3RD AMENDMENT TO REVOLVING AGREEMENT

 

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                                                                    EXHIBIT 10.5

 

 

               THIRD AMENDMENT TO REVOLVING CREDIT, TRANCHE B LOAN

               AND SECURITY AGREEMENT, LIMITED WAIVER AND CONSENT

 

 

             THIRD AMENDMENT TO REVOLVING CREDIT, TRANCHE B LOAN AND SECURITY

AGREEMENT, LIMITED WAIVER AND CONSENT, dated as of February __, 2004

("AMENDMENT"), by and among MAYOR'S JEWELERS, INC., a Delaware corporation,

MAYOR'S JEWELERS OF FLORIDA, INC., a Florida corporation, and each of the other

Domestic Subsidiaries parties thereto (collectively, the "BORROWERS"), FLEET

RETAIL GROUP INC. (f/k/a Fleet Retail Finance Inc.)("FRGI"), GMAC COMMERCIAL

FINANCE, LLC (successor in interest to GMAC Business Credit, LLC) ("GMACCF"), as

syndication agent (the "SYNDICATION AGENT"), BACK BAY CAPITAL FUNDING LLC (the

"TRANCHE B LENDER" and collectively with FRGI and GMACCF, the "LENDERS"), and

FLEET RETAIL GROUP INC. (f/k/a Fleet Retail Finance Inc.), as administrative

agent for itself and the Lenders (the "ADMINISTRATIVE AGENT").

 

             WHEREAS, the Borrowers, the Lenders, and the Administrative Agent

are parties to a Revolving Credit, Tranche B Loan and Security Agreement, dated

as of August 20, 2002 (as amended and in effect from time to time, the "CREDIT

AGREEMENT"), pursuant to which the Lenders have extended credit to the Borrowers

on the terms and subject to the conditions set forth therein;

 

         WHEREAS, the Borrowers, the Lenders, and the Administrative Agent have

agreed, on the terms and conditions set forth herein, to amend certain

provisions of the Credit Agreement; and

 

         WHEREAS, capitalized terms which are used herein without definition and

which are defined in the Credit Agreement shall have the same meanings herein as

in the Credit Agreement.

 

         NOW, THEREFORE, in consideration of the foregoing, and for other good

and valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, the parties hereto hereby agree as follows:

 

         SS.1. AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of

the Credit Agreement is hereby amended by:

 

                  (a) deleting the definition of "Appraised A/R Liquidation

         Value" in its entirety and substituting the following new definition in

         lieu thereof:

 

         "APPRAISED A/R LIQUIDATION VALUE. The product of (a) the net book value

                  of Eligible Private Label Accounts multiplied by (b) the

                  percentage determined from the then most recent appraisal of

                  Eligible Private Label Accounts undertaken at the request of

                  the Administrative Agent, to reflect the appraised estimate of

                  the net recovery on the Eligible Private Label Accounts on a

                  forced liquidation basis.";

 

                  (b) deleting the definition of "Appraised A/R Percentage" in

         its entirety and substituting the following new definition in lieu

         thereof:

 

 

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         "APPRAISED A/R PERCENTAGE. 65%.";

 

                  (c) deleting the definition of "Appraised A/R Tranche B

         Percentage" in its entirety and substituting the following new

         definition in lieu thereof:

 

         "APPRAISED A/R TRANCHE B PERCENTAGE. 65%.";

 

                  (d) deleting the definition of "Appraised Inventory Tranche B

         Percentage" in its entirety and substituting the following new

         definition in lieu thereof:

 

         "APPRAISED INVENTORY TRANCHE B PERCENTAGE. For each Eligible Inventory

                  Category, the Appraised Inventory Tranche B Percentage shall

                  be equal to one hundred and two and one-half percent (102.5%).

                  With respect to additional Eligible Inventory Categories, the

                  Appraised Inventory Tranche B Percentage shall be the

                  percentage determined by the Administrative Agent and the

                  Tranche B Lender."

 

                  (e) deleting the definition of "Borrowing Base" in its

         entirety and substituting the following new definition in lieu thereof:

 

         "BORROWING BASE. The result of the following:

 

                  (a)       Eighty-five percent (85%) multiplied by the Appraised

                           Inventory Liquidation Value of each Eligible

                           Inventory Category.

 

                                  PLUS

 

                  (b)       The lesser of (i) the Appraised A/R Percentage

                           multiplied by the Appraised A/R Liquidation Value and

                           (ii) $3,000,000.

 

                                  MINUS

 

                  (c)       All applicable Reserves.";

 

                  (f) deleting the definition of "Tranche B Borrowing Base" in

         its entirety and substituting the following new definition in lieu

         thereof:

 

         "TRANCHE B BORROWING BASE. The result of the following:

 

                  (a)       The aggregate amount with respect to all Eligible

                           Inventory Categories of the Appraised Inventory

                           Tranche B Percentage for each such Eligible Inventory

                           Category multiplied by the Appraised Inventory

                           Liquidation Value for such Eligible Inventory

                           Category.

