
(h)
The Agent shall have received good standing orsubsistence certificates, as
applicable, for each Loan Party, issued by the appropriate official of such
Loan Party's jurisdiction of organization, dated as of a recent date.
(i)
The Agent shall (i) be reasonably satisfied with the amount, types and terms
and conditions of all insurance maintained by the Loan Parties and their
Subsidiaries, and(ii) have received certificates of insurance identifying
insurers, types of insurance, insurance limits and policy terms and with
endorsements naming the Agent, for the benefit of the Lenders, as lender's
loss payee or additional insured,as applicable, with respect to each insurance
policy required to be maintained with respect to the Collateral and otherwise
in form and substance reasonably satisfactory to the Agent.
(j)
The Borrower shall have paid to the Agent those fees due on the Closing Date
in the amounts set forth herein.
(k)
To the extent not previously delivered to the Agent prior to the date hereof,
the Agent shall have received duly executed copies of the Management
Subordination Agreement
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and the Montrovest Subordination Agreement, each of which shall be in form and
substance satisfactory to the Agent and which shall be in full force and
effect.
(l)
The Agent shall have entered into (i) the Intercreditor Agreement with the
Revolving Loan Agent, and (ii) the Quebec Subordination Agreement with
InvestissementQuebec, each of which agreement shall be in form and substance
satisfactory to the Agent.
(m)
The Agent shall have received a Borrowing BaseCertificate indicating that
Excess Availability as of the Closing Date, after giving effect to the
transactions contemplated hereby (including the making of the Term Loan on the
Closing Date) and by the Revolving Loan Documents, is not less than 14%of the
Combined Loan Cap.
(n)
The Agent shall have received (i) the audited financial statements of the
Borrower for the Fiscal Year ended on March 25, 2017, (ii) the unaudited
financial statementsof the Borrower for the period ending September 30, 2017,
and (iii) forecasts prepared by management of the Borrower of balance sheets,
income statements and cash flow statements of the Borrower on a monthly basis
for the current FiscalYear and next twelve months, and there shall have been
no material misstatements in or omissions from the materials previously
furnished to the Agent for its review.
(o)
There have occurred no material changes in governmental regulations or
policies adversely affecting the Loan Parties, the Agent or the Lenders party
to this transaction.
(p)
The Agent shall have received an executed letter of direction, in form and
substance satisfactory to the Agent.
(q)
The Agent shall have received an Information Certificate dated as of the date
hereof, executed by the Borrower.
3.2.
[Reserved]
.
3.3.
Maturity
. This Agreement shall continue in full force and effect for a term ending on
theMaturity Date.
3.4.
Effect of Maturity
. On the Maturity Date, all commitments of the LenderGroup to provide
additional credit hereunder shall automatically be terminated and all of the
Obligations shall become due and payable immediately without notice or demand
and Borrower shall be required to repay all of the Obligations in full.
Notermination of the obligations of the Lender Group (other than payment in
full of the Obligations and termination of the Commitments) shall relieve or
discharge any Loan Party of its duties, obligations, or covenants hereunder or
under any otherLoan Document and Agent's Liens in the Collateral shall
continue to secure the Obligations and shall remain in effect until all
Obligations have been paid in full and the Commitments have been terminated.
When all of the Obligations have beenpaid in full and the Lender Group's
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Agent will, at Borrower's sole expense, execute and
deliver any termination statements, lien releases,discharges of security
interests, and other similar discharge or release
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documents (and, if applicable, in recordable form) as are reasonably necessary
to release, as of record, Agent's Liens and all notices of security interests
and liens previously filed byAgent.
3.5.
Post-Closing Covenants
. Borrower covenants and agrees to satisfy each item on
Schedule 3.5
on or before the date set forth on
Schedule 3.5
for such item.
4.
REPRESENTATIONS ANDWARRANTIES.
In order to induce the Lender Group to enter into this Agreement, Borrower
makes the followingrepresentations and warranties to the Lender Group which
shall be true, correct, and complete, in all material respects (except that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualifiedor modified by materiality in the text
thereof), as of the Closing Date, and shall be true, correct, and complete, in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties thatalready are qualified or
modified by materiality in the text thereof), as of the date on which the
Borrower delivers a Compliance Certificate, as though made on and as of the
date of such Compliance Certificate (except to the extent that suchrepresentatio
ns and warranties relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in all material
respects (except that such materiality qualifier shall not be applicable to
anyrepresentations and warranties that already are qualified or modified by
materiality in the text thereof) as of such earlier date) and such
representations and warranties shall survive the execution and delivery of
this Agreement:
4.1.
Due Organization and Qualification;
Subsidiaries
.
(a)
Borrower and, subject to the completion of any transaction permitted by
Section 6.3
, each of its Subsidiaries (i) is duly organized and existing and in good
standingunder the laws of the jurisdiction of its organization, (ii) is
qualified or registered to do business in any jurisdiction where the failure
to be so qualified would reasonably be expected to result in a Material
Adverse Effect, and(iii) has all requisite corporate, limited liability or
other organizational power and authority (as applicable) to own and operate
its properties, to carry on its business as now conducted and as proposed to
be conducted, to enter into theLoan Documents to which it is a party and to
carry out the transactions contemplated thereby.
(b)
Set forth on
Schedule 4.1
is a complete andaccurate description as of the Closing Date of the authorized
Equity Interests of Borrower and each of its Subsidiaries, by class, and, as
of the Closing Date, a description of the number of shares of each such class
that are issued and outstanding.Neither Borrower nor any of its Subsidiaries
is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its Equity Interests or any security
convertible into or exchangeable for any of itsEquity Interests except for any
Equity Interests (other than Disqualified Equity Interests) that are permitted
by the Loan Documents.
(c)
Set forth on
Schedule 4.1
(as such Schedule may be updated from time to time to reflect changes
resulting from transactions permitted under this Agreement), is a complete
andaccurate list of the Loan Parties' direct and indirect Subsidiaries,
showing: (i) the number of
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shares of each class of common and preferred Equity Interests authorized for
each of such Subsidiaries, and (ii) the number and the percentage of the
outstanding shares of each such classowned directly or indirectly by Borrower.
All of the outstanding Equity Interests of each such Subsidiary has been
validly issued and is fully paid and non-assessable.
(d)
Except as set forth on
Schedule 4.1,
there are no subscriptions, options, warrants, or calls relating to any shares
of Borrower's or any of its Subsidiaries' EquityInterests as of the Closing
Date, including any right of conversion or exchange under any outstanding
security or other instrument.
4.2.
Due Authorization; No Conflict
.
(a)
As to each Loan Party, the execution, delivery, and performance by such Loan
Party of the Loan Documents to which it is a party have been duly authorized
by all necessaryorganizational action on the part of such Loan Party.
(b)
As to each Loan Party, the execution, delivery, andperformance by such Loan
Party of the Loan Documents to which it is a party do not and will not (i)
violate any material provision of federal, provincial, state, foreign or local
law or regulation applicable to any Loan Party or itsSubsidiaries, or any
order, judgment, or decree of any court or other Governmental Authority
binding on any Loan Party or its Subsidiaries where any such violation would
individually or in the aggregate reasonably be expected to have a
MaterialAdverse Effect, (ii) violate the Governing Documents of any Loan Party
or its Subsidiaries, (iii) conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under any material
agreement of anyLoan Party or its Subsidiaries where any such conflict, breach
or default would individually or in the aggregate reasonably be expected to
have a Material Adverse Effect, (iv) result in or require the creation or
imposition of any Lien of any naturewhatsoever upon any assets of any Loan
Party or its Subsidiaries, other than Permitted Liens, or (v) require any
approval of any holder of Equity Interests of a Loan Party or its Subsidiaries
or any approval or consent of any Person under anymaterial agreement of any
Loan Party or its Subsidiaries, other than consents or approvals that have
been obtained and that are still in force and effect and except, in the case
of material agreements, for consents or approvals, the failure toobtain would
not individually or in the aggregate reasonably be expected to cause a
Material Adverse Effect.
4.3.
Governmental Consents
. The execution, delivery, and performance by each Loan Party of the
LoanDocuments to which such Loan Party is a party and the consummation of the
transactions contemplated by the Loan Documents do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, anyGovernmental Authority, other than registrations, consents,
approvals, notices, or other actions that have been obtained and that are
still in force and effect and except for filings and recordings with respect
to the Collateral to be made, orotherwise delivered to Agent for filing or
recordation, as of the Closing Date or where any such failure to do the
foregoing would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect.
4.4.
Binding Obligations; Perfected Liens
.
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(a)
Each Loan Document has been duly executed and delivered by each Loan Party
that is a party thereto and is the legally valid and binding obligation of
such Loan Party, enforceableagainst such Loan Party in accordance with its
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rightsgenerally.
(b)
Agent's Liens are validly created, perfected (other than (i) any Excluded
Deposit Accounts (as defined in the Canadian Security Documents)), and first
priority Liens,subject only to Permitted Liens, Purchase Money Liens securing
Permitted Purchase Money Indebtedness and Liens securing the interests of
lessors under Capital Leases.
4.5.
Title to Assets; No Encumbrances
. Each of the Loan Parties and its Subsidiaries has(a) good, sufficient and
legal title to (in the case of fee interests in Real Property), (b) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), and (c) good and marketable title to (in thecase of all other
personal property), all of their respective assets reflected in the most
recent financial statements delivered pursuant to
Section 5.1
, in each case except for (i) assets disposed of since the date of
suchfinancial statements to the extent permitted hereby, and (ii) minor
defects in title that do not interfere with any sale, transfer, or other
disposition of such property, or its ability to conduct its business as
currently conducted or toutilize such properties for their intended purposes.
All of such assets are free and clear of Liens except for Permitted Liens.
4.6.
Litigation
.
(a)
There are no actions, suits, or proceedings pending or, to the knowledge of
Borrower, after due inquiry, threatened in writing against a Loan Party or any
of its Subsidiaries thateither individually or in the aggregate would
reasonably be expected to result in a Material Adverse Effect.
(b)
Schedule 4.6(b)
sets forth a complete andaccurate description, with respect to each of the
actions, suits, or proceedings with asserted liabilities in excess of, or that
could reasonably be expected to result in liabilities of a Loan Party in
excess of, $1,000,000 that, as of the ClosingDate, is pending or, to the
knowledge of Borrower, after due inquiry, threatened in writing against a Loan
Party or any of its Subsidiaries, of (i) the parties to such actions, suits,
or proceedings, (ii) the nature of the dispute that isthe subject of such
actions, suits, or proceedings, (iii) the procedural status, as of the Closing
Date, with respect to such actions, suits, or proceedings, and (iv) whether
any liability of the Loan Parties' and their Subsidiaries inconnection with
such actions, suits, or proceedings is covered by insurance.
4.7.
Compliancewith Laws
. No Loan Party nor any of its Subsidiaries (a) is in violation of any
applicable laws, rules, regulations, executive orders, or codes (including
Environmental Laws) that, individually or in the aggregate, would reasonably
beexpected to result in a Material Adverse Effect, or is subject to or in
default with respect to any final judgments, writs, injunctions, decrees,
rules or regulations of any court or any federal, provincial, state, municipal
or other governmentaldepartment, commission, board, bureau, agency or
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instrumentality, domestic or foreign, in each case that, individually or in
the aggregate, would reasonably be expected to result in a Material Adverse
Effect.
4.8.
Financial Statements; No Material Adverse Effect
. All historical financial statements relatingto the Loan Parties and their
Subsidiaries that have been delivered by Borrower to Agent have been prepared
in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end
auditadjustments) and, present fairly in all material respects, the Loan
Parties' and their Subsidiaries' consolidated financial condition as of the
date thereof and results of operations for the period then ended. Since
October 23, 2017,no event, circumstance, or change has occurred that has or
would reasonably be expected to result in a Material Adverse Effect with
respect to the Loan Parties and their Subsidiaries.
4.9.
Solvency
.
(a)
The Loan Parties, taken as a whole, are Solvent.
(b)
No transfer of property is being made by any Loan Party and no obligation is
being incurred by any Loan Party in connection with the transactions
contemplated by this Agreement orthe other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of such Loan
Party.
4.10.
Canadian Pension Plan
. As of the Closing Date, no Loan Party, norany of its Subsidiaries, maintains
or contributes to any Canadian Pension Plans nor have any liabilities or
obligations in respect of a Canadian Defined Benefit Plan that has been
terminated or wound up.
4.11.
Environmental Condition
. Except as set forth on
Schedule 4.11
or except as,individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect, (a) no Loan Party's nor any
of its Subsidiaries' properties or assets has ever been used by a Loan Party,
its Subsidiaries, orby previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such disposal, production, storage, handling, treatment, release or
transport was in violation, in anyrespect, of or has given rise to liability
of a Loan Party or any of its Subsidiaries, or to the knowledge of Borrower,
liability of previous owners or operators, under any applicable Environmental
Law, (b) no Loan Party's nor any of itsSubsidiaries' properties or assets has
ever been designated or identified in any manner pursuant to any Environmental
Law as a Hazardous Materials disposal site, (c) no Loan Party nor any of its
Subsidiaries has received written noticethat a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property owned
or operated by a Loan Party or its Subsidiaries, and (d) no Loan Party nor any
of its Subsidiaries nor any of their respective facilitiesor operations is
subject to any outstanding Environmental Action or other written order,
consent decree, or settlement agreement with any Person relating to any
Environmental Law or Environmental Liabilities.
4.12.
Complete Disclosure
. All factual information taken as a whole (other than forward-lookinginformatio
n and projections and information of a general economic nature and general
information about Borrower's industry) furnished by or on behalf of a Loan
Party or its Subsidiaries in writing to Agent or any Lender (including
allinformation contained in the
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Schedules hereto or in the other Loan Documents) for purposes of or in
connection with this Agreement or the other Loan Documents, and all other such
factual information taken as a whole (otherthan forward-looking information
and projections and information of a general economic nature and general
information about Borrower's industry) hereafter furnished by or on behalf of
a Loan Party or its Subsidiaries in writing to Agent or anyLender will be,
true and accurate, in all material respects, on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in
anymaterial respect at such time in light of the circumstances under which
such information was provided. The Projections delivered to Agent on or about
April 17, 2018 represent, and as of the date on which any other Projections
are delivered toAgent, such additional Projections represent, Borrower's good
faith estimate, on the date such Projections are delivered, of the Loan
Parties' and their Subsidiaries' future performance for the periods covered
thereby based uponassumptions believed by Borrower to be reasonable at the
time of the delivery thereof to Agent (it being understood that such
Projections are subject to significant uncertainties and contingencies, many
of which are beyond the control of the LoanParties and their Subsidiaries, and
no assurances can be given that such Projections will be realized, and
although reflecting Borrower's good faith estimate, projections or forecasts
based on methods and assumptions which Borrower believed tobe reasonable at
the time such Projections were prepared, are not to be viewed as facts, and
that actual results during the period or periods covered by the Projections
may differ materially from projected or estimated results).
4.13.
Patriot Act
; Canadian AML and Anti-Terrorism Laws
.To the extent applicable, each Loan Party and each of its Subsidiaries is in
compliance in all material respects with the (a)
Trading with the Enemy Act
, as amended, and each of the foreign assets control regulations of the United
StatesTreasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any
other enabling legislation or executive order relating thereto, and (b)
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and ObstructTerrorism (
USA Patriot Act
of 2001) (the "
Patriot Act
") and all applicable Canadian Anti-Money Laundering & Anti-Terrorism
Legislation. No part of the proceeds of the Loans made hereunder will be used
by anyLoan Party or any of their Affiliates, directly or indirectly, for any
payments to any governmental official or employee, political party, official
of a political party, candidate for political office, or anyone else acting in
an official capacity,in order to obtain, retain or direct business or obtain
any improper advantage, in violation of the
United States Foreign Corrupt Practices Act
of 1977, as amended.
4.14.
Indebtedness
. Set forth on Schedule 4.14 is a true and complete list of all Indebtedness
ofeach Loan Party and each of its Subsidiaries outstanding as of the Amendment
No. 2 Effective Date that is to remain outstanding immediately after giving
effect to the closing hereunder on the Amendment No. 2 Effective Date and
suchSchedule accurately sets forth the aggregate principal amount of such
Indebtedness as of the Amendment No. 2 Effective Date.
4.15.
Payment of Taxes
. All Federal, provincial and state income Tax returns and all other
materialTax returns and reports of each Loan Party and its Subsidiaries
required to be filed by any of them have been timely filed, and all Federal,
provincial and state income Taxes and all other material Taxes shown on such
Tax returns to be due andpayable and all material assessments, fees and other
governmental charges upon a Loan Party and its Subsidiaries and upon
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their respective assets, income, businesses and franchises that are due and
payable have been paid when due and payable, except (a) where failure to do so
could not reasonably be expected tohave a Material Adverse Effect; or (b) the
validity of such Tax is the subject of a Permitted Protest as contemplated by
Section 5.5
Each Loan Party and each of its Subsidiaries have made adequate provision in
accordance with GAAPfor all Taxes not yet due and payable. Borrower does not
know of any material proposed Tax assessment against a Loan Party or any of
its Subsidiaries that is not being actively contested by such Loan Party or
such Subsidiary diligently, in goodfaith, and by appropriate proceedings;
provided
such reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
4.16.
Margin Stock
. No Loan Party nor any of its Subsidiaries is engaged principally, or as one
ofits important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. No part of the proceeds of
the loans made to Borrower will be used to purchase or carry any Margin Stock
or to extend credit toothers for the purpose of purchasing or carrying any
Margin Stock or for any purpose that violates the provisions of Regulation T,
U or X of the Board of Governors.
4.17.
Governmental Regulation
. No Loan Party nor any of its Subsidiaries is subject to regulationunder the
Federal Power Act
or the
Investment Company Act
of 1940 or under any other federal, provincial or state statute or regulation
which may limit its ability to incur Indebtedness or which may otherwise
render all or any portionof the Obligations unenforceable. No Loan Party nor
any of its Subsidiaries is a "registered investment company" or a company
"controlled" by a "registered investment company" or a "principal underwriter"
of a"registered investment company" as such terms are defined in the
Investment Company Act
of 1940.
4.18.
OFAC
. No Loan Party nor any of its Subsidiaries is in violation of any of the
country or listbased economic and trade sanctions administered and enforced by
OFAC or any Canadian Governmental Authority. No Loan Party nor any of its
Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its
assets located inSanctioned Entities, or (c) to its knowledge derives revenues
directly or indirectly, from investments in, or transactions with Sanctioned
Persons or Sanctioned Entities. No proceeds of any loan made hereunder will be
used to fund anyoperations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity.
4.19.
Employee and Labor Matters
. Except as set forth on
Schedule 4.19
, no Loan Party norany of its Subsidiaries is a party to or otherwise bound by
any collective bargaining or similar agreement with any union or other labor
organization. Except to the extent would not, individually or in the
aggregate, reasonably be expected to resultin a Material Adverse Effect, there
is (i) no unfair labor practice charge or complaint pending or, to the
knowledge of Borrower, threatened against Borrower or any of its Subsidiaries
before any Governmental Authority and no grievance orarbitration proceeding
pending or threatened against Borrower or any of its Subsidiaries which arises
out of or under any collective bargaining agreement and that would reasonably
be expected to result in a material liability, (ii) no strike,labor dispute,
slowdown, stoppage or similar action or grievance pending or threatened in
writing against Borrower or its Subsidiaries that could reasonably be expected
to result in a material liability, or (iii) to the knowledge of Borrower,after
due inquiry, no union representation question existing with respect
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to the employees of Borrower or its Subsidiaries and no union organizing
activity taking place with respect to any of the employees of Borrower or its
Subsidiaries. None of Borrower or itsSubsidiaries has incurred any liability
or obligation under the
Worker Adjustment and Retraining Notification Act
or similar state or foreign law, which remains unpaid or unsatisfied which
could reasonably be expected to result in a MaterialAdverse Effect. The hours
worked and payments made to, classification of, employees of Borrower and its
Subsidiaries have not been in violation of the
Fair Labor Standards Act
or any other applicable legal requirements, except to the extentsuch
violations would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect. All material payments due from
Borrower or its Subsidiaries on account of wages and employee health and
welfare insurance andother benefits have been paid or accrued as a liability
on the books of Borrower and all remittances and withholdings on account of
Taxes and employer or employee contribution to benefit plans have been
remitted to the applicable GovernmentalAuthority when due, except where the
failure to do so would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
4.20.
Intellectual Property
. Each Loan Party and Subsidiary owns or has the lawful right to use
allIntellectual Property necessary for the conduct of its business, without
conflict with any rights of others. There is no pending or, to any Loan
Party's knowledge, threatened material Intellectual Property Claim with
respect to any Loan Party,any Subsidiary or any of their Property (including
any Intellectual Property). All Intellectual Property owned by any Loan Party
or any Subsidiary and registered with the U.S. Patent and Trademark Office,
the Canadian Intellectual Property Office orany other applicable Governmental
Authority is identified on
Schedule 4.20
.
4.21.
EligibleAccounts
. As to each Account that is identified by Borrower as an Eligible Account or
an Eligible Credit Card Receivable in a Borrowing Base Certificate submitted
to Agent, such Account is (a) a bona fide existing payment obligation ofthe
applicable Account Debtor created by the sale and delivery of Inventory or the
rendition of services to such Account Debtor in the ordinary course of
Borrower's business, (b) owed to a Borrower without any known defenses,
disputes,offsets, counterclaims, or rights of return or cancellation, and (c)
not excluded as ineligible by virtue of one or more of the excluding criteria
(other than any Agent-discretionary criteria) set forth in the definition of
Eligible Accounts orEligible Credit Card Receivables, as the case may be.
4.22.
Eligible Inventory
. As to eachitem of Inventory that is identified by Borrower as Eligible
Inventory in a Borrowing Base Certificate submitted to Agent, such Inventory
is (a) of good and merchantable quality, free from known defects, and (b) not
excluded as ineligibleby virtue of one or more of the excluding criteria
(other than any Agent-discretionary criteria) set forth in the definition of
Eligible Inventory.
4.23.
Location of Inventory and Equipment
. Except for the third-party warehouse locationsidentified on
Schedule 4.23
, the Inventory and Equipment of Borrower is not stored with a bailee,
warehouseman, or similar party and is located only at, or in-transit between,
the locations identified on
Schedule 4.23
(as suchSchedule may be updated pursuant to
Section 5.16
).
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4.24.
Inventory Records
. Each Loan Party keepscorrect and accurate records itemizing and describing
the type, quality, and quantity of its and its Subsidiaries' Inventory and the
book value thereof.
4.25.
Credit Card Arrangements
.
Schedule 4.25
is a list describing all arrangements as ofthe Closing Date to which any Loan
Party is a party with respect to the processing and/or payment to such Loan
Party of the proceeds of any credit card charges and debit card charges for
sales made by such Loan Party.
4.26.
No Defaults; Material Contracts
. No event or circumstance has occurred or exists as of thedate of this
Agreement that constitutes a Default or Event of Default.
Schedule 4.26
contains a true, correct and complete list of all Material Contracts, and
except as described thereon, all such Material Contracts are in full force
andeffect. No Loan Party or Subsidiary is in default, and no event or
circumstance has occurred or exists that with the passage of time or giving of
notice would constitute a default, under any Material Contract which would
enable the other contractingparty to terminate such Material Contract. There
is no basis upon which any party (other than a Loan Party or the Subsidiary)
could terminate a Material Contract prior to its scheduled termination date.
4.27.
Operations of Certain Subsidiaries
. As of the Closing Date, CGS is inactive and does notengage in any trade or
business, own any assets or owe any Indebtedness or any other obligation or
liability except as expressly permitted hereunder in its capacity as a Loan
Party and the ownership of all of the outstanding shares of CGS USA. Eachof
CGS USA and Birks Jewellers Limited, is inactive and does not engage in any
trade or business, own any assets or owe any Indebtedness or any other
obligation or liability other than, in the case of CGS USA, (a) the provision
of limitedsupport services to Borrower and (b) the payment by Borrower to CGS
USA of up to US$500,000 in the aggregate in each Fiscal Year in the form of
Permitted Intercompany Advances and reimbursements of reasonable and
documented expenses incurred byCGS USA for and on behalf of Borrower, provided
that no Default or Event of Default has occurred and is continuing at the time
of any such payment.
4.28.
Trade Relations
. There exists no actual or threatened termination, limitation or
modificationof any business relationship between any Loan Party or any
Subsidiary and any customer or supplier, or any group of customers or
suppliers, individually or in the aggregate the consequence of which could
reasonably be expected to result in aMaterial Adverse Effect.
5.
AFFIRMATIVE COVENANTS
.
Borrower covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations:
5.1.
Financial Statements, Reports, Certificates
. Borrower (a) will deliver to Agent each ofthe financial statements, reports,
and other items set forth on
Schedule 5.1
no later than the times specified therein, (b) agree that no Subsidiary of a
Loan Party will have a Fiscal Year different from that of Borrower, (c)
agreeto maintain a system of accounting that enables Borrower to produce
financial statements in accordance with GAAP, and (d) agree that they will,
and will
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cause each other Loan Party to, (i) keep a reporting system that shows all
additions, sales, claims, returns, and allowances with respect to their
Subsidiaries' sales (for avoidance ofdoubt, Agent and Lenders hereby
acknowledge that the reporting system maintained by the Loan Parties on the
Closing Date satisfies this clause (i)), and (ii) agree that they will, and
will cause each other Loan Party to maintain their billingand reporting system
materially consistent with that in effect as of the Closing Date, and shall
only make material modifications thereto with notice to, and with the consent
of, the Agent (such consent not to be unreasonably withheld or delayed).
5.2.
Reporting
. Borrower (a) will deliver to Agent (and if so requested by Agent, withcopies
for each Lender) each of the reports set forth on
Schedule 5.2
at the times specified therein, and (b) agree to use commercially reasonable
efforts in cooperation with Agent to facilitate and implement a system of
electroniccollateral reporting in order to provide electronic reporting of
each of the items set forth on such Schedule.
5.3.
Existence
. Except as otherwise permitted under
Section 6.3
or
Section 6.4
, Borrower will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect such Person's valid existence and
good standing in its jurisdiction of organization and, except as wouldnot
reasonably be expected to result in a Material Adverse Effect, good standing
with respect to all other jurisdictions in which it is qualified or required
to be qualified to do business and any rights, franchises, permits,
licenses,accreditations, authorizations, or other approvals material to their
businesses.
5.4.
Maintenance ofProperties
. Borrower will, and will cause each of its Subsidiaries to, maintain and
preserve all of its assets that are necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear,
tear,casualty, and condemnation and Permitted Dispositions excepted (and
except where the failure to so maintain and preserve assets would not
reasonably be expected to result in a Material Adverse Effect).
5.5.
Taxes
. Borrower will, and will cause each of its Subsidiaries to, pay in full
beforedelinquency or before the expiration of any extension period all
Federal, provincial and state income and capital Taxes and all other material
Taxes imposed, levied, or assessed against it, or any of its assets or in
respect of any of its income,capital, businesses, or franchises, except to the
extent that the validity of such Tax is the subject of a Permitted Protest.
5.6.
Insurance
. Borrower will, and will cause each of its Subsidiaries to, at Borrower'sexpens
e, maintain insurance respecting each of each Loan Party's and its
Subsidiaries' assets wherever located, covering liabilities, losses or damages
as are customarily are insured against by other Persons engaged in same or
similarbusinesses and similarly situated and located and flood insurance
coverage acceptable to Agent with respect to all Real Property Collateral (to
the extent flood insurance is required). All such policies of insurance shall
be with financially soundand reputable insurance companies that are reasonably
acceptable to Agent (it being agreed that any insurance providers which have a
policy in effect with Borrower or any of its Subsidiaries as of the Closing
Date are acceptable to Agent) and insuch amounts as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated and located and, in any event, in amount, adequacy, and
scope reasonably satisfactory to Agent (it being agreedthat the amount,
adequacy, and scope of the policies of insurance of Borrower in effect as of
the
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Closing Date are acceptable to Agent). All property insurance policies
covering the Collateral are to be made payable to Agent for the benefit of
Agent and the Lenders, as their interests mayappear, in case of loss, pursuant
to a standard lenders' loss payable endorsement with a standard non-contributory
"lender" or "secured party" clause and are to contain such other provisions
as Agent may reasonably requireto fully protect the Lenders' interest in the
Collateral and to any payments to be made under such policies. All
certificates of property and general liability insurance are to be delivered
to Agent, with lenders' loss payable (but only inrespect of Collateral) and
additional insured endorsements in favor of Agent and shall provide for not
less than 30 days (10 days in the case of non-payment), or such shorter period
as Agent may agree, prior written notice to Agent of the exerciseof any right
of cancellation. If any Loan Party or its Subsidiaries fails to maintain such
insurance, Agent may arrange for such insurance, but at Borrower's expense and
without any responsibility on Agent's part for obtaining theinsurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Borrower shall give Agent prompt notice of any loss
exceeding $1,000,000 covered by Borrower or its Subsidiaries' casualty
orbusiness interruption insurance. Upon the occurrence and during the
continuance of an Event of Default, Agent shall have the sole right to file
claims under any property and general liability insurance policies in respect
of the Collateral, toreceive, receipt and give acquittance for any payments
that may be payable thereunder, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection,compromise or settlement of any claims
under any such insurance policies.
5.7.
[Reserved]
.
5.8.
[Reserved]
.
5.9.
[Reserved]
.
5.10.
Inspection
.
(a)
Borrower will, and will cause each of its Subsidiaries to, permit Agent, any
Lender and each of their respective duly authorized representatives or agents
to visit any of itsproperties and inspect any of its assets or books and
records, to examine and make copies of its books and records, and to discuss
its affairs, finances, and accounts with, and to be advised as to the same by,
its officers and employees (provided anauthorized representative of a Borrower
shall be allowed to be present) at such reasonable times and intervals as
Agent or any Lender, as applicable, may designate and, so long as no Default
or Event of Default has occurred and is continuing, withreasonable prior
notice to Administrative Borrower and during regular business hours.
(b)
Borrower will, and will cause each of its Subsidiariesto, permit Agent and
each of its duly authorized representatives or agents to conduct appraisals
and valuations at such reasonable times and intervals as Agent may designate;
provided
that the expenses required to be paid by the Loan Partiesin connection
therewith shall be subject to any applicable limitation set forth in
Section 2.5(c)
.
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5.11.
Compliance with Laws and MaterialContracts
. Borrower will, and will cause each of its Subsidiaries to, comply with (a)
the requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority, and (b) all of its Material Contracts,except in each
case where non-compliance with which, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect.
5.12.
Environmental
. Borrower will, and will cause each of its Subsidiaries to,
(a)
Keep any property either owned or operated by any Loan Party or its
Subsidiaries free of any Environmental Liens (other than Permitted Liens) or
post bonds or other financialassurances sufficient to satisfy the obligations
or liability evidenced by such Environmental Liens (other than Permitted
Liens),
(b)
Comply with applicable Environmental Laws, except where a failure to comply
would not reasonably be expected to result in, individually or in the
aggregate, a Material AdverseEffect, and provide to Agent documentation of
such compliance which Agent reasonably requests,
(c)
Promptly notify Agent of any release of which Borrowerhas knowledge of a
Hazardous Material in any reportable quantity or which could reasonably be
expected to result in material liabilities of any Loan Party or its
Subsidiaries from or onto property owned or operated by any Loan Party or
itsSubsidiaries and take any Remedial Actions required to abate said release
or otherwise to come into compliance, in all material respects, with
applicable Environmental Law, except where a failure to comply would not
reasonably be expected to resultin, individually or in the aggregate, a
Material Adverse Effect, and provide to Agent documentation of such compliance
which Agent reasonably requests, and
(d)
Promptly, but in any event within 5 Business Days of its receipt thereof,
provide Agent with written notice of any of the following: (i) notice that an
Environmental Lien hasbeen filed against any of the real or personal property
of a Loan Party or its Subsidiaries, (ii) commencement of any Environmental
Action or written notice that an Environmental Action will be filed against a
Loan Party or its Subsidiaries thatindividually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, and (iii) written
notice of a violation, citation, or other administrative order from a
Governmental Authority that would reasonably be expectedto result in,
individually or in the aggregate, a Material Adverse Effect.
5.13.
DisclosureUpdates
. Each Loan Party will, promptly and in no event later than fifteen Business
Days after obtaining knowledge thereof, notify Agent if any written
information, exhibit, or report furnished to Agent or the Lenders contained,
at the timeit was furnished, any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made. The
foregoing to the contrarynotwithstanding, any notification pursuant to the
foregoing provision will not cure or remedy the effect of the prior untrue
statement of a material fact or omission of any material fact nor shall any
such notification have the effect of amending ormodifying this Agreement or
any of the Schedules hereto.
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5.14.
Formation of Subsidiaries
. Borrower will,at the time that any Loan Party forms any direct or indirect
Subsidiary or acquires any direct or indirect Subsidiary after the Closing
Date, (x) within 30 days of such formation or acquisition (or such later date
as permitted by Agent in itssole discretion) (a) cause such new Subsidiary to
provide to Agent a joinder to the Canadian Security Documents and other
applicable Loan Documents (including this Agreement to the extent that such
Subsidiary is to be joined as a Borrowerhereunder), as applicable, which
joinder shall include such provisions as Agent shall consider necessary or
desirable for the inclusion of such Subsidiary as a Borrower or other Loan
Party including such provisions as are necessary or desirable toreflect the
formation of such Subsidiary under the laws of a jurisdiction other than
Canada or the location of Collateral outside of Canada) and a guarantee of the
Obligations, if required, together with such other security agreements, as
well asappropriate financing statements (and with respect to all Real Property
Collateral subject (or required hereunder to be subject) to a Mortgage,
fixture filings) all in form and substance reasonably satisfactory to Agent
(including being sufficientto grant Agent a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired
Subsidiary (other than Excluded Property, as defined in the Canadian Security
Documents); to the applicable Canadian SecurityDocuments, the guarantee and
such other security agreements shall not be required to be provided to Agent
with respect to Obligations, if the costs to the Loan Parties of providing
such guarantee or such security agreements are unreasonablyexcessive (as
determined by Agent in consultation with Administrative Borrower) in relation
to the benefit to Agent and the Lenders of the security or guarantee afforded
thereby and (b) provide to Agent all other documentation, including one ormore
opinions of counsel reasonably satisfactory to Agent, which, in its reasonable
judgment, is necessary with respect to the execution and delivery of the
applicable documentation referred to above (including policies of title
insurance, or otherdocumentation with respect to all Real Property Collateral
owned in fee simple (for the avoidance of doubt excluding any leasehold
properties) and required to be subject to a Mortgage), and (y) within 60 days
of such formation or acquisition(or such later date as permitted by Agent in
its sole discretion), (a) cause such new Subsidiary to provide to Agent
Mortgages with respect to any Real Property owned in fee simple (for the
avoidance of doubt excluding any leasehold properties)of such new Subsidiary
with a fair market value greater than $500,000, as well as appropriate fixture
filings, all in form and substance reasonably satisfactory to Agent (including
being sufficient to grant Agent a first priority Lien (subject toPermitted
Liens) in and to the Real Property assets of such newly formed or acquired
Subsidiary); and (b) provide to Agent all other documentation, including one
or more opinions of counsel reasonably satisfactory to Agent, which, in
itsopinion, is appropriate with respect to the execution and delivery of the
applicable documentation referred to above (including policies of title
insurance, evidence of flood certification documentation (to the extent
required) or otherdocumentation with respect to all Real Property owned in fee
and subject to (or required hereunder to be subject to) a Mortgage). Any
document, agreement, or instrument executed or issued pursuant to this
Section 5.14
shall constitute aLoan Document.
5.15.
Further Assurances
. Borrower will, and will cause each of the other LoanParties to, at any time
upon the reasonable request of Agent, execute or deliver, or cause to be
executed or delivered to Agent any and all financing statements, fixture
filings, security agreements, pledges, assignments, mortgages, deeds of
trust,opinions of counsel, and all other documents (the "
Additional Documents
") that Agent may reasonably request in form and substance reasonably
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satisfactory to Agent, to create, perfect, and continue perfected or to better
perfect Agent's Liens in all of the assets of Loan Parties (whether now owned
or hereafter arising or acquired,tangible or intangible, real or personal), to
create and perfect Liens in favor of Agent in any Real Property acquired by
any Loan Party with a fair market value in excess of $500,000, and in order to
fully consummate all of the transactionscontemplated hereby and under the
other Loan Documents. To the maximum extent permitted by applicable law, if
any Loan Party refuses or fails to execute or deliver any reasonably requested
Additional Documents within a reasonable period of timefollowing the request
to do so, Borrower, each Borrower and each other Loan Party hereby authorizes
Agent to execute any such Additional Documents in the applicable Loan Party's
name and authorizes Agent to file such executed AdditionalDocuments in any
appropriate filing office. In furtherance of, and not in limitation of, the
foregoing, each Loan Party shall take such actions as Agent may reasonably
request from time to time to ensure that the Obligations are guaranteed by
theGuarantors and are secured by substantially all of the assets of each Loan
Party, including all of the outstanding Equity Interests of Borrower and its
Subsidiaries. Without limiting the generality of the foregoing, the Borrower
shall ensure thatpromptly, and in no event more than 15 days, following the
Montrovest Merger, Montel Sarl shall sign an acknowledgment and confirmation
in respect of the Montrovest Subordination Agreement in form and substance
satisfactory to the Agent.
5.16.
Location of Inventory; Chief Executive Office, Etc
.
. Borrower will, and will cause each otherLoan Party to, keep its Inventory
only at (or in-transit between or to) its locations identified on
Schedule 4.23
and its chief executive office (and registered office) only at the locations
identified on
Schedule 4.23
;
provided
, that Administrative Borrower may amend
Schedule 4.23
so long as such amendment occurs by written notice to Agent not less than 10
days, or such later date as Agent agrees in its sole discretion, prior to the
date on whichsuch Inventory is moved to such new location or such chief
executive office or registered office is relocated and so long as such new
location is within continental Canada in the case of the chief executive
office and the registered office of a LoanParty. Furthermore, upon request,
Borrower will provide the Agent with copies of all existing agreements, and
promptly after execution thereof provide the Agent upon request with copies of
all future agreements, between a Loan Party and anylandlord, warehouseman,
processor, shipper, bailee or other Person that owns any premises at which any
Collateral having an aggregate value of more than the Dollar Equivalent of
$500,000 may be kept or that otherwise may possess or handle anyCollateral.
5.17.
Canadian Compliance
. In addition to and without limiting the generality of
Section 5.11
, with respect to any Canadian Pension Plan established after the Closing
Date, Borrower will, and will cause each of its Subsidiaries to, (a) comply
with applicable provisions and funding requirements of the
IncomeTax Act
(Canada) and applicable federal or provincial pension benefits legislation and
other applicable laws with respect to all Canadian Pension Plans except where
the failure to do so would not reasonably be expected to result in a
MaterialAdverse Effect and (b) furnish to Agent upon Agent's written request
such additional information about any Canadian Pension Plan for which Borrower
or its Subsidiaries would reasonably expect to incur any material liability.
All employeror employee payments, contributions or premiums required to be
remitted, paid to or in respect of Canadian statutory benefit plans that
Borrower or any of its Subsidiaries is required to participate in or comply
with, including the Canada PensionPlan or Quebec Pension Plan as maintained by
the Government of Canada or Province of Quebec,
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respectively, and plans administered pursuant to applicable workplace safety
insurance and employment insurance legislation will be paid or remitted by
each such Person in accordance with theterms thereof, any agreements relating
thereto and all applicable laws except (i) to the extent that any amount so
payable is subject to a Permitted Protest and a Canadian Priority Payable
Reserve for such amount has been established(ii) for failures resulting from
administrative oversight which are promptly remedied once Borrower or its
Subsidiary becomes aware thereof.
5.18.
Credit Card Notifications
. Within 30 days of the Closing Date (or such later date as Agentmay agree),
deliver to the Agent copies of notifications (each, a "
Credit Card Notification
") substantially in the form attached hereto as
Exhibit C-2
, or otherwise in form and substance reasonably acceptable to Agent, whichhave
been executed on behalf of such Loan Party and delivered to such Loan Party's
Credit Card Issuers and Credit Card Processors listed on
Schedule 4.25
. No Loan Party shall enter into any agreements with Credit Card Issuers or
CreditCard Processors other than the ones expressly contemplated herein or in
Section 4.25
unless Agent has received a copy of the Credit Card Notification sent to such
new or additional Credit Card Issuer or Credit Card Processor.
5.19.
Sales Taxes
. If requested by the Agent, the Borrower shall provide cash collateral
inCanadian Dollars in order to secure the Borrower's obligations for sales,
harmonized sales, or goods and services Tax which are past due.
5.20.
[Reserved]
.
5.21.
Lenders' Meetings
. Upon the request of any Agent or the Required Lenders, participate ina
meeting of the Agent and the Lenders once during each Fiscal Year to be held
at the Borrower's corporate offices (or at such other location as may be
agreed to by the Borrower and the Agent) at such time as may be agreed to by
the Borrowerand the Agent.
6.
NEGATIVE COVENANTS.
Borrower covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations:
6.1.
Indebtedness
. Borrower will not, and will not permit any of its Subsidiaries to,
create,incur, assume, suffer to exist, guarantee, or otherwise become or
remain, directly or indirectly, liable with respect to any Indebtedness,
except for Permitted Indebtedness.
6.2.
Liens
. Borrower will not, and will not permit any of its Subsidiaries to, create,
incur,assume, or suffer to exist, directly or indirectly, any Lien on or with
respect to any of its assets, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for Permitted Liens.
6.3.
Restrictions on Fundamental Changes
. Borrower will not, and will not permit any of itsSubsidiaries to,
(a)
other than in order to consummate a Permitted Acquisition, enter into any
merger, amalgamation, consolidation, reorganization, or recapitalization, or
reclassify its Equity
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Interests, except for (i) any merger or amalgamation between Loan Parties;
provided
that Borrower must be the survivor of any merger or amalgamation to which it
is a party (or, in thecase of an amalgamation, the continuing corporation
resulting therefrom must be liable for the Obligations of Borrower under the
Loan Documents), (ii) any merger or amalgamation between a Loan Party (other
than Borrower) and a Subsidiary ofsuch Loan Party that is not a Loan Party so
long as such Loan Party is the surviving entity of any such merger or
amalgamation (or, in the case of an amalgamation, the continuing corporation
resulting therefrom) must be liable for the Obligations ofsuch Loan Party
under the Loan Documents and the priority of the Agent's Liens on the
Collateral is not affected thereby, and (iii) any merger or amalgamation
between Subsidiaries of Borrower that are not Loan Parties,
(b)
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), except for (i) the liquidation or dissolution of non-operating
Subsidiaries of Borrower withnominal assets and nominal liabilities, (ii) the
liquidation or dissolution of a Loan Party (other than Borrower) or any of its
wholly-owned Subsidiaries so long as all of the assets (including any interest
in any Equity Interests) of suchliquidating or dissolving Loan Party or
Subsidiary are transferred to a Loan Party that is not liquidating or
dissolving, or (iii) the liquidation or dissolution of a Subsidiary of
Borrower that is not a Loan Party (other than any suchSubsidiary the Equity
Interests of which (or any portion thereof) is subject to a Lien in favor of
Agent) so long as all of the assets of such liquidating or dissolving
Subsidiary are transferred to a Subsidiary of Borrower that is not
liquidatingor dissolving, or
(c)
suspend or cease operating a substantial portion of its or their business,
except as permitted pursuant to clauses (a) or (b) above or in connection with
a transactionpermitted under
Section 6.4
,
6.4.
Disposal of Assets
. Borrower will not,and will not permit any of its Subsidiaries to, convey,
sell, lease, license, assign, transfer, or otherwise dispose of (or enter into
an agreement to convey, sell, lease, license, assign, transfer, or otherwise
dispose of) any of its or theirassets other than (a) Permitted Dispositions;
(b) transactions expressly permitted by
Sections 6.3 or 6.9
; and (c) sales of equipment, furniture and fixtures in the ordinary course of
business to a Person other than aSubsidiary that is not a Loan Party and
subject to compliance with
Section 6.10
, if applicable, provided the proceeds of such sales of equipment shall be
applied to repay, subject to the Intercreditor Agreement, the Term Loan
hereunder.
6.5.
Nature of Business
. Borrower will not, and will not permit any of its Subsidiaries to,make any
change in the nature of its or their business as described in
Section 4.28
or
Schedule 6.5
or acquire any properties or assets that are not reasonably related to the
conduct of such business activities; provided, that theforegoing shall not
prevent Borrower and its Subsidiaries from engaging in any business that is
reasonably related or ancillary to its or their business.
6.6.
Prepayments and Amendments
. Borrower will not, and will not permit any of its Subsidiaries to,
(a)
Except in connection with Refinancing Indebtedness permitted by
Section 6.1
,
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(i)make any payments in respect of the Montrovest Debt otherthan, so long as
no Default or Event of Default then exists or would (after taking into
consideration the payment to be made) result therefrom and subject to the
Montrovest Subordination Agreement, (x) regularly scheduled payments of
interestin respect of the Montrovest Debt as and when due pursuant to the
Montrovest Debt Documents (y) the principal payments of US$1,250,000 on or
about July 20, 2018 and US$1,250,000 on or about July 20, 2019 pursuant to the
MontrovestDebt 2017 and (z) the fee payment in an aggregate amount not to
exceed $10,000 annually pursuant to the Montrovest Debt 2017. No other
prepayment of, or payment of principal on, the Montrovest Debt may be made
without the prior written consentof Agent in its sole discretion, unless the
Restricted Payment Conditions are satisfied with respect to such prepayment or
payment.
(ii)make any payment on account of Indebtedness (other than as permitted under
paragraph (a)(i) above) that hasbeen contractually subordinated in right of
payment to the Obligations if (A) such payment is not permitted at such time
under the subordination terms and conditions applicable to such Indebtedness
and, (B) where applicable, the RestrictedPayment Conditions have not been
satisfied,
(iii)make any payment on account of the Damiani SubordinatedIndebtedness other
than payments in the amounts and on the due dates therefor set out in the
Damiani Inventory Purchase Agreement provided that any such payment is
permitted to be made at such time under the Damiani Subordination Agreement.
(b)
Directly or indirectly, amend, modify, or change any of the terms or
provisions of, or, in the case of (b)(i) only, waive any of its material
rights under:
(i)The Revolving Loan Documents (except to the extent expressly permitted by
the Intercreditor Agreement), theManagement Agreement (except to the extent
expressly permitted by the Management Subordination Agreement), the Quebec
Subordinated Debt Documents, the Damiani Purchase Documents, the RM JV
Agreement to the extent that, in the case of the RM JVAgreement, such
amendment, modification or change would be reasonably expected to be adverse
to the interests of the Lenders, the Montrovest Debt Documents (except to the
extent expressly permitted by the Montrovest Subordination Agreement) or
anyAdditional Subordinated Debt Documents or any other agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
that is contractually subordinated in right of payment to the Obligations; or
(ii)the Governing Documents of any Loan Party or any of its Subsidiaries if
the effect thereof, eitherindividually or in the aggregate, could reasonably
be expected to be materially adverse to the interests of the Lenders.
Each Loan Partyshall deliver to Agent complete and correct copies of any
amendment, restatement, supplement or other modification to or waiver of the
Management Agreement, the Quebec Subordinated Debt Documents, the Damiani
Purchase Documents, the RM JV Agreement,the Montrovest Debt Documents, any
Additional Subordinated Debt Documents or Governing Documents.
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6.7.
Restricted Payments
. Borrower will not, andwill not permit any of its Subsidiaries to, make any
Restricted Payment;
provided
, that, so long as it is permitted by law, and, so long as no Default or Event
of Default shall have occurred and be continuing or would result therefrom,
(a)
Borrower may declare and pay distributions to the holders of its Equity
Interests so long as the Restricted Payment Conditions are satisfied and
Administrative Borrower has delivereda certificate to Agent prior to the
payment of any such distribution certifying satisfaction of the Restricted
Payment Conditions,
(b)
Loan Parties shall be permitted to make payments of principal and interest on
Permitted Intercompany Advances,
(c)
Borrower shall be permitted to pay Gestofi S.A. fees and expenses in an
aggregate amount not greater than US$300,000 for each calendar year for
services provided to Borrower byemployees of Gestofi S.A., as well as the
amounts permitted to be paid pursuant to the Management Subordination
Agreement, provided that no Default or Event of Default shall have occurred
and be continuing at the time of such payment or would resulttherefrom,
(d)
Borrower shall be permitted to, without duplication, (i) pay to any of
Regaluxe S.r.L., Montrovest or Gestofi S.A., an aggregate amount not to exceed
US$300,000 in any FiscalYear (or such greater amount to the extent consented
to in writing by the Agent in its sole discretion) for expenses incurred by
any of Regaluxe S.r.L., Montrovest or Gestofi S.A. on behalf of (a) the
Chairman of the Board of Directors of theBorrower in connection with carrying
out his duties as Chairman of the Board of Directors of the Borrower in the
ordinary course of business and (b) the Chairman of the Executive Committee of
the Borrower in connection with carrying out hisduties as Chairman of the
Executive Committee of the Borrower in the ordinary course of business, (ii)
pay to Niccolo Rossi, an aggregate amount not to exceed 225,000 in any
calendar year for carrying out his duties as Chairman of theBoard of Directors
of the Borrower plus, an aggregate amount not to exceed EUR 60,000 in any
calendar year for carrying out his duties as Chairman of the Executive
Committee of the Borrower and (iii) (x) pay Regaluxe S.r.L. a fee ofnot more
than 3.5% of the total price of the goods sold to Regaluxe S.r.L. in the form
of a discount (which fee shall be payable to cover import duties and the
carrying costs of value-added Taxes financing), and (y) reimburse Regaluxe
S.r.L.for other reasonable costs and expenses incurred by Regaluxe S.r.L. in
connection with the importation by Regaluxe S.r.L. of goods of the Borrower
and the subsequent sale of such goods by Regaluxe S.r.L. to certain Italian
jewelry stores (so longas, to the extent requested by the Agent, the Agent is
provided with satisfactory documentation supporting such fees, costs and
expenses), provided that in each case, no Default or Event of Default shall
have occurred and be continuing at the timeof such payment or would result
therefrom, and
(e)
Borrower shall be permitted to pay Carlo Coda Nunziante(i) up to an amount not
greater than EUR 150,000 in the aggregate per annum on account of consulting
services provided to the Borrower, (ii) reimbursement of expenses in
connection therewith and (iii) applicable taxes payable byBorrower in
connection therewith.
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6.8.
Accounting Methods
. Borrower will not, and will notpermit any of its Subsidiaries to, modify or
change its Fiscal Year or its method of accounting (other than as may be
required to conform to GAAP, subject to Section 1.2).
6.9.
Investments
. Borrower will not, and will not permit any of its Subsidiaries to, directly
orindirectly, make or acquire any Investment or incur any liabilities
(including contingent obligations) for or in connection with any Investment
except for Permitted Investments.
6.10.
Transactions with Affiliates
.
Borrower will not, and will not permit any of its Subsidiaries to,directly or
indirectly, enter into or permit to exist any transaction with any Affiliate
of Borrower or any of its Subsidiaries except for:
(a)
transactions (other than the payment of management, consulting, monitoring, or
advisory fees) between Borrower or its Subsidiaries, on the one hand, and any
Affiliate of Borrower orits Subsidiaries, on the other hand, so long as such
transactions are no less favorable, taken as a whole, to Borrower or its
Subsidiaries, as applicable, than would be obtained in an arm's length
transaction with a non-Affiliate, provided,however the foregoing restrictions
shall not apply to transactions between any Loan Party and any other Loan
Party,
(b)
so long as it has been approved by Borrower's or its applicable Subsidiary's
Board of Directors (or comparable governing body) in accordance with
applicable law, anyindemnity provided for the benefit of directors (or
comparable managers), officers and employees of Borrower or its applicable
Subsidiary,
(c)
so long as it has been approved by Borrower's or its applicable Subsidiary's
Board of Directors (or comparable governing body) in accordance with
applicable law, reasonableand customary fees, compensation, benefits and
incentive arrangements paid or provided to, and indemnities provided on behalf
of or to, officers, directors or employees of Borrower (or any direct or
indirect Borrower thereof) or any ofBorrower's Subsidiaries,
(d)
transactions permitted by
Section 6.3
or
Section 6.7
, or any Permitted Intercompany Advance,
(e)
any transaction with an Affiliate otherwise permitted hereunder where the only
consideration paid by Borrower or any Subsidiary is Borrower's Qualified
Equity Interests, and
(f)
loans or advances to directors, officers and employees permitted under Section
6.9.
6.11.
Use of Proceeds
. Borrower will not, and will not permit any of its Subsidiaries to, use the
proceedsof any Loan made hereunder for any purpose other than as contemplated
in Section 2.3(c).
6.12.
Limitation on Issuance of Equity Interests
. Borrower will not, and will not permit any of itsSubsidiaries to issue or
sell or enter into any agreement or arrangement for the issuance or sale of
any of its Equity Interests, other than (a) the issuance or sale of Qualified
Equity
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Interests by Borrower, (b) the issuance and sale of Qualified Equity Interests
by any Loan Party or any Subsidiary of a Loan Party to a Loan Party to which
such Loan Party is a directSubsidiary, (c) the issuance and sale of Qualified
Equity Interests by any Subsidiary that is not a Loan Party to another
Subsidiary, (d) transfers and replacements of then-outstanding Equity
Interests, provided that any such transfer orreplacements do not (i) give rise
to a Change of Control, (ii) include any transfer of Equity Interests held by
a Loan Party to a Person that is not a Loan Party (other than a Permitted
Disposition) or (ii) include any transfer ofEquity Interests from a Loan Party
to a Person that is not a Loan Party (other than a Permitted Disposition), (e)
the issuance or sale of Qualified Equity Interests by any Person that is not a
Loan Party, and (f) issuances of QualifiedEquity Interests by a newly created
Subsidiary to such Subsidiary's direct parent in accordance with the terms of
the Agreement.
6.13.
Canadian Employee Benefits
. Borrower will not, and will not permit any of its Subsidiaries to:
(a)
establish, maintain, sponsor, administer, contribute to, participate in or
assume or incur any liability in respect of any Canadian Defined Benefit Plan
or amalgamate with any Personif such Person, sponsors, administers,
contributes to, participates in or has any liability in respect of, any
Canadian Defined Benefit Plan other than a Canadian Multi-Employer Plan,
unless a Canadian Priority Payables Reserve for unremitted anddue pension plan
contributions or wind-up deficiency amounts has been established.
(b)
terminate any Canadian Pension Plan in a manner, ortake any other action with
respect to any Canadian Pension Plan, which would reasonably be expected to
result in a Material Adverse Effect, or
(c)
fail to make full payment when due of any amounts, under the provisions of any
Canadian Pension Plan, any agreement relating thereto or applicable law if
such failure wouldreasonably be expected to result in a Material Adverse
Effect.
6.14.
Sale and LeasebackTransactions
. Borrower will not, and will not permit any of its Subsidiaries to, become or
remain liable as lessee or as a guarantor or other surety, directly or
indirectly, with respect to any lease whereby it shall sell or transfer
anyproperty, real or personal, used or useful in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the propertybeing sold or transferred; provided that a Borrower
and its Subsidiaries may become and remain liable as lessee, guarantor or
other surety with respect to any such lease if and to the extent that Borrower
or any of its Subsidiaries would bepermitted to enter into, and remain liable
under, such lease to the extent that the transaction would constitute a
Permitted Sale Leaseback Transaction, assuming the sale and leaseback
transaction constituted Indebtedness in a principal amount notto exceed the
gross proceeds of the sale.
6.15.
Negative Pledges
. Borrower will not, and will notpermit any of its Subsidiaries to, enter into
any agreement prohibiting the creation or assumption of any Lien upon any of
its properties or assets, whether now owned or hereafter acquired, other than
(a) this Agreement and the other LoanDocuments, (b) any agreements governing
any Permitted Liens securing,
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Capitalized Lease Obligations or Permitted Purchase Money Indebtedness
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financedthereby), (c) the Revolving Loan
Documents, (d) restrictions set forth in the RM JV Agreement (applicable only
to the assets that are the subject of such agreement and the equity interests
in RM JV) and any other provision limiting thedisposition or distribution of
assets or property in joint venture agreements and other similar agreements,
which limitation is applicable only to the assets that are the subject of such
agreements to the extent such joint venture or similaragreement is permitted
under this Agreement, (e) any restrictions with respect to a Subsidiary
imposed pursuant to an agreement that has been entered into in connection with
the disposition of all or substantially all of the Equity Interests orassets
of such Subsidiary that applies only to the Equity Interests or assets of such
Subsidiary, (f) customary provisions in leases, licenses and other contracts
restricting the assignment thereof, (g) any other agreement that does
notrestrict in any manner (directly or indirectly) Liens which may now or
hereafter be created pursuant to any of the Loan Documents to secure any
Obligations, and (h) any prohibition that (i) exists pursuant to the
requirements of applicablelaw, (ii) consists of customary restrictions and
conditions contained in any agreement relating to any transaction permitted
under
Section 6.3
or
6.4
, (iii) restricts subletting or assignment of leasehold interestscontained in
any lease governing a leasehold interest of a Borrower or its Subsidiaries,
(iv) exists in any agreement in effect at the time such Subsidiary becomes a
Subsidiary of Borrower, so long as such agreement was not entered into
incontemplation of such Person becoming a Subsidiary, (v) exists in any
instrument governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Personor the properties or assets of the Person so acquired or
(vi) is imposed by any renewal, extension, refinancing, refund or replacement
(or successive extensions, renewals, refinancings, refunds or replacements)
that are otherwise permitted bythe Loan Documents or the contracts,
instruments or obligations referred to in clause (b), (c), (d), (e), (f), (g),
(h)(iv) or (h)(v) above; provided that such renewals, extensions,
refinancings, refunds or replacements (or successive extensions,renewals,
refinancings, refunds or replacements), taken as a whole, are not more
materially restrictive with respect to such prohibitions than those contained
in the original agreement, as determined in good faith by the Board of
Directors ofBorrower.
6.16.
Restrictions on Subsidiary Distributions
. Borrower will not, and will not permit anyof its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or consensual restriction of any kind on the ability of any such
Subsidiary to (i) pay dividends or make any other distributionson any of such
Subsidiary's Equity Interests owned by Borrower or any other Subsidiary
Borrower, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
Borrower or any other Subsidiary of Borrower, (iii) make loans oradvances to
Borrower or any other Subsidiary of Borrower, or (iv) transfer any of its
property or assets to Borrower or any other Subsidiary of Borrower, except in
each case, encumbrances or restrictions (a) imposed by this Agreement and
theother Loan Documents, (b) contained in an agreement with respect to a
Permitted Disposition, (c) contained in any agreements governing any Permitted
Liens securing Capitalized Lease Obligations or Permitted Purchase Money
Indebtednessotherwise permitted hereby (in which case, any encumbrance or
restriction shall only be effective against the assets financed thereby), (d)
constituting customary restrictions in joint venture agreements and other
similar agreements applicableto joint ventures permitted hereunder and
applicable solely to
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such joint venture, (e) contained in any agreement of a Subsidiary that is not
a Loan Party governing Permitted Indebtedness, (f) contained in any instrument
governing AcquiredIndebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired, or (g)
contained in, or existing by reasonsof, any agreement or instrument (i)
existing on the Closing Date, (ii) relating to property existing at the time
of the acquisition thereof, so long as the encumbrance or restriction relates
only to the property so acquired,(iii) relating to any Indebtedness of, or
otherwise to, any Subsidiary at the time such Subsidiary was merged,
amalgamated or consolidated with or into, or acquired by, a Borrower or a
Subsidiary or became a Subsidiary and not created incontemplation thereof,
(iv) effecting a renewal, extension, refinancing, refund or replacement (or
successive extensions, renewals, refinancings, refunds or replacements) of
Indebtedness issued under an agreement referred to in clauses (c),(e), (f) and
(g)(i) through (g)(iii) above, so long as the encumbrances and restrictions
contained in any such renewal, extension, refinancing, refund or replacement
agreement, taken as a whole, are not materially more restrictive than
theencumbrances and restrictions contained in the original agreement, as
determined in good faith by the Board of Directors of Borrower, (v)
constituting customary provisions restricting subletting or assignment of any
leases of a Borrower or anySubsidiary or provisions in agreements that
restrict the assignment of such agreement or any rights thereunder, (vi)
constituting restrictions on the sale or other disposition of any property
securing Indebtedness as a result of a Lien on suchproperty permitted
hereunder, (vii) constituting restrictions on net worth or on cash or other
deposits imposed by customers under contracts entered into in the ordinary
course of business, (viii) constituting provisions contained inagreements or
instruments relating to Indebtedness permitted hereunder that prohibit the
transfer of all or substantially all of the assets of the obligor under that
agreement or instrument unless the transferee assumes the obligations of
theobligor under such agreement or instrument, or (ix) constituting any
encumbrance or restriction with respect to property under a lease or other
agreement that has been entered into for the employment or use of such
property.
6.17.
Business Activities; Permitted Store Closings
. Borrower will not, and will not permit any of itsSubsidiaries to (a) engage
directly or indirectly (whether through the Subsidiaries or otherwise) in any
type of business other than the businesses conducted by the Loan Parties on
the Closing Date and in related businesses, (b) execute,alter, modify, or
amend any lease;
provided
,
however
, that the Loan Parties may (i) alter, modify or amend any lease in a manner
which is not detrimental to the Loan Parties so long as any such alteration,
modification oramendment does not adversely affect any rights of the Agents or
the Lenders hereunder and (ii) the Loan Parties may terminate the leases on
the retail locations which constitute a Permitted Store Closing, or (c) except
as provided inclause (b) hereof, commit to close any location at which a Loan
Party maintains, offers for sales, or stores any of the Collateral.
6.18.
Margin Regulations
. Borrower will not, and will not permit any of its Subsidiaries to, use all
orany portion of the proceeds of the Term Loan to purchase or carry margin
stock (within the meaning of Regulation U of the Federal Reserve Board) in
contravention of Regulation U of the Federal Reserve Board.
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6.19.
No Speculative Transactions
. Borrower will not,and will not permit any of its Subsidiaries to, engage in
any transaction involving commodity options, futures contracts or similar
transactions other than Secured Hedging Agreements.
6.20.
Amendment of Rolex Canada Documents
. Borrower will not, and will not permit any of its Subsidiariesto, amend any
provision of any Rolex Canada Document in a manner adverse to the Agent and
the other Secured Parties without the prior written consent of the Agent.
6.21.
[Reserved]
.
6.22.
Anti-layering
. Notwithstanding the foregoing, neither a Loan Party nor any Subsidiary of a
LoanParty will create or incur any Indebtedness which is contractually
subordinated or junior in right of payment to any other Indebtedness of the
Loan Parties, unless such Indebtedness is also subordinated or junior in right
of payment, in the samemanner and to the same extent, to the Obligations.
7.
[RESERVED].
8.
EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of default
(each, an "
Event of Default
")under this Agreement:
8.1.
Payments
. If Borrower fails to pay when due and payable, or when declareddue and
payable, (a) all or any portion of the Obligations consisting of interest,
fees, or charges due to the Lender Group, reimbursement of Lender Group
Expenses, or other amounts (other than any portion thereof constituting
principal)constituting Obligations (including any portion thereof that accrues
after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding), and such failurecontinues for a period of (x) 1 Business Day for
failure to pay interest and (y) 3 Business Days for failure to pay any other
amounts due under clause (a) hereof, and (b) all or any portion of the
principal of the Term Loan.
8.2.
Covenants
. If any Loan Party or any of its Subsidiaries:
(a)
fails to perform or observe any covenant or other agreement contained in any
of (i)
Sections 3.5
,
5.1
,
5.2
,
5.3
(solely to the extent that theBorrower is not in good standing in its
jurisdiction of organization),
5.6
, and
5.10
(solely if Borrower refuses to allow Agent or its representatives or agents to
visit Borrower's properties, inspect its assets or books orrecords, examine
and make copies of its books and records, or discuss Borrower's affairs,
finances, and accounts with officers and employees of Borrower), (ii)
Section 6
, (iii)
Section 7
, or (iv)
Section 7
of the Canadian Security Agreement;
(b)
fails to perform or observe any covenant or otheragreement contained in any of
Sections 5.3
(other than if Borrower is not in good standing in its jurisdiction of
organization),
5.4, 5.5
,
5.11
,
5.14
,
5.15
,
5.16
and such failure continues for a period of 15days after the earlier of (i) the
date on which such failure shall first become known to any officer of
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Borrower or (ii) the date on which written notice thereof is given to
Administrative Borrower by Agent;or
(c)
fails to perform or observe any covenant or other agreement contained in this
Agreement, or in any of the other Loan Documents, in each case, other than any
such covenant oragreement that is the subject of another provision of this
Section 8
(in which event such other provision of this
Section 8
shall govern), and such failure continues for a period of 30 days after the
earlier of (i) thedate on which such failure shall first become known to any
officer of Borrower or (ii) the date on which written notice thereof is given
to Administrative Borrower by Agent;
8.3.
Judgments
. If one or more judgments, requirements to pay, orders, or awards for the
payment of money,or requirements to pay money, involving an aggregate amount
of $1,000,000
,
or more (except to the extent fully covered (other than to the extent of
customary deductibles) by insurance pursuant towhich the insurer has not
denied coverage) is entered or filed against a Loan Party or any of its
Subsidiaries, or with respect to any of their respective assets, and either
(a) there is a period of 45 consecutive days at any time after theentry of any
such judgment, order, or award during which (1) the same is not discharged,
satisfied, vacated, or bonded pending appeal, or (2) a stay of enforcement
thereof is not in effect, or (b) enforcement proceedings are commencedupon
such judgment, order, or award;
8.4.
Voluntary Bankruptcy, etc
. If an Insolvency Proceeding iscommenced by a Loan Party or any of its
Subsidiaries;
8.5.
Involuntary Bankruptcy, etc
. If anInsolvency Proceeding is commenced against a Loan Party or any of its
Subsidiaries and any of the following events occur: (a) such Loan Party or
such Subsidiary consents to the institution of such Insolvency Proceeding
against it, (b) thepetition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 60 calendar days of the date of the filing thereof, (d) an
interim trustee is appointedto take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, such Loan Party or its Subsidiary, or (e) an order
for relief shall have been issued orentered therein;
8.6.
Default Under Other Agreements
. If there is (a) a breach or default in oneor more agreements to which a Loan
Party or any of its Subsidiaries is a party with one or more third Persons
relative to a Loan Party's or any of its Subsidiaries' Indebtedness involving
an aggregate amount of $1,000,000 or more, and suchdefault (i) occurs at the
final maturity of the obligations thereunder, or (ii) results in a right by
such third Person, irrespective of whether exercised, to accelerate the
maturity of such Loan Party's or its Subsidiary'sobligations thereunder, or
(b) a default in or an involuntary early termination of one or more Hedge
Agreements to which a Loan Party or any of its Subsidiaries is a party
involving an aggregate Hedge Termination Value of $1,000,000 or more,beyond
any grace period provided therefor;
8.7.
Default under Revolving Loan Documents
. If there is(i) any breach or default of a Loan Party or any of its
Subsidiaries occurs under any of the Revolving Loan Documents (or any
documents relating to renewals, refinancings and extensions of the Debt
incurred thereunder)
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or any Secured Hedging Agreement or (ii) any such Debt shall become or be
declared to be due and payable, or be required to be prepaid or repurchased
(other than by a regularly scheduled orrequired prepayment), prior to the
stated maturity thereof;
provided
that such breach or default shall be deemed continuing hereunder until the
Agents or the Required Lenders have expressly waived such breach or default in
writing,notwithstanding the fact that such breach or default may have been
waived under the terms of the Revolving Loan Documents or any Secured Hedging
Agreement;
8.8.
Default Under Damiani Purchase Documents
. If (i) the Borrower fails to make any payment when dueand payable under the
Damiani Inventory Purchase Agreement or if there is a material breach or
default by a Loan Party or any of its Subsidiaries under any of the Damiani
Purchase Documents and, in each case, such failure, breach or defaultcontinues
for a period of at least thirty (30) days, (ii) any Damiani Subordinated
Indebtedness shall become or be declared to be due and payable, or be required
to be prepaid (other than by a scheduled or required payment in accordancewith
the terms of the Damiani Inventory Purchase Agreement), prior to the stated
due date thereof (iii) any action is taken by Damiani to initiate the
commencement of a Standstill Period (as defined in the Damiani Subordination
Agreement) or(iv) the validity or enforceability of the Damiani Subordination
Agreement shall at any time for any reason (other than solely as the result of
an action or failure to act on the part of Agent) be declared to be null and
void, or Damiani or anyof its Affiliates or agents shall be permitted (by
judicial order or otherwise) to take enforcement actions or institute any
proceeding (including for the return of Inventory) against any Obligor or any
Assets in violation of the DamianiSubordination Agreement;
8.9.
Subordinated Debt Documents
. (i) the earlier of (A) receiptby a Loan Party or any of its Subsidiaries of
notice from any applicable party under any of the Rolex Canada Documents, the
Quebec Subordinated Debt Documents, the Montrovest Debt Documents or the
Additional Subordinated Debt Documents of theoccurrence and continuance of a
payment default or the occurrence of a payment default under any of such
agreements which has continued for fifteen (15) days or (B) any other material
breach or default of a Loan Party or any of itsSubsidiaries occurs under any
of the Rolex Canada Documents, the Quebec Subordinated Debt Documents, the
Montrovest Debt Documents or the Additional Subordinated Debt Documents (or
any documents relating to renewals, refinancings and extensions ofthe Debt
incurred thereunder) or (ii) any such Debt shall become or be declared to be
due and payable, or be required to be prepaid or repurchased (other than by a
regularly scheduled or required prepayment), prior to the stated maturitythereof
;
8.10.
Compliance Certificate; Borrowing Base Certificate; Representations
. If (i) anyinformation contained in any Compliance Certificate or Borrowing
Base Certificate was untrue or incorrect in any material respect when made or
(ii) any representation or warranty made or delivered to the Agent or any
Lender by any Loan Partyherein, in connection with any Loan Document or
transaction contemplated thereby, or in any written statement, report,
financial statement or certificate (other than a Borrowing Base Certificate or
Compliance Certificate) is untrue, incorrect ormisleading in any material
respect when given or confirmed (except that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof).
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8.11.
Guarantee
. If the obligation of any Guarantorunder the guarantee of any of the
Obligations (including any guarantee contained in any Loan Document) is
limited in any material respect or terminated by operation of law or by such
Guarantor (other than in accordance with the terms of thisAgreement);
8.12.
Security Documents
. If any Canadian Security Document or any other Loan Documentthat purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected (to the extent required thereby) and, except to the extent of
Permitted Liens which are non-consensual Permitted Liens, permitted Purchase
MoneyLiens, the interests of lessors under Capital Leases, subject to the
Intercreditor Agreement, first priority Lien on the Collateral covered
thereby, except (a) as a result of a disposition of the applicable Collateral
in a transaction permittedunder this Agreement, or (b) as the result of an
action or failure to act on the part of Agent;
8.13.
Loan Documents
. The validity or enforceability of any Loan Document shall at any time for
any reason(other than solely as the result of an action or failure to act on
the part of Agent) be declared to be null and void, or a proceeding shall be
commenced by a Loan Party or its Subsidiaries, or by any Governmental
Authority having jurisdiction overa Loan Party or its Subsidiaries, seeking to
establish the invalidity or unenforceability thereof, or a Loan Party or its
Subsidiaries shall deny that such Loan Party or its Subsidiaries has any
liability or obligation purported to be created underany Loan Document;
8.14.
Change of Control
. A Change of Control shall occur, whether directly orindirectly; or
8.15.
Material Damage or Loss
. There shall occur any material damage to, or loss,theft or destruction of,
any Collateral, whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty, which in
any such case causes, for more than 5 consecutive days, thecessation or
substantial curtailment of revenue producing activities at more than 5 retail
locations not covered by business interruption insurance.
9.
RIGHTS AND REMEDIES.
9.1.
Rights and Remedies
. Upon the occurrence and during thecontinuation of an Event of Default, Agent
may, and, at the instruction of the Required Lenders, shall (in each case
under clauses (a) or (b) by written notice to Administrative Borrower), in
addition to any other rights or remediesprovided for hereunder or under any
other Loan Document or by applicable law, do any one or more of the following:
(a)
declare the principal of, and any and all accrued andunpaid interest and fees
in respect of, the Loans and all other Obligations, whether evidenced by this
Agreement or by any of the other Loan Documents to be immediately due and
payable, whereupon the same shall become and be immediately due andpayable and
Borrower shall be obligated to repay all of such Obligations in full, without
presentment, demand, protest, or further notice or other requirements of any
kind, all of which are hereby expressly waived by Borrower; and
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(b)
exercise all other rights and remedies available to Agent or the Lenders under
the Loan Documents, under applicable law, or in equity.
The foregoing to the contrary notwithstanding, upon the occurrence of any
Event of Default described in
Section 8.4
or
Section 8.5
, in addition to the remedies set forth above, without any notice to Borrower
or any other Person or any act by the Lender Group, the Commitments shall
automatically terminate and the Obligations, inclusive of the principalof, and
any and all accrued and unpaid interest and fees in respect of, the Loans and
all other Obligations, whether evidenced by this Agreement or by any of the
other Loan Documents, shall automatically become and be immediately due and
payable andBorrower shall automatically be obligated to repay all of such
Obligations in full, without presentment, demand, protest, or notice or other
requirements of any kind, all of which are expressly waived by Borrower.
9.2.
Remedies Cumulative
. The rights and remedies of the Lender Group under this Agreement, the other
LoanDocuments, and all other agreements shall be cumulative. The Lender Group
shall have all other rights and remedies not inconsistent herewith as provided
under the PPSA, by law, or in equity. No exercise by the Lender Group of one
right or remedyshall be deemed an election, and no waiver by the Lender Group
of any Event of Default shall be deemed a continuing waiver. No delay by the
Lender Group shall constitute a waiver, election, or acquiescence by it.
10.
WAIVERS; INDEMNIFICATION.
10.1.
Demand; Protest; etc
. Borrower waives demand, protest, notice of protest, notice of defaultor
dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments,
chattel paper, and guarantees at any time held by the Lender Group pursuant to
the LoanDocuments on which Borrower may in any way be liable.
10.2.
The Lender Group's Liability forCollateral
. Borrower hereby agrees that: (a) so long as Agent complies with its
obligations, if any, under the PPSA, the Lender Group shall not in any way or
manner be liable or responsible for: (i) the safekeeping of the Collateral,(ii)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause, (iii) any diminution in the value thereof, or (iv) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or
otherPerson, and (b) all risk of loss, damage, or destruction of the
Collateral shall be borne by Borrower.
10.3.
Indemnification
. Borrower shall pay, indemnify, defend, and hold the Agent- Related
Persons,the Lender-Related Persons, and each Participant (each, an "
Indemnified Person
") harmless (to the fullest extent permitted by law) from and against any and
all claims, demands, suits, actions, investigations, proceedings,liabilities,
fines, costs, penalties, and damages, and all reasonable and documented
out-of-pocket fees and disbursements of attorneys, experts, or consultants and
all other costs and expenses actually incurred in connection therewith or
inconnection with the enforcement of this indemnification (as and when they
are incurred and irrespective of whether suit is brought but without
duplication of any losses, costs and expenses as to which a Borrower is liable
to such Indemnified Personpursuant to
Section 2.7
or
Article 16
), at
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any time asserted against, imposed upon, or incurred by any of them (a)
inconnection with or as a result of or related to the execution and delivery
(provided that Borrower shall not be liable for costs and expenses (including
lawyers' fees) of any Lender (other than SLR Credit Solutions) incurred in
advising,structuring, drafting, reviewing, administering or syndicating the
Loan Documents), enforcement, performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Loan Documents, or thetransactions contemplated hereby or thereby or the
monitoring of Borrower's and its Subsidiaries' compliance with the terms of
the Loan Documents (
provided
, that the indemnification in this clause (a) shall not extend to(i) disputes
solely between or among the Lenders that do not involve any acts or omissions
of any Loan Party, or (ii) disputes solely between or among the Lenders and
their respective Affiliates that do not involve any acts or omissions ofany
Loan Party; it being understood and agreed that the indemnification in this
clause (a) shall extend to Agent (but not the Lenders) relative to disputes
between or among Agent on the one hand, and one or more Lenders, or one or
more of theirAffiliates, on the other hand, or (iii) any Taxes or any costs
attributable to Taxes, which shall be governed by
Section 16
except to the extent arising from primarily a non- Tax claim), (b) with
respect to any actual orprospective investigation, litigation, or proceeding
related to this Agreement, any other Loan Document, the making of any Loans
hereunder, or the use of the proceeds of the Loans or the Letters of Credit
provided hereunder (irrespective of whetherany Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto, and (c) in connection with or arising out of any presence or release
of Hazardous Materials at, on, under, to or from anyassets or properties
owned, leased or operated by Borrower or any of its Subsidiaries or any
Environmental Actions, Environmental Liabilities or Remedial Actions related
in any way to any such assets or properties of Borrower or any of
itsSubsidiaries (each and all of the foregoing, the "
Indemnified Liabilities
"). The foregoing to the contrary notwithstanding, Borrower shall not have any
obligation to any Indemnified Person under this
Section 10.3
withrespect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person or its officers, directors,
employees, lawyers, or agents.This provision shall survive the termination of
this Agreement and the repayment in full of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowerwere required to
indemnify the Indemnified Person receiving such payment, the Indemnified
Person making such payment is entitled to be indemnified and reimbursed by
Borrower with respect thereto.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALLAPPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE
CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED
PERSON OR OF ANY OTHER PERSON.
10.4.
Subordination; Subrogation
. Until the payment in full of all of the Obligations, the Borrower agreesnot
to exercise, and the Borrower hereby waives, any rights against any other Loan
Party as a result of payment by such Borrower hereunder by way of subrogation,
reimbursement, restitution, contribution or otherwise, and the Borrower will
not proveany claim in competition with any Agent or any Lender in respect of
any payment hereunder in any proceedings of any nature in any Insolvency
Proceeding; the Borrower will not claim any set-off, recoupment or
counterclaim against any other Loan Partyin respect of any liability of a Loan
Party
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to any other Loan Party; and the Borrower waives any benefit of and any right
to participatein any Collateral which may be held by the Agent or any Lender.
The Borrower agrees that, after the occurrence and during the continuance of
any Default or Event of Default, the Borrower will not demand, sue for or
otherwise attempt to collect anyDebt of any other Loan Party to the Borrower
until payment in full of all of the Obligations. If, notwithstanding the
foregoing sentence, the Borrower shall collect, enforce or receive any amounts
in respect of the Debt of any other Loan Party inviolation of the foregoing
sentence while any Obligations of such other Loan Party are still outstanding
or while any Commitments are outstanding, such amounts shall be collected,
enforced and received by such Borrower as trustee for the Agent andthe Lenders
and be paid over to the Agent, for the benefit of the Agent and the Lenders on
account of the Obligations of the Borrower without affecting in any manner the
liability of the Borrower under the other provisions hereof. The provisions
ofthis section shall survive the expiration or termination of this Agreement
and the other Loan Documents.
11.
NOTICES
.
Unless otherwise provided in this Agreement, all notices or demands relating
to this Agreement or any other Loan Documentshall be in writing and (except
for financial statements and other informational documents which may be sent
by first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receiptrequested),
overnight courier, electronic mail (at such email addresses as a party may
designate in accordance herewith), or telefacsimile. In the case of notices or
demands to Borrower or Borrower or Agent, as the case may be, they shall be
sent tothe respective address set forth below:
If to Borrower or Birks Group Inc.
Administrative Borrower: 2020 Robert-Bourassa Blvd.
Suite200
Montreal, Quebec
H3A2A5
Attn: Chief Financial Officer
Fax No.: 514-397-2537
Email: kfontana@birksgroup.com
with copies to: Birks Group Inc.
2020 Robert-Bourassa Blvd.
Suite200
Montreal, Quebec
H3A2A5
Attn: General Counsel
Fax No.: 514-397-2537
Email: mmelfi@birksgroup.com
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If to Agent: SLR Credit Solutions
Two International Place, 17
th
Floor
Boston, MA 02110 USA
Attn:Rebecca E. Tarby
Fax No.: 617-428-8701
Email: rtarby@slrcreditsolutions.com
And a copy (which shall not constitute notice) to:
Proskauer Rose LLP
OneInternational Place
Boston, MA 02110 USA
Attn: Peter J. Antoszyk, Esq.
Fax No.: 617-526-9899
Email:pantoszyk@proskauer.com
Any party hereto may change the address at which they are to receive notices
hereunder, by notice inwriting in the foregoing manner given to the other
party. All notices or demands sent in accordance with this
Section 11
, shall be deemed received on the earlier of the date of actual receipt or 3
Business Days after the deposit thereofin the mail;
provided
, that (a) notices sent by overnight courier service shall be deemed to have
been given when received, (b) notices by facsimile shall be deemed to have
been given when sent (except that, if not given duringnormal business hours
for the recipient, shall be deemed to have been given at the opening of
business on the next Business Day for the recipient) and (c) notices by
electronic mail shall be deemed received upon the sender's receipt of
anacknowledgment from the intended recipient (such as by the "return receipt
requested" function, as available, return email or other written acknowledgment)
.
Each Loan Party hereby authorizes the Agent and the Lenders (but they shall
have no obligation) to respond to usual and customary creditinquiries from
third parties concerning any Loan Party or any Subsidiary.
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION.
(a)THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY INANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL
MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATEDHERETO OR THERETO, AND ANY
CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH
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THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE
THEREIN.
(b)THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT AND THE OTHERLOAN DOCUMENTS SHALL BE TRIED AND LITIGATED
ONLY IN THE PROVINCE OF ONTARIO;
PROVIDED
, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY
MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHEREAGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NONCONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 12(b)
.
(c)TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND EACH MEMBER
OF THE LENDER GROUP HEREBY WAIVETHEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY
TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR
INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACTCLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A "
CLAIM
"). BORROWER AND EACH MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILYWAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
(d)BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS LOCATEDIN THE PROVINCE OF ONTARIO, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDINGSHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TO BRING ANYACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY
LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(e)NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST AGENT, ANY SWING LENDER, ANY
OTHER LENDER, OR ANY AFFILIATE,DIRECTOR, OFFICER, EMPLOYEE, COUNSEL,
REPRESENTATIVE, AGENT, OR ATTORNEY-IN-
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FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR
EXEMPLARY DAMAGESOR LOSSES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR
ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT,
OMISSION, OR EVENT OCCURRING IN CONNECTIONTHEREWITH, AND EACH LOAN PARTY
HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH
DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST
IN ITS FAVOR.
13. ASSIGNMENTS AND PARTICIPATIONS;
SUCCESSORS.
13.1. Assignments and Participations
.
(a)
(i)Subject to the conditions set forth in clause (a)(ii) below, any Lender may
assign and delegate all or any portion of its rights and duties under the Loan
Documents(including the Obligations owed to it and its Commitment) to one or
more assignees so long as such prospective assignee is an Eligible Transferee
(each, an "
Assignee
"), with the prior written consent (such consent not to beunreasonably
withheld or delayed) of:
(A)Administrative Borrower;
provided
, that no consentof Administrative Borrower shall be required (1) if an Event
of Default has occurred and is continuing, or (2) in connection with an
assignment to a Person that is a Lender or an Affiliate (other than natural
persons) of a Lender or aRelated Fund;
provided
further
, that Administrative Borrower shall be deemed to have consented to a proposed
assignment unless it objects thereto by written notice to Agent within 10
Business Days after having received notice thereof;and
(B)Agent; provided that no such consent shall be required in connection with
an assignment to a Personthat is a Lender or an Affiliate of a Lender (other
than a natural person).
(ii)Assignments shall besubject to the following additional conditions:
(A)no assignment may be made to a natural person,
(B) no assignment may be made to a Loan Party or an Affiliate of a Loan Party,
(C)the amount of the Commitments and the other rights and obligations of the
assigning Lender hereunder andunder the other Loan Documents subject to each
such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to Agent) shall be in a minimum amount
(unless waived by Agent) of $5,000,000(except such minimum amount shall not
apply to (I) an assignment or delegation by any Lender to any other Lender, an
Affiliate of any Lender, or a Related Fund of such Lender or (II) a group of
new Lenders, each of which is an Affiliate of eachother or a Related Fund of
such new Lender to the extent that the aggregate amount to be assigned to all
such new Lenders is at least $5,000,000),
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(D)each partial assignment shall be made as an assignment ofa proportionate
part of all the assigning Lender's rights and obligations under this Agreement,
(E)the parties to each assignment shall execute and deliver to Agent an
Assignment and Acceptance;
provided
, that Borrower and Agent may continue to deal solely and directly with the
assigning Lender in connection with the interest so assigned to an Assignee
until written notice of such assignment, together with payment instructions,addr
esses, and related information with respect to the Assignee, have been given
to Administrative Borrower and Agent by such Lender and the Assignee,
(F)unless waived by Agent, the assigning Lender or Assignee has paid to Agent,
for Agent's separateaccount, a processing fee in the amount of $3,500, and
(G)the Assignee, if it is not a Lender, shalldeliver to Agent an Administrative
Questionnaire in a form approved by Agent (the "
Administrative Questionnaire
"), and
(b)
From and after the date that Agent receives the executed Assignment and
Acceptance and, if applicable, payment of the required processing fee, (i) the
Assignee thereunder shallbe a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall be a "Lender" and shall have the rights and obligations of a
Lender under the LoanDocuments, and (ii) the assigning Lender shall, to the
extent that rights and obligations hereunder and under the other Loan
Documents have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (except withrespect to
Section 10.3
) and be released from any future obligations under this Agreement (and in the
case of an Assignment and Acceptance covering all or the remaining portion of
an assigning Lender's rights and obligations underthis Agreement and the other
Loan Documents, such Lender shall cease to be a party hereto and thereto);
provided
, that nothing contained herein shall release any assigning Lender from
obligations that survive the termination of thisAgreement, including such
assigning Lender's obligations under
Section 15
and
Section 17.8(a)
.
(c)
By executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other
and the other partieshereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or inconnection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(ii) such assigning Lender makes no representation orwarranty and assumes no
responsibility with respect to the financial condition of any Loan Party or
the performance or observance by any Loan Party of any of its obligations
under this Agreement or any other Loan Document furnished pursuant
hereto,(iii) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment andAcceptance, (iv) such Assignee will, independently
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and without reliance upon Agent, such assigning Lender or any other Lender,
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own creditdecisions in taking or not taking
action under this Agreement, (v) such Assignee appoints and authorizes Agent
to take such actions and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to Agent, by theterms hereof and
thereof, together with such powers as are reasonably incidental thereto, and
(vi) such Assignee agrees that it will perform all of the obligations which by
the terms of this Agreement are required to be performed by it as aLender.
(d)
Immediately upon Agent's receipt of the required processing fee, if
applicable, and delivery of notice to the assigning Lender pursuant to
Section 13.1(b)
, thisAgreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated to
each Assignee shallreduce such Commitments of the assigning Lender
pro tanto
.
(e)
Any Lender may at any time sell to one or morecommercial banks, financial
institutions, or other Persons (a "
Participant
") participating interests in all or any portion of its Obligations, its
Commitment, and the other rights and interests of that Lender (the"
Originating Lender
") hereunder and under the other Loan Documents;
provided
, that (i) the Originating Lender shall remain a "Lender" for all purposes of
this Agreement and the other Loan Documents and theParticipant receiving the
participating interest in the Obligations, the Commitments, and the other
rights and interests of the Originating Lender hereunder shall not constitute
a "Lender" hereunder or under the other Loan Documents andthe Originating
Lender's obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower, Agent, and the Lenders shallcontinue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender's rights and obligations under this Agreement and the other
Loan Documents, (iv) no Lender shall transfer or grant any participatinginterest
under which the Participant has the right to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment to, or consent or waiver with respect to
thisAgreement or of any other Loan Document would (A) extend the final
maturity date of the Obligations hereunder in which such Participant is
participating, (B) reduce the interest rate applicable to the Obligations
hereunder in which suchParticipant is participating, (C) release all or
substantially all of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participantis participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender (other than a waiver of default interest), or
(E) decreases the amount or postpones the due datesof scheduled principal
repayments or prepayments or premiums payable to such Participant through such
Lender, (v) no participation shall be sold to a natural person, (vi) no
participation shall be sold to a Loan Party or an Affiliate of aLoan Party,
and (vii) all amounts payable by Borrower hereunder shall be determined as if
such Lender had not sold such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been
declared orshall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if theamount
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of its participating interest were owing directly to it as a Lender under this
Agreement.The rights of any Participant only shall be derivative through the
Originating Lender with whom such Participant participates and no Participant
shall have any rights under this Agreement or the other Loan Documents or any
direct rights as to theother Lenders, Agent, Borrower, the Collateral, or
otherwise in respect of the Obligations. No Participant shall have the right
to participate directly in the making of decisions by the Lenders among
themselves.
(f)
In connection with any such assignment or participation or proposed assignment
or participation or any grant of a security interest in, or pledge of, its
rights under and interest inthis Agreement, a Lender may, subject to the
provisions of
Section 17.8
, disclose all documents and information which it now or hereafter may have
relating to Borrower and its Subsidiaries and their respective businesses.
(g)
Any other provision in this Agreement notwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its
rights under and interest inthis Agreement in favor of the Bank of Canada and
the Bank of Canada may enforce such pledge or security interest in any manner
permitted under applicable law.
(h)
Agent (acting solely for this purpose as a non-fiduciary agent on behalf of
Borrower) shall maintain, or cause to be maintained, a register (the "
Register
") on whichit enters the name and address of each Lender as the registered
owner of the Commitments (and the principal amount thereof and stated interest
thereon) held by such Lender (each, a "
Registered Loan
"). Other than in connection withan assignment by a Lender of all or any
portion of its portion of the Commitments to an Affiliate of such Lender or a
Related Fund of such Lender (i) a Registered Loan (and the registered note, if
any, evidencing the same) may be assigned orsold in whole or in part only by
registration of such assignment or sale on the Register (and each registered
note shall expressly so provide) and (ii) any assignment or sale of all or
part of such Registered Loan (and the registered note, ifany, evidencing the
same) may be effected only by registration of such assignment or sale on the
Register, together with the surrender of the registered note, if any,
evidencing the same duly endorsed by (or accompanied by a written instrument
ofassignment or sale duly executed by) the holder of such registered note,
whereupon, at the request of the designated assignee(s) or transferee(s), one
or more new registered notes in the same aggregate principal amount shall be
issued to thedesignated assignee(s) or transferee(s). Prior to the
registration of assignment or sale of any Registered Loan (and the registered
note, if any evidencing the same), Borrower shall treat the Person in whose
name such Registered Loan (and theregistered note, if any, evidencing the
same) is registered as the owner thereof for the purpose of receiving all
payments thereon and for all other purposes, notwithstanding notice to the
contrary. In the case of any assignment by a Lender of allor any portion of
its Commitments to an Affiliate of such Lender or a Related Fund of such
Lender, and which assignment is not recorded in the Register, the assigning
Lender, on behalf of Borrower, shall maintain a register comparable to
theRegister.
(i)
In the event that a Lender sells participations in the Registered Loan, such
Lender, acting solely for this purpose as a non-fiduciary agent on behalf of
Borrower, shall maintain (orcause to be maintained) a register on which it
enters the name of all participants in the Registered Loans held by it (and
the principal amount (and stated interest thereon) of the
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portion of such Registered Loans that is subject to such participations) (the "
Participant Register
"). A Registered Loan (and the registered note, if any, evidencing the
same)may be participated in whole or in part only by registration of such
participation on the Participant Register (and each registered note shall
expressly so provide). Any participation of such Registered Loan (and the
registered note, if any,evidencing the same) may be effected only by the
registration of such participation on the Participant Register. For the
avoidance of doubt, the Agent (in its capacity as Agent) shall have no
responsibility for maintaining a Participant Register.
(j)
Agent shall make a copy of the Register (and each Lender shall make a copy of
its Participant Register to the extent it has one) available for review by
Borrower from time to time asBorrower may reasonably request.
13.2.
Successors
. This Agreement shall bind and inure to thebenefit of the respective
successors and assigns of each of the parties;
provided
, that Borrower may not assign this Agreement or any rights or duties
hereunder without the Lenders' prior written consent and any prohibited
assignmentshall be absolutely void ab initio. No consent to assignment by the
Lenders shall release Borrower from its Obligations. A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to
Section 13.1
and, except as expressly required pursuant to
Section 13.1
, no consent or approval by Borrower is required in connection with any such
assignment.
14. AMENDMENTS;
WAIVERS
.
14.1. Amendments and Waivers
.
(a)
No amendment, waiver or other modification of any provision of this Agreement
or any other Loan Document, and no consent with respect to any departure by
Borrower or any other LoanParty therefrom, shall be effective unless the same
shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and the Loan Parties that are party
thereto and then any such waiver or consentshall be effective, but only in the
specific instance and for the specific purpose for which given;
provided
, that no such waiver, amendment, or consent shall, unless in writing and
signed by all of the Lenders directly and adversely affectedthereby and in the
case of an amendment, all of the Loan Parties that are party thereto, do any
of the following:
(i)increase the amount of or extend the expiration date of any Commitment of
any Lender,
(ii)postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal,interest, fees, or other amounts due
hereunder or under any other Loan Document,
provided
,
however
, that, notwithstanding anything to the contrary in this Agreement, any waiver
(or amendment to the terms) of any mandatory prepayment ofthe Term Loan
pursuant to
Section 2.3
shall be effective when signed or consented to by the Required Lenders and
Agent,
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(iii)reduce the principal of, or the rate of interest on, any Loanor other
extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document (except in connection with the
waiver of applicability of
Section 2.3
(which waiver shall be effective withthe written consent of the Required
Lenders,
(iv)amend, modify, or eliminate this Section or any provision ofthis Agreement
providing for consent or other action by all Lenders,
(v)amend, modify, or eliminate
Section 3.1
,
(vi)amend, modify, or eliminate
Section 15.10
,
(vii)other than as permitted by
Section 15.10
, release Agent's Lien in and to any of the Collateral,
(viii)amend, modify, or eliminate the definitions of "Required Lenders",
"SupermajorityLenders" or "Pro Rata Share",
(ix)contractually subordinate any of Agent's Liens (other thanin respect of
Permitted Liens securing the Revolving Loan Debt, Capital Leases or Permitted
Purchase Money Indebtedness permitted hereunder),
(x)other than in connection with a merger, amalgamation, liquidation,
dissolution or sale of such Person expresslypermitted by the terms hereof or
the other Loan Documents, release Borrower or any Guarantor from any
obligation for the payment of money or consent to the assignment or transfer
by Borrower or any Guarantor of any of its rights or duties under
thisAgreement or the other Loan Documents, or
(xi)amend, modify, or eliminate any of the provisions of
Section 13.1
with respect to assignments to, or participations with, Persons who are Loan
Parties or Affiliates of Loan Parties;
(b)
No amendment, waiver, modification, or consent shall amend, modify, waive, or
eliminate,
(i)the definition of, or any of the terms or provisions of, the Fee Letter,
without the written consent of Agent andBorrower (and shall not require the
written consent of any of the Lenders), or
(ii)any provision of
Section 15
pertaining to Agent, or any other rights or duties of Agent under this
Agreement or the other Loan Documents, without the written consent of Agent,
Borrower, and the Required Lenders;
(c)
No amendment, waiver, modification, elimination, or consent shall amend,
without written consent of Agent, Borrower and the Supermajority Lenders,
modify, or eliminate the definition ofBorrowing Base or any of the defined
terms (including the definitions of Eligible Accounts, Eligible Credit Card
Receivables and Eligible Inventory that are used in such definition
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to the extent that any such change results in more credit being made available
to Borrowerbased upon the Borrowing Base, but not otherwise, or the definition
of Maximum Credit Amount; and
(d)
Anything in this
Section 14.1
to thecontrary notwithstanding, (i) any amendment, modification, elimination,
waiver, consent, termination, or release of, or with respect to, any provision
of this Agreement or any other Loan Document that relates only to the
relationship of theLender Group among themselves, and that does not affect the
rights or obligations of Borrower, shall not require consent by or the
agreement of any Loan Party, and (ii) any amendment, waiver, modification,
elimination, or consent of or with respectto any provision of this Agreement
or any other Loan Document may be entered into without the consent of, or over
the objection of, any Defaulting Lender other than any of the matters governed
by
Section 14.1(a)(i) through(iii)
that affect such Lender.
14.2.
Replacement of CertainLenders
.
(a)
If (i) any action to be taken by the Lender Group or Agent hereunder requires
the consent, authorization, or agreement of the Required Lenders, the
Supermajority Lenders or allLenders directly and adversely affected thereby
and if such action has received the consent, authorization, or agreement of
the Required Lenders but not of all Lenders, the Supermajority Lenders but not
of all Lenders or all Lenders affectedthereby, or (ii) any Lender makes a
claim for compensation under
Section 16
, then Borrower or Agent, upon at least 5 Business Days prior irrevocable
notice, may permanently replace any Lender that failed to give its
consent,authorization, or agreement (a "
Non-Consenting Lender
"), together with its Affiliates, or any Lender that made a claim for
compensation (a "
Tax Lender
"), together with its Affiliates, with one or more ReplacementLenders, and the
Non-Consenting Lender (and its Affiliates) or Tax Lender (and its Affiliates),
as applicable, shall have no right to refuse to be replaced hereunder. Such
notice to replace the Non-Consenting Lender (and its Affiliates) or TaxLender
(and its Affiliates), as applicable, shall specify a closing date for such
replacement, which date shall not be later than 15 Business Days after the
date such notice is given.
(b)
Prior to the closing date of such replacement, the Non-Consenting Lender (and
its Affiliates) or Tax Lender (and its Affiliates), as applicable, and each
Replacement Lender shall executeand deliver an Assignment and Acceptance,
subject only to the Non-Consenting Lender (and its Affiliates) or Tax Lender
(and its Affiliates), as applicable, being repaid in full its share of the
outstanding Obligations (without any premium or penaltyof any kind whatsoever,
but including (i) all interest, fees and other amounts that may be due in
payable in respect thereof, and (ii) an assumption of its Pro Rata Share of
participations in the Letters of Credit). If the Non- ConsentingLender (and
its Affiliates) or Tax Lender (and its Affiliates), as applicable, shall
refuse or fail to execute and deliver any such Assignment and Acceptance prior
to the closing date of such replacement, Agent may, but shall not be required
to,execute and deliver such Assignment and Acceptance in the name or and on
behalf of the Non-Consenting Lender (and its Affiliates) or Tax Lender (and
its Affiliates), as applicable, and irrespective of whether Agent executes and
delivers suchAssignment and Acceptance, the Non-Consenting Lender (and its
Affiliates) or Tax Lender (and its Affiliates), as applicable, shall be deemed
to have executed and delivered such Assignment and Acceptance. The replacement
of any Non-Consenting Lender(and its Affiliates) or Tax Lender (and its
Affiliates), as applicable, shall be made in accordance with the terms of
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Section 14.2
. Until such time as one or more Replacement Lenders shall have acquired all
of the Obligations, the Commitments, and the other rights and obligations of
theNon-Consenting Lender (and its Affiliates) or Tax Lender (and its
Affiliates), as applicable, hereunder and under the other Loan Documents, the
Non-Consenting Lender (and its Affiliates) or Tax Lender (and its Affiliates),
as applicable, shallremain obligated to make the Non-Consenting Lender's (and
its Affiliates') or Tax Lender's (and its Affiliates'), as applicable, Pro
Rata Share of the Term Loan.
14.3.
No Waivers; Cumulative Remedies
. No failure by Agent or any Lender to exercise any right, remedy, oroption
under this Agreement or any other Loan Document, or delay by Agent or any
Lender in exercising the same, will operate as a waiver thereof. No waiver by
Agent or any Lender will be effective unless it is in writing, and then only
to the extentspecifically stated. No waiver by Agent or any Lender on any
occasion shall affect or diminish Agent's and each Lender's rights thereafter
to require strict performance by Borrower of any provision of this Agreement.
Agent's and eachLender's rights under this Agreement and the other Loan
Documents will be cumulative and not exclusive of any other right or remedy
that Agent or any Lender may have.
15.
AGENT; THE LENDER
GROUP.
15.1.
Appointment and Authorization of Agent
. Each Lender hereby designates and appoints Crystal FinancialLLC (d/b/a SLR
Credit Solutions) as its agent under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to execute and
deliver each of the other Loan Documents on its behalf and to take such other
actionon its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with suchpowers as are reasonably incidental thereto. Without
limiting the generality of the foregoing, the Lenders hereby irrevocably
authorize the Agent to enter into the Intercreditor Agreement and agree to be
bound by the provisions thereof. Agent agreesto act as agent for and on behalf
of the Lenders on the conditions contained in this
Section 15
. Any provision to the contrary contained elsewhere in this Agreement or in
any other Loan Document notwithstanding, Agent shall not have anyduties or
responsibilities, except those expressly set forth herein or in the other Loan
Documents, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties,obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent. Without
limiting the generality of the foregoing, the use of the term "agent" in this
Agreement or the other LoanDocuments with reference to Agent is not intended
to connote any fiduciary or other implied (or express) obligations arising
under agency doctrine of any applicable law. Instead, such term is used merely
as a matter of market custom, and is intendedto create or reflect only a
representative relationship between independent contracting parties. Each
Lender hereby further authorizes Agent to act as the secured party under each
of the Loan Documents that create a Lien on any item of Collateral.Except as
expressly otherwise provided in this Agreement, Agent shall have and may use
its sole discretion with respect to exercising or refraining from exercising
any discretionary rights or taking or refraining from taking any actions that
Agentexpressly is entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides
rights or powers to Agent,Lenders agree
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that Agent shall have the right to exercise the following powers as long as
this Agreement remains in effect: (a) maintain, in accordance with its
customary business practices, ledgers andrecords reflecting the status of the
Obligations, the Collateral, payments and proceeds of Collateral, and related
matters, (b) execute or file any and all financing or similar statements or
notices, amendments, renewals, supplements,documents, instruments, proofs of
claim, notices and other written agreements with respect to the Loan
Documents, (c) exclusively receive, apply, and distribute payments and
proceeds of the Collateral as provided in the Loan Documents, (d)perform,
exercise, and enforce any and all other rights and remedies of the Lender
Group with respect to Borrower or its Subsidiaries, the Obligations, the
Collateral, or otherwise related to any of same as provided in the Loan
Documents, and(e) incur and pay such Lender Group Expenses as Agent may deem
necessary or appropriate for the performance and fulfillment of its functions
and powers pursuant to the Loan Documents.
15.2.
Liability of Agent
. None of the Agent-Related Persons shall (a) be liable for any action takenor
omitted to be taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (b) be responsible in any
mannerto any of the Lenders for any recital, statement, representation or
warranty made by Borrower or any of its Subsidiaries or Affiliates, or any
officer or director thereof, contained in this Agreement or in any other Loan
Document, or in anycertificate, report, statement or other document referred
to or provided for in, or received by Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiencyof this Agreement or any other Loan
Document, or for any failure of Borrower or its Subsidiaries or any other
party to any Loan Document to perform its obligations hereunder or thereunder.
No Agent-Related Person shall be under any obligation to anyLenders to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the books and records or properties of Borrower or
itsSubsidiaries.
15.3.
Reliance by Agent
. Agent shall be entitled to rely, and shall be fully protectedin relying,
upon any writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, telefacsimile or other electronic method of transmission, telex or
telephone message, statement or other document or conversation believed by it
tobe genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrower or counsel to any Lender), independent accountants and
other expertsselected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice or concurrence of the Lenders as
it deems appropriate and untilsuch instructions are received, Agent shall act,
or refrain from acting, as it deems advisable. If Agent so requests, it shall
first be indemnified to its reasonable satisfaction by the Lenders against any
and all liability and expense that may beincurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent ofthe Required
Lenders and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
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15.4.
Notice of Default or Event of Default
. Agent shallnot be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default, except with respect to defaults in the
payment of principal, interest, fees, and expenses required to be paid to
Agent for the account of the Lendersand, except with respect to Events of
Default of which Agent has actual knowledge, unless Agent shall have received
written notice from a Lender or Borrower referring to this Agreement,
describing such Default or Event of Default, and stating thatsuch notice is a
"notice of default." Agent promptly will notify the Lenders of its receipt of
any such notice or of any Event of Default of which Agent has actual
knowledge. If any Lender obtains actual knowledge of any Event of Default,such
Lender promptly shall notify the other Lenders and Agent of such Event of
Default. Each Lender shall be solely responsible for giving any notices to its
Participants, if any. Subject to
Section 15.3
, Agent shall take such actionwith respect to such Default or Event of Default
as may be requested by the Required Lenders in accordance with
Section 9
;
provided
, that unless and until Agent has received any such request, Agent may (but
shall not be obligatedto) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable.
15.5.
Credit Decision
. Each Lender acknowledges that none of the Agent-Related Persons has made
anyrepresentation or warranty to it, and that no act by Agent hereinafter
taken, including any review of the affairs of Borrower and its Subsidiaries or
Affiliates, shall be deemed to constitute any representation or warranty by
any Agent-RelatedPerson to any Lender. Each Lender represents to Agent that it
has, independently and without reliance upon any Agent-Related Person and
based on such due diligence, documents and information as it has deemed
appropriate, made its own appraisal of aninvestigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower or any other Person party to a Loan Document, and
all applicable bank regulatory laws relating to the transactionscontemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower. Each Lender also represents that it will, independently
and without reliance upon any Agent- Related Person and based on such
documents andinformation as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deemsnecessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower or any other Person party to a Loan Document.
Except for notices, reports, and other documents expresslyherein required to
be furnished to the Lenders by Agent, Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and
othercondition or creditworthiness of Borrower or any other Person party to a
Loan Document that may come into the possession of any of the Agent-Related
Persons. Each Lender acknowledges that Agent does not have any duty or
responsibility, eitherinitially or on a continuing basis (except to the
extent, if any, that is expressly specified herein) to provide such Lender
with any credit or other information with respect to Borrower, its Affiliates
or any of their respective business, legal,financial or other affairs, and
irrespective of whether such information came into Agent's or its Affiliates'
or representatives' possession before or after the date on which such Lender
became a party to this Agreement.
15.6.
Costs and Expenses; Indemnification
. Agent may incur and pay Lender Group Expenses to the extentAgent reasonably
deems necessary or appropriate for the performance and
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fulfillment of its functions, powers, and obligations pursuant to the Loan
Documents, including court costs, legal fees and expenses, fees and expenses
of financial accountants, advisors,consultants, and appraisers, costs of
collection by outside collection agencies, auctioneer fees and expenses, and
costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrower is obligated to reimburseAgent or Lenders
for such expenses pursuant to this Agreement or otherwise. Agent is authorized
and directed to deduct and retain sufficient amounts from payments or proceeds
of the Collateral received by Agent to reimburse Agent for suchout-of-pocket
costs and expenses prior to the distribution of any amounts to Lenders. In the
event Agent is not reimbursed for such costs and expenses by Borrower or its
Subsidiaries, each Lender hereby agrees that it is and shall be obligated
topay to Agent such Lender's ratable thereof. Whether or not the transactions
contemplated hereby are consummated, each of the Lenders, on a ratable basis,
shall indemnify and defend the Agent-Related Persons (to the extent not
reimbursed by oron behalf of Borrower and without limiting the obligation of
Borrower to do so) from and against any and all Indemnified Liabilities;
provided
, that no Lender shall be liable for the payment to any Agent-Related Person
of any portion of suchIndemnified Liabilities resulting solely from such
Person's gross negligence or willful misconduct nor shall any Lender be liable
for the obligations of any Defaulting Lender in failing to make an extension
of credit hereunder. Withoutlimitation of the foregoing, each Lender shall
reimburse Agent upon demand for such Lender's ratable share of any costs or
out of pocket expenses (including attorneys, accountants, advisors, and
consultants fees and expenses) incurred by Agentin connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, thisAgreement
or any other Loan Document to the extent that Agent is not reimbursed for such
expenses by or on behalf of Borrower. The undertaking in this Section shall
survive the payment of all Obligations hereunder and the resignation or
replacementof Agent.
15.7.
SLR Credit Solutions in Individual Capacity
. SLR Credit Solutions and its Affiliatesmay make loans to, issue letters of
credit for the account of, acquire Equity Interests in, and generally engage
in any kind of banking, trust, financial advisory, underwriting, or other
business with Borrower and its Subsidiaries and Affiliates andany other Person
party to any Loan Document as though Crystal Financial LLC (d/b/a SLR Credit
Solutions) were not Agent hereunder, and, in each case, without notice to or
consent of the other members of the Lender Group. The other members of
theLender Group acknowledge that, pursuant to such activities, SLR Credit
Solutions or its Affiliates may receive information regarding Borrower or its
Affiliates or any other Person party to any Loan Documents that is subject to
confidentialityobligations in favor of Borrower or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of
such confidentiality obligations,which waiver Agent will use its reasonable
best efforts to obtain), Agent shall not be under any obligation to provide
such information to them. The terms "Lender" and "Lenders" include SLR Credit
Solutions in its individualcapacity.
15.8.
Successor Agent
. Agent may resign as Agent upon 30 days prior written notice to theLenders
(unless such notice is waived by the Required Lenders) and Borrower (unless
such notice is waived by Borrower). If Agent resigns under this Agreement, the
Required Lenders shall be entitled, with (so long as no Event of Default has
occurredand is continuing) the consent of Borrower (such consent not to be
unreasonably withheld, delayed, or conditioned), appoint a
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successor Agent for the Lenders. If no successor Agent is appointed prior to
the effective date of the resignation of Agent, Agent may appoint, after
consulting with the Lenders and Borrower, asuccessor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenderswith (so
long as no Event of Default has occurred and is continuing) the consent of
Borrower (such consent not to be unreasonably withheld, delayed, or
conditioned). In any such event, upon the acceptance of its appointment as
successor Agenthereunder, such successor Agent shall succeed to all the
rights, powers, and duties of the retiring Agent and the term "Agent" shall
mean such successor Agent and the retiring Agent's appointment, powers, and
duties as Agent shall beterminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this
Section 15
shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement. If nosuccessor Agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall performall of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.
15.9.
Lender in Individual Capacity
. Any Lender and its respective Affiliates may make loans to, issueletters of
credit for the account of, acquire Equity Interests in and generally engage in
any kind of banking, trust, financial advisory, underwriting, or other
business with Borrower and its Subsidiaries and Affiliates and any other
Person party toany Loan Documents as though such Lender were not a Lender
hereunder without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to
such activities, such Lender and itsrespective Affiliates may receive
information regarding Borrower or its Affiliates or any other Person party to
any Loan Documents that is subject to confidentiality obligations in favor of
Borrower or such other Person and that prohibit thedisclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain),such Lender shall not be under any obligation to provide such
information to them.
15.10.
CollateralMatters
.
(a)
The Lenders hereby irrevocably authorize Agent to release any Lien on any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowerof all of the Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Borrower certify to Agent that the sale or
disposition is permitted under
Section 6.4
(and Agent may rely conclusively on any such certificate, without further
inquiry), (iii) constituting property in which neither Borrower nor any of its
Subsidiaries owned any interest at the time Agent's Lien wasgranted nor at any
time thereafter, (iv) constituting property leased or licensed to Borrower or
its Subsidiaries under a lease or license that has expired or is terminated in
a transaction permitted under this Agreement, or (v) in connectionwith a
credit bid or purchase authorized under this
Section 15.10
. The Loan Parties and the Lenders hereby irrevocably authorize Agent, based
upon the instruction of the Required Lenders, to (a) consent to the sale of,
credit bid orpurchase (either directly or indirectly through one or more
entities) all or any portion of the Collateral at any sale thereof conducted
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under the provisions of the Bankruptcy Code, or similar Insolvency Laws in any
other relevant jurisdiction, including Section 363 of the Bankruptcy Code, (b)
credit bid or purchase(either directly or indirectly through one or more
entities) all or any portion of the Collateral at any sale or other
disposition thereof conducted under the provisions of the PPSA, including
pursuant to Sections 9-610 or 9-620 of the PPSA orsimilar Insolvency Laws in
any other relevant jurisdiction or any similar provision of the PPSA, or (c)
credit bid or purchase (either directly or indirectly through one or more
entities) all or any portion of the Collateral at any other saleor foreclosure
conducted or consented to by Agent in accordance with applicable law in any
judicial action or proceeding or by the exercise of any legal or equitable
remedy. In connection with any such credit bid or purchase, (i) theObligations
owed to the Lenders shall be entitled to be, and shall be, credit bid on a
ratable basis (with Obligations with respect to contingent or unliquidated
claims being estimated for such purpose if the fixing or liquidation thereof
would notimpair or unduly delay the ability of Agent to credit bid or purchase
at such sale or other disposition of the Collateral and, if such contingent or
unliquidated claims cannot be estimated without impairing or unduly delaying
the ability of Agent tocredit bid at such sale or other disposition, then such
claims shall be disregarded, not credit bid, and not entitled to any interest
in the Collateral that is the subject of such credit bid or purchase) and the
Lenders whose Obligations are creditbid shall be entitled to receive interests
(ratably based upon the proportion of their Obligations credit bid in relation
to the aggregate amount of Obligations so credit bid) in the Collateral that
is the subject of such credit bid or purchase (orin the Equity Interests of
the any entities that are used to consummate such credit bid or purchase), and
(ii) Agent, based upon the instruction of the Required Lenders, may accept
non-cash consideration, including debt and equity securitiesissued by any
entities used to consummate such credit bid or purchase and in connection
therewith Agent may reduce the Obligations owed to the Lenders (ratably based
upon the proportion of their Obligations credit bid in relation to the
aggregateamount of Obligations so credit bid) based upon the value of such
non- cash consideration. Except as provided above, Agent will not execute and
deliver a release of any Lien on any Collateral without the prior written
authorization of (y) ifthe release is of all or substantially all of the
Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon
request by Agent or Borrower at any time, the Lenders will confirm in writing
Agent's authority to release anysuch Liens on particular types or items of
Collateral pursuant to this
Section 15.10
;
provided
, that (1) anything to the contrary contained in any of the Loan Documents
notwithstanding, Agent shall not be required to executeany document or take
any action necessary to evidence such release on terms that, in Agent's
opinion, could expose Agent to liability or create any obligation or entail
any consequence other than the release of such Lien without recourse,representat
ion, or warranty, and (2) such release shall not in any manner discharge,
affect, or impair the Obligations or any Liens (other than those expressly
released) upon (or obligations of Borrower in respect of) any and all
interestsretained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral. Each Lender further
hereby irrevocably authorizes Agent, at its option and in its sole discretion,
to subordinate any Liengranted to or held by Agent under any Loan Document to
the holder of any Permitted Lien on such property if such Permitted Lien
secures, a Capital Lease or a Permitted Purchase Money Indebtedness permitted
hereunder or the Revolving Loan Documents.
