April 13, 2007

Lazare Kaplan International Inc.
19 West 44th Street
New York, New York 10036
Attention: Mr. William H. Moryto

 

 

Re:

Facility Letter

Ladies and Gentlemen:

In accordance with our recent discussions, we are please to confirm ABN AMRO
Bank N.V.’s (the “Bank”) agreement to hold available to Lazare Kaplan
International Inc. (the “Borrower”) a revolving loan facility for own-note
borrowings (“Loans”) up to a maximum aggregate principal amount of $7,800,000
(the “Facility”). The Facility will be available at the Bank’s discretion in
accordance with this letter agreement (the “Facility Letter”) until the earlier
to occur of (i) notice from the Bank that the Bank has terminated the Facility
or (ii) December 1, 2008.

Reference is made to the Revolving Credit Agreement dated as of August 14, 2002
(as the same has been and may be amended, restated or otherwise modified, the
“Credit Agreement”) by and among the Borrower, the Bank (as Administrative
Agent, Arranger and a lender) and Bank Leumi USA. Terms used herein but not
otherwise defined shall have the meaning assigned to such terms in the Credit
Agreement and such terms are hereby incorporated herein by reference.

The Bank’s agreement to make the Loans under the Facility is subject to the
following terms and conditions:

The proceeds of the Loans shall be used for working capital. The Borrower
acknowledges and agrees that compliance by the Borrower with the terms and
conditions set forth herein, merely entitles the Borrower to make requests for
Loans hereunder, the granting of which, however, shall, in each case, remain
within the Bank’s sole and absolute discretion.

The interest rate applicable to the Loans made under this Facility shall be
either (i) the Base Rate or (ii) the LIBOR Rate plus LIBOR Rate Margin. Each
Base Rate Loan shall bear interest for the period commencing with the Drawdown
Date thereof and ending on the last day of the Interest Period with respect
thereto at a rate per annum equal to the Base Rate. Each LIBOR Rate Loan shall
bear interest for the period commencing with the Drawdown Date thereof and
ending on the last day of there Interest Period with respect thereto at rate per
annum equal to the sum of (i) the LIBOR Rate determined for such Interest Period
plus (ii) LIBOR Rate Margin. Without limiting the uncommitted nature of this
Facility Letter and the Bank’s right to demand repayment of the Loans hereunder,
together with all interest accrued thereon and any other obligations thereunder,
the Borrower promises to pay interest on each Loan in arrears on each Interest
Payment Date with respect thereto and upon demand. The Borrower hereby further
promises to pay to the order of the Bank, on demand, at the place of payment
indicated in the

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attached note, interest on any unpaid amounts under this Facility Letter
following an Event of Default under the Credit Agreement or after demand by the
Bank under this Facility Letter, at a rate per annum equal to the Base Rate plus
two percent (2%) until such amount is paid in full.

Section 4.1 of the Credit Agreement shall be applicable to all Loans with
interest based on the LIBOR Rate. Please be advised that Loans with interest
based on the LIBOR Rate are made in the Bank’s sole and absolute discretion.

As security for the Facility, you will provide us with an unconditional guaranty
in favor of the Bank by the Guarantors.

Without in any way limiting the uncommitted nature of the Facility, you agree
that if any of the Borrower or its Subsidiaries shall default under any
agreement or agreements evidencing any indebtedness in excess of $100,000 owing
to any person, or if such Indebtedness shall be payable on demand, and demand
shall be made, or any affiliate thereof, or shall fail to pay such amounts
thereunder when due or demanded, irrespective of any applicable period of grace
or cure period, then the Bank may, by written notice to the Borrower, demand,
and the Borrower will make, immediate payment to the Bank of all Loans and other
amounts outstanding under the Facility, including but not limited to interest,
costs and expenses, whether mature, contingent or unmatured.

Without in any way affecting the uncommitted nature of this Facility, you agree
that so long as this Facility is in effect and until all Loans and obligations
incurred hereunder are paid in full, you shall comply with the covenants set
forth in Section 8 of the Credit Agreement.

Upon the execution of this Facility Letter and the related note, the Borrower
acknowledges that $2,800,000 of loans made under the Credit Agreement shall be
allocated to the note under this Facility and such loans shall be deemed “Loans”
under this Facility and shall be subject to the terms of this Facility Letter,
including, but not limited to the Bank’s right to demand repayment of such Loans
at any time.

The terms of this Facility Letter shall not be amended without the prior written
consent of each of the Borrower and the Bank.

The Borrower shall pay to the Bank, on demand, the reasonable costs, expenses
and disbursements (including, but not limited to legal fees) in connection with
the preparation, interpretation, amendment, modification, cancellation,
enforcement or restructuring of the Borrower’s obligations under this Facility
Letter.

All obligations under this Facility are payable immediately on demand. In
addition to any other rights ABN may have, and without limiting the uncommitted
nature of this Facility, if the Borrower does not comply with any of its
undertakings in this letter agreement, or an Event of Default shall have
occurred under Section 9.1(a)-(j) of the Credit Agreement, or should any
guaranty issued in support of this Facility be canceled or in any other way
become ineffective or impaired, the Bank may, at its option, declare all Loans
and other obligations under this Facility to the Bank to be, whereupon they
shall become, immediately due and payable, without presentment, demand, protest
or further notice of any kind, all of which the Borrower hereby waives.

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For the avoidance of doubt, this is not a committed facility; no commitment fee
shall be charged and the Bank may terminate this Facility or demand the Loans at
any time. This Facility Letter shall be governed and construed in accordance
with the laws of the State of New York.

If you are in agreement with the foregoing, kindly indicate your acceptance by
signing the attached copy of this letter in the space provided and the attached
promissory note and returning the same to us.