 

                                  PLUS

 

                  (b)       The lesser of (i) the Appraised A/R Tranche B

                           Percentage multiplied by the Appraised A/R

                            Liquidation Value and (ii) $3,000,000.

 

 

                                       2

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                                  MINUS

 

                  (c)       All applicable Reserves."; and

 

                  (g) deleting the definition of "Tranche B Loan" in its

         entirety and substituting the following new definition in lieu thereof:

 

                  "TRANCHE B LOAN. Together with the Incremental Tranche B

                           Funding Amount, the aggregate principal amount of

                            $12,500,000, plus accrued and unpaid capitalized

                           Tranche B Loan PIK Interest in the amount of

                           $168,491.25. As of the Third Amendment Effective

                           Date, and after giving effect to the funding of the

                           Incremental Funding Amount, the outstanding principal

                           amount of the Tranche B Loan shall be equal to

                           $12,668,491.25."

 

                   (h) deleting the definition of "Yield Revenue" in its entirety

         and substituting the following new definition in lieu thereof:

 

                  "YIELD REVENUE. All amounts which are (or would be) payable on

                           account of the Tranche B Loan, the Tranche B Lender

                           Fees and the Tranche B Loan Interest Rate (as if all

                           interest were paid in cash on the relevant Tranche B

                           Loan Interest Payment Date) with respect to the

                           Tranche B Loan from the Third Amendment Effective

                           Date through the twelve (12) month anniversary of the

                           Third Amendment Effective Date."

 

                   (i) inserting the following new definitions in proper

         alphabetical order therein:

 

                  "ELIGIBLE PRIVATE LABEL ACCOUNTS. Accounts Receivable due on

                           the Borrowers' private label credit card programs

                            which are deemed in the reasonable discretion of the

                           Administrative Agent to be eligible. The

                           Administrative Agent shall act in good faith at all

                           times when determining such eligibility."

 

                  "INCREMENTAL TRANCHE B FUNDING AMOUNT. $2,000,000, which

                           amount shall be funded to the Borrowers by the

                           Tranche B Lender on the Third Amendment Effective

                           Date."

 

                  "THIRD AMENDMENT. The Third Amendment to Revolving Credit

                           Tranche B Loan and Security Agreement, Limited Waiver

                           and Consent dated as of February __, 2004."

 

                  "THIRD AMENDMENT EFFECTIVE DATE. The "Effective Date" as such

                           term is defined in the Third Amendment."

 

         SS.2. AMENDMENT TO SECTION 3 OF THE CREDIT AGREEMENT. Section 3 of the

Credit Agreement is hereby amended by deleting Sections 3.1 and 3.3 in their

entirety and substituting the following new Sections 3.1 and 3.3 in proper

numerical order in lieu thereof:

 

                  "3.1 COMMITMENT TO LEND. Subject to the terms and conditions

         set forth in this Agreement, the Tranche B Lender agrees to lend to the

         Borrowers on the Closing Date the principal amount of $12,500,000. In

         addition, subject to the terms and conditions of the Third Amendment,

         the Tranche B Lender agrees to lend to the Borrowers on the Third

         Amendment Effective Date the Incremental Tranche B Funding Amount."

 

 

 

                                       3

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                  "3.3. PAYMENTS OF PRINCIPAL OF TRANCHE B LOAN. Except as

         contemplated by ss.13.4, the Borrowers may not make any principal

         payments on account of the Tranche B Loan until the Borrowers'

         Obligations to the Revolving Credit Lenders have been paid in full and

         the Commitments have been terminated; PROVIDED, HOWEVER, beginning

         April 30, 2003, the Borrowers may prepay the Tranche B Loan in its

         entirety or in $1,000,000 increments if at such time (i) a Default does

         not exist and one would not result from such prepayment, (ii) after

         giving effect to such payment Availability is in excess of $10,000,000

         and (iii) the Borrowers shall have delivered to the Administrative

         Agent pro forma financial statements for the next 12 months

         demonstrating, in form and substance satisfactory to the Administrative

         Agent, that Availability will exceed $10,000,000 at all times during

         the next 12 months after giving effect to the prepayment of the Tranche

         B Loan. The Borrowers jointly and severally promise to pay on the

         Maturity Date, and there shall become absolutely due and payable on the

         Maturity Date, all of the Tranche B Loans outstanding on such date,

         together with any and all accrued and unpaid interest thereon. If the

         Borrowers prepay the Tranche B Loans in whole or in part, then, in view

         of the impracticality and extreme difficulty of ascertaining the actual

         amount of damages to Tranche B Lender or profits lost by the