(b)
Agent shall have no obligation whatsoever to any of the Lenders (i) to verify
or assure that the Collateral exists or is owned by Borrower or its
Subsidiaries or is cared for,
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protected, or insured or has been encumbered, (ii) to verify or assure that
Agent's Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced orare entitled to any particular priority,
(iii) to verify or assure that any particular items of Collateral meet the
eligibility criteria applicable in respect thereof, (iv) to impose, maintain,
increase, reduce, implement, or eliminate anyparticular Reserve hereunder or
to determine whether the amount of any Reserve is appropriate or not, or (v)
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of therights,
authorities and powers granted or available to Agent pursuant to any of the
Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission, or event related thereto, subject to the
terms and conditionscontained herein, Agent may act in any manner it may deem
appropriate, in its sole discretion given Agent's own interest in the
Collateral in its capacity as one of the Lenders and that Agent shall have no
other duty or liability whatsoever toany Lender as to any of the foregoing,
except as otherwise expressly provided herein.
(c)
Any sale or disposition of Collateral that is permittedunder
Section 6.4
(as modified or waived in accordance with Section 14.1) shall be free and
clear of the Liens created by the Loan Documents.
15.11.
Restrictions on Actions by Lenders; Sharing of Payments
.
(a)
Each of the Lenders agrees that it shall not, without the express written
consent of Agent, and that it shall, to the extent it is lawfully entitled to
do so, upon the written request of Agent,set off against the Obligations, any
amounts owing by such Lender to Borrower or its Subsidiaries or any deposit
accounts of Borrower or its Subsidiaries now or hereafter maintained with such
Lender. Each of the Lenders further agrees that it shallnot, unless
specifically requested to do so in writing by Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings
to enforce any Loan Document against Borrower or any Guarantor or to
forecloseany Lien on, or otherwise enforce any security interest in, any of
the Collateral.
(b)
If, at any time or times any Lender shall receive (i) bypayment, foreclosure,
setoff, or otherwise, any proceeds of Collateral or any payments with respect
to the Obligations, except for any such proceeds or payments received by such
Lender from Agent pursuant to the terms of this Agreement, or(ii) payments
from Agent in excess of such Lender's Pro Rata Share of all such distributions
by Agent, such Lender promptly shall (A) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate thesame to Agent,
or in immediately available funds, as applicable, for the account of all of
the Lenders and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (B) purchase, without recourse
orwarranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied
ratably as among the Lenders in accordance with their Pro Rata Shares;
provided
, that to theextent that such excess payment received by the purchasing party
is thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid thereforshall be returned to such purchasing party,
but without interest except to the extent that such purchasing party is
required to pay interest in connection with the recovery of the excess payment.
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15.12.
Agency for Perfection
. Agent hereby appoints each otherLender as its agent (and each Lender hereby
accepts such appointment) for the purpose of perfecting Agent's Liens in
assets which, in accordance with Article 8 or Article 9, as applicable, of the
PPSA or the applicable provisions of any STA,can be perfected by possession or
control. Should any Lender obtain possession or control of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver possession or control of suchCollateral to
Agent or in accordance with Agent's instructions.
15.13.
Payments by Agent to theLenders
. All payments to be made by Agent to the Lenders shall be made by bank wire
transfer of immediately available funds pursuant to such wire transfer
instructions as each party may designate for itself by written notice to
Agent.Concurrently with each such payment, Agent shall identify whether such
payment (or any portion thereof) represents principal, premium, fees, or
interest of the Obligations.
15.14.
Concerning the Collateral and Related Loan Documents
. Each member of the Lender Group authorizes anddirects Agent to enter into
this Agreement and the other Loan Documents. Each member of the Lender Group
agrees that any action taken by Agent in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral andthe
exercise by Agent of its powers set forth therein or herein, together with
such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
15.15.
Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information
. Bybecoming a party to this Agreement, each Lender:
(a)
is deemed to have requested that Agent furnish such Lender, promptly after it
becomes available, a copy of each field examination report respecting Borrower
or its Subsidiaries(each, a "
Report
") prepared by or at the request of Agent, and Agent shall so furnish each
Lender with such Reports,
(b)
expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to the accuracy of any Report, and (ii) shall
not be liable for anyinformation contained in any Report,
(c)
expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Agent or other party performing any field
examination will inspect onlyspecific information regarding Borrower and its
Subsidiaries and will rely significantly upon Borrower's and its Subsidiaries'
books and records, as well as on representations of Borrower's personnel,
(d)
agrees to keep all Reports and other material, non-public information
regarding Borrower and its Subsidiaries and their operations, assets, and
existing and contemplated businessplans in a confidential manner in accordance
with
Section 17.8
, and
(e)
without limiting the generality of any otherindemnification provision
contained in this Agreement, agrees: (i) to hold Agent and any other Lender
preparing a Report harmless from any action the indemnifying Lender may take
or fail to take or any conclusion the
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indemnifying Lender may reach or draw from any Report in connection with any
loans or other credit accommodations that the indemnifying Lender has made or
may make to Borrower, or theindemnifying Lender's participation in, or the
indemnifying Lender's purchase of, a loan or loans of Borrower, and (ii) to
pay and protect, and indemnify, defend and hold Agent, and any such other
Lender preparing a Report harmlessfrom and against, the claims, actions,
proceedings, damages, costs, expenses, and other amounts (including,
attorneys' fees and costs) incurred by Agent and any such other Lender
preparing a Report as the direct or indirect result of any thirdparties who
might obtain all or part of any Report through the indemnifying Lender.
(f)
In addition to the foregoing, (x) any Lender mayfrom time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower or its Subsidiaries to Agent that has not been
contemporaneously provided by Borrower or such Subsidiary to suchLender, and,
upon receipt of such request, Agent promptly shall provide a copy of same to
such Lender, (y) to the extent that Agent is entitled, under any provision of
the Loan Documents, to request additional reports or information fromBorrower
or its Subsidiaries, any Lender may, from time to time, reasonably request
Agent to exercise such right as specified in such Lender's notice to Agent,
whereupon Agent promptly shall request of Borrower the additional reports
orinformation reasonably specified by such Lender, and, upon receipt thereof
from Borrower or such Subsidiary, Agent promptly shall provide a copy of same
to such Lender, and (z) any time that Agent renders to Borrower a statement
regarding theLoan Account, Agent shall send a copy of such statement to each
Lender.
15.16.
Several Obligations; NoLiability
. Notwithstanding that certain of the Loan Documents now or hereafter may have
been or will be executed only by or in favor of Agent in its capacity as such,
and not by or in favor of the Lenders, any and all obligations on the partof
Agent (if any) to make any credit available hereunder shall constitute the
several (and not joint) obligations of the respective Lenders on a ratable
basis, according to their respective Commitments, to make an amount of such
credit not toexceed, in principal amount, at any one time outstanding, the
amount of their respective Commitments. Nothing contained herein shall confer
upon any Lender any interest in, or subject any Lender to any liability for,
or in respect of, the business,assets, profits, losses, or liabilities of any
other Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall haveany obligation, duty, or
liability to any Participant of any other Lender. Except as provided in
Section 15.6
, no member of the Lender Group shall have any liability for the acts of any
other member of the Lender Group. No Lender shallbe responsible to Borrower or
any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for such Lender
or on its behalf, nor to take any other action on behalf of such Lenderhereunder
or in connection with the financing contemplated herein.
15.17.
Quebec Security
. In its capacityas Agent, for the purposes of holding any hypothec granted to
Agent, Crystal Financial LLC (d/b/a SLR Credit Solutions) is hereby appointed
and shall serve as the hypothecary representative for all present and future
Lenders as contemplated byArticle 2692 of the Civil Code of Quebec. Any person
who becomes a Lender shall, by its execution of an Assignment and Acceptance
be deemed to have consented to and confirmed Agent as the person acting as
hypothecary representative holdingthe aforesaid
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hypothecs as aforesaid and to have ratified, as of the date it becomes a
Lender, all actions taken by Agent in such capacity. The substitution of Agent
pursuant to the provisions of this
Section 15
also constitute the substitution of the hypothecary representative.
16.
WITHHOLDING
TAXES
.
16.1.
Payments
. All payments will be made free and clear of, and withoutdeduction or
withholding for, any present or future Taxes except as required by applicable
law, and in the event any deduction or withholding of Indemnified Taxes is
required by applicable law, Borrower shall comply with the next sentence of
this
Section 16.1
. If any Indemnified Taxes are required to be deducted or withheld on a
payment made by any Loan Party, such Loan Party agrees that the amount payable
by it shall be increased as necessary so that after such deduction
orwithholding is made every payment of all amounts due under this Agreement,
any note, or Loan Document, including any amount paid pursuant to this
Section 16.1
after withholding or deduction for or on account of any Indemnified Taxes,will
not be less than the amount the Agent or the Lender would have received had no
such deduction or withholding been made. Borrower will furnish to Agent as
promptly as possible after the date the payment of any Tax is due pursuant to
applicablelaw, certified copies of Tax receipts or other documentation
reasonably requested by Agent evidencing such payment by Borrower to a
Governmental Authority. In addition, Borrower agrees to pay any present or
future stamp, value added, intangibletransfer or documentary Taxes or any
other excise or property Taxes, charges, or similar levies ("
Other Taxes
") that arise from any payment made hereunder or from the execution, delivery,
performance, recordation, enforcement orfiling of, or otherwise with respect
to this Agreement or any other Loan Document to the relevant Government
Authority in accordance with applicable law. Loan Parties shall indemnify each
Indemnified Person (as defined in
Section 10.3
)(collectively a "
Tax Indemnitee
") for the full amount of Indemnified Taxes or Other Taxes arising in
connection with this Agreement or any other Loan Document or breach thereof by
any Loan Party (including, without limitation, anyIndemnified Taxes or Other
Taxes imposed or asserted on, or attributable to, amounts payable under this
Section 16
) imposed on, or paid by, such Tax Indemnitee and any penalties, interest and
reasonable costs and expenses related thereto(including fees and disbursements
of attorneys and other Tax professionals), as and when they are incurred and
irrespective of whether suit is brought, whether or not such Indemnified Taxes
or Other Taxes were correctly or legally imposed orasserted by the relevant
Governmental Authority (other than Indemnified Taxes or Other Taxes and
additional amounts that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of suchTax
Indemnitee). The obligations of Loan Parties under this
Section 16
shall survive the termination of this Agreement, the resignation and
replacement of the Agent, and the repayment of the Obligations.
16.2.
Exemptions
.
(a)
If a Lender or Participant claims an exemption or reduction from withholding
Tax in a jurisdiction other than the United States, such Lender or such
Participant agrees with and infavor of Agent, to deliver to Agent (or, in the
case of a Participant, to the Lender granting the participation only) any such
form or forms, as may be reasonably requested by Agent or required under the
laws of such jurisdiction as a condition toexemption from, or reduction of,
foreign withholding or backup withholding Tax before receiving its first
payment under this
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Agreement (including, for the avoidance of doubt, if requested, Canada Revenue
Agency Forms NR-301, NR-302 or NR-303, as applicable), but only if such Lender
or such Participant is legally ableto deliver such forms and the completion,
execution, or submission of such forms or other documentation in the
reasonable judgment of such Lender would not subject such Lender to any
material unreimbursed cost or expense or materially prejudice thelegal or
commercial position of such Lender or its Affiliates,
provided
, that nothing in this
Section 16.2(a)
shall require a Lender or Participant to disclose any information that it
deems to be confidential (including withoutlimitation, its Tax returns). Each
Lender and each Participant shall provide new forms (or successor forms) upon
the expiration or obsolescence of any previously delivered forms and to
promptly notify Agent (or, in the case of a Participant, to theLender granting
the participation only) of any change in circumstances which would modify or
render invalid any claimed exemption or reduction.
(b)
If a Lender or Participant claims exemption from, or reduction of, withholding
Tax and such Lender or Participant sells, assigns, grants a participation in,
or otherwise transfersall or part of the Obligations of Borrower to such
Lender or Participant, such Lender or Participant agrees to notify Agent (or,
in the case of a sale of a participation interest, to the Lender granting the
participation only) of the percentageamount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender or Participant. To
the extent of such percentage amount, Agent will treat such Lender's or such
Participant's documentation provided pursuant to
Section 16.2(a)
as no longer valid. With respect to such percentage amount, such Participant
or Assignee may provide new documentation, pursuant to
Section 16.2(a)
, if applicable. Borrower agrees that each Participant shallbe entitled to the
benefits of this
Section 16
with respect to its participation in any portion of the Commitments and the
Obligations so long as such Participant complies with the obligations set
forth in this
Section 16
with respect thereto.
16.3.
Reductions
.
(a)
If the Canada Revenue Agency or any other Governmental Authority of Canada or
other jurisdiction asserts a claim that Agent (or, in the case of a
Participant, to the Lender granting theparticipation) did not properly
withhold Tax from amounts paid to or for the account of any Lender or any
Participant due to a failure on the part of the Lender or any Participant
(because the appropriate form was not delivered, was not properlyexecuted, or
because such Lender failed to notify Agent (or such Participant failed to
notify the Lender granting the participation) of a change in circumstances
which rendered the exemption from, or reduction of, withholding Tax
ineffective, or forany other reason) such Lender shall indemnify and hold
Agent harmless (or, in the case of a Participant, such Participant shall
indemnify and hold the Lender granting the participation harmless) for all
amounts paid, directly or indirectly, by Agent(or, in the case of a
Participant, to the Lender granting the participation), as Tax or otherwise,
including penalties and interest, and including any Taxes imposed by any
jurisdiction on the amounts payable to Agent (or, in the case of aParticipant,
to the Lender granting the participation only) under this
Section 16
, together with all costs and expenses (including attorneys' fees and
expenses). The obligation of the Lenders and the Participants under
thissubsection shall survive the payment of all Obligations and the
resignation or replacement of Agent.
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16.4.
Refunds
. If Agent or a Lender determines, in itssole discretion, that it has received
a refund of any Indemnified Taxes to which Borrower has paid additional
amounts pursuant to this
Section 16
, so long as no Event of Default has occurred and is continuing, it shall pay
over suchrefund to Borrower (but only to the extent of payments made, or
additional amounts paid, by Borrower under this
Section 16
with respect to Indemnified Taxes or Other Taxes giving rise to such a refund
and only to the extent that theAgent or the Lender, as applicable, is
satisfied that it may do so without prejudice to its right, as against the
relevant Governmental Authority, to retain such refund), net of all
out-of-pocket expenses (including Taxes) of Agent or such Lenderand without
interest (other than any interest paid by the applicable Governmental
Authority with respect to such a refund);
provided
, that Borrower, upon the request of Agent or such Lender, agrees to repay the
amount paid over to Borrower(plus any penalties, interest or other charges,
imposed by the applicable Governmental Authority, other than such penalties,
interest or other charges imposed as a result of the willful misconduct or
gross fault of Agent hereunder) to Agent or suchLender in the event Agent or
such Lender is required to repay such refund to such Governmental Authority.
Notwithstanding anything in this Agreement to the contrary, this
Section 16.4
shall not be construed to (a) interfere with theright of the Agent or any
Lender to arrange its affairs in whatever manner it thinks fit and, or (b)
require Agent or any Lender to make available its Tax returns (or any other
information which it deems confidential) to Borrower or any otherPerson.
Further notwithstanding anything to the contrary in this
Section 16.4
, in no event will an Agent or Lender be required to pay any amount to
Borrower pursuant to this
Section 16.4
, the payment of which would place suchAgent or Lender in a less favorable net
after-Tax position than it would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments oradditional amounts
with respect to such Tax had never been paid.
17.
GENERAL PROVISIONS.
17.1.
Effectiveness
. This Agreement shall be binding and deemed effective when executed by
Borrower,Agent, and each Lender whose signature is provided for on the
signature pages hereof.
17.2.
SectionHeadings
. Headings and numbers have been set forth herein for convenience only. Unless
the contrary is compelled by the context, everything contained in each Section
applies equally to this entire Agreement.
17.3.
Interpretation
. Neither this Agreement nor any uncertainty or ambiguity herein shall be
construedagainst the Lender Group or Borrower, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed
by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used soas to accomplish fairly the purposes and
intentions of all parties hereto.
17.4.
Severability ofProvisions
. Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
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17.5.
Debtor-Creditor Relationship
. The relationshipbetween the Lenders and Agent, on the one hand, and the Loan
Parties, on the other hand, is solely that of creditor and debtor. No member
of the Lender Group has (or shall be deemed to have) any fiduciary
relationship or duty to any Loan Partyarising out of or in connection with the
Loan Documents or the transactions contemplated thereby, and there is no
agency or joint venture relationship between the members of the Lender Group,
on the one hand, and the Loan Parties, on the other hand,by virtue of any Loan
Document or any transaction contemplated therein.
17.6.
Counterparts; ElectronicExecution
. This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together,shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission shall be equally as effective as delivery of an
original executed counterpart of thisAgreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission also shall deliver an original executed counterpart of
this Agreement but the failure to deliver an originalexecuted counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
17.7.
Revival and Reinstatement of Obligations; Certain Waivers
. If any member of the Lender Grouprepays, refunds, restores, or returns in
whole or in part, any payment or property (including any proceeds of
Collateral) previously paid or transferred to such member of the Lender Group
in full or partial satisfaction of any Obligation or onaccount of any other
obligation of any Loan Party under any Loan Document, because the payment,
transfer, or the incurrence of the obligation so satisfied is asserted or
declared to be void, voidable, or otherwise recoverable under any law
relatingto creditors' rights, including provisions of the Bankruptcy Code or
other Insolvency Laws relating to fraudulent transfers, preferences, or other
voidable or recoverable obligations or transfers (each, a "
Voidable Transfer
"),or because such member of the Lender Group elects to do so on the
reasonable advice of its counsel in connection with a claim that the payment,
transfer, or incurrence is or may be a Voidable Transfer, then, as to any such
Voidable Transfer, or theamount thereof that such member of the Lender Group
elects to repay, restore, or return (including pursuant to a settlement of any
claim in respect thereof), and as to all reasonable costs, expenses, and
attorneys' fees of such member of theLender Group related thereto, (i) the
liability of the Loan Parties with respect to the amount or property paid,
refunded, restored, or returned will automatically and immediately be revived,
reinstated, and restored and will exist and (ii)Agent's Liens securing such
liability shall be effective, revived, and remain in full force and effect, in
each case, as fully as if such Voidable Transfer had never been made. If,
prior to any of the foregoing, (A) Agent's Liensshall have been released or
terminated or (B) any provision of this Agreement shall have been terminated
or cancelled, Agent's Liens, or such provision of this Agreement, shall be
reinstated in full force and effect and such prior release,termination,
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect the obligation of any Loan Party in respect of such liability
or any Collateral securing such liability.
17.8.
Confidentiality
.
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(a)
Agent and Lenders each individually (and not jointly or jointly and severally)
agree that material, non-public information regarding Borrower and its
Subsidiaries, their operations,assets, and existing and contemplated business
plans ("
Confidential Information
") shall be treated by Agent and the Lenders in a confidential manner, and
shall not be disclosed by Agent and the Lenders to Persons who are not
partiesto this Agreement, except: (i) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group and
to employees, directors and officers of any member of the Lender Group (the
Persons in this clause(i), "
Lender Group Representatives
") on a "need to know" basis in connection with this Agreement and the
transactions contemplated hereby and on a confidential basis, (ii) to
Subsidiaries and Affiliates of any memberof the Lender Group,
provided
that any such Subsidiary or Affiliate shall have agreed to receive such
information hereunder subject to the terms of this
Section 17.8
, (iii) as may be required by regulatory authorities so longas such
authorities are informed of the confidential nature of such information, (iv)
as may be required by statute, decision, or judicial or administrative order,
rule, or regulation;
provided
that (x) prior to any disclosure underthis clause (iv), the disclosing party
agrees to provide Borrower with prior notice thereof, to the extent that it is
practicable to do so and to the extent that the disclosing party is permitted
to provide such prior notice to Borrower pursuant tothe terms of the
applicable statute, decision, or judicial or administrative order, rule, or
regulation and (y) any disclosure under this clause (iv) shall be limited to
the portion of the Confidential Information as may be required bysuch statute,
decision, or judicial or administrative order, rule, or regulation, (v) as may
be agreed to in advance in writing by Borrower, (vi) as requested or required
by any Governmental Authority pursuant to any subpoena or otherlegal process,
provided
, that, (x) prior to any disclosure under this clause (vi) the disclosing
party agrees to provide Borrower with prior written notice thereof, to the
extent that it is practicable to do so and to the extentthat the disclosing
party is permitted to provide such prior written notice to Borrower pursuant
to the terms of the subpoena or other legal process and (y) any disclosure
under this clause (vi) shall be limited to the portion of theConfidential
Information as may be required by such Governmental Authority pursuant to such
subpoena or other legal process, (vii) as to any such information that is or
becomes generally available to the public (other than as a result ofprohibited
disclosure by Agent or the Lenders or the Lender Group Representatives),
(viii) in connection with any assignment, participation or pledge of any
Lender's interest under this Agreement,
provided
that prior to receipt ofConfidential Information any such assignee,
participant, or pledgee shall have agreed in writing to receive such
Confidential Information either subject to the terms of this
Section 17.8
or pursuant to confidentiality requirementssubstantially similar to those
contained in this
Section 17.8
(and such Person may disclose such Confidential Information to Persons
employed or engaged by them as described in clause (i) above), (ix) in
connection with anylitigation or other adversary proceeding involving parties
hereto to the extent such litigation or adversary proceeding involves claims
related to the rights or duties of such parties under this Agreement or the
other Loan Documents;
provided
, that, prior to any disclosure to any Person (other than any Loan Party,
Agent, any Lender, any of their respective Affiliates, or their respective
counsel) under this clause (ix) with respect to litigation involving any
Person(other than Borrower, Agent, any Lender, any of their respective
Affiliates, or their respective counsel), the disclosing party agrees to
provide Borrower with prior written notice thereof, and (x) in connection
with, and to the extentreasonably necessary for, the exercise of any secured
creditor remedy under this Agreement or under any other Loan Document.
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(b)
Anything in this Agreement to the contrary notwithstanding, Agent may disclose
information concerning the terms and conditions of this Agreement and the
other Loan Documents to loansyndication and pricing reporting services or in
its marketing or promotional materials, with such information to consist of
deal terms and other information customarily found in such publications or
marketing or promotional materials and mayotherwise use the name, logos, and
other insignia of Borrower or the other Loan Parties and the Commitments
provided hereunder in any "tombstone" or other advertisements, on its website
or in other marketing materials of the Agent;
provided
that, in the case of this clause, Agent will submit its proposed form of
"tombstone" or comparable advertising to the Administrative Borrower for
approval prior to Agent's initial external use thereof, which approvalof the
Administrative Borrower shall not be unreasonably withheld, conditioned or
delayed, and, following receipt of such approval from the Administrative
Borrower, Agent shall not be required to see further approval for any Loan
Party to use such"tombstone" or other comparable advertising on its website or
in its other marketing materials.
(c)
The Loan Parties hereby acknowledge that Agent or itsAffiliates may make
available to the Lenders materials or information provided by or on behalf of
Borrower hereunder (collectively, "
Borrower Materials
") by posting Borrower Materials on IntraLinks, SyndTrak or another
similarelectronic system (the "
Platform
") and certain of the Lenders may be "public-side" Lenders (i.e., Lenders that
do not wish to receive material non-public information with respect to the
Loan Parties or their securities)(each, a "
Public Lender
"). The Loan Parties shall be deemed to have authorized Agent and its
Affiliates and the Lenders to treat Borrower Materials marked "PUBLIC" or
otherwise at any time filed with the SEC as notcontaining any material
non-public information with respect to the Loan Parties or their securities
for purposes of United States federal and state securities laws. All Borrower
Materials marked "PUBLIC" are permitted to be made availablethrough a portion
of the Platform designated as "Public Investor" (or another similar term).
Agent and its Affiliates and the Lenders shall be entitled to treat Borrower
Materials that are not marked "PUBLIC" or that are not atany time filed with
the SEC as being suitable only for posting on a portion of the Platform not
marked as "Public Investor" (or such other similar term).
17.9.
Survival
. All representations and warranties made by the Loan Parties in the Loan
Documentsand in the certificates or other instruments delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and deliveryof the Loan Documents and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that Agent, or any Lender may have had notice or
knowledge of any Default or Event of Default orincorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of, or any accrued interest on,
any Loan or any fee or any other amount payable under thisAgreement is
outstanding or unpaid and so long as the Commitments have not expired or been
terminated.
17.10.
Patriot Act
; Canadian Anti-Money Laundering & Anti-Terrorism
Legislation
.
(a)
Each Lender that is subject to the requirements of the
Patriot Act
hereby notifies Borrower that pursuant to the requirements of the
Patriot Act
, it is required to obtain, verify and record information that identifies
Borrower, which information includes the name and
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address of Borrower and other information that will allow such Lender to
identify Borrower in accordance with the
Patriot Act
. In addition, if Agent is required by law or regulation orinternal policies
to do so, it shall have the right to periodically conduct (a)
Patriot Act
searches, OFAC/PEP searches, and customary individual background checks for
the Loan Parties and (b) OFAC/PEP searches and customaryindividual background
checks for the Loan Parties' senior management and key principals, and
Borrower agrees to cooperate in respect of the conduct of such searches and
further agrees that the reasonable costs and charges for such searchesshall
constitute Lender Group Expenses hereunder and be for the account of Borrower.
(b)
Each Loan Party acknowledges that, pursuant to theprovisions of Canadian
Anti-Money Laundering & Anti-Terrorism Legislation, Agent and Lenders may be
required to obtain, verify and record information regarding each Loan Party,
its respective directors, authorized signing officers, director indirect
shareholders or other Persons in control of such Loan Party, and the
transactions contemplated hereby. The Loan Parties shall promptly provide all
such information, including supporting documentation and other evidence, as
may bereasonably requested by any Lender or Agent, or any prospective assign
or participant of a Lender or Agent, necessary in order to comply with any
applicable Canadian Anti-Money Laundering & Anti- Terrorism Legislation,
whether now orhereafter in existence. If Agent has ascertained the identity of
any Loan Party or any authorized signatories of any Loan Party for the
purposes of applicable Canadian Anti-Money Laundering & Anti-Terrorism
Legislation, then the Agent:
(i) shall be deemed to have done so as an agent for each Lender, and this
Agreement shallconstitute a "written agreement" in such regard between each
Lender and the Agent within the meaning of applicable Canadian Anti-Money
Laundering & Anti-Terrorism Legislation; and
(ii) shall provide to each Lender copies of all information obtained in such
regard without any representationor warranty as to its accuracy or
completeness.
Notwithstanding the provisions of this Section and except as may otherwise be
agreed inwriting, each Lender agrees that Agent has no obligation to ascertain
the identity of the Loan Parties or any authorized signatories of the Loan
Parties on behalf of any Lender, or to confirm the completeness or accuracy of
any information itobtains from the Loan Parties or any such authorized
signatory in doing so.
17.11.
Integration
. ThisAgreement, together with the other Loan Documents, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before thedate hereof.
17.12.
Birks Group Inc
. as Agent for Borrower
. To the extent a Person other than Birks GroupInc. is a borrower hereunder,
Borrower hereby irrevocably appoints Birks Group Inc. as the borrowing agent
and attorney-in-fact for all Borrower (the "
Administrative Borrower
") which appointment shall remain in full force and effectunless and until
Agent shall have received prior written notice signed by Borrower that such
appointment has been revoked and that another Borrower has been appointed
Administrative Borrower. Borrower hereby irrevocably appoints
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and authorizes the Administrative Borrower (a) to provide Agent with all
notices with respect to Term Loan obtained for the benefit of Borrower and all
other notices and instructions underthis Agreement and the other Loan
Documents (and any notice or instruction provided by Administrative Borrower
shall be deemed to be given by Borrower hereunder and shall bind Borrower),
(b) to receive notices and instructions from members ofthe Lender Group (and
any notice or instruction provided by any member of the Lender Group to the
Administrative Borrower in accordance with the terms hereof shall be deemed to
have been given to Borrower), and (c) to take such action as theAdministrative
Borrower deems appropriate on its behalf to obtain the Term Loan and to
exercise such other powers as are reasonably incidental thereto to carry out
the purposes of this Agreement. It is understood that the handling of the
LoanAccount and Collateral in a combined fashion, as more fully set forth
herein, is done solely as an accommodation to Borrower in order to utilize the
collective borrowing powers of Borrower in the most efficient and economical
manner and at theirrequest, and that Lender Group shall not incur liability to
Borrower as a result hereof. Borrower expects to derive benefit, directly or
indirectly, from the handling of the Loan Account and the Collateral in a
combined fashion since the successfuloperation of Borrower is dependent on the
continued successful performance of the integrated group. To induce the Lender
Group to do so, and in consideration thereof, Borrower hereby jointly and
severally agrees to indemnify each member of theLender Group and hold each
member of the Lender Group harmless against any and all liability, expense,
loss or claim of damage or injury, made against the Lender Group by Borrower
or by any third party whosoever, arising from or incurred by reasonof (i) the
handling of the Loan Account and Collateral of Borrower as herein provided, or
(ii) the Lender Group's relying on any instructions of the Administrative
Borrower, except that Borrower will have no liability to the relevantAgent-Relat
ed Person or Lender-Related Person under this
Section 17.12
with respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willfulmisconduct of such Agent- Related Person or Lender-Related Person, as
the case may be.
17.13.
JudgmentCurrency
. If, for the purposes of obtaining judgment in any court, it is necessary to
convert a sum due hereunder or any other Loan Document in one currency into
another currency, the rate of exchange used shall be that at which
inaccordance with normal banking procedures Agent could purchase the first
currency with such other currency on the Business Day preceding that on which
final judgment is given. The obligation of Borrower in respect of any such sum
due from it toAgent or any Lender hereunder or under the other Loan Documents
shall, notwithstanding any judgment in a currency (the "
Judgment Currency
") other than that in which such sum is denominated in accordance with the
applicableprovisions of this Agreement (the "
Agreement Currency
"), be discharged only to the extent that on the Business Day following
receipt by Agent or such Lender, as the case may be, of any sum adjudged to be
so due in the JudgmentCurrency, Agent or such Lender, as the case may be, may
in accordance with normal banking procedures purchase the Agreement Currency
with the Judgment Currency. If the amount of the Agreement Currency so
purchased is less than the sum originally dueto Agent or any Lender from
Borrower in the Agreement Currency, Borrower agrees, as a separate obligation
and notwithstanding any such judgment, to indemnify Agent or such Lender, as
the case may be, against such loss. If the amount of the AgreementCurrency so
purchased is greater than the sum originally due to Agent or any Lender in
such currency, Agent or such Lender, as the case may be,
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agrees to return the amount of any excess to Borrower (or to any other Person
who may be entitled thereto under applicable law).
17.14.
Intercreditor Agreement
. The parties hereto acknowledge that the exercise of certain of the
Agent'srights and remedies hereunder may be subject to, and restricted by, the
provisions of the Intercreditor Agreement regarding intercreditor arrangements
among the Agent and the Revolving Agent. Notwithstanding the foregoing, each
Loan Party expresslyacknowledges and agrees that the Intercreditor Agreement
is solely for the benefit of the parties thereto, and that notwithstanding the
fact that the exercise of certain of the Agent's and Lenders' rights under the
Loan Documents may besubject to the Intercreditor Agreement, no action taken
or not taken by the Agent or any Lender in accordance with the terms of the
Intercreditor Agreement shall constitute, or be deemed to constitute, a waiver
by the Agent or any Lender of anyrights such Person has with respect to any
Loan Party under any Loan Document and except as specified therein, nothing
contained in the Intercreditor Agreement shall be deemed to modify any of the
provisions of this Agreement and the other LoanDocuments, which, as among the
Loan Parties, the Agent and the Lenders, shall remain in full force and effect.
17.15.
No Setoff
. All payments made by Borrower hereunder or under any note or other Loan
Document will be made without setoff, counterclaim, or other defense.
[Signature pages to follow]
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IN WITNESS WHEREOF
, the parties hereto have caused this Agreement tobe executed and delivered as
of the date first above written.
BIRKS GROUP INC.
By:
Name:
Title:
By:
Name:
Title:
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CRYSTAL FINANCIAL LLC
, as Agent,
By:
Name: Rebecca E. Tarby
Title: Managing Director
CRYSTAL FINANCIAL SPV LLC
, as a Lender,
By:
Name: Rebecca E. Tarby
Title: Managing Director
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Schedule 1.1
Definitions
As used in the Agreement, the following terms shall have the following
definitions:
"
Account
" means an account (as that term is defined in the PPSA).
"
Account Debtor
" means any Person who is obligated on an Account, chattel paper, or an
intangible.
"
Accounting Changes
" means changes in accounting principles required by the promulgation of any
rule,regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants (or
successor thereto or any agency with similar functions, including, to the
extent applicable, the CharteredProfessional Accountants Canada).
"
Acquired Indebtedness
" means Indebtedness of a Person whose assetsor Equity Interests are acquired
by Borrower or any of its Subsidiaries in a Permitted Acquisition;
provided
, that such Indebtedness (a) is either purchase money Indebtedness or a
Capital Lease with respect to Equipment or mortgagefinancing with respect to
Real Property, (b) was in existence prior to the date of such Permitted
Acquisition, and (c) was not incurred in connection with, or in contemplation
of, such Permitted Acquisition.
"
Acquisition
" means (a) the purchase or other acquisition by a Person or its Subsidiaries
of all orsubstantially all of the assets of (or any division or business line
of) any other Person, or (b) the purchase or other acquisition (whether by
means of a merger, amalgamation, consolidation, or otherwise) by a Person or
its Subsidiaries of allor substantially all of the Equity Interests of any
other Person.
"
Additional Documents
" has themeaning specified therefor in
Section 5.15
of the Agreement.
"
Additional Subordinated Debt
"means such unsecured Indebtedness incurred by any Loan Party after the date
of this Agreement to the extent that such Indebtedness is Permitted
Indebtedness and is expressly subordinated to the payment in full of the
Obligations on terms andconditions and pursuant to a Subordination Agreement
in form, scope and substance satisfactory to Agent and the Required Lenders.
"
Additional Subordinated Debt Documents
" means all documents, instruments and agreements executed inconnection with
any Additional Subordinated Debt, any such documents, instruments and
agreements being in form, scope and substance satisfactory to Agent and the
Required Lenders.
"
Adjusted
CDOR
"
for any applicable month, with respect to any portion of the Term Loan, the
rate per annum quoted as the 90-day "
CDOR Rate" as reported on the Refinitiv Screen Canadian Dollar Offered Rate
(CDOR) Page
Canadian Prime Rate" means, for any day, a rate per annum equal to the "prime
rate" for Canadian Dollarcommercial loans made in Canada
-------------------------------------------------------------------------------
as reported by Thomson Reuters under Reuters Instrument Code <CAPRIME=>
on the "CA Prime Rate (Domestic InterestRate) - Composite Display" page to the
extent such page is available
(or any successor page or such other
page or
commercially available service
displaying Canadian interbank bid rates for Canadian Dollar bankers'
acceptances as the Agent may designate from time to time, or if no such
substitute service isavailable, the rate quoted
or source (including the Canadian Dollar "prime rate"announced
by a Schedule I bank under the
Bank Act
(Canada)
selected by the Agent at which such bankis offering to purchase Canadian
Dollar bankers' acceptances) as of 10:00 a.m. Eastern (Toronto)
)as Agent may designate from
time
to time)
(and, if any such reported rate is below one percent, then Adjusted
CDOR
Canadian Prime Rate
shall be deemed to be one percent),
two (2) Business Days prior to the
Closing
Date and each Interest Payment Date thereafter for any subsequentmonth
in eachcase,
less one hundred twenty five (125) basispoints
. Each determination of
the
Adjusted
CDORrate
Canadian Prime Rate
shall be made by
the
Agent and shall be conclusive in the absence of manifest error.
"Adjusted Term CORRA" means, for purposes of any calculation, the rate per
annum equal to (a) Term CORRA for such calculation plus (b) the Term CORRA
Adjustment; provided that if Adjusted Term CORRA as so determined shall ever
be less than theFloor, then Adjusted Term CORRA shall be deemed to be the
Floor.
"
Administrative Borrower
" has the meaning specified therefor in
Section 17.12
of the Agreement.
"
Administrative Questionnaire
" has the meaning specified therefor in
Section 13.1(a)(ii)(G)
of the Agreement.
"
Affected Lender
" has the meaning specified therefor in
Section 2.2(f)
ofthe Agreement.
"
Affiliate
" means, as applied to any Person, any other Person who controls, iscontrolled
by, or is under common control with, such Person. For purposes of this
definition, "control" means the possession, directly or indirectly through one
or more intermediaries, of the power to direct the management and policies ofa
Person, whether through the ownership of Equity Interests, by contract, or
otherwise;
provided
, that, for purposes of the definition of Eligible Accounts and
Section 6.10
of the Agreement: (a) any Person which owns directlyor indirectly 10% or more
of the Equity Interests having ordinary voting power for the election of
directors or other members of the governing body of a Person or 10% or more of
the partnership or other ownership interests of a Person (other than asa
limited partner of such Person) shall be deemed an Affiliate of such Person,
(b) each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person, and (c) each partnership in which a Person is a
generalpartner shall be deemed an Affiliate of such Person.
"
Agent
" has the meaning specified therefor in thepreamble to the Agreement.
"
Agent-Related Persons
" means Agent, together with its Affiliates, officers,directors, employees,
attorneys, and agents.
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"
Agent's Loan Account
" means the Deposit Accountidentified on
Schedule A-1
as Agent's Loan Account (or such other Deposit Account that has been
designated as such, in writing, by Agent to Administrative Borrower and the
Lenders).
"
Agent's Liens
" means the Liens granted by Borrower or any of its Subsidiaries to Agent
under the LoanDocuments and securing all or a portion of the Obligations.
"
Agreement
" means the Credit Agreement towhich this
Schedule 1.1
is attached.
"
Amendment No. 2 Effective Date
" means July 2,2020.
"
Amendment No. 3 Effective Date
" means August 31, 2021.
"
Amendment No. 4 Effective Date
" means December 15, 2021.
"
Amendment No. 5 Effective Date
" means December
23
24
, 2021.
"
Applicable Inventory Percentage
" means(i) 103.5% from the Fifth Amendment Effective Date to and including
December 31, 2022, (ii) 103.25% from January 1, 2023 until March 25, 2023, and
(iii) thereafter reducing as of the first day of each subsequent FiscalQuarter
by 0.25% until the Applicable Inventory Percentage reaches 102.5% where it
shall remain until the Maturity Date;
"
Applicable Margin
" means, as of the Amendment No. 5 Effective Date until the first Pricing
Datethereafter and from one Pricing Date to the next, the percentage
determined in accordance with the pricing grid set forth below (the "
Pricing Grid
"):
Level Modified Fixed ChargeCoverage Ratio Applicable Margin
I Less than1.00:1.00 7.75%
II Greater than or equalto 1.00:1.00 but less than 1.25:1.00 7.00%
III Greater than or equalto 1.25:1.00 6.75%
The Applicable Margin under the Pricing Grid may be adjusted from time to time
on any Pricing Datefollowing the delivery to the Agent of the financial
statements of Borrower for the most recently ended Fiscal Quarter required to
be delivered pursuant to
Section 5.1
accompanied by a written calculation of the Modified Fixed ChargeCoverage
Ratio as set forth in the Compliance Certificate delivered in connection with
such financial statements. If such calculation indicates that the Applicable
Margin under the Pricing Grid shall increase or decrease based on the
calculation ofthe Modified Fixed Charge Coverage Ratio set forth in such
Compliance Certificate, then on the Pricing Date immediately following the
date on which such Compliance Certificate is delivered to Agent, the
Applicable Margin under the Pricing Grid shallbe adjusted in accordance
therewith and will remain in effect until the next Pricing Date;
provided
,
however
, that if the
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Borrower shall fail to deliver any such financial statements or Compliance
Certificate forany such Fiscal Quarter by the date required pursuant to
Section 5.1
, then, effective as of the first Business Day following the date such
financial statements or Compliance Certificate, as applicable, were required
to be delivered andcontinuing until the date that is five (5) Business Days
immediately following the date on which such financial statements and
Compliance Certificate have both been delivered to Agent, the Applicable
Margin under the Pricing Grid shall beconclusively presumed to equal the
percentage shown opposite of Level I in the Pricing Grid. In the event that
the Agent determines that (a) the calculation of the Modified Fixed Charge
Coverage Ratio on which the Applicable Margin under thePricing Grid as of any
Pricing Date was determined is inaccurate and (b) a proper calculation of the
Modified Fixed Charge Coverage Ratio would have resulted in a higher
Applicable Margin as of such Pricing Date, then (i) the Borrower shall assoon
as practicable deliver to Agent a corrected Compliance Certificate for such
period (and if such Compliance Certificate is not accurately restated and
delivered within ten (10) Business Days after the first discovery of such
inaccuracy orupon written notice by the Agent of such determination, then the
Applicable Margin shown opposite of Level I in the Pricing Grid shall apply
retroactively for such period notwithstanding any subsequent restatement
thereof after such ten(10) Business Day period) and (ii) the Borrower will
automatically and retroactively be obligated to pay to the Agent for the
benefit of the Lenders, promptly on demand by the Agent, an amount equal to
the excess of the amount of interestthat should have been paid for such period
over the amount of interest actually paid for such period.
Notwithstanding the foregoing, during the existenceof an Event of Default, the
Applicable Margin (A) shall not decrease in accordance with the Pricing Grid
and (B) shall equal the percentage shown opposite of Level I in the Pricing
Grid and, in each case, shall be subject to adjustment inaccordance with
Section 2.4(b)
.
"
Applicable Premium Trigger Event
" means (i) anyprepayment by any Loan Party of all, or any part, of the
principal balance of the Term Loan for any reason (including, but not limited
to, any optional prepayment or mandatory prepayment, and distribution in
respect thereof, and any refinancingthereof), whether in whole or in part, and
whether before or after (x) the occurrence of an Event of Default, or (y) the
commencement of any Insolvency Proceeding, and notwithstanding any
acceleration (for any reason) of the Obligations;(ii) the acceleration of the
Obligations for any reason, including, but not limited to, acceleration in
accordance with Section 9, including as a result of the commencement of an
Insolvency Proceeding; (iii) the satisfaction, release,payment, restructuring,
reorganization, replacement, reinstatement, defeasance or compromise of any of
the Obligations in any Insolvency Proceeding, foreclosure (whether by power of
judicial proceeding or otherwise) or deed in lieu of foreclosure orthe making
of a distribution of any kind in any Insolvency Proceeding to the Agent, for
the account of the Lenders in full or partial satisfaction of the Obligations;
or (iv) the termination of this Agreement for any reason. For purposes of
thedefinition of the term Early Termination Fee, if an Applicable Premium
Trigger Event occurs under clause (ii), (iii) or (iv) above, the entire
outstanding principal amount of the Term Loan shall be deemed to have been
prepaid on the dateon which such Applicable Premium Trigger Event occurs.
"
Application Event
" means the(a) occurrence of a failure by Borrower to repay all of the
Obligations in full on the Maturity Date, or (b) the occurrence and
continuance of an Event of Default and the election by the Agent (or at the
direction of the Required Lenders)during such
-------------------------------------------------------------------------------
continuance to require that payments and proceeds of Collateral be applied
pursuant to
Section 2.3(b)(i)(A)
.
"
Approved Fund
" means any Person (other than a natural person) that is engaged in making,
holding orinvesting in extensions of credit in its ordinary course of business
and is administered or managed by a Lender, an entity that administers or
manages a Lender, or an Affiliate of either.
"
Assignee
" has the meaning specified therefor in
Section 13.1
of the Agreement.
"
Assignee Group
" means two or more Eligible Transferee that are Affiliates of one another or
two or moreApproved Funds managed by the same investment advisor.
"
Assignment and Acceptance
" means an Assignmentand Acceptance Agreement substantially in the form of
Exhibit A-1
to the Agreement.
"
AuthorizedPerson
" means any one of the individuals identified on
Schedule A-3
to the Agreement, as such schedule is updated from time to time by written
notice from Administrative Borrower to Agent.
"
Availability Block
" means, as of any date of determination, the greater of (i) ten percent(10%)
multiplied by the Borrowing Base (calculated without giving effect to the
Availability Block), and (ii) $8,500,000 plus (A) from December 20 to and
including January 20 of any given Fiscal Year, $5,000,000, or(B) from January
21 to and including January 31 of any given Fiscal Year, $2,000,000.
"
BankruptcyCode
" means title 11 of the United States Code, as in effect from time to time.
"Benchmark" means, initially, the Term CORRA Reference Rate; provided that if
a Benchmark Transition Event has occurred with respect to the Term CORRA
Reference Rate, or the then-currentBenchmark, then "Benchmark" means the
applicable Benchmark Replacement to the extent that such Benchmark Replacement
has replaced such prior benchmark rate pursuant to Section 2.11(a).
"Benchmark Rate Business Day" means any day (other than a Saturday or Sunday)
on which banks are open for business in Toronto, Ontario, Canada.
"Benchmark Replacement" means with respect to any Benchmark Transition Event
for any then-current Benchmark, the
sum of: (a) the alternate benchmark rate that has been selected by Agent
and Administrative Borrower asthe replacement for such Benchmark
giving due consideration to (i) any selection or recommendation of areplacement
benchmark
rate or the mechanism for determining such a rate by the
Relevant Governmental Body
or (ii) any evolving or then-prevailing market convention for determining a
benchmark rate as a replacement for such Benchmark for syndicated credit
facilities denominated Canadian Dollars at suchtime and (b) the related
Benchmark Replacement Adjustment; provided that,
in each case, if suchBenchmark
Replacement as so determined would be less than
the Floor, such Benchmark Replacement shall be deemed to be the Floor
for the purposes of this Agreement
and the other Loan Documents.
-------------------------------------------------------------------------------
"Benchmark Replacement Adjustments" means, with respect to the replacement of
the then-current Benchmark with an Unadjusted BenchmarkReplacement
, the spread adjustment, or method for calculating or determining such spread
adjustment, (whichmay be a positive or negative value or zero) that has been
selected by Agent
and the Administrative Borrowergiving due consideration to (a
) any selection or recommendation of a spread adjustment, or method
forcalculating or determining such spread adjustment, for the replacement of
such Benchmark
with the applicable Unadjusted Benchmark Replacement by the
Relevant Governmental Body or(b)
any evolving or then-prevailing market convention for determining a spread
adjustment, or methodfor calculating or determining such spread adjustment,
for the replacement of
such Benchmark
with the applicable Unadjusted Benchmark Replacement for
syndicated credit facilities denominated in Canadian Dollars at suchtime.
"Benchmark Replacement Date" means, the earliest
to occur of the following events with respect to the
then-current Benchmark:
(a)
in the case of clause (a) or (b) ofthe definition of "Benchmark Transition
Event," the later of (i) the date of the public statement or publication of
information referenced therein and (ii) the date on which the administrator of
such Benchmark (or the published component used in the calculation thereof)
permanently or indefinitely ceases to provide
such Benchmark (or such component thereof); or
(b)
in the case of clause (c) of thedefinition of "Benchmark Transition Event
", the first date on which such Benchmark (or thepublished component used in
the calculation thereof) has been determined and announced by or on behalf of
the administrator of such Benchmark (or such component thereof) or the
regulatory supervisor for the administrator of such Benchmark (or
suchcomponent thereof) to be non-representative; provided that such non-
representativeness will be determined by reference to the most recent
statement or publication referenced in such clause (c) and even if such
Benchmark (or such componentthereof) continues to be provided on such date.
For the avoidance of doubt, the "Benchmark Replacement Date" will be deemed to
have occurred in the case of clause(a) or (b) with respect to any Benchmark
upon the occurrence of the applicable event or events set forth therein with
respect to such Benchmark (or the published component used in the calculation
thereof).
"Benchmark Transition Event" means the occurrence of one or more of the
following events with respect to the
then-current Benchmark:
(a)
a public statement or publication ofinformation by or on behalf of the
administrator of
such Benchmark (or the published component used in thecalculation thereof)
announcing that such administrator has ceased or will cease to provide
such Benchmark (or such component thereof), permanently or indefinitely;
provided that, at the time of such statement or publication, there is no
successor administrator that will continue toprovide
such Benchmark (or such component thereof);
(b)
a public statement or publication ofinformation by the regulatory supervisor
for the administrator of
such Benchmark (or the published componentused in the
-------------------------------------------------------------------------------
calculationthereof), the Bank of Canada
, an insolvency official with jurisdiction over the administrator for
such Benchmark (or such component)
, a resolution authority with jurisdiction over the administrator for
such Benchmark (or suchcomponent)
or a court or an entity with similar insolvency or resolution authority over
the administratorfor
such Benchmark (or such component),
which states thatthe administrator of
such Benchmark (or such component)
has ceased or will cease to provide
such Benchmark (or such component thereof) permanently or indefinitely;
provided that, at the time of such statement or publication, there is no
successor administrator that will continue toprovide
such Benchmark (or such component thereof); or
(c)
a public statement or publication ofinformation
by the regulatory supervisor for the administrator of such Benchmark (or the
published componentused in the calculation thereof) announcing that such
Benchmark (or such component thereof) is not, or as of a specified future date
will not be, representative.
For the avoidance of doubt, a "Benchmark Transition Event"
will be deemed to have
occurred with respect to any Benchmark if a public statement or publication of
information set forth above has occurred withrespect to the then-current
Benchmark (or the published component used in the calculation thereof).
"Benchmark Unavailability Period" means, with respect to any then-current
Benchmark, the period (if any) (x) beginning at the time that a Benchmark
Replacement
Date has occurred if, at such time, no Benchmark Replacement has replaced
such Benchmark for all purposes hereunder and under any Loan Document in
accordance with Section 2.11 and (y
) ending at the time that a Benchmark Replacement has replaced
such Benchmark for all purposes hereunder and under any Loan Document in
accordance with Section 2.11.
"
Board of Directors
" means, as to any Person, the Board ofDirectors (or comparable managers) of
such Person, or any committee thereof duly authorized to act on behalf of the
Board of Directors (or comparable managers).
"
Board of Governors
" means the Board of Governors of the Federal Reserve System of the United
States (or anysuccessor).
"
Borrower
" has the meaning specified therefor in the preamble to the Agreement.
"
Borrower Materials
" has the meaning specified therefor in
Section 17.8(c)
of the Agreement.
"
Borrowing
" means the borrowing under the Term Loan made on or about the date hereof or
a loan by Agentin the case of a Protective Advance.
"
Borrowing Availability
" means the lesser of (i) the sum ofthe "Commitments" (as defined in the
Revolving Credit Agreement)
plus
the Commitments, and (ii) the Borrowing Base.
"
Borrowing Base
" means, as of any date of determination, the Canadian Dollar Equivalent
amount of the resultof:
-------------------------------------------------------------------------------
(a)102.5% of the amount of Eligible Credit Card Receivablesof Borrower, plus
(b)102.5% of the amount of Eligible Accounts of Borrower, provided that the
amountthereof included in the Borrowing Base shall not exceed 20% of the
aggregate amount of the Borrowing Base, plus
(c)the Applicable Inventory Percentage of the amount calculated by multiplying
the Inventory Net RecoveryPercentage of the relevant Eligible Inventory
Category identified in the most recent Inventory appraisal ordered and
obtained by either the Revolving Agent pursuant to the Revolving Credit
Agreement or Agent by the cost (based on GAAP) of suchEligible Inventory,
provided that the amount of Eligible Non-Possessory Inventory included in
Eligible Inventory for the purpose of calculating the Borrowing Base shall not
exceed 5% of the aggregate amount of the Eligible Inventory, minus
(d)the aggregate amount of Receivables Reserves, Loan to Value Reserves,
Inventory Reserves, Canadian PriorityPayables Reserves and other Reserves, if
any, established by Agent in accordance with
Section 2.2(a)
of the Agreement with respect to the Borrowing Base, minus
(e)the Availability Block.
"
Borrowing Base Certificate
" means a certificate in the form of
Exhibit B-1
, containing thecalculation of the Borrowing Base with the initial Borrowing
Base Certificate being attached thereto in order to demonstrate the
calculation of the Borrowing Base for illustration purposes.
"
Business Day
" means any day that is not a Saturday, Sunday, or other day on which banks
are authorized orrequired to close in the State of New York or the Provinces
of Ontario or Quebec.
"
Canadian Anti-MoneyLaundering & Anti-Terrorism Legislation
" means Part II.1 of the Criminal Code (Canada), The
Proceeds of Crime (Money Laundering) and Terrorist Financing Act
(Canada) and the
United Nations Act
(Canada), together withall rules, regulations and interpretations thereunder
or related thereto including, without limitation, the Regulations Implementing
the United Nations Resolutions on the Suppression of Terrorism and the United
Nations Al-Qaida and TalibanRegulations promulgated under the
United Nations Act
(Canada) and any similar Canadian legislation in effect from time to time.
"
Canadian Defined Benefit Plan
" means any Canadian Pension Plan which contains a "defined benefitprovision"
as defined in subsection 147.1(1) of the Income Tax Act (Canada) but does not
include a Canadian Multi-Employer Plan.
"
Canadian Dollar Equivalent
" means, at any time, (a) with respect to any amount denominated in
CanadianDollars, such amount, and (b) with respect to any amount denominated
in another currency, the equivalent amount thereof in Canadian Dollars as
determined by Agent, at such time, on the basis of the Spot Rate (determined
in respect of the mostrecent Revaluation Date or such other date determined by
Agent) for the purchase of Canadian Dollars with such
-------------------------------------------------------------------------------
currency. Calculations of the Borrowing Base with respect to items included
therein that arenot denominated in Canadian Dollars may be adjusted by Agent
pursuant to this definition from time and references herein to the Borrowing
Base (including references based upon the most recent applicable Borrowing
Base Certificate delivered byBorrower to Agent) may reflect such adjustments.
"
Canadian Dollars
", "
Dollars
","
Cdn $
" or "
$
" means the lawful currency of Canada, as in effect from time to time.
"
Canadian Multi-Employer Plan
" means a "multi-employer pension plan", as such term is definedunder the
Pension Benefits Act
(Ontario), under which a Loan Party is required to contribute pursuant to a
collective bargaining agreement and under which (i) the sole obligation of the
Loan Party is to make the contributions specifiedin the applicable collective
bargaining agreement, and (ii) the Loan Party has no liability relating to any
past or future withdrawals from the plan.
"
Canadian Patent Security Agreement
" has the meaning specified therefor in the Canadian Security Agreement.
"
Canadian Pension Plans
" means each pension plan required to be registered under Canadian federal
orprovincial law that is maintained or contributed to, or to which there is or
may be an obligation to contribute by a Loan Party or a Subsidiary thereof,
for its employees or former employees, but does not include the Canada Pension
Plan or theQuebec Pension Plan as maintained by the Government of Canada or
the Province of Quebec, respectively.
"
CanadianPriority Payables Reserves
" means reserves (determined from time to time by Agent in its Permitted
Discretion) for: (a) the amount past due and owing by any Loan Party, or the
accrued amount for which such Loan Party has an obligationto remit, to a
Governmental Authority or other Person pursuant to any applicable law, rule or
regulation, in respect of (i) goods and services Taxes, harmonized sales
Taxes, other sales Taxes, employee income Taxes, municipal Taxes and
otherTaxes payable or to be remitted or withheld; (ii) workers' compensation
or employment insurance; (iii) federal Canada Pension Plan, Quebec Pension
Plan and other statutory pension plan contributions; (iv) vacation or holiday
pay; and(v) other like charges and demands, in each case, to the extent that
any Governmental Authority or other Person may claim a Lien, trust, deemed
trust or other claim ranking or capable of ranking in priority to or
pari passu
with one or moreof the Liens granted in the Loan Documents; and (b) the
aggregate amount of any other liabilities of any Loan Party (i) in respect of
which a trust or deemed trust has been or may be imposed on any Collateral to
provide for payment, or(ii) in respect of unremitted and due pension plan
contributions in respect of Canadian Pension Plans including normal cost
contributions and special payments (iii) without duplication for any amounts
referred to in paragraph (b)(ii)amounts representing any unfunded wind-up
deficiency whether or not due with respect to a Canadian Defined Benefit Plan,
or (iv) which are secured by a Lien, charge, right or claim on any Collateral
(other than Permitted Liens that do not havepriority over Agent's Liens); in
each case, pursuant to any applicable law, rule or regulation and provided
such lien, trust, deemed trust, pledge, charge, right or claim ranks or in the
Permitted Discretion of Agent, is capable of ranking inpriority to or
pari passu
with one or more of the Liens granted in
-------------------------------------------------------------------------------
the Loan Documents (such as certain claims by employees for unpaid wages and
other amounts payable under the Wage Earner Protection Program Act (Canada));
"
Canadian Security Agreement
" means a Canadian Guarantee and Security Agreement dated as of even date
withthe Agreement, in form and substance reasonably satisfactory to Agent,
executed and delivered by each Loan Party to Agent.
"
Canadian Security Documents
" means, collectively, the Canadian Security Agreement, Canadian Patent
SecurityAgreement, the Canadian Trademark Security Agreement, the Quebec
Security Documents and any other Loan Document that grants or purports to
grant a Lien on any of the assets or interests, and the proceeds thereof, of
any Loan Party.
"
Canadian Trademark Security Agreement
" has the meaning specified therefor in the Canadian SecurityAgreement.
"
Capital Adequacy Regulation
" means any law, rule, regulation, guideline, request ordirective of any
central bank or other Governmental Authority, whether or not having the force
of law, regarding capital adequacy of a bank or any Person controlling a bank.
"
Capital Assets
" means fixed assets, both tangible (such as land, buildings, fixtures,
machinery andequipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill);
provided
that Capital Assets shall not include any item customarily charged directly to
expense or depreciated over a useful life of 12 months orless in accordance
with GAAP.
"
Capital Expenditures
" means, with respect to any Person for any period,(a) the amount of all
expenditures by such Person and its Subsidiaries during such period that are
capital expenditures as determined in accordance with GAAP, whether such
expenditures are paid in cash or financed; and (b) the lease of anyassets by
Borrower or any of its Subsidiaries as lessee under any synthetic lease to the
extent that such assets would have been Capital Assets had the synthetic lease
been treated for accounting purposes as a Capital Lease.
"
Capitalized Lease Obligation
" means that portion of the obligations under a Capital Lease that is
requiredto be capitalized in accordance with GAAP.
"
Capital Lease
" means a lease that is required to becapitalized for financial reporting
purposes in accordance with GAAP but excluding leases which would have been
characterized as operating leases according to GAAP as in effect on the
Closing Date.
"
Cash Equivalents
" means obligations that are denominated in Canadian Dollars or United States
Dollars(a) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States or issued by any agency thereof and backed by
the full faith and credit of the United States or by, or unconditionally
guaranteed by, thegovernment of Canada or issued by any agency thereof and
backed by the full faith and credit of Canada, in each case maturing within 1
year from the date of acquisition thereof, (b) marketable direct obligations
issued or fully guaranteed byany state of the United States or province of
Canada or any political subdivision of any such state or province or any
public instrumentality thereof maturing within 1 year from the date of
acquisition thereof and, at the time of acquisition, havingone of the two
highest ratings obtainable from either Standard & Poor's Rating Group ("
S&P
") or Moody's Investors Service,
-------------------------------------------------------------------------------
Inc. ("
Moody's
"), (c) commercial paper maturing no more than 270 days from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1from S&P or at least P-1 from Moody's, (d) certificates of deposit, time
deposits, overnight bank deposits or bankers' acceptances maturing within 1
year from the date of acquisition thereof issued by any bank organized under
thelaws of the United States or any state thereof or the District of Columbia
or a bank organized under the laws of Canada, or any United States or Canadian
branch of a foreign bank, in each case having at the date of acquisition
thereof combinedcapital and surplus of not less than $250,000,000, (e) Deposit
Accounts maintained with (i) any bank that satisfies the criteria described in
clause (d) above, or (ii) any other bank organized under the laws of the
United Statesor any state thereof or the laws of Canada so long as the full
amount maintained with any such other bank is insured by the Federal Deposit
Insurance Corporation or the Canadian Deposit Insurance Corporation, (f)
repurchase obligations of anycommercial bank satisfying the requirements of
clause (d) of this definition of recognized securities dealer having combined
capital and surplus of not less than $250,000,000, having a term of not more
than seven days, with respect tosecurities satisfying the criteria in clauses
(a) or (d) above, (g) debt securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying thecriteria described in clause (d) above, and (h)
Investments in money market funds substantially all of whose assets are
invested in the types of assets described in clauses (a) through (g) above.
"
CGS
" means Cash, Gold & Silver Inc., a corporation formed under the laws of Canada.
"
CGS USA
" means Cash, Gold & Silver USA, Inc., a corporation formed under the laws of
Delaware.
"
Change of Control
" means that:
(a)Montrovest and Mangrove Holding S.A. collectively fail to own and control,
directly or indirectly, amajority of the Equity Interests of Borrower entitled
(without regard to the occurrence of any contingency) to vote for the election
of members of the Board of Directors of Borrower, or
(b)Borrower fails to own and control, directly or indirectly, 100% of the
Equity Interests of each Loan Party(other than Borrower).
"
Change in Law
" means the occurrence after the date of the Agreement of:(a) the adoption or
effectiveness of any law, rule, regulation, judicial ruling, judgment or
treaty, (b) any change in any law, rule, regulation, judicial ruling, judgment
or treaty or in the administration, interpretation, implementationor
application by any Governmental Authority of any law, rule, regulation,
guideline or treaty, or (c) the making or issuance by any Governmental
Authority of any request, rule, guideline or directive, whether or not having
the force of law;
provided
that notwithstanding anything in the Agreement to the contrary, (i) the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued in connection therewith
and(ii) all requests, rules, guidelines or directives concerning capital
adequacy promulgated by the Bank for International Settlements, the Basel
Committee on Banking Supervision (or any successor or similar authority) or
Canada or foreignregulatory authorities
-------------------------------------------------------------------------------
shall, in each case, be deemed to be a "Change in Law," regardless of the date
enacted, adopted or issued.
"
Closing Date
" means the date of the making of the Term Loan (or other extension of credit)
under theAgreement.
"
Code
" means the New York Uniform Commercial Code, as in effect from time to time.
"
Collateral
" means all assets and interests in assets and proceeds thereof now owned or
hereafter acquiredby Borrower or any other Loan Party in or upon which a Lien
is granted by such Person in favor of Agent or any of the Lenders under any of
the Loan Documents.
"
Collateral Access Agreement
" means a landlord waiver, bailee letter, or acknowledgement agreement of
anylessor, warehouseman, processor, consignee or other Person in possession
of, having a Lien upon, or having rights or interests in Borrower's or any of
its Subsidiaries' books and records, Equipment, or Inventory, in each case, in
form andsubstance reasonably satisfactory to Agent.
"
Combined Loan Cap
" means, as at the date of determination,the sum of the "Commitments" (as
defined in the Revolving Credit Agreement)
plus
the Commitment.
"
Combined Total Outstandings
" means the sum of (i) the Revolver Usage
plus
(ii) the TotalOutstandings.
"
Commitment
" means, with respect to each Lender, its Commitment, and, with respect to
allLenders, the aggregate of all Commitments of all of the Lenders, in each
case in such Canadian Dollar amounts as are set forth beside such Lender's
name under the applicable heading on
Schedule C-1
to the Agreement or in the Assignmentand Acceptance or Increase Joinder
pursuant to which such Lender became a Lender under the Agreement, as such
amounts may be reduced or increased from time to time pursuant to assignments
made in accordance with the provisions of
Section 9.1
of the Agreement or otherwise reduced in accordance with the terms of this
Agreement.
"
Commodity ExchangeAct
" means the Commodity Exchange Act (7 U.S.C. (s) 1 et seq.), as amended from
time to time, and any successor statute.
"
Compliance Certificate
" means a certificate substantially in the form of
Exhibit C-1
to theAgreement delivered by a Financial Officer of Borrower to Agent.
"
Confidential Information
" has themeaning specified therefor in
Section 17.8(a)
of the Agreement.
"Conforming Changes" means, means, with respect to the use or administration of
any Benchmark Replacement, any technical, administrative or operational changes
(including changes to the definition of "Business Day," the definition of
"Benchmark Rate Business Day,"timing and frequency of determining rates and
making payments of interest, length of lookback periods, the applicability of
Section 2.13 and other technical, administrative or operational matters)
-------------------------------------------------------------------------------
that Agentdecides may be appropriate to reflect the adoption and implementation
of
any such rate or to permit the useand
administration thereof by Agent in a manner substantially consistent with
market practice (or, if Agentdecides that adoption of any portion of such
market practice is not administratively feasible or if Agent determines that
no market practice for the administrationof
such
Benchmark Replacement exists, in such other manner of administration as Agent
decides is reasonablynecessary in connection with the administration of this
Agreement
and the other Loan Documents).
"
Consolidated EBITDA
" means, for any period, the sum,without duplication, of the amounts for such
period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense,
(iii) provision for federal, provincial, local and foreign income Taxes,
franchise Taxes and other Taxes in lieu ofincome Taxes payable, (iv) total
depreciation expense, (v) total amortization expense, (vi) transaction
expenses incurred by Borrower or any of its Subsidiaries in such period in
connection with Permitted Acquisitions to the extentincluded in the
calculation of Excess Availability for purposes of determining whether the
applicable Acquisition constitutes a Permitted Acquisition, (vii) fees, costs
and expenses incurred on or prior to the Closing Date in connection withthis
Agreement, the other Loan Documents, and the other transactions contemplated
hereby, (viii) financial advisory fees, accounting fees, legal fees and any
other similar third party reasonable out-of-pocket fees and out-of-pocket
expensesincurred in connection any amendment or modification of the Revolving
Loan Documents or Loan Documents, (ix) management and other fees and
reimbursement of expenses permitted pursuant to
Section 6.7(d)
, (x) impairment ofgoodwill and other non-cash items (other than any such non-
cash item to the extent it represents an accrual of or reserve for cash
expenditures in any future period), (xi) to the extent actually reimbursed,
expenses incurred to the extentcovered by indemnification provisions in any
agreement in connection with a Permitted Acquisition, and (xii) other unusual
or non-recurring cash charges approved by the Lender in its Permitted
Discretion, including Restructuring and IntegrationCosts not to exceed
$5,000,000 in the case of the Closing Date US Divestiture (as defined in the
Revolving Credit Agreement as in effect on the Closing Date) incurred in the
Fiscal Year ended on March 31, 2018 and not to exceed $2,000,000 inthe
aggregate for all such charges for the Fiscal Years ending on March 30, 2019
and March 27, 2020, but only, in the case of each of the foregoing clauses
(ii) through (xii), to the extent deducted in the calculation of ConsolidatedNet
Income, less non-cash items added in the calculation of Consolidated Net
Income (other than any such non-cash item to the extent it will result in the
receipt of cash payments in any future period), all of the foregoing as
determined on aconsolidated basis for Borrower and its Subsidiaries in
conformity with GAAP. Notwithstanding the foregoing, Consolidated EBITDA for
the fiscal months ending prior to the date of this Agreement and used in
calculating the Fixed Charge Coverage Ratiofor the applicable twelve fiscal
month period after such date shall be in amounts agreed by the Agent and
Borrower.
"
Consolidated Fixed Charges
" means, with respect to any fiscal period and with respect to Borrower and
itsSubsidiaries determined on a consolidated basis in accordance with GAAP,
the sum, without duplication, of (a) Consolidated Interest Expense paid (other
than interest paid-in-kind, amortization of financing fees, and other non-cash
ConsolidatedInterest Expense) during such period, (b) scheduled principal
payments in respect of Indebtedness that are required to be paid during such
period (excluding (i) Revolving Loan Debt to the extent such payments do not
permanently reduce the"Commitments" (as defined in the Revolving Credit
Agreement), and (ii) Management Debt to the extent such payments constitute an
expense in the calculation of
-------------------------------------------------------------------------------
Consolidated Net Income), (c) Restricted Payments made or required to be made
in cashduring such period; and (d) all management, consulting, monitoring and
advisory fees paid in cash to Borrower and its Affiliates during such period.
Notwithstanding the foregoing, Consolidated Fixed Charges for the fiscal
months ending prior tothe date of this Agreement and used in calculating the
Fixed Charge Coverage Ratio for the applicable twelve fiscal month period
after such date shall be in amounts agreed by the Agent and Borrower.
"
Consolidated Interest Expense
" means, for any period, the aggregate of the interest expense of Borrower
andits Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"
Consolidated NetIncome
" means, for any period, the net income (or loss) of Borrower and its
Subsidiaries on a consolidated basis for such period taken as a single
accounting period determined in conformity with GAAP after deduction for any
non-controllinginterest in such Subsidiaries; provided that there shall be
excluded (i) the income (or loss) of any Person (other than a Loan Party) in
which any other Person (other than a Loan Party) has a joint interest, or a
Subsidiary located outside USand Canada, except to the extent of the amount of
dividends or other distributions actually paid to Borrower or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date itbecomes a Subsidiary of Borrower or is
merged into or amalgamated or consolidated with Borrower or any of its
Subsidiaries or that Person's assets are acquired by Borrower or any of its
Subsidiaries, (iii) the income of any Subsidiary ofBorrower that is not a Loan
Party to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted
by operation of the terms of its charter or any agreement,instrument,
judgment, decree, order, statute, rule or governmental regulation applicable
to that Subsidiary, (iv) (to the extent not included in clauses (i) through
(iii) above) any non-cash extraordinary gains or non-cashextraordinary losses,
(v) the impact of non-cash currency translation gains and losses and mark to
market gains and losses on any Hedge Agreement, (vi) the cumulative effect of
a change in accounting principles during such period, and(vii) gains and
losses from the early extinguishment of Indebtedness or other derivative
instruments.
"
Control Agreement
" means a control agreement, or blocked account agreement, as applicable, in
form andsubstance reasonably satisfactory to Agent, executed and delivered by
Borrower or another Loan Party, Agent, and the applicable securities
intermediary (with respect to a Securities Account) or bank (with respect to a
Deposit Account).
"CORRA" means the Canadian Overnight Repo Rate Average administered and
published by the Bank of Canada (or any successor administrator of the
Canadian Overnight Repo Rate Average).
"
Credit Card Issuer
" shall mean any person (other than a Borrower or any of its Subsidiaries) who
issues orwhose members issue credit cards, including MasterCard or VISA bank
credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc., Visa International,
American Express, Discover, DinersClub, Union Pay, VFI, Inc. (a subsidiary of
The Toronto-Dominion Bank Finance Group) and other bank and non-bank credit or
debit cards, and other issuers approved by the Agent, after the
-------------------------------------------------------------------------------
conduct of such due diligence with respect to such issuers as the Agent
considers necessaryor appropriate, such approval not to be unreasonably
withheld, conditioned or delayed.
"
Credit CardNotifications
" has the meaning provided in
Section 5.18
.
"
Credit Card Processor
"shall mean any servicing or processing agent or any factor or financial
intermediary who facilitates, services, processes or manages the credit
authorization, billing transfer and/or payment procedures with respect to
Borrower's salestransactions involving credit card or debit card purchases by
customers using credit cards or debit cards issued by any Credit Card Issuer.
"
Credit Card Receivables
" shall mean each "intangible" (as defined in the PPSA) together with
allincome, payments and proceeds thereof, owed by a Credit Card Issuer or
Credit Card Processor to Borrower resulting from charges by a customer of
Borrower on credit or debit cards issued by such Credit Card Issuer in
connection with the sale of goodsby a Borrower, or services performed by a
Credit Card Processor or Credit Card Issuer, in each case in the ordinary
course of its business.
"
Damiani
" means, collectively, Damiani International S.A., a corporation incorporated
under the laws ofSwitzerland, and Damiani S.p.A., a corporation incorporated
under the laws of Italy.
"
Damiani Inventory PurchaseAgreement
" means the inventory purchase agreement between the Borrower and Damiani
dated as of April 18, 2019, as the same may be modified, amended, supplemented
or restated in accordance with the prior written consent of the Agent.
"
Damiani Purchase Documents
" means the Damiani Inventory Purchase Agreement, the Damiani Security,
theDamiani Subordination Agreement and all documents, instruments and
agreements executed from time to time in connection with the Damiani Inventory
Purchase Agreement, including the purchase orders arising thereunder and the
documents and agreementsgiving effect to the Damiani Security, in each case as
the same may be modified, amended, supplemented or restated with the prior
written consent of the Agent.
"
Damiani Security
" means (a) the General Security Agreement and Hypothec dated as of April
18,2019 between the Borrower and Damiani; and (b) any other present and future
security, security interests, hypothecs, mortgages, prior claims, liens or
charges affecting the Obligors' assets, or any part thereof, now or hereafter
held by orfor the account of Damiani as security for the Damiani Subordinated
Indebtedness created after the date hereof with the consent of the Agent.
"
Damiani Subordinated Indebtedness
" means all present and future indebtedness and other liabilities
andobligations, contingent or absolute, matured or unmatured, at any time due
or accruing due, owing by the Obligors, or any of them, whether alone or with
another or others and whether as principal or surety, to Damiani under the
Damiani PurchaseDocuments including in respect of all transactions made
pursuant thereto.
-------------------------------------------------------------------------------
"
Damiani Subordination Agreement
" means that certainSubordination Agreement, dated as of April 18, 2019, among
the Borrower, Damiani, the Agent, the Term Loan Agent and Cash, Gold & Silver
Inc., as the same may hereafter be amended, restated, supplemented or
otherwise modified with theprior written consent of Agent.
"
Default
" means an event, condition, or default that, with the givingof notice, the
passage of time, or both, would be an Event of Default.
"
Defaulting Lender
" means anyLender that (a) has failed to fund any amounts required to be
funded by it under the Agreement within 1 Business Day of the date that it is
required to do so under the Agreement, (b) notified Borrower, Agent, or any
Lender in writing thatit does not intend to comply with all or any portion of
its funding obligations under the Agreement, (c) has made a public statement
to the effect that it does not intend to comply with its funding obligations
under the Agreement or under otheragreements generally (as reasonably
determined by Agent) under which it has committed to extend credit, (d)
failed, within 1 Business Day after written request by Agent, to confirm that
it will comply with the terms of the Agreement relating toits obligations to
fund any amounts required to be funded by it under the Agreement, (e)
otherwise failed to pay over to Agent or any other Lender any other amount
required to be paid by it under the Agreement within 1 Business Day of the
datethat it is required to do so under the Agreement, or (f) (i) becomes or is
insolvent or has a Borrower company that has become or is insolvent or (ii)
becomes the subject of a bankruptcy or insolvency proceeding, or has had a
receiver,conservator, trustee, or custodian or appointed for it, or has taken
any action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a Borrower company
that has become the subjectof a bankruptcy or insolvency proceeding, or has
had a receiver, conservator, trustee, or custodian appointed for it, or has
taken any action in furtherance of, or indicating its consent to, approval of
or acquiescence in any such proceeding orappointment.
"
Deposit Account
" means any deposit account maintained in Canada for the deposit of fundswith
a Canadian Bank reasonably acceptable to Agent.
"
Disqualified Equity Interests
" means any EquityInterests that, by their terms (or by the terms of any
security or other Equity Interests into which they are convertible or for
which they are exchangeable), or upon the happening of any event or condition
(a) matures or are mandatorilyredeemable (other than solely for Qualified
Equity Interests), pursuant to a sinking fund obligation or otherwise (except
as a result of a change of control or asset sale so long as any rights of the
holders thereof upon the occurrence of a changeof control or asset sale event
shall be subject to the prior repayment in full of the Loans and all other
Obligations that are accrued and payable and the termination of the
Commitments), (b) are redeemable at the option of the holder thereof(other
than solely for Qualified Equity Interests), in whole or in part, (c) provide
for the scheduled payments of dividends in cash, or (d) are or become
convertible into or exchangeable for Indebtedness or any other Equity
Interests thatwould constitute Disqualified Equity Interests, in each case,
prior to the date that is 91 days after the Maturity Date.
"
Early Termination Fee
" means (i) during the period of time from and after the Fifth AmendmentEffectiv
e Date up to (but not including) the date that is the first anniversary of the
Fifth Amendment Effective Date, an amount equal to three (3.0%) of the
principal amount of
-------------------------------------------------------------------------------
the Term Loan prepaid (or in the case of an Applicable Premium Trigger Event
occurring underclauses (ii), (iii) or (iv) of the definition thereof, deemed
to be prepaid) on such date in cash to the Agent for the ratable account of
the Lenders; (ii) during the period of time from and after the first
anniversary of the FifthAmendment Effective Date up to (but not including) the
date that is the second anniversary of the Fifth Amendment Effective Date, an
amount equal to one and one half percent (1.5%) of the principal amount of the
Term Loan prepaid (or in thecase of an Applicable Premium Trigger Event
occurring under clauses (ii), (iii) or (iv) of the definition thereof, deemed
to be prepaid) on such date in cash to the Agent for the ratable account of
the Lenders; (iii) during the periodof time from and after the second
anniversary of the Fifth Amendment Effective Date up to (but not including)
the date that is the third anniversary of the Fifth Amendment Effective Date,
an amount equal to one half of one percent (0.5%) of theprincipal amount of
the Term Loan prepaid (or in the case of an Applicable Premium Trigger Event
occurring under clauses (ii), (iii) or (iv) of the definition thereof, deemed
to be prepaid) on such date in cash to the Agent for the ratableaccount of the
Lenders, and (iv) from and after the third anniversary of the Fifth Amendment
Effective Date, zero.
"
Eligible Accounts
" means those PLCW Accounts created by Borrower in the ordinary course of its
business,that arise out of Borrower's sale of goods or rendition of services,
that comply with each of the representations and warranties respecting
Eligible Accounts made in the Loan Documents, and that are not excluded as
ineligible by virtue of oneor more of the excluding criteria set forth below;
provided
, that such criteria may be revised from time to time by Agent in Agent's
Permitted Discretion to address the results of any field examination performed
by (or on behalf of)Agent from time to time after the Closing Date. In
determining the amount to be included, Eligible Accounts shall be calculated
net of customer deposits, unapplied cash, Taxes, discounts, credits,
allowances, and rebates. Eligible Accounts shall notinclude the following:
(a)Accounts that the Account Debtor has failed to pay within 90 days of
originalinvoice date (except that this period shall be extended to 150 days
after the original invoice date with respect to Accounts arising from initial
orders made by an Account Debtor that becomes a customer of the Borrower after
the Closing Date) orwithin 60 days of due date,
(b)Accounts owed by an Account Debtor (or its Affiliates) where 50% or more
ofall Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,
(c)Accounts with respect to which the Account Debtor is an Affiliate of any
Loan Party or an employee or agentof any Loan Party or any Affiliate of any
Loan Party,
(d)Accounts arising in a transaction wherein goodsare placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval,
a bill and hold, or any other terms by reason of which the payment by the
Account Debtor may be conditional,
(e)Accounts that are not payable in US Dollars or Canadian Dollars,
(f)Accounts with respect to which the Account Debtor either (i) does not
maintain its chief executiveoffice in Canada or the United States, or is not
organized under the laws of the United States or any state thereof, or the
laws of Canada or any province thereof, (ii) is
-------------------------------------------------------------------------------
the government of any foreign country or sovereign state, or of any state,
province,municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof,
unless the Account is supported by an irrevocable letter of credit reasonably
satisfactory to Agent (as toform, substance and issuer or domestic confirming
bank) that has been delivered to Agent and is directly drawable by Agent,
(g)Accounts with respect to which the Account Debtor is either (i) the United
States or any department,agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Borrower has complied,
to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31
USC (s)3727), (ii) any state of theUnited States, or (iii) a Governmental
Authority of Canada or any province thereof (exclusive, however, of Accounts
with respect to which Borrower has complied, to the reasonable satisfaction of
Agent, with any applicable assignment of claimsstatute, including the
Financial Administration Act (Canada)),
(h)Accounts with respect to which theAccount Debtor is a creditor of a Loan
Party, has or has asserted a right of recoupment or setoff, or has disputed
its obligation to pay all or any portion of the Account, to the extent of such
claim, right of recoupment or setoff, or dispute,
(i)Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent,has gone out of business, or as to which
any Loan Party has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor, unless
the Account is supported by an irrevocable letter ofcredit reasonably
satisfactory to Agent (as to form, substance and issuer or domestic confirming
bank) that has been delivered to Agent and is directly drawable by Agent,
(j)Accounts, the collection of which, Agent, in its Permitted Discretion,
believes to be doubtful, including byreason of the Account Debtor's financial
condition,
(k)Accounts that are not subject to a valid andperfected first priority
Agent's Lien (subject to Permitted Liens having priority under applicable law
for which reserves have been established pursuant to
Section 2.2(b)
),
(l)Accounts with respect to which (i) the goods giving rise to such Account
have not been shipped andbilled to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account
Debtor,
(m)Accounts with respect to which the Account Debtor is a Sanctioned Person or
Sanctioned Entity, or
(n)Accounts that represent the right to receive progress payments or other
advance billings that are due priorto the completion of performance by
Borrower of the subject contract for goods or services.
"
Eligible CreditCard Receivables
" shall mean on any date of determination of the Borrowing Base, each Credit
Card Receivable that satisfies the following criteria at the time of creation
and continues to meet the same at the time of such determination, asdetermined
by the Agent in its Permitted Discretion: such Credit Card Receivable (i) has
been earned by performance and represents the bona fide amounts due to
Borrower from a Credit Card Issuer or Credit Card
-------------------------------------------------------------------------------
Processor, and in each case originated in the ordinary course of business of
such Borrower,and (ii) is not ineligible for inclusion in the calculation of
the Borrowing Base pursuant to any of
clauses (a)
through
(h)
below;
provided
, that such criteria may be revised from time to time by Agent in
Agent'sPermitted Discretion to address the results of any field examination
performed by (or on behalf of) Agent from time to time after the Closing Date.
Without limiting the foregoing, to qualify as an Eligible Credit Card
Receivable, such Credit CardReceivable shall indicate no Person other than
Borrower as payee or remittance party. In determining the amount to be so
included, the face amount of a Credit Card Receivable shall be reduced by,
without duplication, to the extent not reflected insuch face amount, (i) the
amount of all accrued and actual discounts, claims, credits or credits
pending, promotional program allowances, price adjustments, finance charges or
other allowances (including any amount that Borrower may beobligated to rebate
to a customer, a Credit Card Issuer or Credit Card Processor pursuant to the
terms of any agreement or understanding (written or oral)) and (ii) the
aggregate amount of all cash received in respect of such Credit CardReceivable
but not yet applied by the Credit Parties to reduce the amount of such Credit
Card Receivable. Any Credit Card Receivable included within any of the
following categories shall not constitute an Eligible Credit Card Receivable:
(a)Credit Card Receivables which do not constitute an "intangible" (as defined
in the PPSA), asapplicable or an Account;
(b)Credit Card Receivables that have been outstanding for more than
fiveBusiness Days from the date of sale;
(c)Credit Card Receivables that are not subject to a valid andperfected first
priority Agent's Lien (subject to Permitted Liens having priority under
applicable law for which Reserves have been established pursuant to
Section 2.2(b)
);
(d)Credit Card Receivables which are disputed, are with recourse, or with
respect to which a claim,counterclaim, offset or chargeback has been asserted
(to the extent of such dispute, claim, counterclaim, offset or chargeback);
(e)Credit Card Receivables as to which the Credit Card Issuer or Credit Card
Processor has the right undercertain circumstances to require a Credit Party
to repurchase the Credit Card Receivables from such Credit Card Issuer or
Credit Card Processor;
(f)Credit Card Receivables due from a Credit Card Issuer or Credit Card
Processor which is the subject of anybankruptcy or insolvency proceedings;
(g)Credit Card Receivables which are not a valid, legallyenforceable
obligation of the applicable Credit Card Issuer or Credit Card Processor with
respect thereto; or
(h)Credit Card Receivables which do not conform to all representations,
warranties or other provisions in theCredit Documents relating to Credit Card
Receivables in all material respects.
"
Eligible Inventory
"means Inventory of Borrower that consists of finished goods held for sale in
the ordinary course of Borrower's business and complies with each of the
representations and warranties respecting Eligible Inventory made in the Loan
Documents, and
-------------------------------------------------------------------------------
that is not excluded as ineligible by virtue of one or more of the excluding
criteria setforth below;
provided
, that such criteria may be revised from time to time by Agent in Agent's
Permitted Discretion to address the results of any field examination or
appraisal performed by Agent from time to time after the Closing Date.In
determining the amount to be so included, Inventory shall be valued at cost on
a basis consistent with Borrower's historical accounting practices. An item of
Inventory shall not be included in Eligible Inventory if:
(a)Borrower does not have good, valid, and marketable title thereto,
(b)Borrower does not have actual and exclusive possession thereof unless such
Inventory is EligibleNon-Possessory Inventory,
(c)it is not located at one of the locations in Canada or in the continentalUnit
ed States set forth on
Schedule E-1
(as such
Schedule E-1
may be amended from time to time with the prior written consent of Agent) to
the Agreement (or in-transit from one such location to another such location),
(d)it is in-transit to or from a location of Borrower (other than in-transit
from one location set forth on
Schedule E-1
to the Agreement to another location set forth on
Schedule E-1
to the Agreement),
(e)commencing 90 days after the date hereof, it is located on real property
leased by Borrower (other thanstore locations) or in a contract warehouse, in
each case, unless either (1) it is subject to a Collateral Access Agreement
executed by the lessor or warehouseman, as the case may be, and it is
segregated or otherwise separately identifiablefrom goods of others, if any,
stored on the premises or (2) Agent has established a Landlord Reserve with
respect to such location,
(f)it is the subject of a bill of lading or other document of title,
(g)it is not subject to a valid and perfected first priority Agent's Lien
(subject to Permitted Lienshaving priority under applicable law for which
Reserves have been established pursuant to
Section 2.2(b))
,
(h)it consists of personalized items or custom items which cannot be readily
re-sold to other customers,damaged or defective goods or "seconds";
(i)it consists of goods that are obsolete, or goodsthat constitute spare
parts, packaging and shipping materials, supplies used or consumed in
Borrower's business, bill and hold goods, or Inventory acquired on
consignment, or
(j)it is subject to third party trademark, licensing or other proprietary
rights, unless Agent is satisfiedthat such Inventory can be freely sold by
Agent on and after the occurrence of an Event of a Default despite such third
party rights.
"
Eligible Inventory Category
" means the categories of Eligible Inventory set forth below or such
othercategories as may be determined by Agent from time to time in its
Permitted Discretion (including, without limiting the generality of Agent's
Permitted Discretion, it being
-------------------------------------------------------------------------------
understood that Agent shall have received an Inventory appraisal (and such
other Collateralreporting) satisfactory to Agent prior to the inclusion of any
other categories or any adjustments to such categories in the calculations set
forth on the Borrowing Base Certificate in connection with such implementation):
Eligible Inventory Category
Watches and Clocks
Fine Jewelry
Bridal
Giftware
Loose Stones
Silver
Gold
Service
Rolex Watches
Patek Philippe
Graff
"
Eligible Non-Possessory Inventory
" means Inventory of Borrower that isotherwise Eligible Inventory and that
satisfies the following criteria as determined in the Agent's Permitted
Discretion:
(a)the Person in possession of such Inventory is a bailee or processor or
agent of Borrower that is acceptableto Agent and is held pursuant to bailment,
processor or agency arrangements acceptable to the Agent and such Person
maintains exclusive possession of such Inventory until delivered to Borrower
or placed in transit to a location of Borroweridentified on
Schedule E-1
,
(b)title in such Inventory has passed to Borrower,
(c)such Inventory is subject to a Collateral Access Agreement, processor
agreement or bailee agreement asrequired by the Agent, in each case in form
and content satisfactory to the Agent and executed by the bailee, processor,
agent or other Person in possession of such Inventory, as the case may be, and
such Inventory is segregated or otherwiseseparately identifiable from goods of
others, if any, held by the Person in possession of such Inventory, and
(d)Agent in its Permitted Discretion (i) has established such Reserves
(including Reserves for processingand bailee charges and applicable customs
charges and duties) as it considers necessary or appropriate with respect to
such Inventory), and (ii) is satisfied that such Inventory is not subject to
any Person's right or claim (other thanthose for which appropriate Reserves
have been established) which is senior to, or pari passu with, the Agent's
Lien on such Inventory or may otherwise adversely impact the ability of the
Agent to realize upon such Inventory.
"
Eligible Transferee
" means (a) any Lender (other than a Defaulting Lender), any Affiliate of
anyLender (other than a Defaulting Lender) and any Related Fund of any Lender;
-------------------------------------------------------------------------------
(b) (i) a commercial bank organized under the laws of Canada or the United
States or any state thereof, and having total assets in excess of
$250,000,000; (ii) a commercial bankorganized under the laws of any other
country or a political subdivision thereof;
provided
that (A) (x) such bank is acting through a branch or agency located in the
United States or Canada or (y) such bank is organized underthe laws of a
country that is a member of the Organization for Economic Cooperation and
Development or a political subdivision of such country, and (B) such bank has
total assets in excess of $250,000,000; (c) any other entity (other thana
natural person) that is an "accredited investor" (as defined under the
Securities Act (Quebec)) that extends credit or buys loans as one of its
businesses including insurance companies, investment or mutual funds and lease
financingcompanies, and having total assets in excess of $250,000,000; and (d)
during the continuation of an Event of Default, any other Person approved by
Agent, provided that notwithstanding the foregoing, "Eligible Transferee"
shall notinclude (i) any Loan Party or any Affiliate or Subsidiary of any Loan
Party, or (ii) a natural person.
"
Environmental Action
" means any written complaint, summons, citation, notice, directive, order,
claim,litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other written communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials inviolation of Environmental laws (a) from any
assets, properties, or businesses of Borrower, or any Subsidiary of Borrower,
or any of their predecessors in interest, (b) from adjoining properties or
businesses, or (c) from or onto anyfacilities which received Hazardous
Materials generated by Borrower, or any Subsidiary of Borrower, or any of
their predecessors in interest.
"
Environmental Law
" means any applicable federal, provincial, state, foreign or local statute,
law, rule,regulation, ordinance, code, binding and enforceable guideline,
binding and enforceable written policy, or rule of common law now or hereafter
in effect and in each case as amended, or any judicial or administrative
interpretation thereof, includingany judicial or administrative order, consent
decree or judgment, in each case, to the extent binding on Borrower or any of
its Subsidiaries, relating to the environment, the effect of the environment
on employee health, or Hazardous Materials, ineach case as amended from time
to time.
"
Environmental Liabilities
" means all liabilities, monetaryobligations, losses, damages, costs and
expenses (including all reasonable fees, disbursements and expenses of
counsel, experts, or consultants, and costs of investigation and feasibility
studies), fines, penalties, sanctions, and interest incurredas a result of any
claim or demand, or Remedial Action required, by any Governmental Authority or
any third party, and which relate to any Environmental Action.
"
Environmental Lien
" means any Lien in favor of any Governmental Authority for Environmental
Liabilities.
"
Equipment
" means equipment (as that term is defined in the PPSA).
"
Equity Interests
" means, with respect to a Person, all of the shares, options, warrants,
interests,participations, or other equivalents (regardless of how designated,
whether voting or non-voting) of or in such Person, whether voting or
nonvoting, including capital stock (or other ownership or profit interests or
units) or preferred stock.
-------------------------------------------------------------------------------
"
Event of Default
" has the meaning specified thereforin
Section 8
of the Agreement.
"
Excess Availability
" means, as of any date ofdetermination, the Borrowing Availability
less
the then Combined Total Outstandings.
"
ExcludedTaxes
" means (i) any Tax imposed on the net income or net profits of any Lender or
any Participant (including any branch profits Taxes ), in each case imposed by
the jurisdiction (or by any political subdivision or taxing authoritythereof)
in which such Lender or such Participant is organized or the jurisdiction (or
by any political subdivision or taxing authority thereof) in which such
Lender's or such Participant's principal office is located in each case as
aresult of a present or former connection between such Lender or such
Participant and the jurisdiction or taxing authority imposing the Tax (other
than any such connection arising solely from such Lender or such Participant
having executed, deliveredor performed its obligations or received payment
under, or enforced its rights or remedies under the Agreement or any other
Loan Document); (ii) Canadian federal withholding Taxes that would not have
been imposed but for the Lender's or aParticipant's failure to comply with the
requirements of
Section 16.2
of the Agreement, (iii) any Canadian federal withholding Taxes that would be
imposed on amounts payable to a Foreign Lender based upon the applicablewithhold
ing rate in effect at the time such Foreign Lender becomes a party to the
Agreement (or designates a new lending office), except that Excluded Taxes
shall not include (A) any amount that such Foreign Lender (or its assignor, if
any) waspreviously entitled to receive pursuant to
Section 16.1
of the Agreement, if any, with respect to such withholding Tax at the time
such Foreign Lender becomes a party to the Agreement (or designates a new
lending office), and(B) additional Canadian federal withholding Taxes that may
be imposed after the time such Foreign Lender becomes a party to the Agreement
(or designates a new lending office), as a result of a Change in Law, rule,
regulation, order or otherdecision with respect to any of the foregoing by any
Governmental Authority, and (iv) any Canadian federal withholding Taxes
imposed as a result of any Lender or any Participant (A) not dealing at arm's
length (within the meaning ofthe Income Tax Act (Canada)) with a Loan Party
(other than where the non-arm's length relationship arises on account of the
Person having become a party to, received or perfected a security interest
under or enforced any rights or in respect ofany Loan Documents), or (B) being
a "specified shareholder" (within the meaning of Subsection 18(5) of the
Income Tax Act (Canada)) of a Loan Party, or not dealing at arm's length with
such "specified shareholder" of aLoan Party.
"
Fee Letter
" means that certain amended and restated fee letter, dated as of the
FifthAmendment Effective Date, between Borrower and Agent, in form and
substance reasonably satisfactory to Agent, as amended, restated or
supplemented from time to time.
"Fifth Amendment Effective Date" means December 24, 2021.
"
Financial Officer
" means the (i) chairman of the board, (ii) president, (iii) chiefexecutive
officer, (iv) treasurer, (v) chief financial officer, (vi) director of
financial planning and reporting or (vii) director, financial controller, in
each case, of Borrower or, if the context requires, a Loan Party.
-------------------------------------------------------------------------------
"
Fiscal Month
" means each month ending on the lastSaturday of each month other than in the
case of a 53 week year, in which case two of the Fiscal Months in such Fiscal
Year may end on a different day).
"
Fiscal Quarter
" means each of the three month periods ending on the last Saturday of each of
March, June,September and December of any year (other than in the case of a 53
week year, in which case one of the Fiscal Quarters in such Fiscal Year may
end on a different day).
"
Fiscal Year
" means the twelve month period ending on the last Saturday of March of any
year.
"
Fixed Charge Condition
" means, (a) with respect to any proposed Restricted Payment, and,
whereapplicable, any prepayment of Indebtedness, Borrower and its Subsidiaries
would have a Fixed Charge Coverage Ratio on a pro forma basis after giving
effect to such Restricted Payment or prepayment (with such prepayment being
treated as a componentof Consolidated Fixed Charges for purposes of this
definition) of equal to or greater than 1.1 to 1.0 for the most recently ended
12-month period immediately prior to the proposed date of consummation of such
proposed Restricted Payment, orprepayment of Indebtedness for which Agent has
received financial statements required to be delivered under Section 5.1; and
(b) with respect to any proposed Acquisition, the Fixed Charge Acquisition
Condition has been satisfied.
"
Fixed Charge Acquisition Condition
" means, with respect to any proposed Acquisition, Borrower has providedAgent
with written confirmation, supported by reasonably detailed calculations, that
on a pro forma basis (including pro forma adjustments (including, without
limitation, Restructuring and Integration Costs) arising out of events which
are directlyattributable to such proposed Acquisition, are factually
supportable, and are expected to have a continuing impact, in each case,
determined as if the combination had been accomplished at the beginning of the
relevant period; such eliminations andinclusions to be mutually and reasonably
agreed upon by Administrative Borrower and Agent) created by adding the
historical combined financial statements of Borrower (including the combined
financial statements of any other Person or assets thatwere the subject of a
prior Permitted Acquisition during the relevant period) to the historical
consolidated financial statements of the Person to be acquired (or the
historical financial statements related to the assets to be acquired) pursuant
tothe proposed Acquisition, Borrower and its Subsidiaries would have a Fixed
Charge Coverage Ratio of greater than 1.0 to 1.0 for the most recently ended
12-month period immediately prior to the proposed date of consummation of such
proposedAcquisition for which Agent has received financial statements, and;.
"
Fixed Charge Coverage Ratio
"means, with respect to any fiscal period and with respect to Borrower and its
Subsidiaries determined on a consolidated basis in accordance with GAAP, the
ratio of (a) Consolidated EBITDA for such period minus (i) Capital
Expenditures made(to the extent not already incurred in a prior period) or
incurred during such period (to the extent such Capital Expenditures are not
financed with proceeds of Indebtedness (other than Revolving Loans) or Equity
Interests), (ii) all federal,provincial, state and local income and capital
Taxes paid in cash during such period and (iii) all Restricted Payments paid
in cash or Cash Equivalents during such period to (b) Consolidated Fixed
Charges for such period. Notwithstandingthe foregoing, the amount of Capital
Expenditures and Taxes for the fiscal months ending prior to the
-------------------------------------------------------------------------------
date of this Agreement and used in calculating the Fixed Charge Coverage Ratio
for the applicable twelve fiscal month period after such date shall be in
amounts agreed by the Agent and Borrower.
"
Foreign Lender
" means any Lender or Participant that is not resident in Canada (within the
meaning ofthe Income Tax Act (Canada) for the purposes of Part XIII of the
Income Tax Act (Canada).
"Floor" means a rate of interest equal to 1.00%.
"
GAAP
" means generally accepted accounting principles as in effect from time to
time in the United States,consistently applied, provided that Borrower shall
be entitled to elect by notice to Agent and subject to Section 1.2 and such
amendments to this Agreement as the Agent may reasonably require to reflect
the implementation of such election,Canadian accounting standards for private
enterprises or International Financial Reporting Standards, in each case, as
set out in the Chartered Professional Accountants Canada Handbook - Accounting.
"
Governing Documents
" means, with respect to any Person, the certificate or articles of
incorporation,by-laws, or other organizational documents of such Person.
"
Governmental Authority
" means thegovernment of any nation or any political subdivision thereof,
whether at the national, state, territorial, provincial, municipal or any
other level, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entityexercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of, or
pertaining to, government (including any supra-national bodies such as the
European Union or the European Central Bank).
"
Guarantor
" means (a) as of the Closing Date, CGS and (b) thereafter, each Subsidiary of
Borrowerthat is or becomes a guarantor of all or any part of the Obligations.
For certainty, CGS USA and Birks Jewellers Limited, Borrower's Hong Kong
Subsidiary, shall not be required to be a Guarantor.
"
Hazardous Materials
" means (a) substances that are defined or listed in, or otherwise
classifiedpursuant to, any applicable laws or regulations as "hazardous
substances," "hazardous materials," "hazardous wastes," "toxic substances," or
any other formulation intended to define, list, or classifysubstances by
reason of deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil,
petroleum, or petroleum derived substances, natural gas, natural gasliquids,
synthetic gas, drilling fluids, produced waters, and other wastes associated
with the exploration, development, or production of crude oil, natural gas, or
geothermal resources, (c) any flammable substances or explosives or
anyradioactive materials, and (d) asbestos in any form or electrical equipment
that contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of 50 parts per million.
"
Hedge Agreement
" means (a) any and all rate swap transactions, basis swaps, credit
derivativetransactions, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forwardbond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency
-------------------------------------------------------------------------------
options, spot contracts, or any other similar transactions or any combination
of any of the foregoing (including any options to enter into any of the
foregoing), whether or not any suchtransaction is governed by or subject to
any master agreement, and (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement publishedby the International Swaps
and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement.
"
Hedge Provider
" means any Revolving Lender or any of its Affiliates which is a party to a
Hedge Agreementin accordance with the Revolving Credit Agreement.
"
Hedge Termination Value
" means, in respect of anyone or more Hedging Agreements, after taking into
account the effect of any legally enforceable netting agreement relating to
such Hedging Agreements, (a) for any date on or after the date such Hedging
Agreements have been closed out andtermination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Hedging Agreements, asdetermined based upon
one or more mid-market or other readily available quotations provided by any
recognized dealer in such Hedging Agreements (which may include a Revolving
Lender or any Affiliate or branch of a Revolving Lender).
"
Indebtedness
" as to any Person means (a) all obligations of such Person for borrowed
money,(b) all obligations of such Person evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
in respect of letters of credit, bankers acceptances, or other financial
products, (c) allobligations of such Person as a lessee under Capital Leases,
(d) all obligations or liabilities of others secured by a Lien on any asset of
such Person, irrespective of whether such obligation or liability is assumed,
(e) all obligationsof such Person to pay the deferred purchase price of assets
(other than trade payables incurred in the ordinary course of business and
payable in accordance with customary trade practices to the extent not overdue
by more than 90 days from the dateof the original invoice therefor and, for
the avoidance of doubt, other than royalty payments payable in the ordinary
course of business in respect of non-exclusive licenses, but including, for
the avoidance of doubt, obligations in respect ofcredit cards, credit card
processing services, debit cards, stored value cards and commercial cards
(including so-called "commercial cards", "procurement cards" or "p-cards"),
and any earn- out or similar obligations tothe extent required to be
recognized as a liability on the balance sheet of such Person under GAAP, (f)
all monetary obligations of such Person owing under Hedge Agreements (which
amount shall be calculated based on the Hedge Termination Valueas of the date
of determination), (g) any Disqualified Equity Interests of such Person, and
(h) any obligation of such Person guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted,or
sold with recourse) any obligation of any other Person that constitutes
Indebtedness under any of clauses (a) through (g) above. For purposes of this
definition, (i) the amount of any Indebtedness represented by a guarantee
orother similar instrument shall be the lesser of the principal amount of the
obligations guaranteed and still outstanding and the maximum amount for which
the guaranteeing Person may be liable pursuant to the terms of the instrument
embodying suchIndebtedness, and (ii) the amount of any Indebtedness which is
limited or is non-recourse to a Person or for which recourse is limited to an
identified asset shall be valued at the lesser of (A) if applicable, the
limited amount of suchobligations, and (B) if applicable, the fair market
value of such assets securing such obligation.
-------------------------------------------------------------------------------
"
Indemnified Liabilities
" has the meaning specifiedtherefor in
Section 10.3
of the Agreement.
"
Indemnified Person
" has the meaning specifiedtherefor in
Section 10.3
of the Agreement.
"
Indemnified Taxes
" means (a) Taxes, otherthan Excluded Taxes, imposed on or with respect to any
payment made by, or on account of or with respect to any obligation of, any
Loan Party under any Loan Document and (b) to the extent not otherwise
described in (a), Other Taxes.
"
Information Certificate
" means a certificate in the form of
Exhibit I-1
to the Agreement.
"
Insolvency Laws
" means, collectively, (i) the Bankruptcy Code, (ii) the
Bankruptcy andInsolvency Act
(Canada), (iii) the
Companies' Creditors Arrangement Act
(Canada), (iv) the
Winding-Up and Restructuring Act
(Canada), (v) corporate statutes to the extent such statute is used by a
Person topropose an arrangement involving the compromise of the claims of
creditors; and (vi) any similar legislation in a relevant jurisdiction, in
each case as applicable and as in effect from time to time.
"
Insolvency Proceeding
" means any proceeding commenced by or against any Person under any Insolvency
Law orunder any other provincial, state or federal bankruptcy or insolvency
law, each as now and hereafter in effect, any successors to such statutes, and
any similar laws in any jurisdiction including, without limitation, any laws
relating to assignmentsfor the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief and any law
permitting a debtor to obtain a stay or acompromise of the claims of its
creditors.
"
Intellectual Property
" means all intellectual and similarProperty of a Person, including
inventions, designs, patents, patent applications, copyrights, trademarks,
service marks, trade names, trade secrets, confidential or proprietary
information, customer lists, know-how, software and databases; allembodiments
or fixations thereof and all related documentation, registrations and
franchises; all books and records describing or used in connection with the
foregoing; and all licenses or other rights to use any of the foregoing.
"
Intellectual Property Claim
" means any claim or assertion (whether in writing, by suit or otherwise)
thatany Loan Party's or any Subsidiary's ownership, use, marketing, sale or
distribution of any Inventory, Equipment, Intellectual Property or other
Property violates another Person's Intellectual Property.
"
Intercompany Subordination Agreement
" means an intercompany subordination agreement executed and deliveredby
Borrower, each other Loan Party, certain other Subsidiaries of Borrower and
Agent, the form and substance of which is reasonably satisfactory to Agent
concurrently with the making of the first intercompany advance to, or other
Investment in,Borrower or another Loan Party by a Loan Party or other
Subsidiary of Borrower.
-------------------------------------------------------------------------------
"
Intercreditor Agreement
" means the IntercreditorAgreement dated June 29, 2018, by and among the Agent
and the Revolving Loan Agent, and acknowledged by each Loan Party, as it may
be amended, supplemented or otherwise modified from time to time.
"
Interest Payment Date
" means the first (1st) day of each month commencing on the first day of
themonth immediately following the Closing Date and continuing thereafter
until the Maturity Date.
"
Inventory
" means inventory (as that term is defined in the PPSA).
"
Inventory Net Recovery Percentage
" means, as of any date of determination for each Eligible InventoryCategory,
the percentage of the cost of Borrower's Inventory that is estimated to be
recoverable in an orderly liquidation of such Inventory net of all associated
costs and expenses of such liquidation, such percentage to be determined as
toeach category of Inventory and to be as specified in the most recent
appraisal received by Agent from an appraisal company selected by Agent.
"
Inventory Reserves
" means, as of any date of determination, (a) Landlord Reserves, and (b)
thoseReserves that Agent deems necessary or appropriate, in its Permitted
Discretion and subject to Section 2.2(b), to establish and maintain (including
Reserves for slow moving Inventory and Inventory shrinkage) with respect to
Eligible Inventory.
"
Investment
" means, with respect to any Person, any investment by such Person in any
other Person(including Affiliates) in the form of loans, guarantees, advances,
capital contributions (excluding (a) commission, travel, and similar advances
to officers and employees of such Person made in the ordinary course of
business, and (b) bonafide accounts receivable arising in the ordinary course
of business), or assumption, purchase or other acquisitions of Indebtedness,
Equity Interests (including any partnership or joint venture interest), the
acquisition of all or substantially allof the assets of such other Person (or
of any division or business line of such other Person), and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. The amount of any Investment shallbe the original cost
of such Investment plus the cost of all additions thereto (net of all returns
on such Investments except with respect to Permitted Acquisitions;
provided
that the amount of such returns shall be disregarded for purposesof
calculating capacity under any cap or basket with respect to Investments to
the extent in excess of such cap or basket), without any adjustment for
increases or decreases in value, or write-ups, write-downs, or write-offs with
respect to suchInvestment.
"
IRC
" means the Internal Revenue Code of 1986, as in effect from time to time.
"
JV Holdco
" means Birks Investments Inc., a Canadian corporation wholly-owned by Birks
Group Inc.
"
JV Partner
" means FWI LLC, a California corporation.
"
Landlord Reserve
" means, as to each location at which Borrower has Inventory (other than store
locations)or books and records located and as to which a Collateral Access
Agreement has not been received by Agent, a reserve in an amount equal to the
greater of (a) the number of months' rent for which the landlord will have,
under applicablelaw, a Lien in the
-------------------------------------------------------------------------------
Inventory of Borrower to secure the payment of rent or other amounts under the
lease relative to such location, or (b) 3 months' rent under the lease
relative to such location.
"
Lender
" has the meaning set forth in the preamble to the Agreement, and shall also
include any other Personmade a party to the Agreement pursuant to the
provisions of Section 13.1 of the Agreement and "Lenders" means each of the
Lenders or any one or more of them.
"
Lender Group
" means each of the Lenders and Agent, or any one or more of them.
"
Lender Group Expenses
" means all (a) costs or expenses (including Taxes and insurance premiums)requir
ed to be paid by Borrower or any of its Subsidiaries under any of the Loan
Documents that are paid, advanced, or incurred by the Lender Group, (b)
reasonable and documented out-of-pocket fees or charges paid or incurred by
Agent inconnection with the Lender Group's transactions with Borrower and its
Subsidiaries under any of the Loan Documents, including, photocopying,
notarization, couriers and messengers, telecommunication, public record
searches, filing fees,recording fees, publication, real estate surveys, real
estate title policies and endorsements, and environmental audits, (c) Agent's
reasonable and customary fees and charges imposed or incurred in connection
with any background checks orOFAC/PEP searches related to Borrower or its
Subsidiaries, (d) Agent's reasonable and customary fees and charges (as
adjusted from time to time) with respect to the disbursement of funds (or the
receipt of funds) to or for the account ofBorrower (whether by wire transfer
or otherwise), together with any reasonable and documented out-of-pocket costs
and expenses incurred in connection therewith, (e) reasonable and customary
charges imposed or incurred by Agent resulting fromthe dishonor of cheques
payable by or to any Loan Party, (f) reasonable and documented out-of-pocket
costs and expenses paid or incurred by the Lender Group to correct any default
or enforce any provision of the Loan Documents, or during thecontinuance of an
Event of Default, in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale
isconsummated, (g) field examination, appraisal, and valuation fees and
expenses of Agent related to any field examinations, appraisals, or valuation
to the extent of the fees and charges (and up to the amount of any limitation
provided inSection 2.5(c) of the Agreement, (h) Agent's reasonable and
documented out-of- pocket costs and expenses (including reasonable and
documented legal fees and expenses) relative to third party claims or any
other lawsuit or adverseproceeding paid or incurred, whether in enforcing or
defending the Loan Documents or otherwise in connection with the transactions
contemplated by the Loan Documents, Agent's Liens in and to the Collateral, or
the Lender Group'srelationship with Borrower or any of its Subsidiaries, (i)
Agent's reasonable and documented out-of-pocket costs and expenses (including
reasonable and documented out-of- pocket legal fees and due diligence
expenses) incurred in advising,structuring, drafting, reviewing, administering
(including travel, meals, and lodging), syndicating (including reasonable and
documented out-of-pocket costs and expenses relative to the rating of the Term
Loan, CUSIP, DXSyndicateTM, SyndTrak orother communication costs incurred in
connection with a syndication of the loan facilities), or amending, waiving,
or modifying the Loan Documents, and (j) Agent's and each Lender's reasonable
and documented out-of-pocket costs andexpenses (including lawyers,
accountants, consultants, and other advisors fees and expenses (limited in the
case of lawyers to one law firm for Agent (and such other specialty counsel or
local counsel as Agent reasonably elects to employ) and(absent any additional
counsel as may be needed based on conflicts of interest) one law firm for the
Lenders (in the aggregate) other than the Agent)) incurred
-------------------------------------------------------------------------------
in terminating, enforcing (including lawyers, accountants, consultants, and
other advisors fees and expenses (limited in the case of lawyers to one law
firm for Agent (and such other specialtycounsel or local counsel as Agent
reasonably elects to employ) and (absent any additional counsel as may be
needed based on conflicts of interest) one law firm for the Lenders (in the
aggregate) other than the Agent) incurred in connection with a"workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower or any of its
Subsidiaries or in exercising rights or remedies under the Loan Documents), or
defending the Loan Documents, irrespective of whether alawsuit or other
adverse proceeding is brought, or in taking any enforcement action or any
Remedial Action with respect to the Collateral.
"
Lender Group Representatives
" has the meaning specified therefor in
Section 17.8
of theAgreement.
"
Lender-Related Person
" means, with respect to any Lender, such Lender, together with suchLender's
Affiliates, officers, directors, employees, lawyers, and agents.
"
Letter of Credit Usage
"has the meaning specified therefor in the Revolving Credit Agreement.
"
Lien
" means any mortgage, deedof trust, pledge, hypothecation, assignment, charge,
deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest, hypothec or other security arrangement and any other
preference, priority, or preferential arrangement inthe nature of a security
interest of any kind or nature whatsoever, including any conditional sale
contract or other title retention agreement, the interest of a lessor under a
Capital Lease and any synthetic or other financing lease havingsubstantially
the same economic effect as any of the foregoing.
"
Loan
" means the Term Loan, made (or tobe made) hereunder.
"
Loan Documents
" means the Agreement, the Control Agreements, any Borrowing BaseCertificate,
the Fee Letter, the Intercreditor Agreement, the Quebec Intercreditor
Agreement, the Credit Card Notifications, the Intercompany Subordination
Agreements, the Mortgages, the Canadian Security Documents, any guaranties
executed by anyLoan Party, any note or notes executed by Borrower in
connection with the Agreement and payable to any member of the Lender Group,
and any other instrument or agreement entered into, now or in the future, by
any Loan Party or any of its Subsidiariesand any member of the Lender Group in
connection with the Agreement.
"
Loan Party
" means Borrower or anyGuarantor.
"
Loan to Value Reserves
" - as of the date of determination by the Agent, from time to timean amount
equal to the greater of (a) $0; and (b) the amount, if any, by which the
outstanding amount of the Term Loan at such time exceeds the difference
between (1) clauses (a), (b), (c) and (d) (excluding the Loan toValue Reserve)
set forth in the definition of Borrowing Base and (2) clauses (a), (b), (c)
and (d) (excluding the Loan to Value Reserve) set forth in the definition of
"Borrowing Base" as defined in the Revolving CreditAgreement.
-------------------------------------------------------------------------------
"
Management Agreement
" means that certain ManagementConsulting Services Agreement, dated as of
November 20, 2015, between Borrower and Gestofi S.A., in each case, as such
agreement may be amended from time to time in accordance with the terms hereof
and the Management Subordination Agreement.
"
Management Debt
" means collectively, all obligations (including, without limitation, retainer
fees andindemnification expenses) of Borrower to Gestofi S.A. pursuant to the
Management Agreement.
"
ManagementSubordination Agreement
" means that certain Management Subordination Agreement, dated as of the
Closing Date, among Borrower, Gestofi S.A. and Agent, in each case, as the
same may hereafter be amended, restated, supplemented or otherwisemodified
with the consent of Agent.
"
Margin Stock
" as defined in Regulation U of the Board of Governorsof the Federal Reserve
System of the United States as in effect from time to time.
"
Material AdverseEffect
" means (a) a material adverse effect in the business, operations, assets,
liabilities or financial condition of Loan Parties, taken as a whole, (b) a
material impairment of Loan Parties' ability to perform theirpayment or other
material obligations under the Loan Documents to which they are parties or of
the Lender Group's ability to enforce the Obligations or realize upon a
material portion of the Collateral (other than as a result of an action
takenor not taken that is solely in the control of Agent), or (c) a material
impairment of the enforceability or priority of Agent's Liens with respect to
all or a material portion of the Collateral.
"
Material Contract
" means any agreement or arrangement to which any Loan Party or any of its
Subsidiaries isparty (other than the Loan Documents) (a) for which breach,
termination, nonperformance or failure to renew could reasonably be expected
to have a Material Adverse Effect or (b) that relates to Indebtedness in an
aggregate amount of theCanadian Dollar Equivalent of $2,500,000 or more.
Notwithstanding anything to the contrary contained in this Agreement, the term
"Material Contract" shall include, for all purposes, each of the following:
(i) the Revolving LoanDocuments (and any refinancings, renewals or extensions
thereof); (ii) the Quebec Subordinated Debt Documents, (iii) the Rolex Canada
Documents, (iv) the Montrovest Debt Documents, (v) the Management Agreement;
(vi) anyAdditional Subordinated Debt Documents; (vii) the US Divestiture
Agreements; (viii) the Franchise Agreement dated as of October 18, 2017
between Borrower and GD Overseas SA, (ix) the Concession Agreement dated as
ofNovember 30, 2015 between Borrower and Patek Philippe SA Geneve, and (x) the
Damiani Debt Documents.
"
Maturity Date
" means the earlier of (x) December
23
24
, 2026 and (y) the "Commitment Termination Date" as defined in the Revolving
Credit Agreement.
"
Maximum Credit Amount
" has the meaning specified in the Revolving Credit Agreement.
"
Modified Fixed Charge Coverage Ratio
" means, with respect to any fiscal period and with respect to Borrowerand its
Subsidiaries determined on a consolidated basis in accordance with GAAP, the
ratio of (a) Consolidated EBITDA for such period to (b) the sum of (i)
-------------------------------------------------------------------------------
Consolidated Interest Expense, and (ii) Capital Expenditures made (to the
extent not already incurred in a prior period) or incurred during such period
(to the extent such CapitalExpenditures are not financed with proceeds of
Indebtedness (other than Revolving Loans) or Equity Interests), for such
period.
"
Montrovest
" means Montrovest B.V. and following the Montrovest Merger, Montel Sarl.
"
Montrovest Debt
" means all Indebtedness owing to Montrovest under the Montrovest Debt
Documents thatconstitutes Permitted Indebtedness.
"
Montrovest Debt 2017
" means Montrovest Debt incurred by theBorrower to Montrovest as of July 28,
2017 to the extent such Indebtedness constitutes Permitted Indebtedness in an
aggregate principal amount equal to US$2,500,000.
"
Montrovest Debt Documents
" means, collectively, (i) the Amended and Restated Cash Advance Agreementdated
as of June 8, 2011 by and between Borrower and Montrovest, (original principal
amount of US$2,000,000), (ii) the Amended and Restated Cash Advance Agreement
dated as of June 8, 2011 by and between Borrower and Montrovest,(original
principal amount of US$3,000,100), (iii) the Loan Agreement executed on July
28, 2017, with effect as of July 20, 2017 by and between Borrower and
Montrovest and (iv) any other loan agreement entered into by and betweenBorrower
and Montrovest; provided that any such other loan agreement shall be in form,
scope and substance and on terms satisfactory to Agent and the Required
Lenders and shall be subject to the Montrovest Subordination Agreement.
"
Montrovest Merger
" means the merger, pursuant to the laws of Netherlands, of Montrovest B.V.
into MontelSarl.
"
Montrovest Subordination Agreement
" means collectively, (i) Section 5.6 of theMontrovest Debt Documents referred
to in clauses (i) and (ii) of the definition of "Montrovest Debt Documents",
and (ii) the Amended and Restated Postponement and Subordination Agreement,
dated as of the Closing Date, amongthe Borrower, Montrovest, in each case as
hereafter amended, restated, supplemented or otherwise modified with the
consent of Agent and the Required Lenders.
"
Moody's
" has the meaning specified therefor in the definition of Cash Equivalents.
"
Mortgages
" means, individually and collectively, one or more mortgages, deeds of trust,
or deeds to securedebt, executed and delivered by Borrower or one of its
Subsidiaries in favor of Agent, in form and substance reasonably satisfactory
to Agent, that encumber the Real Property Collateral, if any.
"
Non-Consenting Lender
" has the meaning specified therefor in
Section 14.2(a)
of the Agreement.
"
Non-Defaulting Lender
" means each Lender other than a Defaulting Lender.
-------------------------------------------------------------------------------
"
Obligations
" means all loans (including the Term Loan andany Protective Advances)),
debts, principal, interest (including any interest that accrues after the
commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such InsolvencyProceeding),
premiums, liabilities (including all amounts charged to the Loan Account
pursuant to the Agreement), obligations (including indemnification
obligations) of any Loan Party, fees (including the fees provided for in the
Fee Letter) of anyLoan Party, Lender Group Expenses (including any fees or
expenses that accrue after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in
any such Insolvency Proceeding) of anyLoan Party, guaranties of any Loan
Party, and all covenants and duties of any other kind and description owing by
any Loan Party arising out of, under, pursuant to, in connection with, or
evidenced by the Agreement or any of the other Loan Documentsand irrespective
of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all interest not paid when due and all other expenses or other
amountsthat any Loan Party is required to pay or reimburse by the Loan
Documents or by law or otherwise in connection with the Loan Documents.
Without limiting the generality of the foregoing, the Obligations under the
Loan Documents include the obligationto pay (i) the principal of the Term
Loan, (ii) the interest accrued on the Term Loan, (iii) Lender Group Expenses
of any Loan Party, (iv) fees payable by any Loan Party under the Agreement or
any of the other Loan Documents, and(v) indemnities and other amounts payable
by any Loan Party under any Loan Document. Any reference in the Agreement or
in the Loan Documents to the Obligations shall include all or any portion
thereof and any extensions, modifications,renewals, or alterations thereof,
both prior and subsequent to any Insolvency Proceeding.
"
OFAC
" meansThe Office of Foreign Assets Control of the U.S. Department of the
Treasury.
"
Organizational Documents
"means with respect to any Person, its charter, certificate or articles of
incorporation, bylaws, articles of organization, limited liability agreement,
operating agreement, members agreement, shareholders agreement, partnership
agreement,certificate of partnership, certificate of formation, voting trust
agreement, or similar agreement or instrument governing the formation,
organization or operation of such Person. "
Originating Lender
" has the meaning specifiedtherefor in Section 13.1(e).
"
Other Taxes
" has the meaning specified therefor in
Section 16.1
of the Agreement.
"
Participant
" has the meaning specified therefor in
Section 13.1(e)
of the Agreement.
"
Participant Register
" has the meaning set forth in
Section 13.1(i)
of the Agreement.
"
Patriot Act
" has the meaning specified therefor in
Section 4.13
of the Agreement.
"
Permitted Acquisition
" means any Acquisition after theClosing Date by a Borrower or another Loan
Party so long as:
-------------------------------------------------------------------------------
(a)no Default or Event of Default shall have occurred and becontinuing or
would result from the consummation of the proposed Acquisition and the
proposed Acquisition is consensual,
(b)the purchase consideration payable in respect of all Permitted Acquisitions
(including the proposalacquisition and deferred payment obligations) shall not
exceed $10,000,000 in the aggregate during the term of this Agreement,
(c)Borrower has provided Agent with its due diligence package relative to the
proposed Acquisition, includingforecasted balance sheets, profit and loss
statements, and cash flow statements of the Person or assets to be acquired,
all prepared on a basis consistent with such Person's (or assets') historical
audited financial statements (or ifaudited financial statements are not
available, a quality of earnings report acceptable to the Agent acting
reasonably), together with appropriate supporting details and a statement of
underlying assumptions for the 1 year period following the dateof the proposed
Acquisition, on a quarter by quarter basis), in form and substance (including
as to scope and underlying assumptions) reasonably satisfactory to Agent,
(d)Borrower shall have demonstrated, after giving effect to the consummation
of such proposed Acquisition,satisfaction of the applicable Restricted Payment
Conditions,
(e)Borrower has provided Agent with writtennotice of the proposed Acquisition
at least 5 Business Days prior to the anticipated closing date of the proposed
Acquisition and, not later than 5 Business Days prior to the anticipated
closing date of the proposed Acquisition, copies of theacquisition agreement
and other material documents relative to the proposed Acquisition, which
agreement and documents must be reasonably acceptable to Agent,
(f) the assets being acquired (other than a
de minimis
amount of assets in relation to Borrower's and itsSubsidiaries' total assets),
or the Person whose Equity Interests are being acquired, are useful in or
engaged in, as applicable, the business of Borrower and its Subsidiaries or a
business reasonably related thereto,
(g)the assets being acquired (other than a
de minimis
amount of assets in relation to the assets beingacquired) are located within
the United States or Canada, or the Person whose Equity Interests are being
acquired is organized in a jurisdiction located within the United States or
Canada,
(h)the subject assets or Equity Interests, as applicable, are being acquired
directly by a Borrower or one ofits Subsidiaries that is a Loan Party, and, in
connection therewith, the applicable Loan Party shall have complied with
Section 5.11
or
5.12
of the Agreement, as applicable, of the Agreement and, in the case of an
acquisition ofEquity Interests, the applicable Loan Party shall have
demonstrated to Agent that the new Loan Parties have received consideration
sufficient to make the joinder documents binding and enforceable against such
new Loan Parties, and
(i)Agent shall have received prior to or concurrent with the proposed
Acquisition, a certificate signed by anofficer of Administrative Borrower
certifying compliance with the foregoing conditions.
-------------------------------------------------------------------------------
"
Permitted Discretion
" means a determination made in theexercise of reasonable (from the
perspective of a secured asset-based lender) business judgment and made in
good faith.
"
Permitted Dispositions
" means:
(a)sales, abandonment, or other dispositions of Equipment that is
substantially worn, damaged, or obsolete orno longer used or useful in the
ordinary course of business and leases or subleases of Real Property not
useful in the conduct of the business of Borrower and its Subsidiaries,
(b)sales of Inventory (x) to buyers in the ordinary course of business (for
the avoidance of doubt,including sales by a Loan Party to another Loan Party),
and (y) so long as no Event of Default has occurred and is continuing or would
result therefrom, by JV Holdco to RM JV (for resale by RM JV) in accordance
with the terms of the RM JVAgreement in an aggregate amount not to exceed
US$2,500,000 (the "
Permitted JV Inventory Sale
");
(c)the use or transfer of money or Cash Equivalents in a manner that is not
prohibited by the terms of theAgreement or the other Loan Documents,
(d)the licensing, on a non-exclusive basis, of patents, trademarks,copyrights,
and other intellectual property rights in the ordinary course of business,
(e)the granting ofPermitted Liens,
(f)any involuntary loss, damage or destruction of property,
(g)any involuntary condemnation, seizure or taking, by exercise of the power
of eminent domain or otherwise, orconfiscation or requisition of use of
property,
(h)(i) the sale or issuance of Qualified EquityInterests of Borrower, (ii) the
sale or issuance of any Qualified Equity Interests of Loan Party to another
Loan Party, and (iii) the sale or issuance of Equity Interests (other than
Disqualified Equity Interests) of any Subsidiary of aLoan Party that is not a
Loan Party to a Loan Party or any other Subsidiary of a Loan Party, in each
case subject to the terms set forth herein,
(i)(i) the lapse (other than at the end of their respective terms) of
registered patents, trademarks,copyrights and other intellectual property of
Borrower or any of its Subsidiaries that are, in the reasonable business
judgment of such Loan Party, no longer material or no longer used in the
business of Borrower or Subsidiary to the extent noteconomically desirable in
the conduct of its business or (ii) the abandonment of patents, trademarks,
copyrights, or other intellectual property rights in the ordinary course of
business so long as (in each case under clauses (i) and(ii)), (A) with respect
to copyrights, such copyrights are not material revenue generating copyrights,
and (B) such lapse is not materially adverse to the interests of the Lender
Group,
(j)the making of Restricted Payments that are expressly permitted to be made
pursuant to the Agreement,
-------------------------------------------------------------------------------
(k)to the extent constituting dispositions, the making ofPermitted Investments
that are expressly permitted to be made pursuant to the Agreement.
(l)so long as noEvent of Default has occurred and is continuing or would
immediately result therefrom, transfers of assets (i) from any Loan Party
(other than transfer of Inventory, Accounts and Credit Card Receivables by
Borrower) to another Loan Party,(ii) from a Loan Party to Borrower; provided,
that the consideration received for such assets to be so disposed is at least
equal to the fair market value thereof and (iii) from any Subsidiary of
Borrower that is not a Loan Party to anyother Subsidiary of Borrower,
(m)cancellations, terminations or surrenders of any lease,
(n)the termination or unwinding of any Hedge Agreement in accordance with its
terms,
(o)dispositions by any Subsidiary of its own Equity Interests to qualify
directors where required by applicablelaw,
(p)dispositions permitted by
Section 6.4
,
(q)dispositions or sales of assets, or sell all of the assets of any division
or line of business of Borroweror any of its Subsidiaries, in each case,
having a fair market value not in excess of $1,000,000 per Fiscal Year;
provided
that, in each case, (i) the consideration received for such assets shall be in
an amount at least equal to thefair market value thereof; and (ii) at least
75% of the consideration received shall be cash or Cash Equivalents,
(r) grants of licenses with respect to intellectual property, or leases or
subleases of other property, in theordinary course of business which licenses,
leases and subleases do not materially interfere with the ordinary conduct of
the business of Borrower and its Subsidiaries, taken as a whole;
(s)dispositions of Permitted Factoring Facility Accounts to the extent related
to a Permitted FactoringFacility; and
(t)Permitted Sale Leaseback Transactions.
"
Permitted Factoring Facility
" means an unsecured factoring facility established by the Borrower
whichprovides for the sale of Permitted Factoring Facility Accounts on a
non-recourse basis.
"
Permitted FactoringFacility Accounts
" shall mean Accounts (whether now existing or arising in the future) which
are due to Borrower from Account Debtors located outside of Canada and the
United States and which are not otherwise Eligible Accounts.
"
Permitted Indebtedness
" means:
(a)Indebtedness evidenced by the Agreement or the other Loan Documents,
-------------------------------------------------------------------------------
(b)the Revolving Loan Debt in an amount not to exceed theamount permitted
under the Intercreditor Agreement,
provided
that, for the avoidance of doubt, the aggregate Hedge Termination Value of
Secured Hedging Agreement Obligations that constitute Bank Product Debt (as
such term is defined in theRevolving Credit Agreement) shall not exceed
$1,500,000 at any time outstanding;
(c)Indebtedness(including Capital Leases) set forth on
Schedule 4.14
to this Agreement and any Refinancing Indebtedness in respect of such
Indebtedness,
(d)endorsement for collection, deposit or negotiation and warranties of
products or services, in each caseincurred in the ordinary course of business,
(e)the Quebec Subordinated Debt in an aggregate outstandingamount not to
exceed $14,300,000 (as reduced by principal payments from time to time under
the applicable Quebec Subordinated Debt Documents) and solely to the extent
that such Indebtedness is subject to the Quebec Subordination Agreement;
providedthat the Quebec Subordinated Debt Documents shall be in form and
substance reasonably satisfactory to the Agent and the Required Lenders,
(f)the incurrence by Borrower or its Subsidiaries of Indebtedness under Hedge
Agreements that are incurred forthe bona fide purpose of hedging the interest
rate, commodity, or foreign currency risks associated with Borrower's and its
Subsidiaries' operations and not for speculative purposes; provided that the
aggregate Hedge Termination Value ofSecured Hedging Obligations shall not
exceed $5,000,000 at any one time,
(g)Permitted IntercompanyAdvances,
(h)Indebtedness incurred after the Closing Date in connection with the
acquisition, lease orleasing after the Closing Date of any equipment or
fixtures by a Loan Party or under any Capital Lease or Permitted Sale
Leaseback Transaction, as well as Permitted Purchase Money Indebtedness
secured by Purchase Money Liens,
provided
thatthe aggregate principal amount of such Indebtedness of the Loan Parties
shall not exceed the Canadian Dollar Equivalent of $5,000,000 at any one time,
(i)unsecured Indebtedness constituting the Management Debt to the extent
subject to the ManagementSubordination Agreement,
(j)secured Indebtedness in an aggregate amount not to exceed $7,500,000 at
anytime, provided that that (a) such Indebtedness is subordinated in right and
time of payment to the Obligations and in Lien priority to the Agent's Liens
on terms and conditions satisfactory to the Agent and Required Lenders; and(b)
the Restricted Payment Conditions are satisfied at the time of the incurrence
of such Indebtedness,
(k)Additional Subordinated Debt incurred by Borrower or any of its
Subsidiaries in an aggregate outstandingamount not to exceed $15,000,000 at
any one time, and
(l)Indebtedness under any Permitted FactoringFacility.
-------------------------------------------------------------------------------
"
Permitted Intercompany Advances
" means loans and otherInvestments made by (a) a Loan Party to another Loan
Party, (b) a Subsidiary of Borrower that is not a Loan Party to another
Subsidiary of Borrower that is not a Loan Party, (c) a Subsidiary of Borrower
that is not a Loan Party to a LoanParty, so long as the parties thereto are
party to the Intercompany Subordination Agreement, (d) to the extent permitted
by
Section 4.27
, advances made by Borrower to CGS US for the purposes permitted thereunder
and (e) exceptas otherwise permitted under paragraph (d) hereof, Loan Parties
to Subsidiaries of Borrower that are not Loan Parties in an aggregate
outstanding amount not to exceed $50,000.
"
Permitted Investments
" means:
(a)Investments in cash and Cash Equivalents,
(b)Investments in negotiable instruments deposited or to be deposited for
collection in the ordinary course ofbusiness,
(c)advances or extensions of credit made in connection with purchases of goods
or services inthe ordinary course of business,
(d)Investments received in settlement of amounts due to any Loan Party orany
of its Subsidiaries effected in the ordinary course of business or owing to
any Loan Party or any of its Subsidiaries as a result of Insolvency
Proceedings involving an Account Debtor or upon the foreclosure or enforcement
of any Lien in favorof a Loan Party or any of its Subsidiaries,
(e)Investments owned by any Loan Party or any of itsSubsidiaries on the
Closing Date and set forth on
Schedule P-1
to the Agreement and any modification, replacement, renewal or extension
thereof; provided that the amount of the original Investment under this clause
(e) is not increased exceptby the terms of such Investment or as otherwise
permitted pursuant to the definition of Permitted Investments,
(f)(i) guarantees permitted under the definition of Permitted Indebtedness,
and (ii) other guaranteesentered into in the ordinary course of business in
respect of real property leases so long as such guarantees under this clause
(ii), if made by a Loan Party, are in respect of obligations of another Loan
Party,
(g)Permitted Intercompany Advances,
(h)Equity Interests or other securities acquired in connection with the
satisfaction or enforcement ofIndebtedness or claims due or owing to a Loan
Party or any of its Subsidiaries (in bankruptcy of customers or suppliers or
otherwise outside the ordinary course of business) or as security for any such
Indebtedness or claims,
(i)deposits of cash made to secure performance of operating leases, utilities,
and other similar deposits inthe ordinary course of business,
(j)Permitted Acquisitions,
-------------------------------------------------------------------------------
(k)Investments resulting from entering into agreementsrelative to Indebtedness
that is permitted under clause (e) of the definition of Permitted Indebtedness,
(l)equity Investments by any Loan Party in any Subsidiary of such Loan Party
which is required by law tomaintain a minimum net capital requirement or as
may be otherwise required by applicable law,
(m)Investments held by a Person acquired in a Permitted Acquisition to the
extent that such Investments werenot made in contemplation of or in connection
with such Permitted Acquisition and were in existence on the date of such
Permitted Acquisition,
(n)Investments consisting of non-cash consideration received in connection
with Permitted Dispositions,
(o)non-cash loans and advances to employees, officers, and directors of
Borrower or any of its Subsidiaries forthe purpose of purchasing Equity
Interests in Borrower so long as the proceeds of such loans are used in their
entirety to purchase such Equity Interests in Borrower, and (ii) loans and
advances to employees and officers of Borrower or any ofits Subsidiaries in
the ordinary course of business for any other business purpose and in an
aggregate amount not to exceed $200,000 at any one time,
(p)so long as no Event of Default has occurred and is continuing or would
result therefrom, any otherInvestments in an aggregate amount not to exceed
$1,000,000 during the term of the Agreement,
(q)Investments (other than Acquisitions) made by a Borrower or a Subsidiary
thereof made solely with cashproceeds received by Borrower and contributed to
Borrower or Subsidiary substantially concurrently with the making of such
Investments in connection with the issuance of Equity Interests (other than
Disqualified Equity Interests) of Borrower,
(r)Investments by a Borrower or its Subsidiaries held by a Person that becomes
a Subsidiary (or is merged,amalgamated or consolidated with or into a Borrower
or a Subsidiary) pursuant to
Section 6.9
after the Closing Date to the extent that such Investments were not made in
contemplation of such acquisition, merger, amalgamation orconsolidation;
(s) Investments made by JV Holdco in the form of cash and/or Cash Equivalents
in RM JV inorder to fund the formation and capitalization of RM JV in an
amount not to exceed US$1,000;
(t)Investments made by JV Holdco by way of the Permitted JV Inventory Sale; and
(u)Investments in the form of cash and/or Cash Equivalents made by JV Holdco
in the RM JV to finance retailstore renovations and improvements and product
inventories in accordance with the terms of the RM JV Agreement, in an amount
not to exceed US$750,000.
"
Permitted Liens
" means:
-------------------------------------------------------------------------------
(a)Liens granted to, or for the benefit of, Agent to securethe Obligations,
(b)Liens securing the Revolving Loan Debt, subject to the provisions of the
IntercreditorAgreement;
(c)Liens or claims for unpaid Taxes that either (i) are not yet delinquent, or
(ii) do nothave priority over Agent's Liens and the underlying Taxes are the
subject of Permitted Protests,
(d)judgment Liens arising solely as a result of the existence of judgments,
orders, requirements to pay orawards that do not constitute an Event of
Default under
Section 8.3
of the Agreement,
(e)Liensset forth on
Schedule P-2
to the Agreement;
provided
, that to qualify as a Permitted Lien, any such Lien described on
Schedule P-2
to the Agreement shall only secure the Indebtedness that it secures on the
Closing Date and anyRefinancing Indebtedness in respect thereof,
(f)the interests of lessors under operating leases andnon-exclusive licensors
under license agreements,
(g)Capital Leases and other Permitted Purchase MoneyIndebtedness described in
paragraph (g) of the definition of Permitted Indebtedness so long as (i) such
Lien qualifies as a Purchase Money Lien under the terms of this Agreement;
(h)Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen,laborers, or suppliers, incurred in the
ordinary course of business and not in connection with the borrowing of money,
and which Liens either (i) are for sums not yet delinquent, or (ii) are the
subject of Permitted Protests,
(i)Liens on amounts deposited to secure a Borrower's or any of its
Subsidiaries' obligations inconnection with workers' compensation or other
unemployment insurance,
(j)Liens on amounts depositedto secure a Borrower's or any of its
Subsidiaries' obligations in connection with the making or entering into of
bids, tenders, or leases in the ordinary course of business and not in
connection with the borrowing of money,
(k)Liens on amounts deposited to secure a Borrower's or any of its
Subsidiaries' reimbursementobligations with respect to surety or appeal bonds
obtained in the ordinary course of business,
(l)withrespect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof,
(m)non-exclusive licenses of patents, trademarks, copyrights, and other
intellectual property rights in theordinary course of business,
-------------------------------------------------------------------------------
(n)Liens that are replacements of Permitted Liens to theextent that the
original Indebtedness is the subject of permitted Refinancing Indebtedness and
so long as the replacement Liens only encumber those assets that secured the
original Indebtedness,
(o)rights of setoff or bankers' liens upon deposits of funds in favor of banks
or other depositoryinstitutions, solely to the extent incurred in connection
with the maintenance of such Deposit Accounts in the ordinary course of
business,
(p)Liens granted in the ordinary course of business on the unearned portion of
insurance premiums securing thefinancing of insurance premiums to the extent
the financing is permitted under the definition of Permitted Indebtedness,
(q)Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customsduties in connection with the importation of
goods,
(r)Liens solely on any cash earnest money depositsmade by Borrower or any of
its Subsidiaries in connection with any letter of intent or purchase agreement
with respect to a Permitted Acquisition,
(s)Liens assumed by Borrower or any of its Subsidiaries in connection with a
Permitted Acquisition that secureAcquired Indebtedness,
(t)Liens arising from precautionary PPSA financing statements or similar
filingsmade in respect of operating leases entered into by any Loan Party,
(u)Leases or subleases granted toothers not interfering in any material
respect with the business of Borrower and its Subsidiaries, taken as a whole,
(v)security deposits to public utilities or to any municipalities or
Governmental Authorities or other publicauthorities when required by the
utilities, municipalities or Governmental Authorities or other public
authorities in connection with the supply of services or utilities,
(w)Liens arising out of any conditional sale, title retention, consignment or
other similar arrangement for thesale of goods in the ordinary course of
business entered into by Borrower or its Subsidiaries in the ordinary course
of business to the extent such Liens secure only the unpaid purchase price for
such goods and related expenses do not attach to anyassets other than the
goods subject to such arrangements and not otherwise prohibited by this
Agreement so long as any Inventory or Accounts of Borrower subject to such
Liens are reported as ineligible on the relevant Borrowing Base Certificate,
(x)the Rolex Canada Liens and any Liens in favor of Rolex Canada Ltd. to the
extent constituting valid andPurchase Money Liens in accordance with
Applicable Law and subject to the Rolex Canada Subordination Agreement, to the
extent applicable,
(y)Liens securing the Quebec Subordinated Debt permitted pursuant to paragraph
(d) of the definition ofPermitted Indebtedness, provided that such Liens
shall, at all
-------------------------------------------------------------------------------
times be, subordinate and junior in priority to the Liens securing the
Obligations pursuant to the Quebec Subordination Agreement,
(z)Liens securing the Permitted Indebtedness described in paragraph (i) of the
definition thereof providedthat such Liens shall, at all times, be subordinate
and junior in priority to the Liens securing the Obligations;
(aa) Liens on Permitted Factoring Facility Accounts securing a Permitted
Factoring Facility; and
(bb) Liens created by the Damiani Security in favour of Damiani securing the
Damiani Subordinated Indebtedness;
provided
that (i) such Subordinated Indebtedness is subordinated in right and time of
payment to the Obligations and such Liens shall, at all times, be subordinate
and junior in priority to the Liens securing the Obligations, in eachcase
pursuant to the terms of the Damiani Subordination Agreement or other terms
and conditions satisfactory to the Agent and Required Lenders.
"
Permitted Protest
" means the right of Borrower or any of its Subsidiaries to protest any Lien
(other thanany Lien that secures some or all of the Obligations), Taxes (other
than payroll Taxes or remittances or Taxes that are the subject of a
requirement to pay issued by a Canadian Governmental Authority), or rental
payment,
provided
that(a) a reserve with respect to such obligation is established on Borrower's
or the applicable Subsidiary's books and records in such amount as is required
under GAAP, (b) any such protest is instituted promptly and prosecuteddiligently
by Borrower or the applicable Subsidiary, as applicable, in good faith, and
(c) Agent is reasonably satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of
any ofAgent's Liens.
"
Permitted Purchase Money Indebtedness
" means, as of any date of determination,Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred after the
Closing Date and at the time of, or within 30 days after, the acquisition of
any personal property (other than Inventory) for the purpose offinancing all
or any part of the acquisition cost thereof, in an aggregate principal amount
outstanding at any one time not in excess of the amount permitted under
paragraph (g) of the definition of Permitted Indebtedness.
"
Permitted Sale Leaseback Transactions
" means Sale Leaseback Transactions that constitute PermittedIndebtedness
pursuant to paragraph (g) of the definition of Permitted Indebtedness.
"
Permitted StoreClosings
" means the closing of (i) four (4) retail locations, net of any locations
opened, of the Loan Parties in the aggregate in any calendar year, and (ii)
four (4) temporary retail locations, to the extent opened bythe Loan Parties
and closed within six (6) months of such opening, in the aggregate in any
calendar year.
"
Person
" means natural persons, corporations, limited liability companies, unlimited
liability corporations,limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts,
or other organizations, irrespective of whether they are legal entities, and
governments and agencies and politicalsubdivisions thereof.
-------------------------------------------------------------------------------
"
Platform
" has the meaning specified therefor in
Section 17.8(c)
of the Agreement.
"
PLCW Accounts
" means Accounts due on the private labelcredit card programs and all Accounts
due from corporate sales receivables and wholesale receivables, in each case,
of Borrower, which (a) are from an Account Debtor acceptable to Agent in its
Permitted Discretion and (b) are determined byAgent in its Permitted
Discretion to be eligible for inclusion in Eligible Accounts in an amount
reflecting Agent's estimate of the net recovery on such Accounts on a forced
liquidation basis, based upon the most recent appraisal of suchAccounts
undertaken at the request of Agent.
"
PPSA
" means the Personal Property Security Act (Ontario)and the regulations
thereunder, as from time to time in effect;
provided
,
however
, if attachment, perfection or priority of Agent's Lien on any Collateral are
governed by the personal property security laws of any jurisdiction inCanada
other than the laws of the Province of Ontario, "PPSA" means those personal
property security laws in such other jurisdiction in Canada (including the
Civil Code of Quebec
) for the purposes of the provisions hereof relatingto such attachment,
perfection or priority and for the definitions related to such provisions.
"
PricingDate
" means, for any Fiscal Quarter of the Borrower ending on or after December
31, 2021, the first day of the next calendar month following the date that is
five (5) Business Days after the date on which the Agent is in receiptof the
Borrower's most recently delivered Compliance Certificate delivered pursuant
to Section 5.1 for such Fiscal Quarter.
"
Projections
" means Borrower's forecasted (a) balance sheets, (b) profit and loss
statements,and (c) cash flow statements, all prepared on a basis consistent
with Borrower's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions, together with
projections of monthlyExcess Availability for the relevant period.
"
Pro Rata Share
" means, as of any date of determination:
(a)with respect to a Lender's obligation to make all or a portion of the Term
Loan, with respect tosuch Lender's right to receive payments of interest,
fees, and principal with respect to the Term Loan, and with respect to all
other computations and other matters related to the Commitments or the Term
Loan, the percentage obtained bydividing (i) the Term Loan Exposure of such
Lender by (ii) the aggregate Term Loan Exposure of all Lenders,
(b)with respect to all other matters and for all other matters as to a
particular Lender (including theindemnification obligations arising under
Section 15.6
of the Agreement), the Canadian Dollar Equivalent of the percentage obtained
by dividing (i) the sum of the Term Loan Exposure of such Lender by (ii) the
sum of theaggregate Term Loan Exposure of all Lenders, in any such case as the
applicable percentage may be adjusted by assignments permitted pursuant to
Section 13.1;
provided
, that if the term Loan has been repaid in full, and the Commitmentshave been
terminated, Pro Rata Share under this clause shall be determined as if the
Term Loan Exposures had not been repaid, collateralized, or terminated and
shall be based upon the Term Loan Exposures as they existed immediately prior
to theirrepayment, collateralization, or termination.
-------------------------------------------------------------------------------
"
Protective Advances
" has the meaning specified thereforin Section 2.2(c) of the Agreement.
"
Public Lender
" has the meaning specified therefor in
Section 17.8(c)
of the Agreement.
"
Purchase Money Lien
" means a Lien taken or reserved inpersonal property to secure payment of
related Permitted Purchase Money Indebtedness, provided that such Lien (i)
secures an amount not exceeding the lesser of the purchase price of such
personal property and the fair market value of such personalproperty at the
time such Lien is taken or reserved, (ii) extends only to such personal
property and its proceeds, and (iii) is granted prior to or within 30 days
after the purchase of such personal property.
"
Qualified Equity Interests
" means and refers to any Equity Interests issued by Borrower (and not by one
ormore of its Subsidiaries) that is not a Disqualified Equity Interest.
"
Quebec Security Documents
"means, any hypothecs and all other security documents governed by the laws of
the Province of Quebec, each in form and substance reasonably satisfactory to
Agent, executed and delivered by a Loan Party to the Agent to secure the
Obligations, andeach as amended, restated, supplemented or modified from time
to time.
"
Quebec Subordinated Debt
" meanscollectively, (i) all Indebtedness owing to Investissement Quebec under
the Quebec Subordinated Debt Documents in the original aggregate maximum
principal amounts of $10,000,000 and $4,300,000, respectively, which
Indebtedness shall besubject to the Quebec Subordination Agreement, and (ii)
all other Indebtedness owing to Investissement Quebec under the Quebec
Subordinated Debt Documents or otherwise, in each case, which Indebtedness
shall be expressly subordinate topayment in full of the Obligations pursuant
to the Quebec Subordination Agreement.
"
Quebec Subordinated DebtDocuments
" means, collectively, (i) (A) that certain Offre de Pret (Loan Offer) from
Investissement Quebec to Borrower dated June 11, 2020, in respect of a term
loan in the original maximum principal amount of$10,000,000 as amended by a
letter dated February 18, 2021 from Investissement Quebec to Borrower and (B)
that certain Offre de Pret (Loan Offer) from Investissement Quebec to Borrower
dated February 23, 2021, inrespect of a term loan in the original maximum
principal amount of $4,300,000, and, in each case, all security and other
accessory documents or instruments thereto at any time, and subject at all
times to the Quebec Subordination Agreement,(ii) the Quebec Subordinated
Security; and (iii) all other agreements, documents and instruments evidencing
all or any portion of the Quebec Subordinated Debt, and subject at all times
to the Quebec Subordination Agreement, in each case asthe same may be
modified, amended, supplemented or restated with the prior written consent of
the Agent.
"
QuebecSubordinated Security
" means (a) the hypothecs dated on or about July 2, 2020 and June 18, 2021,
respectively, granted by the Borrower in favour of Investissement Quebec; and
(b) any other present and futuresecurity, security interests, hypothecs,
mortgages, prior claims, liens or charges affecting any of the Loan Parties'
assets, or any part thereof, now or hereafter held by or for the account of
Investissement Quebec as security for theQuebec Subordinated Debt created
after the date hereof with the consent of the Agent, which security shall
-------------------------------------------------------------------------------
at all times be subordinated to the security granted by the Loan Parties under
the Canadian Security Documents.
"
Quebec Subordination Agreement
" means the amended and restated subordination agreement dated as ofAugust 31,
2021 between the Borrower, Investissement Quebec, the Revolving Agent and the
Agent, as the same may hereafter be amended, restated, supplemented or
otherwise modified with the consent of Agent.
"
Real Property
" means any estates or interests in real property now owned or hereafter
acquired by Borroweror one of its Subsidiaries and the improvements thereto.
"
Real Property Collateral
" means (a) theReal Property identified on
Schedule R-1
to the Agreement and (b) any Real Property hereafter acquired by any Loan
Party with a fair market value in excess of $500,000.
"
Receivable Reserves
" means, as of any date of determination, those reserves that Agent deems
necessary orappropriate, in its Permitted Discretion and subject to Section
2.2(b), to establish and maintain (including reserves for Taxes, rebates,
discounts, warranty claims, and returns) with respect to the Eligible Accounts.
"
Record
" means information that is inscribed on a tangible medium or that is stored
in an electronic orother medium and is retrievable in perceivable form.
"
Refinancing Indebtedness
" means refinancings,renewals, or extensions of Indebtedness so long as:
(a)such refinancings, renewals, or extensions do notresult in an increase in
the principal amount of the Indebtedness so refinanced, renewed, or extended,
other than by the amount of premiums paid thereon and the fees and expenses
incurred in connection therewith and by the amount of unfundedcommitments with
respect thereto,
(b)such refinancings, renewals, or extensions do not result in ashortening of
the average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are
they on terms or conditions that, taken as a whole, are or could reasonably
beexpected to be materially adverse to the interests of the Lenders,
(c)if the Indebtedness that isrefinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension must include
subordination terms and conditions that are at least as favorable to theLender
Group as those that were applicable to the refinanced, renewed, or extended
Indebtedness, and
(d)the Indebtedness that is refinanced, renewed, or extended is not recourse
to any Person that is liable onaccount of the Obligations other than those
Persons which were obligated with respect to the Indebtedness that was
refinanced, renewed, or extended.
"
Register
" has the meaning set forth in Section 13.1(h) of the Agreement.
-------------------------------------------------------------------------------
"
Registered Loan
" has the meaning set forth inSection 13.1(h) of the Agreement.
"
Related Fund
" means any Person (other than a natural person)that is engaged in making,
purchasing, holding or investing in bank loans and similar extensions of
credit in the ordinary course and that is administered, advised or managed by
(a) a Lender, (b) an Affiliate of a Lender or (c) anentity or an Affiliate of
an entity that administers, advises or manages a Lender.
"
Related Real PropertyDocuments
" means with respect to any Real Property subject to a Mortgage entered into
by any Loan Party, the following, in form and substance reasonably
satisfactory to the Agent and, in the case of a Mortgage entered into by any
Loan Partyafter the date hereof, received by the Agent for review at least 15
days prior to the effective date of the Mortgage (or such shorter length of
time acceptable to the Agent in its reasonable discretion): (a) a mortgagee
title policy (or bindertherefor) covering the Agent's interest under the
Mortgage, in a form and amount and by an insurer reasonably acceptable to the
Agents, which must be fully paid on such effective date; (b) such assignments
of leases, rents, estoppelletters, attornment agreements, consents, waivers
and releases as any Agent may require with respect to other Persons having an
interest in the Real Property; (c) if otherwise in the possession of a Loan
Party, a current, as-built survey of theReal Property, containing a
metes-and-bounds property description and if the Real Property is located in
the United States, flood plain certification, and certified by a licensed
surveyor reasonably acceptable to the Agents; (d) flood insurancein an amount,
with endorsements and by an insurer reasonably acceptable to the Agents, if
the Real Property is within a flood plain; (e) a current appraisal of the Real
Property, prepared by an appraiser reasonably acceptable to the Agents;(f) a
Phase I (and to the extent appropriate, Phase II) environmental assessment
report, prepared by an environmental consulting firm reasonably satisfactory
to the Agents, and accompanied by such reports, certificates, studies or data
as theAgents may reasonably require, which shall all be in form and substance
reasonably satisfactory to the Agents; and (g) an Environmental Agreement and
such other documents, instruments or agreements as the Agents may reasonably
require withrespect to any environmental risks regarding the Real Property. "
Remedial Action
" means all actions taken to (a) clean up, remove, remediate, contain, treat,
monitor, assess, evaluate, or in any way address Hazardous Materialsin the
indoor or outdoor environment, (b) prevent or minimize a release or threatened
release of Hazardous Materials so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment,(c)
restore or reclaim natural resources or the environment, (d) perform any
pre-remedial studies, investigations, or post-remedial operation and
maintenance activities, or (e) conduct any other actions with respect to
HazardousMaterials required by Environmental Laws.
"Relevant Governmental Body" means the Bank of Canada, or a committee
officially endorsed or convened by the Bank of Canada, or any successor thereto
"
Replacement Lender
" has the meaning specified therefor in
Section 2.2(f)
of the Agreement.
"
Report
" has the meaning specified therefor in
Section 15.15
of the Agreement.
"
Required Lenders
" means, at any time, Lenders having or holding more than 50% of the Term Loan
Exposure ofall Lenders;
provided
, that the Term Loan Exposure of any
-------------------------------------------------------------------------------
Defaulting Lender shall be disregarded in the determination of the Required
Lenders; provided further that, at any time there are two (2) or more
non-Affiliate Lenders, the Required Lendersshall be comprised of at least two
(2) non-Affiliate Lenders.
"
Reserves
" means, as of any date ofdetermination, those reserves (other than Receivable
Reserves, Loan to Value Reserves, Bank Product Reserves (as defined in the
Revolving Credit Agreement), Inventory Reserves and Canadian Priority Payable
Reserves) that Agent deems necessary orappropriate, in its Permitted
Discretion and subject to
Section 2.1(c)
, to establish and maintain (including reserves with respect to (a) sums that
Borrower or any of its Subsidiaries are required to pay under any Section of
theAgreement or any other Loan Document (such as Taxes, assessments, insurance
premiums, or, in the case of leased assets, rents or other amounts payable
under such leases) and has failed to pay, (b) currency fluctuations, (c) gift
cards,gift certificates and customer deposits, and (d) amounts owing by
Borrower or any of its Subsidiaries to any Person to the extent secured by a
Lien on, or trust over, any of the Collateral (other than a Permitted Lien),
which Lien, trust ordeemed trust, in the Permitted Discretion of Agent likely
would have a priority superior to the Agent's Liens (such as Liens, trusts or
deemed trust in favor of landlords, warehousemen, carriers, mechanics,
materialmen, laborers, or suppliers,or Liens or trusts for ad valorem, excise,
sales, or other Taxes where given priority under applicable law) in and to
such item of the Collateral) with respect to the Borrowing Base.
"
Restricted Payment
" means to (a) declare or pay any dividend or make any other payment
ordistribution, directly or indirectly, on account of Equity Interests issued
by Borrower or any Subsidiary thereof (including any payment in connection
with any merger, amalgamation or consolidation involving Borrower or such
Subsidiary) or to thedirect or indirect holders of Equity Interests issued by
Borrower in its capacity as such (other than dividends or distributions
payable in Qualified Equity Interests issued by Borrower) now or hereafter
outstanding, except a dividend payable solelyin shares of that class of Equity
Interests to the holders of that class, or (b) purchase, redeem, make any
sinking fund or similar payment, or otherwise acquire or retire for value
(including any payment in connection with any merger, amalgamationor
consolidation involving Borrower), directly or indirectly, any Equity
Interests issued by Borrower now or hereafter outstanding, (c) make any
payment to retire, or to obtain the surrender of, any outstanding warrants,
options, or otherrights to acquire Equity Interests of Borrower now or
hereafter outstanding, (d) any payment or prepayment of Indebtedness by the
Loan Parties or their Subsidiaries to the Loan Parties' or any Subsidiary's
shareholders (or otherequity holders) unless such shareholder is a Loan Party,
(e) derivatives or other transactions with any financial institution,
commodities or stock exchange or clearinghouse (a "
Derivatives Counterparty
") obligating theBorrower or any Subsidiary to make payments to such
Derivatives Counterparty as a result of any change in market value of any
Equity Interests of the Borrowers or such Subsidiary now or hereafter
outstanding, (f) any payments on account ofmanagement, consulting or similar
fees or any success fees (including, without limitation, the Management Debt).
"
Restricted Payment Conditions
" means (a) Excess Availability at all times during the 30 day periodending on
the date of such Restricted Payment is greater than 40% of the Credit Cap (or,
if the Fixed Charge Condition is satisfied, 25% of the Credit Cap), (b) after
giving effect to a Restricted Payment, incurrence of Permitted Indebtednessdescr
ibed in paragraph (i) of the definition thereof or a Permitted Acquisition
(each, a "Payment Event"), Excess Availability is greater than 40% of the
Credit Cap (or, if the Fixed Charge Condition is satisfied, greater than
-------------------------------------------------------------------------------
25% of the Credit Cap), (c) projected Excess Availability at all times during
the 6-month period following the date of such Payment Event is greater than
40% of the Credit Cap (or, if theFixed Charge Condition is satisfied, greater
than 25% of the Credit Cap) (in each case after giving effect to such Payment
Event and as set forth in Excess Availability projections delivered by
Borrower to, and satisfactory to, Agent), (d) noDefault or Event of Default
then exists or would (after taking into consideration the payment to be made)
result therefrom, and (e) not less than five (5) days prior to such payment,
the Borrower shall have delivered to the Agent acertificate certifying, and
providing appropriate calculations, as to the matters set forth in clauses (a)
through (d) above.
"
Restructuring and Integration Costs
" means business optimization expenses and other restructuring andintegration
charges (including, without limitation, the costs associated with business
optimization programs, including costs of consultants, relocation and
recruiting expenses, back office closures, retention costs, severance costs
and systemestablishment costs) in connection with any Permitted Acquisition
after the closing date of such Permitted Acquisition through the first
anniversary of the closing date of such Permitted Acquisition.
"
Revolver Usage
" means, as of any date of determination, the sum of (a) the amount of
outstandingRevolving Loans (inclusive of Swing Loans (as such term is defined
in the Revolving Credit Agreement)) and Protective Advances (as such term is
defined in the Revolving Credit Agreement), plus (b) the amount of the Letter
of Credit Usage.
"
Revolving Agent
" means the "Administrative Agent", as defined in the Revolving Credit
Agreement.
"
Revolving Borrowing Capacity
" means the "Excess Availability", as defined in the RevolvingCredit Agreement.
"
Revolving Credit Agreement
" means the Amended and Restated Credit Agreement dated asof December 23,
2021, by and between, among others, Wells Fargo Capital Finance Corporation
Canada, as administrative agent, the Revolving Lenders party thereto from time
to time, as lenders, and the Borrower, as borrower, as same may beamended on
the date hereof and as further amended from time to time hereafter to the
extent permitted hereunder and in accordance with the Intercreditor Agreement.
"
Revolving Lenders
" means the agents and the lenders under the Revolving Credit Agreement and
the otherRevolving Loan Documents.
"
Revolving Loans
" means the credit extensions (including, without limitation,the "Loans" (as
defined in the Revolving Credit Agreement) provided to the Borrower by the
Revolving Lenders under the Revolving Loan Documents.
"
Revolving Loan Debt
" means all "Obligations" (as defined in the Revolving Credit Agreement)
owingto the Revolving Secured Parties under the Revolving Loan Documents.
"
Revolving Loan Documents
" meansthe "Loan Documents" under and as defined in the Revolving Credit
Agreement.
-------------------------------------------------------------------------------
"
Revolving Secured Parties
" means the "SecuredParties", as defined in the Revolving Credit Agreement.
"
RM JV
" means RMBG Retail Vancouver ULC,an unlimited liability company incorporated
under the laws of British Columbia.
"
RM JV Agreement
" meansthat certain Shareholders Agreement, dated as of April 16, 2021, by and
among JV Partner, JV Holdco and the RM JV, as the same may be modified,
amended, supplemented or restated in accordance with Section 6.6(b)(i) or with
the priorwritten consent of the Agent.
"
Rolex Canada Collateral
" means Collateral of Borrower consisting ofRolex, Tudor and Cellini watches,
watchbands, parts and other accessories now or hereafter sold by Rolex Canada
Ltd. to Borrower, and all other new Rolex, Tudor and Cellini watches, watch
bands, parts and other accessories hereinafter held byBorrower and all cash
proceeds of any of the foregoing, including insurance proceeds (but
specifically excluding accounts receivable), together with all rights and
property of every kind at any time in the possession or control of Rolex
Canada Ltd.,or any of its agents, or in transit to it, belonging to, for the
account of, or subject to the order of such Borrower.
"
Rolex Canada Documents
" means collectively, (i) the Official Rolex Retailer Agreement dated as
ofJune 6, 2017 between Rolex Canada Ltd. and Borrower, (ii) the Official Rolex
Retailer Agreement dated as of June 6, 2017 between Rolex Canada Ltd. and
Borrower (carrying on business as Brinkhaus), (iii) the Official TudorReseller
Agreement dated as of June 6, 2017 between Rolex Canada Ltd. and Borrower, and
(iv) the Rolex Canada Security Agreement.
"
Rolex Canada Liens
" means Liens on the Rolex Canada Collateral granted in favor of Rolex Canada
Ltd.pursuant to the Rolex Canada Security Agreement provided that such Liens
are subject to the Rolex Canada Subordination Agreement.
"
Rolex Canada Security Agreement
" means collectively, all security agreements, if any, entered into betweenthe
Canadian Borrower and Rolex Canada Ltd. pursuant to Section 3.04 of the Rolex
Canada Document described in clause (i) of the definition thereof, which
security agreements shall be on terms and conditions satisfactory to Agent and
theRequired Lenders.
"
Rolex Canada Subordination Agreement
" means the subordination provisions of theRolex Canada Security Agreement,
which shall be on terms and conditions satisfactory to Agent and the Required
Lenders, and affirmed by Rolex Canada Ltd. pursuant to an acknowledgement
letter in form and substance satisfactory to Agent and theRequired Lenders,
and addressed to the Agent from Rolex Canada Ltd. and acknowledged by Borrower.
"
SaleLeaseback Transactions
" means sales of any fixed or capital assets acquired after the Closing Date
by any Loan Party or any Subsidiary: (w) that are made for cash consideration
in an amount not less than the fair value of such fixed orcapital assets and
are consummated within 180 days after such Loan Party or such Subsidiary
completes the capital expenditure project for the relevant store or corporate
initiative which involved the acquisition or construction of such fixed
orcapital assets, (x) in respect of which such fixed or capital assets are not
assets included in the computation of Borrowing Base, (y) in respect of which
the proceeds
-------------------------------------------------------------------------------
shall be applied (i) until payment in full of the Revolving Loan Debt, to the
Revolving Loan Debt as the case may be, and (ii) thereafter, if requested by
the Agent, the Term Loan and(z) in respect of which such fixed or capital
assets are immediately thereafter leased back to the applicable Loan Party or
Subsidiary through a Capital Lease, provided that for certainty, the fixed or
capital assets subject to such sales shallnot include Inventory or Accounts
and shall be limited to the furniture, fixtures and equipment (as such term is
defined in the PPSA), including information technology equipment, of any Loan
Party or any Subsidiary which are located at a retaillocation or the chief
executive office of any Loan Party or any Subsidiary.
"
Sanctioned Entity
" means(a) a country or a government of a country, (b) an agency of the
government of a country, (c) an organization directly or indirectly controlled
by a country or its government, or (d) a Person resident in or determined to
beresident in a country, in each case of clauses (a) through (d) that is
itself a target of Sanctions.
"
Sanctioned Person
" means, at any time (a) any Person named on the list of Specially
DesignatedNationals and Blocked Persons maintained by OFAC, OFAC's
consolidated Non-SDN list or any other Sanctions-related list maintained by
any relevant Sanctions authority, (b) a Person or legal entity that is a
target of Sanctions, (c) anyPerson operating, organized or resident in a
Sanctioned Country, or (d) any Person directly or indirectly owned or
controlled (individually or in the aggregate) by or acting on behalf of any
such Person or Persons described in clauses(a) through (c) above.
"
Sanctions
" means individually and collectively, respectively, any andall economic
sanctions, trade sanctions, financial sanctions, sectoral sanctions, secondary
sanctions, trade embargoes anti-terrorism laws and other sanctions laws,
regulations or embargoes, including those imposed, administered or enforced
fromtime to time by: (a) the United States of America, including those
administered by the Office of Foreign Assets Control (OFAC) of the U.S.
Department of Treasury, the U.S. Department of State, the U.S. Department of
Commerce, or through anyexisting or future executive order, (b) the United
Nations Security Council, (c) the European Union or any European Union member
state, (d) Her Majesty's Treasury of the United Kingdom, or (e) any other
GovernmentalAuthority with jurisdiction over any member of Lender Group or any
Loan Party or any of their respective Subsidiaries or Affiliates.
"
S&P
" has the meaning specified therefor in the definition of Cash Equivalents.
"
SEC
" means the United States Securities and Exchange Commission and any successor
thereto.
"
Secured Hedging Agreement
" means any Hedge Agreement that is entered into by and between Borrower and
anyHedge Provider that constitutes Permitted Indebtedness hereunder and is
secured by the Revolving Agent's Liens.
"
Secured Hedging Obligations
" means all Indebtedness and other obligations of Borrower arising under,
orotherwise with respect to, any Secured Hedging Agreement.
"
Securities Account
" means a securitiesaccount (as that term is defined in the PPSA).
-------------------------------------------------------------------------------
"
Securities Act
" means the
Securities Act
of 1933,as amended from time to time, and any successor statute.
"
Senior Officer
" means the chairman of theboard, president, chief executive officer,
treasurer or chief financial officer, Senior Director, Finance or Director,
Financial Planning and Reporting of a Borrower or, if the context requires, a
Loan Party.
"Sixth Amendment Effective Date" means June 26, 2024.
"
SLR Credit Solutions
" means Crystal Financial LLC d/b/a SLR Credit Solutions.
"
Solvent
" means, with respect to any Person as of any date of determination, that (a)
at fair valuations,the sum of such Person's debts (including contingent
liabilities) is less than all of such Person's assets, (b) such Person is not
engaged or about to engage in a business or transaction for which the
remaining assets of such Personare unreasonably small in relation to the
business or transaction or for which the property remaining with such Person
is an unreasonably small capital, and (c) such Person has not incurred and
does not intend to incur, or reasonably believethat it will incur, debts
beyond its ability to pay such debts as they become due (whether at maturity
or otherwise), and (d) such Person is "solvent" or not "insolvent", as
applicable within the meaning given those termsand similar terms under
applicable Insolvency Law or other laws relating to fraudulent transfers and
conveyances. For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light ofall of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability
(irrespective of whether such contingent liabilities meet the criteria for
accrual underStatement of Financial Accounting Standard No. 5).
"
Spot Rate
" means, for a currency, the ratedetermined by Agent to be the rate quoted by
the Revolving Agent as the spot rate for the purchase by the Revolving Agent
of such currency with another currency through its principal foreign exchange
trading office at approximately 11:00 a.m. (NewYork time) on the date two
Business Days prior to the date as of which the foreign exchange computation
is made;
provided
, that Agent may obtain such spot rate from another financial institution
designated by Agent if the Revolving Agent doesnot have as of the date of
determination a spot buying rate for any such currency.
"
STA
" means
anAct Respecting the Transfer of Securities and the Establishment of Security
Entitlements
(Quebec) or to the extent applicable, comparable legislation in other Canadian
provinces.
"
Subject Permitted Acquisition
" has the meaning specified therefor in the definition of "PermittedDispositions
".
"
Subordinated Debt
" means collectively, the Management Debt, the QuebecSubordinated Debt, the
Montrovest Debt and any Additional Subordinated Debt.
"
Subordination Agreements
"means collectively, the Management Subordination Agreement, the Quebec
Subordination Agreement, the Rolex Canada Subordination Agreements, the
Montrovest Subordination Agreement and any other subordination agreement
entered into by
-------------------------------------------------------------------------------
or among any Loan Party, any subordinated creditor and Agent, in form, scope
and substance satisfactory to the Agent and the Required Lenders.
"
Subsidiary
" of a Person means a corporation, partnership, limited liability company,
unlimited liabilitycorporation, or other entity in which that Person directly
or indirectly owns or controls the Equity Interests having ordinary voting
power to elect a majority of the Board of Directors of such corporation,
partnership, limited liability company, orother entity.
"
Supermajority Lenders
" means, at any time, Lenders having or holding more than 66 2/3%of the sum of
the aggregate Canadian Dollar Equivalent of the Term Loan Exposure of all
Lenders;
provided
, that the Term Loan Exposure of any Defaulting Lender shall be disregarded in
the determination of the Lenders.
"
Taxes
" means any Taxes, levies, imposts, duties, fees, assessments or other charges
of whatever nature nowor hereafter imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein, and all
interest, penalties or similar liabilities with respect thereto.
"
Tax Lender
" has the meaning specified therefor in
Section 14.2(a)
of the Agreement.
"Term CORRA" means,
for any applicable month, with respect to any portion of
the Term Loan, the rate per annum quoted as the 90-day "
CORRA" published by the Term CORRA Administrator as of 10:00 a.m. Eastern
(Toronto) time,
two (2) Business Days prior tothe
Sixth Amendment Effective
Date and each Interest Payment Date thereafter for any subsequent month
. Each determination of Term CORRA shall be made by the Agent and shall be
conclusive in the absence of manifesterror.
"Term CORRA Adjustment" means a percentage equal to 0.32138% per annum.
"Term CORRA Administrator" means the Bank of Canada, CanDeal Benchmark
Administration Services Inc. or, in the reasonable discretion of Agent, TSX
Inc. or an affiliate of TSX Inc. asthe publication source of the Term CORRA
benchmark, or any other commercially available service selected by Agent in
its reasonable discretion.
"Term CORRA Reference Rate" means the forward-looking term rate based on CORRA.
"
Termination Date
" means, the earliest to occur of (i) the Maturity Date, (ii) the date on
whichthe maturity of the Term Loan is accelerated in accordance with
Article 9
, and (iii) the date of the occurrence of an Event of Default pursuant to
Sections 8.4
or
8.5
.
"
Term Loan Exposure
" means, with respect to any Lender, as of any date of determination (a) prior
tothe termination of the Commitments, the amount of such Lender's Commitment,
and (b) after the termination of the Commitments, the aggregate outstanding
principal amount of the Term Loan of such Lender.
"
Term Loan
" has the meaning specified therefor in Section 2.1 of the Agreement.
-------------------------------------------------------------------------------
"
Total Outstandings
" means the aggregate principal balanceof the Term Loan owing to all Lenders.
"Unadjusted Benchmark Replacement" means the
applicable Benchmark Replacement excluding the related BenchmarkReplacement
Adjustment.
"
United States
"means the United States of America.
"
US Divestiture
" means the sale of all of the shares ofMayor's Jewelers, Inc., by Borrower
pursuant to the US Divestiture Agreements.
"
US DivestitureAgreements
" means, collectively, the US Stock Purchase Agreement, the Transition
Services Agreement (as defined in the US Stock Purchase Agreement) and the
other agreements, instruments and documents relating thereto and evidencing
the USDivestiture.
"
US Dollars
" or "
US$
" means United States dollars.
"
US Stock Purchase Agreement
" means that certain Stock Purchase Agreement entered into as of August
11,2017 by and between Aurum Holdings Ltd. and Birks Group Inc. for the
purchase of all shares of capital stock of Mayor's Jewelers, Inc.
"
Voidable Transfer
" has the meaning specified therefor in
Section 17.7
of the Agreement.
Exhibit 4.28
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 26,
2024 (this"
Amendment
"), by and among BIRKS GROUP INC., a federal Canadian corporation (the "
Borrower
"), CASH, GOLD & SILVER INC., as guarantor, BIRKS INVESTMENTS INC., as
guarantor (collectively, the"
Guarantors
") and WELLS FARGO CAPITAL FINANCE CORPORATION CANADA., as administrative
agent (in such capacity, the "
Agent
") for the Lenders and the Lenders that are parties thereto.
W I T N E S S E T H:
WHEREAS, the Borrower, each lender from time to time party thereto (the "
Lenders
") and the Agent haveentered into that certain Amended and Restated Credit
Agreement dated as of December 24, 2021 (as amended, restated, amended and
restated, supplemented or otherwise modified from time to time prior to the
date hereof, the "
CreditAgreement
", and as amended by this Amendment on the Effective Date (as defined below),
the "
Amended Credit Agreement
") (capitalized terms not otherwise defined in this Amendment have the same
meanings assignedthereto in the Amended Credit Agreement); and
WHEREAS, the Borrower and the other Loan Parties have requested certainamendment
s to the Credit Agreement as set forth in this Amendment and the Agent, and
the Lenders, have agreed to such amendments, subject to the terms and
conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiencyof all of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1.
Amendments tothe Credit Agreement
.The Credit Agreement is hereby amended as follows:
(a)The Credit Agreementis amended by deleting the stricken text (indicated
textually in the same manner as the following example:
stricken text
) and by adding the double-underlined text (indicated textually in the same
manner as the following example:
double-underlined text
) as set forth in the pages of
Exhibit A
attached hereto.
(b)Exhibit L-1 of the Credit Agreement is replaced in itsentirety with Exhibit
L-1 attached hereto.
SECTION 2.
Representations and Warranties
.By itsexecution of this Amendment, each of the Borrower and other Loan
Parties hereby represents and warrants to the Agent and the Lenders that:
(a)the execution, delivery and performance of this Amendment are within such
Borrower's and LoanParties' corporate or other organizational powers, have
been duly authorized by all necessary corporate or other organizational
action, and do not and will not (i) contravene the terms of any of such
Person's organizational documents;(ii) conflict with or result in any breach
or contravention of, or the creation of any Lien under (other than any Lien to
secure the Obligations pursuant to the Loan Documents), or require any payment
to be made under (A) any PermittedIndebtedness, (B) any other contractual
obligation to which such Person is a party or affecting such Person or the
properties of such Person or any of its Subsidiaries or (C) any order,
injunction, writ or decree of any GovernmentalAuthority
-------------------------------------------------------------------------------
or any arbitral award to which such Person or its property is subject; or
(iii) violateany law; except with respect to any conflict, breach,
contravention or payment referred to in
clauses (ii)(B)
and
(ii)(C)
, to the extent that such conflict, breach, contravention or payment could not
reasonably be expected to have aMaterial Adverse Effect.
(b)this Amendment has been duly executed and delivered by the Borrower and
eachof the other Loan Parties and constitutes a legal, valid and binding
obligation of such Person, enforceable against such Person in accordance with
its terms, except as such enforceability may be limited by bankruptcy
insolvency, reorganization,receivership, moratorium or other laws affecting
creditors' rights generally and by general principles of equity;
(c)no material approval, consent, exemption, authorization, or other action
by, or notice to, or filing with,any Governmental Authority or any other
Person is necessary or required in connection with (i) the execution, delivery
or performance by, or enforcement against, any Loan Party of this Amendment,
(ii) the grant by any Loan Party of theLiens granted by it pursuant to the
Loan Documents, (iii) the perfection or maintenance of the Liens created under
the Loan Documents (including the priority thereof) or (iv) the exercise by
the Agent or any Lender of its rights under the LoanDocuments or the remedies
in respect of the Collateral pursuant to the Loan Documents, except for the
approvals, consents, exemptions, authorizations, actions, notices and filings
which have been duly obtained, taken, given or made and are in fullforce and
effect and those approvals, consents, exemptions, authorizations or other
actions, notices or filings, the failure of which to obtain or make could not
reasonably be expected to have a Material Adverse Effect;
(d)the representations and warranties of the Borrower and each other Loan
Party contained in Article 4 of theAmended Credit Agreement or any other Loan
Document are true and correct in all material respects (and in all respects if
any such representation or warranty is already qualified by materiality) on
and as of the Effective Date, except to the extentthat such representations
and warranties specifically refer to an earlier date, in which case they are
true and correct in all material respects (and in all respects if any such
representation or warranty is already qualified by materiality) as ofsuch
earlier date, and except that for purposes of this clause (d), the
representations and warranties contained in Section 4.8 of the Amended Credit
Agreement shall be deemed to refer to the most recent statements furnished
pursuant toSection 5.1 of the Credit Agreement; and
(e)no Default or Event of Default exists or would resultfrom this Amendment.
SECTION 3.
Conditions of Effectiveness of this Amendment
.This Amendment shallbecome effective on the date (the "
Effective Date
") when:
(a)The Agent shall havereceived each of the following, each of which shall be
originals or facsimiles (followed promptly by originals) unless otherwise
specified, each properly executed by an officer or director of the signing
Loan Party, each dated as of the EffectiveDate and each in form and substance
reasonably satisfactory to the Agent and its counsel:
i.an executed counterpart of this Amendment from the Borrower and each
Guarantor, and eachLender;
ii.an executed counterpart of the Guarantor Acknowledgement attached hereto,
fromeach Guarantor;
(b)The representations and warranties set forth in
Section 2
of this Amendmentshall be true and correct in all material respects (and in
all respects if any such representation or warranty is
2
-------------------------------------------------------------------------------
already qualified by materiality) on and as of the Effective Date with the
same effect as though such representations and warranties had been made on and
as of the Effective Date, except to theextent that such representations and
warranties specifically refer to an earlier date, in which case they are true
and correct in all material respects (and in all respects if any such
representation or warranty is already qualified by materiality)as of such
earlier date; and
(c)All fees and expenses required to be paid on the Effective Date shall
havebeen paid in full in cash (or the Agent shall be satisfied with the
arrangements made in respect thereof) to the extent, in the case of
reimbursement of expenses, invoiced to the Borrower at least two Business Days
prior to the Effective Date.
SECTION 4.
Reference to and Effect on the Credit Agreement and the other Loan Documents
.
(a)On and after the Effective Date, each reference in the Credit Agreement to
"this Agreement,""hereunder," "hereof" or words of like import referring to
the Credit Agreement shall mean and be a reference to the Amended Credit
Agreement.
(b)The Credit Agreement and each of the other Loan Documents, as specifically
amended by this Amendment, areand shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed.
(c)The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein,operate as a waiver of any right, power or
remedy of any Lender or the Agent, under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents. On and
after the Effective Date, this Amendment shall for allpurposes constitute a
Loan Document.
SECTION 5.
Acknowledgment; Liens Unimpaired
.The Borrower andeach other Loan Party hereby acknowledges that it has read
this Amendment and consents to its terms, and further hereby affirms,
confirms, represents, warrants and agrees that (a) notwithstanding the
effectiveness of this Amendment, theobligations of such Person under each of
the Loan Documents to which such Person is a party shall not be impaired and
each of the Loan Documents to which such Person is a party is, and shall
continue to be, in full force and effect and is herebyconfirmed and ratified
in all respects and (b) after giving effect to this Amendment, (i) the
execution, delivery, performance or effectiveness of this Amendment shall not
impair the validity, effectiveness or priority of the Liens grantedpursuant to
the Loan Documents and such Liens shall continue unimpaired with the same
priority to secure repayment of all Obligations, whether heretofore or
hereafter incurred, and (ii) any guarantee, as and to the extent provided in
the LoanDocuments, shall continue in full force and effect in respect of the
Obligations under the Credit Agreement and the other Loan Documents.
SECTION 6.
Outstanding CDOR Rate Loans
.As of the Effective Date, CDOR Rate Loans (as that term is definedin the
Credit Agreement) will no longer be available, provided that all CDOR Rate
Loans outstanding on such date will continue until the end of their respective
Interest Periods (as that term is defined in the Credit Agreement), and that
theprovisions of the Credit Agreement prior to giving effect to this Amendment
applicable to such CDOR Rate Loans will continue to apply to such CDOR Rate
Loans until the end of their respective Interest Periods.
SECTION 7.
Costs and Expenses
.The Borrower hereby agrees to reimburse the Agent for its reasonable costsand
expenses incurred in connection with this Amendment, including the reasonable
fees, disbursements and other charges of counsel for the Agent, all in
accordance with the terms and conditions of Section 15.7 of the Amended Credit
Agreement.
3
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SECTION 8.
Execution in Counterparts
.This Amendment maybe executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together,
shall constitute but one and the sameAmendment. Execution of any such
counterpart may be by means of (a) an electronic signature that complies with
applicable law, as in effect from time to time,; (b) an original manual
signature; or (c) a faxed, scanned, or photocopiedmanual signature. Each
electronic signature or faxed, scanned, or photocopied manual signature shall
for all purposes have the same validity, legal effect, and admissibility in
evidence as an original manual signature. Agent reserves the right, inits
discretion, to accept, deny, or condition acceptance of any electronic
signature on this Amendment. Any party delivering an executed counterpart of
this Amendment by faxed, scanned or photocopied manual signature shall also
deliver an originalmanually executed counterpart, but the failure to deliver
an original manually executed counterpart shall not affect the validity,
enforceability and binding effect of this Amendment.
SECTION 9.
Governing Law
.This Amendment shall be governed by, and construed in accordance with, the
lawsof the Province of Ontario and the federal laws of Canada applicable
therein.
SECTION10.
Headings
.Section headings herein are included for convenience of reference only and
shall not affect the interpretation of this Amendment.
[Continued on following page.]
4
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IN WITNESS WHEREOF
, each of the undersigned has caused its dulyauthorized officer to execute and
deliver this Amendment as of the date first written above.
BIRKS GROUP INC..,
as Borrower
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: VP, HR, Chief Legal Officer and Corporate Secretary
By: /s/ Katia Fontana
Name: Katia Fontana, CPA
Title: VP and Chief Financial Officer
CASH, GOLD & SILVER INC.,
as guarantor
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: VP, HR, Chief Legal Officer and Corporate Secretary
By: /s/ Katia Fontana
Name: Katia Fontana, CPA
Title: VP and Chief Financial Officer
BIRKS INVESTMENTS INC.,
as guarantor
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: VP, HR, Chief Legal Officer and Corporate Secretary
By: /s/ Katia Fontana
Name: Katia Fontana, CPA
Title: VP and Chief Financial Officer
[BIRKS--FIRSTAMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
-------------------------------------------------------------------------------
WELLS FARGO CAPITAL FINANCE
CORPORATION CANADA
, as Agent and as Lender
By: /s/ Carmela Massari
Name: Carmela Massari
Title: Senior Vice President, Portfolio Manager
[BIRKS--FIRSTAMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
-------------------------------------------------------------------------------
Guarantor Acknowledgement
Reference is hereby made to the foregoing First Amendment to Amended and
Restated Credit Agreement dated as of June
, 2024 (the "
Amendment
"; capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Amendment), by and among Birks Group
Inc., Wells Fargo Capital Finance CorporationCanada, as agent (the "
Agent
") and Lender, and the other parties party thereto. Each of the undersigned,
in its capacity as a Guarantor, acknowledges that its consent to the foregoing
Amendment is not required, but each ofthe undersigned nevertheless does hereby
consent to the foregoing Amendment and to the documents and agreements
referred to therein. Nothing herein shall in any way limit any of the terms or
provisions of any guarantee provided to the Agent or theLoan Documents
executed by the undersigned (as the same may be amended, restated, amended and
restated, supplemented, or otherwise modified from time to time), all of which
are hereby ratified and affirmed in all respects, and remain in full forceand
effect.
Immediately after giving effect to the foregoing Amendment, each Guarantor
reaffirms each Lien granted by itto the Agent under each of the Loan Documents
to which it is a party, which Liens shall continue in full force and effect
during the term of the Amended Credit Agreement and shall continue to secure
the Obligations (after giving effect to thisAmendment), in each case, on and
subject to the terms and conditions set forth in the Amended Credit Agreement
and the other Loan Documents, and hereby restates, ratifies, and reaffirms
each and every term and condition set forth in the AmendedCredit Agreement and
the Loan Documents to which it is a party as such Loan Documents are effective
as of the date hereof. Each Guarantor hereby acknowledges and agrees that,
immediately after giving effect to the Amendment, all of its respectiveobligatio
ns and liabilities under the Loan Documents to which it is a party remain in
full force and effect.
[Continued on followingpage.]
[BIRKS--FIRSTAMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
-------------------------------------------------------------------------------
Guarantors:
CASH, GOLD & SILVER INC.,
as guarantor
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: VP, HR, Chief Legal Officer and Corporate
Secretary
By:
/s/ Katia Fontana
Name: Katia Fontana, CPA
Title: VP and Chief Financial Officer
BIRKS INVESTMENTS INC.,
as guarantor
By: /s/ Miranda Melfi
Name: Miranda Melfi
Title: VP, HR, Chief Legal Officer and Corporate
Secretary
By: /s/ Katia Fontana
Name: Katia Fontana, CPA
Title: VP and Chief Financial Officer
[BIRKS--FIRSTAMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
-------------------------------------------------------------------------------
EXHIBIT A
AMENDED CREDIT AGREEMENT
[See attached.]
-------------------------------------------------------------------------------
ExecutionCopy
EXHIBIT A TO FIRSTAMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
AMENDED AND RESTATED CREDITAGREEMENT
by andamong
WELLS FARGO CAPITAL FINANCE CORPORATION CANADA,
as Administrative Agent,
THE LENDERS THAT ARE PARTIES HERETO
as the Lenders,
and
BIRKS GROUP INC.,
as Borrower
Dated as of December 24, 2021
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION 1
1.1. Definitions 1
1.2. Accounting Terms 1
1.3. PPSA 2
1.4. Construction 2
1.5. Time References 3
1.6. Schedules and Exhibits 4
1.7. Exchange Rates; Currency Equivalents; Applicable Currency 4
1.8. Quebec Interpretation 4
1.9. Rates 5
2. LOANS AND TERMS OF PAYMENT 5
2.1. Revolving Loans 5
2.2. [Intentionally Omitted] 6
2.3. Borrowing Procedures and Settlements 7
2.4. Payments; Reductions of Commitments; Prepayments 15
2.5. Promise to Pay; Promissory Notes 19
2.6. Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations 20
2.7. Crediting Payments 22
2.8. Designated Account 22
2.9. Maintenance of Loan Accounts; Statements of Obligations 22
2.10. Fees 23
2.11. Letters of Credit 23
2.12. Non-Base Rate Option 32
2.13. Capital Requirements 36
2.14. Currencies 38
2.15. Interest Act 38
(Canada); Criminal Rate of Interest; Nominal Rate ofInterest
2.16. Accordion 40
3. CONDITIONS; TERM OF AGREEMENT 41
3.1. Conditions Precedent to the Initial Extension of Credit 41
3.2. Conditions Precedent to all Extensions of Credit 41
3.3. Maturity 41
3.4. Effect of Maturity 41
3.5. Early Termination by Borrower 42
i
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TABLE OF CONTENTS
(continued)
Page
3.6. Post-Closing Covenants 42
4. REPRESENTATIONS AND WARRANTIES 42
4.1. Due Organization and Qualification; Subsidiaries 42
4.2. Due Authorization; No Conflict 43
4.3. Governmental Consents 44
4.4. Binding Obligations; Perfected Liens 44
4.5. Title to Assets; No Encumbrances 44
4.6. Litigation 44
4.7. Compliance with Laws 45
4.8. Financial Statements; No Material Adverse Effect 45
4.9. Solvency 45
4.10. Canadian Pension Plan 45
4.11. Environmental Condition 45
4.12. Complete Disclosure 46
4.13. Patriot Act 46
; Canadian AML and Anti-Terrorism Laws
4.14. Indebtedness 47
4.15. Payment of Taxes 47
4.16. Margin Stock 47
4.17. Governmental Regulation 47
4.18. OFAC 47
4.19. Employee and Labor Matters 48
4.20. Intellectual Property 48
4.21. Eligible Accounts 48
4.22. Eligible Inventory 49
4.23. Location of Inventory and Equipment 49
4.24. Inventory Records 49
4.25. Hedge Agreements 49
4.26. Credit Card Arrangements 49
4.27. No Defaults; Material Contracts 49
4.28. Operations of Certain Subsidiaries 49
5. AFFIRMATIVE COVENANTS 50
5.1. Financial Statements, Reports, Certificates 50
5.2. Reporting 50
ii
-------------------------------------------------------------------------------
TABLE OF CONTENTS
(continued)
Page
5.3. Existence 50
5.4. Maintenance of Properties 50
5.5. Taxes 50
5.6. Insurance 51
5.7. Inspection 51
5.8. Compliance with Laws and Material Contracts 52
5.9. Environmental 52
5.10. Disclosure Updates 52
5.11. Formation of Subsidiaries 53
5.12. Further Assurances 53
5.13. [Intentionally Omitted] 54
5.14. Location of Inventory; Chief Executive Office, Etc. 54
5.15. Bank Products 54
5.16. Hedge Agreements 54
5.17. Canadian Compliance 54
5.18. Credit Card Notifications 55
6. NEGATIVE COVENANTS 55
6.1. Indebtedness 55
6.2. Liens 55
6.3. Restrictions on Fundamental Changes 56
6.4. Disposal of Assets 56
6.5. Nature of Business 56
6.6. Prepayments and Amendments 57
6.7. Restricted Payments 58
6.8. Accounting Methods 59
6.9. Investments 59
6.10. Transactions with Affiliates 59
6.11. Use of Proceeds 60
6.12. Limitation on Issuance of Equity Interests 60
6.13. [Intentionally Omitted] 60
6.14. [Intentionally Omitted] 60
6.15. Canadian Employee Benefits 60
6.16. Sale and Leaseback Transactions 61
iii
-------------------------------------------------------------------------------
TABLE OF CONTENTS
(continued)
Page
6.17. Negative Pledges 61
6.18. Restrictions on Subsidiary Distributions 62
7. FINANCIAL COVENANT 62
7.1. Minimum Excess Availability 63
8. EVENTS OF DEFAULT 63
8.1. Payments 63
8.2. Covenants 63
8.3. Judgments 63
8.4. Voluntary Bankruptcy, etc. 64
8.5. Involuntary Bankruptcy, etc. 64
8.6. Default Under Other Agreements 64
8.7. Default Under Term Loan Documents 64
8.8. Default Under Damiani Purchase Documents 64
8.9. Representations, etc. 65
8.10. Guarantee 65
8.11. Security Documents 65
8.12. Loan Documents 65
8.13. Change of Control 65
9. RIGHTS AND REMEDIES 65
9.1. Rights and Remedies 65
9.2. Remedies Cumulative 66
10. WAIVERS; INDEMNIFICATION 66
10.1. Demand; Protest; etc. 66
10.2. The Lender Group's Liability for Collateral 67
10.3. Indemnification 67
11. NOTICES 68
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION 69
13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS 70
13.1. Assignments and Participations 70
13.2. Successors 74
14. AMENDMENTS; WAIVERS 75
14.1. Amendments and Waivers 75
iv
-------------------------------------------------------------------------------
TABLE OF CONTENTS
(continued)
Page
14.2. Replacement of Certain Lenders 77
14.3. No Waivers; Cumulative Remedies 78
15. AGENT; THE LENDER GROUP 78
15.1. Appointment and Authorization of Agent 78
15.2. [Intentionally Omitted] 79
15.3. Liability of Agent 79
15.4. Reliance by Agent 79
15.5. Notice of Default or Event of Default 80
15.6. Credit Decision 80
15.7. Costs and Expenses; Indemnification 81
15.8. Agent in Individual Capacity 81
15.9. Successor Agent 82
15.10. Lender in Individual Capacity 82
15.11. Collateral Matters 83
15.12. Restrictions on Actions by Lenders; Sharing of Payments 84
15.13. Agency for Perfection 85
15.14. Payments by Agent to the Lenders 85
15.15. Concerning the Collateral and Related Loan Documents 85
15.16. Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports andInformation 86
15.17. Several Obligations; No Liability 87
15.18. Quebec Security 87
16. WITHHOLDING TAXES 87
16.1. Payments 87
16.2. Exemptions 88
16.3. Reductions 90
16.4. Refunds 90
17. GENERAL PROVISIONS 91
17.1. Effectiveness 91
17.2. Section Headings 91
17.3. Interpretation 91
17.4. Severability of Provisions 91
17.5. Bank Product Providers 91
v
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TABLE OF CONTENTS
(continued)
Page
17.6. Debtor-Creditor Relationship 92
17.7. Counterparts; Electronic Execution 92
17.8. Revival and Reinstatement of Obligations; Certain Waivers 92
17.9. Confidentiality 93
17.10. Survival 95
17.11. Patriot Act 95
; Canadian Anti-Money Laundering & Anti-TerrorismLegislation
17.12. Integration 96
17.13. Birks Group Inc. as Agent for Borrower 96
17.14. Judgment Currency 97
17.15. No Setoff 97
17.16. Intercreditor Agreement 97
17.17. Acknowledgement Regarding Any Supported QFCs 97
17.18. Erroneous Payments 98
17.19. Reaffirmation 100
vi
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EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit B-4 Form of Bank Product Provider Agreement
Exhibit C-1 Form of Compliance Certificate
Exhibit C-2 Form of Credit Card Notification
Exhibit I-1 Form of Information Certificate
Exhibit L-1 Form of Non-Base Rate Notice
Schedule A-1 Agent's Canadian Account
Schedule A-2 Agent's US Account
Schedule A-3 Authorized Persons
Schedule C-1 Commitments
Schedule D-1 Canadian Designated Account(s)
Schedule D-2 US Designated Account(s)
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Investments
Schedule P-2 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 1.1 Definitions
Schedule 3.1 Conditions Precedent
Schedule 3.6 Conditions Subsequent
Schedule 4.1 Capitalization of Borrower and its Subsidiaries
Schedule 4.6(b) Litigation
Schedule 4.11 Environmental Matters
Schedule 4.14 Permitted Indebtedness
Schedule 4.19 Employee and Labour Matters
Schedule 4.20 Intellectual Property
Schedule 4.23 Location of Inventory; Chief Executive Office
Schedule 4.26 Credit Card Arrangements
Schedule 4.27 Material Contracts
Schedule 5.1 Financial Statements, Reports, Certificates
Schedule 5.2 Collateral Reporting
Schedule 6.5 Nature of Business
vii
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT
(this "
Agreement
"), is entered into as ofDecember 24, 2021, by and among the lenders
identified on the signature pages hereof (each of such lenders, together with
its successors and permitted assigns, is referred to hereinafter as a "
Lender
", as that term ishereinafter further defined),
WELLS FARGO CAPITAL FINANCE CORPORATION CANADA
, an Ontario corporation, as administrative agent for each member of the
Lender Group and the Bank Product Providers (in such capacity, together with
its successorsand assigns in such capacity, "
Agent
"),
BIRKS GROUP INC
. and together with each other Person organized under the laws of Canada or a
province thereof that joins hereunder as a "Borrower" after the Closing Date
inaccordance with the terms hereof (each, a "
Borrower
" and all references herein to "Borrower" shall include each such additional
Borrower who so joins).
RECITALS
WHEREAS
Birks Group Inc., as original borrower (in such capacity, the "
Original Borrower
") and WellsFargo Canada Corporation, as administrative agent (the "
Original Agent
") entered into a Credit Agreement dated as October 23, 2017 (as amended
pursuant to Amendment No. 1 dated as of June 29, 2018, AmendmentNo. 2 dated as
of April 18, 2019, Amendment No. 3 dated as of December 20, 2019; Amendment
No. 4 dated as of July 2, 2020, Amendment No. 5 dated as of August 31, 2021
and Amendment No. 6 dated as ofDecember 15, 2021, the "
Original Credit Agreement
").
AND WHEREAS
the Original Agentassigned of all its interest, as lender, in the Original
Credit Agreement to the Agent pursuant to an assignment and acceptance
agreement between the Original Agent, as assignor and the Agent, as assignee
dated as of October 1, 2018 and theAgent named herein concurrently replaced
the Original Agent as agent under the Original Credit Agreement.
ANDWHEREAS
the parties hereto wish to amend and restate the Original Credit Agreement on
the terms and conditions set forth herein.
NOW, THEREFORE
, in consideration of the mutual agreements, provisions and covenants
contained herein, the partieshereto agree that the Original Credit Agreement
is hereby amended and restated in its entirety as follows:
1. DEFINITIONS AND CONSTRUCTION
.
1.1.
Definitions
. Capitalized terms used in this Agreement shall have the meanings
specifiedtherefor on
Schedule 1.1
.
1.2.
Accounting Terms
. All accounting terms notspecifically defined herein shall be construed in
accordance with GAAP;
provided
, that if Administrative Borrower notifies Agent that Borrower requests an
amendment to any provision hereof to eliminate the effect of any Accounting
Changeoccurring after the Original Closing Date or in the application thereof
on the operation of such provision (or if Agent notifies Administrative
Borrower that the Required
-------------------------------------------------------------------------------
Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such Accounting
Change or in the application thereof, thenAgent and Borrower agrees that they
will negotiate in good faith amendments to the provisions of this Agreement
that are directly affected by such Accounting Change with the intent of having
the respective positions of the Lenders and Borrower aftersuch Accounting
Change conform as nearly as possible to their respective positions before such
Accounting Change and, until any such amendments have been agreed upon and
agreed to by the Required Lenders, the provisions in this Agreement shall
becalculated as if no such Accounting Change had occurred. When used herein,
the term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant ora
related definition, it shall be understood to mean Borrower and its
Subsidiaries on a consolidated basis, unless the context clearly requires
otherwise. Notwithstanding anything to the contrary contained herein, (a) all
financial statementsdelivered hereunder shall be prepared, and all financial
covenants contained herein shall be calculated, without giving effect to any
election under the Statement of Financial Accounting Standards No. 159 (or any
similar accounting principle)permitting a Person to value its financial
liabilities or Indebtedness at the fair value thereof and (b) the term
"unqualified opinion" as used herein to refer to opinions or reports provided
by accountants shall mean an opinion orreport that is (i) unqualified, and
(ii) does not include any qualification as to scope, going concern or similar
items.
1.3.
PPSA
. Any terms used in this Agreement that are defined in the PPSA shall be
construedand defined as set forth in the PPSA unless otherwise defined herein.
Notwithstanding the foregoing, and where the context so requires, (i) any term
defined in this Agreement by reference to the PPSA shall also have any
extended, alternative oranalogous meaning given to such term in the Code, in
all cases for the extension, preservation or betterment of the security
granted by a Loan Party formed in the United States and rights of the
Collateral located in the United States, (ii) allreferences to Canada or to
any subdivision, department, agency or instrumentality thereof shall be deemed
to refer also to the United States of America or to any subdivision,
department, agency or instrumentality thereof, and (iii) allreferences to
federal or state securities law of the United States shall be deemed to refer
also to analogous applicable federal and provincial securities laws in Canada.
1.4.
Construction
. Unless the context of this Agreement or any other Loan Document
clearlyrequires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms "includes" and
"including" are not limiting, and the term "or" has, except where
otherwiseindicated, the inclusive meaning represented by the phrase "and/or."
The words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement or any other Loan Document refer to thisAgreement or such other Loan
Document, as the case may be, as a whole and not to any particular provision
of this Agreement or such other Loan Document, as the case may be. Unless the
context of this Agreement or any other Loan Document clearlyrequires
otherwise, references to "law" means all international, foreign, federal,
provincial, state and local statutes, treaties, rules, guidelines,
regulations, by-laws, ordinances, decrees, codes and administrative or
judicial orarbitral or administrative or ministerial or departmental or
regulatory precedents or authorities, including the interpretation or
administration thereof by any Governmental Authority charged with the
enforcement, interpretation or administrationthereof, and all applicable
administrative orders, directed duties, requests, licenses, authorizations and
permits of any Governmental Authority. Section, subsection, clause, schedule,
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and exhibit references herein are to this Agreement unless otherwise
specified. Anyreference in this Agreement or in any other Loan Document to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements,thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and
supplements set forth herein). The words "asset" and"property" shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties. All references to "province" or
like terms shall include "territory" and liketerms. Any reference herein or in
any other Loan Document to the satisfaction, repayment, or payment in full of
the Obligations shall mean (a) the payment or repayment in full in immediately
available funds in the Applicable Currency of(i) the principal amount of, and
interest accrued and unpaid with respect to, all outstanding Loans, together
with the payment of any premium applicable to the repayment of the Loans, (ii)
all Lender Group Expenses that have accrued andare unpaid regardless of
whether demand has been made therefor, (iii) all fees or charges that have
accrued hereunder or under any other Loan Document (including the Letter of
Credit Fees and the Unused Line Fee) and are unpaid;
provided
thatsuch fees or charges shall not include fees and charges accrued pursuant
to Letters of Credit that have been cash collateralized in accordance with the
Letter of Credit Collateralization requirements under this Agreement and Bank
Product Obligations(other than Hedge Obligations) to the extent Bank Product
Collateralization has been provided in respect thereof, (b) in the case of
contingent reimbursement obligations with respect to Letters of Credit,
providing Letter of CreditCollateralization in the Applicable Currency, (c) in
the case of obligations with respect to Bank Products (other than Hedge
Obligations), providing Bank Product Collateralization in the Applicable
Currency, (d) the receipt by Agent ofcash collateral in the Applicable
Currency in order to secure any other contingent Obligations for which a claim
or demand for payment has been made on or prior to such time or in respect of
matters or circumstances known to Agent or a Lender atsuch time that are
reasonably expected to result in any loss, cost, damage, or expense (including
legal expenses to the extent payable pursuant to Section 10.3), such cash
collateral to be in such amount as Agent reasonably determines is
appropriateto secure such contingent Obligations, but in no event greater than
103% of the face amount of such claim or demand to the extent a specific
amount has been claimed or demanded, (e) the payment or repayment in full in
immediately availablefunds in the Applicable Currency of all other outstanding
Obligations (including the payment of any termination amount then applicable
(or which would or could become applicable as a result of the repayment of the
other Obligations) under HedgeAgreements provided by Hedge Providers) other
than, in any case, (i) unasserted contingent indemnification Obligations, (ii)
any Bank Product Obligations (other than Hedge Obligations) that, at such
time, are allowed by the applicable BankProduct Provider to remain outstanding
without being required to be repaid or cash collateralized, and (iii) any
Hedge Obligations that, at such time, are allowed by the applicable Hedge
Provider to remain outstanding without being required tobe repaid, and (f) the
termination of all of the Commitments of the Lenders. Any reference herein to
any Person shall be construed to include such Person's successors and assigns.
Any requirement of a writing contained herein or in any otherLoan Document
shall be satisfied by the transmission of a Record.
1.5.
Time References
.Unless the context of this Agreement or any other Loan Document clearly
requires otherwise, all references to time of day refer to Eastern standard
time or Eastern daylight saving time, as in effect in Toronto, Ontario on such
day. For purposes ofthe computation of a period of time from a specified date
to a later specified date, the word "from"
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means "from and including" and the words "to" and "until" eachmeans "to and
including";
provided
that, with respect to a computation of fees or interest payable to Agent or
any Lender, such period shall in any event consist of at least one full day.
1.6.
Schedules and Exhibits
. All of the schedules and exhibits attached to this Agreementshall be deemed
incorporated herein by reference.
1.7.
Exchange Rates; Currency Equivalents;Applicable Currency
.
(a)All references to "Dollars" or "$" shall mean CanadianDollars unless
otherwise specified herein. For purposes of this Agreement and the other Loan
Documents, the Canadian Dollar Equivalent of the Revolving Loans, Letters of
Credit, other Obligations and other references to amounts denominated in
acurrency other than Canadian Dollars shall be determined in accordance with
the terms of this Agreement. Such Canadian Dollar Equivalent shall become
effective as of such Revaluation Date for such Revolving Loans, Letters of
Credit and otherObligations and shall be the Canadian Dollar Equivalent
employed in converting any amounts between the applicable currencies until the
next Revaluation Date to occur for such Revolving Loans, Letters of Credit and
other Obligations. Except asotherwise expressly provided herein or in the
applicable other Loan Document, the applicable amount of any currency for
purposes of this Agreement and the other Loan Documents (including all
calculations in connection with the covenants, includingthe financial
covenants) shall be the Canadian Dollar Equivalent thereof, and for the
purpose of such calculations, comparisons, measurements or determinations,
amounts denominated in currencies other than Canadian Dollars shall be
converted intothe Canadian Dollar Equivalent of such amount on the date of
calculation, comparison, measurement or determination. Notwithstanding the
foregoing, for the purposes of financial statements prepared by Borrower, the
Canadian Dollar Equivalent of eachamount in a currency other than Canadian
Dollars shall be determined in accordance with GAAP.
(b)Wherever in this Agreement and the other Loan Documents in connection with
a borrowing, conversion,continuation or prepayment of a Revolving Loan or the
issuance, amendment or extension of a Letter of Credit, an amount, such as a
required minimum or multiple amount, is expressed in Canadian Dollars, but
such Revolving Loan or Letter of Credit isdenominated in US Dollars, such
amount shall be the relevant US Dollar Equivalent of such Canadian Dollar
amount (rounded to the nearest US Dollar, with 0.5 of a unit being rounded
upward).
1.8.
Quebec Interpretation
. For all purposes of any assets, liabilities or entities locatedin the
Province of Quebec and for all purposes pursuant to which the interpretation
or construction of this Agreement may be subject to the laws of the Province
of Quebec or a court or tribunal exercising jurisdiction in the Province of
Quebec,(a) "personal property" shall include "movable property", (b) "real
property" shall include "immovable property", (c) "tangible property" shall
include "corporeal property",(d) "intangible property" shall include
"incorporeal property", (e) "security interest", "mortgage" and "lien" shall
include a "hypothec", "prior claim" and a"resolutory clause", (f) all
references to filing, registering or recording under the PPSA shall include
publication under the Civil Code of Quebec, (g) all references to "perfection"
of or "perfected" liensor security interest shall include a reference to an
"opposable" or "set up" lien or security interest as against third parties,
(h) any "right of offset", "right of setoff" or similar
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expression shall include a "right of compensation", (i) "goods"shall include
"corporeal movable property" other than chattel paper, documents of title,
instruments, money and securities, (j) an "agent" shall include a "mandatary",
(k) "construction liens" shallinclude "legal hypothecs", (l) "joint and
several" shall include "solidary", (m) "gross negligence or willful
misconduct" shall be deemed to be "intentional or gross fault",(n) "beneficial
ownership" shall include "ownership on behalf of another as mandatary", (o)
"easement" shall include "servitude", (p) "priority" shall include "prior
claim",(q) "survey" shall include "certificate of location and plan", and (r)
"fee simple title" shall include "absolute ownership".
1.9.
Rates
. The interest rate on Loans denominated in Dollars may be determined by
referenceto a benchmark rate that is, or may in the future become, the subject
of regulatory reform or cessation. Regulators have signaled the need to use
alternative reference rates for some of these benchmark rates and, as a
result, such benchmark ratesmay cease to comply with applicable laws and
regulations, may be permanently discontinued or the basis on which they are
calculated may change. Agent does not warrant or accept any responsibility
for, and shall not have any liability with respect to(a) the continuation of,
administration of, submission of, calculation of or any other matter related
to any rates in the definition of any Benchmark, including the Term SOFR
Reference Rate, Term SOFR,
the Term CORRA Reference Rate, Term CORRA
or any other Benchmark, or anycomponent definition thereof or rates referenced
in the definition thereof, or with respect to any alternative, successor or
replacement rate thereto (including any Benchmark Replacement), including
whether the composition or characteristics of anysuch alternative, successor
or replacement rate (including any then-current Benchmark or any Benchmark
Replacement) as it may or may not be adjusted pursuant to
Section 2.12(d)(iii)
, will be similar to, or produce the same value oreconomic equivalence of, or
have the same volume or liquidity as, the Term SOFR Reference Rate, Term SOFR,
theTerm CORRA Reference Rate, Term CORRA
such Benchmark or any other Benchmark prior to its discontinuance or
unavailability, or (b) the effect, implementation or composition of any
ConformingChanges. Agent and its affiliates or other related entities may
engage in transactions that affect the calculation of any Benchmark, any
alternative, successor or replacement rate (including any Benchmark
Replacement) or any relevant adjustmentsthereto and such transactions may be
adverse to the Borrower. Agent may select information sources or services in
its reasonable discretion to ascertain any Benchmark, any component definition
thereof or rates referenced in the definition thereof,in each case pursuant to
the terms of this Agreement, and shall have no liability to the Borrower, any
Lender or any other person or entity for damages of any kind, including direct
or indirect, special, punitive, incidental or consequentialdamages, costs,
losses or expenses (whether in tort, contract or otherwise and whether at law
or in equity), for any error or calculation of any such rate (or component
thereof) provided by any such information source or service. Each
determinationof any Benchmark (or any Benchmark Replacement) shall be made by
Agent and shall be conclusive in the absence of manifest error.
2. LOANS AND TERMS OF PAYMENT
.
2.1.
Revolving Loans
.
(a)Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, each RevolvingLender with a Revolver Commitment agrees
(severally, not jointly or jointly and severally) to make revolving loans in
Canadian Dollars or US Dollars (as selected by Administrative Borrower) ("
Revolving Loans
") to Borrower in anamount at any one time outstanding not to exceed the
Canadian Dollar Equivalent of the lesser of:
(i)suchLender's Revolver Commitment, and
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(ii)such Lender's Pro Rata Share of an amount equal tothe lesser of:
(A)the amount equal to (1) the Maximum Credit Amount less (2) the sum of (x)
theLetter of Credit Usage at such time plus (y) the principal amount of Swing
Loans outstanding at such time, and
(B)the amount equal to the Borrowing Base as of such date (based upon the
Borrowing Base set forth in the mostrecent Borrowing Base Certificate
delivered by Borrower to Agent) less the sum of (1) the Letter of Credit Usage
at such time, plus (2) the principal amount of the Swing Loans outstanding at
such time.
(b)Amounts borrowed pursuant to this
Section 2.1
may be repaid and, subject to the terms andconditions of this Agreement,
reborrowed at any time during the term of this Agreement. The outstanding
principal amount of the Revolving Loans, together with interest accrued and
unpaid thereon, shall constitute Obligations and shall be due andpayable on
the Maturity Date or, if earlier, on the date on which they are declared due
and payable pursuant to the terms of this Agreement.
(c)Anything to the contrary in this Section 2.1 notwithstanding, Agent shall
have the right (but not theobligation), in the exercise of its Permitted
Discretion, to establish and increase or decrease Receivable Reserves,
Inventory Reserves, Loan to Value Reserves, Bank Product Reserves, Canadian
Priority Payable Reserves and other Reserves against theBorrowing Base;
provided, that Agent shall notify Borrower at least 5 Business Days prior to
the date on which any such reserve is to be established or increased; provided
further, that (A) Borrower may not obtain any new Revolving Loans(including
Swing Loans) or Letters of Credit to the extent that such Revolving Loan
(including Swing Loans) or Letter of Credit would cause an Overadvance after
giving effect to the establishment or increase of such reserve as set forth in
suchnotice; (B) no such prior notice shall be required for changes to any
reserves established under this Agreement resulting solely by virtue of
mathematical calculations of the amount of the Reserve in accordance with the
methodology ofcalculation set forth in this Agreement or previously utilized;
(C) no such prior notice shall be required during the continuance of any Event
of Default and (D) no such prior notice shall be required with respect to any
Reserve established inrespect of any consensual Lien that has priority over
Agent's Liens on the Collateral. The amount of any Receivable Reserve,
Inventory Reserve, Loan to Value Reserves, Bank Product Reserve, Canadian
Priority Payables Reserve or other Reserveshall be established by Agent in its
Permitted Discretion and shall have a reasonable relationship to the event,
condition, other circumstance, or fact that is the basis for such reserve and
shall not be duplicative of any other Reserve establishedand currently
maintained. No reserve shall be implemented with respect to matters which are
already specifically reflected as ineligible Accounts or Inventory or Credit
Card Receivables.
(d)Anything to the contrary in this
Section 2.1
notwithstanding, at no time shall the CanadianDollar Equivalent of the
Revolver Usage exceed the Maximum Credit Amount.
2.2.
[IntentionallyOmitted]
.
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2.3.
Borrowing Procedures and Settlements
.
(a)
Procedure for Borrowing Revolving Loans
. Each Borrowing shall be made by a written request by anAuthorized Person
delivered to Agent and received by Agent no later than 1:00 p.m. (i) on the
Business Day that is the requested Funding Date in the case of a request for a
Base Rate Loan or, if available, a Swing Loan, and (ii) on the
Benchmark Rate
Business Day that is 3
Benchmark Rate
Business Days prior to the requested Funding Date in thecase of a
CDOR
TermCORRA
Rate Loan and on the RFR Business Day that is 3 RFR Business Days prior to the
requested Funding Date in the case of a request for a SOFR Rate Loan, in each
case, specifying (A) theamount and type of such Borrowing, and whether in
Canadian Dollars or US Dollars, as applicable and (B) with respect to any
Non-Base Rate Loan, the Interest Period therefor and (C) the requested Funding
Date (which shall be a BusinessDay);
provided
, that Agent may, in its sole discretion, elect to accept as timely requests
that are received later than 1:00 p.m. on the applicable BusinessDay
, RFR Business Day or Benchmark Rate Business Day
. AtAgent's election, in lieu of delivering the above-described written
request, any Authorized Person may give Agent telephonic notice of such
request by the required time. In such circumstances, Borrower agrees that any
such telephonic noticewill be confirmed by Administrative Borrower in writing
within 24 hours of the giving of such telephonic notice, but the failure to
provide such written confirmation shall not affect the validity of the
request. If Borrower requests a borrowing ofNon- Base Rate Loans in any such
request, but fails to specify an Interest Period, it will be deemed to have
specified an Interest Period of one month.
(b)
Making of Swing Loans.
In the case of a request for a Swing Loan by Administrative Borrower and
solong as either (i) the aggregate amount of Swing Loans made since the last
Settlement Date, minus all payments or other amounts applied to Swing Loans
since the last Settlement Date, plus the amount of the requested Swing Loan
does not exceed10% of the Maximum Credit Amount, or (ii) the Swing Lender, in
its sole discretion, agrees to make such Swing Loan notwithstanding the
foregoing limitation, the Swing Lender shall make a Revolving Loan (any such
Revolving Loan for the accountof Borrower made by Swing Lender pursuant to this
Section 2.3(b)
being referred to as a "
Swing Loan
" and all such Revolving Loans for the account of Borrower by Swing Lender
being referred to as "
SwingLoans
") available to Borrower on the Funding Date applicable thereto by
transferring immediately available funds in the Applicable Currency in the
amount of such requested Borrowing to the Canadian Designated Account or US
DesignatedAccount, as applicable. Each Swing Loan shall be deemed to be a
Revolving Loan hereunder and shall be subject to all the terms and conditions
(including
Section 3
) applicable to other Revolving Loans except that all payments (includinginteres
t) on any Swing Loan shall be payable to the Swing Lender solely for its own
account. Subject to the provisions of
Section 2.3(d)(ii)
, Swing Lender shall not make or be obligated to make any Swing Loan if Swing
Lender has actualknowledge that (i) one or more of the applicable conditions
precedent set forth in
Section 3
will not be satisfied or waived on the requested Funding Date for the
Borrowing, or (ii) the requested Borrowing would exceed ExcessAvailability on
such Funding Date. Swing Lender shall not otherwise be required to determine
whether the applicable conditions precedent set forth in
Section 3
have been satisfied on the Funding Date applicable thereto prior to making
anySwing Loan. The Swing Loans shall constitute Revolving Loans and
Obligations, and bear interest at the rate applicable from time to time to
Revolving Loans in the Applicable Currency that are Base Rate Loans.
Notwithstanding anything containedherein to the contrary, Swing Loans shall
not be available at any time that WF Canada is the only Lender.
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(c)
Making of Revolving
Loans
.
(i)In the event that the Swing Lender is not obligated to make a Swing Loan,
then after receipt of a requestfor a Borrowing pursuant to
Section 2.3(a)
, Agent shall notify the applicable Lenders by telecopy, telephone, email, or
other electronic form of transmission, of the requested Borrowing; such
notification to be sent on the Business Day or RFRBusiness Day, as applicable
that is (A) in the case of a Base Rate Loan, at least 1 Business Day prior to
the requested Funding Date, (B) in the case of a request for a SOFR Rate Loan,
prior to 1:00 p.m. at least 3 RFR Business Days priorto the requested Funding
Date, (C) in the case of request for a
CDOR
TermCORRA
Rate Loan, prior to 1:00 p.m. at least three
Benchmark Rate
Business Days prior to the requested FundingDate. If Agent has notified the
applicable Lenders of a requested Borrowing on the Business Day that is 1
Business Day prior to the Funding Date, then each Lender with the applicable
Revolving Commitment shall make the amount of such Lender'sPro Rata Share of
the requested Borrowing available to Agent in immediately available funds in
the Applicable Currency, to Agent's US Account or Agent's Canadian Account, as
applicable, not later than 10:00 a.m. on the Business Day that isthe requested
Funding Date. After Agent's receipt of the proceeds of such Revolving Loans
from the applicable Lenders, Agent shall make the proceeds thereof available
to Borrower on the applicable Funding Date by transferring immediatelyavailable
funds in the Applicable Currency equal to such proceeds received by Agent to
the US Designated Account or the Canadian Designated Account, as applicable;
provided
, that, subject to the provisions of
Section 2.3(d)(ii)
, noLender shall have an obligation to make any Revolving Loan, if (1) one or
more of the applicable conditions precedent set forth in
Section 3
will not be satisfied on the requested Funding Date for the applicable
Borrowing unless suchcondition has been waived, or (2) the requested Borrowing
would exceed the Excess Availability on such Funding Date.
(ii)Unless Agent receives notice from a Lender prior to 9:30 a.m. on the
Business Day that is the requestedFunding Date relative to a requested
Borrowing as to which Agent has notified the Lenders of a requested Borrowing
that such Lender will not make available as and when required hereunder to
Agent for the account of Borrower, the amount of thatLender's Pro Rata Share
of the Borrowing, Agent may assume that each Lender has made or will make such
amount available to Agent in immediately available funds in the Applicable
Currency on the Funding Date and Agent may (but shall not be sorequired), in
reliance upon such assumption, make available to Borrower, a corresponding
amount. If, on the requested Funding Date, any Lender shall not have remitted
the full amount that it is required to make available to Agent in
immediatelyavailable funds in the Applicable Currency and if Agent has made
available to Borrower such amount on the requested Funding Date, then such
Lender shall make the amount of such Lender's Pro Rata Share of the requested
Borrowing available toAgent in immediately available funds in the Applicable
Currency, to Agent's Applicable Account, no later than 10:00 a.m. on the
Business Day that is the first Business Day after the requested Funding Date
(in which case, the interest accrued onsuch Lender's portion of such Borrowing
for the Funding Date shall be for Agent's separate account). If any Lender
shall not remit the full amount that it is required to make available to Agent
in immediately available funds in theApplicable Currency as and when required
hereby and if Agent has made available to Borrower such amount, then that
Lender shall be obligated to immediately remit such amount to Agent, together
with interest at the applicable Defaulting Lender Ratefor each day until the
date on which such amount is so remitted. A notice submitted by Agent to any
Lender with respect to amounts owing under this
Section 2.3(c)(ii)
shall
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be conclusive, absent manifest error. If the amount that a Lender is required
to remit ismade available to Agent, then such payment to Agent shall
constitute such Lender's Revolving Loans for all purposes of this Agreement.
If such amount is not made available to Agent on the Business Day following
the Funding Date, Agent willnotify Administrative Borrower of such failure to
fund and, upon demand by Agent, Borrower shall pay such amount in the
Applicable Currency to Agent, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate perannum equal to the
interest rate applicable at the time to the applicable Revolving Loans
composing such Borrowing.
(d)
Protective Advances and Optional Overadvances
.
(i)Any contrary provision of this Agreement or any other Loan Document
notwithstanding, but subject to
Section 2.3(d)(iv)
, at any time (A) after the occurrence and during the continuance of a Default
or an Event of Default, or (B) that any of the other applicable conditions
precedent set forth in
Section 3
are notsatisfied or waived, Agent hereby is authorized by Borrower and the
Lenders, from time to time, in Agent's sole discretion, to make Revolving
Loans to, or for the benefit of, Borrower, in each case, on behalf of the
Revolving Lenders, thatAgent, in its Permitted Discretion, deems necessary or
desirable (1) to preserve or protect the Collateral, or any portion thereof,
or (2) to enhance the likelihood of repayment of the Obligations (other than
the Bank Product Obligations)(the Revolving Loans described in this
Section
2.3(d)(i)
shall be referred to as "
Protective Advances
"). The Protective Advances shall be made in Canadian Dollars or US Dollars,
as determined by Agent. Notwithstandingthe foregoing, the aggregate Canadian
Dollar Equivalent amount of all Protective Advances outstanding at any one
time shall not exceed 10% of the Maximum Credit Amount (unless Required
Lenders otherwise agree to a higher amount).
(ii)Any contrary provision of this Agreement or any other Loan Document
notwithstanding, but subject to
Section 2.3(d)(iv)
, the Lenders hereby authorize Agent or the Swing Lender, as applicable, and
either Agent or the Swing Lender, as applicable, may, but is not obligated to,
knowingly and intentionally, continue to make Revolving Loans(including Swing
Loans) to Borrower notwithstanding that an Overadvance exists or would be
created thereby, so long as with respect to any such Revolving Loans, (i)
after giving effect to any such Revolving Loans, the Canadian Dollar
Equivalentof the outstanding Revolver Usage does not exceed the Borrowing Base
by more than 10% of the Maximum Credit Amount (unless Required Lenders
otherwise agree to a higher amount), and (ii) after giving effect to such
Revolving Loans, the CanadianDollar Equivalent of the outstanding Revolver
Usage (except for and excluding amounts charged to the applicable Loan Account
for interest, fees, or Lender Group Expenses) does not exceed the Maximum
Credit Amount. In the event Agent obtains actualknowledge that the Canadian
Dollar Equivalent of the Revolver Usage exceeds the amounts permitted by the
immediately foregoing provisions, regardless of the amount of, or reason for,
such excess, Agent shall notify the Lenders as soon as practicable(and prior
to making any (or any additional) intentional Overadvances (except for and
excluding amounts charged to the applicable Loan Account for interest, fees,
or Lender Group Expenses) unless Agent determines that prior notice would
result inimminent harm to the Collateral or its value, in which case Agent may
make such Overadvances and provide notice as promptly as practicable
thereafter), and the Lenders with applicable Revolver Commitments thereupon
shall, together with Agent,jointly determine the terms of arrangements that
shall be implemented with Borrower intended to reduce, within 30
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days, the outstanding principal amount of the applicable Revolving Loans to
Borrower to anamount permitted by the preceding sentence. In such
circumstances, if any Lender with a Revolver Commitment objects to the
proposed terms of reduction or repayment of any Overadvance, the terms of
reduction or repayment thereof shall be implementedaccording to the
determination of the Required Lenders. In any event: (x) if any unintentional
Overadvance remains outstanding for more than 30 days, unless otherwise agreed
to by the Required Lenders, Borrower shall immediately repay Advancesin an
amount sufficient to eliminate all such unintentional Overadvances, and (y)
after the date all such Overadvances have been eliminated, there must be at
least 5 consecutive days before intentional Overadvances are made. The
foregoingprovisions are meant for the benefit of the Lenders and Agent and are
not meant for the benefit of Borrower, which shall continue to be bound by the
provisions of
Section
2.4(e)
. Each Lender with a Revolver Commitment shall beobligated to make Revolving
Loans in accordance with
Section
2.3
in, or settle Overadvances made by Agent with Agent as provided in
Section 2.3(e)
(or
Section 2.3(g)
, as applicable) for, the amount of such Lender'sPro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this
Section 2.3(d)(ii)
, and any Overadvances resulting from the charging to the applicable Loan
Accountof interest, fees, or Lender Group Expenses.
(iii)Each Protective Advance and each Overadvance (each,"
Extraordinary Advance
") shall be deemed to be a Revolving Loan hereunder. No Extraordinary Advance
shall be eligible to be a Non-Base Rate Loan. Prior to Settlement with respect
to Extraordinary Advances, all payments on theExtraordinary Advances,
including interest thereon, shall be payable to Agent solely for its own
account. The Extraordinary Advances shall be repayable on demand, constitute
Obligations hereunder, and bear interest at the rate applicable from timeto
time to Revolving Loans in the Applicable Currency that are Base Rate Loans.
The provisions of this
Section 2.3(d)
are for the exclusive benefit of Agent, Swing Lenders and the Lenders, and are
not intended to benefit Borrower (or anyother Loan Party) in any way.
(iv)Notwithstanding anything contained in this Agreement or any other
LoanDocument to the contrary, no Extraordinary Advance may be made by Agent if
such Extraordinary Advance would cause the aggregate Canadian Dollar
Equivalent principal amount of Extraordinary Advances outstanding to exceed an
amount equal to 10% of theMaximum Credit Amount (unless Required Lenders
otherwise agree to a higher amount). For the avoidance of doubt, nothing in
this
Section 2.3(d)
shall require any Lender to advance Revolving Loans in excess of such Lender's
RevolverCommitment.
(e)
Settlement
. It is agreed that each Lender's funded portion of the RevolvingLoans is
intended by the Lenders to equal, at all times, such Lender's Pro Rata Share
of the outstanding Revolving Loans. Such agreement notwithstanding, Agent,
Swing Lenders, and the other Lenders agree (which agreement shall not be for
thebenefit of Borrower) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among the Lenders as to the
Revolving Loans (including the Swing Loans and the Extraordinary Advances)
shall take place ona periodic basis in accordance with the following
provisions:
(i)Agent shall request settlement("
Settlement
") with the Lenders on a weekly basis, or on a more frequent basis if so
determined by Agent in its sole discretion (1) on behalf of Swing Lender, with
respect to the outstanding Swing Loans, (2) for itself,with respect
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to the outstanding Extraordinary Advances, and (3) with respect to Loan
Parties'payments or other amounts received, as to each by notifying the
Lenders by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 2:00 p.m. on the Business Day immediately
prior to the date of suchrequested Settlement (the date of such requested
Settlement being the "
Settlement Date
"). Such notice of a Settlement Date shall include a summary statement of the
amount of outstanding Revolving Loans (including Swing Loans andExtraordinary
Advances) for the period since the prior Settlement Date. Subject to the terms
and conditions contained herein (including
Section 2.3(g)
): (y) if the amount of the Revolving Loans (including Swing Loans and
ExtraordinaryAdvances) made by a Lender that is not a Defaulting Lender
exceeds such Lender's Pro Rata Share of the Revolving Loans (including Swing
Loans, and Extraordinary Advances) as of a Settlement Date, then Agent shall,
by no later than 12:00 p.m. onthe Settlement Date, transfer in immediately
available funds in the Applicable Currency to a deposit account of such Lender
(as such Lender may designate), an amount such that each such Lender shall,
upon receipt of such amount, have as of theSettlement Date, its Pro Rata Share
of the Revolving Loans (including Swing Loans and Extraordinary Advances); and
(z) if the amount of the Revolving Loans (including the Swing Loans and
Extraordinary Advances) made by a Lender is less thansuch Lender's Pro Rata
Share of the applicable Revolving Loans (including applicable Swing Loans and
applicable Extraordinary Advances) as of a Settlement Date, such Lender shall
no later than 12:00 p.m. on the Settlement Date transfer inimmediately
available funds in the Applicable Currency to Agent's Applicable Account, an
amount such that each such Lender shall, upon transfer of such amount, have as
of the Settlement Date, its Pro Rata Share of the Revolving Loans
(includingSwing Loans and Extraordinary Advances) and Revolving Loans
(including Swing Loans and Extraordinary Advances). Such amounts made
available to Agent under clause (z) of the immediately preceding sentence
shall be applied against the amounts ofthe applicable Swing Loans or
Extraordinary Advances. If any such amount is not made available to Agent by
any Lender on the Settlement Date applicable thereto to the extent required by
the terms hereof, Agent shall be entitled to recover for itsaccount such
amount on demand from such Lender together with interest thereon at the
Defaulting Lender Rate.
(ii)In determining whether a Lender's balance of the Revolving Loans
(including Swing Loans andExtraordinary Advances) is less than, equal to, or
greater than such Lender's Pro Rata Share of the Revolving Loans as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to
such balance the portion of paymentsapplicable to such Obligations actually
received in good funds by Agent with respect to principal, interest, fees
payable by Borrower and allocable to the Lenders hereunder, and proceeds of
Collateral.
(iii)Between Settlement Dates, Agent, to the extent Extraordinary Advances for
the account of Agent or SwingLoans for the account of a Swing Lender are
outstanding, may pay over to Agent or such Swing Lender, as applicable, any
payments or other amounts received by Agent, that in accordance with the terms
of this Agreement would be applied to thereduction of the Revolving Loans, for
application to the Extraordinary Advances or the Swing Loans. Between
Settlement Dates, Agent, to the extent no Extraordinary Advances or Swing
Loans are outstanding, may pay over to the Swing Lender anypayments or other
amounts received by Agent, that in accordance with the terms of this Agreement
would be applied to the reduction of the Revolving Loans, for application to
the Swing Lender's Pro Rata Share of the Revolving Loans. If, as ofany
Settlement Date, payments or other amounts of the Loan Parties received since
the then immediately preceding Settlement Date have been applied to Swing
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Lender's Pro Rata Share of the Revolving Loans other than to its Swing Loans,
asprovided for in the previous sentence, Swing Lender shall pay to Agent for
the accounts of the Lenders, and Agent shall pay to the Lenders (other than a
Defaulting Lender if Agent has implemented the provisions of
Section 2.3(g)
), to beapplied to the outstanding Revolving Loans of such Lenders, an amount
such that each such Lender shall, upon receipt of such amount, have, as of
such Settlement Date, its Pro Rata Share of the Revolving Loans. During the
period between SettlementDates, a Swing Lender with respect to its Swing
Loans, Agent with respect to Extraordinary Advances, and each Lender with
respect to the Revolving Loans other than Swing Loans and Extraordinary
Advances, shall be entitled to interest at theapplicable rate or rates payable
under this Agreement on the daily amount of funds employed by such Swing
Lender, Agent, or the Lenders, as applicable.
(iv)Anything in this
Section 2.3(e)
to the contrary notwithstanding, in the event that a Lender is aDefaulting
Lender, Agent shall be entitled to refrain from remitting settlement amounts
to the Defaulting Lender and, instead, shall be entitled to elect to implement
the provisions set forth in
Section 2.3(g)
.
(f)
Notation
. Agent, as a non-fiduciary agent for Borrower, shall maintain a register
showing in theApplicable Currency the principal amount of the Revolving Loans,
owing to each Lender, including Swing Loans owing to the Swing Lender, and
Extraordinary Advances owing to Agent, and the interests therein of each
Lender, from time to time and suchregister shall, absent manifest error,
conclusively be presumed to be correct and accurate.
(g)
Defaulting Lenders
.
(i)Notwithstanding the provisions of
Section 2.4(b)(ii)
, Agent shall not be obligated to transfer to aDefaulting Lender any payments
made by or on behalf of any Loan Party to Agent for the Defaulting Lender's
benefit or any proceeds of Collateral that would otherwise be remitted
hereunder to the Defaulting Lender, and, in the absence of suchtransfer to the
Defaulting Lender, Agent shall transfer any such proceeds of Collateral or
payments pertaining to or securing Obligations, (i) first, to Agent, to the
extent of any Extraordinary Advances that were made by Agent and that
wererequired to be, but were not, paid by the Defaulting Lender, (ii) second,
to Swing Lender to the extent of any Swing Loans that were made by Swing
Lender and that were required to be, but were not, paid by the Defaulting
Lender, (iii) third, toIssuing Lender, to the extent of the portion of a
Letter of Credit Disbursement that was required to be, but was not, paid by
the Defaulting Lender, (iv) fourth, to each Non-Defaulting Lender ratably in
accordance with its Revolver Commitments(but, in each case, only to the extent
that such Defaulting Lender's portion of a Revolving Loan (or other funding
obligation) was funded by such other Non-Defaulting Lender), (v) fifth, at
Borrower's request (so long as no Event ofDefault exists and the conditions
set forth on
Section 3.2
are satisfied), the funding of any Revolving Loans in respect of which such
Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, or reasonablydetermined by the Agent, (vi) sixth, in Agent's sole
discretion, to a suspense account maintained by Agent, the proceeds of which
shall be retained by Agent and may be made available to be re-advanced to or
for the benefit of Borrower(upon the request of Administrative Borrower and
subject to the conditions set forth in
Section 3.2
) as if such Defaulting Lender had made its portion of Revolving Loans (or
other funding obligations) hereunder, and (vii) seventh, fromand after the
date on which all other Obligations have been paid in full, to such Defaulting
Lender in accordance with tier (A)(13) of
Section 2.4(b)(ii)
. Subject to
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the foregoing, Agent may hold and, in its discretion, re-lend to Borrower for
the account ofsuch Defaulting Lender the amount of all such payments received
and retained by Agent for the account of such Defaulting Lender. Solely for
the purposes of voting or consenting to matters with respect to the Loan
Documents (including the calculationof Pro Rata Share in connection therewith)
and for the purpose of calculating the fees payable under
Section 2.10
, such Defaulting Lender shall be deemed not to be a "Lender" and such
Lender's Commitment shall be deemed to bezero;
provided
, that the foregoing shall not apply to any of the matters governed by
Section 14.1(a)(i)
through (iii). The provisions of this
Section 2.3(g)
shall remain effective with respect to such Defaulting Lender until theearlier
of (y) the date on which all of the Non-Defaulting Lenders, Agent, Issuing
Lenders, and Borrower shall have waived, in writing, the application of this
Section 2.3(g)
to such Defaulting Lender, or (z) the date on which suchDefaulting Lender
makes payment of all amounts that it was obligated to fund hereunder, pays to
Agent all amounts owing by Defaulting Lender in respect of the amounts that it
was obligated to fund hereunder, and, if requested by Agent, providesadequate
assurance of its ability to perform its future obligations hereunder (on which
earlier date, so long as no Event of Default has occurred and is continuing,
any remaining cash collateral held by Agent pursuant to
Section 2.3(g)(ii)
shall be released to Borrower). The operation of this
Section 2.3(g)
shall not be construed to increase or otherwise affect the Commitment of any
Lender, to relieve or excuse the performance by such Defaulting Lender or any
other Lender ofits duties and obligations hereunder, or to relieve or excuse
the performance by Borrower of its duties and obligations hereunder to Agent,
Issuing Lenders, or to the Lenders other than such Defaulting Lender. Any
failure by a Defaulting Lender tofund amounts that it was obligated to fund
hereunder shall constitute a material breach by such Defaulting Lender of this
Agreement and shall entitle Borrower, at their option, upon written notice by
Administrative Borrower to Agent, to arrange fora substitute Lender to assume
the Commitments and Loans of such Defaulting Lender and the Commitments and
Loans of any Affiliate of such Defaulting Lender, such substitute Lender to be
reasonably acceptable to Agent. In connection with thearrangement of such a
substitute Lender, the Defaulting Lenders shall have no right to refuse to be
replaced hereunder, and agree to execute and deliver a completed form of
Assignment and Acceptance in favor of the substitute Lender (and agree
thatthey shall be deemed to have executed and delivered such document if they
fail to do so) subject only to being paid its share of the outstanding
Obligations (other than Bank Product Obligations, but including (1) all
interest, fees, and otheramounts that may be due and payable in respect
thereof, and (2) an assumption of its Pro Rata Share of its participation in
the Letters of Credit);
provided
, that any such assumption of the Commitments and Loans of such DefaultingLender
s shall not be deemed to constitute a waiver of any of the Lender Groups' or
Borrower's rights or remedies against any such Defaulting Lender arising out
of or in relation to such failure to fund. In the event of a direct
conflictbetween the priority provisions of this
Section 2.3(g)
and any other provision contained in this Agreement or any other Loan
Document, it is the intention of the parties hereto that such provisions be
read together and construed, to thefullest extent possible, to be in concert
with each other. In the event of any actual, irreconcilable conflict that
cannot be resolved as aforesaid, the terms and provisions of this
Section 2.3(g)
shall control and govern.
(ii)If any Swing Loan or Letter of Credit is outstanding at the time that a
Lender becomes a Defaulting Lenderthen:
(A)such Defaulting Lender's Swing Loan Exposure and Letter of Credit Exposure
shall bereallocated among the applicable Non-Defaulting Lenders in
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accordance with their respective Pro Rata Shares but only to the extent (x)
the sum ofall Non- Defaulting Lenders' Revolver Usage plus such Defaulting
Lender's Swing Loan Exposure and US Letter of Credit Exposure does not exceed
all Non-Defaulting Lenders' Revolver Commitments does not exceed the total of
allNon-Defaulting Lenders' Revolver Commitments, and (y) the conditions set
forth in
Section 3.2
are satisfied at such time;
(B)if the reallocation described in clause (A) above cannot, or can only
partially, be effected, Borrowershall within one Business Day following notice
by the Agent (x) first, prepay such Defaulting Lender's Swing Loan Exposure
(after giving effect to any partial reallocation pursuant to clause (A) above)
and (y) second, cashcollateralize such Defaulting Lender's applicable Letter
of Credit Exposure (after giving effect to any partial reallocation pursuant
to clause (A) above), pursuant to a cash collateral agreement to be entered
into in form and substancereasonably satisfactory to the Agent, for so long as
such Letter of Credit Exposure is outstanding;
provided
, that Borrower shall not be obligated to cash collateralize any Defaulting
Lender's Letter of Credit Exposure if such DefaultingLender is also an the
Issuing Lender;
(C)if Borrower cash collateralizes any portion of such DefaultingLender's
Letter of Credit Exposure pursuant to this
Section 2.3(g)(ii)
, Borrower shall not be required to pay any Letter of Credit Fees to Agent for
the account of such Defaulting Lender pursuant to
Section 2.6(b)
with respect tosuch cash collateralized portion of such Defaulting Lender's
Letter of Credit Exposure during the period such Letter of Credit Exposure is
cash collateralized;
(D)to the extent the Letter of Credit Exposure of the Non- Defaulting Lenders
is reallocated pursuant to this
Section 2.3(g)(ii)
, then the Letter of Credit Fees payable to the Non-Defaulting Lenders
pursuant to
Section 2.6(b)
shall be adjusted in accordance with such Non-Defaulting Lenders' Letter of
Credit Exposure;
(E)to the extent any Defaulting Lender's Letter of Credit Exposure is neither
cash collateralized norreallocated pursuant to this
Section 2.3(g)(ii)
, then, without prejudice to any rights or remedies of any Issuing Lender or
any Lender hereunder, all Letter of Credit Fees that would have otherwise been
payable to such Defaulting Lender under
Section 2.6(b)
with respect to such portion of such Letter of Credit Exposure shall instead
be payable to the applicable Issuing Lender until such portion of such
Defaulting Lender's Letter of Credit Exposure is cash collateralized
orreallocated;
(F)so long as any Lender is a Defaulting Lender, Swing Lender shall not be
required to makeany Swing Loan and Issuing Lender shall not be required to
issue, amend, or increase any Letter of Credit, in each case, to the extent
(x) the Defaulting Lender's Pro Rata Share of such Swing Loans or Letter of
Credit cannot be reallocatedpursuant to this
Section 2.3(g)(ii)
or (y) the Swing Lender or Issuing Lender, as applicable, has not otherwise
entered into arrangements reasonably satisfactory to the Swing Lender or
Issuing Lender, as applicable, and Borrower toeliminate such Swing Lender's or
Issuing Lender's risk with respect to the Defaulting Lender's participation in
such Swing Loans or Letters of Credit; and
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(G)Agent may release any cash collateral provided by Borrowerpursuant to this
Section 2.3(g)(ii)
to the Issuing Lender and Issuing Lender may apply any such cash collateral to
the payment of such Defaulting Lender's Pro Rata Share of any Letter of Credit
Disbursement that is not reimbursed byBorrower in respect of its Letter of
Credit Obligations.
(h)
Independent Obligations
. All RevolvingLoans (other than Swing Loans and Extraordinary Advances) shall
be made by the Lenders contemporaneously and in accordance with their Pro Rata
Shares. It is understood that (i) no Lender shall be responsible for any
failure by any other Lenderto perform its obligation to make any Revolving
Loan (or other extension of credit) hereunder, nor shall any Commitment of any
Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligations hereunder, and(ii) no failure by any Lender
to perform its obligations hereunder shall excuse any other Lender from its
obligations hereunder.
2.4.
Payments; Reductions of Commitments; Prepayments
.
(a)
Payments by Borrower
.
(i)Except as otherwise expressly provided herein, all payments by Borrower
shall be made to Agent'sApplicable Account for the account of the Lender Group
and shall be made in immediately available funds in the Applicable Currency,
no later than 1:30 p.m. on the date specified herein. Any payment received by
Agent later than 1:30 p.m. shall bedeemed to have been received (unless Agent,
in its sole discretion, elects to credit it on the date received) on the
following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day.
(ii)Unless Agent receives notice from Administrative Borrower prior to the
date on which any payment is due tothe Lenders that Borrower will not make
such payment in full as and when required, Agent may assume that Borrower has
made (or will make) such payment in full to Agent on such date in immediately
available funds and Agent may (but shall not be sorequired), in reliance upon
such assumption, distribute to each Lender on such due date an amount equal to
the amount then due such Lender. If and to the extent Borrower does not make
such payment in full to Agent on the date when due, each Lenderseverally shall
repay to Agent on demand such amount distributed to such Lender, together with
interest thereon at the Defaulting Lender Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
(b)
Apportionment and Application
.
(i)So long as no Application Event has occurred and is continuing and except
as otherwise provided herein withrespect to Defaulting Lenders, all principal
and interest payments received by Agent shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Obligations to which
such payments relate held by each Lender) andall payments of fees and expenses
received by Agent (other than fees or expenses that are for Agent's separate
account or for the separate account of Issuing Lender) shall be apportioned
ratably among the Lenders having a Pro Rata Share of thetype of Commitment or
Obligation to which a particular fee or expense relates. Subject to
Section 2.4(b)(iv)
and
Section 2.4(e)
, all
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payments to be made hereunder by Borrower shall be remitted to Agent and all
such payments,and all proceeds of Collateral securing Obligations received by
Agent, shall be applied, so long as no Application Event has occurred and is
continuing and except as otherwise provided herein with respect to Defaulting
Lenders, to reduce the balanceof the Revolving Loans outstanding and,
thereafter, to Borrower (to be wired to the Canadian Designated Account or US
Designated Account, as applicable) or such other Person entitled thereto under
applicable law.
(ii)At any time that an Application Event has occurred and is continuing and
except as otherwise providedherein with respect to Defaulting Lenders, all
payments remitted to Agent and all proceeds of Collateral received by Agent
shall be applied as follows:
(A)All payments in respect of Obligations and all proceeds of Collateral
securing the Obligations received byAgent shall be applied as follows:
(1)
first
, to pay any Lender Group Expenses (including cost orexpense reimbursements)
or indemnities then due to Agent under the Loan Documents in respect of
Obligations, until paid in full,
(2)
second
, to pay any fees or premiums then due to Agent under the Loan Documents in
respect ofObligations until paid in full,
(3)
third
, to pay interest due in respect of all Protective Advancesuntil paid in full,
(4)
fourth
, to pay the principal of all Protective Advances until paid in full,
(5)
fifth
, ratably, to pay any Lender Group Expenses (including cost or expense
reimbursements) orindemnities then due to any of the Lenders under the Loan
Documents in respect of Obligations, until paid in full,
(6)
sixth
, ratably, to pay any fees or premiums then due to any of the Lenders under
the Loan Documentsin respect of Obligations until paid in full,
(7)
seventh
, to pay interest accrued in respect of theSwing Loans until paid in full,
(8)
eighth
, to pay the principal of all Swing Loans until paid infull,
(9)
ninth
, ratably, to pay interest accrued in respect of the Revolving Loans (other
thanProtective Advances) until paid in full,
(10)
tenth
, ratably
i.to pay the principal of all Revolving Loans until paid in full,
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ii.to Agent, to be held by Agent, for the benefit of IssuingLender (and for
the ratable benefit of each of the Lenders that have an obligation to pay to
Agent, for the account of Issuing Lender, a share of each Letter of Credit
Disbursement), as cash collateral in an amount up to 103% of the then Letter
ofCredit Usage relating to Canadian Dollar- denominated Letters of Credit and
108% of the then existing Letter of Credit Usage relating to US Dollar-denominat
ed Letters of Credit (to the extent permitted by applicable law, such cash
collateral shallbe applied to the reimbursement of any Letter of Credit
Disbursement as and when such disbursement occurs and, if a Letter of Credit
expires undrawn, the cash collateral held by Agent in respect of such Letter
of Credit shall, to the extentpermitted by applicable law, be reapplied
pursuant to this
Section 2.4(b)(ii)
, beginning with tier (A)(1) hereof),
iii.ratably, up to the amount (after taking into account any amounts
previously paid pursuant to this clauseiii. during the continuation of the
applicable Application Event) of the most recently established Bank Product
Reserve, which amount was established prior to the occurrence of, and not in
contemplation of, the subject Application Event, to(I) ratably to the Bank
Product Providers of Bank Products (based on the Bank Product Reserve, if any,
established for each Bank Product of such Bank Product Provider) up to the
amounts then certified by the applicable Bank Product Provider toAgent (in
form and substance reasonably satisfactory to Agent) to be due and payable to
such Bank Product Provider on account of Bank Product Obligations, and (II)
with any balance to be paid to Agent, to be held by Agent, for the ratable
benefit(based on the Bank Product Reserve established for each Bank Product)
of the Bank Product Providers for Bank Products, as cash collateral (which
cash collateral may be released by Agent to the applicable Bank Product
Provider and applied by suchBank Product Provider to the payment or
reimbursement of any amounts due and payable with respect to Bank Product
Obligations owed to the applicable Bank Product Provider as and when such
amounts first become due and payable and, if and at such timeas all such Bank
Product Obligations are paid or otherwise satisfied in full, the cash
collateral held by Agent in respect of such Bank Product Obligations shall be
reapplied pursuant to this
Section 2.4(b)(ii)
, beginning with tier (A)(1)hereof),
(11)
[Intentionally Omitted]
,
(12)
twelfth
, to pay any other Obligations other than Obligations owed to Defaulting
Lenders (includingbeing paid, ratably, to the Bank Product Providers on
account of all amounts then due and payable in respect of Bank Product
Obligations), with any balance to be paid to Agent, to be held by Agent, for
the ratable benefit of the Bank ProductProviders, as cash collateral (which
cash collateral may be released by Agent to the applicable Bank Product
Provider and applied by such Bank Product Provider to the payment or
reimbursement of any amounts due and payable with respect to BankProduct
Obligations owed to the applicable Bank Product Provider as and when such
amounts first become due and payable and, if and at such time as all such Bank
Product Obligations are paid or otherwise satisfied in full, the cash
collateral held byAgent in respect of such Bank Product Obligations shall be
reapplied pursuant to this
Section 2.4(b)(ii)
, beginning with tier (A)(1) hereof),
(13)
thirteenth
, ratably to pay any Obligations owed to Defaulting Lenders; and
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(14)
fourteenth
, to Borrower (to be wired to theCanadian Designated Account or US Designated
Account, as applicable) or such other Person entitled thereto under applicable
law.
(B)
[Intentionally Omitted
]
(iii)Agent promptly shall distribute to each Lender, pursuant to the
applicable wire instructions received fromeach Lender in writing, such funds
as it may be entitled to receive, subject to a Settlement delay as provided in
Section 2.3(e)
.
(iv)In each instance, so long as no Application Event has occurred and is
continuing,
Section 2.4(b)(ii)(A)
shall not apply to any payment made by Borrower to Agent and specified by
Administrative Borrower to be for the payment of specific Obligations then due
and payable (or prepayable) under any provision of thisAgreement or any other
Loan Document.
(v)For purposes of
Section 2.4(b)(ii)
, "paid infull" of a type of Obligation means payment in cash or immediately
available funds of all amounts owing on account of such type of Obligation,
including interest accrued after the commencement of any Insolvency
Proceeding, default interest,interest on interest, and expense reimbursements,
irrespective of whether any of the foregoing would be or is allowed or
disallowed in whole or in part in any Insolvency Proceeding.
(vi)In the event of a direct conflict between the priority provisions of this
Section 2.4
and any otherprovision contained in this Agreement or any other Loan Document,
it is the intention of the parties hereto that such provisions be read
together and construed, to the fullest extent possible, to be in concert with
each other. In the event of anyactual, irreconcilable conflict that cannot be
resolved as aforesaid, if the conflict relates to the provisions of
Section
2.3(g)
and this
Section 2.4
, then the provisions of
Section 2.3(g)
shall control and govern, andif otherwise, then the terms and provisions of this
Section 2.4
shall control and govern.
(c)
Reduction of Commitments
. The Revolver Commitments shall terminate on the Maturity Date. Borrower
mayreduce the Revolver Commitments without premium or penalty other than
payment of the Applicable Revolver Reduction Premium pursuant to the Fee
Letter, to an amount (which may be zero) not less than the sum of (A) the
Revolver Usage as of suchdate, plus (B) the principal amount of all Revolving
Loans not yet made as to which a request has been given by Borrower under
Section 2.3(a)
, plus (C) the amount of all Letters of Credit not yet issued as to which a
request hasbeen given by Administrative Borrower pursuant to
Section 2.11(a)
. Each such reduction shall be in an amount which is not less than $5,000,000
(unless the applicable Revolver Commitments are being reduced to zero and the
amount of theapplicable Revolver Commitments in effect immediately prior to
such reduction are less than $5,000,000), shall be made by providing not less
than 10 Business Days prior written notice to Agent, and shall be irrevocable.
Once reduced, the RevolverCommitments may not be increased except to the
extent of any Available Increase Amount then available. Each such reduction of
the applicable Revolver Commitments shall reduce the applicable Revolver
Commitments of each Lender proportionately inaccordance with its ratable share
thereof. Any notice delivered pursuant to this Section 2.4(c) may state that
such notice is conditioned upon the effectiveness of a third party
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transaction, in which case such notice may be revoked (by written notice to
Agent on orprior to the specified effective date of termination) if such
effectiveness does not occur.
(d)
OptionalPrepayments
. Borrower may prepay the principal of any Revolving Loan at any time in whole
or in part, without premium or penalty.
(e)
Mandatory Prepayments
. If, at any time, (A) the Canadian Dollar Equivalent of the Revolver Usageon
such date exceeds (B) the lesser of the Borrowing Base reflected in the
Borrowing Base Certificate most recently delivered by Borrower to Agent and
the Maximum Credit Amount (other than an excess arising solely as a result of
fluctuations inexchange rates that does not continue for more than one
Business Day), then Borrower shall, within one Business Day, prepay the
Obligations in accordance with
Section 2.4(f)(i)
in an aggregate amount equal to the amount of such excess.
(f)
Application of Payments
.
(i)Each prepayment pursuant to
Section 2.4(e)
shall, (A) so long as no Application Event shall haveoccurred and be
continuing, be applied,
first
, to the outstanding principal amount of the Revolving Loans until paid in
full, and
second
, to cash collateralize the Letters of Credit in an amount equal to 103% of
the then existingLetter of Credit Usage relating to Canadian Dollar-denominated
Letters of Credit and 108% of the then existing Letter of Credit Usage
relating to US Dollar-denominated Letters of Credit, and (B) if an Application
Event shall have occurred andbe continuing, be applied in the manner set forth
in
Section 2.4(b)(ii)
.
(ii)No prepayment appliedto the Revolving Loans or to cash collateralize
Letter of Credit Usage under
Section 2.4(f)(i)
shall result in a reduction in the Maximum Credit Amount;
provided
, that if an Event of Default exists, Required Lenders may elect for anysuch
prepayment applied to Obligations to result in a permanent reduction of the
Maximum Credit Amount.
2.5.
Promise to Pay; Promissory Notes
.
(a)Borrower agrees to pay the Lender Group Expenses owingby Borrower on the
earlier of (i) the first day of the month following the date on which the
applicable Lender Group Expenses were first incurred or (ii) the date on which
demand therefor is made by Agent (it being acknowledged and agreedthat any
charging of such costs, expenses or Lender Group Expenses to the applicable
Loan Account pursuant to the provisions of
Section 2.6(d)
shall be deemed to constitute a demand for payment thereof for the purposes of
this subclause(ii)). Borrower promises to pay all of the Obligations
(including principal, interest, premiums, if any, fees, costs, and expenses
(including Lender Group Expenses)) owing by Borrower in full on the Maturity
Date or, if earlier, on the date on whichsuch Obligations (other than the Bank
Product Obligations) become due and payable pursuant to the terms of this
Agreement. Borrower agrees that their obligations contained in the first
sentence of this
Section 2.5(a)
shall survive payment orsatisfaction in full of all other Obligations.
(b)Any Lender may request that any portion of itsCommitments or the Loans made
by it be evidenced by one or more promissory notes. In such event, Borrower
shall execute and deliver to such Lender the requested promissory notes
payable to the order of such Lender in
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a form furnished by Agent and reasonably satisfactory to Borrower. Thereafter,
the portionof the Commitments and Loans evidenced by such promissory notes and
interest thereon shall at all times be represented by one or more promissory
notes in such form payable to the order of the payee named therein.
2.6.
Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations
.
(a)
Interest Rates
. Except as provided in
Section 2.6(c)
, all Loans, and all Obligations (exceptfor undrawn Letters of Credit) that
have been charged to a Loan Account pursuant to the terms hereof, shall bear
interest as follows:
(i)if the relevant Obligation is a Non-Base Rate Loan in Canadian Dollars, at
a per annum rate equal to
the CDOR Rate plus theCDOR
if Borrower has selected Adjusted Term CORRA with respect to such Obligation
pursuant to the termshereof, Adjusted Term CORRA
plus
the Term CORRA
Rate Margin,
(ii)if the relevant Obligation in a Non-Base Rate Loan in US Dollars. at a per
annum ratio equal to the TermSOFR Rate plus the SOFR Rate Margin,
(iii)if the relevant Obligation is a Base Rate Loan in CanadianDollars, at a
per annum rate equal to the Canadian Base Rate plus the Base Rate Margin,
(iv)if therelevant Obligation is a Base Rate Loan in US Dollars, at a per
annum rate equal to the US Base Rate plus the Base Rate Margin,
(v)otherwise, at a per annum rate equal to the Canadian Base Rate (if such
Obligation is denominated inCanadian Dollars) plus the Base Rate Margin or the
US Base Rate (if such Obligation is denominated in US Dollars) plus the Base
Rate Margin.
(b)
Letter of Credit Fee
. Borrower shall pay to Agent, for the ratable account of the Revolving
Lenderswith a Revolver Commitment, a Letter of Credit fee (the "
Letter of Credit Fees
") (which fee shall be in addition to the fronting fees and commissions, other
fees, charges and expenses set forth in
Section 2.11(k)
) withrespect to the Letter of Credit Usage, that shall accrue at a per annum
rate equal to (i) the Non-Base Rate Margin times the Letter of Credit Usage in
the case of standby Letters of Credit; and (ii) the Non-Base Rate Margin less
0.50% inthe case of commercial Letters of Credit.
(c)
Default Rate
. Upon the occurrence and during thecontinuation of an Event of Default and at
the election of the Required Lenders,
(i)all Loans, and allObligations (except for undrawn Letters of Credit) that
have been charged to the Loan Account pursuant to the terms hereof, shall bear
interest at a per annum rate equal to 2 percentage points above the per annum
rate otherwise applicablethereunder, and
(ii)the Letter of Credit Fee shall be increased to 2 percentage points above
the per annumrate otherwise applicable hereunder.
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(d)
Payment
. Except to the extent provided to thecontrary in
Section 2.10
,
Section 2.11(k)
or
Section 2.12(a)
, (i) all interest, all Letter of Credit Fees and all other fees payable
hereunder or under any of the other Loan Documents shall be due and payable,
inarrears, on the first day of each month, and (ii) all costs and expenses
payable hereunder or under any of the other Loan Documents, and all Lender
Group Expenses shall be due and payable on the earlier of (x) the first day of
the monthfollowing the date on which the applicable costs, expenses, or Lender
Group Expenses were first incurred or (y) the date on which demand therefor is
made by Agent (it being acknowledged and agreed that any charging of such
costs, expenses orLender Group Expenses to the applicable Loan Account
pursuant to the provisions of the following sentence shall be deemed to
constitute a demand for payment thereof for the purposes of this subclause
(y)). Borrower hereby authorizes Agent, from timeto time without prior notice
to Borrower, to charge to the Loan Account (A) on the first day of each month,
all interest accrued during the prior month on the Revolving Loans hereunder,
(B) on the first day of each month, all Letter ofCredit Fees accrued or
chargeable hereunder during the prior month, (C) as and when incurred or
accrued, all fees and costs provided for in
Section 2.10(a)
or
(c)
and owing by Borrower, (D) as and when due and payable,all other fees payable
hereunder or under any of the other Loan Documents by Borrower, (E) as and
when incurred or accrued, the fronting fees and all commissions, other fees,
charges and expenses provided for in
Section 2.11(k)
, asapplicable, owing by Borrower, (F) as and when incurred or accrued, all
other Lender Group Expenses owing by Borrower, and (G) as and when due and
payable all other payment obligations payable under any Loan Document or any
Bank ProductAgreement (including any amounts due and payable to the Bank
Product Providers in respect of Bank Products) owing by Borrower. Agent shall
endeavor to provide prompt notice to the Administrative Borrower after any
costs and expenses described inthis Section 2.6(d) are charged to the Loan
Account; provided that (x) any failure to give or delay in giving such notice
shall not relieve Borrower of their obligation to pay such costs and expenses,
(y) delivery of such notice shall notbe required during the continuance of any
Event of Default, and (z) the Agent shall have no liability, in any event, for
failing to deliver such notice. All amounts (including interest, fees, costs,
expenses, Lender Group Expenses, or otheramounts payable hereunder or under
any other Loan Document or under any Bank Product Agreement) charged to the
applicable Loan Account shall thereupon constitute Revolving Loans hereunder
for the account of Borrower, shall constitute Obligationshereunder of
Borrower, and shall initially accrue interest at the rate then applicable to
Base Rate Loans in the Applicable Currency (unless and until converted into
Non-Base Rate Loans in accordance with the terms of this Agreement).
(e)
Computation
. All interest and fees chargeable under the Loan Documents (other than
amounts accruingat the Base Rate or
CDORRate
Adjusted Term CORRA
) shall be computed on thebasis of a 360 day year. All interest and fees
chargeable under the Loan Documents accruing at the Base Rate or
the CDOR Rate
Adjusted Term CORRA
shall be computed on the basis of a 365 or 366 forthe actual number of days
elapsed in the period during which the interest or fees accrue. In the event
the Base Rate is changed from time to time hereafter, the rates of interest
hereunder based upon the Base Rate automatically and immediately shallbe
increased or decreased by an amount equal to such change in the Base Rate.
(f)
Intent to LimitCharges to Maximum Lawful Rate
. In no event shall the interest rate or rates payable under this Agreement,
plus any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competentjurisdiction shall, in a
final determination, deem applicable. Subject to
Section 2.15
, Borrower and the Lender
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Group, in executing and delivering this Agreement, intend legally to agree
upon the rate orrates of interest and manner of payment stated within it;
provided
, that, anything contained herein to the contrary notwithstanding, if such
rate or rates of interest or manner of payment exceeds the maximum allowable
under applicable law,then, ipso facto, as of the date of this Agreement,
Borrower are and shall be liable only for the payment of such maximum amount
as is allowed by law, and payment received from Borrower in excess of such
legal maximum, whenever received, shall beapplied to reduce the principal
balance of the applicable Obligations to the extent of such excess.
2.7.
Crediting Payments
. The receipt of any payment item by Agent shall not be required tobe
considered a payment on account unless such payment item is a wire transfer of
immediately available funds in the Applicable Currency made to Agent's
Applicable Account or unless and until such payment item is honored when
presented forpayment. Should any payment item not be honored when presented
for payment, then Borrower shall be deemed not to have made such payment and
interest shall be calculated accordingly. Anything to the contrary contained
herein notwithstanding, anypayment item shall be deemed received by Agent only
if it is received into Agent's Applicable Account on a Business Day on or
before 1:30 p.m. If any payment item is received into Agent's Applicable
Account on a non-Business Day or after1:30 p.m. on a Business Day (unless
Agent, in its sole discretion, elects to credit it on the date received), it
shall be deemed to have been received by Agent as of the opening of business
on the immediately following Business Day.
2.8.
Designated Account
. Agent is authorized to make the Revolving Loans, and Issuing Lenderis
authorized to issue the Letters of Credit, under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person or, without instructions, if pursuant to
Section 2.6(d)
. Borrower agreesto establish and maintain the US Designated Account and
Canadian Designated Account with the Designated Account Bank for the purpose
of receiving the proceeds of the Revolving Loans requested by or on behalf of
Borrower and made by Agent or theapplicable Lenders hereunder. Unless
otherwise agreed by Agent and Borrower, any Revolving Loan or Swing Loan
requested by or on behalf of Borrower and made by Agent or the Lenders
hereunder shall be made to the Canadian Designated Account.
2.9.
Maintenance of Loan Accounts; Statements of Obligations
. Agent shall maintain accountson its books in the name of Borrower (with
respect to Canadian Dollars, the "
Canadian Loan Account
" and with respect to US Dollars, the "
US Loan Account
") on which Borrower will be charged with all Revolving Loans(including
Extraordinary Advances and Swing Loans) made by Agent, Swing Lender, or the
Lenders to Borrower or for Borrower's account, the Letters of Credit issued or
arranged by a Issuing Lender for Borrower's account, and all otherpayment
Obligations hereunder or under the other Loan Documents, including, accrued
interest, fees and expenses, and Lender Group Expenses of Borrower with
respect thereto. Agent shall maintain an account on its books in the name of
Borrower (the"
Canadian Loan Account
") on which Borrower will be charged with all Revolving Loans (including
Extraordinary Advances and Swing Loans) made by Agent, Canadian Swing Lender,
or the Lenders to Borrower or for Borrower's account,the Letters of Credit
issued or arranged by an Issuing Lender for Borrower's account, and all other
payment Obligations hereunder or under the other Loan Documents, including,
accrued interest, fees and expenses, and Lender Group Expenses ofBorrower with
respect thereto. In accordance with
Section 2.7
, the applicable Loan Account will be credited with
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all payments received by Agent from Borrower or for Borrower's account. Agent
shallmake available to Administrative Borrower monthly statements regarding
the Loan Accounts, including the principal amount of the Revolving Loans,
interest accrued hereunder, fees accrued or charged hereunder or under the
other Loan Documents, and asummary itemization of all charges and expenses
constituting Lender Group Expenses accrued hereunder or under the other Loan
Documents, and each such statement, absent manifest error, shall be
conclusively presumed to be correct and accurate andconstitute an account
stated between Borrower and the Lender Group unless, within 60 days after
Agent first makes such a statement available to Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection theretodescribi
ng the error or errors contained in such statement.
2.10.
Fees
.
(a)
Agent's Fees
. Borrower shall pay to Agent, for the account of Agent, unless otherwise
indicated,as and when due and payable under the terms of the Fee Letter, the
fees set forth in the Fee Letter.
(b)
Unused Line Fees
. Borrower shall pay to Agent, for the ratable account of the Revolving
Lenders(other than Defaulting Lenders) with a Revolver Commitment, an unused
line fee (the "
Unused Line Fee
") in an amount equal to the Applicable Unused Line Fee Percentage per annum
times the result of (i) the aggregate amount ofthe Revolver Commitments, less
(ii) the average amount of the Revolver Usage during the immediately preceding
month (or portion thereof), which Unused Line Fee shall be due and payable in
arrears on the first day of each month from and afterthe Original Closing Date
up to the first day of the month prior to the date on which the Obligations
are paid in full and on the date on which the Obligations are paid in full.
(c)
Field Examination and Other Fees
. Borrower shall pay to Agent, field examination, appraisal, andvaluation fees
and charges, as and when incurred or chargeable, as follows (i) reasonable and
documented out-of-pocket expenses (including travel, meals, and lodging) if it
elects to employ the services of one or more third Persons to performfield
examinations of Borrower or its Subsidiaries, to establish electronic
collateral reporting systems, to appraise the Collateral (including Eligible
Accounts), or any portion thereof, or to assess Borrower's or its
Subsidiaries'business valuation;
provided
, that so long as no Event of Default shall have occurred and be continuing,
Borrower shall not be obligated to reimburse Agent for more than 2 field
examinations of each Loan Party during any calendar year, ormore than 2
appraisals of Inventory of each Loan Party during any 12-month period;
provided further
,
however
, that if Excess Availability is less than 15% of the Line Cap for a period of
5 consecutive Business Days at any time duringany 12-month period, then
Borrower shall be obligated to reimburse Agent for an additional field
examination of each Loan Party during such 12-month period and for an
additional appraisal of Inventory of each Loan Party during such 12-month
period.
2.11.
Letters of Credit.
(a)Subject to the terms and conditions of this Agreement, upon the request of
Administrative Borrower made inaccordance herewith, and prior to the Maturity
Date, Issuing Lender agrees to issue, or, if Issuing Lender is WF Canada, to
cause an Underlying Issuer (including as Issuing Lender's agent) to issue, a
requested Letter of Credit for the accountof
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Borrower. If Issuing Lender is WF Canada, it may, at its option, elect to
cause anUnderlying Issuer to issue a requested Letter of Credit. If WF Canada
makes such election, it agrees that it will enter into arrangements relative
to the reimbursement of such Underlying Issuer (which may include, among other
means, by becoming anapplicant with respect to such Letter of Credit or
entering into undertakings or other arrangements that provide for
reimbursement of such Underlying Issuer with respect to such drawings under
Letter of Credit; each such obligation or undertaking,irrespective of whether
in writing, a "
Reimbursement Undertaking
") with respect to Letters of Credit issued by such Underlying Issuer for the
account of Borrower. By submitting a request to Issuing Lender for the
issuance of aLetter of Credit, Administrative Borrower shall be deemed to have
requested that (x) Issuing Lender issue the requested Letter of Credit or (y)
in the case in which WF Canada is the Issuing Lender, an Underlying Issuer
issue the requestedLetter of Credit (and, in such case, to have requested WF
Canada to issue a Reimbursement Undertaking with respect to such requested
Letter of Credit). Each request for the issuance of a Letter of Credit, or the
amendment, renewal, or extension ofany outstanding Letter of Credit, shall be
made in writing by an Authorized Person and delivered to Issuing Lender via
telefacsimile or other electronic method of transmission reasonably acceptable
to Issuing Lender and reasonably in advance of therequested date of issuance,
amendment, renewal, or extension. Each such request shall be in form and
substance reasonably satisfactory to Issuing Lender and (i) shall specify (A)
the amount of such Letter of Credit and whether such Letter ofCredit to be
issued in Canadian Dollars, US Dollars, English Pounds or Euros, (B) the date
of issuance, amendment, renewal, or extension of such Letter of Credit, (C)
the proposed expiration date of such Letter of Credit, (D) the nameand address
of the beneficiary of the Letter of Credit, and (E) such other information
(including, the conditions to drawing, and, in the case of an amendment,
renewal, or extension, identification of the Letter of Credit to be so
amended,renewed, or extended) as shall be necessary to prepare, amend, renew,
or extend such Letter of Credit, and (ii) shall be accompanied by such Issuer
Documents as Agent, Issuing Lender or Underlying Issuer may request or
require, to the extentthat such requests or requirements are consistent with
the Issuer Documents that Issuing Lender or Underlying Issuer generally
requests for Letters of Credit in similar circumstances. Issuing Lender's
records of the content of any such requestwill be conclusive, absent manifest
error. Anything contained herein to the contrary notwithstanding, Issuing
Lender may, but shall not be obligated to, issue a Letter of Credit that
supports the obligations of Borrower in respect of (x) a lease ofreal property
to the extent that the face amount of such Letter of Credit exceeds the
highest rent (including all rent-like charges) payable under such lease for a
period of one year, or (y) an employment contract to the extent that the face
amountof such Letter of Credit exceeds the highest compensation payable under
such contract for a period of one year.
(b)Issuing Lender shall have no obligation to issue a Letter of Credit or a
Reimbursement Undertaking in respectof a Letter of Credit, in either case, if
any of the following would result after giving effect to the requested
issuance:
(i)the Canadian Dollar Equivalent of the Letter of Credit Usage would exceed
$5,000,000,
(ii)the Canadian Dollar Equivalent of the Letter of Credit Usage would exceed
the Maximum Credit Amountless the Canadian Dollar Equivalent of the
outstanding amount of Revolving Loans, or
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(iii)the Canadian Dollar Equivalent of the Letter of CreditUsage would exceed
the Borrowing Base at such time less the outstanding principal balance of the
Canadian Dollar Equivalent of the Revolving Loans at such time.
(c)In the event there is a Defaulting Lender as of the date of any request for
the issuance of a Letter ofCredit, the Issuing Lender shall not be required to
issue or arrange for such Letter of Credit or any applicable Reimbursement
Undertaking to the extent (i) the Defaulting Lender's Letter of Credit
Exposure with respect to such Letter ofCredit or any applicable Reimbursement
Undertaking may not be reallocated pursuant to
Section 2.3(g)(ii)
, the Issuing Lender has not otherwise entered into arrangements reasonably
satisfactory to it and Borrower to eliminate the IssuingLender's risk with
respect to the participation in such Letter of Credit or any applicable
Reimbursement Undertaking of the Defaulting Lender, which arrangements may
include Borrower cash collateralizing such Defaulting Lender's Letter ofCredit
Exposure in accordance with
Section 2.3(g)(ii)
. Additionally, Issuing Lender shall have no obligation to issue a Letter of
Credit or a Reimbursement Undertaking in respect of a Letter of Credit if (A)
any order, judgment, ordecree of any Governmental Authority or arbitrator
shall, by its terms, purport to enjoin or restrain Issuing Lender from issuing
such Letter of Credit or a Reimbursement Undertaking or Underlying Issuer from
issuing such Letter of Credit, or anylaw applicable to Issuing Lender or
Underlying Issuer or any request or directive (whether or not having the force
of law) from any Governmental Authority with jurisdiction over Issuing Lender
or Underlying Issuer shall prohibit or request thatIssuing Lender or
Underlying Issuer refrain from the issuance of letters of credit generally or
such Letter of Credit or Reimbursement Undertaking, as applicable, in
particular, (B) the issuance of such Letter of Credit or ReimbursementUndertakin
g would violate one or more policies of Issuing Lender or Underlying Issuer
applicable to letters of credit generally, or (C) amounts demanded to be paid
under any Letter of Credit will or may not be in Canadian Dollars, US
Dollars,British Pounds or Euros.
(d)Any Issuing Lender (other than WF Canada or any of its Affiliates)
shallnotify Agent in writing no later than the Business Day immediately
following the Business Day on which such Issuing Lender issued any Letter of
Credit or Reimbursement Undertaking;
provided
that (i) until Agent advises any such IssuingLender that the provisions of
Section 3.2
are not satisfied, or (ii) unless the aggregate amount of the Letters of
Credit issued in any such week exceeds such amount as shall be agreed by Agent
and such Issuing Lender, such IssuingLender shall be required to so notify
Agent in writing only once each week of the Letters of Credit or Reimbursement
Undertaking issued by such Issuing Lender during the immediately preceding
week as well as the daily amounts outstanding for theprior week, such notice
to be furnished on such day of the week as Agent and such Issuing Lender may
agree. Each Letter of Credit shall be in form and substance reasonably
acceptable to Issuing Lender and Underlying Issuer, including the
requirementthat the amounts payable thereunder must be payable in Canadian
Dollars, US Dollars, British Pounds or Euros. If Issuing Lender makes a
payment under a Letter of Credit or a Reimbursement Undertaking, Borrower
shall jointly and severally pay toAgent an amount equal to the applicable
Letter of Credit Disbursement on the Business Day such Letter of Credit
Disbursement is made and, in the absence of such payment, the amount of the
Letter of Credit Disbursement immediately and automaticallyshall be deemed to
be a Revolving Loan in US Dollars for any Letter of Credit issued in US
Dollars and in Canadian Dollars for any Letter of Credit issued in another
currency (notwithstanding any failure to satisfy any condition precedent set
forthin
Section 3
) in an amount equal to the Canadian Dollar Equivalent thereof and, initially,
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shall bear interest at the rate then applicable to Revolving Loans in the
applicablecurrency that are Base Rate Loans. If a Letter of Credit
Disbursement is deemed to be a Revolving Loan hereunder, Borrower's obligation
to pay the amount of such Letter of Credit Disbursement to Issuing Lender
shall be automatically convertedinto an obligation to pay the resulting
Revolving Loan. Promptly following receipt by Agent of any payment from
Borrower pursuant to this paragraph, Agent shall distribute such payment to
Issuing Lender or, to the extent that any Revolving Lendershave made payments
pursuant to
Section 2.11A(e)
to reimburse Issuing Lender, then to such Revolving Lender and Issuing Lender
as their interests may appear.
(e)Promptly following receipt of a notice of a Letter of Credit Disbursement
pursuant to
Section
2.11(d)
, each Revolving Lender agrees to fund its Pro Rata Share of any Revolving
Loan deemed made pursuant to
Section 2.11(d)
on the same terms and conditions as if Administrative Borrower had requested
the amount thereof as aRevolving Loan and Agent shall promptly pay to Issuing
Lender the amounts so received by it from the Revolving Lenders. By the
issuance of a Letter of Credit or Reimbursement Undertaking (or an amendment,
renewal, or extension of a Letter of Creditor Reimbursement Undertaking) and
without any further action on the part of Issuing Lender or the Revolving
Lenders, Issuing Lender shall be deemed to have granted to each Revolving
Lender with a Revolver Commitment, and each Revolving Lender with aRevolver
Commitment shall be deemed to have purchased, a participation in each Letter
of Credit issued by Issuing Lender and each Reimbursement Undertaking, in an
amount equal to its Pro Rata Share of such Letter of Credit or ReimbursementUnde
rtaking, and each such Revolving Lender agrees to pay to Agent, for the
account of Issuing Lender, such Revolving Lender's Pro Rata Share of any
Letter of Credit Disbursement made by Issuing Lender under the applicable
Letter of Credit orReimbursement Undertaking. In consideration and in
furtherance of the foregoing, each Revolving Lender with a Revolver Commitment
hereby absolutely and unconditionally agrees to pay to Agent, for the account
of Issuing Lender, such RevolvingLender's Pro Rata Share of each Letter of
Credit Disbursement made by Issuing Lender and not reimbursed by Borrower on
the date due as provided in
Section 2.11(d)
, or of any reimbursement payment that is required to be refunded (or
thatAgent or Issuing Lender elects, based upon the advice of counsel, to
refund) to Borrower for any reason. Each Revolving Lender with a Revolver
Commitment acknowledges and agrees that its obligation to deliver to Agent,
for the account of IssuingLender, an amount equal to its respective Pro Rata
Share of each Letter of Credit Disbursement pursuant to this
Section 2.11(e)
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence orcontinuation of an Event of Default or
Default or the failure to satisfy any condition set forth in
Section 3
. If any such Revolving Lender fails to make available to Agent the amount of
such Revolving Lender's Pro Rata Share of a Letterof Credit Disbursement as
provided in this Section, such Revolving Lender shall be deemed to be a
Defaulting Lender and Agent (for the account of Issuing Lender) shall be
entitled to recover such amount on demand from such Revolving Lender
togetherwith interest thereon at the Defaulting Lender Rate until paid in full.
(f)Borrower agrees to indemnify,defend and hold harmless each Letter of Credit
Related Person (to the fullest extent permitted by law) from and against any
Letter of Credit Indemnified Costs, which arise out of or in connection with,
or as a result of:
(i)any Letter of Credit or any pre-advice of its issuance or Reimbursement
Undertaking;
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(ii)any transfer, sale, delivery, surrender or endorsement ofany Drawing
Document at any time(s) held by any such Letter of Credit Related Person in
connection with any Letter of Credit or Reimbursement Undertaking;
(iii)any action or proceeding arising out of, or in connection with, any
Letter of Credit or ReimbursementUndertaking (whether administrative, judicial
or in connection with arbitration), including any action or proceeding to
compel or restrain any presentation or payment under any Letter of Credit or
Reimbursement Undertaking, or for the wrongfuldishonor of, or honoring a
presentation under, any Letter of Credit;
(iv)any independent undertakingsissued by the beneficiary of any Letter of
Credit;
(v)any unauthorized instruction or request made toIssuing Lender or Underlying
Issuer in connection with any Letter of Credit or Reimbursement Undertaking or
requested Letter of Credit or Reimbursement Undertaking or error in computer
or electronic transmission;
(vi)an adviser, confirmer or other nominated person seeking to be reimbursed,
indemnified or compensated inconnection with any Letter of Credit or
Reimbursement Undertaking;
(vii)any third party seeking to enforcethe rights of an applicant,
beneficiary, nominated person, transferee, assignee of Letter of Credit
proceeds or holder of an instrument or document;
(viii)the fraud, forgery or illegal action of parties in connection with a
Letter of Credit or ReimbursementUndertaking other than the Letter of Credit
Related Person;
(ix)Issuing Lender's or UnderlyingIssuer's performance of the obligations of a
confirming institution or entity that wrongfully dishonors a confirmation in
connection with a Letter of Credit; or
(x)the acts or omissions, whether rightful or wrongful, of any present or
future de jure or de factogovernmental or regulatory authority or cause or
event beyond the control of the Letter of Credit Related Person related to a
Letter of Credit or Reimbursement Undertaking;
in each case, including that result from the Letter of Credit Related Person's
own negligence;
provided
,
however
, that suchindemnity shall not be available to any Letter of Credit Related
Person claiming indemnification under clauses (i) through (x) above to the
extent that such Letter of Credit Indemnified Costs may be determined in a
final, non-appealablejudgment of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Letter of
Credit Related Person claiming indemnity. Borrower hereby agrees to pay the
Letter of Credit Related Person claimingindemnity on demand from time to time
all amounts owing under this
Section 2.11(f)
. If and to the extent that the obligations of Borrower under this
Section 2.11(f)
are unenforceable for any reason, Borrower agrees to make the maximumcontributio
n to the Letter of Credit Indemnified Costs permissible under applicable law.
This indemnification provision
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shall survive termination of this Agreement and all Letters of Credit and
ReimbursementUndertaking.
(g)The liability of Issuing Lender (or any other Letter of Credit Related
Person) under, inconnection with or arising out of any Letter of Credit (or
pre-advice) or Reimbursement Undertaking, regardless of the form or legal
grounds of the action or proceeding, shall be limited to direct damages
suffered by Borrower that are causeddirectly by Issuing Lender's gross
negligence or willful misconduct in (i) honoring a presentation under a Letter
of Credit that on its face does not at least substantially comply with the
terms and conditions of such Letter of Credit,(ii) failing to honor a
presentation under a Letter of Credit that strictly complies with the terms
and conditions of such Letter of Credit or (iii) retaining Drawing Documents
presented under a Letter of Credit. Each Issuing Lender andUnderlying Issuer
shall be deemed to have acted with due diligence and reasonable care if such
Person's conduct is in accordance with Standard Letter of Credit Practice or
in accordance with this Agreement. Borrower's aggregate remediesagainst
Issuing Lender and any other Letter of Credit Related Person for wrongfully
honoring a presentation under any Letter of Credit or wrongfully retaining
honored Drawing Documents shall in no event exceed the aggregate amount paid
by Borrowerto Issuing Lender in respect of the honored presentation in
connection with such Letter of Credit under
Section
2.11(d)
, plus interest at the rate then applicable to Revolving Loans in the
applicable currency that are Base Rate Loanshereunder. Borrower shall take
action to avoid and mitigate the amount of any damages claimed against Issuing
Lender or any other Letter of Credit Related Person, including by enforcing
their rights against the beneficiaries of the Letters ofCredit. Any claim by
Borrower under or in connection with any Letter of Credit shall be reduced by
an amount equal to the sum of (x) the amount (if any) saved by Borrower as a
result of the breach or alleged wrongful conduct complained of; and(y) the
amount (if any) of the loss that would have been avoided had Borrower taken
all reasonable steps to mitigate any loss, and in case of a claim of wrongful
dishonor, by specifically and timely authorizing Issuing Lender or
UnderlyingIssuer to effect a cure.
(h)Administrative Borrower is responsible for preparing or approving the
finaltext of the Letter of Credit as issued by Issuing Lender or Underlying
Issuer, irrespective of any assistance Issuing Lender or Underlying Issuer may
provide such as drafting or recommending text or by Issuing Lender's or
UnderlyingIssuer's use or refusal to use text submitted by Administrative
Borrower. Borrower is solely responsible for the suitability of the Letter of
Credit for Borrower's purposes. With respect to any Letter of Credit
containing an"automatic amendment" to extend the expiration date of such
Letter of Credit, each of Issuing Lender and Underlying Issuer, in its sole
and absolute discretion, may give notice of nonrenewal of such Letter of
Credit and, if Borrower doesnot at any time want such Letter of Credit to be
renewed, Administrative Borrower will so notify Agent and Issuing Lender at
least 15 calendar days before Issuing Lender or Underlying Issuer is required
to notify the beneficiary of such Letter ofCredit or any advising bank of such
nonrenewal pursuant to the terms of such Letter of Credit.
(i)Borrower's reimbursement and payment obligations under this
Section 2.11
are absolute,unconditional and irrevocable and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever, including:
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(i)any lack of validity, enforceability or legal effect ofany Letter of
Credit, any Reimbursement Undertaking or this Agreement or any term or
provision therein or herein;
(ii)payment against presentation of any draft, demand or claim for payment
under any Drawing Document that doesnot comply in whole or in part with the
terms of the applicable Letter of Credit or which proves to be fraudulent,
forged or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, or which is signed, issued orpresented by a Person
or a transferee of such Person purporting to be a successor or transferee of
the beneficiary of such Letter of Credit;
(iii)Issuing Lender or any of its branches or Affiliates or Underlying Issuer
or any of its branches orAffiliates being the beneficiary of any Letter of
Credit;
(iv)Issuing Lender or any correspondent orUnderlying Issuer or any
correspondent honoring a drawing against a Drawing Document up to the amount
available under any Letter of Credit even if such Drawing Document claims an
amount in excess of the amount available under the Letter of Credit;
(v)the existence of any claim, set-off, defense or other right that Borrower
or any of its Subsidiariesmay have at any time against any beneficiary, any
assignee of proceeds, Issuing Lender, Underlying Issuer or any other Person;
(vi)any other event, circumstance or conduct whatsoever, whether or not
similar to any of the foregoing thatmight, but for this
Section 2.11(i)
, constitute a legal or equitable defense to or discharge of, or provide a
right of set-off against, Borrower's or any of its Subsidiaries' reimbursement
and other payment obligations andliabilities, arising under, or in connection
with, any Letter of Credit, whether against Issuing Lender, Underlying Issuer,
the beneficiary or any other Person; or
(vii)the fact that any Default or Event of Default shall have occurred and be
continuing;
provided
,
however
, that subject to
Section 2.11(g)
above, the foregoing shall not release Issuing Lender or UnderlyingIssuer from
such liability to Borrower as may be finally determined in a final,
non-appealable judgment of a court of competent jurisdiction against Issuing
Lender or Underlying Issuer following reimbursement or payment of the
obligations andliabilities, including reimbursement and other payment
obligations, of Borrower to Issuing Lender arising under, or in connection
with, this
Section 2.11
or any Letter of Credit or Reimbursement Undertaking or its correspondent.
(j)Without limiting any other provision of this Agreement, Issuing Lender and
each other Letter of CreditRelated Person (if applicable) shall not be
responsible to Borrower for, and Issuing Lender's rights and remedies against
Borrower and the obligation of Borrower to reimburse Issuing Lender for each
drawing under each Letter of Credit and eachReimbursement Undertaking shall
not be impaired (except in the case of the gross negligence or willful
misconduct of the Issuing Lender or any of its Affiliates as finally
determined in a court of competent jurisdiction) by:
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(i)honor of a presentation under any Letter of Credit that onits face
substantially complies with the terms and conditions of such Letter of Credit,
even if the Letter of Credit requires strict compliance by the beneficiary;
(ii)honor of a presentation of any Drawing Document that appears on its face
to have been signed, presented orissued (A) by any purported successor or
transferee of any beneficiary or other Person required to sign, present or
issue such Drawing Document or (B) under a new name of the beneficiary;
(iii)acceptance as a draft of any written or electronic demand or request for
payment under a Letter of Credit,even if nonnegotiable or not in the form of a
draft or notwithstanding any requirement that such draft, demand or request
bear any or adequate reference to the Letter of Credit;
(iv)the identity or authority of any presenter or signer of any Drawing
Document or the form, accuracy,genuineness or legal effect of any Drawing
Document (other than Issuing Lender's or Underlying Issuer's determination
that such Drawing Document appears on its face substantially to comply with
the terms and conditions of the Letter ofCredit);
(v)acting upon any instruction or request relative to a Letter of Credit or
requested Letter ofCredit that each of Issuing Lender and Underlying Issuer in
good faith believes to have been given by a Person authorized to give such
instruction or request;
(vi)any errors, omissions, interruptions or delays in transmission or delivery
of any message, advice ordocument (regardless of how sent or transmitted) or
for errors in interpretation of technical terms or in translation or any delay
in giving or failing to give notice to Borrower;
(vii)any acts, omissions or fraud by, or the insolvency of, any beneficiary,
any nominated person or entity orany other Person or any breach of contract
between any beneficiary and Borrower or any of the parties to the underlying
transaction to which the Letter of Credit relates;
(viii)assertion or waiver of any provision of the ISP or UCP that primarily
benefits an issuer of a letter ofcredit, including any requirement that any
Drawing Document be presented to it at a particular hour or place;
(ix)payment to any paying or negotiating bank (designated or permitted by the
terms of the applicable Letter ofCredit) claiming that it rightfully honored
or is entitled to reimbursement or indemnity under Standard Letter of Credit
Practice applicable to it;
(x)acting or failing to act as required or permitted under Standard Letter of
Credit Practice applicable towhere Issuing Lender or Underlying Issuer has
issued, confirmed, advised or negotiated such Letter of Credit, as the case
may be;
(xi)honor of a presentation after the expiration date of any Letter of Credit
notwithstanding that apresentation was made prior to such expiration date and
dishonored by Issuing Lender or Underlying Issuer, as applicable, if
subsequently Issuing Lender or
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Underlying Issuer, as applicable, or any court or other finder of fact
determines suchpresentation should have been honored;
(xii)dishonor of any presentation that does not strictly comply or that
isfraudulent, forged or otherwise not entitled to honor; or
(xiii)honor of a presentation that is subsequentlydetermined by Issuing Lender
or Underlying Issuer, as applicable, to have been made in violation of
international, federal, provincial, state or local restrictions on the
transaction of business with certain prohibited Persons.
(k)Borrower shall pay immediately upon demand to Agent for the account of
Issuing Lender as non-refundablefees, commissions, and charges (it being
acknowledged and agreed that any charging of such fees, commissions, and
charges to the Canadian Loan Account pursuant to the provisions of
Section 2.6(d)
shall be deemed to constitute a demand forpayment thereof for the purposes of
this
Section 2.11(k)
): (i) a fronting fee which shall be imposed by Issuing Lender upon the
issuance of each Letter of Credit of 0.125% per annum of the face amount
thereof,
plus
(ii) any and all other customary commissions, fees and charges then in effect
imposed by, and any and all reasonable and documented expenses incurred by,
Issuing Lender or Underlying Issuer, or by any adviser, confirming institution
or entityor other nominated person, relating to Letters of Credit, at the time
of issuance of any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including transfers,
assignments of proceeds, amendments,drawings, renewals or cancellations).
Notwithstanding the foregoing, if Issuing Lender is a Person other than WF
Canada, all fronting fees payable in respect of Letters of Credit issued by
such Issuing Lender shall be paid by Borrower immediatelyupon demand directly
to such Issuing Lender for its own account. Borrower shall also pay directly
to Underlying Issuer all of its fees, commissions and charges.
(l)If by reason of (x) any Change in Law, or (y) compliance by Issuing Lender
or any other member ofthe Lender Group or Underlying Issuer with any
direction, request, or requirement (irrespective of whether having the force
of law) of any Governmental Authority or monetary authority including,
Regulation D of the Board of Governors as from time totime in effect (and any
successor thereto):
(i)any reserve, deposit, or similar requirement is or shall beimposed or
modified in respect of any Letter of Credit or any Reimbursement Undertaking
issued or caused to be issued hereunder or hereby, or
(ii)there shall be imposed on Issuing Lender or any other member of the Lender
Group or Underlying Issuer anyother condition regarding any Letter of Credit
or any Reimbursement Undertaking,
and the result of the foregoing is to increase, directlyor indirectly, the
cost to Issuing Lender or any other member of the Lender Group or Underlying
Issuer of issuing, making, participating in, or maintaining any Letter of
Credit or to reduce the amount receivable in respect thereof, then, and in
anysuch case, Agent may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify
Administrative Borrower, and Borrower shall pay within 30 days after demand
therefor, such amounts as Agentmay specify to be necessary to
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compensate Issuing Lender or any other member of the Lender Group or
Underlying Issuer forsuch additional cost or reduced receipt, together with
interest on such amount from the date of such demand until payment in full
thereof at the rate then applicable to Revolving Loans in the applicable
currency that are Base Rate Loans hereunder;
provided
, that (A) Borrower shall not be required to provide any compensation pursuant
to this
Section 2.11(l)
for any such amounts incurred more than 180 days prior to the date on which
the demand for payment of such amounts isfirst made to Administrative
Borrower, and (B) if an event or circumstance giving rise to such amounts is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof. Thedetermination by Agent of
any amount due pursuant to this
Section 2.11(l)
, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final andconclusive and binding on all of the parties hereto.
(m)Unless otherwise expressly agreed by IssuingLender and Borrower when a
Letter of Credit is issued, (i) the rules of the ISP shall apply to each
standby Letter of Credit, and (ii) the rules of UCP shall apply to each
commercial Letter of Credit.
(n)In the event of a direct conflict between the provisions of this
Section 2.11
and any provisioncontained in any Issuer Document, it is the intention of the
parties hereto that such provisions be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflictthat cannot be resolved as aforesaid, the terms
and provisions of this
Section 2.11
shall control and govern.
2.12.
Non-Base Rate Option
.
(a)
Interest and Interest Payment Dates
. In lieu of having interest charged at the rate based upon theBase Rate,
Borrower shall have the option, subject to
Section 2.12(b)
below (the "
Non-Base Rate Option
") to have interest on all or a portion of the Revolving Loans be charged
(whether at the time when made (unless otherwiseprovided herein), upon
conversion from a Base Rate Loan to a Non-Base Rate Loan, or upon continuation
of a Non-Base Rate Loan as a Non-Base Rate Loan) at a rate of interest based
upon the Non-Base Rate. Interest on Non- Base Rate Loans shall bepayable on
the earliest of (i) the last day of the Interest Period applicable thereto;
provided
, that, subject to the following clauses (ii) and (iii), in the case of any
Interest Period greater than 3 months in duration, interestshall be payable at
3 month intervals after the commencement of the applicable Interest Period and
on the last day of such Interest Period, (ii) the date on which all or any
portion of the Obligations are accelerated pursuant to the termshereof, or
(iii) the date on which this Agreement is terminated pursuant to the terms
hereof. On the last day of each applicable Interest Period, unless Borrower
has properly exercised the Non-Base Rate Option with respect thereto, the
interest rateapplicable to such Non-Base Rate Loan automatically shall convert
to the rate of interest then applicable to Base Rate Loans of the same type
hereunder. At any time that an Event of Default has occurred and is
continuing, at the written election ofthe Required Lenders, Borrower no longer
shall have the option to request that Revolving Loans bear interest at a rate
based upon the Non-Base Rate; provided that, for the avoidance of doubt, any
Revolving Loans that are Non-Base Rate Loans as thetime of such election shall
continue as Non- Base Rate Loans until the end of the applicable Interest
Period (and shall then automatically convert to Base Rate Loans of the same
type).
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(b)
Non-Base Rate Election
.
(i) Borrower may, at any time and from time to time, so long as Borrower has
not received a notice from Agent(which notice Agent may elect to give or not
give in its discretion unless Agent is directed to give such notice by the
Required Lenders, in which case, it shall give the notice to Borrower), after
the occurrence and during the continuance of anEvent of Default, to terminate
the right of Borrower to exercise the Non-Base Rate Option during the
continuance of such Event of Default, elect to exercise the Non-Base Rate
Option by Administrative Borrower notifying Agent prior to 11:00 a.m.(A) at
least 3
Benchmark Rate
Business Days prior to thecommencement of the proposed Interest Period in the
case of a
CDOR
TermCORRA
Rate Loan and (B) with respect to an RFR Option electing Term SOFR at least 3
RFR Business Days prior to the commencement of the requested Interest Period
(as applicable, the"
Non-Base Rate Deadline
"). The election of the Non-Base Rate Option by Borrower for a permitted
portion of the Revolving Loans, and an Interest Period pursuant to this
Section, shall be made by delivery by Administrative Borrower toAgent of a
Non-Base Rate Notice received by Agent before the Non-Base Rate Deadline.
Promptly upon its receipt of each such Non-Base Rate Notice, Agent shall
provide a copy thereof to each of the affected Lenders.
(ii)Each Non-Base Rate Notice shall be irrevocable and binding on Borrower. In
connection with each Non-BaseRate Loan, Borrower shall indemnify, defend, and
hold Agent and the Lenders harmless against any loss, cost, or expense
actually incurred by Agent or any Lender (excluding any loss of anticipated
profits and excluding any differential on applicablemargin on funds so
redeployed (in each case, other than breakage costs or any fees associated
therewith)) as a result of (A) the payment of any principal of such Non-Base
Rate Loan other than on the last day of an Interest Period applicablethereto
(including as a result of an Event of Default), (B) the conversion of such
Non-Base Rate Loan other than on the last day of the Interest Period
applicable thereto, or (C) the failure to borrow, convert, continue or prepay
anyNon-Base Rate Loan on the date specified in any Non-Base Rate Notice
delivered pursuant hereto (such losses, costs, or expenses, "
Funding Losses
"). A certificate of Agent or a Lender delivered to Administrative Borrower
settingforth in reasonable detail any amount or amounts that Agent or such
Lender is entitled to receive pursuant to this
Section 2.12
shall be conclusive absent manifest error. Borrower, if such Non-Base Rate
Loan is a Revolving Loan, shall paysuch amount to Agent or the Lender, as
applicable, within 30 days of the date of its receipt of such certificate. If
a payment of a Non-Base Rate Loan on a day other than the last day of the
applicable Interest Period would result in a Funding Loss,Agent may, in its
sole discretion at the request of Administrative Borrower, hold the amount of
such payment as cash collateral in support of the Obligations until the last
day of such Interest Period and apply such amounts to the payment of
theapplicable Non-Base Rate Loan on such last day, it being agreed that Agent
has no obligation to so defer the application of payments to any Non-Base Rate
Loan and that, in the event that Agent does not defer such application,
Borrower shall beobligated to pay any resulting Funding Losses.
(iii)Unless Agent, in its sole discretion, agreesotherwise, Borrower shall
have not more than 10 Non-Base Rate Loans in effect at any given time.
Borrower may only exercise the Non-Base Rate Option for proposed Non-Base Rate
Loans of at least $500,000 or US$500,000, as applicable.
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(c)
Conversion
. Borrower may convert Non-Base RateLoans to Base Rate Loans in the Applicable
Currency at any time;
provided
, that in the event that Non-Base Rate Loans are converted or prepaid on any
date that is not the last day of the Interest Period applicable thereto,
including as aresult of any prepayment through the required application by
Agent of any payments or proceeds of Collateral in accordance with
Section 2.4(b)
or for any other reason, including early termination of the term of this
Agreement or accelerationof all or any portion of the Obligations pursuant to
the terms hereof, Borrower shall indemnify, defend, and hold Agent and the
Lenders and their Participants harmless against any and all Funding Losses in
accordance with
Section 2.12(b)(ii)
.
(d)
Special Provisions Applicable to Non-Base Rate
.
(i)The Non-Base Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take intoaccount any additional or increased costs to
such Lender of maintaining or obtaining deposits in any Applicable Currency or
increased costs (other than Taxes which shall be governed by
Section 16
), in each case, due to changes in applicablelaw occurring subsequent to the
commencement of the then applicable Interest Period, including any Changes in
Law (including any changes in Tax laws (except changes of general
applicability in corporate income Tax laws)) and changes in the reserverequireme
nts imposed by the Board of Governors, which additional or increased costs
would increase the cost of funding or maintaining loans bearing interest at
the applicable Non-Base Rate. In any such event, the affected Lender shall
giveAdministrative Borrower and Agent notice of such a determination and
adjustment and Agent promptly shall transmit the notice to each other Lender
and, upon its receipt of the notice from the affected Lender, Administrative
Borrower may, by notice tosuch affected Lender (A) require such Lender to
furnish to Administrative Borrower a statement setting forth in reasonable
detail the basis for adjusting such Non-Base Rate and the method for
determining the amount of such adjustment, or(B) repay the Non-Base Rate Loans
of such Lender with respect to which such adjustment is made (together with
any amounts due under
Section 2.12(b)(ii)
).
(ii)Subject to the provisions set forth in
Section 2.12(d)(iii)
below, in connection with any Non-Base
Rate
Loan, a request therefor, a conversion to or a continuation thereofor
otherwise, if for any reason Agent shall determine (which determination shall
be conclusive and binding absent manifest error) that (A) if Term SOFR or
CDOR Rate
TermCORRA
is utilized in any calculations hereunder or under any other Loan Document
with respect to any Obligations, interest, fees, commissions or other amounts,
reasonable and adequate means do notexist for ascertaining Term SOFR or
CDORRate
Term CORRA
, as applicable, for the applicableInterest Period with respect to a proposed
SOFR Rate Loan or such
CDOR
TermCORRA
Rate Loan, as applicable, on or prior to the first day of such Interest
Period, (B) a fundamental change has occurred in foreign exchange or interbank
markets with respect to theApplicable Currency (including changes in national
or international financial, political or economic conditions or currency
exchange rates or exchange controls), (C) any Change in Law any time after the
date hereof, in the reasonable opinion ofany Lender, makes it unlawful or
impractical for such Lender to fund or maintain any applicable Non-Base Rate
Loans or to continue such funding or maintaining, or to determine or charge
interest rates
at the CDOR Rate
using TermCORRA
or Term SOFR, and, in the case of this clause (C), such Lender has provided
notice of such determination to Agent, Agent shall promptly give notice to
Administrative Borrower. Upon noticethereof by Agent to Administrative
Borrower, any obligation of the Lenders to make Non-Base
Rate
Loans, as applicable, in the Applicable Currency, and any right of Borrower to
convert any Loan in the Applicable
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Currency to or continue any Loan as an Non-Base
Rate
Loan in the Applicable Currency (to the extent of the affectedNon-Base Rate
Loans, the affected Interest Periods), shall be suspended until Agent (with
respect to this clause (D), at the instruction of all affected Lenders)
revokes such notice. Upon receipt of such notice, (I) the Borrower may revoke
anypending request for a borrowing of, conversion to or continuation of
Non-Rate
Non-Base Rate
Loans in each such affected Applicable Currency (to theextent of the affected
SOFR Rate Loans or, in the case of Non-Base Rate Loans, the affected Interest
Periods) or, failing that, (1) in the case of any request for a borrowing of
an affected Non-Base Rate Loan, Borrower will be deemed to haveconverted any
such request into a request for a borrowing of or conversion to Base Rate
Loans in the Applicable Currency in the amount specified therein and (2) in
the case of any request for a borrowing of an affected Non-Base Rate Loan
thensuch request shall be ineffective and any outstanding affected Non-Base
Rate Loans will be deemed to have been converted into Base Rate Loans in the
Applicable Currency at the end of the applicable Interest Period (or
immediately if it is unlawfulfor any such Loan to be outstanding until such
time). Upon any such prepayment or conversion, Borrower shall also pay accrued
interest on the amount so prepaid or converted, together with any additional
amounts required pursuant to
Section2.12(b)(ii)
.
(iii)
Benchmark Replacement Setting
.
(A)
Benchmark Replacement
. Notwithstanding anything to the contrary herein or in any other Loan
Document,upon the occurrence of a Benchmark Transition Event, with respect to
any Benchmark, Agent and Administrative Borrower may amend this Agreement to
replace such Benchmark with a Benchmark Replacement. Any such amendment with
respect to a BenchmarkTransition Event will become effective at 5:00 p.m. on
the fifth (5th) Business Day after Agent has posted such proposed amendment to
all Lenders and Administrative Borrower so long as Agent has not received, by
such time, written notice ofobjection to such amendment from Lenders
comprising the Required Lenders. No replacement of a Benchmark with a
Benchmark Replacement pursuant to this
Section 2.12(d)(iii)
will occur prior to the applicable Benchmark Transition StartDate.
(B)
Benchmark Replacement Conforming Changes
. In connection with the use, administration,adoption or implementation of a
Benchmark Replacement, Agent will have the right to make Conforming Changes
from time to time and, notwithstanding anything to the contrary herein or in
any other Loan Document, any amendments implementing suchConforming Changes
will become effective without any further action or consent of any other party
to this Agreement or any other Loan Document.
(C)
Notices; Standards for Decisions and Determinations
. Agent will promptly notify AdministrativeBorrower and the Lenders of (1) the
implementation of any Benchmark Replacement and (2) the effectiveness of any
Conforming Changes in connection with the use, administration, adoption or
implementation of a Benchmark Replacement Agentwill promptly notify
Administrative Borrower of the removal or reinstatement of any tenor of a
Benchmark pursuant to
Section 2.12(d)(iii)(D)
. Any determination, decision or election that may be made by Agent or, if
applicable any Lender(or group of Lenders) pursuant to this Section
2.12(d)(iii) including any determination with respect to a tenor, rate or
adjustment or of the occurrence or non-occurrence of an event, circumstance or
date and any decision to take or refrainfrom taking any action or any
selection, will be conclusive and binding absent manifest error and may be
made in its or their sole discretion and without consent from any other party
hereto or any other Loan Document, except, in each case, asexpressly required
pursuant to this
Section 2.12(d)(iii)
.
(D)
Unavailability of Tenor ofBenchmark.
Notwithstanding anything to the contrary herein or in any other Loan Document,
at any time (including in connection with the implementation of a Benchmark
Replacement), (1) if any then-current Benchmark is a term rate (including
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the Term SOFR Reference Rate) and either (I) any tenor for such Benchmark is
notdisplayed on a screen or other information service that publishes such rate
from time to time as selected by Agent in its reasonable discretion or (II)
the administrator of such Benchmark or the regulatory supervisor for the
administrator of suchBenchmark has provided a public statement or publication
of information announcing that any tenor for such Benchmark is not or will not
be representative
or incompliance with or aligned with the International Organization of
Securities Commissions (IOSCO) Principles for Financial Benchmarks
, then Agent may modify the definition of "InterestPeriod" (or any similar or
analogous definition) for any Benchmark settings at or after such time to
remove such unavailable, non-representative, non-compliant or non-aligned
tenor and (2) if a tenor that was removed pursuant to clause(1) above either
(I) is subsequently displayed on a screen or information service for a
Benchmark (including a Benchmark Replacement) or (II) is not, or is no longer,
subject to an announcement that it is not or will not berepresentative
or in compliance with or aligned with the International Organization of
Securities Commissions (IOSCO) Principles for Financial Benchmarks for
aBenchmark (including a Benchmark Replacement)
, then Agent may modify the definition of "Interest Period" (or any similar or
analogous definition) for all Benchmark settings at orafter such time to
reinstate such previously removed tenor.
(E)
Benchmark UnavailabilityPeriod
. Upon Administrative Borrower's receipt of notice of the commencement of a
Benchmark Unavailability Period with respect to a given Benchmark, (I) the
Borrower may revoke any pending request for a borrowing of, conversion to
orcontinuation of Non-Base Rate Loans, in each case, to be made, converted or
continued during any Benchmark Unavailability Period denominated in the
Applicable Currency and, failing that, (1) in the case of any request for any
affected Non-BaseRate Loans, if applicable, Borrower will be deemed to have
converted any such request into a request for a borrowing of or conversion to
Base Rate Loans in the Applicable Currency in the amount specified therein and
(2) in the case of anyrequest for any affected Non-Base Rate Loan, then such
request shall be ineffective and any outstanding affected Non-Base Rate Loans,
if applicable, will be deemed to have been converted into Base Rate Loans in
the Applicable Currency at the end ofthe applicable Interest Period. Upon any
such prepayment or conversion, the Borrower shall also pay accrued on the
amount so prepaid or converted, together with any additional amounts required
pursuant to
Section 2.12(b)(ii)
. During aBenchmark Unavailability Period with respect to any Benchmark or at
any time that a tenor for any then-current Benchmark is not an Available
Tenor, the component of the Base Rate based upon the then-current Benchmark
that is the subject of suchBenchmark Unavailability Period or such tenor for
such Benchmark, as applicable, will not be used in any determination of Base
Rate.
(iv)
No Requirement of Matched Funding
. Anything to the contrary contained herein notwithstanding, neitherAgent, nor
any Lender, nor any of their Participants, is required actually to acquire
deposits in the Applicable Currency to fund or otherwise match fund any
Obligation as to which interest accrues at
the applicable
Term SOFR or
CDORRate
Adjusted Term CORRA
.
2.13.
Capital Requirements
.
(a)If, after the date hereof, any Issuing Lender or any Lender reasonably
determines that (i) any Changein Law regarding capital or reserve requirements
for banks or bank holding companies, or (ii) compliance by such Issuing Lender
or such Lender, or their respective bank holding companies, with any
guideline, request or directive of anyGovernmental Authority regarding capital
adequacy (whether or not having the force of law), has the effect of reducing
the return on such Issuing Lender's, such Lender's, or such holding companies'
capital as a consequence of suchIssuing Lender's or such Lender's commitments
hereunder to a level below that which such Issuing Lender, such Lender, or
such holding companies could have achieved but
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for such Change in Law or compliance (taking into consideration such Issuing
Lender's,such Lender's, or such holding companies' then existing policies with
respect to capital adequacy and assuming the full utilization of such entity's
capital) by any amount deemed by such Issuing Lender or such Lender to be
material,then such Issuing Lender or such Lender may notify Administrative
Borrower and Agent thereof. Following receipt of such notice, Borrower agrees
to pay such Issuing Lender or such Lender on demand the amount of such
reduction of return of capital asand when such reduction is determined,
payable within 30 days after presentation by such Issuing Lender or such
Lender of a statement in the amount and setting forth in reasonable detail
such Issuing Lender's or such Lender's calculationthereof and the assumptions
upon which such calculation was based (which statement shall be deemed true
and correct absent manifest error). In determining such amount, such Issuing
Lender or such Lender may use any reasonable averaging andattribution methods.
Failure or delay on the part of such Issuing Lender or any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Issuing Lender's or such Lender's right to demand suchcompensation;
provided
that Borrower shall not be required to compensate any Issuing Lender or a
Lender pursuant to this Section for any reductions in return incurred more
than 180 days prior to the date that such Issuing Lender or suchLender
notifies Administrative Borrower of such Change in Law giving rise to such
reductions and of such Lender's intention to claim compensation therefor;
provided
further
that if such claim arises by reason of the Change in Lawthat is retroactive,
then the 180-day period referred to above shall be extended to include the
period of retroactive effect thereof.
(b)If any Issuing Lender or any Lender requests additional or increased costs
referred to in
Section 2.11(l)
or
Section 2.12(d)(i)
or amounts under
Section 2.13(a)
or sends a notice under
Section 2.12(d)(i)
relative to changed circumstances (such Issuing Lender or Lender, an "
AffectedLender
"), then such Affected Lender shall use reasonable efforts to promptly
designate a different one of its lending offices or to assign its rights and
obligations hereunder to another of its offices or branches, if (i) in
thereasonable judgment of such Affected Lender, such designation or assignment
would eliminate or reduce amounts payable pursuant to
Section 2.11(l)
,
Section 2.12(d)(i)
or
Section 2.13(a)
, as applicable, or would eliminate theillegality or impracticality of funding
or maintaining Non-Base Rate Loans and (ii) in the reasonable judgment of such
Affected Lender, such designation or assignment would not subject it to any
material unreimbursed cost or expense and wouldnot otherwise be materially
disadvantageous to it. Borrower agrees to pay all reasonable out-of-pocket
costs and expenses incurred by such Affected Lender in connection with any
such designation or assignment. If, after such reasonable efforts,
suchAffected Lender does not so designate a different one of its lending
offices or assign its rights to another of its offices or branches so as to
eliminate Borrower's obligation to pay any future amounts to such Affected
Lender pursuant to
Section 2.11(l)
,
Section 2.11(1)
,
Section 2.12(d)(i)
or
Section 2.13(a)
, as applicable, or to enable Borrower to obtain Non-Base Rate Loans, then
Administrative Borrower (without prejudice to any amounts thendue to such
Affected Lender under
Section 2.11(l)
,
Section 2.12(d)(i)
or
Section 2.13(a)
, as applicable) may, unless prior to the effective date of any such
assignment the Affected Lender withdraws its request for suchadditional
amounts under
Section 2.11(l)
,
Section 2.12(d)(i)
or
Section 2.13(a)
, as applicable, or indicates that it is no longer unlawful or impractical to
fund or maintain Non-Base Rate Loans, may designate a differentIssuing Lender
or substitute a Lender, in each case, reasonably acceptable to Agent to
purchase the Obligations owed to such Affected Lender (and its Affiliates) and
such Affected Lender's (and its Affiliates') commitments hereunder (a"
Replacement Lender
"), and if such Replacement Lender agrees to such purchase, such Affected
Lender (and its Affiliates) shall
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assign to the Replacement Lender its Obligations and commitments, and upon
such purchase bythe Replacement Lender, which such Replacement Lender shall be
deemed to be "Issuing Lender" or a "Lender" (as the case may be) for purposes
of this Agreement and such Affected Lender shall cease to be an "IssuingLender"
or a "Lender" (as the case may be) for purposes of this Agreement.
(c)Notwithstanding anything herein to the contrary, the protection of
Sections 2.11(l)
,
2.12(d)
,and 2.13 shall be available to each Issuing Lender and each Lender (as
applicable) regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, judicial ruling, judgment,
guideline, treaty or other changeor condition which shall have occurred or
been imposed, so long as it shall be customary for Issuing Lenders or Lenders
affected thereby to comply therewith. Notwithstanding any other provision
herein, neither any Issuing Lender nor any Lender shalldemand compensation
pursuant to this
Section 2.13
if it shall not at the time be the general policy or practice of such Issuing
Lender or such Lender (as the case may be) to demand such compensation in
similar circumstances under comparableprovisions of other credit agreements,
if any.
2.14.
Currencies
. The Revolving Loansand other Obligations (unless such other Obligations
expressly provide otherwise) shall be made and repaid in Canadian Dollars. The
Revolving Loans shall be denominated in Canadian Dollars or US Dollars (as
selected by Administrative Borrower inaccordance with
Section 2.3
at the time such Revolving Loan is requested) except (a) Protective Advances
made by Agent shall be denominated in Canadian Dollars or US Dollars (as
selected by Agent), (b) Letters of Credit may beissued in Canadian Dollars, US
Dollars, British Pounds or Euros, and (c) Revolving Loans charged to the
Applicable Loan Account pursuant to
Section 2.6
to pay fees, interest, expenses and other amounts shall be denominated in
theApplicable Currency of such fees, interest, expenses and other amounts. All
Obligations denominated in Canadian Dollars shall be repaid in Canadian
Dollars and all Obligations denominated in US Dollars shall be repaid in
Canadian Dollars. Paymentsmade in a currency other than the currency in which
the applicable Obligations are denominated may be accepted by the Agent in its
sole discretion and, if so accepted, Borrower agrees that the Agent may
convert the payment made to the currency ofthe applicable Obligations at the
applicable Spot Rate in accordance with its normal practices.
2.15.
Interest Act
(Canada); Criminal Rate of Interest; Nominal Rate ofInterest
. Notwithstanding anything to the contrary contained in this Agreement or in
any other Loan Document:
(a)whenever interest payable by Borrower is calculated on the basis of a
period which is less than the actualnumber of days in a calendar year, each
rate of interest determined pursuant to such calculation is, for the purposes
of the
Interest Act
(Canada), equivalent to such rate multiplied by the actual number of days in
the calendar year in whichsuch rate is to be ascertained and divided by the
number of days used as the basis of such calculation,
(b)the Borrower confirms that it fully understands and is able to calculate
the rate of interest applicable tothe Loans based on the methodology for
calculating annual rates provided for in this Agreement. The Borrower hereby
irrevocably agrees not to plead or assert, whether by way of defense or
otherwise, in any proceeding relating to this Agreement orany other Loan
Documents, that the interest payable under this Agreement and the calculation
thereof has
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not been adequately disclosed to the Borrower as required pursuant to Section
4 of the Interest Act(Canada),
(c)in no event shall the aggregate "interest" (as defined in Section 347 of the
Criminal Code
(Canada), as the same shall be amended, replaced or re-enacted from time to
time (the "
Criminal Code Section
")) payable (whether by way of payment, collection or demand) by Borrower to
Agent or any Lender underthis Agreement or any other Loan Document exceed the
effective annual rate of interest on the "credit advanced" (as defined in that
section) under this Agreement or such other Loan Document lawfully permitted
under that section and, if anypayment, collection or demand pursuant to this
Agreement or any other Loan Document in respect of "interest" (as defined in
that section) is determined to be contrary to the provisions of that section
and the amount of such payment orcollection shall be refunded by Agent and
Lenders to Borrower with such "interest" deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by theCriminal Code Section to result in a
receipt by Agent or such Lender of interest at a rate not in contravention of
the Criminal Code Section, such adjustment to be effected, to the extent
necessary, as follows: firstly, by reducing the amounts orrates of interest
required to be paid to Agent or that Lender; and then, by reducing any fees,
charges, expenses and other amounts required to be paid to the affected Agent
or Lender which would constitute "interest". Notwithstanding theforegoing, and
after giving effect to all such adjustments, if Agent or any Lender shall have
received an amount in excess of the maximum permitted by the Criminal Code
Section, then Borrower shall be entitled, by notice in writing to the Agent
oraffected Lender, to obtain reimbursement from Agent or that Lender in an
amount equal to such excess. For the purposes of this Agreement and each other
Loan Document to which Borrower is a party, the effective annual rate of
interest payable byBorrower shall be determined in accordance with generally
accepted actuarial practices and principles over the term of the loans on the
basis of annual compounding for the lawfully permitted rate of interest and,
in the event of dispute, acertificate of a Fellow of the Institute of
Actuaries appointed by Agent for the account of Borrower will be conclusive
for the purpose of such determination in the absence of evidence to the
contrary,
(d)all calculations of interest payable by Borrower under this Agreement or
any other Loan Document are to bemade on the basis of the nominal interest
rate described herein and therein and not on the basis of effective yearly
rates or on any other basis which gives effect to the principle of deemed
reinvestment of interest. The parties acknowledge thatthere is a material
difference between the stated nominal interest rates and the effective yearly
rates of interest and that they are capable of making the calculations
required to determine such effective yearly rates of interest,
(e)any provision of this Agreement that would oblige Borrower to pay any fine,
penalty or rate of interest onany arrears of principal or interest secured by
a mortgage on real property or hypothec on immovables that has the effect of
increasing the charge on arrears beyond the rate of interest payable on
principal money not in arrears shall not apply toBorrower, which shall be
required to pay interest on money in arrears at the same rate of interest
payable on principal money not in arrears, and
(f)if there is a conflict, inconsistency, ambiguity or difference between any
provision of this
Section2.15
and any other Section of this Agreement or any other Loan
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Document with respect to Borrower then the provisions of this
Section 2.15
shallprevail and be paramount.
2.16.
Accordion
.
(a)At any time during the period from and after the Closing Date through but
excluding the date that is threemonths prior to the Maturity Date, at the
option and upon written request of Borrower (but subject to the conditions set
forth in clause (b) below), the Revolver Commitments and the Maximum Credit
Amount may be increased by an amount in theaggregate for all such increases of
the Revolver Commitments and the Maximum Credit Amount not to exceed the
Available Increase Amount (each such increase, an "
Increase
");
provided
, that in no event shall the RevolverCommitments and the Maximum Credit Amount
be increased to an amount in excess of $98,000,000. Each Lender shall increase
its Revolver Commitment (it being understood that each Lender shall be
obligated to increase its Revolver Commitments withrespect to Increases in an
aggregate amount not exceeding $5,000,000 but no Lender shall be obligated to
increase its Revolver Commitment with respect to any further Increases
requested, if a result of such Increase, the aggregate amount of theIncreases
to the Revolver Commitments made pursuant this
Section 2.16
would exceed $5,000,000) by its Pro Rata Share of the proposed Increase upon
the date that such proposed Increase becomes effective (the "
Increase Date
").Any Increase shall be in an amount of at least $1,000,000 and integral
multiples of $1,000,000 in excess thereof. In no event may the Revolver
Commitments and the Maximum Credit Amount be increased pursuant to this
Section 2.16
on more than 5occasions in the aggregate for all such Increases. Additionally,
for the avoidance of doubt, it is understood and agreed that in no event shall
the aggregate amount of the Increases to the Revolver Commitments exceed
$13,000,000.
(b)Each of the following shall be conditions precedent to any Increase of the
Revolver Commitments and theMaximum Credit Amount in connection therewith:
(i)any Increase whereby as a result of such Increase, theaggregate principal
amount of the Increases to the Revolver Commitments made pursuant this
Section 2.16
exceeds $5,000,000, shall (x) require approval in writing by the Agent, and
(y) Agent or Borrower have obtained the commitmentof one or more Lenders (or
other prospective lenders) reasonably satisfactory to Agent and Borrower to
provide the applicable Increase and any such Lenders (or prospective lenders),
Borrower, and Agent have signed a joinder agreement to thisAgreement (an "
Increase Joinder
"), in form and substance reasonably satisfactory to Agent, to which such
Lenders (or prospective lenders), Borrower, and Agent are party,
(ii)each of the conditions precedent set forth in
Section 3.2
are satisfied,
(iii)Borrower shall have paid the Increase fee payable pursuant to the Fee
Letter.
(c)Unless otherwise specifically provided herein, all references in this
Agreement and any other Loan Documentto Revolving Loans shall be deemed,
unless the context otherwise requires, to include Revolving Loans made
pursuant to the increased Revolver Commitments and the Maximum Credit Amount
pursuant to this
Section 2.16
.
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(d)The Revolving Loans, Revolver Commitments and the MaximumCredit Amount
established pursuant to this
Section 2.16
shall constitute Revolving Loans, Revolver Commitments and the Maximum Credit
Amount under, and shall be entitled to all the benefits afforded by, this
Agreement and the other LoanDocuments, and shall, without limiting the
foregoing, benefit equally and ratably from any guarantees and the security
interests created by the Loan Documents. Borrower shall take any actions
reasonably required by Agent to ensure and demonstratethat the Liens and
security interests granted by the Loan Documents continue to be perfected
under the PPSA or otherwise after giving effect to the establishment of any
such new Revolver Commitments and the Maximum Credit Amount.
3. CONDITIONS; TERM OF AGREEMENT.
3.1.
Conditions Precedent to the Initial Extension of Credit
. The obligation of the LenderGroup (or any member thereof) to make any
Revolving Loans hereunder or to extend any other credit hereunder on or after
the Closing Date is subject to the fulfillment (or waiver by Agent and each
Lender), to the satisfaction of Agent and eachLender, of each of the
conditions precedent set forth in Part B of
Schedule 3.1
(the making of such initial extensions of credit by a Lender being
conclusively deemed to be its satisfaction or waiver of the conditions
precedent). The partiesacknowledge that the conditions precedent set forth in
Part A of the
Schedule 3.1
with respect to the initial extension of credit under the Original Credit
Agreement have been satisfied or waived in accordance with the terms thereof.
3.2.
Conditions Precedent to all Extensions of Credit
. The obligation of the Lender Group(or any member thereof) to make any
Revolving Loans hereunder (or to extend any other credit hereunder) at any
time shall be subject to the following conditions precedent (unless waived in
accordance with the terms hereof):
(a)the representations and warranties of Borrower and its Subsidiaries
contained in this Agreement or in theother Loan Documents shall be true and
correct in all material respects (except that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof)on and as of the date
of such extension of credit, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an
earlier date, in which case such representations and warranties shall be
trueand correct in all material respects (except that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof) as of
such earlier date); and
(b)no Default or Event of Default shall have occurred and be continuing on the
date of such extension ofcredit, nor shall either result from the making
thereof.
3.3.
Maturity
. This Agreementshall continue in full force and effect for a term ending on
the Maturity Date.
3.4.
Effect ofMaturity
. On the Maturity Date, all commitments of the Lender Group to provide
additional credit hereunder shall automatically be terminated and all of the
Obligations shall become due and payable immediately without notice or demand
andBorrower shall be required to repay all of the Obligations in full. No
termination of the obligations of the
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Lender Group (other than payment in full of the Obligations and termination of
the Commitments) shall relieve or discharge any Loan Party of its duties,
obligations, or covenants hereunder orunder any other Loan Document and
Agent's Liens in the Collateral shall continue to secure the Obligations and
shall remain in effect until all Obligations have been paid in full and the
Commitments have been terminated. When all of theObligations have been paid in
full and the Lender Group's obligations to provide additional credit under the
Loan Documents have been terminated irrevocably, Agent will, at Borrower's
sole expense, execute and deliver any terminationstatements, lien releases,
discharges of security interests, and other similar discharge or release
documents (and, if applicable, in recordable form) as are reasonably necessary
to release, as of record, Agent's Liens and all notices ofsecurity interests
and liens previously filed by Agent.
3.5.
Early Termination byBorrower
. Borrower has the option, at any time upon 10 Business Days prior written
notice to Agent by Administrative Borrower, to terminate this Agreement and
terminate the Commitments hereunder by repaying to Agent all of the
Obligations infull and the Applicable Prepayment Premium pursuant to the Fee
Letter. The foregoing notwithstanding, (a) Administrative Borrower may rescind
termination notices relative to proposed payments in full of the Obligations
with the proceeds ofthird party Indebtedness if the closing for such issuance
or incurrence does not happen on or before the date of the proposed
termination (in which case, a new notice shall be required to be sent in
connection with any subsequent termination), and(b) Administrative Borrower
may extend the date of termination at any time with the consent of Agent
(which consent shall not be unreasonably withheld or delayed).
3.6.
Post-Closing Covenants
. Borrower covenants and agrees to satisfy each item on Part B of
Schedule 3.6
on or before the date set forth on
Schedule 3.6
for such item.
4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, Borrower
makes the following representations and warrantiesto the Lender Group which
shall be true, correct, and complete, in all material respects (except that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality inthe text
thereof), as of the Closing Date, and shall be true, correct, and complete, in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified
ormodified by materiality in the text thereof), as of the date of the making
of each Revolving Loan (or other extension of credit) made thereafter, as
though made on and as of the date of such Revolving Loan (or other extension
of credit) (except tothe extent that such representations and warranties
relate solely to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects (except that
such materiality qualifier shall not beapplicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) as of such earlier date) and such representations and warranties
shall survive the execution and delivery of this Agreement:
4.1.
Due Organization and Qualification; Subsidiaries
.
(a)Borrower and, subject to the completion of any transaction permitted by
Section 6.3
, each of itsSubsidiaries (i) is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization, (ii) is
qualified or registered to do business in any
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jurisdiction where the failure to be so qualified would reasonably be expected
to result in a Material Adverse Effect, and (iii) has all requisite corporate,
limited liability or otherorganizational power and authority (as applicable)
to own and operate its properties, to carry on its business as now conducted
and as proposed to be conducted, to enter into the Loan Documents to which it
is a party and to carry out thetransactions contemplated thereby.
(b)Set forth on
Schedule 4.1
is a complete and accuratedescription as of the Closing Date of the authorized
Equity Interests of Borrower and each of its Subsidiaries, by class, and, as
of the Closing Date, a description of the number of shares of each such class
that are issued and outstanding. NeitherBorrower nor any of its Subsidiaries
is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its Equity Interests or any security
convertible into or exchangeable for any of its EquityInterests except for any
Equity Interests (other than Disqualified Equity Interests) that are permitted
by the Loan Documents.
(c)Set forth on
Schedule 4.1
(as such Schedule may be updated from time to time to reflect changesresulting
from transactions permitted under this Agreement), is a complete and accurate
list of the Loan Parties' direct and indirect Subsidiaries, showing: (i) the
number of shares of each class of common and preferred Equity Interestsauthorize
d for each of such Subsidiaries, and (ii) the number and the percentage of the
outstanding shares of each such class owned directly or indirectly by
Borrower. All of the outstanding Equity Interests of each such Subsidiary has
beenvalidly issued and is fully paid and non-assessable.
(d)Except as set forth on
Schedule 4.1,
thereare no subscriptions, options, warrants, or calls relating to any shares
of Borrower's or any of its Subsidiaries' Equity Interests as of the Closing
Date, including any right of conversion or exchange under any outstanding
security orother instrument.
4.2. Due Authorization; No Conflict
.
(a)As to each Loan Party, the execution, delivery, and performance by such
Loan Party of the Loan Documents towhich it is a party have been duly
authorized by all necessary organizational action on the part of such Loan
Party.
(b)As to each Loan Party, the execution, delivery, and performance by such
Loan Party of the Loan Documents towhich it is a party do not and will not (i)
violate any material provision of federal, provincial, state, foreign or local
law or regulation applicable to any Loan Party or its Subsidiaries, or any
order, judgment, or decree of any court orother Governmental Authority binding
on any Loan Party or its Subsidiaries where any such violation would
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect, (ii) violate the Governing Documents of anyLoan Party or its
Subsidiaries, (iii) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any material agreement of
any Loan Party or its Subsidiaries where any such conflict, breach ordefault
would individually or in the aggregate reasonably be expected to have a
Material Adverse Effect, (iv) result in or require the creation or imposition
of any Lien of any nature whatsoever upon any assets of any Loan Party or its
Subsidiaries,other than Permitted Liens, or (v) require any approval of any
holder of Equity Interests of a Loan Party or its Subsidiaries or any approval
or consent of
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any Person under any material agreement of any Loan Party or its Subsidiaries,
other than consents or approvals that have been obtained and that are still in
force and effect and except, in thecase of material agreements, for consents
or approvals, the failure to obtain would not individually or in the aggregate
reasonably be expected to cause a Material Adverse Effect.
4.3.
Governmental Consents
. The execution, delivery, and performance by each Loan Party ofthe Loan
Documents to which such Loan Party is a party and the consummation of the
transactions contemplated by the Loan Documents do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by,any Governmental Authority, other than registrations, consents,
approvals, notices, or other actions that have been obtained and that are
still in force and effect and except for filings and recordings with respect
to the Collateral to be made, orotherwise delivered to Agent for filing or
recordation, as of the Closing Date or where any such failure to do the
foregoing would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect.
4.4.
Binding Obligations; Perfected Liens
.
(a)Each Loan Document has been duly executed and delivered by each Loan Party
that is a party thereto and isthe legally valid and binding obligation of such
Loan Party, enforceable against such Loan Party in accordance with its
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization,moratorium, or similar laws
relating to or limiting creditors' rights generally.
(b)Agent'sLiens are validly created, perfected (other than (i) any Excluded
Deposit Accounts (as defined in the Canadian Security Documents)), and first
priority Liens, subject only to Permitted Liens which are non-consensual
Permitted Liens, PurchaseMoney Liens securing Permitted Purchase Money
Indebtedness and Liens securing the interests of lessors under Capital Leases.
4.5.
Title to Assets; No Encumbrances
. Each of the Loan Parties and its Subsidiaries has(a) good, sufficient and
legal title to (in the case of fee interests in Real Property), (b) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), and (c) good and marketable title to (in the case ofall other
personal property), all of their respective assets reflected in the most
recent financial statements delivered pursuant to
Section 5.1
, in each case except for (i) [Reserved], and (ii) minor defects in title that
do notinterfere with any sale, transfer, or other disposition of such
property, or its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes. All of such assets are
free and clear of Liens exceptfor Permitted Liens.
4.6.
Litigation
.
(a)There are no actions, suits, or proceedings pending or, to the knowledge of
Borrower, after due inquiry,threatened in writing against a Loan Party or any
of its Subsidiaries that either individually or in the aggregate would
reasonably be expected to result in a Material Adverse Effect.
(b)
Schedule 4.6(b)
sets forth a complete and accurate description, with respect to each of the
actions,suits, or proceedings with asserted liabilities in excess of, or that
could
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reasonably be expected to result in liabilities of a Loan Party in excess of,
$1,000,000 that, as of the Closing Date, is pending or, to the knowledge of
Borrower, after due inquiry, threatenedin writing against a Loan Party or any
of its Subsidiaries, of (i) the parties to such actions, suits, or
proceedings, (ii) the nature of the dispute that is the subject of such
actions, suits, or proceedings, (iii) the procedural status,as of the Closing
Date, with respect to such actions, suits, or proceedings, and (iv) whether
any liability of the Loan Parties' and their Subsidiaries in connection with
such actions, suits, or proceedings is covered by insurance.
4.7.
Compliance with Laws
. No Loan Party nor any of its Subsidiaries (a) is inviolation of any
applicable laws, rules, regulations, executive orders, or codes (including
Environmental Laws) that, individually or in the aggregate, would reasonably
be expected to result in a Material Adverse Effect, or is subject to or
indefault with respect to any final judgments, writs, injunctions, decrees,
rules or regulations of any court or any federal, provincial, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domesticor foreign, in each case that, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse Effect.
4.8.
Financial Statements; No Material Adverse Effect
. All historical financial statementsrelating to the Loan Parties and their
Subsidiaries that have been delivered by Borrower to Agent have been prepared
in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject toyear-end audit
adjustments) and, subject to the impact of the Original Closing Date US
Divestiture, present fairly in all material respects, the Loan Parties' and
their Subsidiaries' consolidated financial condition as of the date thereofand
results of operations for the period then ended. Since October 30, 2021 no
event, circumstance, or change has occurred that has or would reasonably be
expected to result in a Material Adverse Effect with respect to the Loan
Parties andtheir Subsidiaries.
4.9.
Solvency
.
(a)The Loan Parties, taken as a whole, are Solvent.
(b)No transfer of property is being made by any Loan Party and no obligation
is being incurred by any LoanParty in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of such Loan
Party.
4.10.
Canadian Pension Plan
. As of the Closing Date, no Loan Party, nor any of itsSubsidiaries maintains
or contributes to any Canadian Pension Plans nor have any liabilities or
obligations in respect of a Canadian Defined Benefit Plan that has been
terminated or wound up.
4.11.
Environmental Condition
. Except as set forth on
Schedule 4.11
or except as,individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect, (a) no Loan Party's nor any
of its Subsidiaries' properties or assets has ever been used by a Loan Party,
its Subsidiaries, orby previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such disposal, production, storage, handling, treatment, release or
transport was in violation, in anyrespect, of or has given rise to liability
of a Loan Party or any of its Subsidiaries, or to the knowledge of
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Borrower, liability of previous owners or operators, under any applicable
Environmental Law, (b) no Loan Party's nor any of its Subsidiaries' properties
or assets has ever beendesignated or identified in any manner pursuant to any
Environmental Law as a Hazardous Materials disposal site, (c) no Loan Party
nor any of its Subsidiaries has received written notice that a Lien arising
under any Environmental Law hasattached to any revenues or to any Real
Property owned or operated by a Loan Party or its Subsidiaries, and (d) no
Loan Party nor any of its Subsidiaries nor any of their respective facilities
or operations is subject to any outstandingEnvironmental Action or other
written order, consent decree, or settlement agreement with any Person
relating to any Environmental Law or Environmental Liabilities.
4.12.
Complete Disclosure
. All factual information taken as a whole (other thanforward-looking
information and projections and information of a general economic nature and
general information about Borrower's industry) furnished by or on behalf of a
Loan Party or its Subsidiaries in writing to Agent or any Lender(including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement or the other Loan
Documents, and all other such factual information taken as a whole (other
thanforward-looking information and projections and information of a general
economic nature and general information about Borrower's industry) hereafter
furnished by or on behalf of a Loan Party or its Subsidiaries in writing to
Agent or anyLender will be, true and accurate, in all material respects, on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (taken as a
whole) not misleading in anymaterial respect at such time in light of the
circumstances under which such information was provided. The Projections
delivered to Agent on April 29, 2021 represent, and as of the date on which
any other Projections are delivered to Agent,such additional Projections
represent, Borrower's good faith estimate, on the date such Projections are
delivered, of the Loan Parties' and their Subsidiaries' future performance for
the periods covered thereby based upon assumptionsbelieved by Borrower to be
reasonable at the time of the delivery thereof to Agent (it being understood
that such Projections are subject to significant uncertainties and
contingencies, many of which are beyond the control of the Loan Parties
andtheir Subsidiaries, and no assurances can be given that such Projections
will be realized, and although reflecting Borrower's good faith estimate,
projections or forecasts based on methods and assumptions which Borrower
believed to bereasonable at the time such Projections were prepared, are not
to be viewed as facts, and that actual results during the period or periods
covered by the Projections may differ materially from projected or estimated
results).
4.13.
Patriot Act
; Canadian AML and Anti-Terrorism Laws
. To the extentapplicable, each Loan Party and each of its Subsidiaries is in
compliance in all material respects with the (a)
Trading with the Enemy Act
, as amended, and each of the foreign assets control regulations of the United
States TreasuryDepartment (31 CFR, Subtitle B, Chapter V, as amended) and any
other enabling legislation or executive order relating thereto, and (b)
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism(
USA Patriot Act
of 2001) (the "
Patriot Act
") and all applicable Canadian Anti-Money Laundering & Anti-Terrorism
Legislation. No part of the proceeds of the Loans made hereunder will be used
by any Loan Partyor any of their Affiliates, directly or indirectly, for any
payments to any governmental official or employee, political party, official
of a political party, candidate for political office, or anyone else acting in
an official capacity, in order toobtain, retain or direct
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business or obtain any improper advantage, in violation of the
United States Foreign Corrupt Practices Act
of 1977, as amended.
4.14.
Indebtedness
. Set forth on
Schedule 4.14
is a true and complete list of allIndebtedness of each Loan Party and each of
its Subsidiaries outstanding as of the Closing Date (excluding Indebtedness
referenced in paragraph (a) and paragraphs (c) through (h) of the definition
of "PermittedIndebtedness") and such Schedule accurately sets forth the
aggregate principal amount of such Indebtedness as of the Closing Date. As of
the Closing Date, Borrower has no outstanding Indebtedness or trade payables
owing to any of the securedparties listed in paragraph 8 of Part A of
Schedule 3.6
that is secured by the security perfected by the PPSA registration in favour
of the applicable secured party listed therein.
4.15.
Payment of Taxes
. All Federal, provincial and state income Tax returns and all othermaterial
Tax returns and reports of each Loan Party and its Subsidiaries required to be
filed by any of them have been timely filed, and all Federal, provincial and
state income Taxes and all other material Taxes shown on such Tax returns to
be dueand payable and all material assessments, fees and other governmental
charges upon a Loan Party and its Subsidiaries and upon their respective
assets, income, businesses and franchises that are due and payable have been
paid when due and payable,except (a) where failure to do so could not
reasonably be expected to have a Material Adverse Effect; or (b) the validity
of such Tax is the subject of a Permitted Protest as contemplated by
Section 5.5
Each Loan Party and eachof its Subsidiaries have made adequate provision in
accordance with GAAP for all Taxes not yet due and payable. Borrower does not
know of any material proposed Tax assessment against a Loan Party or any of
its Subsidiaries that is not being activelycontested by such Loan Party or
such Subsidiary diligently, in good faith, and by appropriate proceedings;
provided
such reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made orprovided therefor.
4.16.
Margin Stock
. No Loan Party nor any of its Subsidiaries isengaged principally, or as one
of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. No part of the proceeds of
the loans made to Borrower will be used to purchase or carry anyMargin Stock
or to extend credit to others for the purpose of purchasing or carrying any
Margin Stock or for any purpose that violates the provisions of Regulation T,
U or X of the Board of Governors.
4.17.
Governmental Regulation
. No Loan Party nor any of its Subsidiaries is subject toregulation under the
Federal Power Act
or the
Investment Company Act
of 1940 or under any other federal, provincial or state statute or regulation
which may limit its ability to incur Indebtedness or which may otherwise
render all orany portion of the Obligations unenforceable. No Loan Party nor
any of its Subsidiaries is a "registered investment company" or a company
"controlled" by a "registered investment company" or a "principalunderwriter"
of a "registered investment company" as such terms are defined in the
Investment Company Act
of 1940.
4.18.
OFAC
. No Loan Party nor any of its Subsidiaries is in violation of any of the
countryor list based economic and trade sanctions administered and enforced by
OFAC or any Canadian Governmental Authority. No Loan Party nor any of its
Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its
assets located inSanctioned Entities, or (c) to its knowledge derives revenues
directly or indirectly, from investments in, or transactions with
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Sanctioned Persons or Sanctioned Entities. No proceeds of any loan made
hereunder will be used to fund any operations in, finance any investments or
activities in, or make any payments to, aSanctioned Person or a Sanctioned
Entity.
4.19.
Employee and Labor Matters
. Except asset forth on
Schedule 4.19
, no Loan Party nor any of its Subsidiaries is a party to or otherwise bound
by any collective bargaining or similar agreement with any union or other
labor organization. Except to the extent would not,individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect,
there is (i) no unfair labor practice charge or complaint pending or, to the
knowledge of Borrower, threatened against Borrower or any of itsSubsidiaries
before any Governmental Authority and no grievance or arbitration proceeding
pending or threatened against Borrower or any of its Subsidiaries which arises
out of or under any collective bargaining agreement and that would reasonably
beexpected to result in a material liability, (ii) no strike, labor dispute,
slowdown, stoppage or similar action or grievance pending or threatened in
writing against Borrower or its Subsidiaries that could reasonably be expected
to result in amaterial liability, or (iii) to the knowledge of Borrower, after
due inquiry, no union representation question existing with respect to the
employees of Borrower or its Subsidiaries and no union organizing activity
taking place with respect toany of the employees of Borrower or its
Subsidiaries. None of Borrower or its Subsidiaries has incurred any liability
or obligation under the
Worker Adjustment and Retraining Notification Act
or similar state or foreign law, which remainsunpaid or unsatisfied which
could reasonably be expected to result in a Material Adverse Effect. The hours
worked and payments made to, classification of, employees of Borrower and its
Subsidiaries have not been in violation of the
Fair LaborStandards Act
or any other applicable legal requirements, except to the extent such
violations would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect. All material payments due from
Borrower orits Subsidiaries on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability
on the books of Borrower and all remittances and withholdings on account of
Taxes and employer or employeecontribution to benefit plans have been remitted
to the applicable Governmental Authority when due, except where the failure to
do so would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
4.20.
Intellectual Property
. Each Loan Party and Subsidiary owns or has the lawful right touse all
Intellectual Property necessary for the conduct of its business, without
conflict with any rights of others. There is no pending or, to any Loan
Party's knowledge, threatened material Intellectual Property Claim with
respect to any LoanParty, any Subsidiary or any of their Property (including
any Intellectual Property). All Intellectual Property owned by any Loan Party
or any Subsidiary and registered with the U.S. Patent and Trademark Office,
the Canadian Intellectual PropertyOffice or any applicable Governmental
Authority in the European Union is identified on
Schedule 4.20
.
4.21.
Eligible Accounts
. As to each Account that is identified by Borrower as an EligibleAccount or
an Eligible Credit Card Receivable in a Borrowing Base Certificate submitted
to Agent, such Account is (a) a bona fide existing payment obligation of the
applicable Account Debtor created by the sale and delivery of Inventory or
therendition of services to such Account Debtor in the ordinary course of
Borrower's business, (b) owed to a Borrower without any known defenses,
disputes, offsets, counterclaims, or rights of return or cancellation, and (c)
not excludedas ineligible by virtue of one or more of the excluding criteria
(other than any Agent-discretionary
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criteria) set forth in the definition of Eligible Accounts or Eligible Credit
Card Receivables, as the case may be.
4.22.
Eligible Inventory
. As to each item of Inventory that is identified by Borrower asEligible
Inventory in a Borrowing Base Certificate submitted to Agent, such Inventory
is (a) of good and merchantable quality, free from known defects, and (b) not
excluded as ineligible by virtue of one or more of the excluding criteria(other
than any Agent-discretionary criteria) set forth in the definition of Eligible
Inventory.
4.23.
Location of Inventory and Equipment
. Except for the third-party warehouse locationsidentified on
Schedule
4.23
, the Inventory and Equipment of Borrower is not stored with a bailee,
warehouseman, or similar party and is located only at, or in-transit between,
the locations identified on
Schedule 4.23
(assuch Schedule may be updated pursuant to
Section 5.14
).
4.24.
Inventory Records
.Each Loan Party keeps correct and accurate records itemizing and describing
the type, quality, and quantity of its and its Subsidiaries' Inventory and the
book value thereof.
4.25.
Hedge Agreements
. On each date that any Hedge Agreement is executed by any HedgeProvider, each
Loan Party party to such Hedge Agreement satisfies all eligibility,
suitability and other requirements under the
Commodity Exchange Act
and the Commodity Futures Trading Commission regulations and, in the case of a
guarantor ofHedge Obligations, is a Qualified ECP Guarantor.
4.26.
Credit Card Arrangements
.
Schedule 4.26
is a list describing all arrangements as of the Closing Date to which any Loan
Party is a party with respect to the processing and/or payment to such Loan
Party of the proceeds of any credit card charges and debit card chargesfor
sales made by such Loan Party.
4.27.
No Defaults; Material Contracts
. No event orcircumstance has occurred or exists as of the date of this
Agreement that constitutes a Default or Event of Default.
Schedule 4.27
contains a true, correct and complete list of all Material Contracts, and
except as described thereon, all suchMaterial Contracts are in full force and
effect. No Loan Party or Subsidiary is in default, and no event or
circumstance has occurred or exists that with the passage of time or giving of
notice would constitute a default, under any Material Contractwhich would
enable the other contracting party to terminate such Material Contract. There
is no basis upon which any party (other than a Loan Party or the Subsidiary)
could terminate a Material Contract prior to its scheduled termination date.
4.28.
Operations of Certain Subsidiaries
. As of the Closing Date, CGS is inactive and doesnot engage in any trade or
business, own any assets or owe any Indebtedness or any other obligation or
liability except as expressly permitted hereunder in its capacity as a Loan
Party and the ownership of all of the outstanding shares of CGS USA.Each of
CGS USA and Birks Jewellers Limited, is inactive and does not engage in any
trade or business, own any assets or owe any Indebtedness or any other
obligation or liability other than, in the case of CGS USA, (a) the provision
of limitedsupport services to Borrower and (b) the payment by Borrower to CGS
USA of up to US$500,000 in the aggregate in each Fiscal Year in the form of
Permitted Intercompany
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Advances and reimbursements of reasonable and documented expenses incurred by
CGS USA for and on behalf of Borrower, provided that no Default or Event of
Default has occurred and is continuing atthe time of any such payment.
5. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations:
5.1.
Financial Statements, Reports, Certificates
. Borrower (a) will deliver to Agenteach of the financial statements, reports,
and other items set forth on
Schedule 5.1
no later than the times specified therein, (b) agree that no Subsidiary of a
Loan Party will have a Fiscal Year different from that of Borrower,(c) agree
to maintain a system of accounting that enables Borrower to produce financial
statements in accordance with GAAP, and (d) agree that they will, and will
cause each other Loan Party to, (i) keep a reporting system that showsall
additions, sales, claims, returns, and allowances with respect to their
Subsidiaries' sales (for avoidance of doubt, Agent and Lenders hereby
acknowledge that the reporting system maintained by the Loan Parties on the
Closing Date satisfiesthis clause (i)), and (ii) agree that they will, and
will cause each other Loan Party to maintain their billing and reporting
system materially consistent with that in effect as of the Closing Date, and
shall only make material modificationsthereto with notice to, and with the
consent of, the Agent (such consent not to be unreasonably withheld or
delayed).
5.2.
Reporting
. Borrower (a) will deliver to Agent (and if so requested by Agent, withcopies
for each Lender) each of the reports set forth on
Schedule 5.2
at the times specified therein, and (b) agree to use commercially reasonable
efforts in cooperation with Agent to facilitate and implement a system of
electroniccollateral reporting in order to provide electronic reporting of
each of the items set forth on such Schedule.
5.3.
Existence
. Except as otherwise permitted under
Section 6.3
or
Section6.4
, Borrower will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect such Person's valid existence and
good standing in its jurisdiction of organization and, except as would not
reasonablybe expected to result in a Material Adverse Effect, good standing
with respect to all other jurisdictions in which it is qualified or required
to be qualified to do business and any rights, franchises, permits, licenses,
accreditations,authorizations, or other approvals material to their businesses.
5.4.
Maintenance ofProperties
. Borrower will, and will cause each of its Subsidiaries to, maintain and
preserve all of its assets that are necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear,
tear,casualty, and condemnation and Permitted Dispositions excepted (and
except where the failure to so maintain and preserve assets would not
reasonably be expected to result in a Material Adverse Effect).
5.5.
Taxes
. Borrower will, and will cause each of its Subsidiaries to, pay in full
beforedelinquency or before the expiration of any extension period all
Federal, provincial and state income and capital Taxes and all other material
Taxes imposed, levied, or assessed against it, or any of its assets or in
respect of any of its income,capital, businesses, or franchises, except to the
extent that the validity of such Tax is the subject of a Permitted Protest.
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5.6.
Insurance
. Borrower will, and willcause each of its Subsidiaries to, at Borrower's
expense, maintain insurance respecting each of each Loan Party's and its
Subsidiaries' assets wherever located, covering liabilities, losses or damages
as are customarily are insuredagainst by other Persons engaged in same or
similar businesses and similarly situated and located and flood insurance
coverage acceptable to Agent with respect to all Real Property Collateral (to
the extent flood insurance is required). All suchpolicies of insurance shall
be with financially sound and reputable insurance companies that are
reasonably acceptable to Agent (it being agreed that any insurance providers
which have a policy in effect with Borrower or any of its Subsidiaries asof
the Closing Date are acceptable to Agent) and in such amounts as is carried
generally in accordance with sound business practice by companies in similar
businesses similarly situated and located and, in any event, in amount,
adequacy, and scopereasonably satisfactory to Agent (it being agreed that the
amount, adequacy, and scope of the policies of insurance of Borrower in effect
as of the Closing Date are acceptable to Agent). All property insurance
policies covering the Collateral are tobe made payable to Agent for the
benefit of Agent and the Lenders, as their interests may appear, in case of
loss, pursuant to a standard lenders' loss payable endorsement with a standard
non-contributory "lender" or "securedparty" clause and are to contain such
other provisions as Agent may reasonably require to fully protect the Lenders'
interest in the Collateral and to any payments to be made under such policies.
All certificates of property and generalliability insurance are to be
delivered to Agent, with lenders' loss payable (but only in respect of
Collateral) and additional insured endorsements in favor of Agent and shall
provide for not less than 30 days (10 days in the case ofnon-payment), or such
shorter period as Agent may agree, prior written notice to Agent of the
exercise of any right of cancellation. If any Loan Party or its Subsidiaries
fails to maintain such insurance, Agent may arrange for such insurance, but
atBorrower's expense and without any responsibility on Agent's part for
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. Borrower shall give Agent prompt
notice ofany loss exceeding $1,000,000 covered by Borrower or its
Subsidiaries' casualty or business interruption insurance. Upon the occurrence
and during the continuance of an Event of Default, Agent shall have the sole
right to file claims under anyproperty and general liability insurance
policies in respect of the Collateral, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute
any and all endorsements, receipts, releases, assignments,reassignments or
other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
5.7.
Inspection
.
(a)Borrower will, and will cause each of its Subsidiaries to, permit Agent,
any Lender and each of theirrespective duly authorized representatives or
agents to visit any of its properties and inspect any of its assets or books
and records, to examine and make copies of its books and records, and to
discuss its affairs, finances, and accounts with, andto be advised as to the
same by, its officers and employees (provided an authorized representative of
a Borrower shall be allowed to be present) at such reasonable times and
intervals as Agent or any Lender, as applicable, may designate and, so longas
no Default or Event of Default has occurred and is continuing, with reasonable
prior notice to Administrative Borrower and during regular business hours.
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(b)Borrower will, and will cause each of its Subsidiaries to,permit Agent and
each of its duly authorized representatives or agents to conduct appraisals
and valuations at such reasonable times and intervals as Agent may designate;
provided
that the expenses required to be paid by the Loan Parties inconnection
therewith shall be subject to any applicable limitation set forth in
Section 2.10(c)
.
5.8.
Compliance with Laws and Material Contracts
. Borrower will, and will cause each of itsSubsidiaries to, comply with (a)
the requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority, and (b) all of its Material Contracts, except in each
case where non-compliance with which, individuallyor in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect.
5.9.
Environmental
. Borrower will, and will cause each of its Subsidiaries to,
(a)Keep any property either owned or operated by any Loan Party or its
Subsidiaries free of any EnvironmentalLiens (other than Permitted Liens) or
post bonds or other financial assurances sufficient to satisfy the obligations
or liability evidenced by such Environmental Liens (other than Permitted
Liens),
(b)Comply with applicable Environmental Laws, except where a failure to comply
would not reasonably be expectedto result in, individually or in the
aggregate, a Material Adverse Effect, and provide to Agent documentation of
such compliance which Agent reasonably requests,
(c)Promptly notify Agent of any release of which Borrower has knowledge of a
Hazardous Material in anyreportable quantity or which could reasonably be
expected to result in material liabilities of any Loan Party or its
Subsidiaries from or onto property owned or operated by any Loan Party or its
Subsidiaries and take any Remedial Actions required toabate said release or
otherwise to come into compliance, in all material respects, with applicable
Environmental Law, except where a failure to comply would not reasonably be
expected to result in, individually or in the aggregate, a MaterialAdverse
Effect, and provide to Agent documentation of such compliance which Agent
reasonably requests, and
(d)Promptly, but in any event within 5 Business Days of its receipt thereof,
provide Agent with written noticeof any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of a Loan Party or its Subsidiaries, (ii) commencement of any Environmental
Action or written notice that anEnvironmental Action will be filed against a
Loan Party or its Subsidiaries that individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, and (iii) written
notice of a violation, citation, or otheradministrative order from a
Governmental Authority that would reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect.
5.10.
Disclosure Updates
. Each Loan Party will, promptly and in no event later than fifteenBusiness
Days after obtaining knowledge thereof, notify Agent if any written
information, exhibit, or report furnished to Agent or the Lenders contained,
at the time it was furnished, any untrue statement of a material fact or
omitted to state anymaterial fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made. The
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foregoing to the contrary notwithstanding, any notification pursuant to the
foregoing provision will not cure or remedy the effect of the prior untrue
statement of a material fact or omission ofany material fact nor shall any
such notification have the effect of amending or modifying this Agreement or
any of the Schedules hereto.
5.11.
Formation of Subsidiaries
. Borrower will, at the time that any Loan Party forms anydirect or indirect
Subsidiary or acquires any direct or indirect Subsidiary after the Closing
Date, (x) within 30 days of such formation or acquisition (or such later date
as permitted by Agent in its sole discretion) (a) cause such newSubsidiary to
provide to Agent a joinder to the Canadian Security Documents and other
applicable Loan Documents (including this Agreement to the extent that such
Subsidiary is to be joined as a Borrower hereunder), as applicable, which
joinder shallinclude such provisions as Agent shall consider necessary or
desirable for the inclusion of such Subsidiary as a Borrower or other Loan
Party including such provisions as are necessary or desirable to reflect the
formation of such Subsidiary underthe laws of a jurisdiction other than Canada
or the location of Collateral outside of Canada and a guarantee of the
Obligations, if required, together with such other security agreements, ,as
well as appropriate financing statements (and withrespect to all Real Property
Collateral subject (or required hereunder to be subject) to a Mortgage,
fixture filings) all in form and substance reasonably satisfactory to Agent
(including being sufficient to grant Agent a first priority Lien(subject to
Permitted Liens)) in and to the assets of such newly formed or acquired
Subsidiary (other than Excluded Property, as defined in the Canadian Security
Documents); to the applicable Canadian Security Documents, the guarantee and
such othersecurity agreements shall not be required to be provided to Agent
with respect to Obligations, if the costs to the Loan Parties of providing
such guarantee or such security agreements are unreasonably excessive (as
determined by Agent inconsultation with Administrative Borrower) in relation
to the benefit to Agent and the Lenders of the security or guarantee afforded
thereby and (b) provide to Agent all other documentation, including one or
more opinions of counsel reasonablysatisfactory to Agent, which, in its
reasonable judgment, is necessary with respect to the execution and delivery
of the applicable documentation referred to above (including policies of title
insurance, or other documentation with respect to allReal Property Collateral
owned in fee and required to be subject to a Mortgage), and (y) within 60 days
of such formation or acquisition (or such later date as permitted by Agent in
its sole discretion), (a) cause such new Subsidiary to provideto Agent
Mortgages with respect to any Real Property owned in fee of such new
Subsidiary with a fair market value greater than $1,000,000, as well as
appropriate fixture filings, all in form and substance reasonably satisfactory
to Agent (includingbeing sufficient to grant Agent a first priority Lien
(subject to Permitted Liens) in and to the Real Property assets of such newly
formed or acquired Subsidiary); and (b) provide to Agent all other
documentation, including one or more opinionsof counsel reasonably
satisfactory to Agent, which, in its opinion, is appropriate with respect to
the execution and delivery of the applicable documentation referred to above
(including policies of title insurance, evidence of flood certificationdocumenta
tion (to the extent required) or other documentation with respect to all Real
Property owned in fee and subject to (or required hereunder to be subject to)
a Mortgage). Any document, agreement, or instrument executed or issued
pursuant tothis
Section
5.11
shall constitute a Loan Document.
5.12.
FurtherAssurances
. Borrower will, and will cause each of the other Loan Parties to, at any time
upon the reasonable request of Agent, execute or deliver, or cause to be
executed or delivered to Agent any and all financing statements, fixturefilings,
security
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agreements, pledges, assignments, mortgages, deeds of trust, opinions of
counsel, and all other documents (the "
Additional Documents
") that Agent may reasonably request in formand substance reasonably
satisfactory to Agent, to create, perfect, and continue perfected or to better
perfect Agent's Liens in all of the assets of Loan Parties (whether now owned
or hereafter arising or acquired, tangible or intangible, realor personal), to
create and perfect Liens in favor of Agent in any Real Property acquired by
any Loan Party with a fair market value in excess of $1,000,000, and in order
to fully consummate all of the transactions contemplated hereby and under
theother Loan Documents. To the maximum extent permitted by applicable law, if
any Loan Party refuses or fails to execute or deliver any reasonably requested
Additional Documents within a reasonable period of time following the request
to do so,Borrower, each Borrower and each other Loan Party hereby authorizes
Agent to execute any such Additional Documents in the applicable Loan Party's
name and authorizes Agent to file such executed Additional Documents in any
appropriate filingoffice. In furtherance of, and not in limitation of, the
foregoing, each Loan Party shall take such actions as Agent may reasonably
request from time to time to ensure that the Obligations are guaranteed by the
Guarantors and are secured bysubstantially all of the assets of each Loan
Party, including all of the outstanding Equity Interests of Borrower and its
Subsidiaries. Without limiting the generality of the foregoing, the Borrower
shall ensure that promptly, and in no event morethan 15 days, following the
Montrovest Merger, Montel shall sign an acknowledgment and confirmation in
respect of the Montrovest Subordination Agreement in form and substance
satisfactory to the Agent.
5.13.
[Intentionally Omitted]
.
Location of Inventory; Chief Executive Office,Etc
.
. Borrower will, and will cause each other Loan Party to, keep its Inventory
only at (or in-transit between or to) its locations identified on
Schedule 4.23
and its chief executive office (and registered office) only at thelocations
identified on
Schedule 4.23
;
provided
, that Administrative Borrower may amend
Schedule
4.23
so long as such amendment occurs by written notice to Agent not less than 10
days, or such later date as Agent agreesin its sole discretion, prior to the
date on which such Inventory is moved to such new location or such chief
executive office or registered office is relocated and so long as such new
location is within continental Canada in the case of the chiefexecutive office
and the registered office of a Loan Party.
5.15.
Bank Products
. On orbefore the 120
th
day after the Original Closing Date, the Loan Parties shall establish their
primary depository and treasury management relationships in the United States
with Wells Fargo or oneor more of its Affiliates and their primary depository
and treasury management relationships in Canada with Wells Fargo or one or
more of its Affiliates, Bank of Montreal, The Toronto-Dominion Bank, Royal
Bank of Canada, National Bank of Canada,Canadian Imperial Bank of Commerce or
any other Canadian bank reasonably acceptable to Agent and will maintain such
depository and treasury management relationships at all times during the term
of the Agreement.
5.16.
Hedge Agreements
. Borrower agrees that it shall offer to Wells Fargo or one or more ofits
respective Affiliates the first opportunity to bid for all Hedge Agreements to
be entered into by any Loan Party or any of its Subsidiaries during the term
of the Agreement.
5.17.
Canadian Compliance
. In addition to and without limiting the generality of
Section5.8
, with respect to any Canadian Pension Plan established after the Closing
Date, Borrower will, and will cause each of its Subsidiaries to, (a) comply
with applicable provisions
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and funding requirements of the Income Tax Act (Canada) and applicable federal
or provincial pension benefits legislation and other applicable laws with
respect to all Canadian Pension Plansexcept where the failure to do so would
not reasonably be expected to result in a Material Adverse Effect and (b)
furnish to Agent upon Agent's written request such additional information
about any Canadian Pension Plan for which Borroweror its Subsidiaries would
reasonably expect to incur any material liability. All employer or employee
payments, contributions or premiums required to be remitted, paid to or in
respect of Canadian statutory benefit plans that Borrower or any of
itsSubsidiaries is required to participate in or comply with, including the
Canada Pension Plan or Quebec Pension Plan as maintained by the Government of
Canada or Province of Quebec, respectively, and plans administered pursuant to
applicableworkplace safety insurance and employment insurance legislation will
be paid or remitted by each such Person in accordance with the terms thereof,
any agreements relating thereto and all applicable laws except (i) to the
extent that any amountso payable is subject to a Permitted Protest and a
Canadian Priority Payable Reserve for such amount has been established (ii)
for failures resulting from administrative oversight which are promptly
remedied once Borrower or its Subsidiarybecomes aware thereof.
5.18.
Credit Card Notifications
. Within 30 days of the OriginalClosing Date (or such later date as Agent may
agree), deliver to the Agent copies of notifications (each, a "
Credit Card Notification
") substantially in the form attached hereto as
Exhibit C-2
, or otherwise in form andsubstance reasonably acceptable to Agent, which have
been executed on behalf of such Loan Party and delivered to such Loan Party's
Credit Card Issuers and Credit Card Processors listed on
Schedule
4.26
. No Loan Party shall enterinto any agreements with Credit Card Issuers or
Credit Card Processors other than the ones expressly contemplated herein or in
Section 4.26
unless Agent has received a copy of the Credit Card Notification sent to such
new or additional CreditCard Issuer or Credit Card Processor.
6. NEGATIVE COVENANTS.
Borrower covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations:
6.1.
Indebtedness
. Borrower will not, and will not permit any of its Subsidiaries to,create,
incur, assume, suffer to exist, guarantee, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness, except for
Permitted Indebtedness. Borrower shall not incur any Indebtedness or have
trade payablesowing to any secured party listed in paragraph 8 of Part A of
Schedule 3.6
that is secured by the security perfected by the PPSA registration in favour
of such secured party until it has satisfied its obligations under paragraph 8
of Part Aof
Schedule 3.6
with respect to such PPSA Registration.
6.2.
Liens
. Borrowerwill not, and will not permit any of its Subsidiaries to, create,
incur, assume, or suffer to exist, directly or indirectly, any Lien on or with
respect to any of its assets, of any kind, whether now owned or hereafter
acquired, or any income orprofits therefrom, except for Permitted Liens.
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6.3.
Restrictions on Fundamental Changes
.Borrower will not, and will not permit any of its Subsidiaries to,
(a)other than in order to consummate aPermitted Acquisition, enter into any
merger, amalgamation, consolidation, reorganization, or recapitalization, or
reclassify its Equity Interests, except for (i) any merger or amalgamation
between Loan Parties;
provided
that Borrowermust be the survivor of any merger or amalgamation to which it is
a party (or, in the case of an amalgamation, the continuing corporation
resulting therefrom must be liable for the Obligations of Borrower under the
Loan Documents), (ii) anymerger or amalgamation between a Loan Party (other
than Borrower) and a Subsidiary of such Loan Party that is not a Loan Party so
long as such Loan Party is the surviving entity of any such merger or
amalgamation (or, in the case of an amalgamation,the continuing corporation
resulting therefrom) must be liable for the Obligations of such Loan Party
under the Loan Documents and the priority of the Agent's Liens on the
Collateral is not affected thereby, and (iii) any merger oramalgamation
between Subsidiaries of Borrower that are not Loan Parties,
(b)liquidate, wind up, ordissolve itself (or suffer any liquidation or
dissolution), except for (i) the liquidation or dissolution of non-operating
Subsidiaries of Borrower with nominal assets and nominal liabilities, (ii) the
liquidation or dissolution of a LoanParty (other than Borrower) or any of its
wholly-owned Subsidiaries so long as all of the assets (including any interest
in any Equity Interests) of such liquidating or dissolving Loan Party or
Subsidiary are transferred to a Loan Party that is notliquidating or
dissolving, or (iii) the liquidation or dissolution of a Subsidiary of
Borrower that is not a Loan Party (other than any such Subsidiary the Equity
Interests of which (or any portion thereof) is subject to a Lien in favor
ofAgent) so long as all of the assets of such liquidating or dissolving
Subsidiary are transferred to a Subsidiary of Borrower that is not liquidating
or dissolving, or
(c)suspend or cease operating a substantial portion of its or their business,
except as permitted pursuant toclauses (a) or (b) above or in connection with
a transaction permitted under
Section 6.4
,
6.4.
Disposal of Assets
. Borrower will not, and will not permit any of its Subsidiaries to,convey,
sell, lease, license, assign, transfer, or otherwise dispose of (or enter into
an agreement to convey, sell, lease, license, assign, transfer, or otherwise
dispose of) any of its or their assets other than (a) Permitted Dispositions;(b)
transactions expressly permitted by
Sections 6.3 or 6.9
; and (c) sales of equipment, furniture and fixtures in the ordinary course of
business to a Person other than a Subsidiary that is not a Loan Party and
subject tocompliance with
Section 6.10
, if applicable, provided the proceeds of such sales of equipment shall be
applied to repay the Revolving Loans and/or provide Letter of Credit
Collateralization, as applicable, without a permanent reductionin the
Commitments.
6.5.
Nature of Business
. Borrower will not, and will not permit anyof its Subsidiaries to, make any
change in the nature of its or their business as described in
Section 4.28
or
Schedule 6.5
or acquire any properties or assets that are not reasonably related to the
conduct of such businessactivities;
provided
, that the foregoing shall not prevent Borrower and its Subsidiaries from
engaging in any business that is reasonably related or ancillary to its or
their business.
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6.6.
Prepayments and Amendments
. Borrowerwill not, and will not permit any of its Subsidiaries to,
(a) Except in connection with Refinancing Indebtednesspermitted by
Section
6.1
,
(i)make any payments in respect of the Montrovest Debt other than,so long as
no Default or Event of Default then exists or would (after taking into
consideration the payment to be made) result therefrom and subject to the
Montrovest Subordination Agreement, (x) regularly scheduled payments of
interest inrespect of the Montrovest Debt as and when due pursuant to the
Montrovest Debt Documents (y) the principal payments of US$1,250,000 on or
about July 20, 2018 and US$1,250,000 on or about July 20, 2019 pursuant to the
Montrovest Debt2017 and (z) the fee payment in an aggregate amount not to
exceed $10,000 annually pursuant to the Montrovest Debt 2017. No other
prepayment of, or payment of principal on, the Montrovest Debt may be made
without the prior written consent ofAgent in its sole discretion, unless the
Restricted Payment Conditions are satisfied with respect to such prepayment or
payment,
(ii)make any payment on account of Indebtedness (other than as permitted under
paragraph (a)(i) above) that hasbeen contractually subordinated in right of
payment to the Obligations if (A) such payment is not permitted at such time
under the subordination terms and conditions applicable to such Indebtedness
and, (B) where applicable, the RestrictedPayment Conditions have not been
satisfied,
(iii)make any payment on account of the Damiani SubordinatedIndebtedness other
than payments in the amounts and on the due dates therefor set out in the
Damiani Inventory Purchase Agreement provided that any such payment is
permitted to be made at such time under the Damiani Subordination Agreement.
(b)Directly or indirectly, amend, modify, or change any of the terms or
provisions of, or, in the case of(b)(i) only, waive any of its material rights
under:
(i)the Term Loan Documents (except to the extentexpressly permitted by the
Intercreditor Agreement), the Management Agreement (except to the extent
expressly permitted by the Management Subordination Agreement), the Quebec
Subordinated Debt Documents, the Damiani Purchase Documents, the RM
JVAgreement to the extent that, in the case of the RM JV Agreement, such
amendment, modification or change would be reasonably expected to be adverse
to the interests of the Lenders, the Montrovest Debt Documents (except to the
extent expresslypermitted by the Montrovest Subordination Agreement), or any
Additional Subordinated Debt Documents or any other agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
that is contractually subordinated inright of payment to the Obligations; or
(ii)the Governing Documents of any Loan Party or any of itsSubsidiaries if the
effect thereof, either individually or in the aggregate, could reasonably be
expected to be materially adverse to the interests of the Lenders, and
(c) make any payments in respect of the Term Loan Debt other than regularly
scheduled interest payments pursuant to the termsof the Term Loan Agreement.
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Each Loan Party shall deliver to Agent complete and correct copies of any
amendment,restatement, supplement or other modification to or waiver of the
Management Agreement, the Quebec Subordinated Debt Documents, the Damiani
Purchase Documents, the RM JV Agreement, the Montrovest Debt Documents, any
Additional Subordinated DebtDocuments or Governing Documents.
6.7.
Restricted Payments
. Borrower will not, and willnot permit any of its Subsidiaries to, make any
Restricted Payment;
provided
, that, so long as it is permitted by law, and, so long as no Default or Event
of Default shall have occurred and be continuing or would result therefrom,
(a)Borrower may declare and pay distributions to the holders of its Equity
Interests to so long as thefollowing conditions are satisfied and
Administrative Borrower has delivered a certificate to Agent prior to the
payment of any such distribution certifying satisfaction of the Restricted
Payment Conditions,
(b)Loan Parties shall be permitted to make payments of principal and interest
on Permitted IntercompanyAdvances,
(c)the Borrower shall be permitted to pay Gestofi S.A. fees and expenses in an
aggregate amountnot greater than US$300,000 for each calendar year for
services provided to Borrower by employees of Gestofi S.A., as well as the
amounts permitted to be paid pursuant to the Management Subordination
Agreement, provided that no Default or Event ofDefault shall have occurred and
be continuing at the time of such payment or would result therefrom,
(d)Borrower shall be permitted to, without duplication, (i) pay to any of
Regaluxe S.r.L., Montrovest B.V.(which, following the Montrovest Merger, shall
mean Montel) or Gestofi S.A., an aggregate amount not to exceed US$300,000 in
any Fiscal Year (or such greater amount to the extent consented to in writing
by the Agent in its sole discretion) forexpenses incurred by any of Regaluxe
S.r.L., Montrovest B.V. (which, following the Montrovest Merger, shall mean
Montel) or Gestofi S.A. on behalf of (a) the Chairman of the Board of
Directors of the Borrower in connection with carrying out hisduties as
Chairman of the Board of Directors of the Borrower in the ordinary course of
business and (b) the Chairman of the Executive Committee of the Borrower in
connection with carrying out his duties as Chairman of the Executive Committee
ofthe Borrower in the ordinary course of business, (ii) pay to Niccolo Rossi,
an aggregate amount not to exceed 225,000 in any calendar year for carrying
out his duties as Chairman of the Board of Directors of the Borrower plus,
anaggregate amount not to exceed 60,000 in any calendar year for carrying out
his duties as Chairman of the Executive Committee of the Borrower and (iii)
(x) pay Regaluxe S.r.L. a fee of not more than 3.5% of the total price of
thegoods sold to Regaluxe S.r.L. in the form of a discount (which fee shall be
payable to cover import duties and the carrying costs of value-added Taxes
financing), and (y) reimburse Regaluxe S.r.L. for other reasonable costs and
expensesincurred by Regaluxe S.r.L. in connection with the importation by
Regaluxe S.r.L. of goods of the Borrower and the subsequent sale of such goods
by Regaluxe S.r.L. to certain Italian jewelry stores (so long as, to the
extent requested by the Agent,the Agent is provided with satisfactory
documentation supporting such fees, costs and expenses), provided that in each
case, no Default or Event of Default shall have occurred and be continuing at
the time of such payment or would result therefrom;
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(e)the purchase by Borrower of Equity Interests issued by itfrom employees of
Mayor's Jewelers, Inc., in an aggregate amount not to exceed US$100,000 on the
Original Closing Date; and
(f)the Borrower shall be permitted to pay Carlo Coda Nunziante up to an amount
not greater thanEUR 150,000 in the aggregate per annum on account of
consulting services provided to the Borrower, reimbursement of expenses in
connection therewith and applicable taxes payable by the Borrower in
connection therewith, provided that no Defaultor Event of Default shall have
occurred and be continuing at the time of such payment or would result
therefrom.
6.8.
Accounting Methods
. Borrower will not, and will not permit any of its Subsidiaries to,modify or
change its Fiscal Year or its method of accounting (other than as may be
required to conform to GAAP, subject to Section 1.2).
6.9.
Investments
. Borrower will not, and will not permit any of its Subsidiaries to,directly
or indirectly, make or acquire any Investment or incur any liabilities
(including contingent obligations) for or in connection with any Investment
except for Permitted Investments.
6.10.
Transactions with Affiliates
. Borrower will not, and will not permit any of itsSubsidiaries to, directly
or indirectly, enter into or permit to exist any transaction with any
Affiliate of Borrower or any of its Subsidiaries except for:
(a)transactions (other than the payment of management, consulting, monitoring,
or advisory fees) betweenBorrower or its Subsidiaries, on the one hand, and
any Affiliate of Borrower or its Subsidiaries, on the other hand, so long as
such transactions are no less favorable, taken as a whole, to Borrower or its
Subsidiaries, as applicable, than would beobtained in an arm's length
transaction with a non-Affiliate;
provided
,
however
the foregoing restrictions shall not apply to (x) Permitted Dispositions
permitted pursuant to clause (n) thereof or (y) othertransactions between any
Loan Party and any other Loan Party,
(b)so long as it has been approved byBorrower's or its applicable Subsidiary's
Board of Directors (or comparable governing body) in accordance with
applicable law, any indemnity provided for the benefit of directors (or
comparable managers), officers and employees of Borroweror its applicable
Subsidiary,
(c)so long as it has been approved by Borrower's or its applicableSubsidiary's
Board of Directors (or comparable governing body) in accordance with
applicable law, reasonable and customary fees, compensation, benefits and
incentive arrangements paid or provided to, and indemnities provided on behalf
of or to,officers, directors or employees of Borrower (or any direct or
indirect Borrower thereof) or any of Borrower's Subsidiaries,
(d)transactions permitted by
Section 6.3
or
Section 6.7
, or any Permitted Intercompany Advance,
(e)any transaction with an Affiliate otherwise permitted hereunder where the
only consideration paid byBorrower or any Subsidiary is Borrower's Qualified
Equity Interests, and
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(f)loans or advances to directors, officers and employeespermitted under
Section 6.9
.
6.11.
Use of Proceeds
. Borrower will not, andwill not permit any of its Subsidiaries to, use the
proceeds of any Loan made hereunder for any purpose other than consistent with
the terms and conditions hereof, for their lawful and permitted purposes
(including without limitation financing theongoing working capital, capital
expenditures, Permitted Acquisitions and general corporate needs of Borrower
and its Subsidiaries, as well as, on the Closing Date, to pay the fees, costs,
and expenses incurred in connection with this Agreement, theother Loan
Documents and the other transactions contemplated hereby and thereby).
6.12.
Limitation on Issuance of Equity Interests
. Borrower will not, and will not permit anyof its Subsidiaries to issue or
sell or enter into any agreement or arrangement for the issuance or sale of
any of its Equity Interests, other than (a) the issuance or sale of Qualified
Equity Interests by Borrower, (b) the issuance andsale of Qualified Equity
Interests by any Loan Party or any Subsidiary of a Loan Party to a Loan Party
to which such Loan Party is a direct Subsidiary, (c) the issuance and sale of
Qualified Equity Interests by any Subsidiary that is not a LoanParty to
another Subsidiary, (d) transfers and replacements of then-outstanding Equity
Interests, provided that any such transfer or replacements do not (i) give
rise to a Change of Control, (ii) include any transfer of EquityInterests held
by a Loan Party to a Person that is not a Loan Party (other than a Permitted
Disposition) or (iii) include any transfer of Equity Interests from a Loan
Party to a Person that is not a Loan Party (other than a PermittedDisposition),
(e) the issuance or sale of Qualified Equity Interests by any Person that is
not a Loan Party, and (f) issuances of Qualified Equity Interests by a newly
created Subsidiary to such Subsidiary's direct parent inaccordance with the
terms of the Agreement.
6.13.
[Intentionally Omitted]
.
6.14.
[Intentionally Omitted]
.
6.15.
Canadian Employee Benefits
. Borrower will not, and will not permit any of itsSubsidiaries to:
(a)establish, maintain, sponsor, administer, contribute to, participate in or
assume orincur any liability in respect of any Canadian Defined Benefit Plan
or amalgamate with any Person if such Person, sponsors, administers,
contributes to, participates in or has any liability in respect of, any
Canadian Defined Benefit Plan other thana Canadian Multi-Employer Plan, unless
a Canadian Priority Payables Reserve for unremitted and due pension plan
contributions or wind-up deficiency amounts has been established.
(b)terminate any Canadian Pension Plan in a manner, or take any other action
with respect to any CanadianPension Plan, which would reasonably be expected
to result in a Material Adverse Effect, or
(c)fail tomake full payment when due of any amounts, under the provisions of
any Canadian Pension Plan, any agreement relating thereto or applicable law if
such failure would reasonably be expected to result in a Material Adverse
Effect.
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6.16.
Sale and Leaseback Transactions
.Borrower will not, and will not permit any of its Subsidiaries to, become or
remain liable as lessee or as a guarantor or other surety, directly or
indirectly, with respect to any lease whereby it shall sell or transfer any
property, real orpersonal, used or useful in its business, whether now owned
or hereafter acquired, and thereafter rent or lease such property or other
property which it intends to use for substantially the same purpose or
purposes as the property being sold ortransferred; provided that a Borrower
and its Subsidiaries may become and remain liable as lessee, guarantor or
other surety with respect to any such lease if and to the extent that Borrower
or any of its Subsidiaries would be permitted to enterinto, and remain liable
under, such lease to the extent that the transaction would constitute a
Permitted Sale Leaseback Transaction, assuming the sale and leaseback
transaction constituted Indebtedness in a principal amount not to exceed the
grossproceeds of the sale.
6.17.
Negative Pledges
. Borrower will not, and will not permitany of its Subsidiaries to, enter into
any agreement prohibiting the creation or assumption of any Lien upon any of
its properties or assets, whether now owned or hereafter acquired, other than
(a) this Agreement and the other Loan Documents,(b) any agreements governing
any Permitted Liens securing Capitalized Lease Obligations or Permitted
Purchase Money Indebtedness otherwise permitted hereby (in which case, any
prohibition or limitation shall only be effective against the assetsfinanced
thereby), (c) restrictions set forth in the RM JV Agreement (applicable only
to the assets that are the subject of such agreement and the equity interests
in RM JV) and any other provision limiting the disposition or distribution
ofassets or property in joint venture agreements and other similar agreements,
which limitation is applicable only to the assets that are the subject of such
agreements to the extent such joint venture or similar agreement is permitted
under thisAgreement, (d) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement that has been entered into in connection with the
disposition of all or substantially all of the Equity Interests or assets of
such Subsidiary thatapplies only to the Equity Interests or assets of such
Subsidiary, (e) customary provisions in leases, licenses and other contracts
restricting the assignment thereof, (f) any other agreement that does not
restrict in any manner (directlyor indirectly) Liens which may now or
hereafter be created pursuant to any of the Loan Documents to secure any
Obligations, and (g) any prohibition that (i) exists pursuant to the
requirements of applicable law, (ii) consists ofcustomary restrictions and
conditions contained in any agreement relating to any transaction permitted
under
Section
6.3
or
6.4
, (iii) restricts subletting or assignment of leasehold interests contained in
any leasegoverning a leasehold interest of a Borrower or its Subsidiaries,
(iv) exists in any agreement in effect at the time such Subsidiary becomes a
Subsidiary of Borrower, so long as such agreement was not entered into in
contemplation of suchPerson becoming a Subsidiary, (v) exists in any
instrument governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person or the properties orassets of the Person so acquired or
(vi) is imposed by any renewal, extension, refinancing, refund or replacement
(or successive extensions, renewals, refinancings, refunds or replacements)
that are otherwise permitted by the Loan Documents orthe contracts,
instruments or obligations referred to in clause (b), (c), (d), (e), (f),
(g)(iv) or (g)(v) above; provided that such renewals, extensions,
refinancings, refunds or replacements (or successive extensions, renewals,
refinancings,refunds or replacements), taken as a whole, are not more
materially restrictive with respect to such prohibitions than those contained
in the original agreement, as determined in good faith by the Board of
Directors of Borrower.
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6.18.
Restrictions on SubsidiaryDistributions
. Borrower will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or consensual restriction of any kind on the ability of any
suchSubsidiary to (i) pay dividends or make any other distributions on any of
such Subsidiary's Equity Interests owned by Borrower or any other Subsidiary
Borrower, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
Borroweror any other Subsidiary of Borrower, (iii) make loans or advances to
Borrower or any other Subsidiary of Borrower, or (iv) transfer any of its
property or assets to Borrower or any other Subsidiary of Borrower, except in
each case,encumbrances or restrictions (a) imposed by this Agreement and the
other Loan Documents, (b) contained in an agreement with respect to a
Permitted Disposition, (c) contained in any agreements governing any Permitted
Liens securingCapitalized Lease Obligations or Permitted Purchase Money
Indebtedness otherwise permitted hereby (in which case, any encumbrance or
restriction shall only be effective against the assets financed thereby), (d)
constituting customaryrestrictions in joint venture agreements and other
similar agreements applicable to joint ventures permitted hereunder and
applicable solely to such joint venture, (e) contained in any agreement of a
Subsidiary that is not a Loan Partygoverning Permitted Indebtedness, (f)
contained in any instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or theproperties or assets of the Person so
acquired, or (g) contained in, or existing by reasons of, any agreement or
instrument (i) existing on the Closing Date, (ii) relating to property
existing at the time of the acquisition thereof,so long as the encumbrance or
restriction relates only to the property so acquired, (iii) relating to any
Indebtedness of, or otherwise to, any Subsidiary at the time such Subsidiary
was merged, amalgamated or consolidated with or into, oracquired by, a
Borrower or a Subsidiary or became a Subsidiary and not created in
contemplation thereof, (iv) effecting a renewal, extension, refinancing,
refund or replacement (or successive extensions, renewals, refinancings,
refunds orreplacements) of Indebtedness issued under an agreement referred to
in clauses (c), (e), (f) and (g)(i) through (g)(iii) above, so long as the
encumbrances and restrictions contained in any such renewal, extension,
refinancing, refund orreplacement agreement, taken as a whole, are not
materially more restrictive than the encumbrances and restrictions contained
in the original agreement, as determined in good faith by the Board of
Directors of Borrower, (v) constitutingcustomary provisions restricting
subletting or assignment of any leases of a Borrower or any Subsidiary or
provisions in agreements that restrict the assignment of such agreement or any
rights thereunder, (vi) constituting restrictions on thesale or other
disposition of any property securing Indebtedness as a result of a Lien on
such property permitted hereunder, (vii) constituting restrictions on net
worth or on cash or other deposits imposed by customers under contracts
enteredinto in the ordinary course of business, (viii) constituting provisions
contained in agreements or instruments relating to Indebtedness permitted
hereunder that prohibit the transfer of all or substantially all of the assets
of the obligorunder that agreement or instrument unless the transferee assumes
the obligations of the obligor under such agreement or instrument, or (ix)
constituting any encumbrance or restriction with respect to property under a
lease or other agreementthat has been entered into for the employment or use
of such property.
7. FINANCIAL
COVENANT
.
Borrower covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations,Borrower will:
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7.1.
Minimum Excess Availability
. MaintainExcess Availability of not less than 10% of the Maximum Credit
Amount at all times, except that Borrower shall not be in breach of this
covenant if Excess Availability falls below 10% of the Maximum Credit Amount
for not more than two consecutiveBusiness Days once during any Fiscal Month.
8. EVENTS OF
DEFAULT
.
Any one or more of the following events shall constitute an event of default
(each, an "
Event of Default
")under this Agreement:
8.1.
Payments
.
If Borrower fails to pay when due andpayable, or when declared due and
payable, (a) all or any portion of the Obligations consisting of interest,
fees, or charges due to the Lender Group, reimbursement of Lender Group
Expenses, or other amounts (other than any portion thereofconstituting
principal) constituting Obligations (including any portion thereof that
accrues after the commencement of an Insolvency Proceeding, regardless of
whether allowed or allowable in whole or in part as a claim in any such
InsolvencyProceeding), and such failure continues for a period of 5 Business
Days, (b) all or any portion of the principal of the Loans, or (c) any amount
payable to Issuing Lender in reimbursement of any drawing under a Letter of
Credit (which does notbecome a Revolving Loan in accordance with
Section 2.11)
;
8.2.
Covenants
.
If any Loan Party or any of its Subsidiaries:
(a)fails to perform or observe any covenant or otheragreement contained in any
of (i)
Sections 3.6
,
5.1
,
5.2
,
5.3
,
5.6
and
5.7
(solely if Borrower refuses to allow Agent or its representatives or agents to
visit Borrower's properties, inspect its assetsor books or records, examine
and make copies of its books and records, or discuss Borrower's affairs,
finances, and accounts with officers and employees of Borrower),
5.15
or
5.16
, (ii)
Section 6
, (iii)
Section
7
, or (iv)
Section 7
of the Canadian Security Agreement;
(b)fails to perform orobserve any covenant or other agreement contained in any
of
Sections 5.3
(other than if Borrower is not in good standing in its jurisdiction of
organization),
5.4
,
5.5
,
5.8
,
5.11
,
5.12
,
5.14
and such failure continues for a period of 15 days after the earlier of (i)
the date on which such failure shall first become known to any officer of
Borrower or (ii) the date on which written notice thereof is given
toAdministrative Borrower by Agent; or
(c) fails to perform or observe any covenant or other agreementcontained in
this Agreement, or in any of the other Loan Documents, in each case, other
than any such covenant or agreement that is the subject of another provision
of this
Section 8
(in which event such other provision of this
Section 8
shall govern), and such failure continues for a period of 30 days after the
earlier of (i) the date on which such failure shall first become known to any
officer of Borrower or (ii) the date on which written noticethereof is given
to Administrative Borrower by Agent;
8.3.
Judgments
. If one or morejudgments, requirements to pay, orders, or awards for the
payment of money, or requirements to pay money, involving an aggregate amount
of $1,000,000, or more (except to the extent fully covered (other than to the
extent of customary deductibles) byinsurance pursuant to which the insurer has
not denied coverage) is entered or filed against a Loan Party or any of its
Subsidiaries, or with respect to any of their respective assets, and either
(a) there is a period of 45 consecutive days atany time after the entry of any
such judgment,
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order, or award during which (1) the same is not discharged, satisfied,
vacated, or bonded pending appeal, or (2) a stay of enforcement thereof is not
in effect, or (b) enforcementproceedings are commenced upon such judgment,
order, or award;
8.4.
Voluntary Bankruptcy,etc.
If an Insolvency Proceeding is commenced by a Loan Party or any of its
Subsidiaries;
8.5.
Involuntary Bankruptcy, etc.
If an Insolvency Proceeding is commenced against a LoanParty or any of its
Subsidiaries and any of the following events occur: (a) such Loan Party or
such Subsidiary consents to the institution of such Insolvency Proceeding
against it, (b) the petition commencing the Insolvency Proceeding is nottimely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 60 calendar days of the date of the filing thereof, (d) an
interim trustee is appointed to take possession of all or any substantial
portionof the properties or assets of, or to operate all or any substantial
portion of the business of, such Loan Party or its Subsidiary, or (e) an order
for relief shall have been issued or entered therein;
8.6.
Default Under Other Agreements
.
If there is (a) a default in one or moreagreements to which a Loan Party or
any of its Subsidiaries is a party with one or more third Persons relative to
a Loan Party's or any of its Subsidiaries' Indebtedness involving an aggregate
amount of $1,000,000 or more, and such default(i) occurs at the final maturity
of the obligations thereunder, or (ii) results in a right by such third
Person, irrespective of whether exercised, to accelerate the maturity of such
Loan Party's or its Subsidiary's obligationsthereunder, or (b) a default in or
an involuntary early termination of one or more Hedge Agreements to which a
Loan Party or any of its Subsidiaries is a party involving an aggregate Hedge
Termination Value of $1,000,000 or more, beyond anygrace period provided
therefor;
8.7.
Default Under Term Loan Documents
.
If thereis (i) any breach or default of a Loan Party or any of its
Subsidiaries occurs under any of the Term Loan Documents (or any documents
relating to renewals, refinancings and extensions of the Indebtedness incurred
thereunder) or any SecuredHedging Agreement or (ii) any such Indebtedness
shall become or be declared to be due and payable, or be required to be
prepaid or repurchased (other than by a regularly scheduled or required
prepayment), prior to the stated maturity thereof;provided that such breach or
default shall be deemed continuing hereunder until the Agent or the Required
Lenders have expressly waived such breach or default in writing, notwithstanding
the fact that such breach or default may have been waivedunder the terms of
the Term Loan Documents or any Secured Hedging Agreement;
8.8.
Default UnderDamiani Purchase Documents
. If (i) the Borrower fails to make any payment when due and payable under the
Damiani Inventory Purchase Agreement or if there is a material breach or
default by a Loan Party or any of its Subsidiaries underany of the Damiani
Purchase Documents and, in each case, such failure, breach or default
continues for a period of at least 30 days, (ii) any Damiani Subordinated
Indebtedness shall become or be declared to be due and payable, or be required
tobe prepaid (other than by a scheduled or required payment in accordance with
the terms of the Damiani Inventory Purchase Agreement), prior to the stated
due date thereof (iii) any action is taken by Damiani to initiate the
commencement of aStandstill Period (as defined in the Damiani Subordination
Agreement) or (iv) the validity or enforceability of the Damiani Subordination
Agreement shall at any time for any reason (other than solely as the
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result of an action or failure to act on the part of Agent) be declared to be
null and void, or Damiani or any of its Affiliates or agents shall be
permitted (by judicial order or otherwise) totake enforcement actions or
institute any proceeding (including for the return of Inventory) against any
Obligor or any Assets in violation of the Damiani Subordination Agreement;
8.9.
Representations, etc
. If any warranty, representation, certificate, statement, orRecord made
herein or in any other Loan Document or delivered in writing to Agent or any
Lender in connection with this Agreement or any other Loan Document proves to
be untrue in any material respect (except that such materiality qualifier
shallnot be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of the date of
issuance or making or deemed making thereof;
8.10.
Guarantee
. If the obligation of any Guarantor under the guarantee of any of
theObligations (including any guarantee contained in any Loan Document) is
limited in any material respect or terminated by operation of law or by such
Guarantor (other than in accordance with the terms of this Agreement);
8.11.
Security Documents
. If any Canadian Security Document or any other Loan Document thatpurports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected (to the extent required thereby) and, except to the extent of
Permitted Liens which are non-consensual Permitted Liens, permitted Purchase
Money Liens,the interests of lessors under Capital Leases, first priority Lien
on the Collateral covered thereby, except (a) as a result of a disposition of
the applicable Collateral in a transaction permitted under this Agreement, or
(b) as theresult of an action or failure to act on the part of Agent;
8.12.
Loan Documents
. Thevalidity or enforceability of any Loan Document shall at any time for any
reason (other than solely as the result of an action or failure to act on the
part of Agent) be declared to be null and void, or a proceeding shall be
commenced by a LoanParty or its Subsidiaries, or by any Governmental Authority
having jurisdiction over a Loan Party or its Subsidiaries, seeking to
establish the invalidity or unenforceability thereof, or a Loan Party or its
Subsidiaries shall deny that such LoanParty or its Subsidiaries has any
liability or obligation purported to be created under any Loan Document;
8.13.
Change of Control
. A Change of Control shall occur, whether directly or indirectly.
9. RIGHTS AND
REMEDIES
.
9.1.
Rights and Remedies
. Upon the occurrence and during the continuation of an Event ofDefault, Agent
may, and, at the instruction of the Required Lenders, shall (in each case
under clauses (a) or (b) by written notice to Administrative Borrower), in
addition to any other rights or remedies provided for hereunder or underany
other Loan Document or by applicable law, do any one or more of the following:
(a)(i) declare theprincipal of, and any and all accrued and unpaid interest
and fees in respect of, the Loans and all other Obligations (other than the
Bank Product Obligations), whether evidenced by this Agreement or by any of
the other Loan Documents to beimmediately due and payable, whereupon the same
shall become and be immediately due and payable and
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Borrower shall be obligated to repay all of such Obligations in full, without
presentment, demand, protest, or further notice or other requirements of any
kind, all of which are hereby expresslywaived by Borrower, and (ii) direct
Borrower to provide (and Borrower agrees that upon receipt of such notice
Borrower will provide) Letter of Credit Collateralization to Agent to be held
as security for Borrower's reimbursementobligations for drawings that may
subsequently occur under issued and outstanding Letters of Credit;
(b)declare the Commitments terminated, whereupon the Commitments shall
immediately be terminated together with(i) any obligation of any Revolving
Lender to make Revolving Loans, (ii) the obligation of any Swing Lender to
make Swing Loans, and (iii) the obligation of any Issuing Lender to issue, or
cause the issuance of, Letters of Credit; and
(c)exercise all other rights and remedies available to Agent or the Lenders
under the Loan Documents,under applicable law, or in equity.
The foregoing to the contrary notwithstanding, upon the occurrence of any
Event of Default describedin
Section 8.4
or
Section 8.5
, in addition to the remedies set forth above, without any notice to Borrower
or any other Person or any act by the Lender Group, the Commitments shall
automatically terminate and the Obligations (otherthan the Bank Product
Obligations), inclusive of the principal of, and any and all accrued and
unpaid interest and fees in respect of, the Loans and all other Obligations
(other than the Bank Product Obligations), whether evidenced by this
Agreementor by any of the other Loan Documents, shall automatically become and
be immediately due and payable and Borrower shall automatically be obligated
to repay all of such Obligations in full (including Borrower being obligated
to provide (and Borroweragrees that they will provide) (1) Letter of Credit
Collateralization to Agent to be held as security for Borrower's reimbursement
obligations in respect of drawings that may subsequently occur under issued
and outstanding Letters ofCredit and (2) Bank Product Collateralization to be
held as security for Borrower's or its Subsidiaries' obligations in respect of
outstanding Bank Products), without presentment, demand, protest, or notice or
other requirements ofany kind, all of which are expressly waived by Borrower.
9.2.
Remedies Cumulative
. Therights and remedies of the Lender Group under this Agreement, the other
Loan Documents, and all other agreements shall be cumulative. The Lender Group
shall have all other rights and remedies not inconsistent herewith as provided
under the PPSA, bylaw, or in equity. No exercise by the Lender Group of one
right or remedy shall be deemed an election, and no waiver by the Lender Group
of any Event of Default shall be deemed a continuing waiver. No delay by the
Lender Group shall constitute awaiver, election, or acquiescence by it.
10. WAIVERS;
INDEMNIFICATION
.
10.1.
Demand; Protest; etc
. Borrower waives demand, protest, notice of protest, notice ofdefault or
dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments,
chattel paper, and guarantees at any time held by the Lender Group pursuant to
the LoanDocuments on which Borrower may in any way be liable.
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10.2.
The Lender Group's Liability forCollateral
.
Borrower hereby agrees that: (a) so long as Agent complies with its
obligations, if any, under the PPSA, the Lender Group shall not in any way or
manner be liable or responsible for: (i) the safekeeping of theCollateral,
(ii) any loss or damage thereto occurring or arising in any manner or fashion
from any cause, (iii) any diminution in the value thereof, or (iv) any act or
default of any carrier, warehouseman, bailee, forwarding agency,or other
Person, and (b) all risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
10.3.
Indemnification
.
Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the
Lender-Related Persons, and each Participant (each, an "
Indemnified Person
") harmless (to the fullest extent permitted by law) from and against any and
all claims, demands, suits, actions, investigations,proceedings, liabilities,
fines, costs, penalties, and damages, and all reasonable and documented
out-of-pocket fees and disbursements of attorneys, experts, or consultants and
all other costs and expenses actually incurred in connection therewithor in
connection with the enforcement of this indemnification (as and when they are
incurred and irrespective of whether suit is brought but without duplication
of any losses, costs and expenses as to which a Borrower is liable to such
IndemnifiedPerson pursuant to
Section 2.13
or
Article 16
), at any time asserted against, imposed upon, or incurred by any of them (a)
in connection with or as a result of or related to the execution and delivery
(provided that Borrower shallnot be liable for costs and expenses (including
lawyers' fees) of any Lender (other than Wells Fargo and WF Canada) incurred
in advising, structuring, drafting, reviewing, administering or syndicating
the Loan Documents), enforcement,performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Loan Documents, or the transactions contemplated hereby or thereby or
the monitoring of Borrower's and itsSubsidiaries' compliance with the terms of
the Loan Documents (
provided
, that the indemnification in this clause (a) shall not extend to (i) disputes
solely between or among the Lenders that do not involve any acts or
omissionsof any Loan Party, or (ii) disputes solely between or among the
Lenders and their respective Affiliates that do not involve any acts or
omissions of any Loan Party; it being understood and agreed that the
indemnification in this clause(a) shall extend to Agent (but not the Lenders)
relative to disputes between or among Agent on the one hand, and one or more
Lenders, or one or more of their Affiliates, on the other hand, or (iii) any
Taxes or any costs attributable toTaxes, which shall be governed by
Section 16
except to the extent arising from primarily a non- Tax claim), (b) with
respect to any actual or prospective investigation, litigation, or proceeding
related to this Agreement, any other LoanDocument, the making of any Loans or
issuance of any Letters of Credit hereunder, or the use of the proceeds of the
Loans or the Letters of Credit provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act,omission, event, or
circumstance in any manner related thereto, and (c) in connection with or
arising out of any presence or release of Hazardous Materials at, on, under,
to or from any assets or properties owned, leased or operated by Borroweror
any of its Subsidiaries or any Environmental Actions, Environmental
Liabilities or Remedial Actions related in any way to any such assets or
properties of Borrower or any of its Subsidiaries (each and all of the
foregoing, the"
Indemnified Liabilities
"). The foregoing to the contrary notwithstanding, Borrower shall not have any
obligation to any Indemnified Person under this
Section 10.3
with respect to any Indemnified Liability that a court ofcompetent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person or its officers, directors,
employees, lawyers, or agents. This provision shall survive the termination of
thisAgreement and the repayment in full of the Obligations. If any Indemnified
Person makes any
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payment to any other Indemnified Person with respect to an Indemnified
Liability as to which Borrower were required to indemnify the Indemnified
Person receiving such payment, the IndemnifiedPerson making such payment is
entitled to be indemnified and reimbursed by Borrower with respect thereto.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE ORIN PART ARE
CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED
PERSON OR OF ANY OTHER PERSON
.
11. NOTICES
.
Unless otherwise provided in this Agreement, all notices or demands relating
to this Agreement or any other Loan Documentshall be in writing and (except
for financial statements and other informational documents which may be sent
by first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receiptrequested),
overnight courier, electronic mail (at such email addresses as a party may
designate in accordance herewith), or telefacsimile. In the case of notices or
demands to Borrower or Borrower or Agent, as the case may be, they shall be
sent tothe respective address set forth below:
If to Borrower or Birks Group Inc.
Administrative 2020 Robert-Bourassa Blvd.
Borrower: Suite 200
Montreal, Quebec
H3A 2A5
Attn: Chief Financial Officer
Fax No.: 514-397-2537
Email: kfontana@birksgroup.com
with copies to: Birks Group Inc.
2020 Robert-Bourassa Blvd.
Suite 200
Montreal, Quebec
H3A 2A5
Attn: General Counsel
Fax No.: 514-397-2537
Email: mmelfi@birksgroup.com
If to Agent: Wells Fargo Capital Finance Corporation Canada
125 High St.
11th floor
MAC J9266-114
Boston, MA 02110
eFax No.: 855-842-6360
Email: Emily.J.Abrahamson@wellsfargo.com
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Any party hereto may change the address at which they are to receive notices
hereunder, bynotice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this
Section 11
, shall be deemed received on the earlier of the date of actual receipt or 3
Business Days after the depositthereof in the mail;
provided
, that (a) notices sent by overnight courier service shall be deemed to have
been given when received, (b) notices by facsimile shall be deemed to have
been given when sent (except that, if not givenduring normal business hours
for the recipient, shall be deemed to have been given at the opening of
business on the next Business Day for the recipient) and (c) notices by
electronic mail shall be deemed received upon the sender's receiptof an
acknowledgment from the intended recipient (such as by the "return receipt
requested" function, as available, return email or other written acknowledgment)
.
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL
REFERENCE PROVISION
.
(a)
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLYPROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL
MATTERS ARISINGHEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, AND ANY
CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THEPROVINCE OF ONTARIO AND THE FEDERAL LAWS OF
CANADA APPLICABLE THEREIN.
(b)
THE PARTIES AGREE THATALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY
IN THE PROVINCE OF ONTARIO;
PROVIDED
, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHERPROPERTY
MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE
AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY
MAY BE FOUND. BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE
EXTENTPERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 12(b)
.
(c)
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND EACH MEMBER OF
THE LENDER GROUP HEREBYWAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL
OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDINGCONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A "
CLAIM
"). BORROWER AND EACH
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MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENTOF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(d)
BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTSLOCATED IN THE PROVINCE OF ONTARIO, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION ORPROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TOBRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY
LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(e)
NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST AGENT, ANY SWING LENDER, ANY
OTHER LENDER, ANY ISSUINGLENDER, OR ANY AFFILIATE, DIRECTOR, OFFICER,
EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM
FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OR
LOSSES IN RESPECT OF ANY CLAIM FOR BREACH OFCONTRACT OR ANY OTHER THEORY OF
LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING
IN CONNECTION THEREWITH, AND EACH LOAN PARTY HEREBY WAIVES,RELEASES, AND
AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
13. ASSIGNMENTS AND PARTICIPATIONS;
SUCCESSORS
.
13.1.
Assignments and Participations
.
(a)(i)Subject to the conditions set forth in clause (a)(ii) below, any Lender
may assign and delegateall or any portion of its rights and duties under the
Loan Documents (including the Obligations owed to it and its Commitments) to
one or more assignees so long as such prospective assignee is an Eligible
Transferee (each, an"
Assignee
"), with the prior written consent (such consent not to be unreasonably
withheld or delayed) of:
(A)Administrative Borrower;
provided
, that no consent of Administrative Borrower shall be required(1) if an Event
of Default has occurred and is continuing, or (2) in connection with an
assignment to a Person that is a Lender or an Affiliate
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(other than natural persons) of a Lender or a Related Fund;
provided
further
, that Administrative Borrower shall be deemed to have consented to a proposed
assignment unless itobjects thereto by written notice to Agent within 10
Business Days after having received notice thereof; and
(B)Agent, Swing Lenders, and Issuing Lenders; provided that no such consent
shall be required in connectionwith an assignment to a Person that is a Lender
or an Affiliate of a Lender (other than a natural person).
(ii)Assignments shall be subject to the following additional conditions:
(A)no assignment may be made to a natural person,
(B)no assignment may be made to a Loan Party or an Affiliate of a Loan Party,
(C)the amount of the Commitments and the other rights and obligations of the
assigning Lender hereunder andunder the other Loan Documents subject to each
such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to Agent) shall be in a minimum amount
(unless waived by Agent) of $5,000,000(except such minimum amount shall not
apply to (I) an assignment or delegation by any Lender to any other Lender, an
Affiliate of any Lender, or a Related Fund of such Lender or (II) a group of
new Lenders, each of which is an Affiliate of eachother or a Related Fund of
such new Lender to the extent that the aggregate amount to be assigned to all
such new Lenders is at least $5,000,000),
(D)each partial assignment shall be made as an assignment of a proportionate
part of all the assigningLender's rights and obligations under this Agreement,
(E)the parties to each assignment shall executeand deliver to Agent an
Assignment and Acceptance;
provided
, that Borrower and Agent may continue to deal solely and directly with the
assigning Lender in connection with the interest so assigned to an Assignee
until written notice of suchassignment, together with payment instructions,
addresses, and related information with respect to the Assignee, have been
given to Administrative Borrower and Agent by such Lender and the Assignee,
(F)unless waived by Agent, the assigning Lender or Assignee has paid to Agent,
for Agent's separateaccount, a processing fee in the amount of $3,500,
(G)the Assignee, if it is not a Lender, shall deliverto Agent an Administrative
Questionnaire in a form approved by Agent (the "
Administrative Questionnaire
"), and
(H)the Assignee shall have the ability to make Revolving Loans in accordance
with the terms of this Agreement,
(b)From and after the date that Agent receives the executed Assignment and
Acceptance and, if applicable,payment of the required processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned
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to it pursuant to such Assignment and Acceptance, shall be a "Lender" and
shall have the rights and obligations of a Lender under the Loan Documents,
and (ii) the assigning Lendershall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights (except with respect
to
Section
10.3
) and bereleased from any future obligations under this Agreement (and in the
case of an Assignment and Acceptance covering all or the remaining portion of
an assigning Lender's rights and obligations under this Agreement and the
other Loan Documents,such Lender shall cease to be a party hereto and thereto);
provided
, that nothing contained herein shall release any assigning Lender from
obligations that survive the termination of this Agreement, including such
assigning Lender'sobligations under
Section 15
and
Section 17.9(a)
.
(c)By executing and delivering anAssignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigningLender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness,sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Partyor the
performance or observance by any Loan Party of any of its obligations under
this Agreement or any other Loan Document furnished pursuant hereto, (iii)
such Assignee confirms that it has received a copy of this Agreement, together
withsuch other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such Assignee will, independently and without reliance upon
Agent, such assigningLender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement, (v)
such Assignee appoints andauthorizes Agent to take such actions and to
exercise such powers under this Agreement and the other Loan Documents as are
delegated to Agent, by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto, and(vi) such Assignee agrees that it
will perform all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(d)Immediately upon Agent's receipt of the required processing fee, if
applicable, and delivery of noticeto the assigning Lender pursuant to
Section 13.1(b)
, this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arisingtherefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.
(e)Any Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons (a"
Participant
") participating interests in all or any portion of its Obligations, its
Commitment, and the other rights and interests of that Lender (the "
Originating Lender
") hereunder and under the other LoanDocuments;
provided
, that (i) the Originating Lender shall remain a "Lender" for all purposes of
this Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations, theCommitments, and the other
rights and interests of the Originating Lender hereunder shall not constitute
a "Lender" hereunder
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or under the other Loan Documents and the Originating Lender's obligations
under this Agreement shall remain unchanged, (ii) the Originating Lender shall
remain solely responsible forthe performance of such obligations, (iii)
Borrower, Agent, and the Lenders shall continue to deal solely and directly
with the Originating Lender in connection with the Originating Lender's rights
and obligations under this Agreement andthe other Loan Documents, (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has the right to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other LoanDocument, except to
the extent such amendment to, or consent or waiver with respect to this
Agreement or of any other Loan Document would (A) extend the final maturity
date of the Obligations hereunder in which such Participant isparticipating,
(B) reduce the interest rate applicable to the Obligations hereunder in which
such Participant is participating, (C) release all or substantially all of the
Collateral or guaranties (except to the extent expressly providedherein or in
any of the Loan Documents) supporting the Obligations hereunder in which such
Participant is participating, (D) postpone the payment of, or reduce the
amount of, the interest or fees payable to such Participant through such
Lender(other than a waiver of default interest), or (E) decreases the amount
or postpones the due dates of scheduled principal repayments or prepayments or
premiums payable to such Participant through such Lender, (v) no participation
shall besold to a natural person, (vi) no participation shall be sold to a
Loan Party or an Affiliate of a Loan Party, and (vii) all amounts payable by
Borrower hereunder shall be determined as if such Lender had not sold such
participation,except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed
to have the right of set offin respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement. The rights of any Participant only shall bederivative through the
Originating Lender with whom such Participant participates and no Participant
shall have any rights under this Agreement or the other Loan Documents or any
direct rights as to the other Lenders, Agent, Borrower, theCollateral, or
otherwise in respect of the Obligations. No Participant shall have the right
to participate directly in the making of decisions by the Lenders among
themselves.
(f)In connection with any such assignment or participation or proposed
assignment or participation or any grantof a security interest in, or pledge
of, its rights under and interest in this Agreement, a Lender may, subject to
the provisions of
Section 17.9
, disclose all documents and information which it now or hereafter may have
relating to Borrowerand its Subsidiaries and their respective businesses.
(g)Any other provision in this Agreementnotwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of the Bank of Canada and
the Bank of Canada may enforce such pledge or securityinterest in any manner
permitted under applicable law.
(h)Agent (acting solely for this purpose as anon-fiduciary agent on behalf of
Borrower) shall maintain, or cause to be maintained, a register (the "
Register
") on which it enters the name and address of each Lender as the registered
owner of the Revolver Commitments (and theprincipal amount thereof and stated
interest thereon) held by such Lender (each, a "
Registered Loan
"). Other than in connection with an assignment by a Lender of all or any
portion of its portion of the Revolver Commitments to anAffiliate of such
Lender or a Related Fund of such
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Lender (i) a Registered Loan (and the registered note, if any, evidencing the
same) may be assigned or sold in whole or in part only by registration of such
assignment or sale on theRegister (and each registered note shall expressly so
provide) and (ii) any assignment or sale of all or part of such Registered
Loan (and the registered note, if any, evidencing the same) may be effected
only by registration of such assignmentor sale on the Register, together with
the surrender of the registered note, if any, evidencing the same duly
endorsed by (or accompanied by a written instrument of assignment or sale duly
executed by) the holder of such registered note, whereupon,at the request of
the designated assignee(s) or transferee(s), one or more new registered notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale
ofany Registered Loan (and the registered note, if any evidencing the same),
Borrower shall treat the Person in whose name such Registered Loan (and the
registered note, if any, evidencing the same) is registered as the owner
thereof for the purposeof receiving all payments thereon and for all other
purposes, notwithstanding notice to the contrary. In the case of any
assignment by a Lender of all or any portion of its Revolver Commitments to an
Affiliate of such Lender or a Related Fund ofsuch Lender, and which assignment
is not recorded in the Register, the assigning Lender, on behalf of Borrower,
shall maintain a register comparable to the Register.
(i)In the event that a Lender sells participations in the Registered Loan,
such Lender, acting solely for thispurpose as a non-fiduciary agent on behalf
of Borrower, shall maintain (or cause to be maintained) a register on which it
enters the name of all participants in the Registered Loans held by it (and
the principal amount (and stated interest thereon)of the portion of such
Registered Loans that is subject to such participations) (the "
Participant Register
"). A Registered Loan (and the registered note, if any, evidencing the same)
may be participated in whole or in part only byregistration of such
participation on the Participant Register (and each registered note shall
expressly so provide). Any participation of such Registered Loan (and the
registered note, if any, evidencing the same) may be effected only by
theregistration of such participation on the Participant Register. For the
avoidance of doubt, the Agent (in its capacity as Agent) shall have no
responsibility for maintaining a Participant Register.
(j)Agent shall make a copy of the Register (and each Lender shall make a copy
of its Participant Register tothe extent it has one) available for review by
Borrower from time to time as Borrower may reasonably request.
13.2.
Successors
. This Agreement shall bind and inure to the benefit of the respectivesuccessors
and assigns of each of the parties;
provided
, that Borrower may not assign this Agreement or any rights or duties
hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void abinitio. No consent to assignment by the
Lenders shall release Borrower from its Obligations. A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to
Section
13.1
and, except as expressly required pursuant to
Section 13.1
, no consent or approval by Borrower is required in connection with any such
assignment.
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14. AMENDMENTS;
WAIVERS
.
14.1.
Amendments and Waivers
.
(a)No amendment, waiver or other modification of any provision of this
Agreement or any other Loan Document(other than Bank Product Agreements or the
Fee Letter), and no consent with respect to any departure by Borrower or
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by the Required Lenders (or by Agent at thewritten request of the
Required Lenders) and the Loan Parties that are party thereto and then any
such waiver or consent shall be effective, but only in the specific instance
and for the specific purpose for which given;
provided
, that nosuch waiver, amendment, or consent shall, unless in writing and
signed by all of the Lenders directly and adversely affected thereby and in
the case of an amendment, all of the Loan Parties that are party thereto, do
any of the following:
(i)increase the amount of or extend the expiration date of any Commitment of
any Lender (except as contemplatedby
Section 2.16
) or amend, modify, or eliminate the fifth sentence of
Section 2.4(c)
,
(ii)postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal,interest, fees, or other amounts due
hereunder or under any other Loan Document,
provided
,
however
, that, notwithstanding anything to the contrary in this Agreement, any waiver
(or amendment to the terms) of any mandatory prepayment ofAdvances pursuant to
Section 2.4(e)
shall be effective when signed or consented to by the Required Lenders and
Agent,
(iii)reduce the principal of, or the rate of interest on, any Loan or other
extension of credit hereunder, orreduce any fees or other amounts payable
hereunder or under any other Loan Document (except in connection with the
waiver of applicability of
Section 2.6(c)
which waiver shall be effective with the written consent of the Required
Lenders),
(iv)amend, modify, or eliminate this Section or any provision of this
Agreement providing for consent orother action by all Lenders,
(v)amend, modify, or eliminate
Section 3.1
or
3.2
,
(vi)amend, modify, or eliminate
Section 15.11
,
(vii) other than as permitted by
Section 15.11
, release Agent's Lien in and to any of theCollateral,
(viii)amend, modify, or eliminate the definitions of "Required Lenders","Superma
jority Lenders" or "Pro Rata Share",
(ix)contractually subordinate any ofAgent's Liens (other than in respect of
Permitted Liens securing Capital Leases or Permitted Purchase Money
Indebtedness permitted hereunder),
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(x)other than in connection with a merger, amalgamation,liquidation,
dissolution or sale of such Person expressly permitted by the terms hereof or
the other Loan Documents, release Borrower or any Guarantor from any
obligation for the payment of money or consent to the assignment or transfer
by Borroweror any Guarantor of any of its rights or duties under this
Agreement or the other Loan Documents,
(xi)amend, modify, or eliminate any of the provisions of
Section 2.4(b)(i)
or
(ii)
, or
(xii)amend, modify, or eliminate any of the provisions of
Section 13.1
with respect to assignments to,or participations with, Persons who are Loan
Parties or Affiliates of Loan Parties;
(b)No amendment,waiver, modification, or consent shall amend, modify, waive,
or eliminate,
(i)the definition of, or any ofthe terms or provisions of, the Fee Letter,
without the written consent of Agent and Borrower (and shall not require the
written consent of any of the Lenders),
(ii)any provision of
Section 15
pertaining to Agent, or any other rights or duties of Agent under
thisAgreement or the other Loan Documents, without the written consent of
Agent, Borrower, and the Required Lenders;
(c)No amendment, waiver, modification, elimination, or consent shall amend,
without written consent of Agent,Borrower and the Supermajority Lenders,
modify, or eliminate the definition of Borrowing Base or any of the defined
terms (including the definitions of Eligible Accounts, Eligible Credit Card
Receivables and Eligible Inventory that are used in suchdefinition to the
extent that any such change results in more credit being made available to
Borrower based upon the Borrowing Base, but not otherwise, or the definition
of Maximum Credit Amount);
(d)No amendment, waiver, modification, elimination, or consent shall amend,
modify, or waive any provision ofthis Agreement or the other Loan Documents
pertaining to an Issuing Lender, or any other rights or duties an Issuing
Lender under this Agreement or the other Loan Documents, without the written
consent of such Issuing Lender, Agent, Borrower, andthe Required Lenders;
(e)No amendment, waiver, modification, elimination, or consent shall amend,
modify,or waive any provision of this Agreement or the other Loan Documents
pertaining to a Swing Lender, or any other rights or duties of a Swing Lender
under this Agreement or the other Loan Documents, without the written consent
of such Swing Lender,Agent, Borrower, and the Required Lenders; and
(f)Anything in this
Section 14.1
to the contrarynotwithstanding, (i) any amendment, modification, elimination,
waiver, consent, termination, or release of, or with respect to, any provision
of this Agreement or any other Loan Document that relates only to the
relationship of the Lender Groupamong themselves, and that does not affect the
rights or obligations of Borrower, shall not require consent by or the
agreement of any Loan Party (ii) any
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amendment, waiver, modification, elimination, or consent of or with respect to
any provision of this Agreement or any other Loan Document may be entered into
without the consent of, or over theobjection of, any Defaulting Lender other
than any of the matters governed by
Section
14.1(a)(i) through (iii)
that affect such Lender and (iii) any amendment contemplated by
Section
2.12(d)(iii)
ofthis Agreement in connection with a Benchmark Transition Event shall be
effective as contemplated by such
Section 2.12(d)(iii)
hereof.
14.2.
Replacement of Certain Lenders
.
(a)If (i) any action to be taken by the Lender Group or Agent hereunder
requires the consent,authorization, or agreement of the Required Lenders, the
Supermajority Lenders or all Lenders directly and adversely affected thereby
and if such action has received the consent, authorization, or agreement of
the Required Lenders but not of allLenders, the Supermajority Lenders but not
of all Lenders or all Lenders affected thereby, or (ii) any Lender makes a
claim for compensation under
Section 16
, then Borrower or Agent, upon at least 5 Business Days prior irrevocablenotice,
may permanently replace any Lender that failed to give its consent,
authorization, or agreement (a "
Non-Consenting Lender
"), together with its Affiliates, or any Lender that made a claim for
compensation (a "
TaxLender
"), together with its Affiliates, with one or more Replacement Lenders, and
the Non-Consenting Lender (and its Affiliates) or Tax Lender (and its
Affiliates), as applicable, shall have no right to refuse to be replaced
hereunder. Suchnotice to replace the Non-Consenting Lender (and its
Affiliates) or Tax Lender (and its Affiliates), as applicable, shall specify
an effective date for such replacement, which date shall not be later than 15
Business Days after the date such noticeis given.
(b)Prior to the effective date of such replacement, the Non-Consenting Lender
(and itsAffiliates) or Tax Lender (and its Affiliates), as applicable, and
each Replacement Lender shall execute and deliver an Assignment and
Acceptance, subject only to the Non-Consenting Lender (and its Affiliates) or
Tax Lender (and its Affiliates), asapplicable, being repaid in full its share
of the outstanding Obligations (without any premium or penalty of any kind
whatsoever, but including (i) all interest, fees and other amounts that may be
due in payable in respect thereof, and (ii) anassumption of its Pro Rata Share
of participations in the Letters of Credit). If the Non-Consenting Lender (and
its Affiliates) or Tax Lender (and its Affiliates), as applicable, shall
refuse or fail to execute and deliver any such Assignment andAcceptance prior
to the effective date of such replacement, Agent may, but shall not be
required to, execute and deliver such Assignment and Acceptance in the name or
and on behalf of the Non-Consenting Lender (and its Affiliates) or Tax Lender
(andits Affiliates), as applicable, and irrespective of whether Agent executes
and delivers such Assignment and Acceptance, the Non-Consenting Lender (and
its Affiliates) or Tax Lender (and its Affiliates), as applicable, shall be
deemed to haveexecuted and delivered such Assignment and Acceptance. The
replacement of any Non-Consenting Lender (and its Affiliates) or Tax Lender
(and its Affiliates), as applicable, shall be made in accordance with the
terms of
Section 14.2
. Until suchtime as one or more Replacement Lenders shall have acquired all of
the Obligations, the Commitments, and the other rights and obligations of the
Non-Consenting Lender (and its Affiliates) or Tax Lender (and its Affiliates),
as applicable, hereunderand under the other Loan Documents, the Non-Consenting
Lender (and its Affiliates) or Tax Lender (and its Affiliates), as applicable,
shall remain obligated to make the Non-Consenting Lender's (and its
Affiliates') or Tax Lender's(and its Affiliates'), as applicable, Pro Rata
Share of Revolving Loans
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and to purchase a participation in each Letter of Credit, in an amount equal
to its Pro Rata Share of participations in such Letters of Credit.
14.3.
No Waivers; Cumulative Remedies
.
No failure by Agent or any Lender to exercise anyright, remedy, or option
under this Agreement or any other Loan Document, or delay by Agent or any
Lender in exercising the same, will operate as a waiver thereof. No waiver by
Agent or any Lender will be effective unless it is in writing, and thenonly to
the extent specifically stated. No waiver by Agent or any Lender on any
occasion shall affect or diminish Agent's and each Lender's rights thereafter
to require strict performance by Borrower of any provision of this
Agreement.Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or
remedy that Agent or any Lender may have.
15. AGENT; THE LENDER
GROUP
.
15.1.
Appointment and Authorization of Agent
.
Each Lender hereby designates andappoints WF Canada as its agent under this
Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to designate, appoint, andauthorize) Agent to execute
and deliver each of the other Loan Documents on its behalf and to take such
other action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform suchduties as are
expressly delegated to Agent by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
Agent agrees to act as agent for and on behalf of the Lenders (and the Bank
ProductProviders) on the conditions contained in this
Section
15
. Any provision to the contrary contained elsewhere in this Agreement or in
any other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, exceptthose expressly set forth herein or in the other Loan
Documents, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender (or Bank Product Provider), and no implied
covenants, functions, responsibilities, duties,obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise
exist against Agent. Without limiting the generality of the foregoing, the use
of the term "agent" in this Agreement or the other LoanDocuments with
reference to Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is
intendedto create or reflect only a representative relationship between
independent contracting parties. Each Lender hereby further authorizes (and by
entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to authorize) Agent toact as the secured party under each of the Loan
Documents that create a Lien on any item of Collateral. Except as expressly
otherwise provided in this Agreement, Agent shall have and may use its sole
discretion with respect to exercising orrefraining from exercising any
discretionary rights or taking or refraining from taking any actions that
Agent expressly is entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents. Without limiting the generalityof the
foregoing, or of any other provision of the Loan Documents that provides
rights or powers to Agent, Lenders agree that Agent shall have the right to
exercise the following powers as long as this Agreement remains in effect: (a)
maintain,in accordance with its customary business practices, ledgers and
records reflecting the status of the Obligations, the Collateral, payments and
proceeds of Collateral, and related matters, (b) execute or file any and all
financing or similarstatements or notices, amendments, renewals, supplements,
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documents, instruments, proofs of claim, notices and other written agreements
with respect to the Loan Documents, (c) make Revolving Loans, for itself or on
behalf of Lenders, as provided inthe Loan Documents, (d) exclusively receive,
apply, and distribute payments and proceeds of the Collateral as provided in
the Loan Documents, (e) open and maintain such bank accounts and cash
management arrangements as Agent deemsnecessary and appropriate in accordance
with the Loan Documents for the foregoing purposes, (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower or its Subsidiaries, theObligations, the Collateral, or otherwise
related to any of same as provided in the Loan Documents, and (g) incur and
pay such Lender Group Expenses as Agent may deem necessary or appropriate for
the performance and fulfillment of its functions andpowers pursuant to the
Loan Documents.
15.2.
[Intentionally Omitted]
.
15.3.
Liability of Agent
. None of the Agent-Related Persons shall (a) be liable for anyaction taken or
omitted to be taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (b) be responsiblein any
manner to any of the Lenders (or Bank Product Providers) for any recital,
statement, representation or warranty made by Borrower or any of its
Subsidiaries or Affiliates, or any officer or director thereof, contained in
this Agreement or inany other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by
Agent under or in connection with, this Agreement or any other Loan Document,
or the validity, effectiveness,genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of Borrower or
its Subsidiaries or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-RelatedPerson shall be under any
obligation to any Lenders (or Bank Product Providers) to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or toinspect
the books and records or properties of Borrower or its Subsidiaries.
15.4.
Reliance byAgent
. Agent shall be entitled to rely, and shall be fully protected in relying,
upon any writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, telefacsimile or other electronic method of transmission, telex
ortelephone message, statement or other document or conversation believed by
it to be genuine and correct and to have been signed, sent, or made by the
proper Person or Persons, and upon advice and statements of legal counsel
(including counsel toBorrower or counsel to any Lender), independent
accountants and other experts selected by Agent. Agent shall be fully
justified in failing or refusing to take any action under this Agreement or
any other Loan Document unless Agent shall firstreceive such advice or
concurrence of the Lenders as it deems appropriate and until such instructions
are received, Agent shall act, or refrain from acting, as it deems advisable.
If Agent so requests, it shall first be indemnified to its reasonablesatisfactio
n by the Lenders (and, if it so elects, the Bank Product Providers) against
any and all liability and expense that may be incurred by it by reason of
taking or continuing to take any such action. Agent shall in all cases be
fullyprotected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
Required Lenders and such request and any action taken or failure to act
pursuant thereto shall bebinding upon all of the Lenders (and Bank Product
Providers).
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15.5.
Notice of Default or Event ofDefault
. Agent shall not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default, except with respect to defaults in the
payment of principal, interest, fees, and expenses required to be paid to
Agent forthe account of the Lenders and, except with respect to Events of
Default of which Agent has actual knowledge, unless Agent shall have received
written notice from a Lender or Borrower referring to this Agreement,
describing such Default or Event ofDefault, and stating that such notice is a
"notice of default." Agent promptly will notify the Lenders of its receipt of
any such notice or of any Event of Default of which Agent has actual
knowledge. If any Lender obtains actual knowledgeof any Event of Default, such
Lender promptly shall notify the other Lenders and Agent of such Event of
Default. Each Lender shall be solely responsible for giving any notices to its
Participants, if any. Subject to
Section 15.4
, Agent shalltake such action with respect to such Default or Event of Default
as may be requested by the Required Lenders in accordance with
Section 9
;
provided
, that unless and until Agent has received any such request, Agent may (but
shall notbe obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable.
15.6.
Credit Decision
. Each Lender (and Bank Product Provider) acknowledges that none of
theAgent-Related Persons has made any representation or warranty to it, and
that no act by Agent hereinafter taken, including any review of the affairs of
Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation orwarranty by any Agent-Related Person to any Lender (or Bank
Product Provider). Each Lender represents (and by entering into a Bank Product
Agreement, each Bank Product Provider shall be deemed to represent) to Agent
that it has, independently andwithout reliance upon any Agent-Related Person
and based on such due diligence, documents and information as it has deemed
appropriate, made its own appraisal of an investigation into the business,
prospects, operations, property, financial andother condition and
creditworthiness of Borrower or any other Person party to a Loan Document, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and toextend
credit to Borrower. Each Lender also represents (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to represent)
that it will, independently and without reliance upon any Agent-Related Person
and basedon such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make suchinvestigations as it deems necessary to inform itself as to
the business, prospects, operations, property, financial and other condition
and creditworthiness of Borrower or any other Person party to a Loan Document.
Except for notices, reports, andother documents expressly herein required to
be furnished to the Lenders by Agent, Agent shall not have any duty or
responsibility to provide any Lender (or Bank Product Provider) with any
credit or other information concerning the business,prospects, operations,
property, financial and other condition or creditworthiness of Borrower or any
other Person party to a Loan Document that may come into the possession of any
of the Agent-Related Persons. Each Lender acknowledges (and byentering into a
Bank Product Agreement, each Bank Product Provider shall be deemed to
acknowledge) that Agent does not have any duty or responsibility, either
initially or on a continuing basis (except to the extent, if any, that is
expresslyspecified herein) to provide such Lender (or Bank Product Provider)
with any credit or other information with respect to Borrower, its Affiliates
or any of their respective business, legal, financial or other affairs, and
irrespective of whethersuch information came into Agent's or its Affiliates' or
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representatives' possession before or after the date on which such Lender
became aparty to this Agreement (or such Bank Product Provider entered into a
Bank Product Agreement).
15.7.
Costs and Expenses; Indemnification
. Agent may incur and pay Lender Group Expenses tothe extent Agent reasonably
deems necessary or appropriate for the performance and fulfillment of its
functions, powers, and obligations pursuant to the Loan Documents, including
court costs, legal fees and expenses, fees and expenses of financialaccountants,
advisors, consultants, and appraisers, costs of collection by outside
collection agencies, auctioneer fees and expenses, and costs of security
guards or insurance premiums paid to maintain the Collateral, whether or not
Borrower areobligated to reimburse Agent or Lenders for such expenses pursuant
to this Agreement or otherwise. Agent is authorized and directed to deduct and
retain sufficient amounts from payments or proceeds of the Collateral received
by Agent to reimburseAgent for such out-of-pocket costs and expenses prior to
the distribution of any amounts to Lenders (or Bank Product Providers). In the
event Agent is not reimbursed for such costs and expenses by Borrower or its
Subsidiaries, each Lender herebyagrees that it is and shall be obligated to
pay to Agent such Lender's ratable thereof. Whether or not the transactions
contemplated hereby are consummated, each of the Lenders, on a ratable basis,
shall indemnify and defend the Agent-RelatedPersons (to the extent not
reimbursed by or on behalf of Borrower and without limiting the obligation of
Borrower to do so) from and against any and all Indemnified Liabilities;
provided
, that no Lender shall be liable for the payment to anyAgent-Related Person of
any portion of such Indemnified Liabilities resulting solely from such
Person's gross negligence or willful misconduct nor shall any Lender be liable
for the obligations of any Defaulting Lender in failing to make aRevolving
Loan or other extension of credit hereunder. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for such Lender's
ratable share of any costs or out of pocket expenses (including attorneys,
accountants,advisors, and consultants fees and expenses) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal
proceedings or otherwise) of, orlegal advice in respect of rights or
responsibilities under, this Agreement or any other Loan Document to the
extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section shall survive thepayment of all
Obligations hereunder and the resignation or replacement of Agent.
15.8.
Agentin Individual Capacity
. WF Canada and its Affiliates may make loans to, issue letters of credit for
the account of, accept deposits from, provide Bank Products to, acquire Equity
Interests in, and generally engage in any kind of banking,trust, financial
advisory, underwriting, or other business with Borrower and its Subsidiaries
and Affiliates and any other Person party to any Loan Document as though WF
Canada were not Agent hereunder, and, in each case, without notice to
orconsent of the other members of the Lender Group. The other members of the
Lender Group acknowledge (and by entering into a Bank Product Agreement, each
Bank Product Provider shall be deemed to acknowledge) that, pursuant to such
activities, WFCanada or its Affiliates may receive information regarding
Borrower or its Affiliates or any other Person party to any Loan Documents
that is subject to confidentiality obligations in favor of Borrower or such
other Person and that prohibit thedisclosure of such information to the
Lenders (or Bank Product Providers), and the Lenders acknowledge (and by
entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to acknowledge) that, in such circumstances (and in theabsence of a
waiver of such confidentiality obligations, which waiver Agent will use its
reasonable best efforts to obtain), Agent shall not be under any obligation to
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provide such information to them. The terms "Lender" and "Lenders"include WF
Canada in its individual capacity.
15.9.
Successor Agent
. Agent may resignas Agent upon 30 days prior written notice to the Lenders
(unless such notice is waived by the Required Lenders) and Borrower (unless
such notice is waived by Borrower) and without any notice to the Bank Product
Providers. If Agent resigns underthis Agreement, the Required Lenders shall be
entitled, with (so long as no Event of Default has occurred and is continuing)
the consent of Borrower (such consent not to be unreasonably withheld,
delayed, or conditioned), appoint a successor Agentfor the Lenders (and the
Bank Product Providers). If, at the time that Agent's resignation is
effective, it is acting as an Issuing Lender or a Swing Lender, such
resignation shall also operate to effectuate its resignation as such
IssuingLender or such Swing Lender, as applicable, and it shall automatically
be relieved of any further obligation to issue Letters of Credit, or to make
Swing Loans. If no successor Agent is appointed prior to the effective date of
the resignation ofAgent, Agent may appoint, after consulting with the Lenders
and Borrower, a successor Agent. If Agent has materially breached or failed to
perform any material provision of this Agreement or of applicable law, the
Required Lenders may agree inwriting to remove and replace Agent with a
successor Agent from among the Lenders with (so long as no Event of Default
has occurred and is continuing) the consent of Borrower (such consent not to
be unreasonably withheld, delayed, or conditioned).In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor
Agent shall succeed to all the rights, powers, and duties of the retiring
Agent and the term "Agent" shall mean such successor Agent andthe retiring
Agent's appointment, powers, and duties as Agent shall be terminated. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Section 15
shall inure to its benefit as to any actions taken oromitted to be taken by it
while it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignationshall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.
15.10.
Lender in Individual Capacity
. Any Lender and its respective Affiliates may makeloans to, issue letters of
credit for the account of, accept deposits from, provide Bank Products to,
acquire Equity Interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting, or other business with Borrowerand
its Subsidiaries and Affiliates and any other Person party to any Loan
Documents as though such Lender were not a Lender hereunder without notice to
or consent of the other members of the Lender Group (or the Bank Product
Providers). The othermembers of the Lender Group acknowledge (and by entering
into a Bank Product Agreement, each Bank Product Provider shall be deemed to
acknowledge) that, pursuant to such activities, such Lender and its respective
Affiliates may receive informationregarding Borrower or its Affiliates or any
other Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, andthe Lenders acknowledge (and
by entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to acknowledge) that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver suchLender will use
its reasonable best efforts to obtain), such Lender shall not be under any
obligation to provide such information to them.
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15.11.
Collateral Matters
.
(a)The Lenders hereby irrevocably authorize (and by entering into a Bank
Product Agreement, each Bank ProductProvider shall be deemed to authorize)
Agent to release any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Borrower of all of the
Obligations, (ii) constituting property beingsold or disposed of if a release
is required or desirable in connection therewith and if Borrower certify to
Agent that the sale or disposition is permitted under
Section 6.4
(and Agent may rely conclusively on any such certificate, withoutfurther
inquiry), (iii) constituting property in which neither Borrower nor any of its
Subsidiaries owned any interest at the time Agent's Lien was granted nor at
any time thereafter, (iv) constituting property leased or licensed toBorrower
or its Subsidiaries under a lease or license that has expired or is terminated
in a transaction permitted under this Agreement, or (v) in connection with a
credit bid or purchase authorized under this
Section 15.11
. The LoanParties and the Lenders hereby irrevocably authorize (and by
entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to authorize) Agent, based upon the instruction of the Required
Lenders, to (a) consent to the saleof, credit bid or purchase (either directly
or indirectly through one or more entities) all or any portion of the
Collateral at any sale thereof conducted under the provisions of the
Bankruptcy Code, or similar Insolvency Laws in any other relevantjurisdiction,
including Section 363 of the Bankruptcy Code, (b) credit bid or purchase
(either directly or indirectly through one or more entities) all or any
portion of the Collateral at any sale or other disposition thereof
conductedunder the provisions of the PPSA, including pursuant to Sections
9-610 or 9-620 of the PPSA or similar Insolvency Laws in any other relevant
jurisdiction or any similar provision of the PPSA, or (c) credit bid or
purchase (either directly orindirectly through one or more entities) all or
any portion of the Collateral at any other sale or foreclosure conducted or
consented to by Agent in accordance with applicable law in any judicial action
or proceeding or by the exercise of any legalor equitable remedy. In
connection with any such credit bid or purchase, (i) the Obligations owed to
the Lenders and the Bank Product Providers shall be entitled to be, and shall
be, credit bid on a ratable basis (with Obligations with respectto contingent
or unliquidated claims being estimated for such purpose if the fixing or
liquidation thereof would not impair or unduly delay the ability of Agent to
credit bid or purchase at such sale or other disposition of the Collateral
and, ifsuch contingent or unliquidated claims cannot be estimated without
impairing or unduly delaying the ability of Agent to credit bid at such sale
or other disposition, then such claims shall be disregarded, not credit bid,
and not entitled to anyinterest in the Collateral that is the subject of such
credit bid or purchase) and the Lenders and the Bank Product Providers whose
Obligations are credit bid shall be entitled to receive interests (ratably
based upon the proportion of theirObligations credit bid in relation to the
aggregate amount of Obligations so credit bid) in the Collateral that is the
subject of such credit bid or purchase (or in the Equity Interests of the any
entities that are used to consummate such credit bidor purchase), and (ii)
Agent, based upon the instruction of the Required Lenders, may accept non-cash
consideration, including debt and equity securities issued by any entities
used to consummate such credit bid or purchase and in connectiontherewith
Agent may reduce the Obligations owed to the Lenders and the Bank Product
Providers (ratably based upon the proportion of their Obligations credit bid
in relation to the aggregate amount of Obligations so credit bid) based upon
the valueof such non-cash consideration;
provided
, that except as otherwise agreed in writing by Required Lenders, Bank Product
Obligations not entitled to the application set forth in
Section
2.4(b)(ii)(A)
shall not be entitled to be,and shall not be, credit bid, or used in the
calculation of the ratable interest of the Lenders and Bank Product Providers
in the Obligations
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which are credit bid. Except as provided above, Agent will not execute and
deliver a releaseof any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Lenders (without requiring the authorization of the
Bank Product Providers), or(z) otherwise, the Required Lenders (without
requiring the authorization of the Bank Product Providers). Upon request by
Agent or Borrower at any time, the Lenders will (and if so requested, the Bank
Product Providers will) confirm in writingAgent's authority to release any
such Liens on particular types or items of Collateral pursuant to this
Section 15.11
;
provided
, that (1) anything to the contrary contained in any of the Loan Documents
notwithstanding, Agentshall not be required to execute any document or take
any action necessary to evidence such release on terms that, in Agent's
opinion, could expose Agent to liability or create any obligation or entail
any consequence other than the release ofsuch Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly released) upon (or obligations of Borrower in respectof) any and all
interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral. Each Lender further
hereby irrevocably authorizes (and by entering into a Bank Product
Agreement,each Bank Product Provider shall be deemed to irrevocably authorize)
Agent, at its option and in its sole discretion, to subordinate any Lien
granted to or held by Agent under any Loan Document to the holder of any
Permitted Lien on such property ifsuch Permitted Lien secures a Capital Lease
or a Permitted Purchase Money Indebtedness permitted hereunder.
(b)Agent shall have no obligation whatsoever to any of the Lenders (or the
Bank Product Providers) (i) toverify or assure that the Collateral exists or
is owned by Borrower or its Subsidiaries or is cared for, protected, or
insured or has been encumbered, (ii) to verify or assure that Agent's Liens
have been properly or sufficiently orlawfully created, perfected, protected,
or enforced or are entitled to any particular priority, (iii) to verify or
assure that any particular items of Collateral meet the eligibility criteria
applicable in respect thereof, (iv) to impose,maintain, increase, reduce,
implement, or eliminate any particular Reserve hereunder or to determine
whether the amount of any Reserve is appropriate or not, or (v) to exercise at
all or in any particular manner or under any duty of care,disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent pursuant to any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act,
omission,or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity
as one of the Lenders andthat Agent shall have no other duty or liability
whatsoever to any Lender (or Bank Product Provider) as to any of the
foregoing, except as otherwise expressly provided herein.
(c)Any sale or disposition of Collateral that is permitted under
Section 6.4
(as modified or waived inaccordance with Section 14.1) shall be free and clear
of the Liens created by the Loan Documents.
15.12.
Restrictions on Actions by Lenders; Sharing of Payments
.
(a)Each of the Lenders agrees that it shall not, without the express written
consent of Agent, and that itshall, to the extent it is lawfully entitled to
do so, upon the written request of Agent, set off against the Obligations, any
amounts owing by such Lender to Borrower
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or its Subsidiaries or any deposit accounts of Borrower or its Subsidiaries
now or hereaftermaintained with such Lender. Each of the Lenders further
agrees that it shall not, unless specifically requested to do so in writing by
Agent, take or cause to be taken any action, including, the commencement of
any legal or equitable proceedings toenforce any Loan Document against
Borrower or any Guarantor or to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral.
(b)If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise,any proceeds of Collateral or any payments
with respect to the Obligations, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of suchLender's Pro Rata Share of all such
distributions by Agent, such Lender promptly shall (A) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately availablefunds, as applicable, for the
account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (B) purchase,
without recourse or warranty, an undivided interest andparticipation in the
Obligations owed to the other Lenders so that such excess payment received
shall be applied ratably as among the Lenders in accordance with their Pro
Rata Shares;
provided
, that to the extent that such excess paymentreceived by the purchasing party
is thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid therefor shall be returned to suchpurchasing party,
but without interest except to the extent that such purchasing party is
required to pay interest in connection with the recovery of the excess payment.
15.13.
Agency for Perfection
. Agent hereby appoints each other Lender (and each Bank ProductProvider) as
its agent (and each Lender hereby accepts (and by entering into a Bank Product
Agreement, each Bank Product Provider shall be deemed to accept) such
appointment) for the purpose of perfecting Agent's Liens in assets which,
inaccordance with Article 8 or Article 9, as applicable, of the PPSA or the
applicable provisions of any STA, can be perfected by possession or control.
Should any Lender obtain possession or control of any such Collateral, such
Lender shall notifyAgent thereof, and, promptly upon Agent's request therefor
shall deliver possession or control of such Collateral to Agent or in
accordance with Agent's instructions.
15.14.
Payments by Agent to the Lenders
. All payments to be made by Agent to the Lenders (orBank Product Providers)
shall be made by bank wire transfer of immediately available funds pursuant to
such wire transfer instructions as each party may designate for itself by
written notice to Agent. Concurrently with each such payment, Agentshall
identify whether such payment (or any portion thereof) represents principal,
premium, fees, or interest of the Obligations.
15.15.
Concerning the Collateral and Related Loan Documents
. Each member of the Lender Groupauthorizes and directs Agent to enter into
this Agreement and the other Loan Documents. Each member of the Lender Group
agrees (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to agree) that any action takenby Agent in accordance
with the terms of this Agreement or the other Loan Documents relating to the
Collateral and the exercise by Agent of its powers set forth therein or
herein, together with such other powers that are reasonably incidentalthereto,
shall be binding upon all of the Lenders (and such Bank Product Provider).
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15.16.
Field Examination Reports; Confidentiality;Disclaimers by Lenders; Other
Reports and Information
. By becoming a party to this Agreement, each Lender:
(a)is deemed to have requested that Agent furnish such Lender, promptly after
it becomes available, a copy ofeach field examination report respecting
Borrower or its Subsidiaries (each, a "
Report
") prepared by or at the request of Agent, and Agent shall so furnish each
Lender with such Reports,
(b)expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to theaccuracy of any Report, and (ii) shall not
be liable for any information contained in any Report,
(c)expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Agentor other party performing any field
examination will inspect only specific information regarding Borrower and its
Subsidiaries and will rely significantly upon Borrower's and its Subsidiaries'
books and records, as well as onrepresentations of Borrower's personnel,
(d)agrees to keep all Reports and other material, non-publicinformation
regarding Borrower and its Subsidiaries and their operations, assets, and
existing and contemplated business plans in a confidential manner in
accordance with
Section 17.9
, and
(e)without limiting the generality of any other indemnification provision
contained in this Agreement, agrees:(i) to hold Agent and any other Lender
preparing a Report harmless from any action the indemnifying Lender may take
or fail to take or any conclusion the indemnifying Lender may reach or draw
from any Report in connection with any loans orother credit accommodations
that the indemnifying Lender has made or may make to Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrower, and (ii) to pay andprotect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses,
and other amounts (including, attorneys' fees and costs) incurredby Agent and
any such other Lender preparing a Report as the direct or indirect result of
any third parties who might obtain all or part of any Report through the
indemnifying Lender.
(f)In addition to the foregoing, (x) any Lender may from time to time request
of Agent in writing thatAgent provide to such Lender a copy of any report or
document provided by Borrower or its Subsidiaries to Agent that has not been
contemporaneously provided by Borrower or such Subsidiary to such Lender, and,
upon receipt of such request, Agentpromptly shall provide a copy of same to
such Lender, (y) to the extent that Agent is entitled, under any provision of
the Loan Documents, to request additional reports or information from Borrower
or its Subsidiaries, any Lender may, from timeto time, reasonably request
Agent to exercise such right as specified in such Lender's notice to Agent,
whereupon Agent promptly shall request of Borrower the additional reports or
information reasonably specified by such Lender, and, uponreceipt thereof from
Borrower or such Subsidiary, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement toeach
Lender.
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15.17.
Several Obligations; No Liability
.Notwithstanding that certain of the Loan Documents now or hereafter may have
been or will be executed only by or in favor of Agent in its capacity as such,
and not by or in favor of the Lenders, any and all obligations on the part of
Agent (if any)to make any credit available hereunder shall constitute the
several (and not joint) obligations of the respective Lenders on a ratable
basis, according to their respective Commitments, to make an amount of such
credit not to exceed, in principalamount, at any one time outstanding, the
amount of their respective Commitments. Nothing contained herein shall confer
upon any Lender any interest in, or subject any Lender to any liability for,
or in respect of, the business, assets, profits,losses, or liabilities of any
other Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall have any obligation,duty, or
liability to any Participant of any other Lender. Except as provided in
Section 15.7
, no member of the Lender Group shall have any liability for the acts of any
other member of the Lender Group. No Lender shall be responsible toBorrower or
any other Person for any failure by any other Lender (or Bank Product
Provider) to fulfill its obligations to make credit available hereunder, nor
to advance for such Lender (or Bank Product Provider) or on its behalf, nor to
take anyother action on behalf of such Lender (or Bank Product Provider)
hereunder or in connection with the financing contemplated herein.
15.18.
Quebec Security
. In its capacity as Agent, for the purposes of holding any hypothecgranted to
Agent, Wells Fargo is hereby appointed and shall serve as the hypothecary
representative for all present and future Lenders and Bank Product Providers
as contemplated by Article 2692 of the Civil Code of Quebec. Any person
whobecomes a Lender or a Bank Product Provider shall, by its execution of an
Assignment and Acceptance (in the case of a Lender), or by entering into a
Bank Product Agreement (in the case of a Bank Product Provider) be deemed to
have consented to andconfirmed Agent as the person acting as hypothecary
representative holding the aforesaid hypothecs as aforesaid and to have
ratified, as of the date it becomes a Lender or Bank Product Provider, as the
case may be, all actions taken by Agent in suchcapacity. The substitution of
Agent pursuant to the provisions of this
Section 15
also constitute the substitution of the hypothecary representative.
16. WITHHOLDING TAXES.
16.1.
Payments
. All payments will be made free and clear of, and without deduction
orwithholding for, any present or future Taxes except as required by
applicable law, and in the event any deduction or withholding of Indemnified
Taxes is required by applicable law, Borrower shall comply with the next
sentence of this
Section16.1
. If any Indemnified Taxes are required to be deducted or withheld on a
payment made by any Loan Party, such Loan Party agrees that the amount payable
by it shall be increased as necessary so that after such deduction or
withholding is madeevery payment of all amounts due under this Agreement, any
note, or Loan Document, including any amount paid pursuant to this
Section 16.1
after withholding or deduction for or on account of any Indemnified Taxes,
will not be less than theamount provided for herein. Borrower will furnish to
Agent as promptly as possible after the date the payment of any Tax is due
pursuant to applicable law, certified copies of Tax receipts or other
documentation reasonably requested by Agentevidencing such payment by
Borrower. Borrower agrees to pay any present or future stamp, value added,
intangible transfer or documentary Taxes or any other excise or property
Taxes, charges, or similar levies ("
Other Taxes
") thatarise from any payment made hereunder or from
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the execution, delivery, performance, recordation, or filing of, or otherwise
with respectto this Agreement or any other Loan Document. Loan Parties shall
indemnify each Indemnified Person (as defined in
Section 10.3
) (collectively a "
Tax Indemnitee
") for the full amount of Indemnified Taxes or Other Taxes arisingin
connection with this Agreement or any other Loan Document or breach thereof by
any Loan Party (including, without limitation, any Indemnified Taxes or Other
Taxes imposed or asserted on, or attributable to, amounts payable under this
Section16
) imposed on, or paid by, such Tax Indemnitee and all reasonable costs and
expenses related thereto (including fees and disbursements of attorneys and
other Tax professionals), as and when they are incurred and irrespective of
whether suit isbrought, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority (other than Indemnified Taxes or Other Taxes and additional amounts
that a court of competentjurisdiction finally determines to have resulted from
the gross negligence or willful misconduct of such Tax Indemnitee). The
obligations of Loan Parties under this
Section 16
shall survive the termination of this Agreement, the resignationand
replacement of the Agent, and the repayment of the Obligations.
16.2.
Exemptions
.
(a)If a Lender or Participant is entitled to claim an exemption or reduction
from United Stateswithholding tax, such Lender or Participant agrees with and
in favor of Agent, to deliver to Agent (or, in the case of a Participant, to
the Lender granting the participation only) one of the following before
receiving its first payment under thisAgreement:
(i)if such Lender or Participant is entitled to claim an exemption from United
Stateswithholding Tax pursuant to the portfolio interest exception, (A) a
statement of the Lender or Participant, signed under penalty of perjury, that
it is not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC,
(II)a 10% shareholder of Borrower (within the meaning of Section 871(h)(3)(B)
of the IRC), or (III) a controlled foreign corporation related to Borrower for
the purposes of Section 881(c)(3)(C) of the IRC, and (B) a properly completed
andexecuted IRS Form W-8BEN, W-8BEN-E or Form W-8IMY (with proper
attachments), as applicable;
(ii)if suchLender or Participant is entitled to claim an exemption from, or a
reduction of, withholding Tax under a United States Tax treaty, a properly
completed and executed copy of IRS Form W-8BEN or W-8BEN-E, as applicable;
(iii)if such Lender or Participant is entitled to claim that interest paid
under this Agreement is exempt fromUnited States withholding Tax because it is
effectively connected with a United States trade or business of such Lender, a
properly completed and executed copy of IRS Form W-8ECI;
(iv)if such Lender or Participant is entitled to claim that interest paid
under this Agreement is exempt fromUnited States withholding Tax because such
Lender or Participant serves as an intermediary, a properly completed and
executed copy of IRS Form W-8IMY (with proper attachments); or
(v)a properly completed and executed copy of any other form or forms,
including IRS Form W-9, as may berequired under the IRC or other laws of the
United States as
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a condition to exemption from, or reduction of, United States withholding or
backupwithholding tax.
(b)Each Lender or Participant shall provide new forms (or successor forms)
upon theexpiration or obsolescence of any previously delivered forms and to
promptly notify Agent (or, in the case of a Participant, to the Lender
granting the participation only) of any change in circumstances which would
modify or render invalid anyclaimed exemption or reduction.
(c)If a Lender or Participant claims an exemption or reduction fromwithholding
Tax in a jurisdiction other than the United States, such Lender or such
Participant agrees with and in favor of Agent, to deliver to Agent (or, in the
case of a Participant, to the Lender granting the participation only) any such
form orforms, as may be reasonably requested by Agent or required under the
laws of such jurisdiction as a condition to exemption from, or reduction of,
foreign withholding or backup withholding Tax before receiving its first
payment under this Agreement(including, for the avoidance of doubt, if
requested, Canada Revenue Agency Forms NR-301, NR-302 or NR-303, as
applicable), but only if such Lender or such Participant is legally able to
deliver such forms and the completion, execution, orsubmission of such forms
or other documentation in the reasonable judgment of such Lender would not
subject such Lender to any material unreimbursed cost or expense or materially
prejudice the legal or commercial position of such Lender or itsAffiliates,
provided
, that nothing in this
Section 16.2(c)
shall require a Lender or Participant to disclose any information that it
deems to be confidential (including without limitation, its Tax returns). Each
Lender and eachParticipant shall provide new forms (or successor forms) upon
the expiration or obsolescence of any previously delivered forms and to
promptly notify Agent (or, in the case of a Participant, to the Lender
granting the participation only) of anychange in circumstances which would
modify or render invalid any claimed exemption or reduction.
(d)If aLender or Participant claims exemption from, or reduction of,
withholding Tax and such Lender or Participant sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender or Participant,such Lender or Participant agrees to
notify Agent (or, in the case of a sale of a participation interest, to the
Lender granting the participation only) of the percentage amount in which it
is no longer the beneficial owner of Obligations ofBorrower to such Lender or
Participant. To the extent of such percentage amount, Agent will treat such
Lender's or such Participant's documentation provided pursuant to
Section 16.2(a)
or 16.2(c) as no longer valid. With respect tosuch percentage amount, such
Participant or Assignee may provide new documentation, pursuant to
Section 16.2(a)
or 16.2(c), if applicable. Borrower agrees that each Participant shall be
entitled to the benefits of this
Section 16
withrespect to its participation in any portion of the Commitments and the
Obligations so long as such Participant complies with the obligations set
forth in this
Section 16
with respect thereto.
(e)If a payment made to a Lender under any Loan Document would be subject to
U.S. federal income withholdingTax imposed by FATCA if such Lender were to
fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the IRC, as applicable), such
Lender shall deliver to Agent (or, in thecase of a Participant, to the Lender
granting the participation only) at the time or times prescribed by law and at
such time or times reasonably requested by Agent (or, in the case of a
Participant, the
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Lender granting the participation) such documentation prescribed by applicable
law(including as prescribed by Section 1471(b)(3)(C)(i) of the IRC) and such
additional documentation reasonably requested by Agent (or, in the case of a
Participant, the Lender granting the participation) as may be necessary for
Agent or Borrowerto comply with their obligations under FATCA and to determine
that such Lender has complied with such Lender's obligations under FATCA or to
determine the amount to deduct and withhold from such payment. Solely for
purposes of this clause (e),"FATCA" shall include any amendments made to FATCA
after the date of this Agreement.
16.3.
Reductions
.
(a)If a Lender or a Participant is subject to an applicable withholding Tax,
Agent (or, in the case of aParticipant, the Lender granting the participation)
may withhold from any payment to such Lender or such Participant an amount
equivalent to the applicable withholding Tax. If the forms or other
documentation required by
Section 16.2(a)
or16.2(c) are not delivered to Agent (or, in the case of a Participant, to the
Lender granting the participation), then Agent (or, in the case of a
Participant, to the Lender granting the participation) may withhold from any
payment to such Lender orsuch Participant not providing such forms or other
documentation an amount equivalent to the applicable withholding Tax.
(b)If the Canada Revenue Agency or any other Governmental Authority of Canada
or other jurisdiction asserts aclaim that Agent (or, in the case of a
Participant, to the Lender granting the participation) did not properly
withhold Tax from amounts paid to or for the account of any Lender or any
Participant due to a failure on the part of the Lender or anyParticipant
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify Agent (or such Participant failed to
notify the Lender granting the participation) of a change in circumstances
whichrendered the exemption from, or reduction of, withholding Tax
ineffective, or for any other reason) such Lender shall indemnify and hold
Agent harmless (or, in the case of a Participant, such Participant shall
indemnify and hold the Lender grantingthe participation harmless) for all
amounts paid, directly or indirectly, by Agent (or, in the case of a
Participant, to the Lender granting the participation), as Tax or otherwise,
including penalties and interest, and including any Taxes imposedby any
jurisdiction on the amounts payable to Agent (or, in the case of a
Participant, to the Lender granting the participation only) under this
Section 16
, together with all costs and expenses (including attorneys' fees and
expenses).The obligation of the Lenders and the Participants under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.
16.4.
Refunds
. If Agent or a Lender determines, in its sole discretion, that it has
receiveda refund of any Indemnified Taxes to which Borrower has paid
additional amounts pursuant to this
Section 16
, so long as no Event of Default has occurred and is continuing, it shall pay
over such refund to Borrower (but only to the extentof payments made, or
additional amounts paid, by Borrower under this
Section 16
with respect to Indemnified Taxes giving rise to such a refund), net of all
out-of-pocket expenses of Agent or such Lender and without interest (other
than anyinterest paid by the applicable Governmental Authority with respect to
such a refund);
provided
, that Borrower, upon the request of Agent or such Lender, agrees to repay the
amount paid over to Borrower (plus any penalties, interest or othercharges,
imposed by the applicable Governmental Authority, other than such penalties,
interest or other charges imposed as a result of
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the willful misconduct or gross negligence of Agent hereunder) to Agent or
such Lender inthe event Agent or such Lender is required to repay such refund
to such Governmental Authority. Notwithstanding anything in this Agreement to
the contrary, this
Section 16
shall not be construed to require Agent or any Lender to makeavailable its Tax
returns (or any other information which it deems confidential) to Borrower or
any other Person.
17. GENERAL PROVISIONS.
17.1.
Effectiveness
. This Agreement shall be binding and deemed effective when executed
byBorrower, Borrower, Agent, and each Lender whose signature is provided for
on the signature pages hereof.
17.2.
Section Headings
. Headings and numbers have been set forth herein for convenienceonly. Unless
the contrary is compelled by the context, everything contained in each Section
applies equally to this entire Agreement.
17.3.
Interpretation
. Neither this Agreement nor any uncertainty or ambiguity herein shallbe
construed against the Lender Group or Borrower or Borrower, whether under any
rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to
the ordinarymeaning of the words used so as to accomplish fairly the purposes
and intentions of all parties hereto.
17.4.
Severability of Provisions
. Each provision of this Agreement shall be severable fromevery other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
17.5.
Bank Product Providers
. Each Bank Product Provider in its capacity as such shall bedeemed a third
party beneficiary hereof and of the provisions of the other Loan Documents for
purposes of any reference in a Loan Document to the parties for whom Agent is
acting. Agent hereby agrees to act as agent for such Bank Product
Providersand, by virtue of entering into a Bank Product Agreement, the
applicable Bank Product Provider shall be automatically deemed to have
appointed Agent as its agent and to have accepted the benefits of the Loan
Documents. It is understood and agreedthat the rights and benefits of each
Bank Product Provider under the Loan Documents consist exclusively of such
Bank Product Provider's being a beneficiary of the Liens (and, if applicable,
guarantees) granted to Agent and the right to share inpayments and collections
out of the Collateral as more fully set forth herein. In addition, each Bank
Product Provider, by virtue of entering into a Bank Product Agreement, shall
be automatically deemed to have agreed that Agent shall have theright, but
shall have no obligation, to establish, maintain, relax, or release reserves
in respect of the Bank Product Obligations and that if reserves are
established there is no obligation on the part of Agent to determine or insure
whether theamount of any such reserve is appropriate or not. In connection
with any such distribution of payments or proceeds of Collateral, Agent shall
be entitled to assume no amounts are due or owing to any Bank Product Provider
unless such Bank ProductProvider has provided a written certification (setting
forth a reasonably detailed calculation) to Agent as to the amounts that are
due and owing to it and such written certification is received by Agent a
reasonable period of time prior to themaking of such distribution. Agent shall
have no obligation to calculate the amount due and payable with respect to any
Bank Products, but may rely upon the written certification of the amount due
and payable
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from the applicable Bank Product Provider. In the absence of an updated
certification, Agentshall be entitled to assume that the amount due and
payable to the applicable Bank Product Provider is the amount last certified
to Agent by such Bank Product Provider as being due and payable (less any
distributions made to such Bank ProductProvider on account thereof). Borrower
may obtain Bank Products from any Bank Product Provider, although Borrower is
not required to do so. Borrower acknowledges and agrees that no Bank Product
Provider has committed to provide any Bank Products andthat the providing of
Bank Products by any Bank Product Provider is in the sole and absolute
discretion of such Bank Product Provider. Notwithstanding anything to the
contrary in this Agreement or any other Loan Document, no provider or holder
ofany Bank Product shall have any voting or approval rights hereunder (or be
deemed a Lender) solely by virtue of its status as the provider or holder of
such agreements or products or the Obligations owing thereunder, nor shall the
consent of anysuch provider or holder be required (other than in their
capacities as Lenders, to the extent applicable) for any matter hereunder or
under any of the other Loan Documents, including as to any matter relating to
the Collateral or the release ofCollateral or Guarantors.
17.6.
Debtor-Creditor Relationship
. The relationship betweenthe Lenders and Agent, on the one hand, and the Loan
Parties, on the other hand, is solely that of creditor and debtor. No member
of the Lender Group has (or shall be deemed to have) any fiduciary
relationship or duty to any Loan Party arising outof or in connection with the
Loan Documents or the transactions contemplated thereby, and there is no
agency or joint venture relationship between the members of the Lender Group,
on the one hand, and the Loan Parties, on the other hand, by virtueof any Loan
Document or any transaction contemplated therein.
17.7.
Counterparts; ElectronicExecution
. This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together,shall constitute but one and the same Agreement. Execution of any
such counterpart may be by means of (a) an electronic signature that complies
with the federal Electronic Signatures in Global and National Commerce Act, as
in effect from timeto time, state enactments of the Uniform Electronic
Transactions Act, as in effect from time to time, or any other relevant and
applicable electronic signatures law; (b) an original manual signature; or (c)
a faxed, scanned, or photocopiedmanual signature. Each electronic signature or
faxed, scanned, or photocopied manual signature shall for all purposes have
the same validity, legal effect, and admissibility in evidence as an original
manual signature. Agent reserves the right, inits discretion, to accept, deny,
or condition acceptance of any electronic signature on this Agreement. Any
party delivering an executed counterpart of this Agreement by faxed, scanned
or photocopied manual signature shall also deliver an originalmanually
executed counterpart, but the failure to deliver an original manually executed
counterpart shall not affect the validity, enforceability and binding effect
of this Agreement. The foregoing shall apply to each other Loan Document, and
anynotice delivered hereunder or thereunder,
mutatis mutandis
.
17.8.
Revival andReinstatement of Obligations; Certain Waivers
. If any member of the Lender Group or any Bank Product Provider repays,
refunds, restores, or returns in whole or in part, any payment or property
(including any proceeds of Collateral)previously paid or transferred to such
member of the Lender Group or such Bank Product Provider in full or partial
satisfaction of any Obligation or on account of any other obligation of any
Loan Party under any
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Loan Document or any Bank Product Agreement, because the payment, transfer, or
theincurrence of the obligation so satisfied is asserted or declared to be
void, voidable, or otherwise recoverable under any law relating to creditors'
rights, including provisions of the Bankruptcy Code or other Insolvency Laws
relating tofraudulent transfers, preferences, or other voidable or recoverable
obligations or transfers (each, a "
Voidable Transfer
"), or because such member of the Lender Group or Bank Product Provider elects
to do so on the reasonable adviceof its counsel in connection with a claim
that the payment, transfer, or incurrence is or may be a Voidable Transfer,
then, as to any such Voidable Transfer, or the amount thereof that such member
of the Lender Group or Bank Product Provider electsto repay, restore, or
return (including pursuant to a settlement of any claim in respect thereof),
and as to all reasonable costs, expenses, and attorneys' fees of such member
of the Lender Group or Bank Product Provider related thereto,(i) the liability
of the Loan Parties with respect to the amount or property paid, refunded,
restored, or returned will automatically and immediately be revived,
reinstated, and restored and will exist and (ii) Agent's Liens securingsuch
liability shall be effective, revived, and remain in full force and effect, in
each case, as fully as if such Voidable Transfer had never been made. If,
prior to any of the foregoing, (A) Agent's Liens shall have been released
orterminated or (B) any provision of this Agreement shall have been terminated
or cancelled, Agent's Liens, or such provision of this Agreement, shall be
reinstated in full force and effect and such prior release, termination,
cancellationor surrender shall not diminish, release, discharge, impair or
otherwise affect the obligation of any Loan Party in respect of such liability
or any Collateral securing such liability.
17.9.
Confidentiality
.
(a)Agent and Lenders each individually (and not jointly or jointly and
severally) agree that material,non-public information regarding Borrower and
its Subsidiaries, their operations, assets, and existing and contemplated
business plans ("
Confidential Information
") shall be treated by Agent and the Lenders in a confidential manner,and
shall not be disclosed by Agent and the Lenders to Persons who are not parties
to this Agreement, except: (i) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group and
to employees,directors and officers of any member of the Lender Group (the
Persons in this clause (i), "
Lender Group Representatives
") on a "need to know" basis in connection with this Agreement and the
transactions contemplated herebyand on a confidential basis, (ii) to
Subsidiaries and Affiliates of any member of the Lender Group (including the
Bank Product Providers),
provided
that any such Subsidiary or Affiliate shall have agreed to receive such
informationhereunder subject to the terms of this
Section 17.9
, (iii) as may be required by regulatory authorities so long as such
authorities are informed of the confidential nature of such information, (iv)
as may be required by statute,decision, or judicial or administrative order,
rule, or regulation;
provided
that (x) prior to any disclosure under this clause (iv), the disclosing party
agrees to provide Borrower with prior notice thereof, to the extent that it
ispracticable to do so and to the extent that the disclosing party is
permitted to provide such prior notice to Borrower pursuant to the terms of
the applicable statute, decision, or judicial or administrative order, rule,
or regulation and(y) any disclosure under this clause (iv) shall be limited to
the portion of the Confidential Information as may be required by such
statute, decision, or judicial or administrative order, rule, or regulation,
(v) as may be agreed toin advance in writing by Borrower, (vi) as requested or
required by any Governmental Authority pursuant to any subpoena or other legal
process,
provided
, that, (x) prior to any disclosure under this clause (vi) the disclosingparty
agrees to provide Borrower with prior written notice thereof, to the extent
that it is practicable to do so
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and to the extent that the disclosing party is permitted to provide such prior
writtennotice to Borrower pursuant to the terms of the subpoena or other legal
process and (y) any disclosure under this clause (vi) shall be limited to the
portion of the Confidential Information as may be required by such
Governmental Authoritypursuant to such subpoena or other legal process, (vii)
as to any such information that is or becomes generally available to the
public (other than as a result of prohibited disclosure by Agent or the
Lenders or the Lender GroupRepresentatives), (viii) in connection with any
assignment, participation or pledge of any Lender's interest under this
Agreement,
provided
that prior to receipt of Confidential Information any such assignee,
participant, or pledgeeshall have agreed in writing to receive such
Confidential Information either subject to the terms of this
Section 17.9
or pursuant to confidentiality requirements substantially similar to those
contained in this
Section 17.9
(and suchPerson may disclose such Confidential Information to Persons employed
or engaged by them as described in clause (i) above), (ix) in connection with
any litigation or other adversary proceeding involving parties hereto to the
extent suchlitigation or adversary proceeding involves claims related to the
rights or duties of such parties under this Agreement or the other Loan
Documents;
provided
, that, prior to any disclosure to any Person (other than any Loan Party,
Agent, anyLender, any of their respective Affiliates, or their respective
counsel) under this clause (ix) with respect to litigation involving any
Person (other than Borrower, Agent, any Lender, any of their respective
Affiliates, or their respectivecounsel), the disclosing party agrees to
provide Borrower with prior written notice thereof, and (x) in connection
with, and to the extent reasonably necessary for, the exercise of any secured
creditor remedy under this Agreement or under anyother Loan Document.
(b)Anything in this Agreement to the contrary notwithstanding, Agent may
discloseinformation concerning the terms and conditions of this Agreement and
the other Loan Documents to loan syndication and pricing reporting services or
in its marketing or promotional materials, with such information to consist of
deal terms and otherinformation customarily found in such publications or
marketing or promotional materials and may otherwise use the name, logos, and
other insignia of Borrower or the other Loan Parties and the Commitments
provided hereunder in any"tombstone" or other advertisements, on its website
or in other marketing materials of the Agent;
provided
that, in the case of this clause, Agent will submit its proposed form of
"tombstone" or comparable advertising tothe Administrative Borrower for
approval prior to Agent's initial external use thereof, which approval of the
Administrative Borrower shall not be unreasonably withheld, conditioned or
delayed, and, following receipt of such approval from theAdministrative
Borrower, Agent shall not be required to see further approval for any Loan
Party to use such "tombstone" or other comparable advertising on its website
or in its other marketing materials.
(c)The Loan Parties hereby acknowledge that Agent or its Affiliates may make
available to the Lenders materialsor information provided by or on behalf of
Borrower hereunder (collectively, "
Borrower Materials
") by posting Borrower Materials on IntraLinks, SyndTrak or another similar
electronic system (the "
Platform
") andcertain of the Lenders may be "public-side" Lenders (i.e., Lenders that
do not wish to receive material non-public information with respect to the
Loan Parties or their securities) (each, a "
Public Lender
"). The LoanParties shall be deemed to have authorized Agent and its
Affiliates and the Lenders to treat Borrower Materials marked "PUBLIC" or
otherwise at any time filed with the SEC as not containing any material
non-public information with respectto the Loan Parties or their securities for
purposes of United States federal and state securities laws. All Borrower
Materials marked "PUBLIC" are permitted to be made
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available through a portion of the Platform designated as "Public Investor"
(oranother similar term). Agent and its Affiliates and the Lenders shall be
entitled to treat Borrower Materials that are not marked "PUBLIC" or that are
not at any time filed with the SEC as being suitable only for posting on a
portion ofthe Platform not marked as "Public Investor" (or such other similar
term).
17.10.
Survival
. All representations and warranties made by the Loan Parties in the
LoanDocuments and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution anddelivery of the Loan Documents and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that Agent,
any Issuing Lender, or any Lender mayhave had notice or knowledge of any
Default or Event of Default or incorrect representation or warranty at the
time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of, or any accrued intereston, any Loan or any
fee or any other amount payable under this Agreement is outstanding or unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or been terminated.
17.11.
Patriot Act;
Canadian Anti-Money Laundering & Anti-TerrorismLegislation
.
(a)Each Lender that is subject to the requirements of the
Patriot Act
hereby notifies Borrower that pursuant to the requirements of the
Patriot Act
, it is required to obtain, verify and record information that identifies
Borrower, which information includes the name and address of Borrowerand other
information that will allow such Lender to identify Borrower in accordance
with the
Patriot Act
. In addition, if Agent is required by law or regulation or internal policies
to do so, it shall have the right to periodically conduct(a)
Patriot Act
searches, OFAC/PEP searches, and customary individual background checks for
the Loan Parties and (b) OFAC/PEP searches and customary individual background
checks for the Loan Parties' senior management and keyprincipals, and Borrower
agrees to cooperate in respect of the conduct of such searches and further
agrees that the reasonable costs and charges for such searches shall
constitute Lender Group Expenses hereunder and be for the account of Borrower.
(b)Each Loan Party acknowledges that, pursuant to the provisions of Canadian
Anti-MoneyLaundering & Anti-Terrorism Legislation, Agent and Lenders may be
required to obtain, verify and record information regarding each Loan Party,
its respective directors, authorized signing officers, direct or indirect
shareholders or otherPersons in control of such Loan Party, and the
transactions contemplated hereby. The Loan Parties shall promptly provide all
such information, including supporting documentation and other evidence, as
may be reasonably requested by any Lender orAgent, or any prospective assign
or participant of a Lender or Agent, necessary in order to comply with any
applicable Canadian Anti-Money Laundering & Anti- Terrorism Legislation,
whether now or hereafter in existence. If Agent hasascertained the identity of
any Loan Party or any authorized signatories of any Loan Party for the
purposes of applicable Canadian Anti-Money Laundering & Anti-Terrorism
Legislation, then the Agent:
(i)shall be deemed to have done so as an agent for each Lender, and this
Agreement shall constitute a"written agreement" in such regard between each
Lender and the
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Agent within the meaning of applicable Canadian Anti-Money Laundering &
Anti-Terrorism Legislation;and
(ii)shall provide to each Lender copies of all information obtained in such
regard without anyrepresentation or warranty as to its accuracy or
completeness.
Notwithstanding the provisions of this Section and except as may otherwisebe
agreed in writing, each Lender agrees that Agent has no obligation to
ascertain the identity of the Loan Parties or any authorized signatories of
the Loan Parties on behalf of any Lender, or to confirm the completeness or
accuracy of anyinformation it obtains from the Loan Parties or any such
authorized signatory in doing so.
17.12.
Integration
. This Agreement, together with the other Loan Documents, reflects theentire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof. The foregoing to the contrary
notwithstanding, allBank Product Agreements, if any, are independent
agreements governed by the written provisions of such Bank Product Agreements,
which will remain in full force and effect, unaffected by any repayment,
prepayments, acceleration, reduction, increase,or change in the terms of any
credit extended hereunder, except as otherwise expressly provided in such Bank
Product Agreement.
17.13.
Birks Group Inc. as Agent for Borrower
. To the extent a Person other than Birks GroupInc. is a borrower hereunder,
Borrower hereby irrevocably appoints Birks Group Inc. as the borrowing agent
and attorney-in-fact for all Borrower (the "
Administrative Borrower
") which appointment shall remain in full force and effectunless and until
Agent shall have received prior written notice signed by Borrower that such
appointment has been revoked and that another Borrower has been appointed
Administrative Borrower. Borrower hereby irrevocably appoints and authorizes
theAdministrative Borrower (a) to provide Agent with all notices with respect
to Revolving Loans and Letters of Credit obtained for the benefit of Borrower
and all other notices and instructions under this Agreement and the other Loan
Documents(and any notice or instruction provided by Administrative Borrower
shall be deemed to be given by Borrower hereunder and shall bind Borrower),
(b) to receive notices and instructions from members of the Lender Group (and
any notice orinstruction provided by any member of the Lender Group to the
Administrative Borrower in accordance with the terms hereof shall be deemed to
have been given to Borrower), and (c) to take such action as the Administrative
Borrower deemsappropriate on its behalf to obtain Revolving Loans and Letters
of Credit and to exercise such other powers as are reasonably incidental
thereto to carry out the purposes of this Agreement. It is understood that the
handling of the Loan Accounts andCollateral in a combined fashion, as more
fully set forth herein, is done solely as an accommodation to Borrower in
order to utilize the collective borrowing powers of Borrower in the most
efficient and economical manner and at their request, andthat Lender Group
shall not incur liability to Borrower as a result hereof. Borrower expects to
derive benefit, directly or indirectly, from the handling of the Loan Accounts
and the Collateral in a combined fashion since the successful operation
ofBorrower is dependent on the continued successful performance of the
integrated group. To induce the Lender Group to do so, and in consideration
thereof, Borrower hereby jointly and severally agrees to indemnify each member
of the Lender Group andhold each member of the Lender Group harmless against
any and all liability, expense, loss or claim of damage or injury, made
against the Lender Group by Borrower or by any third
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party whosoever, arising from or incurred by reason of (i) the handling of the
LoanAccounts and Collateral of Borrower as herein provided, or (ii) the Lender
Group's relying on any instructions of the Administrative Borrower, except
that Borrower will have no liability to the relevant Agent- Related Person
orLender-Related Person under this
Section 17.13
with respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Agent-RelatedPerson or Lender-Related Person, as
the case may be.
17.14.
Judgment Currency
. If, forthe purposes of obtaining judgment in any court, it is necessary to
convert a sum due hereunder or any other Loan Document in one currency into
another currency, the rate of exchange used shall be that at which in
accordance with normal bankingprocedures Agent could purchase the first
currency with such other currency on the Business Day preceding that on which
final judgment is given. The obligation of Borrower in respect of any such sum
due from it to Agent or any Lender hereunder orunder the other Loan Documents
shall, notwithstanding any judgment in a currency (the "
Judgment Currency
") other than that in which such sum is denominated in accordance with the
applicable provisions of this Agreement (the"
Agreement Currency
"), be discharged only to the extent that on the Business Day following
receipt by Agent or such Lender, as the case may be, of any sum adjudged to be
so due in the Judgment Currency, Agent or such Lender, as thecase may be, may
in accordance with normal banking procedures purchase the Agreement Currency
with the Judgment Currency. If the amount of the Agreement Currency so
purchased is less than the sum originally due to Agent or any Lender from
Borrowerin the Agreement Currency, Borrower agrees, as a separate obligation
and notwithstanding any such judgment, to indemnify Agent or such Lender, as
the case may be, against such loss. If the amount of the Agreement Currency so
purchased is greaterthan the sum originally due to Agent or any Lender in such
currency, Agent or such Lender, as the case may be, agrees to return the
amount of any excess to Borrower (or to any other Person who may be entitled
thereto under applicable law).
17.15.
No Setoff
. All payments made by Borrower hereunder or under any note or other
LoanDocument will be made without setoff, counterclaim, or other defense.
17.16.
IntercreditorAgreement
. The parties hereto acknowledge that the exercise of certain of the Agent's
rights and remedies hereunder may be subject to, and restricted by, the
provisions of the Intercreditor Agreement regarding intercreditor
arrangementsamong the Agent and the Term Loan Agent. Notwithstanding the
foregoing, each Loan Party expressly acknowledges and agrees that the
Intercreditor Agreement is solely for the benefit of the parties thereto, and
that notwithstanding the fact that theexercise of certain of the Agent's and
Lenders' rights under the Loan Documents may be subject to the Intercreditor
Agreement, no action taken or not taken by the Agent or any Lender in
accordance with the terms of the IntercreditorAgreement shall constitute, or
be deemed to constitute, a waiver by the Agent or any Lender of any rights
such Person has with respect to any Loan Party under any Loan Document and
except as specified therein, nothing contained in the IntercreditorAgreement
shall be deemed to modify any of the provisions of this Agreement and the
other Loan Documents, which, as among the Loan Parties, the Agent and the
Lenders, shall remain in full force and effect.
17.17.
Acknowledgement Regarding Any Supported QFCs
. To the extent that the Loan Documentsprovide support, through a guarantee or
otherwise, for Hedge Agreements or any
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other agreement or instrument that is a QFC (such support, "QFC Credit
Support"and each such QFC a "Supported QFC"), the parties acknowledge and
agree as follows with respect to the resolution power of the Federal Deposit
Insurance Corporation under the Federal Deposit Insurance Act and Title II of
the Dodd-FrankWall Street Reform and Consumer Protection Act (together with
the regulations promulgated thereunder, the "U.S. Special Resolution Regimes")
in respect of such Supported QFC and QFC Credit Support (with the provisions
below applicablenotwithstanding that the Loan Documents and any Supported QFC
may in fact be stated to be governed by the laws of the State of New York
and/or of the United States or any other state of the United States): In the
event a Covered Entity that is partyto a Supported QFC (each, a "Covered
Party") becomes subject to a proceeding under a U.S. Special Resolution
Regime, the transfer of such Supported QFC and the benefit of such QFC Credit
Support (and any interest and obligation in or undersuch Supported QFC and
such QFC Credit Support, and any rights in property securing such Supported
QFC or such QFC Credit Support) from such Covered Party will be effective to
the same extent as the transfer would be effective under the U.S.
SpecialResolution Regime if the Supported QFC and such QFC Credit Support (and
any such interest, obligation and rights in property) were governed by the
laws of the United States or a state of the United States. In the event a
Covered Party or a BHC ActAffiliate of a Covered Party becomes subject to a
proceeding under a U.S. Special Resolution Regime, Default Rights under the
Loan Documents that might otherwise apply to such Supported QFC or any QFC
Credit Support that may be exercised againstsuch Covered Party are permitted
to be exercised to no greater extent than such Default Rights could be
exercised under the U.S. Special Resolution Regime if the Supported QFC and
the Loan Documents were governed by the laws of the United States ora state of
the United States. Without limitation of the foregoing, it is understood and
agreed that rights and remedies of the parties with respect to a Defaulting
Lender shall in no event affect the rights of any Covered Party with respect
to aSupported QFC or any QFC Credit Support.
17.18.
Erroneous Payments
.
(a)Each Lender and each other Bank Product Provider and any other party hereto
hereby severally agrees that if(i) the Agent notifies(which such notice shall
be conclusive absent manifest error) such Lender or any Bank Product Provider
(or the Lender which is an Affiliate of a Lender or Bank Product Provider) or
any other Person that has received fundsfrom the Agent or any of its
Affiliates, either for its own account or on behalf of a Lender or Bank
Product Provider (each such recipient, a "
Payment Recipient
") that the Agent has determined in its sole discretion that any fundsreceived
by such Payment Recipient were erroneously transmitted to, or otherwise
erroneously or mistakenly received by, such Payment Recipient (whether or not
known to such Payment Recipient) or (ii) any Payment Recipient receives any
paymentfrom the Agent (or any of its Affiliates) (x) that is in a different
amount than, or on a different date from, that specified in a notice of
payment, prepayment or repayment sent by the Agent (or any of its Affiliates)
with respect to suchpayment, prepayment or repayment, as applicable, (y) that
was not preceded or accompanied by a notice of payment, prepayment or
repayment sent by the Agent (or any of its Affiliates) with respect to such
payment, prepayment or repayment, asapplicable, or (z) that such Payment
Recipient otherwise becomes aware was transmitted or received in error or by
mistake (in whole or in part) then, in each case, an error in payment shall be
presumed to have been made (any such amounts specifiedin clauses (i) or (ii)
of this
Section 17.18(a)
, whether received as a payment, prepayment or repayment of principal,
interest, fees, distribution or otherwise; individually and collectively, an "
ErroneousPayment
"), then, in each case, such
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Payment Recipient is deemed to have knowledge of such error at the time of its
receipt ofsuch Erroneous Payment; provided that nothing in this Section shall
require the Agent to provide any of the notices specified in clauses (i) or
(ii) above. Each Payment Recipient agrees that it shall not assert any right
or claim to anyErroneous Payment, and hereby waives any claim, counterclaim,
defense or right of set-off or recoupment with respect to any demand, claim or
counterclaim by the Agent for the return of any Erroneous Payments, including
without limitation waiver ofany defense based on "discharge for value" or any
similar doctrine.
(b)Without limiting theimmediately preceding clause (a), each Payment
Recipient agrees that, in the case of clause (a)(ii) above, it shall promptly
notify the Agent in writing of such occurrence.
(c)In the case of either clause (a)(i) or (a)(ii) above, such Erroneous
Payment shall at all times remain theproperty of the Agent and shall be
segregated by the Payment Recipient and held in trust for the benefit of the
Agent, and upon demand from the Agent such Payment Recipient shall (or, shall
cause any Person who received any portion of an ErroneousPayment on its behalf
to), promptly, but in all events no later than one Business Day thereafter,
return to the Agent the amount of any such Erroneous Payment (or portion
thereof) as to which such a demand was made in same day funds and in
thecurrency so received, together with interest thereon in respect of each day
from and including the date such Erroneous Payment (or portion thereof) was
received by such Payment Recipient to the date such amount is repaid to the
Agent at the greaterof the Federal Funds Rate and a rate determined by the
Agent in accordance with banking industry rules on interbank compensation from
time to time in effect.
(d)In the event that an Erroneous Payment (or portion thereof) is not
recovered by the Agent for any reason,after demand therefor by the Agent in
accordance with immediately preceding clause (c), from any Lender that is a
Payment Recipient or an Affiliate of a Payment Recipient (such unrecovered
amount as to such Lender, an "
Erroneous PaymentReturn Deficiency
"), then at the sole discretion of the Agent and upon the Agent's written
notice to such Lender (i) such Lender shall be deemed to have made a cashless
assignment of the full face amount of the portion of itsLoans (but not its
Commitments) with respect to which such Erroneous Payment was made (the "
Erroneous Payment Impacted Loans
") to the Agent or, at the option of the Agent, the Agent's applicable lending
affiliate (suchassignee, the "
Agent Assignee
") in an amount that is equal to the Erroneous Payment Return Deficiency (or
such lesser amount as the Agent may specify) (such assignment of the Loans
(but not Commitments) of the Erroneous PaymentImpacted Loans, the "
Erroneous Payment Deficiency Assignment
") plus any accrued and unpaid interest on such assigned amount, without
further consent or approval of any party hereto and without any payment by the
Agent Assignee asthe assignee of such Erroneous Payment Deficiency Assignment.
Without limitation of its rights hereunder, following the effectiveness of the
Erroneous Payment Deficiency Assignment, the Agent may make a cashless
reassignment to the applicableassigning Lender of any Erroneous Payment
Deficiency Assignment at any time by written notice to the applicable
assigning Lender and upon such reassignment all of the Loans assigned pursuant
to such Erroneous Payment Deficiency Assignment shall bereassigned to such
Lender without any requirement for payment or other consideration. The parties
hereto acknowledge and agree that (1) any assignment contemplated in this
clause (d) shall be made without any requirement for any payment orother
consideration paid by the applicable assignee or received by the assignor, (2)
the provisions of this clause (d) shall govern in the event of any
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conflict with the terms and conditions of
Section 13
and (3) the Agent mayreflect such assignments in the Register without further
consent or action by any other Person.
(e)Eachparty hereto hereby agrees that (x) in the event an Erroneous Payment
(or portion thereof) is not recovered from any Payment Recipient that has
received such Erroneous Payment (or portion thereof) for any reason, the Agent
(1) shall besubrogated to all the rights of such Payment Recipient and (2) is
authorized to set off, net and apply any and all amounts at any time owing to
such Payment Recipient under any Loan Document, or otherwise payable or
distributable by the Agentto such Payment Recipient from any source, against
any amount due to the Agent under this
Section 17.18
or under the indemnification provisions of this Agreement, (y) the receipt of
an Erroneous Payment by a Payment Recipient shall not forthe purpose of this
Agreement be treated as a payment, prepayment, repayment, discharge or other
satisfaction of any Obligations owed by the Borrower or any other Loan Party,
except, in each case, to the extent such Erroneous Payment is, and solelywith
respect to the amount of such Erroneous Payment that is, comprised of funds
received by the Agent from the Borrower or any other Loan Party (or any other
Person on behalf of the Borrower) for the purpose of making for a payment on
theObligations and (z) subject to the preceding clause (y), to the extent that
an Erroneous Payment was in any way or at any time credited as payment or
satisfaction of any of the Obligations, the Obligations or any part thereof
that were so credited,and all rights of the Payment Recipient, as the case may
be, shall be reinstated and continue in full force and effect as if such
payment or satisfaction had never been received.
(f)Each party's obligations under this
Section 17.18
shall survive the resignation or replacementof the Agent or any transfer of
right or obligations by, or the replacement of, a Lender, the termination of
the Commitments or the repayment, satisfaction or discharge of all Obligations
(or any portion thereof) under any Loan Document.
(g)The provisions of this
Section 17.18
to the contrary notwithstanding, (i) nothing in this
Section17.18
will constitute a waiver or release of any claim of any party hereunder
arising from any Payment Recipient's receipt of an Erroneous Payment and (ii)
there will only be deemed to be a recovery of the Erroneous Payment to
theextent that Agent has received payment from the Payment Recipient in
immediately available funds the Erroneous Payment Return Deficiency, whether
directly from the Payment Recipient, as a result of the exercise by Agent of
its rights of subrogationor set off as set forth above in clause (e) or as a
result of the receipt by Agent Assignee of a payment of the outstanding
principal balance of the Loans assigned to Agent Assignee pursuant to an
Erroneous Payment Deficiency Assignment, butexcluding any other amounts in
respect thereof (it being agreed that any payments of interest, fees, expenses
or other amounts (other than principal) received by Agent Assignee in respect
of the Loans assigned to Agent Assignee pursuant to anErroneous Payment
Deficiency Assignment shall be the sole property of the Agent Assignee and
shall not constitute a recovery of the Erroneous Payment).
17.19.
Reaffirmation
.
(a)On the Closing Date, the Original Credit Agreement shall be amended and
restated in its entirety hereby andthe provisions of the Original Credit
Agreement shall be superseded by the provisions hereof. In addition, unless
specifically amended hereby or
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contemporaneously herewith, each of the other "Loan Documents" (as defined in
theOriginal Credit Agreement) shall continue in full force and effect and,
from and after the Closing Date, (i) all references to loans or Revolving
Loans to, or notes issued by, or Obligations of, the Original Borrower therein
shall be deemed torefer to the loans or Revolving Loans to, or notes issued
by, or Obligations of, Borrower hereunder, and (ii) all references to the
"Loan Documents" contained therein shall be deemed to refer to the Loan
Documents as defined in thisAgreement.
(b)It is the intention of each of the parties hereto that the Original Credit
Agreement beamended and restated so as to preserve the perfection and priority
of all security interests securing Indebtedness and Obligations under the
Original Credit Agreement and that all Indebtedness and Obligations of
Borrower hereunder and Borrower andthe Guarantors under the other Loan
Documents shall be secured by the applicable Loan Documents and that this
Agreement does not constitute a novation of any or all of the obligations and
liabilities existing under the Original Credit Agreement, theother "Loan
Documents" (as defined in the Original Credit Agreement) or any related
documents. The parties confirm that the Canadian Security Documents delivered
in connection with the execution of the Original Credit Agreement shallremain
in full force and effect and shall continue to secure the Obligations of
Borrower hereunder and the Guarantors thereunder.
[Signature pages to follow]
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IN WITNESS WHEREOF
, the parties hereto have caused this Agreement tobe executed and delivered as
of the date first above written.
BIRKS GROUP INC.
By:
Name:
Katia Fontana,CPA
Title:
VP, Chief FinancialOfficer
By:
Name:
Miranda Melfi
Title:
VP, HR, Chief Legal Officerand
Corporate Secretary
WELLS FARGO CAPITAL FINANCE
CORPORATION CANADA
, as Agent, and as the initial Lender hereunder
By:
Name:
CarmelaMassari
Title:
Senior Vice President,Portfolio
Manager
Signature Page to Credit Agreement
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By execution hereof, each Guarantor acknowledges, agrees and consents to all
of the termsand conditions of (a) this Agreement; and (b) (A) all Loan
Documents to which it is a party, including all guarantees granted by such
Guarantor to and in favour of the Agent, and (B) all security granted by such
Guarantor to andin favour of the Agent, security for the Obligations, are, in
the case of (A) and (B), in full force and effect and are hereby confirmed and
all obligations of all parties thereunder are not affected or prejudiced in
any manner.
CASH, GOLD & SILVER INC.,
as guarantor
By:
Name: Katia Fontana
, CPA
Title:
Vice President
VP, Chief Financial Officer
By:
Name: Miranda Melfi
Title:
VP, HR, Chief Legal Officer and Corporate
Secretary
Signature Page to Credit Agreement
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By execution hereof, each Guarantor acknowledges, agrees and consents to all
of the termsand conditions of (a) this Agreement; and (b) (A) all Loan
Documents to which it is a party, including all guarantees granted by such
Guarantor to and in favour of the Agent, and (B) all security granted by such
Guarantor to andin favour of the Agent, security for the Obligations, are, in
the case of (A) and (B), in full force and effect and are hereby confirmed and
all obligations of all parties thereunder are not affected or prejudiced in
any manner.
BIRKS INVESTMENTS INC.,
as guarantor
By:
Name: Katia Fontana
Title:
Vice President
VP, Chief FinancialOfficer
By:
Name: Miranda Melfi
Title:
VP, HR, Chief Legal Officer andCorporate
Secretary
Signature Page to Credit Agreement
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Schedule 1.1
Definitions
As used in the Agreement, the following terms shall have the following
definitions:
"
Account
" means an account (as that term is defined in the PPSA).
"
Account Debtor
" means any Person who is obligated on an Account, chattel paper, or an
intangible.
"
Accounting Changes
" means changes in accounting principles required by the promulgation of any
rule,regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants (or
successor thereto or any agency with similar functions, including, to the
extent applicable, the CharteredProfessional Accountants Canada).
"
Acquired Indebtedness
" means Indebtedness of a Person whose assetsor Equity Interests are acquired
by Borrower or any of its Subsidiaries in a Permitted Acquisition;
provided
, that such Indebtedness (a) is either purchase money Indebtedness or a
Capital Lease with respect to Equipment or mortgagefinancing with respect to
Real Property, (b) was in existence prior to the date of such Permitted
Acquisition, and (c) was not incurred in connection with, or in contemplation
of, such Permitted Acquisition.
"
Acquisition
" means (a) the purchase or other acquisition by a Person or its Subsidiaries
of all orsubstantially all of the assets of (or any division or business line
of) any other Person, or (b) the purchase or other acquisition (whether by
means of a merger, amalgamation, consolidation, or otherwise) by a Person or
its Subsidiaries of allor substantially all of the Equity Interests of any
other Person.
"
Additional Documents
" has themeaning specified therefor in
Section 5.12
of the Agreement.
"
Additional Subordinated Deb
t"means such unsecured Indebtedness incurred by any Loan Party after the date
of this Agreement to the extent that such Indebtedness is Permitted
Indebtedness and is expressly subordinated to the full payment of the
Obligations on terms and conditionsand pursuant to a Subordination Agreement
in form, scope and substance satisfactory to Agent and the Required Lenders.
"
Additional Subordinated Debt Documents
" means all documents, instruments and agreements executed inconnection with
any Additional Subordinated Debt, any such documents, instruments and
agreements being in form, scope and substance satisfactory to Agent and the
Required Lenders.
"Adjusted Term CORRA" means, for purposes of any calculation, the rate per
annum equal to (a) Term CORRA for such calculation plus (b) the Term CORRA
Adjustment; provided that if Adjusted Term CORRA as so determined shall ever
be less than theFloor, then Adjusted Term CORRA
shall be deemed to be
the Floor.
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"
Administrative Borrower
" has the meaning specifiedtherefor in
Section 17.13
of the Agreement.
"
Administrative Questionnaire
" has the meaningspecified therefor in
Section 13.1(a)
of the Agreement.
"
Affected Lender
" has the meaningspecified therefor in
Section 2.13(b)
of the Agreement.
"
Affiliate
" means, as applied to anyPerson, any other Person who controls, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" means the possession, directly or indirectly through one
or more intermediaries, of the powerto direct the management and policies of a
Person, whether through the ownership of Equity Interests, by contract, or
otherwise;
provided
, that, for purposes of the definition of Eligible Accounts and
Section 6.10
of theAgreement: (a) any Person which owns directly or indirectly 10% or more
of the Equity Interests having ordinary voting power for the election of
directors or other members of the governing body of a Person or 10% or more of
the partnership orother ownership interests of a Person (other than as a
limited partner of such Person) shall be deemed an Affiliate of such Person,
(b) each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person, and(c) each partnership in which a Person is a
general partner shall be deemed an Affiliate of such Person.
"
Agent
" has the meaning specified therefor in the preamble to the Agreement.
"
Agent's Applicable Account
" means the Agent's Canadian Account and/or the Agent's USAccount, as the
context requires.
"
Agent's Canadian Account
" means the Deposit Account identifiedon
Schedule A-1
as Agent's Canadian Account (or such other Deposit Account that has been
designated as such, in writing, by Agent to Administrative Borrower and the
Lenders).
"
Agent's Liens
" means the Liens granted by Borrower or any of its Subsidiaries to Agent
under the LoanDocuments and securing all or a portion of the Obligations.
"
Agent's US Account
" means the DepositAccount identified on
Schedule A-2
as Agent's US Account (or such other Deposit Account that has been designated
as such, in writing, by Agent to Administrative Borrower and the Lenders).
"
Agent-Related Persons
" means Agent, together with its Affiliates, officers, directors,
employees,attorneys, and agents.
"
Agreement
" means the Credit Agreement to which this
Schedule 1.1
isattached.
"
Applicable Currency
" means Canadian Dollars;
provided
, that with respect to RevolvingLoans and any other Obligations denominated in
US Dollars, Applicable Currency means US Dollars.
-------------------------------------------------------------------------------
"
Applicable Margin
" means, as of any date of determinationand with respect to Base Rate Loans or
Non-Base Rate Loans, as applicable, the applicable margin set forth in the
following table that corresponds to the Average Excess Availability of
Borrower for the most recently completed FiscalQuarter
;
provided
, that for the period from the Closing Date through the end of the Fiscal
Quarter ending December 25, 2021, the Applicable Revolver Margin shall be set
at the margin in the row styled "Level III":
Level Average Applicable Margin in Applicable Margin in Applicable Margin in
Excess Respect of Base Rate respect of respect of SOFR
Availability Loans (the "Base Rate CDOR Rate Loans (the
as a % of the Margin") Term "SOFR Rate
Line Cap CORRA Margin")
Rate Loans
(the
"
CDOR
Term
CORRA
Rate
Margin")
I e 66% 0.00% 1.50% 1.625%
II < 66% but 0.25% 1.75% 1.875%
e 33%
III < 33% 0.50% 2.00% 2.125%
The Applicable Margin shall be re-determined by Agent as of the first day of
each FiscalQuarter of Borrower.
"
Applicable Unused Line Fee Percentage
" means 0.25% per annum.
"
Application Event
" means the (a) occurrence of a failure by Borrower to repay all of the
Obligationsin full on the Maturity Date, or (b) the occurrence and continuance
of an Event of Default and the election by the Agent or the Required Lenders
during such continuance to require that payments and proceeds of Collateral be
applied pursuant to
Section 2.4(b)(ii)
of the Agreement.
"
Assignee
" has the meaning specified therefor in
Section13.1(a)
of the Agreement.
"
Assignment and Acceptance
" means an Assignment and Acceptance Agreementsubstantially in the form of
Exhibit A-1
to the Agreement.
"
Authorized Person
" means any one ofthe individuals identified on
Schedule A-3
to the Agreement, as such schedule is updated from time to time by written
notice from Administrative Borrower to Agent.
"
Availability Block
" means, as of any date of determination, the greater of (i) ten percent(10%)
multiplied by the Term Loan Borrowing Base (calculated without giving effect
to the Availability Block), and (ii) $8,500,000 plus (A) from December 20 to
January 20 of any given Fiscal Year, $5,000,000, or(B) from January 21 to
January 31 of any given Fiscal Year, $2,000,000.
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"
Available Increase Amount
" means, as of any date ofdetermination, an amount equal to the result of (a)
$13,000,000 minus (b) the aggregate principal amount of Increases to the
Revolver Commitments previously made pursuant to
Section 2.16
of the Agreement.
"
Available Tenor
" means, as of any date of determination and with respect to any then-current
Benchmark, forany Currency, as applicable, (a) if such Benchmark is a term
rate, any tenor for such Benchmark (or component thereof) that is or may be
used for determining the length of an Interest Period pursuant to this
Agreement or (b) otherwise, anypayment period for interest calculated with
reference to such Benchmark (or component thereof) that is or may be used for
determining any frequency of making payments of interest calculated with
reference to such Benchmark, in each case, as of suchdate and not including,
for the avoidance of doubt, any tenor for such Benchmark that is then-removed
from the definition of "Interest Period" pursuant to
Section 2.12(d)(iii)(D)
.
"
Average Excess Availability
" means, with respect to any period, the sum of the aggregate amount of
ExcessAvailability for each Business Day in such period (calculated as of the
end of each respective Business Day) divided by the number of Business Days in
such period.
"
Bank Product
" means any one or more of the following financial products or accommodations
extended to aLoan Party by a Bank Product Provider: (a) credit cards
(including commercial credit cards (including so-called "purchase cards",
"procurement cards" or "
P-cards
")), (b) credit card processing services,(c) debit cards, (d) stored value
cards, (e) Cash Management Services, or (f) transactions under Hedge
Agreements.
"
Bank Product Agreements
" means those agreements entered into from time to time by a Loan Party with a
BankProduct Provider in connection with the obtaining of any of the Bank
Products.
"
Bank ProductCollateralization
" means, with respect to the Bank Product Obligations, as applicable,
providing cash collateral (pursuant to documentation reasonably satisfactory
to Agent) in the Applicable Currency to be held by Agent for the benefit ofthe
applicable Bank Product Providers (other than the Hedge Providers) in an
amount determined by Agent as sufficient to satisfy the reasonably estimated
credit exposure with respect to the applicable then existing Bank Product
Obligations (otherthan Hedge Obligations).
"
Bank Product Obligations
" means (a) all obligations, liabilities,reimbursement obligations, fees, or
expenses owing by any Loan Party to any Bank Product Provider pursuant to or
evidenced by a Bank Product Agreement and irrespective of whether for the
payment of money, whether direct or indirect, absolute orcontingent, due or to
become due, now existing or hereafter arising, (b) all Hedge Obligations, and
(c) all amounts that Agent or any Lender is obligated to pay to a Bank Product
Provider as a result of Agent or such Lender purchasingparticipations from, or
executing guarantees or indemnities or reimbursement obligations to, a Bank
Product Provider with respect to the Bank Products provided by such Bank
Product Provider to any Loan Party;
provided
, in order for any itemdescribed in clauses (a), (b), or (c) above, as
applicable, to constitute "Bank Product Obligations", if the applicable Bank
Product Provider is any Person other than Wells Fargo or its Affiliates, then
the applicable Bank Productmust have been provided on or after
-------------------------------------------------------------------------------
the Closing Date and Agent shall have received a Bank Product Provider
Agreement within 10 days after the date of the provision of the applicable
Bank Product to a Loan Party.
"
Bank Product Provider
" means any Lender or any of its Affiliates, including each of the foregoing
in itscapacity, if applicable, as a Hedge Provider;
provided
, that no such Person (other than Wells Fargo or its Affiliates) shall
constitute a Bank Product Provider with respect to a Bank Product unless and
until Agent receives a Bank ProductProvider Agreement from such Person with
respect to the applicable Bank Product within 10 days after the provision of
such Bank Product to Borrower or any of its Subsidiaries;
provided
further
, that if, at any time, a Lender ceases tobe a Lender under the Agreement,
then, from and after the date on which it ceases to be a Lender thereunder,
neither it nor any of its Affiliates shall constitute Bank Product Providers
and the obligations with respect to Bank Products provided bysuch former
Lender or any of its Affiliates shall no longer constitute Bank Product
Obligations.
"
Bank ProductProvider Agreement
" means an agreement in substantially the form attached hereto as
Exhibit B-4
to the Agreement, in form and substance satisfactory to Agent, duly executed
by the applicable Bank Product Provider, Borrower, andAgent.
"
Bank Product Reserves
" means, as of any date of determination, those reserves that Agent
hasestablished (based upon the applicable Bank Product Provider's reasonable
and good faith determination of its credit exposure to the Loan Parties in
respect of Bank Product Obligations) in respect of Bank Products then provided
or outstanding.
"
Bankruptcy Code
" means title 11 of the United States Code, as in effect from time to time.
"
Base Rate
" means the Canadian Base Rate;
provided
, that with respect to Obligations denominated inUS Dollars, Base Rate means
the US Base Rate.
"
Base Rate Loan
" means a Revolving Loan that bearsinterest at a rate determined by reference
to the applicable Base Rate.
All Base Rate Loans shall be denominated inCanadian Dollars (if bearing
interest at the Canadian Base Rate) or denominated in Dollars (if bearing
interest at the U.S. Base Rate).
"
Base Rate Margin
" has the meaning set forth in the definition of Applicable Margin.
"Benchmark" means, initially, with respect to any
(a)
Obligations, interest, fees, commissions or other amountsdenominated in, or
calculated with respect to, US Dollars, the Term SOFR Reference Rate; provided
that if a Benchmark Transition Event has occurred with respect to the Term
SOFR Reference Rate or then-current Benchmark for US Dollars, then"Benchmark"
means, with respect to such Obligations, interest, fees, commissions or other
amounts, the applicable Benchmark Replacement to the extent that such
Benchmark Replacement has replaced such prior benchmark rate pursuant
toSection 2.12(d)(iii)
,
; and (b) Obligations, interest, fees, commissions or other amounts
denominated in, or calculatedwith respect to, Canadian Dollars, the Term CORRA
Reference Rate; provided that if a Benchmark Transition Event has occurred
with respect to the Term CORRA Reference Rate or then-current Benchmark for
Canadian Dollars, then "Benchmark"means, with respect to such Obligations,
interest, fees, commissions
-------------------------------------------------------------------------------
or other amounts, the applicable Benchmark Replacement to theextent that such
Benchmark Replacement has replaced such prior benchmark rate pursuant to
Section 2.12(d)(iii).
"Benchmark Rate Business Day" means, for any Obligations, interest, fees,
commissions or other amounts denominated in, or calculated with respect to
Canadian Dollars, any day (other than a Saturday or Sunday) on which banks are
open for business inToronto, Ontario, Canada.
"
BenchmarkReplacement
" means with respect to any Benchmark Transition Event for any then-current
Benchmark, the sum of: (a) the alternate benchmark rate that has been selected
by Agent and Administrative Borrower as the replacement for suchBenchmark
giving due consideration to (i) any selection or recommendation of a
replacement benchmark rate or the mechanism for determining such a rate by the
Relevant Governmental Body or (ii) any evolving or then-prevailing
marketconvention for determining a benchmark rate as a replacement for such
Benchmark for syndicated credit facilities denominated in US Dollars
or Canadian Dollars, as applicable,
at such time and (b) therelated Benchmark Replacement Adjustment; provided
that, in each case, if such Benchmark Replacement as so determined would be
less than the Floor, such Benchmark Replacement shall be deemed to be the
Floor for the purposes of this Agreement and theother Loan Documents.
"
Benchmark Replacement Adjustment
" means, with respect to any replacementof any then-current Benchmark with an
Unadjusted Benchmark Replacement for any applicable Available Tenor, the
spread adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero)that has been
selected by Agent and Administrative Borrower giving due consideration to (a)
any selection or recommendation of a spread adjustment, or method for
calculating or determining such spread adjustment, for the replacement of
suchBenchmark with the applicable Unadjusted Benchmark Replacement by the
Relevant Governmental Body or (b) any evolving or then-prevailing market
convention for determining a spread adjustment, or method for calculating or
determining such spreadadjustment, for the replacement of such Benchmark with
the applicable Unadjusted Benchmark Replacement for syndicated credit
facilities denominated in USDollars
or Canadian Dollars, as applicable
.
"
Benchmark Replacement Date
" means, the earliest to occur of the following events with respect to
thethen-current Benchmark for US Dollars
or Canadian Dollars, as applicable
:
(a) in the case of clause (a) or (b) of thedefinition of "Benchmark Transition
Event," the later of (i) the date of the public statement or publication of
information referenced therein and (ii) the date on which the administrator of
such Benchmark (or the publishedcomponent used in the calculation thereof)
permanently or indefinitely ceases to provide all Available Tenors (if
applicable) of such Benchmark (or such component thereof); or
(b) in the case of clause (c) of the definition of "Benchmark Transition
Event", the first dateon which such Benchmark (or the published component used
in the calculation thereof) has been determined and announced by or on behalf
of the administrator of such Benchmark (or such component thereof) or the
regulatory supervisor for theadministrator of such Benchmark (or such
component thereof) to be non-representative
or non-compliant with or non-aligned with the International Organization
ofSecurities Commissions (IOSCO) Principles for Financial Benchmarks
;
provided
that such non-representativeness, non-compliance or non-alignment will be
determined by reference to themost recent
-------------------------------------------------------------------------------
statement or publication referenced in such clause (c) and even if any
Available Tenor of such Benchmark (or such component thereof) continues to be
provided on such date.
For the avoidance of doubt, the "Benchmark Replacement Date" will be deemed to
have occurred in the case of clause(a) or (b) with respect to any Benchmark
upon the occurrence of the applicable event or events set forth therein with
respect to all then-current Available Tenors (if applicable) of such Benchmark
(or the published component used in thecalculation thereof).
"
Benchmark Transition Event
" means with respect to the then-current Benchmark forUS Dollars
or Canadian Dollars, as applicable
, the occurrence ofone or more of the following events with respect to such
Benchmark:
(a) a public statement orpublication of information by or on behalf of the
administrator of such Benchmark (or the published component used in the
calculation thereof) announcing that such administrator has ceased or will
cease to provide all Available Tenors (ifapplicable) of such Benchmark (or
such component thereof), permanently or indefinitely;
provided
that, at the time of such statement or publication, there is no successor
administrator that will continue to provide any Available Tenor (ifapplicable)
of such Benchmark (or such component thereof);
(b) a public statement or publication ofinformation by the regulatory
supervisor for the administrator of such Benchmark (or the published component
used in the calculation thereof), the Board of Governors, the Federal Reserve
Bank of New York, the central bank for the Currency applicableto such
Benchmark, an insolvency official with jurisdiction over the administrator for
such Benchmark (or such component), a resolution authority with jurisdiction
over the administrator for such Benchmark (or such component) or a court or an
entitywith similar insolvency or resolution authority over the administrator
for such Benchmark (or such component), which states that the administrator of
such Benchmark (or such component) has ceased or will cease to provide all
Available Tenors (ifapplicable) of such Benchmark (or such component thereof)
permanently or indefinitely;
provided
that, at the time of such statement or publication, there is no successor
administrator that will continue to provide any Available Tenor (ifapplicable)
of such Benchmark (or such component thereof); or
(c) a public statement or publication ofinformation by
or on behalfof
the regulatory supervisor for
the administratorof such Benchmark (or the published component used in the
calculation thereof)
or by the regulatory supervisor for the administrator of
announcing that
such Benchmark (or such component thereof)
announcing that
or, if suchBenchmark is a term rate,
all Available Tenors
(if applicable)
of such Benchmark (or such component thereof) are not, or as of a specified
future date will not be, representative
or incompliance with or aligned with the International Organization of
Securities Commissions (IOSCO) Principles for Financial Benchmarks
.
For the avoidance of doubt, a "Benchmark Transition Event" will be deemed to
have occurred with respect to anyBenchmark if a public statement or
publication of information set forth above has occurred with respect to each
then-current Available Tenor (if applicable) of such Benchmark (or the
published component used in the calculation thereof).
"
Benchmark Transition Start Date
" means with respect to any Benchmark for US Dollars
or Canadian Dollars, as applicable,
, in the case of a BenchmarkTransition Event, the earlier of (a) the
applicable Benchmark Replacement Date and (b) if such Benchmark Transition
Event is a public statement or publication of information of a prospective
event, the 90
th
day prior to the expected date of such event as of such public statement or
publication of information (or if the expected date of such prospective event
is fewer than 90 days after such statementor publication, the date of such
statement or publication).
-------------------------------------------------------------------------------
"
Benchmark Unavailability Period
" means, with respect toany then-current Benchmark for US Dollars
or Canadian Dollars, as applicable
, the period (if any) (x) beginning at the time that a Benchmark Replacement
Date with respect to such Benchmark pursuant to clauses (a) or (b) of that
definition has occurred if, at such time, noBenchmark Replacement has replaced
such Benchmark for all purposes hereunder and under any Loan Document in
accordance with
Section 2.12(d)(iii)
and (y) ending at the time that a Benchmark Replacement has replaced such
Benchmark forall purposes hereunder and under any Loan Document in accordance
with
Section 2.12(d)(iii)
.
"
BHC Act Affiliate
" of a Person means an "affiliate" (as such term is defined under,
andinterpreted in accordance with, 12 U.S.C. 1841(k)) of such Person.
"
Board of Directors
" means, as toany Person, the Board of Directors (or comparable managers) of
such Person, or any committee thereof duly authorized to act on behalf of the
Board of Directors (or comparable managers).
"
Board of Governors
" means the Board of Governors of the Federal Reserve System of the United
States (or anysuccessor).
"
Borrower
" has the meaning specified therefor in the preamble to the Agreement.
"
Borrower Materials
" has the meaning specified therefor in
Section 17.9(c)
of the Agreement.
"
Borrowing
" means a borrowing consisting of Revolving Loans made on the same day by the
Revolving Lenderswith Revolver Commitments (or Agent on behalf thereof), or by
Swing Lender in the case of a Swing Loan, or by Agent in the case of an
Extraordinary Advance.
"
Borrowing Base
" means, as of any date of determination, the Canadian Dollar Equivalent
amount of the resultof:
(a) 90% of the amount of Eligible Credit Card Receivables of Borrower, plus
(b) 90% of the amount of Eligible Accounts of Borrower, provided that the
amount thereof included in theBorrowing Base shall not exceed 20% of the
aggregate amount of the Borrowing Base, plus
(c) 90% of theamount calculated by multiplying the Inventory Net Recovery
Percentage of the relevant Eligible Inventory Category identified in the most
recent Inventory appraisal ordered and obtained by Agent by the cost (based on
GAAP) of such Eligible Inventoryprovided that the amount of Eligible
Non-Possessory Inventory included in Eligible Inventory for the purpose of
calculating the Borrowing Base shall not exceed 5% of the aggregate amount of
the Eligible Inventory, minus
(d) the aggregate amount of Receivables Reserves, Loan to Value Reserves, Bank
Product Reserves, InventoryReserves, Canadian Priority Payables Reserves and
other Reserves, if any, established by Agent in accordance with Section 2.1(c)
of the Agreement with respect to the Borrowing Base, minus
(e) the Availability Block.
-------------------------------------------------------------------------------
"
Borrowing Base Certificate
" means a certificate in theform of
Exhibit B-1
, containing the calculation of the Borrowing Base.
"
Business Day
" means anyday that is not a Saturday, Sunday, or other day on which banks are
authorized or required to close in the State of New York or the Provinces of
Ontario or Quebec, except that, if a determination of a Business Day shall
relate to a SOFR Rate Loan,the term "Business Day" also shall exclude any day
on which banks are closed for dealings in US Dollar deposits in the London
interbank market.
"
Canadian Anti-Money Laundering & Anti-Terrorism Legislation
" means Part II.1 of the Criminal Code(Canada), The
Proceeds of Crime (Money Laundering) and Terrorist Financing Act
(Canada) and the
United Nations Act
(Canada), together with all rules, regulations and interpretations thereunder
or related thereto including, withoutlimitation, the Regulations Implementing
the United Nations Resolutions on the Suppression of Terrorism and the United
Nations Al-Qaida and Taliban Regulations promulgated under the
United Nations Act
(Canada) and any similar Canadianlegislation in effect from time to time.
"
Canadian Base Rate
" means,
for
on
any day,
a
the
rate per annum equal to the
greater of (a) the CDOR Rate existing on such day (which rate shall be
calculatedbased upon an Interest Period of 1 month),
greatest of (a) the Floor, (b) Adjusted Term CORRAfor a one-month tenor as in
effect on such day (provided that clause (b) shall not be applicable during
any period in which Adjusted Term CORRA is unavailable, unascertainable or
illegal)
plus 1 percentage point
,
and (
b
c
) the "prime rate" for Canadian Dollar commercial loans made in Canada as
reported by
Thomson
Reuters under Reuters Instrument Code
<CAPRIME=>
on the "CA Prime Rate (Domestic Interest Rate) - Composite Display" page
to the extent such page is available
(or any successor page or such other commercially available service or
source(including the Canadian Dollar "prime rate" announced by a Schedule I
bank under the
Bank Act
(Canada)) as
the
Agent may designate from time to time).
Each determination of the
Any change in the
Canadian Base Rate
shall be made by Agent and shall be conclusive in the absence of manifesterror
due to a change in the foregoing rate shall be effective as of the opening of
business on theeffective date of such change
.
"
Canadian DefinedBenefit Plan
" means any Canadian Pension Plan which contains a "defined benefit provision"
as defined in subsection 147.1(1) of the Income Tax Act (Canada) but does not
include a Canadian Multi-Employer Plan.
"
Canadian Designated Account
" means the Canadian Dollar Deposit Account(s) of Borrower identified on
Schedule D-1
to the Agreement (or such other Deposit Account of Borrower located at
Designated Account Bank that has been designated as such, in writing, by
Administrative Borrower to Agent).
"
Canadian Dollar Equivalent
" means, at any time, (a) with respect to any amount denominated in
CanadianDollars, such amount, and (b) with respect to any amount denominated
in another currency, the equivalent amount thereof in Canadian Dollars as
determined by Agent, at such time, on the basis of the Spot Rate (determined
in respect of the mostrecent Revaluation Date or such other date determined by
Agent) for the purchase of Canadian Dollars with such currency. Calculations
of the Borrowing Base with respect to items included therein that are not
-------------------------------------------------------------------------------
denominated in Canadian Dollars may be adjusted by Agent pursuant to this
definition from time and references herein to the Borrowing Base (including
references based upon the most recentapplicable Borrowing Base Certificate
delivered by Borrower to Agent) may reflect such adjustments.
"
CanadianDollars
", "
Dollars
", "
Cdn $
" or "
$
" means the lawful currency of Canada, as in effect from time to time.
"
Canadian Multi-Employer Plan
" means a "multi-employer pension plan", as such term is definedunder the
Pension Benefits Act (Ontario), under which a Loan Party is required to
contribute pursuant to a collective bargaining agreement and under which (i)
the sole obligation of the Loan Party is to make the contributions specified
in theapplicable collective bargaining agreement, and (ii) the Loan Party has
no liability relating to any past or future withdrawals from the plan.
"
Canadian Patent Security Agreement
" has the meaning specified therefor in the Canadian Security Agreement.
"
Canadian Pension Plans
" means each pension plan required to be registered under Canadian federal
orprovincial law that is maintained or contributed to, or to which there is or
may be an obligation to contribute by a Loan Party or a Subsidiary thereof,
for its employees or former employees, but does not include the Canada Pension
Plan or theQuebec Pension Plan as maintained by the Government of Canada or
the Province of Quebec, respectively.
"
CanadianPriority Payables Reserves
" means reserves (determined from time to time by Agent in its Permitted
Discretion) for: (a) the amount past due and owing by any Loan Party, or the
accrued amount for which such Loan Party has an obligationto remit, to a
Governmental Authority or other Person pursuant to any applicable law, rule or
regulation, in respect of (i) goods and services Taxes, harmonized sales
Taxes, other sales Taxes, employee income Taxes, municipal Taxes and
otherTaxes payable or to be remitted or withheld; (ii) workers' compensation
or employment insurance; (iii) federal Canada Pension Plan, Quebec Pension
Plan and other statutory pension plan contributions; (iv) vacation or holiday
pay; and(v) other like charges and demands, in each case, to the extent that
any Governmental Authority or other Person may claim a Lien, trust, deemed
trust or other claim ranking or capable of ranking in priority to or
pari passu
with one or moreof the Liens granted in the Loan Documents; and (b) the
aggregate amount of any other liabilities of any Loan Party (i) in respect of
which a trust or deemed trust has been or may be imposed on any Collateral to
provide for payment, or(ii) in respect of unremitted and due pension plan
contributions in respect of Canadian Pension Plans including normal cost
contributions and special payments (iii) without duplication for any amounts
referred to in paragraph (b)(ii)amounts representing any unfunded wind-up
deficiency whether or not due with respect to a Canadian Defined Benefit Plan,
or (iv) which are secured by a Lien, charge, right or claim on any Collateral
(other than Permitted Liens that do not havepriority over Agent's Liens); in
each case, pursuant to any applicable law, rule or regulation and provided
such lien, trust, deemed trust, pledge, charge, right or claim ranks or in the
Permitted Discretion of Agent, is capable of ranking inpriority to or
pari passu
with one or more of the Liens granted in the Loan Documents (such as certain
claims by employees for unpaid wages and other amounts payable under the Wage
Earner Protection Program Act (Canada)).
-------------------------------------------------------------------------------
"
Canadian Security Agreement
" means a Canadian Guaranteeand Security Agreement dated as of the Original
Closing Date, in form and substance reasonably satisfactory to Agent, executed
and delivered by each Loan Party to Agent.
"
Canadian Security Documents
" means, collectively, the Canadian Security Agreement, the Quebec
SecurityDocuments and any other Loan Document that grants or purports to grant
a Lien on any of the assets or interests, and the proceeds thereof, of any
Loan Party.
"
Canadian Trademark Security Agreement
" has the meaning specified therefor in the Canadian SecurityAgreement.
"
Capital Assets
" means fixed assets, both tangible (such as land, buildings, fixtures,machinery
and equipment) and intangible (such as patents, copyrights, trademarks,
franchises and goodwill);
provided
that Capital Assets shall not include any item customarily charged directly to
expense or depreciated over a useful life of12 months or less in accordance
with GAAP.
"
Capital Expenditures
" means, with respect to any Person forany period, (a) the amount of all
expenditures by such Person and its Subsidiaries during such period that are
capital expenditures as determined in accordance with GAAP, whether such
expenditures are paid in cash or financed; and (b) thelease of any assets by
Borrower or any of its Subsidiaries as lessee under any synthetic lease to the
extent that such assets would have been Capital Assets had the synthetic lease
been treated for accounting purposes as a Capital Lease.
"
Capital Lease
" means a lease that is required to be capitalized for financial reporting
purposes inaccordance with GAAP but excluding leases which would have been
characterized as operating leases according to GAAP as in effect on the
Original Closing Date.
"
Capitalized Lease Obligation
" means that portion of the obligations under a Capital Lease that is
requiredto be capitalized in accordance with GAAP.
"
Cash Equivalents
" means obligations that are denominated inCanadian Dollars or United States
Dollars (a) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States or issued by any agency thereof and backed by
the full faith and credit of the United States or by, orunconditionally
guaranteed by, the government of Canada or issued by any agency thereof and
backed by the full faith and credit of Canada, in each case maturing within 1
year from the date of acquisition thereof, (b) marketable directobligations
issued or fully guaranteed by any state of the United States or province of
Canada or any political subdivision of any such state or province or any
public instrumentality thereof maturing within 1 year from the date of
acquisitionthereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Rating Group ("
S&P
") or Moody's Investors Service, Inc.("
Moody's
"), (c) commercial paper maturing no more than 270 days from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's,(d) certificates of deposit, time
deposits, overnight bank deposits or bankers' acceptances maturing within 1
year from the date of acquisition thereof issued by any bank organized under
the laws of the United States or any state thereofor the District of Columbia
or a bank organized under the laws of Canada, or any United States or Canadian
branch of a foreign bank, in each case having at the date of acquisition
thereof combined capital and surplus of not
-------------------------------------------------------------------------------
less than $250,000,000, (e) Deposit Accounts maintained with (i) any bank that
satisfies the criteria described in clause (d) above, or (ii) any other bank
organized under thelaws of the United States or any state thereof or the laws
of Canada so long as the full amount maintained with any such other bank is
insured by the Federal Deposit Insurance Corporation or the Canadian Deposit
Insurance Corporation,(f) repurchase obligations of any commercial bank
satisfying the requirements of clause (d) of this definition of recognized
securities dealer having combined capital and surplus of not less than
$250,000,000, having a term of not morethan seven days, with respect to
securities satisfying the criteria in clauses (a) or (d) above, (g) debt
securities with maturities of six months or less from the date of acquisition
backed by standby letters of credit issued by anycommercial bank satisfying
the criteria described in clause (d) above, and (h) Investments in money
market funds substantially all of whose assets are invested in the types of
assets described in clauses (a) through (g) above.
"
Cash Management Services
" means any cash management or related services including treasury,depository,
return items, overdraft, controlled disbursement, merchant store value cards,
e-payables services, electronic funds transfer, interstate depository network,
automatic clearing house transfer (including the Automated Clearing
Houseprocessing of electronic funds transfers through the direct Federal
Reserve Fedline system) and other customary cash management arrangements.
"
CDOR Rate
" means the average rate per annum as reported on theRefinitiv Screen Canadian
Dollar Offered Rate("
CDOR
") Page (or any successor pageor such other page or commercially available
service displaying Canadian interbank bid rates for Canadian Dollar bankers'
acceptances as the Agent may designate from time to time, or if no such
substitute service is available, the rate quotedby a Schedule I bank under the
Bank Act (Canada) selected by the Agent at which such bank is offering to
purchase Canadian Dollar bankers' acceptances) as of 10:00 a.m. Eastern
(Toronto) time on the date of commencement of the requestedInterest Period,
for a term, and in an amount, comparable to the Interest Period and the amount
of the CDOR Rate Loan requested (whether as an initial CDOR Rate Loan or as a
continuation of a CDOR Rate Loan or as a conversion of a Base Rate Loan toa
CDOR Rate Loan) by Borrower in accordance with this Agreement (and, if any
such reported rate is below zero, then the rate determined pursuant to
this clause (b)
shall be deemed to be
zero). Each determination of the CDOR Rate shall be made by the Agent and
shall be conclusive in the absence of manifest error.
"
CDOR Rate Loan
" means each portion of the Revolving Loans
that bears interest at a rate determined by reference to
the CDOR Rate.
"
CGS
" means Cash, Gold & Silver Inc., a corporation formed under the laws of Canada.
"
CGS USA
" means Cash, Gold & Silver USA, Inc., a corporation formed under the laws of
Delaware.
"
Change in Law
" means the occurrence after the date of
the
this
Agreement of
any of the following
: (a) the adoption or effectiveness of any law, rule, regulation, judicial
ruling, judgment or treaty, (b) any change in any law, rule, regulation,
judicial ruling, judgment or treaty or in theadministration, interpretation,
implementation or application by any Governmental
-------------------------------------------------------------------------------
Authority of any law, rule, regulation, guideline or treaty, or (c) the making
or issuance by any Governmental Authority of any request, rule, guideline or
directive, whether or not havingthe force of law;
provided
that notwithstanding anything in the Agreement to the contrary, (i) the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued inconnection therewith
and (ii) all requests, rules, guidelines or directives concerning capital
adequacy promulgated by the Bank for International Settlements, the Basel
Committee on Banking Supervision (or any successor or similar authority)
orCanada or foreign regulatory authorities shall, in each case, be deemed to
be a "Change in Law," regardless of the date enacted, adopted or issued.
"
Change of Control
" means that:
(a)Montel and Mangrove Holding S.A. collectively fail to own and control,
directly or indirectly, a majority ofthe Equity Interests of Borrower entitled
(without regard to the occurrence of any contingency) to vote for the election
of members of the Board of Directors of Borrower, or
(b)Borrower fails to own and control, directly or indirectly, 100% of the
Equity Interests of each Loan Party(other than Borrower).
"
Closing Date
" means the date of this Agreement.
"
Code
" means the New York Uniform Commercial Code, as in effect from time to time.
"
Collateral
" means all assets and interests in assets and proceeds thereof now owned or
hereafter acquiredby Borrower or any other Loan Party in or upon which a Lien
is granted by such Person in favor of Agent or any of the Lenders under any of
the Loan Documents.
"
Collateral Access Agreement
" means a landlord waiver, bailee letter, or acknowledgement agreement of
anylessor, warehouseman, processor, consignee or other Person in possession
of, having a Lien upon, or having rights or interests in Borrower's or any of
its Subsidiaries' books and records, Equipment, or Inventory, in each case, in
form andsubstance reasonably satisfactory to Agent.
"
Commitment
" means, with respect to each Lender, itsRevolver Commitment, and, with
respect to all Lenders, their Revolver Commitments, in each case in such
Canadian Dollar amounts as are set forth beside such Lender's name under the
applicable heading on
Schedule C-1
to the Agreement orin the Assignment and Acceptance or Increase Joinder
pursuant to which such Lender became a Lender under the Agreement, as such
amounts may be reduced or increased from time to time pursuant to assignments
made in accordance with the provisionsof
Section
13.1
of the Agreement, reductions of the Revolver Commitments pursuant to
Section 2.4(c)
, and increases to the Revolver Commitments pursuant to
Section 2.16
.
"
Commodity Exchange Act
" means the Commodity Exchange Act (7 U.S.C. (s) 1 et seq.), as amended from
timeto time, and any successor statute.
-------------------------------------------------------------------------------
"
Compliance Certificate
" means a certificate substantiallyin the form of
Exhibit C-1
to the Agreement delivered by a Financial Officer of Borrower to Agent.
"
Confidential Information
" has the meaning specified therefor in
Section 17.9(a)
of the Agreement.
"Conforming Changes" means, with respect to the use or administration of any
initial Benchmark or the use, administration, adoption or implementation of
any Benchmark Replacement, any technical, administrative or operational
changes (including changes tothe definition of "Business Day," the definition
of "U.S. Government Securities Business Day," the definition of "Benchmark
Rate Business Day," the definition of "U.S. Base Rate" (if applicable),
thedefinition of "Canadian Base Rate" (if applicable), the definition of
"Interest Period" or any similar or analogous definition (or the addition of a
concept of "interest period"), timing and frequency of determiningrates and
making payments of interest, timing of borrowing requests or prepayment,
conversion or continuation notices, length of lookback periods, the
applicability of Section 2.12 and other technical, administrative or
operational matters)that Agent decides may be appropriate to reflect the
adoption and implementation of any such rate or to permit the use and
administration thereof by Agent in a manner substantially consistent with
market practice (or, if Agent decides that adoptionof any portion of such
market practice is not administratively feasible or if Agent determines that
no market practice for the administration of such Benchmark Replacement
exists, in such other manner of administration as Agent decides is
reasonablynecessary in connection with the administration of this Agreement
and the other Loan Documents).
"
Consolidated EBITDA
" means, for any period, the sum, without duplication, of the amounts for such
period of(i) Consolidated Net Income, (ii) Consolidated Interest Expense,
(iii) provision for federal, provincial, local and foreign income Taxes,
franchise Taxes and other Taxes in lieu of income Taxes payable, (iv) total
depreciationexpense, (v) total amortization expense, (vi) transaction expenses
incurred by Borrower or any of its Subsidiaries in such period in connection
with Permitted Acquisitions to the extent included in the calculation of
Excess Availabilityfor purposes of determining whether the applicable
Acquisition constitutes a Permitted Acquisition, (vii) fees, costs and
expenses incurred on or prior to the Closing Date in connection with this
Agreement, the other Loan Documents and theother transactions contemplated
hereby or thereby, (viii) financial advisory fees, accounting fees, legal fees
and any other similar third party reasonable out-of-pocket fees and
out-of-pocket expenses incurred in connection with the pursuit ofany
acquisition, offering of Equity Interest, investment, disposition, repayment
of junior or subordinated Indebtedness, recapitalization, or the incurrence,
issuance, repayment, amendment or modification of Indebtedness (in each case,
regardless ofwhether such transaction is consummated), (ix) management and
other fees and reimbursement of expenses permitted pursuant to
Section
1.1.1(e)
, (x) impairment of goodwill and other non-cash items (other than any such
non-cashitem to the extent it represents an accrual of or reserve for cash
expenditures in any future period), (xi) to the extent actually reimbursed,
expenses incurred to the extent covered by indemnification provisions in any
agreement in connectionwith a Permitted Acquisition, and (xii) other unusual
or non-recurring cash charges including Restructuring and Integration Costs
not to exceed $5,000,000 in the case of the Original Closing Date US
Divestiture incurred in the 2018 Fiscal Yearand otherwise $2,000,000 in the
aggregate for all such charges during any twelve fiscal-month period, but
only, in the case of each of the foregoing clauses (ii) through (xii), to the
extent deducted in the calculation of Consolidated NetIncome, less non-cash
-------------------------------------------------------------------------------
items added in the calculation of Consolidated Net Income (other than any such
non-cash item to the extent it will result in the receipt of cash payments in
any future period), all of theforegoing as determined on a consolidated basis
for Borrower and its Subsidiaries in conformity with GAAP. Notwithstanding the
foregoing, Consolidated EBITDA for the fiscal months ending prior to the date
of this Agreement and used in calculatingthe Fixed Charge Coverage Ratio for
the applicable twelve fiscal month period after such date shall be in amounts
agreed by the Agent and Borrower.
"
Consolidated Fixed Charges
" means, with respect to any fiscal period and with respect to Borrower and
itsSubsidiaries determined on a consolidated basis in accordance with GAAP,
the sum, without duplication, of (a) Consolidated Interest Expense paid (other
than interest paid-in-kind, amortization of financing fees, and other non-cash
ConsolidatedInterest Expense) during such period, (b) scheduled principal
payments in respect of Indebtedness that are required to be paid during such
period (excluding Management Debt to the extent such payments constitute an
expense in the calculation ofConsolidated Net Income), (c) Restricted Payments
made or required to be made in cash during such period; and (d) all
management, consulting, monitoring and advisory fees paid in cash to Borrower
and its Affiliates during such period.Notwithstanding the foregoing,
Consolidated Fixed Charges for the fiscal months ending prior to the date of
this Agreement and used in calculating the Fixed Charge Coverage Ratio for the
applicable twelve fiscal month period after such date shall bein amounts
agreed by the Agent and Borrower.
"
Consolidated Interest Expense
" means, for any period, theaggregate of the interest expense of Borrower and
its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"
Consolidated Net Income
" means, for any period, the net income (or loss) of Borrower and its
Subsidiarieson a consolidated basis for such period taken as a single
accounting period determined in conformity with GAAP after deduction for
non-controlling interest in such Subsidiaries; provided that there shall be
excluded (i) the income (or loss) ofany Person (other than a Loan Party) in
which any other Person (other than a Loan Party) has a joint interest, or a
Subsidiary located outside US and Canada, except to the extent of the amount
of dividends or other distributions actually paid toBorrower or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of Borrower or is
merged into or amalgamated or consolidated with Borrower or anyof its
Subsidiaries or that Person's assets are acquired by Borrower or any of its
Subsidiaries, (iii) the income of any Subsidiary of Borrower that is not a
Loan Party to the extent that the declaration or payment of dividends or
similardistributions by that Subsidiary of that income is not at the time
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary,(iv) (to the extent not included in clauses (i)
through (iii) above) any non-cash extraordinary gains or non-cash
extraordinary losses, (v) the impact of non-cash currency translation gains
and losses and mark to market gains andlosses on any Hedge Agreement, (vi) the
cumulative effect of a change in accounting principles during such period, and
(vii) gains and losses from the early extinguishment of Indebtedness or other
derivative instruments.
"
Control Agreement
" means a control agreement, or blocked account agreement, as applicable, in
form andsubstance reasonably satisfactory to Agent, executed and delivered by
-------------------------------------------------------------------------------
Borrower or another Loan Party, Agent, and the applicable securities
intermediary (with respect to a Securities Account) or bank (with respect to a
Deposit Account).
"CORRA" means a rate equal to the Canadian Overnight Repo Rate Average as
administered and published by the CORRA Administrator.
"CORRA Administrator" means the Bank of Canada (or any successor administrator
of the Canadian Overnight Repo Rate Average).
"
Covered Entity
" means any of the following:
(a)a "covered entity" as that term is defined in, and interpreted in
accordance with, 12 C.F.R.(s) 252.82(b);
(b)a "covered bank" as that term is defined in, and interpreted in
accordancewith, 12 C.F.R. (s) 47.3(b); or
(c)a "covered FSI" as that term is defined in, andinterpreted in accordance
with, 12 C.F.R. (s) 382.2(b).
"
Covered Party
" has the meaning specifiedtherefor in Section 17.17 of this Agreement.
"
Credit Card Issuer
" shall mean any person (other than aBorrower or any of its Subsidiaries) who
issues or whose members issue credit cards, including MasterCard or VISA bank
credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc., VisaInternational,
American Express, Discover, Diners Club, Union Pay, VFI, Inc. (a subsidiary of
The Toronto-Dominion Bank Finance Group) and other bank and non-bank credit or
debit cards, and other issuers approved by the Agent, after the conduct ofsuch
due diligence with respect to such issuers as the Agent considers necessary or
appropriate, such approval not to be unreasonably withheld, conditioned or
delayed.
"
Credit Card Notifications
" has the meaning provided in
Section
5.18
.
"
Credit Card Processor
" shall mean any servicing or processing agent or any factor or financial
intermediarywho facilitates, services, processes or manages the credit
authorization, billing transfer and/or payment procedures with respect to
Borrower's sales transactions involving credit card or debit card purchases by
customers using credit cards ordebit cards issued by any Credit Card Issuer.
"
Credit Card Receivables
" shall mean each"intangible" (as defined in the PPSA) together with all
income, payments and proceeds thereof, owed by a Credit Card Issuer or Credit
Card Processor to Borrower resulting from charges by a customer of Borrower on
credit or debit cardsissued by such Credit Card Issuer in connection with the
sale of goods by a Borrower, or services performed by a Credit Card Processor
or Credit Card Issuer, in each case in the ordinary course of its business.
-------------------------------------------------------------------------------
"
Damiani
" means, collectively, Damiani International S.A.,a corporation incorporated
under the laws of Switzerland, and Damiani S.p.A., a corporation incorporated
under the laws of Italy.
"
Damiani Inventory Purchase Agreement
" means the inventory purchase agreement between the Borrower andDamiani dated
as of April 18, 2019, as the same may be modified, amended, supplemented or
restated in accordance with the prior written consent of the Agent.
"
Damiani Purchase Documents
" means the Damiani Inventory Purchase Agreement, the Damiani Security,
theDamiani Subordination Agreement and all documents, instruments and
agreements executed from time to time in connection with the Damiani Inventory
Purchase Agreement, including the purchase orders arising thereunder and the
documents and agreementsgiving effect to the Damiani Security, in each case as
the same may be modified, amended, supplemented or restated with the prior
written consent of the Agent.
"
Damiani Security
" means (a) the General Security Agreement and Hypothec dated as of April
18,2019 between the Borrower and Damiani; and (b) any other present and future
security, security interests, hypothecs, mortgages, prior claims, liens or
charges affecting the Obligors' assets, or any part thereof, now or hereafter
held by orfor the account of Damiani as security for the Damiani Subordinated
Indebtedness created after the date hereof with the consent of the Agent.
"
Damiani Subordinated Indebtedness
" means all present and future indebtedness and other liabilities
andobligations, contingent or absolute, matured or unmatured, at any time due
or accruing due, owing by the Obligors, or any of them, whether alone or with
another or others and whether as principal or surety, to Damiani under the
Damiani PurchaseDocuments including in respect of all transactions made
pursuant thereto.
"
Damiani SubordinationAgreement
" means that certain Subordination Agreement, dated as of April 18, 2019,
among the Borrower, Damiani, the Agent, the Term Loan Agent and Cash, Gold &
Silver Inc., as the same may hereafter be amended, restated,supplemented or
otherwise modified with the prior written consent of Agent.
"
Default
" means an event,condition, or default that, with the giving of notice, the
passage of time, or both, would be an Event of Default.
"
Default Right
" has the meaning assigned to that term in, and shall be interpreted in
accordance with, 12C.F.R. (s)(s) 252.81, 47.2 or 382.1, as applicable.
"
Defaulting Lender
" means any Lender that(a) has failed to fund any amounts required to be
funded by it under the Agreement within 1 Business Day of the date that it is
required to do so under the Agreement (including the failure to make available
to Agent amounts required pursuant toa Settlement or to make a required
payment in connection with a Letter of Credit Disbursement), (b) notified
Borrower, Agent, or any Lender in writing that it does not intend to comply
with all or any portion of its funding obligations underthe Agreement, (c) has
made a public statement to the effect that it does not intend to comply with
its funding obligations under the Agreement or under other agreements
generally (as reasonably determined by Agent) under
-------------------------------------------------------------------------------
which it has committed to extend credit, (d) failed, within 1 Business Day
after written request by Agent, to confirm that it will comply with the terms
of the Agreement relating to itsobligations to fund any amounts required to be
funded by it under the Agreement, (e) otherwise failed to pay over to Agent or
any other Lender any other amount required to be paid by it under the
Agreement within 1 Business Day of the date thatit is required to do so under
the Agreement, or (f) (i) becomes or is insolvent or has a Borrower company
that has become or is insolvent or (ii) becomes the subject of a bankruptcy or
insolvency proceeding, or has had a receiver, conservator,trustee, or
custodian or appointed for it, or has taken any action in furtherance of, or
indicating its consent to, approval of or acquiescence in any such proceeding
or appointment or has a Borrower company that has become the subject of
abankruptcy or insolvency proceeding, or has had a receiver, conservator,
trustee, or custodian appointed for it, or has taken any action in furtherance
of, or indicating its consent to, approval of or acquiescence in any such
proceeding orappointment.
"
Defaulting Lender Rate
" means (a) for the first 3 days from and after the date therelevant payment
is due, the Canadian Base Rate (if such Obligations are denominated in
Canadian Dollars) or the US Base Rate (if such Obligations are denominated US
Dollars), and (b) thereafter, the interest rate then applicable to
RevolvingLoans in the Applicable Currency that are Base Rate Loans (inclusive
of the Base Rate Margin applicable thereto).
"
Deposit Account
" means any deposit account maintained in Canada for the deposit of funds with
a CanadianBank reasonably acceptable to Agent.
"
Designated Account Bank
" has the meaning specified therefor in
Schedule D-1
to the Agreement (or such other bank that is located within Canada that has
been designated as such, in writing, by Administrative Borrower to Agent).
"
Disqualified Equity Interests
" means any Equity Interests that, by their terms (or by the terms of
anysecurity or other Equity Interests into which they are convertible or for
which they are exchangeable), or upon the happening of any event or condition
(a) matures or are mandatorily redeemable (other than solely for Qualified
EquityInterests), pursuant to a sinking fund obligation or otherwise (except
as a result of a change of control or asset sale so long as any rights of the
holders thereof upon the occurrence of a change of control or asset sale event
shall be subject tothe prior repayment in full of the Loans and all other
Obligations that are accrued and payable and the termination of the
Commitments), (b) are redeemable at the option of the holder thereof (other
than solely for Qualified Equity Interests),in whole or in part, (c) provide
for the scheduled payments of dividends in cash, or (d) are or become
convertible into or exchangeable for Indebtedness or any other Equity
Interests that would constitute Disqualified Equity Interests, ineach case,
prior to the date that is 91 days after the Maturity Date.
"
Drawing Document
" means anyLetter of Credit or other document presented for purposes of
drawing under any Letter of Credit.
"
EligibleAccounts
" means those PLCW Accounts created by Borrower in the ordinary course of its
business, that arise out of Borrower's sale of goods or rendition of services,
that comply with each of the representations and warranties respectingEligible
Accounts made in the Loan Documents, and that are not excluded as ineligible
by virtue of one or more of the
-------------------------------------------------------------------------------
excluding criteria set forth below;
provided
, that such criteria may be revised from time to time by Agent in Agent's
Permitted Discretion to address the results of any fieldexamination performed
by (or on behalf of) Agent from time to time after the Closing Date. In
determining the amount to be included, Eligible Accounts shall be calculated
net of customer deposits, unapplied cash, Taxes, discounts, credits,allowances,
and rebates. Eligible Accounts shall not include the following:
(a)Accounts that the AccountDebtor has failed to pay within 90 days of
original invoice date (except that this period shall be extended to 150 days
after the original invoice date with respect to Accounts arising from initial
orders made by an Account Debtor that becomes acustomer of the Borrower after
the Closing Date) or within 60 days of due date,
(b)Accounts owed by anAccount Debtor (or its Affiliates) where 50% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,
(c)Accounts with respect to which the Account Debtor is an Affiliate of any
Loan Party or an employee or agentof any Loan Party or any Affiliate of any
Loan Party,
(d)Accounts arising in a transaction wherein goodsare placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval,
a bill and hold, or any other terms by reason of which the payment by the
Account Debtor may be conditional,
(e)Accounts that are not payable in US Dollars or Canadian Dollars,
(f)Accounts with respect to which the Account Debtor either (i) does not
maintain its chief executiveoffice in Canada or the United States, or is not
organized under the laws of the United States or any state thereof, or the
laws of Canada or any province thereof, (ii) is the government of any foreign
country or sovereign state, or of anystate, province, municipality, or other
political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless the Account is supported
by an irrevocable letter of credit reasonably satisfactory toAgent (as to
form, substance and issuer or domestic confirming bank) that has been
delivered to Agent and is directly drawable by Agent,
(g)Accounts with respect to which the Account Debtor is either (i) the United
States or any department,agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Borrower has complied,
to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31
USC (s)3727), (ii) any state of theUnited States, or (iii) a Governmental
Authority of Canada or any province thereof (exclusive, however, of Accounts
with respect to which Borrower has complied, to the reasonable satisfaction of
Agent, with any applicable assignment of claimsstatute, including the
Financial Administration Act (Canada)),
(h)Accounts with respect to which theAccount Debtor is a creditor of a Loan
Party, has or has asserted a right of recoupment or setoff, or has disputed
its obligation to pay all or any portion of the Account, to the extent of such
claim, right of recoupment or setoff, or dispute,
(i)Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent,has gone out of business, or as to which
any Loan Party has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial
-------------------------------------------------------------------------------
condition of such Account Debtor, unless the Account is supported by an
irrevocable letter of credit reasonably satisfactory to Agent (as to form,
substance and issuer or domestic confirmingbank) that has been delivered to
Agent and is directly drawable by Agent,
(j)Accounts, the collection ofwhich, Agent, in its Permitted Discretion,
believes to be doubtful, including by reason of the Account Debtor's financial
condition,
(k)Accounts that are not subject to a valid and perfected first priority
Agent's Lien (subject toPermitted Liens having priority under applicable law
for which reserves have been established pursuant to
Section 2.1(c))
,
(l)Accounts with respect to which (i) the goods giving rise to such Account
have not been shipped andbilled to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account
Debtor,
(m)Accounts with respect to which the Account Debtor is a Sanctioned Person or
Sanctioned Entity, or
(n)Accounts that represent the right to receive progress payments or other
advance billings that are due priorto the completion of performance by
Borrower of the subject contract for goods or services.
"
Eligible CreditCard Receivables
" shall mean on any date of determination of the Borrowing Base, each Credit
Card Receivable that satisfies the following criteria at the time of creation
and continues to meet the same at the time of such determination, asdetermined
by the Agent in its Permitted Discretion: such Credit Card Receivable (i) has
been earned by performance and represents the bona fide amounts due to
Borrower from a Credit Card Issuer or Credit Card Processor, and in each
caseoriginated in the ordinary course of business of such Borrower, and (ii)
is not ineligible for inclusion in the calculation of the Borrowing Base
pursuant to any of
clauses (a)
through
(h)
below;
provided
, that suchcriteria may be revised from time to time by Agent in Agent's
Permitted Discretion to address the results of any field examination performed
by (or on behalf of) Agent from time to time after the Closing Date. Without
limiting the foregoing, toqualify as an Eligible Credit Card Receivable, such
Credit Card Receivable shall indicate no Person other than Borrower as payee
or remittance party. In determining the amount to be so included, the face
amount of a Credit Card Receivable shall bereduced by, without duplication, to
the extent not reflected in such face amount, (i) the amount of all accrued
and actual discounts, claims, credits or credits pending, promotional program
allowances, price adjustments, finance charges orother allowances (including
any amount that Borrower may be obligated to rebate to a customer, a Credit
Card Issuer or Credit Card Processor pursuant to the terms of any agreement or
understanding (written or oral)) and (ii) the aggregateamount of all cash
received in respect of such Credit Card Receivable but not yet applied by the
Credit Parties to reduce the amount of such Credit Card Receivable. Any Credit
Card Receivable included within any of the following categories shall
notconstitute an Eligible Credit Card Receivable:
(a)Credit Card Receivables which do not constitute an"intangible" (as defined
in the PPSA), as applicable or an Account;
-------------------------------------------------------------------------------
(b)Credit Card Receivables that have been outstanding formore than five
Business Days from the date of sale;
(c)Credit Card Receivables that are not subject to avalid and perfected first
priority Agent's Lien (subject to Permitted Liens having priority under
applicable law for which Reserves have been established pursuant to
Section 2.1(c))
;
(d)Credit Card Receivables which are disputed, are with recourse, or with
respect to which a claim,counterclaim, offset or chargeback has been asserted
(to the extent of such dispute, claim, counterclaim, offset or chargeback);
(e)Credit Card Receivables as to which the Credit Card Issuer or Credit Card
Processor has the right undercertain circumstances to require a Credit Party
to repurchase the Credit Card Receivables from such Credit Card Issuer or
Credit Card Processor;
(f)Credit Card Receivables due from a Credit Card Issuer or Credit Card
Processor which is the subject of anybankruptcy or insolvency proceedings;
(g)Credit Card Receivables which are not a valid, legallyenforceable
obligation of the applicable Credit Card Issuer or Credit Card Processor with
respect thereto; or
(h)Credit Card Receivables which do not conform to all representations,
warranties or other provisions in theCredit Documents relating to Credit Card
Receivables in all material respects.
"
Eligible Inventory
"means Inventory of Borrower that consists of finished goods held for sale in
the ordinary course of Borrower's business and complies with each of the
representations and warranties respecting Eligible Inventory made in the Loan
Documents, andthat is not excluded as ineligible by virtue of one or more of
the excluding criteria set forth below;
provided
, that such criteria may be revised from time to time by Agent in Agent's
Permitted Discretion to address the results of anyfield examination or
appraisal performed by Agent from time to time after the Closing Date. In
determining the amount to be so included, Inventory shall be valued at cost on
a basis consistent with Borrower's historical accounting practices. Anitem of
Inventory shall not be included in Eligible Inventory if:
(a)Borrower does not have good, valid,and marketable title thereto,
(b)Borrower does not have actual and exclusive possession thereof unlesssuch
Inventory is Eligible Non-Possessory Inventory,
(c)it is not located at one of the locations inCanada or in the continental
United States set forth on
Schedule E-1
(as such
Schedule E-1
may be amended from time to time with the prior written consent of Agent) to
the Agreement (or in-transit from one such location to another suchlocation),
(d)it is in-transit to or from a location of Borrower (other than in-transit
from one locationset forth on
Schedule E-1
to the Agreement to another location set forth on
Schedule E-1
to the Agreement),
-------------------------------------------------------------------------------
(e)commencing 90 days after the date hereof, it is located onreal property
leased by Borrower (other than store locations) or in a contract warehouse, in
each case, unless either (1) it is subject to a Collateral Access Agreement
executed by the lessor or warehouseman, as the case may be, and it
issegregated or otherwise separately identifiable from goods of others, if
any, stored on the premises or (2) Agent has established a Landlord Reserve
with respect to such location,
(f)it is the subject of a bill of lading or other document of title,
(g)it is not subject to a valid and perfected first priority Agent's Lien
(subject to Permitted Lienshaving priority under applicable law for which
Reserves have been established pursuant to
Section 2.1(c))
,
(h)it consists of personalized items or custom items which cannot be readily
re-sold to other customers,damaged or defective goods or "seconds";
(i)it consists of goods that are obsolete, or goodsthat constitute spare
parts, packaging and shipping materials, supplies used or consumed in
Borrower's business, bill and hold goods, or Inventory acquired on
consignment, or
(j)it is subject to third party trademark, licensing or other proprietary
rights, unless Agent is satisfiedthat such Inventory can be freely sold by
Agent on and after the occurrence of an Event of a Default despite such third
party rights.
"
Eligible Inventory Category
" means the categories of Eligible Inventory set forth below or such
othercategories as may be determined by Agent from time to time in its
Permitted Discretion (including, without limiting the generality of Agent's
Permitted Discretion, it being understood that Agent shall have received an
Inventory appraisal (andsuch other Collateral reporting) satisfactory to Agent
prior to the inclusion of any other categories or any adjustments to such
categories in the calculations set forth on the Borrowing Base Certificate in
connection with such implementation):
Eligible Inventory Category
Watches and Clocks
Fine Jewelry
Bridal
Giftware
Loose Stones
Silver
Gold
Service
Rolex Watches
Patek Philippe
Graff
-------------------------------------------------------------------------------
"
Eligible Non-Possessory Inventory
"
meansInventory of Borrower that is otherwise Eligible Inventory and that
satisfies the following criteria as determined in the Agent's Permitted
Discretion:
(a)the Person in possession of such Inventory is a bailee or processor or
agent of Borrower that is acceptableto Agent and is held pursuant to bailment,
processor or agency arrangements acceptable to the Agent and such Person
maintains exclusive possession of such Inventory until delivered to Borrower
or placed in transit to a location of Borroweridentified on
Schedule E-1
,
(b)title in such Inventory has passed to Borrower,
(c)such Inventory is subject to a Collateral Access Agreement, processor
agreement or bailee agreement asrequired by the Agent, in each case in form
and content satisfactory to the Agent and executed by the bailee, processor,
agent or other Person in possession of such Inventory, as the case may be, and
such Inventory is segregated or otherwiseseparately identifiable from goods of
others, if any, held by the Person in possession of such Inventory, and
(d)Agent in its Permitted Discretion (i) has established such Reserves
(including Reserves for processingand bailee charges and applicable customs
charges and duties) as it considers necessary or appropriate with respect to
such Inventory, and (ii) is satisfied that such Inventory is not subject to
any Person's right or claim (other thanthose for which appropriate Reserves
have been established) which is senior to, or pari passu with, the Agent's
Lien on such Inventory or may otherwise adversely impact the ability of the
Agent to realize upon such Inventory.
"
Eligible Transferee
" means (a) any Lender (other than a Defaulting Lender), any Affiliate of
anyLender (other than a Defaulting Lender) and any Related Fund of any Lender;
(b) (i) a commercial bank organized under the laws of Canada or the United
States or any state thereof, and having total assets in excess of
$1,000,000,000; (ii) acommercial bank organized under the laws of any other
country or a political subdivision thereof;
provided
that (A) (x) such bank is acting through a branch or agency located in the
United States or Canada or (y) such bank isorganized under the laws of a
country that is a member of the Organization for Economic Cooperation and
Development or a political subdivision of such country, and (B) such bank has
total assets in excess of $1,000,000,000; (c) any otherentity (other than a
natural person) that is an "accredited investor" (as defined under the
Securities Act (Ontario)) that extends credit or buys loans as one of its
businesses including insurance companies, investment or mutual funds andlease
financing companies, and having total assets in excess of $1,000,000,000; and
(d) during the continuation of an Event of Default, any other Person approved
by Agent.
"
Environmental Action
" means any written complaint, summons, citation, notice, directive, order,
claim,litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other written communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials inviolation of Environmental laws (a) from any
assets, properties, or businesses of Borrower, or any Subsidiary of Borrower,
or any of their predecessors in interest, (b) from adjoining properties or
businesses,
-------------------------------------------------------------------------------
or (c) from or onto any facilities which received Hazardous Materials
generated by Borrower, or any Subsidiary of Borrower, or any of their
predecessors in interest.
"
Environmental Law
" means any applicable federal, provincial, state, foreign or local statute,
law, rule,regulation, ordinance, code, binding and enforceable guideline,
binding and enforceable written policy, or rule of common law now or hereafter
in effect and in each case as amended, or any judicial or administrative
interpretation thereof, includingany judicial or administrative order, consent
decree or judgment, in each case, to the extent binding on Borrower or any of
its Subsidiaries, relating to the environment, the effect of the environment
on employee health, or Hazardous Materials, ineach case as amended from time
to time.
"
Environmental Liabilities
" means all liabilities, monetaryobligations, losses, damages, costs and
expenses (including all reasonable fees, disbursements and expenses of
counsel, experts, or consultants, and costs of investigation and feasibility
studies), fines, penalties, sanctions, and interest incurredas a result of any
claim or demand, or Remedial Action required, by any Governmental Authority or
any third party, and which relate to any Environmental Action.
"
Environmental Lien
" means any Lien in favor of any Governmental Authority for Environmental
Liabilities.
"
Equipment
" means equipment (as that term is defined in the PPSA).
"
Equity Interests
" means, with respect to a Person, all of the shares, options, warrants,
interests,participations, or other equivalents (regardless of how designated,
whether voting or non-voting) of or in such Person, whether voting or
nonvoting, including capital stock (or other ownership or profit interests or
units) or preferred stock.
"
Erroneous Payment
" has the meaning specified therefor in
Section
17.18
of this Agreement.
"
Erroneous Payment Deficiency Assignment
" has the meaning specified therefor in
Section
17.18(d)
of this Agreement.
"
Erroneous Payment Impacted Loans
" has the meaning specifiedtherefor in
Section 17.18(d)
of this Agreement.
"
Erroneous Payment Return Deficiency
" has themeaning specified therefor in
Section 17.18(d)
of this Agreement.
"
Event of Default
" has themeaning specified therefor in
Section 8
of the Agreement.
"
Excess Availability
" means, asof any date of determination, the amount that Borrower is entitled
to borrow as Revolving Loans under
Section
2.1
of the Agreement (after giving effect to the then outstanding Revolver Usage).
"
Excluded Swap Obligation
" means, with respect to any Loan Party, any Swap Obligation if, and to the
extentthat, all or a portion of the agreement of such Loan Party to be
-------------------------------------------------------------------------------
jointly and severally liable for such Swap Obligation of another Loan Party or
any guarantee of such Loan Party of, or the grant by such Loan Party of a
security interest to secure, such SwapObligation (or any guarantee thereof) is
or becomes illegal under the Commodity Exchange Act or any rule, regulation or
order of the Commodity Futures Trading Commission (or the application or
official interpretation of any thereof) by virtue ofsuch Loan Party's failure
for any reason to constitute an "eligible contract participant" as defined in
the Commodity Exchange Act and the regulations thereunder at the time the
agreement of such Loan Party to be jointly and severallyliable for such Swap
Obligation or guarantee of such Swap Obligation or the grant of such security
interest becomes effective with respect to such Swap Obligation. If a Swap
Obligation arises under a master agreement governing more than one swap,such
exclusion shall apply only to the portion of such Swap Obligation that is
attributable to swaps for which such joint and several liability or guarantee
or security interest is or becomes illegal.
"
Excluded Taxes
" means (i) any Tax imposed on the net income or net profits of any Lender or
anyParticipant (including any branch profits Taxes ), in each case imposed by
the jurisdiction (or by any political subdivision or taxing authority thereof)
in which such Lender or such Participant is organized or the jurisdiction (or
by any politicalsubdivision or taxing authority thereof) in which such
Lender's or such Participant's principal office is located in each case as a
result of a present or former connection between such Lender or such
Participant and the jurisdiction ortaxing authority imposing the Tax (other
than any such connection arising solely from such Lender or such Participant
having executed, delivered or performed its obligations or received payment
under, or enforced its rights or remedies under theAgreement or any other Loan
Document); (ii) Canadian federal withholding Taxes that would not have been
imposed but for the Lender's or a Participant's failure to comply with the
requirements of
Section 16.2
of the Agreement,(iii) any Canadian federal withholding Taxes that would be
imposed on amounts payable to a Foreign Lender based upon the applicable
withholding rate in effect at the time such Foreign Lender becomes a party to
the Agreement (or designates a newlending office), except that Excluded Taxes
shall not include (A) any amount that such Foreign Lender (or its assignor, if
any) was previously entitled to receive pursuant to
Section 16.1
of the Agreement, if any, with respect to suchwithholding Tax at the time such
Foreign Lender becomes a party to the Agreement (or designates a new lending
office), and (B) additional Canadian federal withholding Taxes that may be
imposed after the time such Foreign Lender becomes a partyto the Agreement (or
designates a new lending office), as a result of a change in law, rule,
regulation, order or other decision with respect to any of the foregoing by
any Governmental Authority, (iv) any United States federal withholdingTaxes
imposed under FATCA, and (v) any Canadian federal withholding Taxes imposed as
a result of any Lender or any Participant (A) not dealing at arm's length
(within the meaning of the Income Tax Act (Canada)) with a Loan Party, or(B)
being a "specified shareholder" (within the meaning of Subsection 18(5) of the
Income Tax Act (Canada)) of a Loan Party, or not dealing at arm's length with
such "specified shareholder" of a Loan Party.
"
Existing Credit Facilities
" means, collectively, (i) the Second Amended and Restated Revolving Creditand
Security Agreement, dated as of June 8, 2011 among Mayor's Jewelers, Inc.
Birks & Mayors Inc. the lenders party thereto and Bank of America, N.A. as
administrative agent, as supplemented, amended and restated from time totime,
and (ii) the Third Amended and Restated Term Loan Agreement and Security
Agreement, dated as of November 21, 2014 among Mayor's Jewelers, Inc.,
Borrower, the lenders party thereto and Crystal Financial
-------------------------------------------------------------------------------
LLC, as administrative agent and collateral agent, as supplemented, amended
and restated from time to time.
"
Extraordinary Advances
" has the meaning specified therefor in
Section
2.3(d)(iii)
of theAgreement.
"
FATCA
" means Sections 1471 through 1474 of the IRC, as of the date of the Agreement
(or anyamended or successor version that is substantively comparable and not
materially more onerous to comply with) and any current or future regulations
or official interpretations thereof.
"
Federal Funds Rate
" means, for any period, a fluctuating interest rate per annum equal to, for
each dayduring such period, the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bankof New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by Agent from three Federal funds brokers of
recognized standing selected by it.
"
Fee Letter
" means that certain fee letter, dated as of even date with the Agreement,
among Borrower andAgent, in form and substance reasonably satisfactory to
Agent, as amended, restated or supplemented from time to time.
"
Financial Officer
" means the (i) chairman of the board, (ii) president, (iii) chiefexecutive
officer, (iv) treasurer, (v) chief financial officer, (vi) director of
financial planning and reporting or (vii) director, financial controller, in
each case, of Borrower or, if the context requires, a Loan Party.
"
Fiscal Month
" means each month ending on the last Saturday of each month other than in the
case of a 53week year, in which case two of the Fiscal Months in such Fiscal
Year may end on a different day.
"
FiscalQuarter
" means each of the three month periods ending on the last Saturday of each of
March, June, September and December of any year (other than in the case of a
53 week year, in which case one of the Fiscal Quarters in such Fiscal Yearmay
end on a different day).
"
Fiscal Year
" means the twelve month period ending on the last Saturday ofMarch of any year.
"
Fixed Charge Acquisition Condition
" means, with respect to any proposedAcquisition, Borrower has provided Agent
with written confirmation, supported by reasonably detailed calculations, that
on a pro forma basis (including pro forma adjustments (including, without
limitation, Restructuring and Integration Costs)arising out of events which
are directly attributable to such proposed Acquisition, are factually
supportable, and are expected to have a continuing impact, in each case,
determined as if the combination had been accomplished at the beginning of
therelevant period; such eliminations and inclusions to be mutually and
reasonably agreed upon by Administrative Borrower and Agent) created by adding
the historical combined financial statements of Borrower (including the
combined financial statementsof any other Person
-------------------------------------------------------------------------------
or assets that were the subject of a prior Permitted Acquisition during the
relevant period) to the historical consolidated financial statements of the
Person to be acquired (or the historicalfinancial statements related to the
assets to be acquired) pursuant to the proposed Acquisition, Borrower and its
Subsidiaries would have a Fixed Charge Coverage Ratio of greater than 1.0 to
1.0 for the most recently ended 12-month periodimmediately prior to the
proposed date of consummation of such proposed Acquisition for which Agent has
received financial statements.
"
Fixed Charge Condition
" means, (a) with respect to any proposed Restricted Payment, and,
whereapplicable, any prepayment of Indebtedness, Borrower and its Subsidiaries
would have a Fixed Charge Coverage Ratio on a pro forma basis after giving
effect to such Restricted Payment or prepayment (with such prepayment being
treated as a componentof Consolidated Fixed Charges for purposes of this
definition) of equal to or greater than 1.1 to 1.0 for the most recently ended
12-month period immediately prior to the proposed date of consummation of such
proposed Restricted Payment, orprepayment of Indebtedness for which Agent has
received financial statements required to be delivered under Section 5.1; and
(b) with respect to any proposed Acquisition, the Fixed Charge Acquisition
Condition has been satisfied.
"
Fixed Charge Coverage Ratio
" means, with respect to any fiscal period and with respect to Borrower and
itsSubsidiaries determined on a consolidated basis in accordance with GAAP,
the ratio of (a) Consolidated EBITDA for such period minus (i) Capital
Expenditures made (to the extent not already incurred in a prior period) or
incurred duringsuch period (to the extent such Capital Expenditures are not
financed with proceeds of Indebtedness (other than Revolving Loans) or Equity
Interests), (ii) all federal, provincial, state and local income and capital
Taxes paid in cash duringsuch period and (iii) all Restricted Payments paid in
cash or Cash Equivalents during such period to (b) Consolidated Fixed Charges
for such period. Notwithstanding the foregoing, the amount of Capital
Expenditures and Taxes for the fiscalmonths ending prior to the date of this
Agreement and used in calculating the Fixed Charge Coverage Ratio for the
applicable twelve fiscal month period after such date shall be in amounts
agreed by the Agent and Borrower.
"
Floor
" means a rate of interest equal to
0.0
%.
"
Foreign Lender
" means any Lender or Participant that is not resident in Canada within the
meaning of the
Income Tax Act
(Canada) for the purposes of Part XIII of the
Income Tax Act
(Canada).
"
FundingDate
" means the date on which a Borrowing occurs.
"
Funding Losses
" has the meaning specifiedtherefor in
Section
2.12(b)(ii)
of the Agreement.
"
GAAP
" means generally acceptedaccounting principles as in effect from time to time
in the United States, consistently applied, provided that Borrower shall be
entitled to elect by notice to Agent and subject to Section 1.2 and such
amendments to this Agreement as the Agentmay reasonably require to reflect the
implementation of such election, Canadian accounting standards for private
enterprises or International Financial Reporting Standards, in each case, as
set out in the Chartered Professional Accountants CanadaHandbook - Accounting.
-------------------------------------------------------------------------------
"
Governing Documents
" means, with respect to any Person,the certificate or articles of
incorporation, by-laws, or other organizational documents of such Person.
"
Governmental Authority
" means the government of any nation or any political subdivision thereof,
whether atthe national, state, territorial, provincial, municipal or any other
level, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory oradministrative powers or functions of, or pertaining to,
government (including any supra-national bodies such as the European Union or
the European Central Bank).
"
Guarantor
" means (a) as of the Closing Date, CGS and JV Holdco, and (b) thereafter,
eachSubsidiary of Borrower that is or becomes a guarantor of all or any part
of the Obligations. For certainty, CGS USA and Birks Jewellers Limited,
Borrower's Hong Kong Subsidiary, shall not be required to be a Guarantor.
"
Hazardous Materials
" means (a) substances that are defined or listed in, or otherwise
classifiedpursuant to, any applicable laws or regulations as "hazardous
substances," "hazardous materials," "hazardous wastes," "toxic substances," or
any other formulation intended to define, list, or classifysubstances by
reason of deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil,
petroleum, or petroleum derived substances, natural gas, natural gasliquids,
synthetic gas, drilling fluids, produced waters, and other wastes associated
with the exploration, development, or production of crude oil, natural gas, or
geothermal resources, (c) any flammable substances or explosives or
anyradioactive materials, and (d) asbestos in any form or electrical equipment
that contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of 50 parts per million.
"
Hedge Agreement
" means (a) any and all rate swap transactions, basis swaps, credit
derivativetransactions, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forwardbond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, orany other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and alltransactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International
ForeignExchange Master Agreement, or any other master agreement.
"
Hedge Obligations
" means any and allobligations or liabilities, whether absolute or contingent,
due or to become due, now existing or hereafter arising, of any Loan Party
arising under, owing pursuant to, or existing in respect of Hedge Agreements
entered into with one or more of theHedge Providers.
"
Hedge Provider
" means any Lender or any of its Affiliates;
provided
, that nosuch Person (other than Wells Fargo or its Affiliates) shall
constitute a Hedge Provider unless and until Agent receives a Bank Product
Provider Agreement from such Person with respect to the
-------------------------------------------------------------------------------
applicable Hedge Agreement within 10 days after the execution and delivery of
such Hedge Agreement with Borrower or any of its Subsidiaries;
provided further
, that if, at any time, aLender ceases to be a Lender under the Agreement,
then, from and after the date on which it ceases to be a Lender thereunder,
neither it nor any of its Affiliates shall constitute Hedge Providers and the
obligations with respect to Hedge Agreementsentered into with such former
Lender or any of its Affiliates shall no longer constitute Hedge Obligations.
"
Hedge Termination Value
" means, in respect of any one or more Hedging Agreements, after taking into
accountthe effect of any legally enforceable netting agreement relating to
such Hedging Agreements, (a) for any date on or after the date such Hedging
Agreements have been closed out and termination value(s) determined in
accordance therewith, suchtermination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Hedging Agreements, as determined based upon
one or more mid-market or other readilyavailable quotations provided by any
recognized dealer in such Hedging Agreements (which may include a Lender or
any Affiliate or branch of a Lender).
"
Increase
" has the meaning specified therefor in
Section 2.16
.
"
Increase Date
" has the meaning specified therefor in
Section
2.16
.
"
Indebtedness
" as to any Person means (a) all obligations of such Person for borrowed
money,(b) all obligations of such Person evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
in respect of letters of credit, bankers acceptances, or other financial
products, (c) allobligations of such Person as a lessee under Capital Leases,
(d) all obligations or liabilities of others secured by a Lien on any asset of
such Person, irrespective of whether such obligation or liability is assumed,
(e) all obligationsof such Person to pay the deferred purchase price of assets
(other than trade payables incurred in the ordinary course of business and
payable in accordance with customary trade practices to the extent not overdue
by more than 90 days from the dateof the original invoice therefor and, for
the avoidance of doubt, other than royalty payments payable in the ordinary
course of business in respect of non-exclusive licenses), but including, for
the avoidance of doubt, obligations in respect ofcredit cards, credit card
processing services, debit cards, stored value cards and commercial cards
(including so-called "commercial cards", "procurement cards" or "p-cards"),
and any earn-out or similar obligations tothe extent required to be recognized
as a liability on the balance sheet of such Person under GAAP, (f) all
monetary obligations of such Person owing under Hedge Agreements (which amount
shall be calculated based on the Hedge Termination Valueas of the date of
determination), (g) any Disqualified Equity Interests of such Person, and (h)
any obligation of such Person guaranteeing or intended to guarantee (whether
directly or indirectly guaranteed, endorsed, co-made, discounted,or sold with
recourse) any obligation of any other Person that constitutes Indebtedness
under any of clauses (a) through (g) above. For purposes of this definition,
(i) the amount of any Indebtedness represented by a guarantee orother similar
instrument shall be the lesser of the principal amount of the obligations
guaranteed and still outstanding and the maximum amount for which the
guaranteeing Person may be liable pursuant to the terms of the instrument
embodying suchIndebtedness, and (ii) the amount of any Indebtedness which is
limited or is non-recourse to a Person or for which recourse is limited to an
-------------------------------------------------------------------------------
identified asset shall be valued at the lesser of (A) if applicable, the
limited amount of such obligations, and (B) if applicable, the fair market
value of such assets securing suchobligation.
"
Indemnified Liabilities
" has the meaning specified therefor in
Section 10.3
of theAgreement.
"
Indemnified Person
" has the meaning specified therefor in
Section
10.3
of theAgreement.
"
Indemnified Taxes
" means (a) Taxes, other than Excluded Taxes, imposed on or withrespect to any
payment made by, or on account of or with respect to any obligation of, any
Loan Party under any Loan Document and (b) to the extent not otherwise
described in (a), Other Taxes.
"
Information Certificate
" means a certificate in the form of
Exhibit I-1
to the Agreement.
"
Insolvency Laws
" means, collectively, (i) the Bankruptcy Code, (ii) the
Bankruptcy andInsolvency Act
(Canada), (iii) the
Companies' Creditors Arrangement Act
(Canada), (iv) the
Winding-Up and Restructuring Act
(Canada), (v) corporate statutes to the extent such statute is used by a
Person topropose an arrangement involving the compromise of the claims of
creditors; and (vi) any similar legislation in a relevant jurisdiction, in
each case as applicable and as in effect from time to time.
"
Insolvency Proceeding
" means any proceeding commenced by or against any Person under any Insolvency
Law orunder any other provincial, state or federal bankruptcy or insolvency
law, each as now and hereafter in effect, any successors to such statutes, and
any similar laws in any jurisdiction including, without limitation, any laws
relating to assignmentsfor the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief and any law
permitting a debtor to obtain a stay or acompromise of the claims of its
creditors.
"
Intercompany Subordination Agreement
" means an intercompanysubordination agreement executed and delivered by
Borrower, each other Loan Party, certain other Subsidiaries of Borrower and
Agent, the form and substance of which is reasonably satisfactory to Agent
concurrently with the making of the firstintercompany advance to, or other
Investment in, Borrower or another Loan Party by a Loan Party or other
Subsidiary of Borrower.
"
Intercreditor Agreement
" means the Intercreditor Agreement dated June 29, 2018, by and among the
Agentand the Term Loan Agent, and acknowledged by each Loan Party, as it may
be amended, supplemented or otherwise modified from time to time.
"
Interest Period
" means,
(a) with respect to each SOFR Rate Loan, a period commencing on the date of
the making of such SOFR Rate Loan (or the continuation of a SOFR Rate Loan or
the conversion of a Base Rate Loan to a SOFR Rate Loan) andending 1 or 3 or,
subject to availability, 6 months thereafter and
-------------------------------------------------------------------------------
(b) with respect to each
CDOR
Term CORRA
Rate Loan, a period commencing on the date of the making of such
CDOR
Term CORRA
Rate Loan (or the continuation of a
CDOR
Term CORRA
Rate Loan or the conversion of a Base Rate Loan to a
CDOR
Term CORRA
Rate Loan) and ending 1
, 2
or 3 months thereafter;
provided, that for both SOFR Rate Loans and
CDOR
Term CORRA
Rate Loans, (i) interest shallaccrue at the applicable rate
based upon the Term SOFR Rate or CDOR Rate, as applicable,
from andincluding the first day of each Interest Period to, but excluding, the
day on which any Interest Period expires and
(ii
) Borrower may not electan
the
Interest Period
which will end after the Maturity Date
; provided, further, that for SOFRRate Loans (but not CDOR Rate Loans) (A
shall commence on the date of advance of or conversion to anySOFR Rate Loan or
Term CORRA Rate Loan and, in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the date on which
the immediately preceding Interest Period expires, (ii
) any Interest Period that would end on a day that is not a Business Day shall
be extended to the next succeeding Business Day unless such Business Day falls
in another calendar month, in which case suchInterest Period shall end on the
next preceding Business Day,(
B
iii
) with respect to an Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of suchInterest Period), the Interest
Period shall end on the last Business Day of the calendar month that is
1, 2 (only in the case of CDOR Rate Loans), 3 or, subjectto availability in
the case of SOFR Rate Loans, 6 months
one, three or six months, as applicable,
after the date onwhich the Interest Period began, as applicable
, (iv
) Borrower may not electan
Interest Period
which will end after the Maturity Date
and (
C
v
) no tenor that has been removed from this definition pursuant to
Section 2.12(d)(iii)(D)
shall be available for specification in any borrowing, conversion or
continuation notice.
"
Inventory
" means inventory (as that term is defined in the PPSA).
"
Inventory Net Recovery Percentage
" means, as of any date of determination for each Eligible InventoryCategory,
the percentage of the cost of Borrower's Inventory that is estimated to be
recoverable in an orderly liquidation of such Inventory net of all associated
costs and expenses of such liquidation, such percentage to be determined as
toeach category of Inventory and to be as specified in the most recent
appraisal received by Agent from an appraisal company selected by Agent.
"
Inventory Reserves
" means, as of any date of determination, (a) Landlord Reserves, and (b)
thoseReserves that Agent deems necessary or appropriate, in its Permitted
Discretion and subject to
Section 2.1(c)
, to establish and maintain (including Reserves for slow moving Inventory and
Inventory shrinkage) with respect to EligibleInventory.
"
Investment
" means, with respect to any Person, any investment by such Person in any
otherPerson (including Affiliates) in the form of loans, guarantees, advances,
capital contributions (excluding (a) commission, travel, and similar advances
to officers and employees of such Person made in the ordinary course of
business, and(b) bona fide accounts receivable arising in the ordinary course
of business), or assumption, purchase or other acquisitions of Indebtedness,
Equity Interests (including any partnership or joint venture interest), the
acquisition of all orsubstantially all of the assets of such other Person (or
of any division or business line of
-------------------------------------------------------------------------------
such other Person), and any other items that are or would be classified as
investments on abalance sheet prepared in accordance with GAAP. The amount of
any Investment shall be the original cost of such Investment plus the cost of
all additions thereto (net of all returns on such Investments except with
respect to Permitted Acquisitions;
provided
that the amount of such returns shall be disregarded for purposes of
calculating capacity under any cap or basket with respect to Investments to
the extent in excess of such cap or basket), without any adjustment for
increases ordecreases in value, or write-ups, write-downs, or write-offs with
respect to such Investment.
"
IRC
"means the Internal Revenue Code of 1986, as in effect from time to time.
"
ISP
" means, with respect toany Letter of Credit, the International Standby
Practices 1998 (International Chamber of Commerce Publication No. 590) and any
subsequent revision thereof adopted by the International Chamber of Commerce
on the date such Letter of Credit isissued.
"
Issuer Document
" means, with respect to any Letter of Credit, a letter of credit
application,a letter of credit agreement, or any other document, agreement or
instrument entered into (or to be entered into) by Borrower in favor of
Issuing Lender and relating to such Letter of Credit.
"
Issuing Lender
" means WF Canada or any other Lender that, at the request of Administrative
Borrower andwith the consent of Agent, agrees, in such Lender's sole
discretion, to become an Issuing Lender for the purpose of issuing Letters of
Credit or, if WF Canada is the Issuing Lender, shall include WF Canada, to the
extent applicable, representedby or acting for, through or on behalf of an
Underlying Issuer in its capacity as an issuer of Letters of Credit hereunder.
For avoidance of doubt, no Issuing Lender other than WF Canada may issue a
Reimbursement Undertaking without Agent'sprior written consent.
"
JV Holdco
" means Birks Investments Inc., a Canadian corporation wholly-owned byBirks
Group Inc.
"
JV Partner
" means FWI LLC, a California corporation
"
Landlord Reserve
" means, as to each location at which Borrower has Inventory (other than store
locations)or books and records located and as to which a Collateral Access
Agreement has not been received by Agent, a reserve in an amount equal to the
greater of (a) the number of months' rent for which the landlord will have,
under applicablelaw, a Lien in the Inventory of Borrower to secure the payment
of rent or other amounts under the lease relative to such location, or (b) 3
months' rent under the lease relative to such location.
"
Lender
" has the meaning set forth in the preamble to the Agreement, shall include
Issuing Lender and SwingLender, and shall also include any other Person made a
party to the Agreement pursuant to the provisions of
Section 13.1
of the Agreement and "Lenders" means each of the Lenders or any one or more of
them.
"
Lender Group
" means each of the Lenders (including Issuing Lender and Swing Lender) and
Agent, or any oneor more of them.
-------------------------------------------------------------------------------
"
Lender Group Expenses
" means all (a) costs orexpenses (including Taxes and insurance premiums)
required to be paid by Borrower or any of its Subsidiaries under any of the
Loan Documents that are paid, advanced, or incurred by the Lender Group, (b)
reasonable and documented out-of-pocketfees or charges paid or incurred by
Agent in connection with the Lender Group's transactions with Borrower and its
Subsidiaries under any of the Loan Documents, including, photocopying,
notarization, couriers and messengers, telecommunication,public record
searches, filing fees, recording fees, publication, real estate surveys, real
estate title policies and endorsements, and environmental audits, (c) Agent's
reasonable and customary fees and charges imposed or incurred inconnection
with any background checks or OFAC/PEP searches related to Borrower or its
Subsidiaries, (d) Agent's reasonable and customary fees and charges (as
adjusted from time to time) with respect to the disbursement of funds (or
thereceipt of funds) to or for the account of Borrower (whether by wire
transfer or otherwise), together with any reasonable and documented
out-of-pocket costs and expenses incurred in connection therewith, (e)
reasonable and customary chargesimposed or incurred by Agent resulting from
the dishonor of checks payable by or to any Loan Party, (f) reasonable and
documented out-of-pocket costs and expenses paid or incurred by the Lender
Group to correct any default or enforce anyprovision of the Loan Documents, or
during the continuance of an Event of Default, in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portionthereof,
irrespective of whether a sale is consummated, (g) field examination,
appraisal, and valuation fees and expenses of Agent related to any field
examinations, appraisals, or valuation to the extent of the fees and charges
(and up to theamount of any limitation provided in
Section 2.10(c)
of the Agreement), (h) Agent's reasonable and documented out-of-pocket costs
and expenses (including reasonable and documented legal fees and expenses)
relative to third partyclaims or any other lawsuit or adverse proceeding paid
or incurred, whether in enforcing or defending the Loan Documents or otherwise
in connection with the transactions contemplated by the Loan Documents,
Agent's Liens in and to theCollateral, or the Lender Group's relationship with
Borrower or any of its Subsidiaries, (i) Agent's reasonable and documented
out-of-pocket costs and expenses (including reasonable and documented
out-of-pocket legal fees and duediligence expenses) incurred in advising,
structuring, drafting, reviewing, administering (including travel, meals, and
lodging), syndicating (including reasonable and documented out-of-pocket costs
and expenses relative to the rating of theRevolving Loans or the Revolver
Commitments, CUSIP, DXSyndicateTM, SyndTrak or other communication costs
incurred in connection with a syndication of the loan facilities), or
amending, waiving, or modifying the Loan Documents, and(j) Agent's and each
Lender's reasonable and documented out-of-pocket costs and expenses (including
lawyers, accountants, consultants, and other advisors fees and expenses
(limited in the case of lawyers to one law firm for Agent (andsuch other
specialty counsel or local counsel as Agent reasonably elects to employ) and
(absent any additional counsel as may be needed based on conflicts of
interest) one law firm for the Lenders (in the aggregate) other than the
Agent)) incurredin terminating, enforcing (including lawyers, accountants,
consultants, and other advisors fees and expenses (limited in the case of
lawyers to one law firm for Agent (and such other specialty counsel or local
counsel as Agent reasonably elects toemploy) and (absent any additional
counsel as may be needed based on conflicts of interest) one law firm for the
Lenders (in the aggregate) other than the Agent) incurred in connection with a
"workout," a "restructuring," or anInsolvency Proceeding concerning Borrower
or any of its Subsidiaries or in exercising rights or remedies under the Loan
Documents), or
-------------------------------------------------------------------------------
defending the Loan Documents, irrespective of whether a lawsuit or other
adverse proceedingis brought, or in taking any enforcement action or any
Remedial Action with respect to the Collateral.
"
LenderGroup Representatives
" has the meaning specified therefor in
Section 17.9
of the Agreement.
"
Lender-Related Person
" means, with respect to any Lender, such Lender, together with such
Lender'sAffiliates, officers, directors, employees, lawyers, and agents.
"
Letter of Credit
" means a letter ofcredit issued by Issuing Lender or Underlying Issuer for
the account of Borrower.
"
Letter of CreditCollateralization
" means with respect to the Letter of Credit Obligations either (a) providing
cash collateral in the Applicable Currency (pursuant to documentation
reasonably satisfactory to Agent, including provisions that specifythat the
applicable Letter of Credit Fees and all commissions, fees, charges and
expenses provided for in the Agreement (including any fronting fees) will
continue to accrue while the applicable Letters of Credit are outstanding) to
be held by Agentfor the benefit of the applicable Revolving Lenders in an
amount equal to 108% of the then existing Letter of Credit Usage relating to
US Dollar-denominated Letters of Credit, 103% of the then existing Letter of
Credit Usage relating to CanadianDollar-denominated Letters of Credit, (b)
delivering to Agent documentation executed by all beneficiaries under the
applicable Letters of Credit, in form and substance reasonably satisfactory to
Agent and the applicable Issuing Lender,terminating all of such beneficiaries'
rights under the Letters of Credit, or (c) providing Agent with a standby
letter of credit, in form and substance reasonably satisfactory to Agent in
the Applicable Currency, from a commercial bankacceptable to Agent (in its
sole discretion) in an amount equal to 108% of the then existing Letter of
Credit Usage relating to US Dollar-denominated Letters of Credit, 108% of the
then existing Letter of Credit Usage relating to CanadianDollar-denominated
Letters of Credit, (it being understood that the applicable Letter of Credit
Fee and all fronting fees set forth in the Agreement will continue to accrue
while the applicable Letters of Credit are outstanding and that any suchfees
that accrue must be an amount that can be drawn under any such standby letter
of credit).
"
Letter of CreditDisbursement
" means a payment made by Issuing Lender pursuant to a Letter of Credit or a
Reimbursement Undertaking.
"
Letter of Credit Exposure
" means, as of any date of determination with respect to any Lender,
suchLender's Pro Rata Share of the Letter of Credit Usage on such date
(including such Lender's Pro Rata Share of Reimbursement Undertakings on such
date).
"
Letter of Credit Fee
" has the meaning specified therefor in
Section 2.6(b)
of the Agreement.
"
Letter of Credit Indemnified Costs
" means any and all claims, demands, suits, actions, investigations,proceedings,
liabilities, fines, costs, penalties, and damages, and all reasonable
documented fees and disbursements of lawyers or experts, and all other costs
and expenses actually incurred in connection therewith or in connection with
theenforcement of the indemnification set forth in
Section 2.11
(as and when they are incurred and irrespective of whether
-------------------------------------------------------------------------------
suit is brought), which may be incurred by or awarded against any Letter of
Credit RelatedPerson (other than Taxes, which shall be governed by
Section 16
) in connection with any Letter of Credit.
"
Letter of Credit Obligations
" means the obligation of Borrower to reimburse Issuing Lender for amounts
paidpursuant to Letters of Credit.
"
Letter of Credit Related Person
" means each member of the Lender Group(including each of each Issuing Lender
and its branches, Affiliates, and correspondents and Underlying Issuer and its
branches, Affiliates and correspondents) and each such Person's respective
directors, officers, employees, lawyers and agents.
"
Letter of Credit Usage
" means, as of any date of determination, the aggregate undrawn amount of
alloutstanding Letters of Credit.
"
Lien
" means any mortgage, deed of trust, pledge, hypothecation,assignment, charge,
deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest, hypothec or other security arrangement and any other
preference, priority, or preferential arrangement in the nature of a security
interestof any kind or nature whatsoever, including any conditional sale
contract or other title retention agreement, the interest of a lessor under a
Capital Lease and any synthetic or other financing lease having substantially
the same economic effect asany of the foregoing.
"
Line Cap
" means, as at the date of determination, the lesser of (a) theMaximum Credit
Amount; and (b) the Borrowing Base as of such date.
"
Loan
" means any RevolvingLoan, (including any Swing Loan or Extraordinary Advance)
made (or to be made) hereunder.
"
LoanAccount
" means the US Loan Account or the Canadian Loan Account, as context requires.
"
LoanDocuments
" means the Agreement, the Control Agreements, any Borrowing Base Certificate,
the Fee Letter, the Credit Card Notifications, the Intercompany Subordination
Agreements, any Issuer Documents, the Letters of Credit, the Mortgages,the
Canadian Security Documents, any guaranties executed by any Loan Party, any
note or notes executed by Borrower in connection with the Agreement and
payable to any member of the Lender Group, and any other instrument or
agreement entered into,now or in the future, by any Loan Party or any of its
Subsidiaries and any member of the Lender Group in connection with the
Agreement.
"
Loan Party
" means Borrower or any Guarantor.
"
Loan to Value Reserve
" as of the date of determination by the Agent, from time to time an amount
equal tothe greater of (a) $0; and (b) the amount, if any, by which the
outstanding amount of the Term Loan at such time exceeds the difference
between (1) clauses (a), (b), (c) and (d) (excluding the Loan to Value
Reserve) setforth in the definition of Term Loan Borrowing Base and (2)
clauses (a), (b), (c) and (d) (excluding the Loan to Value Reserve) set forth
in the definition of the Borrowing Base.
-------------------------------------------------------------------------------
"Management Agreement"
means that certain ManagementConsulting Services Agreement, dated as of
November 20, 2015, between Borrower and Gestofi S.A., in each case, as such
agreement may be amended from time to time in accordance with the terms hereof
and the Management Subordination Agreement.
"Management Debt"
means collectively, all obligations (including, without limitation, retainer
fees andindemnification expenses) of Borrower to Gestofi S.A. pursuant to the
Management Agreement.
"ManagementSubordination Agreement"
means that certain Management Subordination Agreement, dated as of June 29,
2018, among Borrower, Gestofi S.A., Term Loan Agent and Agent, as the same may
hereafter be amended, restated, supplemented orotherwise modified with the
consent of Agent.
"
Margin Stock
" as defined in Regulation U of the Board ofGovernors of the Federal Reserve
System of the United States as in effect from time to time.
"
Material AdverseEffect
" means (a) a material adverse effect in the business, operations, assets,
liabilities or financial condition of the Loan Parties, taken as a whole, (b)
a material impairment of Loan Parties' ability to perform theirpayment or
other material obligations under the Loan Documents to which they are parties
or of the Lender Group's ability to enforce the Obligations or realize upon a
material portion of the Collateral (other than as a result of an action
takenor not taken that is solely in the control of Agent), or (c) a material
impairment of the enforceability or priority of Agent's Liens with respect to
all or a material portion of the Collateral.
"
Material Contract
" means any agreement or arrangement to which any Loan Party or any of its
Subsidiaries isparty (other than the Loan Documents) (a) for which breach,
termination, nonperformance or failure to renew could reasonably be expected
to have a Material Adverse Effect or (b) that relates to Indebtedness in an
aggregate amount of theCanadian Dollar Equivalent of $2,500,000 or more.
Notwithstanding anything to the contrary contained in this Agreement, the term
"Material Contract" shall include, for all purposes, each of the following:
(i) the Quebec SubordinatedDebt Documents, (ii) the Rolex Canada Documents,
(iii) the Montrovest Debt Documents, (iv) the Management Agreement; (v) any
Additional Subordinated Debt Documents; (vi) the Original Closing Date US
Divestiture Agreements;(vii) the Term Loan Documents, (viii) the Franchise
Agreement dated as of October 18, 2017 between Borrower and GD Overseas SA,
(ix) the Concession Agreement dated as of November 30, 2015 between Borrower
and Patek PhilippeSA Geneve and (x) the Damiani Debt Documents.
"
Maturity Date
" means December 24, 2026.
"
Maximum Credit Amount
" means $85,000,000, as permanently decreased by the amount of reductions in
theRevolver Commitments made in accordance with
Section 2.4(c)
of the Agreement or increased by the amount of any Increase made in accordance
with Section 2.16 of the Agreement.
"
Montel
" means Montel Sarl, a corporation formed under the laws of Luxembourg, and
its successors andpermitted assigns.
-------------------------------------------------------------------------------
"
Montrovest Debt
" means all Indebtedness owing toMontrovest B.V. (which, following the
Montrovest Merger, shall mean Montel) under the Montrovest Debt Documents that
constitutes Permitted Indebtedness.
"
Montrovest Debt 2017
" means Montrovest Debt incurred by the Borrower as of July 28, 2017 and owing
toMontrovest B.V. (which, following the Montrovest Merger, shall mean Montel)
to the extent such Indebtedness constitutes Permitted Indebtedness in an
aggregate principal amount equal to US$2,500,000.
"
Montrovest Debt Documents
" means, collectively, (i) the Amended and Restated Cash Advance Agreementdated
as of June 8, 2011 by and between Borrower and Montrovest B.V., (original
principal amount of US$2,000,000), (ii) the Amended and Restated Cash Advance
Agreement dated as of June 8, 2011 by and between Borrower and MontrovestB.V.,
(original principal amount of US$3,000,100), (iii) the Loan Agreement executed
on July 28, 2017, with effect as of July 20, 2017 by and between Borrower and
Montrovest B.V. and (iv) any other loan agreement entered into byand between
Borrower and Montrovest B.V. prior to the Montrovest Merger or thereafter with
Montel; provided that any such other loan agreement shall be in form, scope
and substance and on terms satisfactory to Agent and the Required Lenders
andshall be subject to the Montrovest Subordination Agreement.
"
Montrovest Merger
" means the merger,pursuant to the laws of Netherlands, of Montrovest B.V.
into Montel Sarl.
"
Montrovest SubordinationAgreement
" means collectively, (i) Section 5.6 of the Montrovest Debt Documents
referred to in clauses (i) and (ii) of the definition of "Montrovest Debt
Documents", and (ii) the Postponement andSubordination Agreement, dated as of
June 29, 2018, among the Borrower, Montrovest B.V. (which, following the
Montrovest Merger, shall mean Montel), the Term Loan Agent and Agent, in each
case as hereafter amended, restated, supplemented orotherwise modified with
the consent of Agent and the Required Lenders.
"
Moody's
" has the meaningspecified therefor in the definition of Cash Equivalents.
"
Mortgages
" means, individually andcollectively, one or more mortgages, deeds of trust,
or deeds to secure debt, executed and delivered by Borrower or one of its
Subsidiaries in favor of Agent, in form and substance reasonably satisfactory
to Agent, that encumber the Real PropertyCollateral, if any.
"
Non-Base Rate
" means
the CDOR Rate
Adjusted TermCORRA
;
provided
, that with respect to Obligations denominated in US Dollars, Non-Base Rate
means the Term SOFR Rate.
"
Non-Base Rate Deadline
" has the meaning specified therefor in
Section 2.12(b)(i)
of the Agreement.
"
Non-Base Rate Loan
" means a Revolving Loan that bears interest at a rate determined by reference
tothe applicable Non-Base Rate.
-------------------------------------------------------------------------------
"
Non-Base Rate Margin
" has the meaning set forth in thedefinition of Applicable Margin.
"
Non-Base Rate Notice
" means a written notice in the form of
Exhibit N-1
to the Agreement.
"
Non-Base Rate Option
" has the meaning specified therefor in
Section 2.12(a)
of the Agreement.
"
Non-Consenting Lender
" has the meaning specified therefor in
Section 14.2(a)
of the Agreement.
"
Non-Defaulting Lender
" means each Lender other than aDefaulting Lender.
"
Obligations
" means (a) all loans (including the Revolving Loans (inclusive ofExtraordinary
Advances and Swing Loans)), debts, principal, interest (including any interest
that accrues after the commencement of an Insolvency Proceeding, regardless of
whether allowed or allowable in whole or in part as a claim in any
suchInsolvency Proceeding), reimbursement or indemnification obligations with
respect to Letters of Credit (irrespective of whether contingent), premiums,
liabilities (including all amounts charged to the Loan Account pursuant to
the
this
Agreement), obligations (including indemnification obligations) of any Loan
Party, fees (including the fees provided for in the Fee Letter) of any Loan
Party, Lender Group Expenses (including any fees or expensesthat accrue after
the commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding) of
any Loan Party, guaranties of any Loan Party, and all covenants andduties of
any other kind and description owing by any Loan Party arising out of, under,
pursuant to, in connection with, or evidenced by
the
this
Agreement or any of the other Loan Documents and irrespective ofwhether for
the payment of money, whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, and including all
interest not paid when due and all other expenses or other amounts that any
Loan Partyis required to pay or reimburse by the Loan Documents or by law or
otherwise in connection with the Loan Documents, (b) all debts, liabilities,
or obligations (including reimbursement obligations, irrespective of whether
contingent) owing byBorrower or any other Loan Party to Issuing Lender now or
hereafter arising from or in respect of a Letters of Credit, and (c) all Bank
Product Obligations;
provided
, that Obligations shall not include Excluded Swap Obligations. Withoutlimiting
the generality of the foregoing, the Obligations under the Loan Documents
include the obligation to pay (i) the principal of the Revolving Loans, (ii)
the interest accrued on the Revolving Loans, (iii) the amount necessary
toreimburse Issuing Lender for amounts paid or payable pursuant to Letters of
Credit, (iv) letter of credit commissions, charges, expenses, and fees, in
each case in respect of Letters of Credit (v) Lender Group Expenses of any
Loan Party,(vi) fees payable by any Loan Party under
the
this
Agreement or any of the other Loan Documents, and (vii) indemnities and other
amounts payable by any Loan Party under any Loan Document (excluding Excluded
Swap Obligations). Any reference in
the
this
Agreement or in the Loan Documents to the Obligations shall include all or any
portion thereof and any extensions, modifications, renewals, or alterations
thereof, both prior and subsequent to any InsolvencyProceeding.
-------------------------------------------------------------------------------
"
OFAC
" means The Office of Foreign Assets Control of theU.S. Department of the
Treasury.
"
Onset Permitted Sale Leaseback Transactions
" means the sale andleaseback of the Property (as such term is defined in the
Onset Sale Leaseback Agreement).
"
Onset Sale LeasebackAgreement
" means the sale and leaseback agreement dated as of March 15, 2017 among,
inter alios
, Borrower and Onset Financial, Inc.
"
Original Agent
" has the meaning specified therefor in the recitals to the Agreement.
"
Original Borrower
" has the meaning specified therefor in the recitals to the Agreement.
"
Original Closing Date
" means the date of the making of the initial Revolving Loan (or other
extension ofcredit) under the Original Agreement.
"
Original Closing Date US Divestiture
" means the sale of all ofthe shares of Mayor's Jewelers, Inc., by Borrower
pursuant to the Original Closing Date US Divestiture Agreements.
"
Original Closing Date US Divestiture Agreements
" means, collectively, the US Stock Purchase Agreement, theTransition Services
Agreement (as defined in the US Stock Purchase Agreement) and the other
agreements, instruments and documents relating thereto and evidencing the
Original Closing Date US Divestiture.
"
Original Credit Agreement
" has the meaning specified therefor in the recitals to the Agreement.
"
Originating Lender
" has the meaning specified therefor in
Section 13.1(e)
of the Agreement.
"
Other Taxes
" has the meaning specified therefor in
Section 16.1(a)
of the Agreement.
"
Overadvance
" means, as of any date of determination, that the Revolver Usage is greater
than any of thelimitations set forth in
Section 2.1
or
Section 2.11
.
"
Participant
" has the meaningspecified therefor in
Section 13.1(e)
of the Agreement.
"
Participant Register
" has the meaningset forth in
Section 13.1
of the Agreement.
"
Patriot Act
" has the meaning specified therefor in
Section 4.13
of the Agreement.
-------------------------------------------------------------------------------
"
Permitted Acquisition
" means any Acquisition after theClosing Date by a Borrower or another Loan
Party so long as:
(a)no Default or Event of Default shall haveoccurred and be continuing or
would result from the consummation of the proposed Acquisition and the
proposed Acquisition is consensual,
(b)the purchase consideration payable in respect of all Permitted Acquisitions
(including the proposalacquisition and deferred payment obligations) shall not
exceed $10,000,000 in the aggregate during the term of this Agreement,
(c)Borrower has provided Agent with its due diligence package relative to the
proposed Acquisition, includingforecasted balance sheets, profit and loss
statements, and cash flow statements of the Person or assets to be acquired,
all prepared on a basis consistent with such Person's (or assets') historical
financial statements, together withappropriate supporting details and a
statement of underlying assumptions for the 1 year period following the date
of the proposed Acquisition, on a quarter by quarter basis, in form and
substance (including as to scope and underlying assumptions)reasonably
satisfactory to Agent,
(d)Borrower shall have demonstrated, after giving effect to theconsummation of
such proposed Acquisition, satisfaction of the applicable Restricted Payment
Conditions,
(e)Borrower has provided Agent with written notice of the proposed Acquisition
at least 5 Business Days priorto the anticipated closing date of the proposed
Acquisition and, not later than 5 Business Days prior to the anticipated
closing date of the proposed Acquisition, copies of the acquisition agreement
and other material documents relative to theproposed Acquisition, which
agreement and documents must be reasonably acceptable to Agent,
(f)the assetsbeing acquired (other than a de minimis amount of assets in
relation to Borrower's and its Subsidiaries' total assets), or the Person
whose Equity Interests are being acquired, are useful in or engaged in, as
applicable, the business ofBorrower and its Subsidiaries or a business
reasonably related thereto,
(g)the assets being acquired(other than a de minimis amount of assets in
relation to the assets being acquired) are located within the United States or
Canada, or the Person whose Equity Interests are being acquired is organized
in a jurisdiction located within the UnitedStates or Canada,
(h)the subject assets or Equity Interests, as applicable, are being acquired
directly bya Borrower or one of its Subsidiaries that is a Loan Party, and, in
connection therewith, the applicable Loan Party shall have complied with
Section 5.11
or
5.12
of the Agreement, as applicable, of the Agreement and, in the caseof an
acquisition of Equity Interests, the applicable Loan Party shall have
demonstrated to Agent that the new Loan Parties have received consideration
sufficient to make the joinder documents binding and enforceable against such
new Loan Parties,and
-------------------------------------------------------------------------------
(i)Agent shall have received prior to or concurrent with theproposed
Acquisition, a certificate signed by an officer of Administrative Borrower
certifying compliance with the foregoing conditions.
"
Permitted Discretion
" means a determination made in the exercise of reasonable (from the
perspective of asecured asset-based lender) business judgment and made in good
faith.
"
Permitted Dispositions
" means:
(a)sales, abandonment, or other dispositions of Equipment that is
substantially worn, damaged, or obsoleteor no longer used or useful in the
ordinary course of business and leases or subleases of Real Property not
useful in the conduct of the business of Borrower and its Subsidiaries,
(b)sales of Inventory (x) to buyers in the ordinary course of business (for
the avoidance of doubt,including sales by a Loan Party to another Loan Party),
and (y) so long as no Event of Default has occurred and is continuing or would
result therefrom, by JV Holdco to RM JV (for resale by RM JV) in accordance
with the terms of the RM JVAgreement in an aggregate amount not to exceed
US$2,500,000 (the "
Permitted JV Inventory Sale
"),
(c)the use or transfer of money or Cash Equivalents in a manner that is not
prohibited by the terms of theAgreement or the other Loan Documents,
(d)the licensing, on a non-exclusive basis, of patents, trademarks,copyrights,
and other intellectual property rights in the ordinary course of business,
(e)the granting ofPermitted Liens,
(f)any involuntary loss, damage or destruction of property,
(g)any involuntary condemnation, seizure or taking, by exercise of the power
of eminent domain or otherwise, orconfiscation or requisition of use of
property,
(h)(i) the sale or issuance of Qualified EquityInterests of Borrower, (ii) the
sale or issuance of any Qualified Equity Interests of Loan Party to another
Loan Party, and (iii) the sale or issuance of Equity Interests (other than
Disqualified Equity Interests) of any Subsidiary of aLoan Party that is not a
Loan Party to a Loan Party or any other Subsidiary of a Loan Party, in each
case subject to the terms set forth herein,
(i)(i) the lapse (other than at the end of their respective terms) of
registered patents, trademarks,copyrights and other intellectual property of
Borrower or any of its Subsidiaries that are, in the reasonable business
judgment of such Loan Party, no longer material or no longer used in the
business of Borrower or Subsidiary to the extent noteconomically desirable in
the conduct of its business or (ii) the abandonment of patents, trademarks,
copyrights, or other intellectual property rights in the ordinary course of
business so long as (in each case under clauses (i) and(ii)), (A) with respect
to copyrights, such copyrights are not material revenue generating copyrights,
and (B) such lapse is not materially adverse to the interests of the Lender
Group,
-------------------------------------------------------------------------------
(j)the making of Restricted Payments that are expresslypermitted to be made
pursuant to the Agreement,
(k)to the extent constituting dispositions, the making ofPermitted Investments
that are expressly permitted to be made pursuant to the Agreement.
(l)so long as noEvent of Default has occurred and is continuing or would
immediately result therefrom, transfers of assets (i) from any Loan Party
(other than transfer of Inventory, Accounts and Credit Card Receivables by
Borrower) to another Loan Party,(ii) from a Loan Party to Borrower; provided,
that the consideration received for such assets to be so disposed is at least
equal to the fair market value thereof and (iii) from any Subsidiary of
Borrower that is not a Loan Party to anyother Subsidiary of Borrower,
(m)cancellations, terminations or surrenders of any lease,
(n)the termination or unwinding of any Hedge Agreement in accordance with its
terms,
(o)dispositions by any Subsidiary of its own Equity Interests to qualify
directors where required by applicablelaw,
(p)dispositions permitted by
Section 6.3
,
(q)dispositions or sales of assets, or sell all of the assets of any division
or line of business of Borroweror any of its Subsidiaries, in each case,
having a fair market value not in excess of $1,000,000 per Fiscal Year;
provided
that, in each case, (i) the consideration received for such assets shall be in
an amount at least equal to thefair market value thereof; and (ii) at least
75% of the consideration received shall be cash or Cash Equivalents,
(r)grants of licenses with respect to intellectual property, or leases or
subleases of other property, in theordinary course of business which licenses,
leases and subleases do not materially interfere with the ordinary conduct of
the business of Borrower and its Subsidiaries, taken as a whole;
(s)dispositions of Permitted Factoring Facility Accounts to the extent related
to a Permitted FactoringFacility, and
(t)Permitted Sale Leaseback Transactions.
"
Permitted Factoring Facility
" means an unsecured factoring facility established by the Borrower
whichprovides for the sale of Permitted Factoring Facility Accounts on a
non-recourse basis.
"
Permitted FactoringFacility Accounts
" shall mean Accounts (whether now existing or arising in the future) which
are due to Borrower from Account Debtors located outside of Canada and the
United States and which are not otherwise Eligible Accounts.
"
Permitted Indebtedness
" means:
-------------------------------------------------------------------------------
(a)Indebtedness evidenced by the Agreement or the other LoanDocuments,
(b)Indebtedness (including Capital Leases) set forth on
Schedule 4.14
to this Agreementand any Refinancing Indebtedness in respect of such
Indebtedness,
(c)endorsement for collection, depositor negotiation and warranties of
products or services, in each case incurred in the ordinary course of business,
(d)the Quebec Subordinated Debt in an aggregate outstanding amount not to
exceed $14,300,000 (as reduced byprincipal payments from time to time under
the applicable Quebec Subordinated Debt Documents) and solely to the extent
that such Indebtedness is subject to the Quebec Subordination Agreement;
provided that the Quebec Subordinated Debt Documentsshall be in form and
substance reasonably satisfactory to the Agent and the Required Lenders,
(e)theincurrence by Borrower or its Subsidiaries of Indebtedness under Hedge
Agreements that are incurred for the bona fide purpose of hedging the interest
rate, commodity, or foreign currency risks associated with Borrower's and
itsSubsidiaries' operations and not for speculative purposes; provided that
the aggregate Hedge Termination Value of Secured Hedging Obligations shall not
exceed $5,000,000 at any one time,
(f)Permitted Intercompany Advances,
(g)Indebtedness incurred after the Original Closing Date in connection with
the acquisition, lease or leasingafter the Original Closing Date of any
equipment or fixtures by a Loan Party or under any Capital Lease or Permitted
Sale Leaseback Transaction, as well as Permitted Purchase Money Indebtedness
secured by Purchase Money Liens,
provided
thatthe aggregate principal amount of such Indebtedness of the Loan Parties
shall not exceed the Canadian Dollar Equivalent of $15,000,000 at any one time,
(h)unsecured Indebtedness constituting the Management Debt to the extent
subject to the ManagementSubordination Agreement,
(i)secured Indebtedness in an aggregate amount not to exceed $20,000,000 at
anytime, which amount shall include the Term Loan Debt but excluding the
Quebec Subordinated Debt, provided that that (a) such Indebtedness (other than
the Term Loan Debt) is subordinated in right and time of payment to the
Obligations and in Lienpriority to the Agent's Liens on terms and conditions
satisfactory to the Agent and Required Lenders, (b) the Term Loan Debt
remains, at all times, subject to the Intercreditor Agreement, and (c) the
Restricted Payment Conditions aresatisfied at the time of the incurrence of
such Indebtedness,
(j)Additional Subordinated Debt incurred byBorrower or any of its Subsidiaries
in an aggregate outstanding amount not to exceed $15,000,000 at any one time,
and
(k)Indebtedness under any Permitted Factoring Facility.
"
Permitted Intercompany Advances
" means loans and other Investments made by (a) a Loan Party to another
LoanParty, (b) a Subsidiary of Borrower that is not a Loan Party to another
Subsidiary of Borrower that is not a Loan Party, (c) a Subsidiary of Borrower
that is not a
-------------------------------------------------------------------------------
Loan Party to a Loan Party, so long as the parties thereto are party to the
IntercompanySubordination Agreement, (d) to the extent permitted by
Section 4.28
, advances made by Borrower to CGS US for the purposes permitted thereunder
and (e) except as otherwise permitted under paragraph (d) hereof, Loan Parties
toSubsidiaries of Borrower that are not Loan Parties in an aggregate
outstanding amount not to exceed $50,000.
"
Permitted Investments
" means:
(a)Investments in cash and Cash Equivalents,
(b)Investments in negotiable instruments deposited or to be deposited for
collection in the ordinary course ofbusiness,
(c)advances or extensions of credit made in connection with purchases of goods
or services inthe ordinary course of business,
(d)Investments received in settlement of amounts due to any Loan Party orany
of its Subsidiaries effected in the ordinary course of business or owing to
any Loan Party or any of its Subsidiaries as a result of Insolvency
Proceedings involving an Account Debtor or upon the foreclosure or enforcement
of any Lien in favorof a Loan Party or any of its Subsidiaries,
(e)Investments owned by any Loan Party or any of itsSubsidiaries on the
Closing Date and set forth on
Schedule P-1
to the Agreement and any modification, replacement, renewal or extension
thereof; provided that the amount of the original Investment under this clause
(e) is not increased exceptby the terms of such Investment or as otherwise
permitted pursuant to the definition of Permitted Investments,
(f)(i) guarantees permitted under the definition of Permitted Indebtedness,
and (ii) other guaranteesentered into in the ordinary course of business in
respect of real property leases so long as such guarantees under this clause
(ii), if made by a Loan Party, are in respect of obligations of another Loan
Party,
(g)Permitted Intercompany Advances,
(h)Equity Interests or other securities acquired in connection with the
satisfaction or enforcement ofIndebtedness or claims due or owing to a Loan
Party or any of its Subsidiaries (in bankruptcy of customers or suppliers or
otherwise outside the ordinary course of business) or as security for any such
Indebtedness or claims,
(i)deposits of cash made to secure performance of operating leases, utilities,
and other similar deposits inthe ordinary course of business,
(j)Permitted Acquisitions,
(k)Investments resulting from entering into (i) Bank Product Agreements, or
(ii) agreements relative toIndebtedness that is permitted under clause (e) of
the definition of Permitted Indebtedness,
-------------------------------------------------------------------------------
(l)equity Investments by any Loan Party in any Subsidiary ofsuch Loan Party
which is required by law to maintain a minimum net capital requirement or as
may be otherwise required by applicable law,
(m)Investments held by a Person acquired in a Permitted Acquisition to the
extent that such Investments werenot made in contemplation of or in connection
with such Permitted Acquisition and were in existence on the date of such
Permitted Acquisition,
(n)Investments consisting of non-cash consideration received in connection
with Permitted Dispositions,
(o)non-cash loans and advances to employees, officers, and directors of
Borrower or any of its Subsidiaries forthe purpose of purchasing Equity
Interests in Borrower so long as the proceeds of such loans are used in their
entirety to purchase such Equity Interests in Borrower, and loans and advances
to employees and officers of Borrower or any of itsSubsidiaries in the
ordinary course of business for any other business purpose and in an aggregate
amount not to exceed $200,000 at any one time,
(p)so long as no Event of Default has occurred and is continuing or would
result therefrom, any otherInvestments in an aggregate amount not to exceed
$1,000,000 during the term of the Agreement,
(q)Investments (other than Acquisitions) made by a Borrower or a Subsidiary
thereof made solely with cashproceeds received by Borrower and contributed to
Borrower or Subsidiary substantially concurrently with the making of such
Investments in connection with the issuance of Equity Interests (other than
Disqualified Equity Interests) of Borrower,
(r)Investments by a Borrower or its Subsidiaries held by a Person that becomes
a Subsidiary (or is merged,amalgamated or consolidated with or into a Borrower
or a Subsidiary) pursuant to
Section 6.9
after the Closing Date to the extent that such Investments were not made in
contemplation of such acquisition, merger, amalgamation orconsolidation,
(s)Investments made by JV Holdco in the form of cash and/or Cash Equivalents
in RM JV inorder to fund the formation and capitalization of RM JV in an
amount not to exceed US$1,000,
(t)Investments made by JV Holdco by way of the Permitted JV Inventory Sale, and
(u)Investments in the form of cash and/or Cash Equivalents made by JV Holdco
in the RM JV to finance retailstore renovations and improvements and product
inventories in accordance with the terms of the RM JV Agreement, in an amount
not to exceed US$750,000.
"
Permitted Liens
" means:
(a)Liens granted to, or for the benefit of, Agent to secure the Obligations,
-------------------------------------------------------------------------------
(b)Liens or claims for unpaid Taxes that either (i) arenot yet delinquent, or
(ii) do not have priority over Agent's Liens and the underlying Taxes are the
subject of Permitted Protests,
(c)judgment Liens arising solely as a result of the existence of judgments,
orders, requirements to pay orawards that do not constitute an Event of
Default under
Section 8.3
of the Agreement,
(d)Liensset forth on
Schedule P-2
to the Agreement;
provided
, that to qualify as a Permitted Lien, any such Lien described on
Schedule P-2
to the Agreement shall only secure the Indebtedness that it secures on the
Closing Date and anyRefinancing Indebtedness in respect thereof,
(e)the interests of lessors under operating leases andnon-exclusive licensors
under license agreements,
(f)Capital Leases and other Permitted Purchase MoneyIndebtedness described in
paragraph (g) of the definition of Permitted Indebtedness so long as (i) such
Lien qualifies as a Purchase Money Lien under the terms of this Agreement;
(g)Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen,laborers, or suppliers, incurred in the
ordinary course of business and not in connection with the borrowing of money,
and which Liens either (i) are for sums not yet delinquent, or (ii) are the
subject of Permitted Protests,
(h)Liens on amounts deposited to secure a Borrower's or any of its
Subsidiaries' obligations inconnection with workers' compensation or other
unemployment insurance,
(i)Liens on amounts depositedto secure a Borrower's or any of its
Subsidiaries' obligations in connection with the making or entering into of
bids, tenders, or leases in the ordinary course of business and not in
connection with the borrowing of money,
(j)Liens on amounts deposited to secure a Borrower's or any of its
Subsidiaries' reimbursementobligations with respect to surety or appeal bonds
obtained in the ordinary course of business,
(k)withrespect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof,
(l)non-exclusive licenses of patents, trademarks, copyrights, and other
intellectual property rights in theordinary course of business,
(m)Liens that are replacements of Permitted Liens to the extent that
theoriginal Indebtedness is the subject of permitted Refinancing Indebtedness
and so long as the replacement Liens only encumber those assets that secured
the original Indebtedness,
-------------------------------------------------------------------------------
(n)rights of setoff or bankers' liens upon deposits offunds in favor of banks
or other depository institutions, solely to the extent incurred in connection
with the maintenance of such Deposit Accounts in the ordinary course of
business,
(o)Liens granted in the ordinary course of business on the unearned portion of
insurance premiums securing thefinancing of insurance premiums to the extent
the financing is permitted under the definition of Permitted Indebtedness,
(p)Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customsduties in connection with the importation of
goods,
(q)Liens solely on any cash earnest money depositsmade by Borrower or any of
its Subsidiaries in connection with any letter of intent or purchase agreement
with respect to a Permitted Acquisition,
(r)Liens assumed by Borrower or any of its Subsidiaries in connection with a
Permitted Acquisition that secureAcquired Indebtedness,
(s)Liens arising from precautionary PPSA financing statements or similar
filingsmade in respect of operating leases entered into by any Loan Party,
(t)Leases or subleases granted toothers not interfering in any material
respect with the business of Borrower and its Subsidiaries, taken as a whole,
(u)security deposits to public utilities or to any municipalities or
Governmental Authorities or other publicauthorities when required by the
utilities, municipalities or Governmental Authorities or other public
authorities in connection with the supply of services or utilities,
(v)Liens arising out of any conditional sale, title retention, consignment or
other similar arrangement for thesale of goods in the ordinary course of
business entered into by Borrower or its Subsidiaries in the ordinary course
of business to the extent such Liens secure only the unpaid purchase price for
such goods and related expenses do not attach to anyassets other than the
goods subject to such arrangements and not otherwise prohibited by this
Agreement so long as any Inventory or Accounts of Borrower subject to such
Liens are reported as ineligible on the relevant Borrowing Base Certificate,
(w)the Rolex Canada Liens and any Liens in favor of Rolex Canada Ltd. to the
extent constituting valid andPurchase Money Liens in accordance with
Applicable Law and subject to the Rolex Canada Subordination Agreement, to the
extent applicable,
(x)Liens securing the Quebec Subordinated Debt permitted pursuant to paragraph
(d) of the definition ofPermitted Indebtedness, provided that such Liens
shall, at all times be, subordinate and junior in priority to the Liens
securing the Obligations pursuant to the Quebec Subordination Agreement,
(y)Liens securing the Permitted Indebtedness described in paragraph (i) of the
definition thereof,including such Liens granted in favour of the Term Loan
Agent in connection
-------------------------------------------------------------------------------
with the Term Loan Agreement, provided that such Liens shall, at all times, be
subordinateand junior in priority to the Liens securing the Obligations;
(z)Liens on Permitted Factoring FacilityAssets securing a Permitted Factoring
Facility; and (aa) Liens created by the Damiani Security in favour of Damiani
securing the Damiani Subordinated Indebtedness; provided that (i) such
Subordinated Indebtedness is subordinated in right andtime of payment to the
Obligations and such Liens shall, at all times, be subordinate and junior in
priority to the Liens securing the Obligations, in each case pursuant to the
terms of the Damiani Subordination Agreement or other terms andconditions
satisfactory to the Agent and Required Lenders.
"
Permitted Protest
" means the right ofBorrower or any of its Subsidiaries to protest any Lien
(other than any Lien that secures some or all of the Obligations), Taxes
(other than payroll Taxes or remittances or Taxes that are the subject of a
requirement to pay issued by a CanadianGovernmental Authority), or rental
payment,
provided
that (a) a reserve with respect to such obligation is established on
Borrower's or the applicable Subsidiary's books and records in such amount as
is required under GAAP,(b) any such protest is instituted promptly and
prosecuted diligently by Borrower or the applicable Subsidiary, as applicable,
in good faith, and (c) Agent is reasonably satisfied that, while any such
protest is pending, there will be noimpairment of the enforceability,
validity, or priority of any of Agent's Liens.
"
Permitted Purchase MoneyIndebtedness
" means, as of any date of determination, Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred after the
Original Closing Date and at the time of, or within 30 days after,
theacquisition of any personal property (other than Inventory) for the purpose
of financing all or any part of the acquisition cost thereof, in an aggregate
principal amount outstanding at any one time not in excess of the amount
permitted underparagraph (g) of the definition of Permitted Indebtedness.
"
Permitted Sale Leaseback Transactions
"means collectively (a) Sale Leaseback Transactions that constitute Permitted
Indebtedness pursuant to paragraph (g) of the definition of Permitted
Indebtedness; and (b) Onset Permitted Sale Leaseback Transactions.
"
Person
" means natural persons, corporations, limited liability companies, unlimited
liability corporations,limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts,
or other organizations, irrespective of whether they are legal entities, and
governments and agencies and politicalsubdivisions thereof.
"
Platform
" has the meaning specified therefor in
Section 17.9(c)
of theAgreement.
"
PLCW Accounts
" means Accounts due on the private label credit card programs and allAccounts
due from corporate sales receivables and wholesale receivables, in each case,
of Borrower, which (a) are from an Account Debtor acceptable to Agent in its
Permitted Discretion and (b) are determined by Agent in its PermittedDiscretion
to be eligible for inclusion in Eligible Accounts in an amount reflecting
Agent's estimate of the net recovery on such Accounts on a forced liquidation
basis, based upon the most recent appraisal of such Accounts undertaken at
therequest of Agent.
-------------------------------------------------------------------------------
"
PPSA
" means the Personal Property Security Act (Ontario)and the regulations
thereunder, as from time to time in effect;
provided
,
however
, if attachment, perfection or priority of Agent's Lien on any Collateral are
governed by the personal property security laws of any jurisdiction inCanada
other than the laws of the Province of Ontario, "PPSA" means those personal
property security laws in such other jurisdiction in Canada (including the
Civil Code of Quebec) for the purposes of the provisions hereof relating to
suchattachment, perfection or priority and for the definitions related to such
provisions.
"
Pro Rata Share
"means, as of any date of determination:
(a)with respect to a Lender's obligation to make all or aportion of the
Revolving Loans, with respect to such Lender's right to receive payments of
interest, fees, and principal with respect to the Revolving Loans, and with
respect to all other computations and other matters related to the
RevolverCommitments or the Revolving Loans, the percentage obtained by
dividing (i) the Revolving Loan Exposure of such Lender by (ii) the aggregate
Revolving Loan Exposure of all Lenders,
(b)with respect to a Lender's obligation to participate in the Letters of
Credit, with respect to suchLender's obligation to reimburse Issuing Lender,
and with respect to such Lender's right to receive payments of Letter of
Credit Fees, and with respect to all other computations and other matters
related to the Letters of Credit, thepercentage obtained by dividing (i) the
Revolving Loan Exposure of such Lender by (ii) the aggregate Revolving Loan
Exposure of all Lenders;
provided
, that if all of the Revolving Loans have been repaid in full and all
RevolverCommitments have been terminated, but Letters of Credit remain
outstanding, Pro Rata Share under this clause shall be determined as if the
Revolver Commitments had not been terminated and based upon the Revolver
Commitments as they existedimmediately prior to their termination, and
(c)with respect to all other matters and for all other mattersas to a
particular Lender (including the indemnification obligations arising under
Section 15.7
of the Agreement), the Canadian Dollar Equivalent of the percentage obtained
by dividing (i) the sum of the Revolving Loan Exposure of suchLender by (ii)
the sum of the aggregate Revolving Loan Exposure of all Lenders, in any such
case as the applicable percentage may be adjusted by assignments permitted
pursuant to
Section 13.1
;
provided
, that if all of the Loanshave been repaid in full, all Letters of Credit have
been made the subject of Letter of Credit Collateralization, and all
Commitments have been terminated, Pro Rata Share under this clause shall be
determined as if the Revolving Loan Exposures hadnot been repaid,
collateralized, or terminated and shall be based upon the Revolving Loan
Exposures as they existed immediately prior to their repayment, collateralizatio
n, or termination.
"
Projections
" means Borrower's forecasted (a) balance sheets, (b) profit and loss
statements,and (c) cash flow statements, all prepared on a basis consistent
with Borrower's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions, together with
projections of monthlyExcess Availability for the relevant period.
-------------------------------------------------------------------------------
"
Protective Advances
" has the meaning specified thereforin
Section 2.3(d)(i)
of the Agreement.
"
Public Lender
" has the meaning specified therefor in
Section 17.9(c)
of the Agreement.
"
Purchase Money Lien
" means a Lien taken or reserved inpersonal property to secure payment of
related Permitted Purchase Money Indebtedness, provided that such Lien (i)
secures an amount not exceeding the lesser of the purchase price of such
personal property and the fair market value of such personalproperty at the
time such Lien is taken or reserved,
(ii) extends only to such personal property and its proceeds, and(iii) is
granted prior to or within 30 days after the purchase of such personal
property.
"
QFC
"has the meaning assigned to the term "qualified financial contract" in, and
shall be interpreted in accordance with, 12 U.S.C. (s) 5390(c)(8)(D).
"
QFC Credit Support
" has the meaning specified therefor in Section 17.17 of this Agreement.
"
Qualified ECP Guarantor
" means, in respect of any Swap Obligation, each Loan Party that has total
assetsexceeding $10,000,000 at the time the relevant guarantee, keepwell, or
grant of the relevant security interest becomes effective with respect to such
Swap Obligation or such other person as constitutes an "eligible contract
participant"under the Commodity Exchange Act or any regulations promulgated
thereunder and can cause another person to qualify as an "eligible contract
participant" at such time by entering into a keepwell under Section
1a(18)(A)(v)(II) of theCommodity Exchange Act.
"
Qualified Equity Interests
" means and refers to any Equity Interests issued byBorrower (and not by one
or more of its Subsidiaries) that is not a Disqualified Equity Interest.
"
QuebecSecurity Documents
" means, any hypothecs and all other security documents governed by the laws
of the Province of Quebec, each in form and substance reasonably satisfactory
to Agent, executed and delivered by a Loan Party to the Agent tosecure the
Obligations, and each as amended, restated, supplemented or modified from time
to time.
"
QuebecSubordinated Debt
" means collectively, (i) all Indebtedness owing to Investissement Quebec
under the Quebec Subordinated Debt Documents in the original aggregate maximum
principal amounts of $10,000,000 and $4,300,000,respectively, which
Indebtedness shall be subject to the Quebec Subordination Agreement, and (ii)
all other Indebtedness owing to Investissement Quebec under the Quebec
Subordinated Debt Documents or otherwise, in each case, whichIndebtedness
shall be expressly subordinate to payment in full of the Obligations pursuant
to the Quebec Subordination Agreement.
"
Quebec Subordinated Debt Documents
" means, collectively, (i) (A) that certain Offre de Pret(Loan Offer) from
Investissement Quebec to Borrower dated June 11, 2020, in respect of a term
loan in the original maximum principal amount of $10,000,000 as amended by a
letter dated February 18, 2021 from InvestissementQuebec to Borrower and (B)
that certain Offre de Pret (Loan Offer) from Investissement Quebec to Borrower
dated February 23, 2021, in respect
-------------------------------------------------------------------------------
of a term loan in the original maximum principal amount of $4,300,000, and, in
each case,all security and other accessory documents or instruments thereto at
any time, and subject at all times to the Quebec Subordination Agreement, (ii)
the Quebec Subordinated Security; and (iii) all other agreements, documents
and instrumentsevidencing all or any portion of the Quebec Subordinated Debt,
and subject at all times to the Quebec Subordination Agreement, in each case
as the same may be modified, amended, supplemented or restated with the prior
written consent of the Agent.
"
Quebec Subordinated Security
" means (a) the hypothecs dated on or about July 2, 2020 andJune 18, 2021,
respectively, granted by the Borrower in favour of Investissement Quebec; and
(b) any other present and future security, security interests, hypothecs,
mortgages, prior claims, liens or charges affecting any of theLoan Parties'
assets, or any part thereof, now or hereafter held by or for the account of
Investissement Quebec as security for the Quebec Subordinated Debt created
after the date hereof with the consent of the Agent, which securityshall at
all times be subordinated to the security granted by the Loan Parties under
the Canadian Security Documents.
"
Quebec Subordination Agreement
" means the amended and restated subordination agreement dated as ofAugust 24,
2021 between the Borrower, Investissement Quebec, the Term Loan Agent and the
Agent, as the same may hereafter be amended, restated, supplemented or
otherwise modified with the consent of Agent.
"Rate Determination Date" means, with respect to Term CORRA (a) for any
calculation with respect to a Term CORRA Rate Loan for any Interest Period,
the day that is two
(2) Benchmark Rate Business Days prior to the first day of such Interest
Period or (b) for any calculation with respectto a Base Rate Loan for any day,
the day that is two (2) Benchmark Rate Business Days prior to such day.
"
Real Property
" means any estates or interests in real property now owned or hereafter
acquired by Borroweror one of its Subsidiaries and the improvements thereto.
"
Real Property Collateral
" means (a) theReal Property identified on
Schedule R-1
to the Agreement and (b) any Real Property hereafter acquired by any Loan
Party with a fair market value in excess of $1,000,000.
"
Receivable Reserves
" means, as of any date of determination, those reserves that Agent deems
necessary orappropriate, in its Permitted Discretion and subject to
Section 2.1(c)
, to establish and maintain (including reserves for Taxes, rebates, discounts,
warranty claims, and returns) with respect to the Eligible Accounts.
"
Record
" means information that is inscribed on a tangible medium or that is stored
in an electronic orother medium and is retrievable in perceivable form.
"
Refinancing Indebtedness
" means refinancings,renewals, or extensions of Indebtedness so long as:
(a)such refinancings, renewals, or extensions do notresult in an increase in
the principal amount of the Indebtedness so refinanced, renewed, or extended,
other than by the
-------------------------------------------------------------------------------
amount of premiums paid thereon and the fees and expenses incurred in
connection therewithand by the amount of unfunded commitments with respect
thereto,
(b)such refinancings, renewals, orextensions do not result in a shortening of
the average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are
they on terms or conditions that, taken as a whole,are or could reasonably be
expected to be materially adverse to the interests of the Lenders,
(c)if theIndebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension must include
subordination terms and conditions that are at leastas favorable to the Lender
Group as those that were applicable to the refinanced, renewed, or extended
Indebtedness, and
(d)the Indebtedness that is refinanced, renewed, or extended is not recourse
to any Person that is liable onaccount of the Obligations other than those
Persons which were obligated with respect to the Indebtedness that was
refinanced, renewed, or extended.
"
Register
" has the meaning set forth in
Section 13.1(h)
of the Agreement.
"
Registered Loan
" has the meaning set forth in
Section 13.1(h)
of the Agreement.
"
Reimbursement Undertaking
" has the meaning specified therefor in
Section 2.11(a)
of the Agreement.
"
Related Fund
" means any Person (other than a natural person) that is engaged in making,
purchasing,holding or investing in bank loans and similar extensions of credit
in the ordinary course and that is administered, advised or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity thatadministers, advises or manages a Lender.
"
Relevant Governmental Body
" means
(a)
with respect to a Benchmark Replacement in respect ofObligations, interest,
fees, commissions or other amounts denominated in, or calculated with respect
to, US Dollars, the Board of Governors or the Federal Reserve Bank of New
York, or a committee officially endorsed or convened by the Board ofGovernors
or the Federal Reserve Bank of New York, or any successor thereto
.
and (b) with respect to a Benchmark Replacement in respect of Obligations,
interest, fees, commissions or other amountsdenominated in, or calculated with
respect to, Canadian Dollars, the Bank of Canada, or a committee officially
endorsed or convened by the Bank of Canada, or any successor thereto.
"
Remedial Action
" means all actions taken to (a) clean up, remove, remediate, contain, treat,
monitor,assess, evaluate, or in any way address Hazardous Materials in the
indoor or outdoor environment, (b) prevent or minimize a release or threatened
release of Hazardous Materials so they do not migrate or endanger or threaten
to endanger publichealth or welfare or the indoor or outdoor environment, (c)
restore or reclaim natural resources or the environment, (d) perform any
pre-remedial studies, investigations, or post-remedial operation and
maintenance activities, or(e) conduct any other actions with respect to
Hazardous Materials required by Environmental Laws.
-------------------------------------------------------------------------------
"
Replacement Lender
" has the meaning specified thereforin
Section
2.12(b)
of the Agreement.
"
Report
" has the meaning specified therefor in
Section 15.16
of the Agreement. "
Required Lenders
" means, at any time, Lenders having or holding more than 50% of the sum of
the aggregate Canadian Dollar Equivalent of Revolving Loan Exposure of all
Lenders;
provided
,that (i) the Revolving Loan Exposure of any Defaulting Lender shall be
disregarded in the determination of the Required Lenders, and (ii) at any time
there are 2 or more Lenders, "Required Lenders" must include at least 2
Lenders(who are not Affiliates of one another).
"
Reserves
" means, as of any date of determination, thosereserves (other than Receivable
Reserves, Loan to Value Reserves, Bank Product Reserves, Inventory Reserves
and Canadian Priority Payable Reserves) that Agent deems necessary or
appropriate, in its Permitted Discretion and subject toSection 2.1(c), to
establish and maintain (including reserves with respect to (a) sums that
Borrower or any of its Subsidiaries are required to pay under any Section of
the Agreement or any other Loan Document (such as Taxes, assessments,insurance
premiums, or, in the case of leased assets, rents or other amounts payable
under such leases) and has failed to pay, (b) currency fluctuations, (c) gift
cards, gift certificates and customer deposits, and (d) amounts owing
byBorrower or any of its Subsidiaries to any Person to the extent secured by a
Lien on, or trust over, any of the Collateral (other than a Permitted Lien),
which Lien, trust or deemed trust, in the Permitted Discretion of Agent likely
would have apriority superior to the Agent's Liens (such as Liens, trusts or
deemed trust in favor of landlords, warehousemen, carriers, mechanics,
materialmen, laborers, or suppliers, or Liens or trusts for ad valorem,
excise, sales, or other Taxes wheregiven priority under applicable law) in and
to such item of the Collateral) with respect to the Borrowing Base.
"
Restricted Payment
" means to (a) declare or pay any dividend or make any other payment
ordistribution, directly or indirectly, on account of Equity Interests issued
by Borrower or any Subsidiary thereof (including any payment in connection
with any merger, amalgamation or consolidation involving Borrower or such
Subsidiary) or to thedirect or indirect holders of Equity Interests issued by
Borrower in its capacity as such (other than dividends or distributions
payable in Qualified Equity Interests issued by Borrower), or (b) purchase,
redeem, make any sinking fund orsimilar payment, or otherwise acquire or
retire for value (including any payment in connection with any merger,
amalgamation or consolidation involving Borrower) any Equity Interests issued
by Borrower, (c) make any payment to retire, or toobtain the surrender of, any
outstanding warrants, options, or other rights to acquire Equity Interests of
Borrower now or hereafter outstanding, and (d) any payments on account of
management, consulting or similar fees or any success fees(including, without
limitation, the Management Debt).
"
Restricted Payment Conditions
" means(x) Excess Availability at all times during the 30 day period ending on
the date of such Restricted Payment is greater than 40% of the Line Cap (or,
if the Fixed Charge Condition is satisfied, 25% of the Line Cap), (y) after
giving effectto a Restricted Payment, incurrence of Permitted Indebtedness
described in paragraph (i) of the definition thereof or a Permitted
Acquisition (each, a "Payment Event"), Excess Availability is greater than 40%
of the Line Cap (or, ifthe Fixed Charge Condition is satisfied, greater than
25%
-------------------------------------------------------------------------------
of the Line Cap), and (z) projected Excess Availability at all times during
the 6-monthperiod following the date of such Payment Event is greater than 40%
of the Line Cap (or, if the Fixed Charge Condition is satisfied, greater than
25% of the Line Cap) (in each case after giving effect to such Payment Event
and as set forth in ExcessAvailability projections delivered by Borrower to,
and satisfactory to, Agent).
"
Restructuring and IntegrationCosts
" means business optimization expenses and other restructuring and integration
charges (including, without limitation, the costs associated with business
optimization programs, including costs of consultants, relocation and
recruitingexpenses, back office closures, retention costs, severance costs and
system establishment costs) in connection with any Permitted Acquisition after
the Original Closing Date of such Permitted Acquisition through the first
anniversary of the OriginalClosing Date of such Permitted Acquisition.
"
Revaluation Date
" means (a) with respect to anyRevolving Loan denominated in US Dollars, each
of the following: (i) each date of a Borrowing of such Revolving Loan, (ii)
each date of a continuation of such Revolving Loan pursuant to
Section 2.12
, and (iii) such additionaldates as Agent shall determine or the Required
Lenders shall require, (b) with respect to any Letter of Credit denominated in
US Dollars, each of the following: (i) each date of issuance of such Letter of
Credit, (ii) each date of anamendment of such Letter of Credit having the
effect of increasing the amount thereof, (iii) each date of any payment by an
Issuing Lender under such Letter of Credit, and (iv) such additional dates as
Agent or an Issuing Lender shalldetermine or the Required Lenders shall
require, and (c) with respect to any other Obligations denominated in US
Dollars, each date as Agent shall determine unless otherwise prescribed in
this Agreement or any other Loan Documents.
"
Revolver Commitment
" means, with respect to each Revolving Lender, its Revolver Commitment, and,
withrespect to all Revolving Lenders, their Revolver Commitments, in each case
as set forth beside such Revolving Lender's name under the applicable heading
on
Schedule C-1
to the Agreement or in the Assignment and Acceptance pursuant towhich such
Revolving Lender became a Revolving Lender under the Agreement, as such
amounts may be reduced or increased from time to time pursuant to assignments
made in accordance with the provisions of
Section 13.1
of the Agreement.
"
Revolver Usage
" means, as of any date of determination, the sum of (a) the amount of
outstandingRevolving Loans (inclusive of Swing Loans and Protective Advances),
plus (b) the amount of the Letter of Credit Usage.
"
Revolving Lender
" means a Lender that has a Revolver Commitment or that has an outstanding
Revolving Loan.
"
Revolving Loan Exposure
" means, with respect to any Revolving Lender, as of any date of determination(a
) prior to the termination of the Revolver Commitments, the amount of such
Lender's Revolver Commitment, and (b) after the termination of the Revolver
Commitments, the aggregate outstanding principal amount of the Revolving Loans
ofsuch Lender.
"
Revolving Loans
" has the meaning specified therefor in
Section 2.1(a)
of theAgreement.
-------------------------------------------------------------------------------
"
RFR
" means, for any Obligations, interest, fees,commissions or other amounts
denominated in, or calculated with respect to US Dollars, SOFR.
"
RFR BusinessDay
" means, with respect to SOFR Rate Loans, a U.S. Government Securities
Business Day,
provided
, that for purposes of notice requirements in
Sections 2.3(a)
,
2.4(d)
and
2.12(b)
, in each case, such day is also aBusiness Day.
"
RFR Loan
" means a SOFR Rate Loan.
"
RFR Option
" has the meaning specified therefor in
Section 2.12(a)
of this Agreement.
"
RM JV
" means RMBG Retail Vancouver ULC, an unlimited liability company incorporated
under the laws ofBritish Columbia.
"
RM JV
Agreement" means that certain Shareholders Agreement, dated as ofApril 16,
2021, by and among JV Partner, JV Holdco and the RM JV, as the same may be
modified, amended, supplemented or restated in accordance with Section
6.6(b)(i) or with the prior written consent of the Agent.
"
Rolex Canada Collateral
" means Collateral of Borrower consisting of Rolex, Tudor and Cellini
watches,watchbands, parts and other accessories now or hereafter sold by Rolex
Canada Ltd. to Borrower, and all other new Rolex, Tudor and Cellini watches,
watch bands, parts and other accessories hereinafter held by Borrower and all
cash proceeds of any ofthe foregoing, including insurance proceeds (but
specifically excluding accounts receivable), together with all rights and
property of every kind at any time in the possession or control of Rolex
Canada Ltd., or any of its agents, or in transit toit, belonging to, for the
account of, or subject to the order of such Borrower.
"
Rolex CanadaDocuments
" means collectively, (i) the Official Rolex Retailer Agreement dated as of
June 6, 2017 between Rolex Canada Ltd. and Borrower, (ii) the Official Rolex
Retailer Agreement dated as of June 6, 2017 between RolexCanada Ltd. and
Borrower (carrying on business as Brinkhaus), (iii) the Official Tudor
Reseller Agreement dated as of June 6, 2017 between Rolex Canada Ltd. and
Borrower, and (iv) the Rolex Canada Security Agreement.
"
Rolex Canada Liens
" means Liens on the Rolex Canada Collateral granted in favor of Rolex Canada
Ltd.pursuant to the Rolex Canada Security Agreement provided that such Liens
are subject to the Rolex Canada Subordination Agreement.
"
Rolex Canada Security Agreement
" means collectively, all security agreements, if any, entered into betweenthe
Canadian Borrower and Rolex Canada Ltd. pursuant to Section
3.04 of the Rolex Canada Document described in clause(i) of the definition
thereof, which security agreements shall be on terms and conditions
satisfactory to Agent and the Required Lenders.
"
Rolex Canada Subordination Agreement
" means the subordination provisions of the Rolex Canada SecurityAgreement,
which shall be on terms and conditions satisfactory to Agent and the Required
Lenders, and affirmed by Rolex Canada Ltd. pursuant to an acknowledgement
letter in form and substance satisfactory to Agent and the Required Lenders,
andaddressed to the Agent from Rolex Canada Ltd. and acknowledged by Borrower.
-------------------------------------------------------------------------------
"
S&P
" has the meaning specified therefor in thedefinition of Cash Equivalents.
"
Sale Leaseback Transactions
" means sales of any fixed or capitalassets acquired after the Original
Closing Date by any Loan Party or any Subsidiary: (w) that are made for cash
consideration in an amount not less than the fair value of such fixed or
capital assets and are consummated within 180 days aftersuch Loan Party or
such Subsidiary completes the capital expenditure project for the relevant
store or corporate initiative which involved the acquisition or construction
of such fixed or capital assets, (x) in respect of which such fixed orcapital
assets are not assets included in the computation of Borrowing Base, (y) in
respect of which the proceeds shall be applied to repay the Revolving Loans
and/or Letter of Credit Collateralization, as the case may be (without a
permanentreduction in the Commitments) and (z) in respect of which such fixed
or capital assets are immediately thereafter leased back to the applicable
Loan Party or Subsidiary through a Capital Lease, provided that for certainty,
the fixed or capitalassets subject to such sales shall not include Inventory
or Accounts and shall be limited to the furniture, fixtures and equipment (as
such term is defined in the PPSA), including information technology equipment,
of any Loan Party or any Subsidiarywhich are located at a retail location or
the chief executive office of any Loan Party or any Subsidiary.
"
Sanctioned Entity
" means (a) a country or a government of a country, (b) an agency of
thegovernment of a country, (c) an organization directly or indirectly
controlled by a country or its government, or (d) a Person resident in or
determined to be resident in a country, in each case of clauses (a) through
(d) that isitself a target of Sanctions.
"
Sanctioned Person
" means, at any time (a) any Person named on thelist of Specially Designated
Nationals and Blocked Persons maintained by OFAC, OFAC's consolidated Non-SDN
list or any other Sanctions-related list maintained by any relevant Sanctions
authority, (b) a Person or legal entity that is a target ofSanctions, (c) any
Person operating, organized or resident in a Sanctioned Country, or (d) any
Person directly or indirectly owned or controlled (individually or in the
aggregate) by or acting on behalf of any such Person or Personsdescribed in
clauses (a) through (c) above.
"
Sanctions
" means individually and collectively,respectively, any and all economic
sanctions, trade sanctions, financial sanctions, sectoral sanctions, secondary
sanctions, trade embargoes anti-terrorism laws and other sanctions laws,
regulations or embargoes, including those imposed,administered or enforced
from time to time by: (a) the United States of America, including those
administered by the Office of Foreign Assets Control (OFAC) of the U.S.
Department of Treasury, the U.S. Department of State, the U.S. Departmentof
Commerce, or through any existing or future executive order, (b) the United
Nations Security Council, (c) the European Union or any European Union member
state, (d) Her Majesty's Treasury of the United Kingdom, or (e) anyother
Governmental Authority with jurisdiction over any member of Lender Group or
any Loan Party or any of their respective Subsidiaries or Affiliates.
"
SEC
" means the United States Securities and Exchange Commission and any successor
thereto.
-------------------------------------------------------------------------------
"
Secured Hedging Agreement
" means any Hedging Agreementthat is entered into by and between Borrower and
any Hedge Provider that constitutes Permitted Indebtedness hereunder and is
secured by the Agent's Liens.
"
Secured Hedging Obligations
" means all Indebtedness and other obligations of Borrower arising under,
orotherwise with respect to, any Secured Hedging Agreement.
"
Securities Account
" means a securitiesaccount (as that term is defined in the PPSA).
"
Securities Act
" means the
Securities Act
of1933, as amended from time to time, and any successor statute.
"
Settlement
" has the meaning specifiedtherefor in
Section 2.3(e)(i)
of the Agreement.
"
Settlement Date
" has the meaning specifiedtherefor in
Section 2.3(e)(i)
of the Agreement.
"
SOFR
" means, a rate equal to the securedovernight financing rate as administered
by the SOFR Administrator.
"
SOFR Administrator
" means theFederal Reserve Bank of New York (or a successor administrator of
the secured overnight financing rate).
"
SOFRRate Loan
" means a Loan that bears interest at a rate determined by reference to, Term
SOFR (other than pursuant to clause (c) of the definition of U.S. Base Rate).
"
Solvent
" means, with respect to any Person as of any date of determination, that
(a) at fair valuations, the sum of such Person's debts (including contingent
liabilities) is less than all of suchPerson's assets, (b) such Person is not
engaged or about to engage in a business or transaction for which the
remaining assets of such Person are unreasonably small in relation to the
business or transaction or for which the propertyremaining with such Person is
an unreasonably small capital, and (c) such Person has not incurred and does
not intend to incur, or reasonably believe that it will incur, debts beyond
its ability to pay such debts as they become due (whether atmaturity or
otherwise), and (d) such Person is "solvent" or not "insolvent", as applicable
within the meaning given those terms and similar terms under applicable
Insolvency Law or other laws relating to fraudulent transfersand conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that canreasonably
be expected to become an actual or matured liability (irrespective of whether
such contingent liabilities meet the criteria for accrual under Statement of
Financial Accounting Standard No. 5).
"
Spot Rate
" means, for a currency, the rate determined by Agent to be the rate quoted by
Wells Fargo actingin such capacity as the spot rate for the purchase by Wells
Fargo of such currency with another currency through its principal foreign
exchange trading office at approximately 11:00 a.m. (New York time) on the
date two Business Days prior to thedate as of which the foreign exchange
computation is made;
provided
, that Agent may obtain such spot rate
-------------------------------------------------------------------------------
from another financial institution designated by Agent if Wells Fargo acting
in suchcapacity does not have as of the date of determination a spot buying
rate for any such currency.
"
STA
"means the Securities Transfer Act, 2006 (Ontario) or to the extent
applicable, comparable legislation in other Canadian provinces.
"
Standard Letter of Credit Practice
" means, for an Issuing Lender, any domestic or foreign law or letter ofcredit
practices applicable in the city in which such Issuing Lender issued the
applicable Letter of Credit or, for its branch or correspondent, such laws and
practices applicable in the city in which it has advised, confirmed or
negotiated suchLetter of Credit, as the case may be, in each case, (a) which
letter of credit practices are of banks that regularly issue letters of credit
in the particular city, and (b) which laws or letter of credit practices are
required or permittedunder ISP or UCP, as chosen in the applicable Letter of
Credit.
"
Subject Permitted Acquisition
" has themeaning specified therefor in the definition of "Permitted
Dispositions".
"Subordinated Debt"
means collectively, the Management Debt, the Quebec Subordinated Debt, the
Montrovest Debt and any Additional Subordinated Debt.
"
Subordination Agreements
" means collectively, the Management Subordination Agreement, the
QuebecSubordination Agreements, the Rolex Canada Subordination Agreements, the
Montrovest Subordination Agreement and any other subordination agreement
entered into by or among any Loan Party, any subordinated creditor and Agent,
in form, scope andsubstance satisfactory to the Agent and the Required Lenders.
"
Subsidiary
" of a Person means acorporation, partnership, limited liability company,
unlimited liability corporation, or other entity in which that Person directly
or indirectly owns or controls the Equity Interests having ordinary voting
power to elect a majority of the Board ofDirectors of such corporation,
partnership, limited liability company, or other entity.
"
SupermajorityLenders
" means, at any time, Lenders having or holding more than 66 2/3% of the sum
of the aggregate Canadian Dollar Equivalent of the Revolving Loan Exposure of
all Lenders;
provided
, that (i) the Revolving Loan Exposure of anyDefaulting Lender shall be
disregarded in the determination of the Lenders, and (ii) at any time there
are 2 or more Lenders, "Supermajority Lenders" must include at least 2 Lenders
(who are not Affiliates of one another).
"
Supported QFC
" has the meaning specified therefor in Section 17.17 of this Agreement.
"
Swap Obligation
" means, with respect to any Loan Party, any obligation to pay or perform
under anyagreement, contract or transaction that constitutes a "swap" within
the meaning of section1a(47) of the
Commodity Exchange Act
.
"
Swing Lender
" means Agent or any other Lender that, at the request of Borrower and with
the consent ofAgent agrees, in such Lender's sole discretion, to become the
Swing Lender under
Section 2.3(b)
of the Agreement.
-------------------------------------------------------------------------------
"
Swing Loan
" has the meaning specified therefor in
Section 2.3(b)
of the Agreement.
"
Swing Loan Exposure
" means, as of any date of determinationwith respect to any Lender, such
Lender's Pro Rata Share of the Swing Loans on such date.
"
TaxLender
" has the meaning specified therefor in
Section 14.2(a)
of the Agreement.
"
Taxes
"means any Taxes, levies, imposts, duties, fees, assessments or other charges
of whatever nature now or hereafter imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein, and all
interest, penalties orsimilar liabilities with respect thereto.
"Term CORRA" means,
(a)for any calculation with respect to a Term CORRA Rate Loan, the Term CORRA
Reference Rate for a tenorcomparable to the applicable Interest Period on the
applicable Rate Determination Date, as such rate is published by the Term
CORRA Administrator; provided, however, that if as of 5:00 p.m. Toronto time
on any Rate Determination Date the Term CORRAReference Rate for the applicable
tenor has not been published by the Term CORRA Administrator and a Benchmark
Replacement Date with respect to the Term CORRA Reference Rate has not
occurred, then Term CORRA will be the Term CORRA Reference Rate forsuch tenor
as published by the Term CORRA Administrator on the first preceding Benchmark
Rate Business Day for which such Term CORRA Reference Rate for such tenor was
published by the Term CORRA Administrator so long as such first precedingBenchma
rk Rate Business Day is not more than three
(3)Benchmark Rate Business Days prior to such Rate Determination Date, and
(b)for any calculation with respect to a Base Rate Loan on any day, the Term
CORRA Reference Rate for a tenor of one month on the applicable Rate
Determination Date, as such rate is published by the Term CORRA Administrator;
provided, however, that if asof 5:00
p.m. Toronto time on any Rate Determination Datethe Term CORRA Reference Rate
for the applicable tenor has not been published by the Term CORRA
Administrator and a Benchmark Replacement Date with respect to the Term CORRA
Reference Rate has not occurred, then Term CORRA will be the Term
CORRAReference Rate for such tenor as published by the Term CORRA
Administrator on the first preceding Benchmark Rate Business Day for which
such Term CORRA Reference Rate for such tenor was published by the Term CORRA
Administrator so long as such firstpreceding Benchmark Rate Business Day is
not more than three (3) Benchmark Rate Business Days prior to such Rate
Determination Date;
"Term CORRA Adjustment" means, for any calculation with respect to a Base Rate
Loan or a Term CORRA Rate Loan, a percentage per annum as set forth below for
the applicable type of such Loan and (if applicable) Interest Period therefor:
Base Rate Loans:
0.29547%
Term CORRA Rate Loans:
-------------------------------------------------------------------------------
InterestPeriod Percentage
Onemonth 0.29547%
Threemonths 0.32138%
"Term CORRA Administrator" means CanDeal Benchmark Administration Services
Inc. ("CanDeal") or, in the reasonable discretion of Agent, TSX Inc. or an
affiliate of TSX Inc. as the publication source of the CanDeal/TMX Term CORRA
benchmarkthat is administered by CanDeal (or a successor administrator of the
Term CORRA Reference Rate selected by Agent in its reasonable discretion).
"Term CORRA Rate Loan" means a Loan
that bears interest at a rate determined by reference to
Adjusted Term CORRA (other than pursuant to clause (b) of the definition of
Canadian Base Rate).
"Term CORRA Rate Margin" has the meaning specified therefor in the definition
of "Applicable Margin".
"Term CORRA Reference Rate" means the forward-looking term rate based on
CORRA.
"
Term Loan
" means the credit extensions (including, without limitation, the "Loan" as
defined inthe Term Loan Agreement) provided to the Borrower by the Term Loan
Lenders under the Term Loan Documents.
"
TermLoan Agent
" means the "Agent", as defined in the Term Loan Agreement. "
Term Loan Agreement
" means the Credit Agreement dated as of June 29, 2018, by and between, among
others, the Term Loan Agent, asadministrative agent, the Term Loan Lenders
party thereto from time to time, as lenders, and the Borrower, as borrower, as
same may be amended from time to time hereafter to the extent permitted
hereunder and in accordance with the IntercreditorAgreement.
"
Term Loan Borrowing Base
" means the "Borrowing Base" as defined in the Term LoanAgreement.
"
Term Loan Debt
" means all "Obligations" (as defined in the Term Loan Agreement)owing to the
Term Loan Secured Parties under the Term Loan Documents.
"
Term Loan Documents
" means the"Loan Documents" under and as defined in the Term Loan Agreement.
"
Term Loan Lenders
" meansthe "Lenders" as defined in the Term Loan Agreement.
"
Term Loan Secured Parties
" means the"Lender Group", as defined in the Term Loan Agreement.
-------------------------------------------------------------------------------
"
Term Loan Usage
" means the aggregate principal balance ofthe Term Loan owing to all Term Loan
Lenders.
"
Term SOFR
" means,
(a)for any calculation with respect to a SOFR Rate Loan, the Term SOFR
Reference Rate for a tenor comparable tothe applicable Interest Period on the
day (such day, the "
Periodic Term SOFR Determination Day
") that is two (2) RFR Business Days prior to the first day of such Interest
Period, as such rate is published by the Term SOFRAdministrator;
provided
,
however
, that if as of 5:00 p.m. (Eastern time) on any Periodic Term SOFR
Determination Day the Term SOFR Reference Rate for the applicable tenor has
not been published by the Term SOFR Administrator and aBenchmark Replacement
Date with respect to the Term SOFR Reference Rate has not occurred, then Term
SOFR will be the Term SOFR Reference Rate for such tenor as published by the
Term SOFR Administrator on the first preceding RFR Business Day forwhich such
Term SOFR Reference Rate for such tenor was published by the Term SOFR
Administrator so long as such first preceding RFR Business Day is not more
than three (3) RFR Business Days prior to such Periodic Term SOFR
Determination Day,and
(b)for any calculation with respect to a US Base Rate Loan on any day, the
Term SOFR Reference Ratefor a tenor of one month on the day (such day, the "
Base Rate Term SOFR Determination Day
") that is two (2) RFR Business Days prior to such day, as such rate is
published by the Term SOFR Administrator;
provided
,
however
, that if as of 5:00 p.m. (Eastern time) on any Base Rate Term SOFR
Determination Day the Term SOFR Reference Rate for the applicable tenor has
not been published by the Term SOFR Administrator and a Benchmark Replacement
Date withrespect to the Term SOFR Reference Rate has not occurred, then Term
SOFR will be the Term SOFR Reference Rate for such tenor as published by the
Term SOFR Administrator on the first preceding RFR Business Day for which such
Term SOFR Reference Ratefor such tenor was published by the Term SOFR
Administrator so long as such first preceding RFR Business Day is not more
than three (3) RFR Business Days prior to such Base Rate SOFR Determination
Day;
provided
,
further
, that if Term SOFR determined as provided above (including pursuant to the
proviso under clause (a) orclause (b) above) shall ever be less than the
Floor, then Term SOFR shall be deemed to be the Floor.
"
TermSOFR Administrator
" means CME Group Benchmark Administration Limited (CBA) (or a successor
administrator of the Term SOFR Reference Rate selected by Agent in its
reasonable discretion).
"
Term SOFR Reference Rate
" means the forward-looking term rate based on SOFR.
"
Test Period
" shall mean, for any date of determination under this Agreement, the twelve
consecutive monthsof Borrower most recently ended as of such date of
determination.
"
U.S. Special Resolution Regimes
" hasthe meaning specified therefor in Section of this Agreement.
"
U.S.C.
" means Title 12 (Banks andBanking) of the United States Code of Federal
Regulations.
"
U.S. Government Securities Business Day
"means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on
which the Securities Industry and Financial Markets Association, or any
successor thereto, recommends that the fixed income departments of its members
be closedfor the entire day for purposes of trading in United States
government securities.
-------------------------------------------------------------------------------
"
UCP
" means, with respect to any Letter of Credit, theUniform Customs and Practice
for Documentary Credits 2007 Revision, International Chamber of Commerce
Publication No. 600 and any subsequent revision thereof adopted by the
International Chamber of Commerce on the date such Letter of Credit isissued.
"
Unadjusted Benchmark Replacement
" means the applicable Benchmark Replacement excluding therelated Benchmark
Replacement Adjustment.
"
Underlying Issuer
" means The Toronto-Dominion Bank or one ofits Affiliates or such other Person
that is acceptable to Agent and Borrower.
"
United States
" means theUnited States of America.
"
Unused Line Fee
" has the meaning specified therefor in
Section2.10(b)
.
"
US Base Rate
" means the greatest of (a) the Floor, (b) the Federal Funds Rateplus
1
D
2
%, (c) Term SOFR for a one-month tenor as in effect on such day, plus 1% (1
percentage point) (
provided
that
clause (c)
shall not beapplicable during any period in which Term SOFR is unavailable,
unascertainable or illegal), and (d) the rate of interest announced, from time
to time, within Wells Fargo at its principal office in San Francisco as its
"prime rate" ineffect on such day, with the understanding that the "prime
rate" is one of Wells Fargo's base rates (not necessarily the lowest of such
rates) and serves as the basis upon which effective rates of interest are
calculated for thoseloans making reference thereto and is evidenced by the
recording thereof after its announcement in such internal publications as
Wells Fargo may designate. Any change in the U.S. Base Rate due to a change in
the foregoing rate shall be effective asof the opening of business on the
effective day of such change.
"
US Designated Account
" means the USDollar Deposit Account(s) of Borrower identified on
Schedule D-2
to the Agreement (or such other Deposit Account(s) of Borrower located at
Designated Account Bank that has been designated as such, in writing, by
Administrative Borrower toAgent).
"
US Dollar Equivalent
" means, at any time, (a) with respect to any amount denominated inUS Dollars,
such amount; and (b) with respect to any amount denominated in Canadian
Dollars, the equivalent amount thereof in US Dollars as determined by Agent,
at such time on the basis of the Spot Rate (determined in respect of the
mostrecent Revaluation Date or such other date determined by Agent) for the
purchase of US Dollars with Canadian Dollars.
"
US Dollars
" or "
US$
" means United States dollars.
"
US Loan Account
" has the meaning specified therefor in
Section
2.9
of the Agreement.
"
US Stock Purchase Agreement
" means that certain Stock Purchase Agreement entered into as of August
11,2017 by and between Aurum Holdings Ltd. and Birks Group Inc. for the
purchase of all shares of capital stock of Mayor's Jewelers, Inc.
-------------------------------------------------------------------------------
"
Voidable Transfer
" has the meaningspecified therefor in
Section 17.8
of the Agreement.
"
Wells Fargo
" means WellsFargo Bank, National Association, a national banking association.
"
WF Canada
" meansWells Fargo Capital Finance Corporation Canada.
-------------------------------------------------------------------------------
EXHIBIT L-1
Wells Fargo Capital Finance Corporation Canada, as Agent
underthe below referenced Credit Agreement
125 High St.
11thfloor
MAC J9266-114
Boston, MA 02110
Attn: Emily Abrahamson
Fax No.: 855-842-6360
Email: Emily.J.Abrahamson@wellsfargo.com
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement, dated as of December 24, 2021 (asamended, restated, supplemented,
or otherwise modified from time to time, the "
Credit Agreement
"), by and among Birks Group Inc. as "Borrower", the lenders identified on the
signature pages thereof (each of such lenders,together with its successors and
permitted assigns, is referred to hereinafter as a "
Lender
" and, collectively, the "
Lenders
") and Wells Fargo Capital Finance Corporation Canada, an Ontario corporation("
Wells Fargo
"), as Agent for each member of the Lender Group and the Bank Product
Providers (in such capacity, together with its successors and assigns in such
capacity "
Agent
"). Capitalized terms used herein, butnot specifically defined herein, shall
have the meanings ascribed to them in the Credit Agreement.
This Non-Base RateNotice represents Borrower's request to elect the Non-Base
Rate Option
[for Term Corra Loans] [SOFR Rate Loans]
with respect to outstanding Revolving Loans in the amount of
[$
][Cdn$
]
(the "
Non-Base Rate Advance
")
[, and is a written confirmation of the telephonic notice of such election
given to Agent]
.
The Non-Base Rate Advance will have an Interest Period of [1 or 3 month(s)
(only in the case of Term CORRA Loans), [or]1, 2, 3, [or] 6 (only in the case
of SOFR Rate Loans)] month(s) commencing on
.
This Non-Base Rate Notice further confirms Borrower's acceptance, for purposes
of determining the rate of interest basedon the Non-Base Rate under the Credit
Agreement, of the Non-Base Rate as determined pursuant to the Credit Agreement.
Borrower represents and warrants that (i) as of the date hereof, the
representations and warranties of Borrower and itsSubsidiaries contained in
the Credit Agreement and in the other Loan Documents are true and correct in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already arequalified or
modified by materiality in the text thereof) on and as of the date hereof, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date, in which case
suchrepresentations and warranties shall be true and correct in all material
respects (except that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or modified by
materiality in the textthereof) as of such earlier date)), (ii) each of the
covenants and agreements contained in any Loan Document have been performed
(to the extent required to be performed on or before the date hereof or each
-------------------------------------------------------------------------------
such effective date), and (iii) no Default or Event of Default has occurred
and iscontinuing on the date hereof, nor will any thereof occur after giving
effect to the request above.
[signature page follows]
Dated:
Birks Group Inc., as Borrower
By
Name:
Title:
By
Name:
Title:
Acknowledged by:
WELLSFARGO CAPITAL FINANCE CORPORATION CANADA,
an Ontario corporation, as Agent
By:
Name:
Title:
Exhibit 4.29
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT ("Master Agreement") made as of July 14, 2023, between
VARILEASE FINANCE, INC., a Michigan corporation, having its chiefexecutive
offices at 2800 East Cottonwood Parkway, 2nd Floor, Salt Lake City, UT 84121
(and together with any other affiliate entity that is indicated as the lessor
under a Schedule, "Lessor") and BIRKS GROUP INC., a corporationincorporated
under the laws of the Province of Quebec, Canada, having its chief executive
offices at 2020 Blvd. Robert-Bourassa, Bureau 200, Montreal, QC H3A 2A5,
Canada ("Lessee").
1. LEASE
On the terms and conditions of this Master Agreement, Lessor shall lease to
Lessee, and Lessee shall hire from Lessor, the items of personal property
describedin the Schedule(s) (collectively the "Equipment", and individually an
"Item") which shall incorporate this Master Agreement. Subject to Section
16(a)(viii), each Schedule constitutes a separate and independent lease
andcontractual obligation of Lessee. The term "Lease" refers to an individual
Schedule that incorporates the terms and conditions of this Master Agreement.
In the event of a conflict between this Master Agreement and any Schedule,
thelanguage of the Schedule shall prevail. The Lease is effective upon
execution by both Lessee and Lessor.
2. TERM
(a) The term of the Lease may be comprised of a Progress Funding Term,
Installation Term and Base Term. The Progress Funding Term for each Item, if
applicable,shall commence on the date the Authorization for Progress Payment
(the "Authorization") is executed and shall end on the date specified on the
Installation Certificate (the "Installation Date"). The Installation Term
shallcommence on the Installation Date and terminate on the first day of the
month following the Installation Date (the "Base Term Commencement Date"). The
Base Term of the Lease shall begin on the Base Term Commencement Date and
shall, subjectto Section 19(b), end on the last day of the last month of the
Base Term. The date of installation for any Item shall be the earlier of
either (i) the Installation Date or (ii) if Lessee does not, for any reason,
sign an InstallationCertificate, the date Lessor determines, in its sole
discretion, to be either (1) the date of Lessor's last Progress Payment (as
defined in Section 2(b)), or (2) the date the Equipment has been delivered,
installed, andacceptable for all purposes under the Lease after an inspection
of the Equipment.
(b) In the event Lessee requests, for its benefit, that Lessor advancepayments
to supplier(s) or manufacturer(s) of the Equipment (the "Supplier(s)") or, in
the case of a "sale and leaseback" transaction, to the Lessee, during the
period prior to Lessee's delivery of the InstallationCertificate and make
progress payments to such Supplier(s) or otherwise reimburse Lessee for
payments made to such Supplier(s) (all such Lessor payments and reimbursements
are collectively referred to as "Progress Payments"), Lessor may,in its sole
discretion, accommodate such requests by Lessee and make such Progress
Payments pursuant to the terms provided for in this Section 2(b). Lessee shall
pay to Lessor a daily pro rata rental fee (the "Rental Fee(s)") from thedate
of execution of the Authorization for each Item of Equipment through the
Installation Date calculated by multiplying the Base Lease Rate Factor
specified in the applicable Schedule times the amount of such Progress Payment
divided by 30. RentalFees will be billed monthly to Lessee. If all of the
Equipment to be included in the applicable Schedule is not delivered,
installed and accepted by Lessee by ninety (90) days after the date of
Lessor's execution of the applicable Schedule(the "Funding
Cut-Off
Date"), Lessor may, at its sole option, pursue any one of the following
options: (i) commence the term of any Schedule (using the Funding
Cut-
Off Date as the Installation Date) based on the portion of the Equipment
thathas been delivered to Lessee and paid for by Lessor as of the Funding
Cut-Off
Date; (ii) extend the Progress Funding Term and establish a new Funding
Cut-Off
Date;or (iii) demand that the Lessee pay to Lessor a total amount equal to all
Progress Payments paid at the request of Lessee, plus all pro rata Rental
Fees, taxes, late fees and other payments which are due and owing under the
Lease. Should suchdemand be made by Lessor, Lessee hereby unconditionally
agrees to reimburse said amounts to Lessor in full within three (3) business
days of said demand, and upon receipt of said payment in full, Lessor shall
release Lessee from further paymentobligations under the Lease. Lessor hereby
reserves the right to terminate the Progress Funding Term and not make
Progress Payments at any time if Lessor determines, in Lessor's sole
discretion, that there has been an adverse change inLessee's financial
condition, at which time Lessor may elect either (i), (ii) or (iii) above.
Notwithstanding anything to the contrary in the Lease, for purposes of Section
2(b)(iii), in the event such demand for reimbursement is madeby Lessor and
Lessee fails to reimburse Lessor in accordance with the terms herein, such
failure shall automatically constitute an Event of Default, Lessee shall waive
any right to cure or remedy the default as otherwise provided inSection 16(a),
and Lessor shall be entitled to pursue all of its available remedies under the
Lease.
3. RENTAL
(a) The rental amount payable to Lessor by Lessee for the Equipment will be as
set forth on the Schedule, as amended ("Base Monthly Rental"). As rentfor the
Equipment, Lessee shall pay Lessor in immediately available funds and in
advance on the Base Term Commencement Date and on the first day of each
calendar month during the Base Term of the Lease the Base Monthly Rental, and
upon receipt of aninvoice, an amount equal to 1/30th of the Base Monthly
Rental for each Item times the number of days which will elapse from the date
such Item was installed to the Base Term Commencement Date of the Lease.
Notwithstanding the foregoing or anythingto the contrary contained in this
Master Agreement or the Lease, no Base Monthly Rental will be required to be
paid to Lessor to the extent the Lease contemplates application of any advance
payment to such Base Monthly Rental, and such Base MonthlyRental due will be
satisfied from such advance payment. Each remittance from Lessee to Lessor
shall contain information as to the Lease for which payment is made. In the
event of a partial installation of less than all the Equipment prior to
theBase Term Commencement Date, Lessee shall pay pro rata rental for such
Items of Equipment upon receipt of invoice for same.
(b) For any payment of rentor other amount due under a Lease which is past
due, interest shall accrue at the rate of 2% per month, from the date such
payment was due until payment is received by Lessor, or if such rate shall
exceed the maximum rate of interest allowed by law,then at such maximum rate.
1
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(c) UNLESS OTHERWISE PROVIDED FOR HEREIN, THIS IS A
NON-CANCELABLE,
NON-TERMINABLE
LEASE OF EQUIPMENT FOR THE ENTIRE LEASE TERM AS PROVIDED IN EACH SCHEDULE
HERETO.
4. TAXES
Lessee shall within five (5) days of Lessor's request or upon the due date
reflected on an invoice, reimburse Lessor (or pay directly, but only
ifinstructed by Lessor) for all taxes, fees, and assessments that may be
imposed by any taxing authority on the Equipment, on its purchase, ownership,
delivery, possession, operation, rental, return to Lessor or its purchase by
Lessee (collectively"Taxes") to the extent Lessor actually pays such Taxes on
the Equipment; provided, however, that Lessee shall not be liable for any such
Taxes (whether imposed by the United States of America or by any other
domestic or foreign taxingauthority) imposed on or measured by Lessor's net
income or tax preference items. Lessee's obligation includes, but is not
limited to, the obligation to pay all license and registration fees, recycling
fees, and all sales, use, personalproperty, recordation and any other taxes
and governmental charges, together with any penalties, fines and interest
thereon, that may be imposed during the term and any extension or renewal term
of the applicable Schedule. Lessor shall report andfile any and all Taxes and
shall invoice Lessee for same. Lessor will not provide annual personal
property valuation notices to Lessee, unless requested in writing. Lessee
shall promptly reimburse Lessor for all Taxes actually paid by Lessor
withrespect to the Equipment, and Lessor agrees to either: (i) pay such Taxes
as and when they become due; or (ii) instruct Lessee to pay such Taxes
directly and provide Lessee with all applicable invoices, notices or
correspondence receivedfrom any taxing authority with respect to such Taxes.
5. NET LEASE
The Lease is a net lease, it being the intention of the parties that all
costs, expenses and liabilities associated with the Equipment or its lease
shall beborne by Lessee. Lessee's agreement to pay all obligations under the
Lease, including but not limited to Base Monthly Rental, is absolute and
unconditional and such agreement is for the benefit of Lessor and its
Assignee(s). Lessee'sobligations shall not be subject to any abatement,
deferment, reduction, setoff, defense, counterclaim or recoupment for any
reason whatsoever. Except as may be otherwise expressly provided in the Lease,
it shall not terminate, nor shall theobligations of Lessee be affected by
reason of any defect in or damage to, or any loss or destruction of, or
obsolescence of, the Equipment or any Item from any cause whatsoever, or the
interference with its use by any private person, corporation orgovernmental
authority, or as a result of any war, riot, insurrection, pandemic or an act
of God. It is the express intention of Lessor and Lessee that all rent and
other sums payable by Lessee under the Lease shall be, and continue to be,
payablein all events throughout the term of the Lease. The Lease shall be
binding upon the Lessee, its successors and permitted assigns and shall inure
to the benefit of Lessor and its Assignee(s).
6. INSTALLATION, RETURN AND USE OF EQUIPMENT
(a) Upon delivery of the Equipment to Lessee, Lessee shall pay all
transportation, installation, rigging, packing and insurance charges with
respect to theEquipment. In the case of a sale and leaseback transaction,
Lessee shall certify the date the Equipment was first put into use. Lessee
will provide the required electric current and a suitable place of
installation for the Equipment with allappropriate facilities as specified by
the manufacturer. Lessee must operate an Item according to the specifications
of the manufacturer and the manufacturer's standard maintenance contract.
(b) Provided that no Event of Default shall have occurred and is continuing
after applicable notice and cureperiods, Lessee shall, at all times during the
term of the Lease, be entitled to unlimited use of the Equipment. Lessee will
at all times keep the Equipment in its sole possession and control. The
Equipment shall not be moved from the locationstated in the Schedule without
the prior written consent of Lessor. Lessee will comply with all laws,
regulations, and ordinances, and all applicable requirements of the
manufacturer of the Equipment that apply to the physical possession,
use,operation, condition, and maintenance of the Equipment. Lessee agrees to
obtain all permits and licenses necessary for the operation of the Equipment.
(c) Lessee shall not without the prior written consent of Lessor affix or
install any accessory, feature, equipment or device to the Equipment or make
anyimprovement, upgrade, modification, alteration or addition to the Equipment
(any such accessory, feature, equipment, device or improvement, upgrade,
modification, alteration or addition affixed or installed is an "Improvement").
Title toall Improvements shall, without further act, upon the making, affixing
or installation of such Improvement, vest solely in Lessor, except such
Improvements as may be readily removed without causing material damage to the
Equipment and without in anyway affecting or impairing the originally intended
function, value or use of the Equipment. Provided the Equipment is returned to
Lessor in the condition required by the Lease, including, but not limited to
coverage under the manufacturer'sstandard maintenance contract, title to the
Improvement shall vest in the Lessee upon removal. Any Improvement not removed
from the Equipment prior to return shall at Lessor's option remain the
property of Lessor and shall be certified formaintenance by the manufacturer,
at Lessee's expense.
Lessee shall notify Lessor in writing no less than fifteen (15) days prior to
the desiredinstallation date of the type of Improvement Lessee desires to
obtain. Lessor may, at any time within ten (10) days after receipt of the
notice offer to provide the Improvement to Lessee upon terms and conditions to
be mutually agreed upon.Lessee shall cause such documents to be executed and
delivered to Lessor as shall be reasonably required by Lessor to vest title to
such Improvements in Lessor and to protect the interests of Lessor and any
Assignee in the Improvement.
During the term of the Lease and any renewal term, Lessee shall cause all
Improvements to be maintained, at Lessee's expense, in accordance with
therequirements of Section 7. Unless otherwise agreed to by Lessor, upon the
expiration or earlier termination of the term of the Lease, any Improvement
shall be
de-installed
and removed from the Equipmentby the manufacturer, at Lessee's expense. If the
Improvement is removed, the Equipment shall be restored to its unmodified
condition and shall be certified for maintenance by the manufacturer, at
Lessee's expense.
(d) Subject to Section 19(b), Lessee shall, at the termination of the Lease,
at its expense, cause the Equipment to be decontaminated and remove
allproprietary data from any and all memory storage devices from the
Equipment, by the manufacturer or other entity approved by Lessor in
accordance with manufacturer specifications and all applicable laws, rules and
regulations, if any,
de-install,
pack and return the Equipment to Lessor at such location as shall be
designated by Lessor in the same operating order, repair, condition and
appearance as of the date the Equipment was installed,reasonable wear and tear
excepted, with all current engineering changes prescribed by the manufacturer
of the Equipment or a maintenance contractor approved by Lessor (the
"Maintenance Organization") incorporated in the Equipment. Untilthe return of
the Equipment to Lessor, Lessee shall be obligated to pay the Base Monthly
Rental and all other sums due under the Lease. Upon redelivery to Lessor,
Lessee shall arrange and pay for such repairs (if any) as are necessary for
themanufacturer of the Equipment to accept the Equipment under a maintenance
contract at its then standard rates.
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(e) Lessee shall comply with all present and future federal, state, regional
and municipal laws, statutes,ordinances, regulations, rules, judicial
andsimilar requirements of all federal, state, regional and municipal
governmental agencies or other governmental entities with legal authority
pertaining to the protection of human or wildlife health andsafety or the
environment, including, without limitation, any such laws, statutes,
ordinances, regulations, rules, judicial and administrative orders and
decrees, permits, licenses, approvals, authorizations and similar requirements
regulating orrelating to Hazardous Materials (defined below) or to the
generation, use, storage, release, presence, disposal, transport, or handling
of any other substance, oil, oil byproducts, gas element, or material which
has the potential to pollute,contaminate or harm any land, subsurface area,
water source or watercourse, air or other natural resource, hereinafter
referred to as "Environmental Laws".
"Hazardous Materials" is defined as any hazardous or toxic substance, material
or waste that is or becomes regulated under any applicable local,state or
federal law, including, but not limited to, those substances, materials, and
waste listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR 172.101) or defined by the Environmental Protection
Agency as"any material that poses a threat to human health and/or the
environment. Typical Hazardous substances are toxic, corrosive, ignitable,
explosive, or chemically reactive".
7. MAINTENANCE AND REPAIRS
Lessee shall, during the term of the Lease, maintain in full force and effect
a contract with the manufacturer of the Equipment or Maintenance Organizationcov
ering at least prime shift maintenance of the Equipment. Lessee, upon Lessor's
request, shall furnish Lessor with a copy of such maintenance contract as
amended or supplemented. During the term of the Lease, Lessee shall, at its
expense,keep the Equipment in good working order, repair, appearance and
condition and make all reasonably necessary adjustments, repairs and
replacements, all of which shall become the property of Lessor during the term
of the Lease, subject toLessee's right to acquire the Equipment and any
improvements thereto at the conclusion of the Lease. Lessee shall not use or
permit the use of the Equipment for any purpose for which, the Equipment is
not designed or intended.
8. OWNERSHIP, LIENS AND INSPECTIONS
(a) Lessee shall keep the Equipment free from any marking or labeling which
might be interpreted as a claim of ownership by Lessee or any party other
thanLessor and its Assignee(s), and, if requested by Lessor, shall affix and
maintain tags, decals or plates furnished by Lessor on the Equipment
indicating ownership and title to the Equipment in Lessor or its Assignee(s).
Upon reasonable notice toLessee, Lessor or its agents shall have access to the
Equipment and Lessee's books and records with respect to the Lease and the
Equipment at reasonable times for the purpose of inspection and for any other
purposes contemplated by the Lease,subject to the reasonable security
requirements of Lessee.
(b) Lessee shall execute and deliver such instruments as may be reasonably
requested by Lessor,including financing statements filed under the UCC, PPSA
or other applicable law governing secured transactions, as are required to be
filed to evidence the interest of Lessor and its Assignee(s) in the Equipment
or the Lease. Lessee has no interestin the Equipment except as expressly set
forth in the Lease, and that interest is a leasehold interest. Lessor and
Lessee agree, and Lessee represents for the benefit of Lessor and its
Assignee(s) that the Lease is intended to be a "financelease" and not a "lease
intended as security" as those terms are used in the UCC; and that the Lease
is intended to be a "true lease" as the term is commonly used under the
Internal Revenue Code of 1986, as amended("Tax Code").
(c) LESSEE SHALL KEEP THE LEASE, THE EQUIPMENT AND ANY IMPROVEMENTS FREE AND
CLEAR OF ALL LIENS AND ENCUMBRANCESOF WHATSOEVER KIND (EXCEPT THOSE CREATED BY
LESSOR) AND LESSEE SHALL NOT ASSIGN THE LEASE OR ANY OF ITS RIGHTS UNDER THE
LEASE OR SUBLEASE ANY OF THE EQUIPMENT OR GRANT ANY RIGHTS TO THE EQUIPMENT
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR. Nopermitted assignment or
sublease shall relieve Lessee of any of its obligations under the Lease and
Lessee agrees to pay all costs and expenses Lessor may incur in connection
with such sublease or assignment by Lessee. Lessee grants to Lessor theright
of first refusal on any sublease or other grant of Lessee's rights to the
Equipment, which right of first refusal will terminate at the conclusion of
the Lease.
9. DISCLAIMER OF WARRANTIES
(a) LESSOR LEASES THE EQUIPMENT "AS IS," AND BEING NEITHER THE MANUFACTURER OF
THE EQUIPMENT NOR THE AGENT OF EITHER THE MANUFACTURER OR SELLER,LESSOR
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH
RESPECT TO THE CONDITION OR PERFORMANCE OF THE EQUIPMENT, ITS MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR WITH RESPECT TO PATENT INFRINGEMENTS OR
THELIKE. LESSOR SHALL HAVE NO LIABILITY TO LESSEE OR ANY OTHER PERSON FOR ANY
CLAIM, LOSS OR DAMAGE OF ANY KIND OR NATURE WHATSOEVER, NOR SHALL THERE BE ANY
ABATEMENT OF RENTAL FOR ANY REASON INCLUDING CLAIMS ARISING OUT OF OR IN
CONNECTION WITH(i) THE DEFICIENCY OR INADEQUACY OF THE EQUIPMENT FOR ANY
PURPOSE, WHETHER OR NOT KNOWN OR DISCLOSED TO LESSOR, (ii) ANY DEFICIENCY OR
DEFECT IN THE EQUIPMENT, (iii) THE USE OR PERFORMANCE OF THE EQUIPMENT, OR
(iv) ANY LOSS OFBUSINESS OR OTHER CONSEQUENTIAL LOSS OR DAMAGE, WHETHER OR NOT
RESULTING FROM ANY OF THE FOREGOING.
(b) For the term of the Lease, Lessor assigns toLessee (to the extent
possible), and Lessee may have the benefit of, any and all manufacturer's
warranties, service agreements and patent indemnities, if any, with respect to
the Equipment; provided, however, that Lessee's sole remedy forthe breach of
any such warranty, indemnification or service agreement shall be against the
manufacturer of the Equipment and not against Lessor, nor shall any such
breach have any effect whatsoever on the rights and obligations of Lessor or
Lesseewith respect to the Lease.
(c) NO REPRESENTATIONS OR WARRANTIES OF THE MANUFACTURER OR DISTRIBUTOR OF THE
EQUIPMENT, OR ANY OTHER THIRD PARTY, CAN BINDLESSOR, AND LESSEE ACKNOWLEDGES
AND AGREES THAT LESSOR SHALL HAVE NO OBLIGATIONS WITH RESPECT TO THE EQUIPMENT
EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR IN ANOTHER DOCUMENT EXECUTED BY
LESSOR.
10. ASSIGNMENT
(a) Lessee acknowledges and understands that Lessor may assign to a successor,
financing lender and/or purchaser ("Assignee") all or any part of theLessor's
right, title and interest in and to the Lease and the Equipment and Lessee
hereby consents to such assignment(s). In the event Lessor transfers or
assigns, or retransfers or reassigns, to an Assignee all or part of
Lessor'sinterest in the Lease, the Equipment or any sums payable under the
Lease (including any extension rentals, purchase sums or new schedule rentals
which may become due at the end of the Base Term), whether as collateral
security for loans or advancesmade or to be made to Lessor by such Assignee or
otherwise, Lessee covenants that, upon receipt of notice of any such transfer
or assignment which may include an invoice to remit payment to an Assignee,
3
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(i) Lessee shall, if so instructed, pay and perform its obligations under the
Lease to theAssignee (or to any other party designated by Assignee), and shall
not assign the Lease or any of its rights under the Lease or permit the Lease
to be amended, modified, or terminated without the prior written consent of
Assignee;
(ii) Lessee's obligations under the Lease with respect to Assignee shall be
absolute and unconditional and not be subject to anyabatement, reduction,
recoupment, defense, offset or counterclaim for any reason, alleged or proven,
including, but not limited to, a defect in the Equipment, the condition,
design, operation or fitness for use of the Equipment or any loss
ordestruction or obsolescence of the Equipment or any part, the prohibition of
or other restrictions against Lessee's use of the Equipment, the interference
with such use by any person or entity, any failure by Lessor to perform any of
itsobligations contained in the Lease, any insolvency or bankruptcy of Lessor,
or for any other cause;
(iii) Lessee shall, upon request ofLessor, submit documents and certificates
as may be reasonably required by Assignee to secure and complete such transfer
or assignment, including but not limited to the documents set forth in Section
15(c) of this Master Agreement;
(iv) Lessee shall, where applicable, execute and deliver to Assignee copies of
any notices which are required under the Lease to be sent toLessor; and
(v) Lessee shall, if requested, restate to Assignee the representations,
warranties and covenants contained in the Lease(upon which Lessee acknowledges
Assignee may rely) and shall make such other representations, warranties and
covenants to Assignee as may be reasonably required to give effect to the
assignment.
(b) Lessor shall not make an assignment or transfer to any Assignee who shall
not agree that, so long as Lessee is not in default under the Lease,
suchAssignee shall take no action to interfere with Lessee's quiet enjoyment
and use of the Equipment in accordance with the terms of the Lease. No such
assignment or conveyance shall relieve Lessor of its obligations under the
Lease. No suchassignment shall increase Lessee's obligations nor decrease
Lessee's rights hereunder. Notwithstanding the foregoing or anything to the
contrary contained in this Master Agreement, any assignee of Lessor will be
bound by all terms of thisMaster Agreement, as well as any Schedule(s), and
any assignee of Lessor's interest in the Equipment will be bound by the terms
of this Master Agreement, including but not limited to Lessee's right to
purchase the Equipment pursuant toSection 19(b). Upon any assignment by
Lessor, the Lessor will promptly notify Lessee of such assignment of its
interest, and Lessee shall be entitled to rely on any notice of assignment
from Lessor.
11. QUIET ENJOYMENT
Lessor covenants that so long as Lessee is not in default under a Lease,
Lessor shall take no action to interfere with Lessee's possession and use of
theEquipment subject to and in accordance with the provisions of the Lease.
12. INDEMNIFICATION
Except for the gross negligence or willful misconduct of Lessor or Assignee,
Lessee shall and does agree to indemnify, protect, defend, save and hold
harmlessLessor and its Assignee(s) from and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs, or
expenses of any kind and nature whatsoever, including but not limited to
reasonable attorney fees(including without limitation attorney fees in
connection with the enforcement of this indemnification) which may be imposed
upon, incurred by or asserted against Lessor or its Assignee(s) in any way
relating to or arising out of the Lease, themanufacture, ownership, lease,
possession, use, condition, operation, accident in connection with the
Equipment (including, without limitation, those claims based on latent and
other defects, whether or not discoverable, or claims based on strictliability,
or any claim for patent, trademark or copyright infringement, or claims for
any damages to any person or property, any costs associated with, or any fines
caused by violation of any Environmental Laws) or Lessee's failure to
protector remove proprietary data from memory storage devices. Lessor's and
its Assignee's rights arising from this Section shall survive the expiration
or other termination of the Lease. Nothing in this Section shall limit or
waive any right ofLessee to proceed against the manufacturer of the Equipment.
13. RISK OF LOSS
(a) Lessee assumes and shall bear the entire risk of loss and damage, whether
or not insured against, of the Equipment from any and every cause whatsoever,
anddamage caused by the Equipment to the environment, any person or property,
as of the date the Equipment is delivered to Lessee.
(b) In the event of lossor damage of any kind to any Item, Lessee shall use
all reasonable efforts to place the Item in good repair, condition and working
order to the reasonable satisfaction of Lessor within sixty (60) days of such
loss or damage, unless the Lessor,in its sole reasonable discretion,
determines in writing within twenty (20) days of receiving notice from the
Lessee of such damage that such Item has been irreparably damaged, in which
case Lessee shall, within thirty (30) days ofLessor's determination of
irreparable loss, make its election to either pay Lessor the Stipulated Loss
Value for the irreparably damaged Item or replace the irreparably damaged
Item, all as provided in this Section. For purposes of this Sectionand
Sections 14 and 19(b), the Stipulated Loss Value will start at 110% of
Lessor's original equipment cost and decline by 1.25% per month during the
Base Term and will not decline any further after the expiration of the Base
Term. To theextent that the Item is damaged but not irreparably damaged and if
Lessee is entitled, pursuant to the insurance coverage, to obtain proceeds
from such insurance for the repair of the Item, Lessee (provided no Event of
Default has occurred and iscontinuing under the Lease) may arrange for the
disbursement of such proceeds to the manufacturer or other entity approved by
Lessor to perform the repairs to pay the cost of repair. However, Lessee's
obligation to timely repair the damagedItem is not contingent upon receipt of
such insurance proceeds.
(c) In the event that Lessee elects to pay Lessor the Stipulated Loss Value
for theirreparably damaged Item, Lessee shall (i) pay such amount (computed as
of the first day of the month following the determination of the irreparable
damage by the Lessor) to Lessor on the first day of the month following the
election by Lesseeas provided in (b) above, (ii) pay all Base Monthly Rental
for the Item up to the date that the Stipulated Loss Value is paid to Lessor,
and (iii) arrange with the applicable insurance company (with the consent of
Lessor, which consentshall not be unreasonably withheld, conditioned or
delayed) for the disposition of the irreparably damaged Item. If not all the
Equipment is irreparably damaged, the value for calculation of Stipulated Loss
Value ("Value") as set forth onthe Schedule for the irreparably damaged Item
shall be multiplied by the applicable Stipulated Loss Value percentage in
relation to all Equipment listed in the Schedule and Authorization(s) for
Progress Payment to compute the Stipulated Loss Valuefor such irreparably
damaged Item, and the Base Monthly Rental for the undamaged Equipment
remaining due (after payment of the Stipulated Loss Value for the irreparably
damaged Item) shall be that amount resulting from multiplying the original
BaseMonthly Rental by the ratio of the Value of the undamaged Equipment
divided by the Value for all the Equipment listed in the Schedule and
Authorization(s) for Progress Payment prior to the damage.
4
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(d) If Lessee elects to replace the irreparably damaged Item, Lessee shall
continue all payments under the Leasewithout interruption, as if no such
damage, loss or destruction had occurred, and shall replace such irreparably
damaged Item, paying all such costs associated with the replacement, and
Lessee shall be entitled to insurance proceeds up to the amountexpended by
Lessee in effecting the replacement. Lessee shall within twenty (20) days
following the date of determination of irreparable damage by the Lessor effect
the replacement by replacing the irreparably damaged Item with a"Replacement
Item" so that Lessor has good, marketable and unencumbered title to such
Replacement Item. The Replacement Item shall have a fair market value equal to
or greater than the Item replaced and an anticipated fair market value, atthe
expiration of the Base Term, equal to the fair market value that the replaced
Item would have had at the end of the Base Term; and further, the Replacement
Item shall be the same manufacture, model and type (or, if such manufacture,
model andtype is unavailable, a substantially similar product) and of at least
equal capacity to the Item for which the replacement is being made. Upon
delivery, such Replacement Item shall become subject to all of the terms and
conditions of the Lease and,for the avoidance of doubt, ownership of such
Replacement Item shall immediately vest in Lessor free and clear of all
claims, liens and encumbrances. Lessee shall execute all instruments or
documents reasonably necessary to effect the foregoing.
(e) For purposes of this Section 13, the term "fair market value" shall mean
the price of the Equipment delivered and installed atLessee's location that
would be obtained in an
arm's-length
transaction between an informed and willing buyer-lessee under no compulsion
to buy or lease and an informed and willing seller-lessorunder no compulsion
to sell or lease. If Lessor and Lessee are unable to agree upon fair market
value, such value shall be determined, at Lessee's expense, in accordance with
the foregoing definition, by three (3) independent appraisers,one to be
appointed by Lessee, one to be appointed by Lessor and the third to be
appointed by the first two. Upon the completion of the appraisals, the fair
market value shall be determined by the average of the valuations in the
appraisals.
14. INSURANCE
During the term of the Lease, Lessee, at its own expense, shall maintain in
regard to the Equipment all property insurance (in an amount not less than
theStipulated Loss Value) and comprehensive public liability insurance,
including any claims caused from the breach of any Environmental Laws
involving the Equipment, in amounts and with carriers reasonably satisfactory
to Lessor. Any such insuranceshall name Lessor and the Assignee(s) as
additional insured and, as for the all property insurance, loss payees as
their interests may appear. All such insurance shall provide that it may not
be terminated, canceled or altered without at leastthirty (30) days' prior
written notice to Lessor and its Assignee(s). Coverage afforded to Lessor
shall not be rescinded, impaired, or invalidated by any act or neglect of
Lessee. Lessee agrees to supply to Lessor, upon request, evidenceof such
insurance.
15. REPRESENTATIONS AND WARRANTIES OF LESSEE; FINANCIAL STATEMENTS
(a) Lessee represents and warrants to Lessor and its Assignee(s) (i) that the
execution, delivery and performance of this Master Agreement and the Leasewas
duly authorized and that upon execution of this Master Agreement and the Lease
by Lessee and Lessor, this Master Agreement and the Lease will be in full
force and effect and constitute a valid legal and binding obligation of
Lessee, andenforceable against Lessee in accordance with their respective
terms; (ii) to the extent descriptions have been provided by Lessee, the
Equipment is accurately described in the Lease and all documents of Lessee
relating to the Lease;(iii) that Lessee is in good standing in the
jurisdiction of its incorporation and/or organization and in any jurisdiction
in which any of the Equipment is located; (iv) that no consent, notice to,
registration with or approval from state,federal or other government authority
or agency is required with respect to the execution, delivery and performance
by the Lessee of this Master Agreement or the Lease or, if any such approval,
notice, registration or action is required, it has beenobtained; (v) that the
entering into and performance of this Master Agreement and the Lease will not
violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's articles of incorporation, bylaws,articles of
organization, operating agreements and/or other corporate entity documents or
result in any breach of, or constitute a default under, or result in the
creation of any lien, charge, security interest or other encumbrance upon any
assetsof Lessee or upon the Equipment pursuant to any instrument to which
Lessee is a party or by which it or its property may be bound; (vi) there are
no actions, suits or proceedings pending or, to Lessee's knowledge,
threatened, in any courtor administrative agency, arbitrator or governmental
body which will, if determined adversely to Lessee, materially affect its
ability to perform its obligations under the Lease or any related agreement to
which it is a party; (vii) that asidefrom this Master Agreement and the Lease
there are no additional agreements between Lessee and Lessor relating to the
Equipment, and (viii) that any and all financial statements and other
information supplied to Lessor at the time of executionof the Lease and any
amendment, are true and complete. The foregoing representations and warranties
shall survive the execution and delivery of the Lease and any amendments
hereto and shall upon the written request of Lessor be made to Lessor'sAssignee(
s).
(b) Prior to and during the term of the Lease, Lessee will furnish Lessor with
Lessee's annual audited financial statements no laterthan one hundred twenty
(120) days after its fiscal year end and a copy of its quarterly unaudited
financial statements within forty-five (45) days after the end of each fiscal
quarter. If Lessee is a subsidiary of another company, Lesseeshall supply such
company's financial statements and guarantees as are reasonably acceptable to
Lessor. Lessor's obligations to perform under any Lease is subject to the
condition that the financial statements furnished to Lessor by Lesseepresent
the financial condition and results of operations of Lessee and its affiliated
corporations and/or companies, if any, and any guarantor of Lessee's
obligations under any Lease, as of the date of such financial statements, and
that sincethe date of such statements there have been no material adverse
changes in the assets or liabilities, the financial condition or other
condition which in Lessor's or Assignee(s)' sole reasonable discretion are
deemed to be materiallyadverse. Lessee shall also provide Lessor with such
other statements concerning the Lease and the condition of the Equipment as
Lessor may from
time-to-time
reasonablyrequest.
(c) Upon Lessor's request, Lessee shall, with respect to each Lease, deliver
to Lessor (i) corporate entity documents, which mayinclude the bylaws,
operating agreement, partnership agreement, resolution or corporate action
authorizing the transactions contemplated in the Lease; (ii) an incumbency
certificate certifying that the person signing this Master Agreement and
theLease holds the office the person purports to hold and has authority to
sign on behalf of Lessee; (iii) an opinion of Lessee's counsel with respect to
the representations in Section 15(a); (iv) an agreement with Lessor's
Assigneewith regard to any assignment as referred to in Section 10; (v) the
purchase documents if Lessee has sold or assigned its interest in the
Equipment to Lessor; (vi) an insurance certificate evidencing the insurance
provided by Lesseepursuant to Section 14; and (vii) an Installation
Certificate duly executed by Lessee as referred to in Section 2. Failure by
Lessee to deliver any of these documents when due may, at Lessor's option,
result in a continuation ofthe Installation Term thus delaying the Base Term
Commencement Date or an increase in the Base Monthly Rental to recover costs
incurred by Lessor consequent to the delay or the termination of the Lease as
provided in Section 16.
5
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16. DEFAULT, REMEDIES
(a) The following shall be deemed "Events of Default" under the Lease:
(i) Lessee fails to pay any installment of rent or other charge or amount due
under the Lease when the same becomes due and payable and suchfailure
continues for ten (10) days after Lessor's written notice to Lessee thereof;
(ii) Except as expressly permitted inthe Lease, Lessee attempts to remove,
sell, encumber, assign or sublease or fails to insure any of the Equipment;
(iii) Anyrepresentation or warranty made by Lessee or Lessee's guarantor in
the Lease or any document supplied in connection with the Lease or any
financial statement is untrue as and when made;
(iv) Lessee fails to observe or perform any of the other obligations required
to be observed by Lessee under the Lease, including failure todeliver any
documents required of Lessee under the Lease, and such failure continues
uncured for ten (10) days after its occurrence thereof;
(v) if Lessee (i) becomes insolvent, (ii) is generally unable to pay, or fails
to pay, its debts as they become due,(iii) files, or has filed against it, a
petition for voluntary or involuntary bankruptcy or pursuant to any other
insolvency law, (iv) makes or seeks to make a general assignment for the
benefit of its creditors, or (v) applies for,or consents to, the appointment
of a trustee, receiver, or custodian for a substantial part of its property or
business; and/or
(vi) Ifwithin thirty (30) days after the commencement of any action against
Lessee or Lessee's guarantor seeking reorganization, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation, such action is notdismissed, or if within thirty (30) days after
the appointment (with or without Lessee's or Lessee's guarantor's consent) of
any trustee, receiver or liquidator such appointment is not vacated;
(vii) Lessee or any guarantor of Lessee shall suffer an adverse change in its
financial condition after the date hereof as determined byLessor in its sole
discretion, including but not limited to a transfer of assets by Lessee or a
guarantor of Lessee that would materially impact the financial condition of
Lessee or any guarantor of Lessee, or there shall occur a substantial changein
ownership of the outstanding stock of the Lessee, any subsidiary of Lessee or
a substantial change in its board of directors, members or partners;
(viii) Lessee is in default of any other Schedule or agreement executed with
Lessor or under any agreement with any other party that inLessor's sole
opinion is a material agreement; or shall fail to sign and deliver to Lessor
any document requested by Lessor in connection with this Master Agreement or
shall fail to do anything determined by Lessor to be necessary or desirableto
effectuate the transaction contemplated by this Master Agreement or to protect
Lessor's rights and interest in this Master Agreement and Equipment; or shall
fail to provide financial statements to Lessor as provided for in Section
15(b) hereof;
(ix) Lessee breaches any applicable license or other agreement for software;
and/or
(x) Failure of Lessee to timely execute and deliver to Lessor any document
required under Section 10 of this Master Agreement.
(b) Lessee shall immediately notify Lessor of the occurrence of an Event of
Default or any event that wouldbecome an Event of Default. If an Event of
Default occurs and is continuing beyond the applicable notice and cure periods
provided in this Section 16, Lessor may declare the Lessee to be in default.
Upon a declaration or notice of default,Lessor may immediately apply the
Security Deposits (as defined and set forth in Section 18) to any one or more
of the obligations of Lessee to Lessor, including unpaid rent, fees, costs,
charges, expenses and/or the Stipulated Loss Value (asdefined and set forth in
Section 13) or as otherwise provided for in any Schedule to this Master
Agreement. The application of the Security Deposits shall not be in lieu of,
but shall be in addition to all other remedies available to Lessorunder the
Master Agreement and applicable law. Lessee authorizes Lessor at any time
thereafter, with or without terminating the Lease, to enter any premises where
the Equipment may be and take possession of the Equipment. Lessee shall, upon
suchdeclaration or notice of default, without further demand, immediately pay
Lessor an amount which is equal to (i) any unpaid amount due on or before
Lessor declared the Lease to be in default, plus (ii) the greater of (a) the
sum ofthe remaining monthly rentals and other amounts owed under the Lease,
including interest, as provided herein, or (b) as liquidated damages for loss
of a bargain and not as a penalty, an amount equal to the Stipulated Loss
Value for theEquipment computed as of the date the last Base Monthly Rental
payment was due prior to the date Lessor declared the Lease to be in default,
together with interest, as provided herein, plus (iii) all attorney fees and
court costs incurred byLessor relating to the enforcement of its rights under
the Lease. After an Event of Default, at the request of Lessor and to the
extent requested by Lessor, Lessee shall immediately comply with the
provisions of Section 6(d) and Lessor may sellthe Equipment at a private or
public sale, in bulk or in parcels, with or without notice, without having the
Equipment present at the place of sale; or Lessor may lease, otherwise dispose
of or keep idle all or part of the Equipment, subject,however, to its
obligation to mitigate damages. The proceeds of sale, lease or other
disposition, if any, of the Equipment shall be applied: (1) to all Lessor's
costs, charges and expenses incurred in taking, removing, holding,
repairing,selling, leasing or otherwise disposing of the Equipment including
actual attorney fees; then (2) to Lessor in an amount equal to the greater of
(a) the sum of the remaining monthly rentals and other amounts owed under the
Lease, or(b) the Stipulated Loss Value for the Equipment and all other sums
owed by Lessee under the Lease; plus any unpaid rent which accrued to the date
Lessor declared the Lease to be in default; plus, any indemnities that remain
unpaid under theLease; and (3) any surplus shall be retained by Lessor. Lessee
shall pay any deficiency in (1) and (2) immediately. If Lessee breaches
Section 19(l) of this Master Agreement with regard to Software (as hereinafter
defined inSection 19(l)), Lessee shall be liable to Lessor for additional
damages in an amount equal to the original purchase price paid by Lessor for
the Software and, at Lessor's option, Lessor shall also be entitled to
injunctive and otherequitable relief. The exercise of any of the foregoing
remedies by Lessor shall not constitute a termination of the Lease unless
Lessor so notifies Lessee in writing. Lessor may also proceed by appropriate
court action, either at law or in equity,to enforce performance by Lessee of
the applicable covenants of the Lease or to recover damages for the breach of
the Lease. Upon the happening of an Event of Default by Lessee with regard to
Software under Section 19(l) of this Lease, Lessormay elect any of the
following remedies: (i) by notice to Lessee, declare any license agreement
with respect to Software terminated, in which event the right and License of
Lessee to use the Software shall immediately terminate and Lessee
shallthereupon cease all use of the Software and return all copies thereof to
Lessor or original Licensor; (ii) have access to and disable the Software by
any means deemed necessary by Lessor, for which purposes Lessee hereby
expressly consents tosuch access and disablement, promises to take no action
that would prevent or interfere with Lessor's ability to perform such access
and disablement, and waives and releases any and all claims that it has or
might otherwise have for any and alllosses, damages, expenses, or other
detriment that it might suffer as a result of such access and disablement.
Lessee agrees that the detriment that Lessor will suffer as a result of a
breach by Lessee of the obligations contained in this MasterAgreement cannot
be adequately compensated by monetary damages, and therefore, Lessor shall be
entitled to injunctive and other equitable relief to enforce the provisions of
this paragraph. LESSEE AGREES THAT LESSOR SHALL HAVE NO DUTY TO MITIGATELESSOR'S
DAMAGES UNDER ANY SCHEDULE BY TAKING LEGAL ACTION TO RECOVER THE SOFTWARE
FROM LESSEE OR ANY THIRD PARTY, OR TO DISPOSE OF THE SOFTWARE BY SALE,
RE-LEASE
OR OTHERWISE.
6
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(c) The waiver by Lessor of any breach of any obligation of Lessee shall not
be deemed a waiver of any futurebreach of the same or any other obligation.
The subsequent acceptance of rental payments under the Lease by Lessor shall
not be deemed a waiver of any such prior existing breach at the time of
acceptance of such rental payments. The rights affordedLessor under Section 16
shall be cumulative and concurrent and shall be in addition to every other
right or remedy provided for the Lease or now or later existing in law
(including as appropriate all the rights of a secured party or lessor,
asapplicable, under the UCC, PPSA or other applicable law governing secured
transactions) or in equity and Lessor's exercise or attempted exercise of such
rights or remedies shall not preclude the simultaneous or later exercise of
any or allother rights or remedies.
(d) In the event Lessee fails to perform any of its obligations under the
Lease within ten (10) days after Lessee'sreceipt of written notice from Lessor
of such failure to perform, Lessor may perform the same at the cost and
expense of Lessee. In any such event, Lessee shall promptly reimburse Lessor
for any such reasonable costs and expenses actually incurredby Lessor.
17. LESSOR'S TAX BENEFITS
Lessee acknowledges that Lessor shall be entitled to claim all tax benefits,
credits and deductions related to the ownership of the Equipment for
federalincome tax purposes including, without limitation:
(i) deductions on Lessor's cost of the Equipment for each of its tax years
during the term of theLease under any method of depreciation or other cost
recovery formula permitted by the Tax Code, and (ii) interest deductions as
permitted by the Tax Code on the aggregate interest paid to any Assignee
(hereinafter collectively"Lessor's Tax Benefits"). Lessee agrees to take no
action inconsistent (including the voluntary substitution of Equipment) with
the foregoing or which would result in the loss, disallowance, recapture or
unavailability to Lessor ofLessor's Tax Benefits. Lessee hereby indemnifies
Lessor and its Assignee(s) from and against (a) any loss, disallowance,
unavailability or recapture of Lessor's Tax Benefits resulting from any action
or failure to act of Lessee,including replacement of the Equipment, plus (b)
all interest, penalties, costs, actual reasonable attorney fees or additional
tax liability actually paid to a taxing authority resulting from such loss,
disallowance, unavailability orrecapture.
18. SECURITY DEPOSIT
In the event a Schedule requires that one or more security deposits be
provided to Lessor (the "Security Deposits"), Lessor acknowledges receipt
ofthe Security Deposits and Lessee grants to Lessor a security interest in
each of the Security Deposits, to secure all obligations of Lessee under this
Master Agreement and all Schedules hereto, including but not limited to all
payment obligationsand all other obligations of Lessee to Lessor for which
Lessee is now or may in the future become liable. Lessee authorizes Lessor to
file all financing statements, amendments to financing statements and other
documents as may be required, if any,with any public filing agency in any
jurisdiction, to advise of Lessor's interest in the Security Deposits. Lessee
agrees to execute such additional documents or instruments as may reasonably
be deemed necessary by Lessor in order to maintainand continue such security
interest.
19. GENERAL
(a) The Lease shall be deemed to have been made and delivered in the State of
Michigan and shall be governed in all respects by the laws of such State.
LESSEEAGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND/OR FEDERAL COURTS
IN THE STATE OF MICHIGAN IN ALL MATTERS RELATING TO THE LEASE, THE EQUIPMENT,
AND THE CONDUCT OF THE RELATIONSHIP BETWEEN LESSOR AND LESSEE. THE PARTIES
HERETO AGREE THAT IN THEEVENT OF AN ALLEGED BREACH OF THIS MASTER AGREEMENT OR
ANY DOCUMENTS RELATING THERETO BY EITHER PARTY, OR ANY CONTROVERSIES ARISE
BETWEEN THE PARTIES RELATING TO THIS MASTER AGREEMENT OR ANY DOCUMENTS
RELATING THERETO, SUCH CONTROVERSIES SHALL BETRIED BY A JUDGE ALONE BEFORE THE
FEDERAL OR STATE COURTS IN OAKLAND COUNTY, MICHIGAN. THE PARTIES, HAVING HAD
THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOOSING,
HEREBY KNOWINGLY AND VOLUNTARILY CONSENT TO MICHIGANJURISDICTION AS SET FORTH
HEREIN AND WAIVE THEIR RIGHTS TO A TRIAL BY JURY IN ANY MATTER RELATING TO
THIS MASTER AGREEMENT OR ANY DOCUMENTS RELATED THERETO. IN THE EVENT THAT ANY
CASE, LAWSUIT OR CLAIMS ARE FILED AGAINST LESSOR ARISING OUT OF THISLEASE,
EITHER PARTY SHALL BE ENTITLED TO ITS ATTORNEY FEES AND COURT COSTS IN THE
EVENT SUCH PARTY IS THE PREVAILING PARTY BY A FINAL
NON-APPEALABLE
JUDGMENT RENDERED BY A COURT OF COMPETENT JURISDICTION.
(b) Provided no Event of Default has occurred and is continuing, and provided
no Event of Default or event which with the giving of notice or lapse of
time,or both, would constitute an Event of Default has occurred and is
continuing, upon the completion of the Base Term of any Schedule, Lessee
shall, upon giving one hundred eighty (180) days prior written notice to
Lessor by certified mail, electone of the following options: (i) purchase all,
but not less than all, of the Items of Equipment on the applicable Schedule
for a price to be agreed upon by both Lessor and any applicable Assignee and
Lessee, (ii) extend the Schedule forall, but not less than all, of the Items
of Equipment on the applicable Schedule for an additional twelve (12) months
at the Base Monthly Rental then in effect or (iii) return all, but not less
than all of the Items of Equipment on theapplicable Schedule to Lessor at
Lessee's expense to a destination within the Continental United States as
directed by Lessor, provided that for option (iii) to apply, Lessee shall have
paid all late charges, interest, taxes, penalties dueunder the Lease, Lessee
agrees to pay to Lessor an additional per diem rent ("Hold Over Rent") in an
amount equal to one hundred twenty five percent (125%) of the Base Monthly
Rental then in effect divided by thirty (30) until allItems of Equipment are
received by Lessor, Lessee shall have complied with Sections 6 (a), (b), (c)
and Section 7 hereof, and Lessee shall immediately pay to Lessor a Terminal
Rental Adjustment Cost ("TRAC") in an amount equal tosubsection (ii) above.
Provided that Lessee selects option (iii), Lessor shall use its best efforts
to remarket the Equipment and remit to Lessee any amount collected by Lessor
less its reasonable remarketing costs which shall include, withoutlimitation,
costs of repossession, reconfiguration,
de-installation
and installation, refurbishment, storage, and freight charges and legal fees,
whether in house or to third parties. With respect to option(i) and option
(iii), both Lessor and Lessee shall have absolute and sole discretion
regarding the terms and conditions of the agreement to the purchase price of
the Equipment. In the event that Lessor and Lessee have not agreed to
eitheroption (i) or option (iii) by the conclusion of the Base Term, or if
Lessee fails to provide notice of its election via certified mail at least one
hundred eighty (180) days prior to the termination of the Base Term, then
option(ii) shall automatically apply at the end of the Base Term. At the
conclusion of option (ii) above, the Lease shall continue for successive six
(6) month renewals at the payment specified on the respective Schedule until
either Lesseeor Lessor provide the other party with at least ninety (90) days
written notice of their desire to terminate the agreement.
7
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(c) This Master Agreement and the Lease, along with the ancillary documents
related to the foregoing, constitutethe entire and only agreement between
Lessee and Lessor with respect to the lease of the Equipment, and the parties
have only those rights and have incurred only those obligations as
specifically set forth herein. The covenants, conditions, termsand provisions
may not be waived or modified orally and shall supersede all previous
proposals, both oral and written, negotiations, representations, commitments
or agreements between the parties. The Lease may not be amended or discharged
except bya subsequent written agreement entered into by duly authorized
representatives of Lessor and Lessee. A photocopy or facsimile or scanned
reproduction of an original signature of a party to this Agreement shall bind
that party to the terms,conditions and covenants of the Agreement as if it
were the original.
LESSEE INITIALS
(d) All notices, consents or requests desired or required to be given under
the Lease shall be in writing and shall besent by certified mail, return,
receipt requested, or by courier service to the address of the other party set
forth in the introduction of this Master Agreement or to such other address as
such party shall have designated by proper notice.
(e) Each Schedule shall be executed with one original. Lessee consents to
signing this Master Agreement and other documents required by the Lease as
providedherein through an electronic means such as a
"e-
signature" or electronic marking in a mechanism and form required by Lessor,
which may require dual authentication, to the extent Lessor requests
thatLessee sign documents electronically. To the extent that a Schedule
constitutes chattel paper, a security interest in the Schedule may only be
created through the transfer or possession of the original Schedule, however
it may be marked"Original". This Master Agreement, in the form of a photocopy,
is Exhibit A to the Schedule and is not chattel paper by itself.
(f) Sectionheadings are for convenience only and shall not be construed as
part of the Lease.
(g) It is expressly understood that all of the Equipment shall be andremain
personal property, notwithstanding the manner in which the same may be
attached or affixed to realty, and, upon Lessor's request, Lessee shall
request from its mortgagee, landlord or owner of the premises a waiver in a
form containingsubstance that is reasonably satisfactory to Lessor.
(h) Lessor may upon written notice to Lessee advise Lessee that certain Items
supplied to Lessee areleased to Lessor and supplied to Lessee under the Lease
as a sublease. Lessee agrees to execute and deliver such acknowledgements and
assignments in connection with such a Lease as are reasonably required. If at
any time during the term of the LeaseLessor's right to lease such Equipment
expires, Lessor may remove such Equipment from Lessee's premises and shall
promptly provide identical substitute Equipment. All expenses of such
substitution, including de-installation, installationand transportation
expenses, shall be borne by Lessor.
(i) Prior to the delivery of any Item, the obligations of Lessor hereunder
shall be suspended to the extent thatit is hindered or prevented from
complying therewith because of: labor disturbances, including strikes and
lockouts; acts of God; pandemics; fires; storms; accidents; failure to deliver
any Item; governmental regulations or interferences or anycause whatsoever not
within the sole control of Lessor.
(j) Lessee hereby acknowledges and agrees that it has had a full and fair
opportunity to readeach of the terms and conditions of this Master Agreement,
specifically Sections 2, 16 and 19, and that Lessee fully understands the
terms and conditions herein, having had the opportunity to consult with an
attorney of its own choosing prior toexecuting this Master Agreement and any
related documents.
LESSEE INITIALS
(k) Any provision of this Master Agreement or any Schedule deemed to be
unlawful or unenforceable shall be ineffectivewithout invalidating the
remaining provisions of this Master Agreement and such Schedule.
(l) In the event the Equipment includes software (which Lesseeagrees shall
include all documentation, later versions, updates, upgrades, and
modifications) (herein "Software"), the following shall apply: (i) Lessee
shall possess and use the Software in accordance with the terms and conditions
ofany license agreement ("License") entered into with the owner/vendor of such
Software and shall not breach the License (at Lessor's request, Lessee shall
provide a complete copy of the License to Lessor); (ii) Lessee agrees
thatLessor shall have an interest in the License and Software arising out of
its payment of the price thereof to the extent the same is assignable and is
an assignee or third party beneficiary of the License; (iii) as due
consideration ofLessor's payment of the License and Software and for providing
the Software to Lessee at a lease rate (as opposed to a debt rate), Lessee
agrees that Lessor is leasing (and not financing) the Software to Lessee; (iv)
except for theoriginal price paid by Lessor, Lessee shall, at its own expense,
pay promptly when due all servicing fees, maintenance fees update and upgrade
costs, modification cost, and all other costs and expenses relating to the
Software and maintain theLicense in effect during the term of the Lease; and
(v) the Software shall be deemed Equipment for all purposes under the Lease.
(m) The partiesagree that this is a "Finance Lease" as defined by section
2A-103(g)
of the UCC. Lessee acknowledges either (a) that Lessee has reviewed and
approved any written Supply Contract (as defined byUCC
2-A-103(y))
covering the Equipment purchased from the Supplier (as defined by UCC
2A-103(x))
thereof for lease to Lessee or(b) that Lessor has informed or advised Lessee,
in writing, either previously or by this Lease of the following: (i) the
identity of the Supplier, (ii) that the Lessee may have rights under the
Supply Contract; and (iii) that theLessee may contact the Supplier for a
description of any such rights Lessee may have under the Supply Contract.
Lessee hereby waives any and all rightsand remedies granted to Lessee by
Sections 303 and 508 through 522 of Articles 2A of the UCC (although no such
waiver shall constitute a waiver of any of Lessee's rights or remedies against
the manufacturer of the Equipment).
8
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(n) The parties acknowledge that serial numbers and/or other identifiable
information for one or more Items maybe unavailable prior to execution of the
applicable Schedule. In the event a Schedule fails to indicate serial numbers
or other identifiable information or incorrectly identifies serial numbers or
other identifiable information, for one or moreItems after execution of the
applicable Schedule, Lessee expressly consents to Lessor's unilateral
amendment of the applicable Schedule to insert or correct serial numbers or
other identifiable information therein.
(o) Lessee hereby authorizes and appoints Lessor and Lessor's agents and
assigns as Lessee's
attorney-in-fact
to execute acknowledgement letters and other documents required to be executed
by Lessee to effect any underwriting or perfect any security interest
withregard to a Schedule.
The parties have executed this MasterLease Agreement as of the date first
written above.
LESSOR: LESSEE:
VARILEASE FINANCE, INC. BIRKS GROUP INC.
By: /s/ Helen Vahdati By: /s/ Marco Pasteris
Name: Helen Vahdati Name: Marco Pasteris
Title: Vice President Title: Vice-President, Finance
9
Exhibit 4.30
SCHEDULE NO. 01
SCHEDULE NO. 01 dated July 14, 2023 (the "Schedule") between VARILEASE
FINANCE, INC. (the "Lessor") and BIRKS GROUP INC. (the"Lessee") incorporates
by reference the terms and conditions of Master Lease Agreement dated July 14,
2023 between Lessor and Lessee (the "Master Agreement"), attached hereto, and
constitutes a separate lease between Lessor andLessee. The Schedule and Master
Agreement are hereinafter referred to collectively, as the "Lease". All
capitalized terms used herein but not defined herein shall have the same
meanings ascribed to them in the Master Agreement.
1. Equipment:
Assorted leasehold improvements, furniture, security equipment and related equipment asapproved by Lessor
together with all other equipment and property hereafter purchased pursuant to the terms of the Lease, and any
and all additions, enhancements and replacements thereto (collectively, the "Equipment"). Leaseholdimprovements,
software and soft costs, collectively, shall not exceed ninety percent (90%) of the Total Equipment Cost.
The Equipment shall be more fully and completely described in an Installation
Certificate, which shall later be executed by Lessee inconnection with the
Schedule. Upon Lessee's execution thereof, this section shall be automatically
amended to include all equipment and property described in the Installation
Certificate.
2. Equipment Location:
6455 MacLeod Trail Southwest, Unit 1127, Calgary, AB T2H 0K8, Canada; and
3035 Boul. Le Carrefour, Local R038A,Laval, QC H7T 1C8, Canada
Upon Lessee's execution of an Installation Certificate in connection with this
Schedule,this section shall be automatically amended to include any additional
locations specified in the Installation Certificate.
3. Total Equipment Cost:
$3,600,000.00
4. Base Term:
24 Months
5. Base Monthly Rental:
$142,200.00 (plus applicable sales/use tax)
6. Advance Payment:
$995,400.00 applied to the first(1
st
) and last six (6) rentals (plus applicable
sales/use tax). Lessee shall pay the first (1
st
) and last six (6) rentals in advanceupon the
execution of this Schedule. Lessee acknowledges
and agrees that, notwithstanding anything
to the contrary herein, this payment is
non-refundable
to Lessee under any circumstances, including, withoutlimitation, any termination
of this Lease for any reason prior to the end of its scheduled term. This
payment shall be deemed earned by Lessor, and upon receipt by Lessor, shall
immediately be applied to satisfy Lessee's obligation to make thefirst (1
st
) and last six (6) rentals.
7. Base Lease Rate Factor:
0.03950
8. Floating Lease Rate Factor:
The Base Lease Rate Factor shown in Section 7, which is used tocalculate the Base
Monthly Rental, shall increase 0.00008775 for every five (5) basis point increase in
24-month
U.S. Treasury Notes, until all Items of Equipment have been installed, at which point
thedate set forth on the Installation Certificate of the Lease shall have occurred. The
24-month
U.S. Treasury Note yield used as the basis for the derivation
of the Base Lease Rate Factor contained herein is4.14%.
9. Equipment Return Location:
To Be Advised
10. Special Terms:
a. Electronic Payment:
On or before the due date, Lessee shall electronically transfer in immediatelyavailable funds, all rental payments and other
sums required to fulfill Lessee's contractual obligation under the Lease ("Lease Payments"). Further, the Lease Payments must
be in US Dollars. Failure or refusal of Lessee to authorizesuch transfers or failure of Lessor or its assigns to receive such
payments by electronic transfer shall constitute an additional Event of Default under Section 16(a) of the Master Agreement.
Lessee Initials:
b. Canada Location and Indemnification:
Notwithstanding anything to the contrary herein or in the MasterAgreement, the parties
acknowledge and agree that the Equipment is or shall be located in Canada (the "Canada
Equipment") and Lessee will comply with all Canadian and local laws, regulations, and
ordinances, and all applicable requirementsof the manufacturer of the Canada Equipment
that apply to the physical possession, use, operation, condition, and maintenance of the
Canada Equipment. Lessee agrees to obtain all Canadian and local permits and licenses
necessary for the operation ofthe Canada Equipment. Lessee shall and does agree to
indemnify, defend, and hold harmless Lessor and its Assignee(s) from and against any
and all liabilities, obligations, losses, damages, penalties, claims, actions, suits,
costs, or expenses of anykind and nature whatsoever, including but not limited to
attorney's fees (including without limitation attorney's fees in connection with the
enforcement of this indemnification) which may be imposed upon, incurred by Lessor or
itsAssignee(s) in any way relating to or arising in connection with the location and
operation thereat, of the Canada Equipment. Notwithstanding the foregoing or anything to the
contrary contained herein, Lessee's obligation to indemnify does notextend to any damages
caused by and arising out of the gross negligence or willful misconduct of Lessor.
Lessor Initials: Lessee Initials:
Page 1 of 3 Pages
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c. Tax Payment and Indemnification
for the Canada Equipment:
Notwithstanding anything to the contrary underthe Master Agreement, for this Schedule only, during the term
of the Lease, Lessee shall pay directly all taxes, fees, and assessments, including, but not limited to,
sales, use, property tax and any foreign withholding tax that may be imposed byany taxing authority on the
Canada Equipment, on its purchase, ownership, delivery, possession, operation, rental, return to Lessor or
its purchase by Lessee (collectively, the "Canadian Taxes"). If any Canadian Taxes must be deducted orwithheld
from any amounts payable to Lessor, the amount payable shall be increased to yield to Lessor (after
payment of all Canadian Taxes) the full dollar amount projected for payment. Lessee hereby agrees to indemnify
and hold Lessor harmless fromand against any and all losses incurred by Lessor arising out of Lessee's
absolute and unconditional obligation to remit any and all Canadian Taxes directly to the applicable taxing
authority as required under any law where any Item of CanadaEquipment is located ("Jurisdiction"). Lessee
hereby agrees to provide quarterly and/or annual reports, as applicable, to Lessor verifying that all
Canadian Taxes have been paid in accordance with the laws of each applicable Jurisdiction(collectively, the
"Canadian Tax Reports"). FAILURE OF LESSEE TO PROVIDE THE CANADIAN TAX REPORTS TO LESSOR AS PROVIDED HEREIN
SHALL CONSTITUTE AN EVENT OF DEFAULT UNDER SECTION 16(a)(IV) OF THE MASTER AGREEMENT. Lessee further
agrees toindemnify, defend and hold Lessor harmless from and against any and all demands, claims, costs,
expenses, attorney fees or liabilities that may result therefrom or from enforcement of this Indemnification.
Lessee Initials:
d. Guarantee:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree
that thisLease is guaranteed by BIRKS INVESTMENTS INC.; BIRKS JEWELLERS LIMITED; BIRKS
USA, INC.; and CASH, GOLD & SILVER INC. as set forth in the four (4) Guarantees, each
dated July 14, 2023, copies of which are attached hereto andincorporated herein.
e. Purchase Option:
For purposes of this Schedule only, provided no Event of Default has occurred, iscontinuing and remains uncured,
Section 19(b)(i) of the Master Agreement shall be deleted in its entirety and replaced with the following:
"purchase all, but not less than all, of the Items of Equipment for twenty percent (20%) of theTotal Equipment
Cost". All other terms and conditions of the Master Agreement shall remain in full force and effect without change.
f. Sale Leaseback:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree thatall or a portion of this
transaction is structured as a sale leaseback, whereby Lessor shall purchase the equipment from Lessee for
purposes of leasing the equipment back to Lessee in accordance with the terms and conditions set forth in the
SaleLeaseback Agreement dated July 14, 2023, a copy of which is attached hereto and incorporated herein.
g. Additional Event of Default; Lien Releases:
No later than sixty (60) days after Lessor'spayment for any Item of Equipment (the "Default
Date"), Lessee shall provide to Lessor lien releases and/or subordination of interest
letter(s) in a form acceptable to Lessor in its sole discretion (collectively, the
"LienReleases") relating to security interests or other encumbrances with respect to such
Item of Equipment. If the Lien Releases have not been received by Lessor by the Default
Date, Lessor may, in its sole discretion, pursue any one of thefollowing options: (i)
allow Lessee additional time to provide the Lien Releases and extend the Default Date;
or (ii) demand that Lessee pay to Lessor a total amount equal to all Lessor's payments
for Equipment, plus all pro ratarentals, taxes, late fees and other payments which are
due and owing under the Lease within three (3) business days of such demand, and upon
receipt of said payment in full, Lessor shall release Lessee from further payment
obligations under theLease. In the event such demand for reimbursement is made by Lessor
and Lessee fails to reimburse Lessor in accordance with the terms herein, such failure
shall automatically constitute an Event of Default under the Lease, Lessee shall waive
anyright to cure or remedy the default as otherwise provided in the Master Agreement,
and Lessor shall be entitled to pursue all of its available remedies under the Lease.
h. Self-Maintenance:
For this Schedule only, Lessee shall, during the term of the Lease, self-maintain theEquipment in
accordance with manufacturer recommendations, or engage the services of a maintenance organization (the
"Maintenance Organization") to maintain the Equipment and provide Lessor upon request with a copy of such
maintenancecontract as amended or supplemented, if applicable. During the term of the Lease, Lessee shall,
at its expense, keep the Equipment in good working order, repair, appearance and condition and make
all necessary adjustments, repairs and replacements,all of which shall become the property of Lessor.
Lessee shall not use or permit the use of the Equipment for any purpose for which, in the opinion of the
manufacturer of the Equipment or Maintenance Organization, the Equipment is not designed orintended.
i. Equipment Labeling:
Notwithstanding anything contrary in the Master Agreement, the Equipment may bemarked with decals or other
non-permanent
labeling with Lessee's identification.
Lessee's execution and delivery of this Schedule shall constitute its offer to
lease the Equipment described herein upon the terms and conditions setforth
herein. Lessor's subsequent execution of this Schedule in Michigan and
delivery to Lessee shall constitute its acceptance of the Lease. The Lease
shall be deemed made in Michigan.
Upon Lessor's request, Lessee hereby agrees to provide evidence of Lessee's
identity to comply with any applicable law, rule or regulation,including, but
not limited to, Section 326 of the "Patriot Act" signed into law on October
26, 2001.
Notwithstanding anything hereinor in the Master Agreement to the contrary,
Lessee acknowledges and agrees that as between Lessor and Lessee, Lessor shall
be entitled to claim for federal income tax purposes, without limitation, all
benefits, credits and deductions related to theEquipment.
Lessee acknowledges that this Schedule authorizes the Lessor, its agents or
assignee(s) to sign, execute and file on its behalf any documents,including
financing statements, other filings and recordings, which are reasonably
required to make public this lease transaction with respect to the Equipment.
The parties intend this transaction to be a true lease, but if any court or
tribunal,having power to bind the parties, should conclude that all or part of
this Schedule is not a true lease but is in the nature of a sale, consignment,
or other transaction, the parties intend and the Lessee hereby grants a
continuing security interestin the Equipment and other personal property
described in the Master Agreement, whether now owned or hereafter acquired,
from the date of this Schedule to secure the payment of all Lessee's
indebtedness to Lessor. In the event serial numbersfor Items are unavailable
upon execution hereof, Lessee authorizes Lessor to amend this Schedule by
inserting correct serial numbers with respect to those Items.
Lessor Initials: Lessee Initials:
Page 2 of 3 Pages
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THIS SCHEDULE TOGETHER WITH THE MASTER AGREEMENT AND ANY ADDITIONAL
PROVISION(S) REFERRED TO IN ITEM 10CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE
LESSOR AND LESSEE AS TO THE LEASE AND THE EQUIPMENT.
LESSOR: LESSEE:
VARILEASE FINANCE, INC. BIRKS GROUP INC.
By: /s/ Helen Vahdati By: /s/ Marco Pasteris
Name: Helen Vahdati Name: Marco Pasteris
Title: Vice President Title: Vice-President, Finance
Page 3 of 3 Pages
Exhibit 4.31
SCHEDULE NO. 02
SCHEDULE NO. 02 dated February 1, 2024 (the "Schedule") between VARILEASE
FINANCE, INC. (the "Lessor") and BIRKS GROUP INC. (the"Lessee") incorporates
by reference the terms and conditions of Master Lease Agreement dated July 14,
2023 between Lessor and Lessee (the "Master Agreement"), attached hereto, and
constitutes a separate lease between Lessor andLessee. The Schedule and Master
Agreement are hereinafter referred to collectively, as the "Lease". All
capitalized terms used herein but not defined herein shall have the same
meanings ascribed to them in the Master Agreement. Lesseehereby acknowledges
that Lessor may replace this Schedule with multiple schedules for the purpose
of separating the Equipment and may file corresponding UCC financing
statements in anticipation of such separation.
1. Equipment:
Assorted leasehold improvements, furniture, security equipment and related
equipment asapproved by Lessor together with all other equipment and property
hereafter purchased pursuant to the terms of the Lease, and any and all
additions, enhancements and replacements thereto (collectively, the "Equipment").
The Equipment shall be more fully and completely described in an Installation
Certificate, which shall later be executedby Lessee in connection with the
Schedule. Upon Lessee's execution thereof, this section shall be automatically
amended to include all equipment and property described in the Installation
Certificate.
2. Equipment Location:
Unit D100A, 8500 Decarie Blvd., Mount Royal, QC H4P 2N2, Canada
Upon Lessee's execution of an Installation Certificate in connection with this
Schedule, this section shall beautomatically amended to include any additional
locations specified in the Installation Certificate.
3. Total Equipment Cost:
$2,500,000.00 USD
4. Base Term:
24 Months
5. Base Monthly Rental:
$100,375.00 USD (plus applicable sales/use tax)
6. Advance Payment:
$100,375.00 USD applied to the last rental (plus applicable
sales/use tax). Lesseeshall pay the last rental in advance upon the
execution of this Schedule. Lessee acknowledges and agrees that,
notwithstanding anything to the contrary herein, this payment is
non-
refundable to Lessee underany circumstances, including, without limitation, any
termination of this Lease for any reason prior to the end of its scheduled term.
This payment shall be deemed earned by Lessor, and upon receipt by Lessor, shall
immediately be applied to satisfyLessee's obligation to make the last rental.
7. Base Lease Rate Factor:
0.04015
8. Floating Lease Rate Factor:
The Base Lease Rate Factor shown in Section 7, which is used tocalculate the Base
Monthly Rental, shall increase 0.00008775 for every five (5) basis point increase in
24-month
U.S. Treasury Notes, until all Items of Equipment have been installed, at which point
thedate set forth on the Installation Certificate of the Lease shall have occurred. The
24-month
U.S. Treasury Note yield used as the basis for the derivation
of the Base Lease Rate Factor contained herein is4.34%.
9. Equipment Return Location:
To Be Advised
10. Special Terms:
a. Electronic Payment:
On or before the due date, Lessee shall electronically transfer in immediatelyavailable funds, all rental payments and other
sums required to fulfill Lessee's contractual obligation under the Lease ("Lease Payments"). Further, the Lease Payments must
be in US Dollars. Failure or refusal of Lessee to authorizesuch transfers or failure of Lessor or its assigns to receive such
payments by electronic transfer shall constitute an additional Event of Default under Section 16(a) of the Master Agreement.
Lessee Initials:
b. Additional Event of Default; Lien Releases:
No later than sixty (60) days after Lessor'spayment for any Item of Equipment (the "Default
Date"), Lessee shall provide to Lessor lien releases and/or subordination of interest
letter(s) in a form acceptable to Lessor in its sole discretion (collectively, the
"LienReleases") relating to security interests or other encumbrances with respect to such
Item of Equipment. If the Lien Releases have not been received by Lessor by the Default
Date, Lessor may, in its sole discretion, pursue any one of thefollowing options: (i)
allow Lessee additional time to provide the Lien Releases and extend the Default Date;
or (ii) demand that Lessee pay to Lessor a total amount equal to all Lessor's payments
for Equipment, plus all pro ratarentals, taxes, late fees and other payments which are
due and owing under the Lease within three (3) business days of such demand, and upon
receipt of said payment in full, Lessor shall release Lessee from further payment
obligations under theLease. In the event such demand for reimbursement is made by Lessor
and Lessee fails to reimburse Lessor in accordance with the terms herein, such failure
shall automatically constitute an Event of Default under the Lease, Lessee shall waive
anyright to cure or remedy the default as otherwise provided in the Master Agreement,
and Lessor shall be entitled to pursue all of its available remedies under the Lease.
Lessor Initials: Lessee Initials:
Page 1 of 3 Pages
-------------------------------------------------------------------------------
c. Canadian Location and Indemnification:
Notwithstanding anything to the contrary herein or in the MasterAgreement, the parties
acknowledge and agree that the Equipment is or shall be located in Canada (the "Canada
Equipment") and Lessee will comply with all Canadian, provincial and local laws, regulations,
and ordinances, and all applicablerequirements of the manufacturer of the Canada
Equipment that apply to the physical possession, use, operation, condition, and maintenance
of the Canada Equipment. Lessee agrees to obtain all Canadian, provincial and local
permits and licensesnecessary for the operation of the Canada Equipment. Lessee shall and
does agree to indemnify, defend, and hold harmless Lessor and its Assignee(s) from and
against any and all liabilities, obligations, losses, damages, penalties, claims,
actions,suits, costs, or expenses of any kind and nature whatsoever, including but not limited
to attorneys fees (including without limitation attorneys fees in connection with the
enforcement of this indemnification) which may be imposed upon, incurred byLessor or its
Assignee(s) in any way relating to or arising in connection with the location and operation
thereat, of the Canada Equipment. Notwithstanding the foregoing or anything to the
contrary contained herein, Lessee's obligation toindemnify does not extend to any damages
caused by and arising out of the gross negligence or willful misconduct of Lessor.
d. Tax Payment and Indemnification
for the Canada Equipment:
Notwithstanding anything to the contrary underthe Master Agreement, for this Schedule only, during the term
of the Lease, Lessee shall pay directly all taxes, fees, and assessments, including, but not limited to,
sales, use, property tax and any foreign withholding tax that may be imposed byany taxing authority on the
Canada Equipment, on its purchase, ownership, delivery, possession, operation, rental, return to Lessor or
its purchase by Lessee (collectively, the "Canadian Taxes"). If any Canadian Taxes must be deducted orwithheld
from any amounts payable to Lessor, the amount payable shall be increased to yield to Lessor (after
payment of all Canadian Taxes) the full dollar amount projected for payment. Lessee hereby agrees to indemnify
and hold Lessor harmless fromand against any and all losses incurred by Lessor arising out of Lessee's
absolute and unconditional obligation to remit any and all Canadian Taxes directly to the applicable taxing
authority as required under any law where any Item of CanadaEquipment is located ("Jurisdiction"). Lessee
hereby agrees to provide quarterly and/or annual reports, as applicable, to Lessor verifying that all
Canadian Taxes have been paid in accordance with the laws of each applicable Jurisdiction(collectively, the
"Canadian Tax Reports"). FAILURE OF LESSEE TO PROVIDE THE CANADIAN TAX REPORTS TO LESSOR AS PROVIDED HEREIN
SHALL CONSTITUTE AN EVENT OF DEFAULT UNDER SECTION 16(a)(IV) OF THE MASTER AGREEMENT. Lessee further
agrees toindemnify, defend and hold Lessor harmless from and against any and all demands, claims, costs,
expenses, attorney fees or liabilities that may result therefrom or from enforcement of this Indemnification.
Lessee Initials:
e. Equipment Labeling:
Notwithstanding anything contrary in the Master Agreement, the Equipment may bemarked with decals or other
non-permanent
labeling with Lessee's identification.
f. Guarantee:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree
that thisLease is guaranteed by BIRKS INVESTMENTS INC.; BIRKS JEWELLERS LIMITED; BIRKS
USA, INC.; and CASH, GOLD & SILVER INC. as set forth in the four (4) Guarantees, each
dated July 14, 2023, copies of which are attached hereto andincorporated herein.
g. Purchase Option:
For purposes of this Schedule only, provided no Event of Default has occurred, iscontinuing and remains uncured,
Section 19(b)(i) of the Master Agreement shall be deleted in its entirety and replaced with the following:
"purchase all, but not less than all, of the Items of Equipment for twenty percent (20%) of theTotal Equipment
Cost". All other terms and conditions of the Master Agreement shall remain in full force and effect without change.
h. Progress Payment Rate;
Master Agreement Amendment:
For purposes of this Schedule only, provided no Eventof Default has occurred
and is continuing under the Lease, Section 2(b) of the Master Agreement shall
be amended by deleting the entire second sentence and replacing it with "Lessee
shall pay to Lessor a daily pro rata rental fee("Rental Fee") from the
date of execution of the Authorization for each Item of Equipment to the
Installation Date calculated by multiplying 0.03000 times the amount of such
Progress Payment divided by thirty (30)." All other termsand conditions of
the Master Agreement shall continue in full force and effect without change.
i. Sale Leaseback:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree thata portion of this
transaction is structured as a sale leaseback, whereby Lessor shall purchase the equipment from Lessee for
purposes of leasing the equipment back to Lessee in accordance with the terms and conditions set forth in the
Sale LeasebackAgreement dated February 1, 2024, a copy of which is attached hereto and incorporated herein.
j. Self-Maintenance:
For this Schedule only, Lessee shall, during the term of the Lease, self-maintain theEquipment in
accordance with manufacturer recommendations, or engage the services of a maintenance organization (the
"Maintenance Organization") to maintain the Equipment and provide Lessor upon request with a copy of such
maintenancecontract as amended or supplemented, if applicable. During the term of the Lease, Lessee shall,
at its expense, keep the Equipment in good working order, repair, appearance and condition and make
all necessary adjustments, repairs and replacements,all of which shall become the property of Lessor.
Lessee shall not use or permit the use of the Equipment for any purpose for which, in the opinion of the
manufacturer of the Equipment or Maintenance Organization, the Equipment is not designed orintended.
Lessee's execution and delivery of this Schedule shall constitute its offer to
lease the Equipment described herein uponthe terms and conditions set forth
herein. Lessor's subsequent execution of this Schedule in Michigan and
delivery to Lessee shall constitute its acceptance of the Lease. The Lease
shall be deemed made in Michigan.
Upon Lessor's request, Lessee hereby agrees to provide evidence of Lessee's
identity to comply with any applicable law, rule or regulation,including, but
not limited to, Section 326 of the "Patriot Act" signed into law on October
26, 2001.
Notwithstanding anything hereinor in the Master Agreement to the contrary,
Lessee acknowledges and agrees that as between Lessor and Lessee, Lessor shall
be entitled to claim for federal income tax purposes, without limitation, all
benefits, credits and deductions related to theEquipment.
Lessor Initials: Lessee Initials:
Page 2 of 3 Pages
-------------------------------------------------------------------------------
Lessee acknowledges that this Schedule authorizes the Lessor, its agents or
assignee(s) to sign, execute andfile on its behalf any documents, including
financing statements, other filings and recordings, which are reasonably
required to make public this lease transaction with respect to the equipment.
The parties intend this transaction to be a truelease, but if any court or
tribunal, having power to bind the parties, should conclude that all or part
of this Schedule is not a true lease but is in the nature of a sale,
consignment, or other transaction, the parties intend and the Lessee
herebygrants a continuing security interest in the Equipment and other
personal property described in the Master Agreement, whether now owned or
hereafter acquired, from the date of this Schedule to secure the payment of
all Lessee's indebtedness toLessor. In the event serial numbers for Items are
unavailable upon execution hereof, Lessee authorizes Lessor to amend this
Schedule by inserting correct serial numbers with respect to those Items.
THIS SCHEDULE TOGETHER WITH THE MASTER AGREEMENT AND ANY ADDITIONAL
PROVISION(S) REFERRED TO IN ITEM 10 CONSTITUTE THE ENTIRE AGREEMENT BETWEEN
THE LESSOR ANDLESSEE AS TO THE LEASE AND THE EQUIPMENT.
LESSOR: LESSEE:
VARILEASE FINANCE, INC. BIRKS GROUP INC.
By: /s/ Amanda Christensen By: /s/ Marco Pasteris
Name: Amanda Christensen Name: Marco Pasteris
Title: Vice President Title: Vice-President, Finance
Page 3 of 3 Pages
Exhibit 4.32
SCHEDULE NO. 03
SCHEDULE NO. 03 dated February 1, 2024 (the "Schedule") between VARILEASE
FINANCE, INC. (the "Lessor") and BIRKS GROUP INC. (the"Lessee") incorporates
by reference the terms and conditions of Master Lease Agreement dated July 14,
2023 between Lessor and Lessee (the "Master Agreement"), attached hereto, and
constitutes a separate lease between Lessor andLessee. The Schedule and Master
Agreement are hereinafter referred to collectively, as the "Lease". All
capitalized terms used herein but not defined herein shall have the same
meanings ascribed to them in the Master Agreement.
1. Equipment:
Assorted leasehold improvements, furniture, security equipment and related
equipment asapproved by Lessor together with all other equipment and property
hereafter purchased pursuant to the terms of the Lease, and any and all
additions, enhancements and replacements thereto (collectively, the "Equipment").
The Equipment shall be more fully and completely described in an Installation
Certificate, which shall later be executedby Lessee in connection with the
Schedule. Upon Lessee's execution thereof, this section shall be automatically
amended to include all equipment and property described in the Installation
Certificate.
2. Equipment Location:
698 West Hastings Street, Vancouver, BC V6C 1V4, Canada
Upon Lessee's execution of an Installation Certificate in connection with this
Schedule, this section shall be automatically amended toinclude any additional
locations specified in the Installation Certificate.
3. Total Equipment Cost:
$525,000.00 USD
4. Base Term:
24 Months
5. Base Monthly Rental:
$21,078.75 USD (plus applicable sales/use tax)
6. Advance Payment:
$21,078.75 USD applied to the last rental (plus applicable sales/use
tax). Lessee shallpay the last rental in advance upon the
execution of this Schedule. Lessee acknowledges and agrees that,
notwithstanding anything to the contrary herein, this payment is
non-
refundable to Lessee under anycircumstances, including, without limitation, any
termination of this Lease for any reason prior to the end of its scheduled term.
This payment shall be deemed earned by Lessor, and upon receipt by Lessor, shall
immediately be applied to satisfyLessee's obligation to make the last rental.
7. Base Lease Rate Factor:
0.04015
8. Floating Lease Rate Factor:
The Base Lease Rate Factor shown in Section 7, which is used tocalculate the Base
Monthly Rental, shall increase 0.00008775 for every five (5) basis point increase in
24-month
U.S. Treasury Notes, until all Items of Equipment have been installed, at which point
thedate set forth on the Installation Certificate of the Lease shall have occurred. The
24-month
U.S. Treasury Note yield used as the basis for the derivation
of the Base Lease Rate Factor contained herein is4.34%.
9. Equipment Return Location:
To Be Advised
10. Special Terms:
a. Electronic Payment:
On or before the due date, Lessee shall electronically transfer in immediatelyavailable funds, all rental payments and other
sums required to fulfill Lessee's contractual obligation under the Lease ("Lease Payments"). Further, the Lease Payments must
be in US Dollars. Failure or refusal of Lessee to authorizesuch transfers or failure of Lessor or its assigns to receive such
payments by electronic transfer shall constitute an additional Event of Default under Section 16(a) of the Master Agreement.
Lessee Initials:
b. Additional Event of Default; Lien Releases:
No later than sixty (60) days after Lessor'spayment for any Item of Equipment (the "Default
Date"), Lessee shall provide to Lessor lien releases and/or subordination of interest
letter(s) in a form acceptable to Lessor in its sole discretion (collectively, the
"LienReleases") relating to security interests or other encumbrances with respect to such
Item of Equipment. If the Lien Releases have not been received by Lessor by the Default
Date, Lessor may, in its sole discretion, pursue any one of thefollowing options: (i)
allow Lessee additional time to provide the Lien Releases and extend the Default Date;
or (ii) demand that Lessee pay to Lessor a total amount equal to all Lessor's payments
for Equipment, plus all pro ratarentals, taxes, late fees and other payments which are
due and owing under the Lease within three (3) business days of such demand, and upon
receipt of said payment in full, Lessor shall release Lessee from further payment
obligations under theLease. In the event such demand for reimbursement is made by Lessor
and Lessee fails to reimburse Lessor in accordance with the terms herein, such failure
shall automatically constitute an Event of Default under the Lease, Lessee shall waive
anyright to cure or remedy the default as otherwise provided in the Master Agreement,
and Lessor shall be entitled to pursue all of its available remedies under the Lease.
Lessor Initials: Lessee Initials:
Page 1 of 3 Pages
-------------------------------------------------------------------------------
c. Canadian Location and Indemnification:
Notwithstanding anything to the contrary herein or in the MasterAgreement, the parties
acknowledge and agree that the Equipment is or shall be located in Canada (the "Canada
Equipment") and Lessee will comply with all Canadian, provincial and local laws, regulations,
and ordinances, and all applicablerequirements of the manufacturer of the Canada
Equipment that apply to the physical possession, use, operation, condition, and maintenance
of the Canada Equipment. Lessee agrees to obtain all Canadian, provincial and local
permits and licensesnecessary for the operation of the Canada Equipment. Lessee shall
and does agree to indemnify, defend, and hold harmless Lessor and its Assignee(s) from
and against any and all liabilities, obligations, losses, damages, penalties, claims,
actions,suits, costs, or expenses of any kind and nature whatsoever, including but not
limited to attorneys fees (including without limitation attorneys fees in connection with
the enforcement of this indemnification) which may be imposed upon, incurred byLessor
or its Assignee(s) in any way relating to or arising in connection with the location and
operation thereat, of the Canada Equipment. Notwithstanding the foregoing or anything
to the contrary contained herein, Lessee's obligation toindemnify does not extend to any
damages caused by arising out of the gross negligence or willful misconduct of Lessor.
d. Tax Payment and Indemnification
for the Canada Equipment:
Notwithstanding anything to the contrary underthe Master Agreement, for this Schedule only, during the term
of the Lease, Lessee shall pay directly all taxes, fees, and assessments, including, but not limited to,
sales, use, property tax and any foreign withholding tax that may be imposed byany taxing authority on the
Canada Equipment, on its purchase, ownership, delivery, possession, operation, rental, return to Lessor or
its purchase by Lessee (collectively, the "Canadian Taxes"). If any Canadian Taxes must be deducted orwithheld
from any amounts payable to Lessor, the amount payable shall be increased to yield to Lessor (after
payment of all Canadian Taxes) the full dollar amount projected for payment. Lessee hereby agrees to indemnify
and hold Lessor harmless fromand against any and all losses incurred by Lessor arising out of Lessee's
absolute and unconditional obligation to remit any and all Canadian Taxes directly to the applicable taxing
authority as required under any law where any Item of CanadaEquipment is located ("Jurisdiction"). Lessee
hereby agrees to provide quarterly and/or annual reports, as applicable, to Lessor verifying that all
Canadian Taxes have been paid in accordance with the laws of each applicable Jurisdiction(collectively, the
"Canadian Tax Reports"). FAILURE OF LESSEE TO PROVIDE THE CANADIAN TAX REPORTS TO LESSOR AS PROVIDED HEREIN
SHALL CONSTITUTE AN EVENT OF DEFAULT UNDER SECTION 16(a)(IV) OF THE MASTER AGREEMENT. Lessee further
agrees toindemnify, defend and hold Lessor harmless from and against any and all demands, claims, costs,
expenses, attorney fees or liabilities that may result therefrom or from enforcement of this Indemnification.
Lessee Initials:
e. Equipment Labeling:
Notwithstanding anything contrary in the Master Agreement, the Equipment may bemarked with decals or other
non-permanent
labeling with Lessee's identification.
f. Guarantee:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree
that thisLease is guaranteed by BIRKS INVESTMENTS INC.; BIRKS JEWELLERS LIMITED; BIRKS
USA, INC.; and CASH, GOLD & SILVER INC. as set forth in the four (4) Guarantees, each
dated July 14, 2023, copies of which are attached hereto andincorporated herein.
g. Purchase Option:
For purposes of this Schedule only, provided no Event of Default has occurred, iscontinuing and remains uncured,
Section 19(b)(i) of the Master Agreement shall be deleted in its entirety and replaced with the following:
"purchase all, but not less than all, of the Items of Equipment for twenty percent (20%) of theTotal Equipment
Cost". All other terms and conditions of the Master Agreement shall remain in full force and effect without change.
h. Progress Payment Rate;
Master Agreement Amendment:
For purposes of this Schedule only, provided no Eventof Default has occurred
and is continuing under the Lease, Section 2(b) of the Master Agreement shall
be amended by deleting the entire second sentence and replacing it with "Lessee
shall pay to Lessor a daily pro rata rental fee("Rental Fee") from the
date of execution of the Authorization for each Item of Equipment to the
Installation Date calculated by multiplying 0.03000 times the amount of such
Progress Payment divided by thirty (30)." All other termsand conditions of
the Master Agreement shall continue in full force and effect without change.
i. Sale Leaseback:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree thata portion of this
transaction is structured as a sale leaseback, whereby Lessor shall purchase the equipment from Lessee for
purposes of leasing the equipment back to Lessee in accordance with the terms and conditions set forth in the
Sale LeasebackAgreement dated February 1, 2024, a copy of which is attached hereto and incorporated herein.
j. Self-Maintenance:
For this Schedule only, Lessee shall, during the term of the Lease, self-maintain theEquipment in
accordance with manufacturer recommendations, or engage the services of a maintenance organization (the
"Maintenance Organization") to maintain the Equipment and provide Lessor upon request with a copy of such
maintenancecontract as amended or supplemented, if applicable. During the term of the Lease, Lessee shall,
at its expense, keep the Equipment in good working order, repair, appearance and condition and make
all necessary adjustments, repairs and replacements,all of which shall become the property of Lessor.
Lessee shall not use or permit the use of the Equipment for any purpose for which, in the opinion of the
manufacturer of the Equipment or Maintenance Organization, the Equipment is not designed orintended.
Lessee's execution and delivery of this Schedule shall constitute its offer to
lease the Equipment described herein uponthe terms and conditions set forth
herein. Lessor's subsequent execution of this Schedule in Michigan and
delivery to Lessee shall constitute its acceptance of the Lease. The Lease
shall be deemed made in Michigan.
Upon Lessor's request, Lessee hereby agrees to provide evidence of Lessee's
identity to comply with any applicable law, rule or regulation,including, but
not limited to, Section 326 of the "Patriot Act" signed into law on October
26, 2001.
Notwithstanding anything hereinor in the Master Agreement to the contrary,
Lessee acknowledges and agrees that as between Lessor and Lessee, Lessor shall
be entitled to claim for federal income tax purposes, without limitation, all
benefits, credits and deductions related to theEquipment.
Lessor Initials: Lessee Initials:
Page 2 of 3 Pages
-------------------------------------------------------------------------------
Lessee acknowledges that this Schedule authorizes the Lessor, its agents or
assignee(s) to sign, execute andfile on its behalf any documents, including
financing statements, other filings and recordings, which are reasonably
required to make public this lease transaction with respect to the equipment.
The parties intend this transaction to be a truelease, but if any court or
tribunal, having power to bind the parties, should conclude that all or part
of this Schedule is not a true lease but is in the nature of a sale,
consignment, or other transaction, the parties intend and the Lessee
herebygrants a continuing security interest in the Equipment and other
personal property described in the Master Agreement, whether now owned or
hereafter acquired, from the date of this Schedule to secure the payment of
all Lessee's indebtedness toLessor. In the event serial numbers for Items are
unavailable upon execution hereof, Lessee authorizes Lessor to amend this
Schedule by inserting correct serial numbers with respect to those Items.
THIS SCHEDULE TOGETHER WITH THE MASTER AGREEMENT AND ANY ADDITIONAL
PROVISION(S) REFERRED TO IN ITEM 10 CONSTITUTE THE ENTIRE AGREEMENT BETWEEN
THE LESSOR ANDLESSEE AS TO THE LEASE AND THE EQUIPMENT.
LESSOR: LESSEE:
VARILEASE FINANCE, INC. BIRKS GROUP INC.
By: By:
/s/ Amanda Christensen /s/ Marco Pasteris
Name: Amanda Christensen Name: Marco Pasteris
Title: Vice President Title: Vice-President, Finance
Page 3 of 3 Pages
Exhibit 4.33
SCHEDULE NO. 04
SCHEDULE NO. 04 dated June 3, 2024 (the "Schedule") between VARILEASE FINANCE,
INC. (the "Lessor") and BIRKS GROUP INC. (the"Lessee") incorporates by
reference the terms and conditions of Master Lease Agreement dated July 14,
2023 between Lessor and Lessee (the "Master Agreement") and constitutes a
separate lease between Lessor and Lessee. TheSchedule and Master Agreement are
hereinafter referred to collectively, as the "Lease". All capitalized terms
used herein but not defined herein shall have the same meanings ascribed to
them in the Master Agreement.
1. Equipment:
Assorted leasehold improvements, furniture, security equipment and related
equipment asapproved by Lessor together with all other equipment and property
hereafter purchased pursuant to the terms of the Lease, and any and all
additions, enhancements and replacements thereto (collectively, the "Equipment").
The Equipment shall be more fully and completely described in an Installation
Certificate, which shall later be executedby Lessee in connection with the
Schedule. Upon Lessee's execution thereof, this section shall be automatically
amended to include all equipment and property described in the Installation
Certificate.
2. Equipment Location:
25 The West Mall, Etobicoke, ON M9C 1B8, Canada
Upon Lessee's execution of an Installation Certificate in connection with this
Schedule, this section shall be automatically amended toinclude any additional
locations specified in the Installation Certificate.
3. Total Equipment Cost:
$600,000.00
4. Base Term:
24 Months
5. Base Monthly Rental:
$24,090.00 (plus applicable sales/use tax)
6. Advance Payment:
$24,090.00 applied to the last rental (plus applicable sales/use
tax). Lessee shall paythe last rental in advance upon the
execution of this Schedule. Lessee acknowledges and agrees that,
notwithstanding anything to the contrary herein, this payment is
non-refundable
to Lessee under anycircumstances, including, without limitation, any termination
of this Lease for any reason prior to the end of its scheduled term. This
payment shall be deemed earned by Lessor, and upon receipt by Lessor, shall
immediately be applied to satisfyLessee's obligation to make the last rental.
7. Base Lease Rate Factor:
0.04015
8. Floating Lease Rate Factor:
The Base Lease Rate Factor shown in Section 7, which is used tocalculate the Base
Monthly Rental, shall increase 0.00008775 for every five (5) basis point increase in
24-month
U.S. Treasury Notes, until all Items of Equipment have been installed, at which point
thedate set forth on the Installation Certificate of the Lease shall have occurred. The
24-month
U.S. Treasury Note yield used as the basis for the derivation
of the Base Lease Rate Factor contained herein is4.75%.
9. Equipment Return Location:
To Be Advised
10. Special Terms:
a. Electronic Payment:
On or before the due date, Lessee shall electronically transfer in immediatelyavailable funds, all rental payments and other
sums required to fulfill Lessee's contractual obligation under the Lease ("Lease Payments"). Further, the Lease Payments must
be in US Dollars. Failure or refusal of Lessee to authorizesuch transfers or failure of Lessor or its assigns to receive such
payments by electronic transfer shall constitute an additional Event of Default under Section 16(a) of the Master Agreement.
Lessee Initials:
b. Additional Event of Default; Lien Releases:
No later than sixty (60) days after Lessor'spayment for any Item of Equipment (the "Default
Date"), Lessee shall provide to Lessor lien releases and/or subordination of interest
letter(s) in a form acceptable to Lessor in its sole discretion (collectively, the
"LienReleases") relating to security interests or other encumbrances with respect to such
Item of Equipment. If the Lien Releases have not been received by Lessor by the Default
Date, Lessor may, in its sole discretion, pursue any one of thefollowing options: (i)
allow Lessee additional time to provide the Lien Releases and extend the Default Date;
or (ii) demand that Lessee pay to Lessor a total amount equal to all Lessor's payments
for Equipment, plus all pro ratarentals, taxes, late fees and other payments which are
due and owing under the Lease within three (3) business days of such demand, and upon
receipt of said payment in full, Lessor shall release Lessee from further payment
obligations under theLease. In the event such demand for reimbursement is made by Lessor
and Lessee fails to reimburse Lessor in accordance with the terms herein, such failure
shall automatically constitute an Event of Default under the Lease, Lessee shall waive
anyright to cure or remedy the default as otherwise provided in the Master Agreement,
and Lessor shall be entitled to pursue all of its available remedies under the Lease.
Lessor Initials: Lessee Initials:
Page 1 of 3 Pages
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c. Canadian Location and Indemnification:
Notwithstanding anything to the contrary herein or in the MasterAgreement, the parties
acknowledge and agree that the Equipment is or shall be located in Canada (the "Canada
Equipment") and Lessee will comply with all Canadian, provincial and local laws, regulations,
and ordinances, and all applicablerequirements of the manufacturer of the Canada
Equipment that apply to the physical possession, use, operation, condition, and maintenance
of the Canada Equipment. Lessee agrees to obtain all Canadian, provincial and local
permits and licensesnecessary for the operation of the Canada Equipment. Lessee shall and
does agree to indemnify, defend, and hold harmless Lessor and its Assignee(s) from and
against any and all liabilities, obligations, losses, damages, penalties, claims,
actions,suits, costs, or expenses of any kind and nature whatsoever, including but not limited
to attorneys fees (including without limitation attorneys fees in connection with the
enforcement of this indemnification) which may be imposed upon, incurred byLessor or its
Assignee(s) in any way relating to or arising in connection with the location and operation
thereat, of the Canada Equipment. Notwithstanding the foregoing or anything to the
contrary contained herein, Lessee's obligation toindemnify does not extend to any damages
caused by and arising out of the gross negligence or willful misconduct of Lessor.
d. Tax Payment and Indemnification
for the Canada Equipment:
Notwithstanding anything to the contrary underthe Master Agreement, for this Schedule only, during the term
of the Lease, Lessee shall pay directly all taxes, fees, and assessments, including, but not limited to,
sales, use, property tax and any foreign withholding tax that may be imposed byany taxing authority on the
Canada Equipment, on its purchase, ownership, delivery, possession, operation, rental, return to Lessor or
its purchase by Lessee (collectively, the "Canadian Taxes"). If any Canadian Taxes must be deducted orwithheld
from any amounts payable to Lessor, the amount payable shall be increased to yield to Lessor (after
payment of all Canadian Taxes) the full dollar amount projected for payment. Lessee hereby agrees to indemnify
and hold Lessor harmless fromand against any and all losses incurred by Lessor arising out of Lessee's
absolute and unconditional obligation to remit any and all Canadian Taxes directly to the applicable taxing
authority as required under any law where any Item of CanadaEquipment is located ("Jurisdiction"). Lessee
hereby agrees to provide quarterly and/or annual reports, as applicable, to Lessor verifying that all
Canadian Taxes have been paid in accordance with the laws of each applicable Jurisdiction(collectively, the
"Canadian Tax Reports"). FAILURE OF LESSEE TO PROVIDE THE CANADIAN TAX REPORTS TO LESSOR AS PROVIDED HEREIN
SHALL CONSTITUTE AN EVENT OF DEFAULT UNDER SECTION 16(a)(IV) OF THE MASTER AGREEMENT. Lessee further
agrees toindemnify, defend and hold Lessor harmless from and against any and all demands, claims, costs,
expenses, attorney fees or liabilities that may result therefrom or from enforcement of this Indemnification.
Lessee Initials:
e. Equipment Labeling:
Notwithstanding anything contrary in the Master Agreement, the Equipment may bemarked with decals or other
non-permanent
labeling with Lessee's identification.
f. Guarantee:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree
that thisLease is guaranteed by BIRKS INVESTMENTS INC.; BIRKS JEWELLERS LIMITED; BIRKS
USA, INC.; and CASH, GOLD & SILVER INC. as set forth in the four (4) Guarantees, each
dated July 14, 2023, copies of which are attached hereto andincorporated herein.
g. Purchase Option:
For purposes of this Schedule only, provided no Event of Default has occurred, iscontinuing and remains uncured,
Section 19(b)(i) of the Master Agreement shall be deleted in its entirety and replaced with the following:
"purchase all, but not less than all, of the Items of Equipment for twenty percent (20%) of theTotal Equipment
Cost". All other terms and conditions of the Master Agreement shall remain in full force and effect without change.
h. Progress Payment Rate;
Master Agreement Amendment:
For purposes of this Schedule only, provided no Eventof Default has occurred
and is continuing under the Lease, Section 2(b) of the Master Agreement shall
be amended by deleting the entire second sentence and replacing it with "Lessee
shall pay to Lessor a daily pro rata rental fee("Rental Fee") from the
date of execution of the Authorization for each Item of Equipment to the
Installation Date calculated by multiplying 0.03000 times the amount of such
Progress Payment divided by thirty (30)." All other termsand conditions of
the Master Agreement shall continue in full force and effect without change.
i. Sale Leaseback:
Notwithstanding anything to the contrary herein, the parties acknowledge and agree thatall or a portion of this
transaction is structured as a sale leaseback, whereby Lessor shall purchase the equipment from Lessee for
purposes of leasing the equipment back to Lessee in accordance with the terms and conditions set forth in
the SaleLeaseback Agreement dated June 3, 2024, a copy of which is attached hereto and incorporated herein.
j. Self-Maintenance:
For this Schedule only, Lessee shall, during the term of the Lease, self-maintain theEquipment in
accordance with manufacturer recommendations, or engage the services of a maintenance organization (the
"Maintenance Organization") to maintain the Equipment and provide Lessor upon request with a copy of such
maintenancecontract as amended or supplemented, if applicable. During the term of the Lease, Lessee shall,
at its expense, keep the Equipment in good working order, repair, appearance and condition and make
all necessary adjustments, repairs and replacements,all of which shall become the property of Lessor.
Lessee shall not use or permit the use of the Equipment for any purpose for which, in the opinion of the
manufacturer of the Equipment or Maintenance Organization, the Equipment is not designed orintended.
Lessee's execution and delivery of this Schedule shall constitute its offer to
lease the Equipment described herein uponthe terms and conditions set forth
herein. Lessor's subsequent execution of this Schedule in Michigan and
delivery to Lessee shall constitute its acceptance of the Lease. The Lease
shall be deemed made in Michigan.
Upon Lessor's request, Lessee hereby agrees to provide evidence of Lessee's
identity to comply with any applicable law, rule or regulation,including, but
not limited to, Section 326 of the "Patriot Act" signed into law on October
26, 2001.
Notwithstanding anything hereinor in the Master Agreement to the contrary,
Lessee acknowledges and agrees that as between Lessor and Lessee, Lessor shall
be entitled to claim for federal income tax purposes, without limitation, all
benefits, credits and deductions related to theEquipment.
Lessor Initials: Lessee Initials:
Page 2 of 3 Pages
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Lessee acknowledges that this Schedule authorizes the Lessor, its agents or
assignee(s) to sign, execute andfile on its behalf any and all necessary
documents, including financing statements, other filings and recordings, to
make public this lease transaction with respect to the Equipment. The parties
intend this transaction to be a true lease, but if anycourt or tribunal,
having power to bind the parties, should conclude that all or part of this
Schedule is not a true lease but is in the nature of a sale, consignment, or
other transaction, the parties intend and the Lessee hereby grants acontinuing
security interest in the Equipment and other personal property described in
the Master Agreement, whether now owned or hereafter acquired, from the date
of this Schedule to secure the payment of all Lessee's indebtedness to
Lessor.In the event serial numbers for Items are unavailable upon execution
hereof, Lessee authorizes Lessor to amend this Schedule by inserting correct
serial numbers with respect to those Items.
THIS SCHEDULE TOGETHER WITH THE MASTER AGREEMENT AND ANY ADDITIONAL
PROVISION(S) REFERRED TO IN ITEM 10 CONSTITUTE THE ENTIRE AGREEMENT BETWEEN
THE LESSOR ANDLESSEE AS TO THE LEASE AND THE EQUIPMENT.
LESSOR: LESSEE:
VARILEASE FINANCE, INC. BIRKS GROUP INC.
By: By:
/s/ Alex Conner /s/ Marco Pasteris
Name: Alex Conner Name: Marco Pasteris
Title: Assistant Vice President Title: Vice-President, Finance
Page 3 of 3 Pages
Exhibit 4.34
CONFIDENTIAL
To the Board of Directors of Birks GroupInc.:
We write this letter in our capacity as majority shareholder (along with the
shares owned with our related entity Montel S.a.r.l) of BirksGroup Inc. (the
"Company") for the purposes of providing financial support to the Company.
This letter is intended to demonstrate MangroveHolding S.A.'s willingness to
provide additional financial support to the Company up to an amount of
CA$3,750,000, if necessary, to assist the Company in satisfying the Company's
obligations and debt service requirements as they come duein the normal course
of operations, or in meeting its financial covenant requirements of
maintaining minimum excess availability levels of $8.5 million at all times,
as defined in the credit facility arrangements provided by Wells Fargo
CapitalFinance Corporation Canada and SLR Credit Solutions, together the
senior lenders, (the "
Financial Covenants
"), until at least July 31, 2025.
Specifically, and subject in all respects to the aforementioned CA$3,750,000
limit and it being understood that in no event shall the liability of
theundersigned hereunder in any circumstances exceed such amount of
CA$3,750,000, Mangrove Holding S.A. confirms that, as long as we, together
with the shares owned by Montel S.a.r.l, will remain majority shareholders of
the Company, we willcontinue to provide financial support to assist the
Company in (i) avoiding any breach of the Financial Covenants at any time
until July 31, 2025, and (ii) satisfying, on a timely basis, all of the
Company's liabilities andobligations that it is unable to satisfy when due
until July 31, 2025. A maximum amount of CA$2,750,000 will be disbursed, if
necessary, prior to January 1, 2025, with the balance of up to CA$1,000,000 to
be disbursed, if necessary, afterJanuary 1, 2025 and on or prior to July 31,
2025. The Company shall provide a reasonable delay for the funds to be
disbursed.
-------------------------------------------------------------------------------
Exhibit 4.34
In addition and subject to the terms and conditions herein, the undersigned
represents that Mangrove HoldingS.A. has the intent and ability to provide the
financial support outlined in this letter to the Company to the extent and
when deemed necessary by the Company, upon request by the Company's Board of
Directors, and that there are no restrictionson Mangrove Holding S.A. to
provide such financial support of up to CA$3,750,000. The financial support
will bear interest at a rate of 15% per annum to Mangrove Holding S.A., but
will have no interest or principal repayment prior to July 31,2025 and will be
subject to any other terms and conditions mutually acceptable taking into
account the financial situation in which the Company will then find itself.
Upon execution of this agreement, the Company shall pay reasonable closing fee
tocover for legal and administrative cost to be paid at signature of this
letter. This closing fee will be capped at a maximum of fifty thousand dollars
(CA$50,000). In addition, a committed capital charge of 5% per annum will be
charged to theCompany upon execution of this agreement and will be payable at
the earliest date of July 31, 2025 or (i), (ii) and (iii) below. The payment
of the closing fee and the committed capital charge will be subject to the
Company's seniorlenders' approval.
Any request by the Company's Board of Directors addressed to Mangrove Holding
S.A. for financial support shall beaccompanied by a current business plan and
projected cash flows of the Company for information purposes.
This undertaking will be valid from the date ofthis letter through July 31,
2025 and will become null and void prior to July 31, 2025 (i) in the case of a
change of control of the Company, where Mangrove Holding S.A. (or its related
entities) lose its majority shareholding,(ii) upon the closing of a
significant form of equity investment (that may include a debt portion) and/or
equity recapitalization of the Company, or (iii) in the case of bankruptcy or
insolvency of the Company.
Signed
this 15th day of July, 2024.
MANGROVE HOLDING S.A.
by /Christian Reiser/
Name: Christian Reiser
Title: Director
(with the capacity tobind Mangrove Holding S.A.)
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Exhibit 4.34
Acknowledged and agreed to
by the Company this16
th
day of July, 2024.
BIRKS GROUP INC.
by /Jean-Christophe Bedos/
Name: Jean-Christophe Bedos
Title: President and Chief Executive Officer
Exhibit 8.1
LIST OF SUBSIDIARIES OF BIRKS GROUP INC.
Name Jurisdiction of Incorporation
Birks USA, Inc. (formerly Cash, Gold & Silver USA, Inc.) Delaware
Cash, Gold & Silver Inc. Canada
Birks Jewellers Limited Hong Kong
Birks Investments Inc. Canada
RMBG Retail Vancouver ULC* British Columbia, Canada
* 49% held by Birks Investments Inc.
Exhibit 11.1
BIRKS GROUP INC.
POLICY,PROCEDURES AND GUIDELINES GOVERNING
INSIDER TRADING AND DISCLOSURE
I. PURPOSE
Birks Group Inc. (the "Company") is a corporation incorporated under the
Canada Business Corporations Act
(the "CBCA") and is considered a "foreign private issuer" under the United
States Securities and Exchange Act of 1934, as amended (the "Exchange Act").
The Company's Class A Voting Shares are listed and tradedon the NYSE American.
In order to comply with the CBCA, U.S. federal and state securities laws
governing (a) trading in Company securities while in the possession of
"material nonpublic information" concerning the Company, and(b) disclosing
material nonpublic information to outsiders ("Tipping"), and in order to
prevent the appearance of improper insider trading or disclosure, the Company
has adopted this Policy, Procedures and Guidelines Governing InsiderTrading
(this "Policy") for all of its directors, officers and employees, their family
members, and specially designated outsiders who have access to the Company's
material nonpublic information hereinafter collectively referred to
as"Insiders".
II. SCOPE
A. This Policy covers all directors, officers and employees of the
Company, their family members, and anyoutsiders whom the Compliance
Officer (as defined herein) may designate as Insiders because they
have access to material nonpublic information concerning the Company.
B. This Policy applies to any and all transactions in the Company's
securities, including its commonstock, options to purchase common
stock, and any other type of securities that the Company may issue,
such as preferred stock, convertible debentures, warrants, or
exchange-traded
options or other derivativesecurities.
C. This Policy will be delivered to all directors, officers, employees, and designated outsiders
upon itsadoption by the Company, and to all new directors, officers, employees, and
designated outsiders at the start of their employment or relationship with the Company. In
addition, this Policy, as may be amended from time to time, will be posted on theCompany's
intranet site and provided to Insiders on a periodic basis. Upon first receiving a copy of
this Policy or any revised versions, each Insider must sign an acknowledgment that he or
she has received a copy and agrees to comply with thePolicy's terms. "Key Insiders", as
defined below, may be required to certify compliance with this Policy on an annual basis.
Adopted by the Board of Directors: 06-02-06
Last Revised 09-14-23
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III. KEY INSIDERS
The Company has designated those positions listed on
Exhibit A
attached hereto as Key Insiders (including relatives andpersons sharing the
same household) who, because of their position with the Company and their
access to material nonpublic information, must obtain the prior approval
before engaging in any transaction involving Company securities from
theCompliance Committee (as defined below) in accordance with the procedures
set forth in Section VI.C below. The Company will amend
Exhibit A
from time to time as necessary to reflect any changes to positions considered
to be Key Insiders.
IV. INSIDER TRADING COMPLIANCE OFFICER AND COMPLIANCE COMMITTEE
The Company has designated the Chief Financial Officer as its Insider Trading
Compliance Officer (the "ComplianceOfficer"). The Insider Trading Compliance
Committee (the "Compliance Committee") will consist of the Compliance Officer
and the Company's Chief Legal Officer. The Compliance Committee will review
and either approve or disapproveall proposed trades by Key Insiders in
accordance with the procedures set forth in Section VI.C below.
In addition to thetrading approval duties described in Section VI.C below, the
duties of the Compliance Committee will include the following:
A. Administering this Policy and monitoring and enforcing compliance with all Policy provisions and procedures.
B. Responding to all inquiries relating to this Policy and its procedures.
C. Designating and announcing special trading blackout periods during which no Insiders may trade in Companysecurities.
D. Providing copies of this Policy and other appropriate materials to all current and new directors, officersand employees, and
such other persons who the Compliance Officer determines have access to material nonpublic information concerning the Company.
E. Administering, monitoring and enforcing compliance with the CBCA and all federal and state
insider tradinglaws and regulations, including without limitation Part XI of the CBCA,
Sections 10(b), 16, 20A and 21A of the Exchange Act and the rules and regulations promulgated
thereunder, and Rule 144 under the Securities Act of 1933 (the "SecuritiesAct").
F. Recommending to the Board of Directors for approval appropriate revisions to this Policy as necessary
toreflect changes in the CBCA, U.S. federal or state insider trading laws and regulations.
G. Maintaining as Company records originals or copies of all documents required
by the provisions of thisPolicy or the procedures set forth herein.
2
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H. Maintaining the accuracy of the list of Key Insiders as attached on
Exhibit A
, and updating itperiodically as necessary to reflect additions to or deletions from such Exhibit.
The ComplianceOfficer may designate one or more individuals who may perform
the Compliance Officer's duties or the duties of the other member of the
Compliance Committee in the event that the Compliance Officer or other
Compliance Committee member is unableor unavailable to perform such duties.
V. DEFINITION OF "MATERIAL NONPUBLIC INFORMATION"
A. "MATERIAL" INFORMATION
Information about the Company is "material" if it would be expected to affect
the investment or voting decisions ofthe reasonable shareholder or investor,
or if the disclosure of the information would be expected to significantly
alter the total mix of the information in the marketplace about the Company.
In simple terms, material information is any type ofinformation that could
reasonably be expected to affect the price of Company securities. While it is
not possible to identify all information that would be deemed "material," the
following types of information ordinarily would beconsidered material:
. Financial performance,
six-months
interim and
year-end
earnings, and significant changes in financial performance or liquidity.
. Company projections and strategic plans.
. Potential mergers and acquisitions or the sale of Company assets or subsidiaries.
. New major contracts, orders, suppliers, customers, or finance sources, or the loss thereof.
. Significant changes or developments in supplies or inventory, including product defects or product returns.
. Significant pricing changes.
. Stock splits, public or private securities/debt offerings, or changes in Company dividend policies or amounts.
. Significant changes in senior management.
. Significant labor disputes or negotiations.
. Actual or threatened major litigation, or the resolution of such litigation.
3
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. A significant disruption in the Company's operations or loss, potential loss, breach or unauthorizedaccess
of its property or assets, including its facilities and information technology infrastructure.
Material information is not limited to historical facts but may also include
projections and forecasts. With respect to afuture event, such as a merger,
acquisition or introduction of a new product, the point at which negotiations
or product development are determined to be material is determined by
balancing the probability that the event will occur against themagnitude of
the effect the event would have on a company's operations or stock price
should it occur. Thus, information concerning an event that would have a large
effect on stock price, such as a merger, may be material even if thepossibility
that the event will occur is relatively small. Obviously, what is material
information cannot be described or listed with precision, since there are many
gray areas and varying circumstances. When in doubt about whether
particularnonpublic information is material, you should presume it is material
and consult with the Company's Chief Legal Officer.
B. "NONPUBLIC" INFORMATION
Material information is "nonpublic" if it has not been widely disseminated to
the public through major newswireservices, national news services, or
financial news services. For the purposes of this Policy, information will be
considered public, i.e., no longer "nonpublic", after the close of trading on
the second full trading day following theCompany's widespread public release
of the information.
C. CONSULT THE COMPLIANCE OFFICER FOR GUIDANCE
Any Insiders who are unsure whether the information that they possess is
material or nonpublic must consult the ComplianceOfficer for guidance before
trading in any Company securities.
VI. STATEMENT OF COMPANY POLICY AND PROCEDURES
A. PROHIBITED ACTIVITIES
1. No Insider may trade in Company securities while possessing material nonpublic information concerning theCompany.
2. No Insider may trade in Company securities during "Blackout Periods" described in Section
VI.Bbelow, or during any special trading blackout periods designated by the Compliance Officer.
4
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3. No Key Insider may trade in Company securities
unless the trade(s) have been approved by the
ComplianceCommittee in accordance with the procedures
set forth in Section VI.C below. Key Insiders who wish
to sell Company securities are strongly encouraged
to sell their securities pursuant to a predetermined
written plan, which plan has been approved bythe
Compliance Committee, and complies with Rule
10b5-1
of the Exchange Act (including
"cooling-off
periods", prohibitions on multiple overlapping plans,limitations on "single-trade plans" and mandated
representations regarding legal compliance) and which may not be modified or terminated except in compliance
with this policy and applicable law and regulation. The Compliance Committeeshall not approve any plan to
trade Company securities that does not meet the criteria set forth in Section VI.F below. In addition to the
requirement that adoption of a trading plan be approved by the Compliance Committee, any termination ormodification
of a trading plan must also be approved and the Compliance Committee must be provided not less than 7
days notice of the intent to take any such action. The Company will comply with any disclosure obligations
required by applicable lawand regulation if any director or officer has adopted, modified or terminated a Rule
10b5-1
plan. Key Insiders should retain
all records and documents
that support their reasons
for making each trade.
4. The Compliance Officer may not trade in Company securities
unless the trade(s) have been approved by theother member of the
Compliance Committee and the Company's Chief Executive Officer in
accordance with the procedures set forth in Section VI.C below.
5. No Insider may disclose or "tip" material nonpublic information concerning the Company to anyoutside
person (including family members, analysts, individual investors, and members of the investment
community and news media), unless required as part of that Insider's regular duties for the Company
and authorized by the ComplianceOfficer. In any instance in which such information is disclosed
to outsiders, the Company will take such steps as are necessary to preserve the confidentiality of
the information, including requiring the outsider to agree in writing to comply withthe terms of
this Policy and/or to sign a confidentiality agreement. All inquiries from outsiders regarding
material nonpublic information about the Company must be forwarded to the Chief Financial Officer.
6. No Insider may give trading advice of any kind about the Company to anyone while possessing materialnonpublic
information about the Company, except that Insiders should advise others not to trade if doing so might violate
the law or this Policy. The Company strongly discourages all Insiders from giving trading advice concerning the
Company tothird parties even when the Insiders do not possess material nonpublic information about the Company.
7. No Insider may trade in any interest or position relating to the
future price of Company securities, such asa put, call or short sale.
8. No Insider may (a) trade in the securities of any other public company while possessing materialnonpublic
information concerning that company, (b) disclose or "tip" material nonpublic information
concerning any other public company to anyone, or (c) give trading advice of any kind to anyone
concerning any other publiccompany while possessing material nonpublic information about that company.
5
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B. BLACKOUT PERIODS
1. Blackout Periods for Key Insiders.
In addition to the general prohibition on trading at any timewhile in possession of material nonpublic information, Key
Insiders may not trade in Company securities (other than as specified by this Policy) during a "Blackout Period" beginning:
(i) 30 days prior to the end of a fiscal year and ending at the close of
trading on the second full trading day following thelater of: (i) the
Company's widespread public release of
year-end
earnings results, and (ii) sales results for the following first fiscal
quarter if any, and
(ii) 30 days prior to the end of the Company's
six-month
interim period andending at the close of trading on the second full trading
day following the later of: (i) the Company's widespread public release of
six-month
interim period earnings results, and (ii) holidaysales results for the third
fiscal quarter if any and in the event that no such sales results are
released, January 15.
2. Blackout Periods for All Other
Employees and Insiders.
In addition to the general prohibition ontrading at any time while in
possession of material nonpublic information, all employees and Insiders
who are not Key Insiders may not trade in Company securities (other
than as specified by this Policy) during a "Blackout Period"beginning:
(i) 30 days prior to the end of a fiscal year and ending at the close of
trading on thesecond full trading day following the later of: (i) the
Company's widespread public release of
year-end
earnings results, and (ii) sales results for the following first fiscal
quarter if any,and
(ii) 30 days prior to the end of the Company's
six-month
interim periodand ending at the close of trading on the second full trading
day following the later of: (i) the Company's widespread public release of
six-month
interim period earnings results, and (ii) salesresults for the third fiscal
quarter if any and in the event that no such sales results are released,
January 15.
3. No Trading During Trading Windows While in
Possession of Material
Nonpublic Information.
No Insiderspossessing material nonpublic information concerning the Company may trade in
Company securities even during applicable trading windows. However, Insiders possessing such
information may trade during a trading window only after the close of tradingon the second
full trading day following the Company's widespread public release of such information.
6
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4. No Trading During Blackout Periods.
No Insiders may trade in Company securities during BlackoutPeriods or during any special blackout periods that the Compliance
Officer may designate. No Insiders may disclose to any third party that a special blackout period has been designated.
5. Exceptions for Hardship Cases
. The Compliance Officer may, on a
case-by-case
basis, authorize trading in Company securities outside of the
applicable trading windows (but not during special blackout periods)
due to financial hardship or other hardships, but only inaccordance
with the procedures set forth in Section VI.C.2 below.
6. Other Exceptions
. Under certain very limited circumstances, an Insider subject to restrictions underthis Policy may be permitted
to trade during a Blackout Period, but only if the Compliance Officer concludes that the Insider does not in fact
possess material nonpublic information. Insiders wishing to trade during a Blackout Period must contactthe Compliance
Officer for approval at least two business days in advance of any proposed trades involving Company securities.
C. PROCEDURES FOR APPROVING TRADES BY KEY INSIDERS, HARDSHIP CASES AND EXCEPTIONS
1. Key Insider Trades.
No Key Insider may trade in Company securities until:
a. the person trading has notified the Compliance Officer in writing of the amount and nature of the proposedtrade(s),
b. the person trading has certified to the Compliance Officer in writing no earlier than
two business daysprior to the proposed trade(s) that (i) he or she is not in possession
of material nonpublic information concerning the Company and (ii) the proposed trade(s)
do not violate the trading restrictions of Rule 144 of the Securities Act, and
c. the Compliance Committee has approved the trade(s), and the Compliance
Officer has certified the ComplianceCommittee's approval in writing.
2. Hardship Trades.
The Compliance Officer may, on a
case-by-case
basis, authorize trading in Company securities outside of the applicable
trading windows due to financial hardship or other hardships only after
a. the person trading has notified the Compliance Officer in writing of the
circumstances of the hardship andthe amount and nature of the proposed trade(s),
7
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b. the person trading has certified to the Compliance Officer in writing no earlier than two business daysprior to the
proposed trade(s) that he or she is not in possession of material nonpublic information concerning the Company, and
c. the Compliance Committee has approved the trade(s) and the Compliance Officer has certified the ComplianceCommittee's approval
in writing. Only the Compliance Officer's approval is necessary for hardship trades by Insiders who are not Key Insiders.
3. Exceptions.
In certain very limited circumstances, the Compliance Officer may, on a
case-by-case
basis, authorize trading in Company securities during a Blackout Period only after
a. the person trading has notified the Compliance Officer in writing of the amount and nature of the proposedtrade(s),
b. the person trading has certified to the Compliance Officer in writing no earlier than two business daysprior to the
proposed trade(s) that he or she is not in possession of material nonpublic information concerning the Company, and
c. the Compliance Committee has approved the trade(s) and the Compliance Officer has certified the ComplianceCommittee's
approval in writing. Only the Compliance Officer's approval is necessary for exceptions by Insiders who are not Key Insiders.
4. No Obligation to Approve Trades.
The existence of the foregoing approval procedures does not in anyway obligate the
Compliance Officer or Compliance Committee to approve any trades requested by Key
Insiders, hardship applicants or exceptions applicants. The Compliance Officer or
Compliance Committee may reject any trading requests at their solereasonable discretion.
D. EMPLOYEE BENEFIT PLANS
1. Employee Stock Purchase Plans.
The trading prohibitions and restrictions set forth in this Policy donot apply to periodic contributions by the Company
or employees to employee benefit plans (e.g., pension or 401K plans) that are used to purchase Company securities
pursuant to the employees' advance instructions. However, no officers oremployees may alter their instructions regarding
the purchase or sale of Company securities in such plans while in the possession of material nonpublic information.
8
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2. Stock Option Plans.
The trading prohibitions and restrictions of this Policy apply to all sales ofsecurities acquired through the
exercise of stock options granted by the Company, but not to the acquisition of securities through such exercises.
3. Warrants
. The trading prohibitions and restrictions of this Policy apply to all
sales of securitiesacquired through the exercise of Company warrants.
E. PRIORITY OF STATUTORY OR REGULATORY TRADING RESTRICTIONS
The trading prohibitions and restrictions set forth in this Policy will be
superseded by any greater prohibitions orrestrictions prescribed by the CBCA,
U.S. federal or state securities laws and regulations, e.g., restrictions on
the sale of securities subject to Rule 144 under the Securities Act. Any
Insider who is uncertain whether other prohibitions orrestrictions apply
should ask the Compliance Officer.
F. PREDETERMINED TRADING PLANS.
Prior to approving a plan to trade Company securities, the ComplianceCommittee
shall confirm that such plan meets the requirements of Rule
10b5-1
under the Exchange Act (such
predetermined trading plan, a "Rule
10b5-1
plan"), aswell as the following criteria:
1. If to be newly adopted, has been submitted to the Compliance Committee
for review and approval at least fivebusiness days prior to adoption;
2. If revised, amended or terminated, has been submitted to the Compliance Committee for
review and approval atleast at least five business days prior to implementation;
3. Is not duplicative of any other Rule
10b5-1
plan (i.e., you may notenter in to more than one Rule
10b5-1
plan at a time, except in limited circumstances);
4. Limits the use of the Rule
10b5-1
safe harbor to one single-tradeplan in any
12-month
period. A "single-trade plan" refers to a plan designed to effect the open market purchase
or sale of the total amount of the securities subject to the plan as a singletransaction;
5. Is adopted by the Insider while the Insider is not in possession of any material
nonpublic informationconcerning the securities of the Company or the Company;
6. Was entered into during a trading window and not, unless the Compliance Committee approves otherwise,entered into, or
modified, during Blackout Periods or during any special blackout periods that the Compliance Officer may designate;
9
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7. Contains a written representation from the Insider certifying that such Insider (i) is not aware ofmaterial
nonpublic information about the Company or its securities and (ii) is adopting or modifying the Rule
10b5-1
plan in good faith and not as part of a plan or
scheme to evade the prohibitions ofExchange Act Rule
10b-5;
8. Is in in writing;
9. Either (i) expressly specifies the security or securities to be traded, the amount (which
may be anumber of shares or a dollar amount), price (which may be the market price on a
particular date, a limit price or a specified price) and date of the proposed trades; (ii)
provides a written formula or computer program, for determining amounts,prices, and dates;
or (iii) did not permit the Insider to exercise any subsequent influence over how, when or
whether to effect purchases or sales and gives a third party the discretionary authority
to execute such purchases and sales, outsidethe control of the Insider, so long as such
third party does not possess any material nonpublic information about the Company; and
10. The Insider may not alter
or deviate from the Rule
10b5-1
plan(except as permitted by this policy and in compliance with law), or enter
into a hedging transaction or position with respect to those securities.
For Section 16 reporting persons, trading under a
pre-approved
Rule
10b5-1
plan may not begin until after the expiration of a
cooling-off
period ending on the later of (x) 90 days after adoption of such plan and (y)
(2) two business daysfollowing the disclosure of the Company's financial
results on Form
6-K
or Form
20-F,
as applicable, for the fiscal quarter in which the approved
10b5-1
plan was adopted, up to a maximum of 120 days. For all other persons subject
to this Policy, an approved
10b5-1
plan may not begin until after the expiration of a
30-day
cooling-off
period after adoption of such plan. A
cooling-off
period is required by U.S. federal securities rules and designedto minimize
any risk that a claim will be made that an individual was aware of material
non-public
information about the Company when he or she entered into the approved Rule
10b5-1
plan and/or that the plan was not entered into in good faith.
Transactions effected in full compliance with a
pre-cleared
trading plan will notrequire further
pre-clearance
at the time of the transaction. With respect to any
pre-cleared
trading plan, the third party effecting transactions on behalf of theInsider
should be instructed to send duplicate confirmations of all such transactions
to the Company's Chief Legal Officer.
10
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VII. POTENTIAL CIVIL, CRIMINAL AND DISCIPLINARY SANCTIONS
A. CIVIL AND CRIMINAL PENALTIES
The consequences of prohibited insider trading or Tipping can be severe.
Persons violating insider trading or Tipping rulesmay be required to disgorge
the profit made or the loss avoided by the trading, pay the loss suffered by
the person who purchased securities from or sold securities to the insider
tippee, pay civil penalties up to three times the profit made or lossavoided,
pay a criminal penalty of up to $5 million, and serve a jail term of up to
twenty years. The Company and/or the supervisors of the person violating the
rules may also be required to pay major civil or criminal penalties.
B. COMPANY DISCIPLINE
Violation of this Policy or the CBCA, or U.S. federal or state insider trading
or Tipping laws by any director, officer oremployee, or their family members,
may subject the director to dismissal proceedings and the officer or employee
to disciplinary action by the Company up to and including termination for
cause.
C. REPORTING OF VIOLATIONS
Any Insider who violates this Policy or the CBCA, or any U.S. federal or state
laws governing insider trading or Tipping, orknows of any such violation by
any other Insiders, must report the violation immediately to the Compliance
Officer. Upon learning of any such violation, the Compliance Officer, in
consultation with the other Compliance Committee member and theCompany's legal
counsel, will determine whether the Company should release any material
nonpublic information, or whether the Company should report the violation to
the Securities and Exchange Commission or other appropriate governmentalauthorit
y.
VIII. INQUIRIES
Please direct all inquiries regarding any of the provisions or procedures of
this Policy to the Compliance Committee.
11
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BIRKS GROUP INC.
RECEIPT AND ACKNOWLEDGMENT
I,__________________________________, hereby acknowledge that I have received
and read a copy of the "Policy, Procedures and Guidelines Covering Insider
Trading and Disclosure" and agree to comply with its terms. I understand that
violationof insider trading or disclosure laws or regulations may subject me
to severe civil and/or criminal penalties, and that violation of the terms of
the above-titled Policy may subject me to discipline by the Company up to and
including termination forcause.
Signature Date
12
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BIRKS GROUP INC.
APPLICATION AND APPROVAL FOR TRADING BY KEY INSIDERS
Name:
Title:
Proposed Trade Date:
Type of Security to be Traded:
Type of Trade (Purchase/Sale):
Number of Shares to be Traded:
*Reason(s) for Trading:
*Only required in hardship situations
EXAMPLES OF MATERIAL NONPUBLIC INFORMATION
While it is not possible to identify all information that would be deemed
"material nonpublic information," the following types ofinformation ordinarily
would be included in the definition if not yet publicly released by the
Company:
. Financial performance, especially monthly comparable store sales, interim and
year-end
earnings, and significant changes in financial performance or liquidity.
. Company projections and strategic plans.
. Potential mergers and acquisitions or the sale of Company assets or subsidiaries.
. New major contracts, orders, suppliers, customers, or finance sources, or the loss thereof.
. Major discoveries or significant changes or developments in products or product lines.
. Significant changes or developments in supplies or inventory, including product defects or product returns.
. Significant pricing changes.
13
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. Stock splits, public or private securities/debt offerings, or changes in Company dividend policies or amounts.
. Significant changes in senior management.
. Significant labor disputes or negotiations.
. Actual or threatened major litigation, or the resolution of such litigation.
. A significant disruption in the Company's operations or loss, potential loss, breach or unauthorizedaccess
of its property or assets, including its facilities and information technology infrastructure.
CERTIFICATION
I, ____________________________, hereby certify that I am not in possession of
any material nonpublic information (as defined in theCompany's "Policy,
Procedures and Guidelines Governing Insider Trading and Disclosure")
concerning Birks Group Inc., (ii) to the best of my knowledge, the proposed
trade(s) listed above do not violate the trading restrictions of Rule144 under
the Securities Act of 1933, as amended, and (iii) to the best of my knowledge,
the proposed trade(s) listed above do not violate Rule
10b5-1
under the Securities Exchange Act of 1934, asamended. I understand that if I
trade while possessing such information or in violation of such trading
restrictions, I may be subject to severe civil and/or criminal penalties, and
may be subject to discipline by the Company up to and includingtermination for
cause.
Signature Date
REVIEW AND DECISION
The undersigned hereby certifies that the Insider Trading Compliance Committee
has reviewed the foregoing application and ____ APPROVES ____DISAPPROVES the
proposed trade(s).
Insider Trading Compliance Officer (or Designee) Date
14
Exhibit 12.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Jean-Christophe Bedos, certify that:
1. I have reviewed this Annual Report on Form 20-F of Birks Group Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary tomake the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all materialrespects
the financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this report;
4. The company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures(as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed underour supervision, to
ensure that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to bedesigned under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
(c) Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report ourconclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the company's internal control over
financial reporting that occurred duringthe period covered by the Annual
Report that has materially affected, or is reasonably likely to materially
affect, the company's internal control over financial reporting; and
5. The company's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financialreporting, to the
company's auditors and the audit committee of the company's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financialreporting which are reasonably
likely to adversely affect the company's ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in thecompany's internal control over
financial reporting.
Date: July 16, 2024 /s/ Jean-ChristopheBedos
Jean-Christophe Bedos,
President and Chief Executive Officer
Exhibit 12.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Katia Fontana, certify that:
1. I havereviewed this Annual Report on Form 20-F of Birks Group Inc.;
2. Based on my knowledge, this report does not contain any untrue statementof
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all materialrespects
the financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this report;
4. The company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures(as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed underour supervision, to
ensure that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to bedesigned under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report ourconclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the company's internal control over
financial reporting that occurred duringthe period covered by the Annual
Report that has materially affected, or is reasonably likely to materially
affect, the company's internal control over financial reporting; and
5. The company's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financialreporting, to the
company's auditors and the audit committee of the company's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financialreporting which are reasonably
likely to adversely affect the company's ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in thecompany's internal control over
financial reporting.
Date: July 16, 2024 /s/ Katia Fontana
Katia Fontana,
Vice President and Chief Financial Officer
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Birks Group Inc. (the "Company") on
Form 20-F for the year ended March 30, 2024 asfiled with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Jean-Christophe
Bedos, President and Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. section 1350, as adopted pursuant tosection 906 of the
Sarbanes-Oxley Act of 2002 that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition andresults of operations of the Company.
Date: July 16, 2024 /s/ Jean-Christophe Bedos
Jean-Christophe Bedos,
President and Chief Executive Officer
Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Birks Group Inc. (the "Company") on
Form 20-F for the year ended March 30, 2024 asfiled with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Katia Fontana, Vice
President, Chief Financial & Administrative Officer of the Company, certify,
pursuant to 18 U.S.C. section 1350, asadopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 that:
1. The Report fully complies with the requirements of section 13(a) or 15(d)
ofthe Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition andresults of operations of the Company.
Date: July 16, 2024 /s/ Katia Fontana
Katia Fontana
Vice President and Chief Financial Officer
Exhibit 15.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements on
Form S-8 (Nos. 333-218932, 333-139613 and 333-273259) of Birks Group Inc.
ofour report dated July 16, 2024, with respect to the consolidated balance
sheets of Birks Group Inc. as of March 30, 2024 and March 25, 2023, and the
related consolidated statements of operations, other comprehensive income
(loss), changesto stockholders' equity (deficiency) and cash flows for the
years ended March 30, 2024, March 25, 2023, and March 26, 2022, and the
related notes.
/s/ KPMG LLP
July 16, 2024
Montreal, Canada
Exhibit 97.1
BIRKS GROUP INC.
POLICYREGARDING THE MANDATORY RECOVERY OF COMPENSATION
Effective as of November 30, 2023
I. Applicability
. This Policy Regarding the Mandatory
Recovery of Compensation (this"
Policy
") applies to any Incentive Compensation paid to
the Executive Officers of Birks Group Inc. (the "
Company
"). This Policy is intended to comply with and be interpreted
in accordance with therequirements of Section 811 ("
Section
811
") of the New York Stock Exchange American ("
NYSE
") Company Guide. The provisions of Section 811 shall prevail in theevent of any conflict between the text of
this Policy and such section. Certain capitalized terms used in this Policy are defined in Section IV hereof.
II. Recovery
.
a. Triggering Event
.
Except as provided herein and subject to Section II(b) below, in the event
that the Company is required to prepare a Financial Restatement, theCompany
shall recover any Recoverable Amount of any Incentive Compensation received by
a current or former Executive Officer during the Look-Back Period. The
Recoverable Amount shall be repaid to the Company within a reasonably prompt
time after thecurrent or former Executive Officer is notified in writing of
the Recoverable Amount as set forth in Section II(d) below, accompanied by a
reasonably detailed computation thereof. For the sake of clarity, the recovery
rule in this Section II(a)shall apply regardless of any misconduct, fault, or
illegal activity of the Company, any Executive Officer, or the Company's Board
of Directors (the "
Board
") or any committee thereof.
b. Compensation Subject to Recovery
.
i. Incentive Compensation subject to mandatory recovery under Section II(a)
includes any Incentive Compensationreceived by an Executive Officer:
a. After beginning service as an Executive Officer;
b. Who served as an Executive Officer at any time during the performance period for that Incentive Compensation;
-------------------------------------------------------------------------------
c. While the Company has a class of securities listed on a national securities exchange or a national securitiesassociation; and
d. During the Look-Back Period.
ii. As used in this Section II(b), Incentive Compensation is deemed "received" in the fiscal period thatthe Financial
Reporting Measure specified in the applicable Incentive Compensation award is attained, even if the payment or grant of
the Incentive Compensation occurs after the end of that period. This Section II(b) will only apply to IncentiveCompensation
received in any fiscal period ending on or after the effective date of Section 811, being October 2, 2023.
c. Recoupment
.
i. The Compensation and Nominating
Committee of the Board (the "
Compensation Committee
")shall determine, at its sole discretion, the method for recouping
Incentive Compensation, which may include (A) requiring reimbursement of
Incentive Compensation previously paid; (B) seeking recovery of any
gain realized on the vesting,exercise, settlement, sale, transfer, or
other disposition of any equity-based awards; (C) deducting the amount
to be recouped from any compensation otherwise owed by the Company to
the Executive Officer; and/or (D) taking any otherremedial and recovery
action permitted by law, as determined by the Compensation Committee.
d. Recoverable Amount
.
i. The Recoverable Amount is equal to the amount of Incentive Compensation received
in excess of the amount ofIncentive Compensation that would have been received
had it been determined based on the restated amounts in the Financial Restatement,
without regard to taxes paid by the Company or the Executive Officer.
ii. In the event the Incentive Compensation is based on a measurement that
is not subject to mathematicalrecalculation, the Recoverable Amount
shall be based on a reasonable estimate of the effect of the Financial
Restatement, as determined by the Compensation Committee, which shall
be set forth in writing. For example, in the case of IncentiveCompensation
based on stock price or total shareholder return, the Recoverable
Amount shall be based on a reasonable estimate of the effect of the
Financial Restatement on the stock price or total shareholder return.
- 2 -
Adopted by the Board of Directors: November 30, 2023
-------------------------------------------------------------------------------
e. Exceptions to Applicability
.
The Company must recover the Recoverable Amount of Incentive Compensation as
stated above in Section II(a), unless the Compensation Committee,or in the
absence of such committee, a majority of the independent directors serving on
the Board, makes a determination that recovery would be impracticable, and at
least one of the following applies:
i. The direct expense paid to a third party to assist in enforcing recovery would exceed the Recoverable
Amount,and a reasonable attempt to recover the Recoverable Amount has already been made and documented;
ii. Recovery of the Recoverable Amount would violate home country law (provided such law was adopted prior toNovember 28, 2022
and that an opinion of counsel in such country is obtained stating that recoupment would result in such violation); or
iii. Recovery would likely cause an otherwise
tax-qualified
retirement plan,under which benefits are broadly available to employees of the Company and its subsidiaries,
to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
III. Miscellaneous.
a. The Board or Compensation Committee may require that any incentive plan, employment agreement, equity
awardagreement, or similar agreement entered into on or after the date hereof shall, as a condition to the
grant of any benefit thereunder, require an Executive Officer to agree to abide by the terms of this
Policy, including the repayment of theRecoverable Amount of erroneously awarded Incentive Compensation.
b. The Company shall not indemnify any Executive Officer or other individual against
the loss of any incorrectlyawarded or otherwise recouped Incentive Compensation.
c. The Company shall comply with applicable compensation recovery policy
disclosure rules of the Securities andExchange Commission (the "
Commission
").
IV. Definitions.
a. Incentive Compensation
. "
Incentive Compensation
" means any compensation that isgranted, earned, or vests based
wholly or in part upon the attainment of a Financial Reporting
Measure, but does not include awards that are earned or vest based
solely on the continued provision of services for a period of time.
- 3 -
Adopted by the Board of Directors: November 30, 2023
-------------------------------------------------------------------------------
b. Financial Reporting Measure
. "
Financial Reporting Measure
" means any reportingmeasure that is determined and presented in accordance with the accounting principles used in preparing
the Company's financial statements, and any measures that are derived wholly or in part from such measures. Stock
price and totalshareholder return are considered to be Financial Reporting Measures for purposes of this Policy. A financial
reporting measure need not be presented within the financial statements or included in a filing with the Commission.
c. Financial Restatement
. A "
Financial Restatement
" means any accountingrestatement due to the material noncompliance of
the Company with any financial reporting requirement under applicable
securities laws, including any required accounting restatement to
correct an error in previously issued financial statements that(i) is
material to the previously issued financial statements (commonly referred
to as a "Big R" restatement), or (ii) is not material to previously
issued financial statements, but would result in a material misstatement
if theerror were left uncorrected in the current period or the error
correction were recognized in the current period (commonly referred to
as a "little r" restatement). For purposes of this Policy, the date of a
Financial Restatement will bedeemed to be the earlier of (i) the date the
Board, a committee of the Board, or officers authorized to take such
action if Board action is not required, concludes, or reasonably should
have concluded, that the Company is required to prepare anaccounting
restatement, and (ii) the date a court, regulator, or other legally
authorized body directs the Company to prepare an accounting restatement.
d. Executive Officer
. "
Executive Officer
" shall mean the Company's ChiefExecutive Officer, President, Chief Financial Officer,
or principal accounting officer (or, if there is no such accounting officer, the
Controller), any vice-president of the Company in charge of a principal business
unit, division or function (suchas sales, administration or finance), and any other
officer or person who performs a significant policy-making function for the Company,
whether such person is employed by the Company or a subsidiary thereof. For the
sake of clarity, "ExecutiveOfficer" includes at a minimum executive officers
identified by the Board pursuant to 17 Code of Federal Regulations ("CFR") 229.401(b).
e. Look-Back Period
. The "
Look-Back Period
" means the three completed fiscal yearsimmediately preceding the date of a
Financial Restatement and any transition period as set forth in Section 811.
- 4 -
Adopted by the Board of Directors: November 30, 2023
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