Very truly yours,

ABN AMRO Bank N.V.

 

 

 

Anna Martin

Ned Koppelson

 

 

 

Accepted and agreed:

 

LAZARE KAPLAN INTERNATIONAL INC.

 

 

 

 

By

 

 

 

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Name

 

 

 

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Title

 

 

 

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PROMISSORY NOTE

New York, New York
April 13, 2007

$7,800,000

          On April 13, 2007, FOR VALUE RECEIVED, the undersigned, LAZARE KAPLAN
INTERNATIONAL INC., a Delaware corporation (the “Borrower”) promises to pay to
the order of ABN AMRO Bank N.V. at its New York office at 565 Fifth Avenue, New
York, New York 10017, ON DEMAND the principal sum of Seven Million Eight Hundred
Thousand Dollars ($7,800,000), or such lesser amount as may be advanced to the
Borrower hereon pursuant to the Agreement hereinafter identified.

          The Borrower hereby promises to pay interest, at the place of payment,
ON DEMAND (computed on the basis of a year of 360 days for the actual number of
days elapsed) on the principal amount from time to time remaining unpaid hereon
from the date hereof until paid at the rates, and payable in the manner
specified in the Agreement and ON DEMAND or otherwise on the dates, specified in
the Agreement.

          All loans made by the payee hereof against this Note, and all payments
made by the Borrower on account of the unpaid principal amount hereof, shall be
recorded on the books and records of the holder hereof and endorsed hereon prior
to any transfer hereof, and the Borrower agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the amount shown as
owing on this Note on the books and records of the holder hereof shall be deemed
prima facie correct.

          This Note is issued under the terms and provisions of Facility Letter
bearing even date herewith by and among the Borrower and ABN AMRO BANK N.V, and
this Note and the holder hereof are entitled to all of the benefits provided for
by said Agreement or referred to therein, including the ability of the Bank to
demand payment of the Note at any time.

          The Loans evidenced by this Note may be prepaid in whole or in part on
any business day, without penalty or premium.

          Demand of payment of this Note shall be sufficiently made upon the
Borrower by written, telex, telegraphic, electronic or telephonic notice given
by or on behalf of the holder to the Borrower at its last known address. No
other method of delivering actual demand or notice is precluded hereby, and any
such notice or demand shall be fully effective, without further demand,
presentment, protest or notice of any kind, all of which are hereby waived by
the Borrower. No delay on the party of the holder in exercising any of its
options, powers or rights, or partial or single exercise thereof shall
constitute a waiver thereof. The options, powers and rights of the holder hereof
specified herein are in addition to those otherwise created.

          This Note shall be construed in accordance with, and governed by, the
internal laws of the State of New York.

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          The Borrower hereby promises to pay all costs and expenses (including
attorneys’ fees) suffered or incurred by the holder hereof in collecting this
Note or in enforcing any rights in any collateral therefor.

 

 

 

 

LAZARE KAPLAN INTERNATIONAL INC.

 

 

 

By:

 

 

 

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Its:

 

 

 

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GUARANTY

          This Guaranty Agreement (the “Guaranty”) dated as of this 13th day of
April, 2007, from each of the parties who have executed this Guaranty (being
herein referred to collectively, as the “Guarantors” and individually, as a
“Guarantor”) in favor of ABN AMRO Bank N.V. (“ABN AMRO”).

W I T N E S S E T H     T H A T :

          WHEREAS, LAZARE KAPLAN INTERNATIONAL INC., a Delaware corporation,
(the “Borrower”) and ABN AMRO have entered into the Facility Letter, dated as of
April 13, 2007 (such Facility Letter as the same may be amended, modified,
supplemented, restated and/or replaced from time to time being hereinafter
referred to as the “Facility Letter”), pursuant to which ABN AMRO as the “Bank”
agreed, subject to certain terms and conditions, to extend credit and make
certain other financial accommodations to the Borrower;

          WHEREAS, the Bank shall be hereinafter referred to as the “Guaranteed
Creditor”;

          WHEREAS, pursuant to the Facility Letter, the Bank has required, among
other things, that each Guarantor provide to the Guaranteed Creditor its payment
guarantee of the credit facilities under the Facility Letter;

          WHEREAS, the Borrower provides each Guarantor that is a subsidiary of
the Borrower (whether directly or indirectly) with substantial financial,
management, administrative, and technical support, and each Guarantor will
benefit, directly or indirectly, from credit and other financial accommodations
extended by the Guaranteed Creditor to the Borrower;

          WHEREAS, as to each Guarantor that is not a subsidiary of the
Borrower, it is in the best business interest of such Guarantor and its
stockholders that the Borrower receive credit and other financial accommodations
extended by the Guaranteed Creditor because of the mutual business interests and
endeavors of the Borrower and such Guarantor;

          NOW, THEREFORE, for and in consideration of the benefits accruing to
each Guarantor, the receipt and sufficiency are hereby acknowledged, each
Guarantor hereby makes the following representations and warranties to the
Guaranteed Creditor and hereby covenants and agrees with the Guaranteed Creditor
as follows:

          Section 1. All capitalized terms used herein without definition shall
have the same meanings herein as such terms have in the Facility Letter.

          Section 2. Each Guarantor hereby jointly and severally guarantees to
the Guaranteed Creditor, the due and punctual payment when due of (a) any and
all indebtedness, obligations, and liabilities of whatsoever kind and nature of
the Borrower under the Facility Letter, whether direct or indirect, absolute or
contingent, due or to become due, and whether now existing or hereafter arising
and howsoever held, evidenced, or acquired, (the “Bank Obligations”), (b) any
and all reasonable expenses and charges, legal or otherwise, suffered or
incurred by the Guaranteed Creditor, in collecting or enforcing any of such
indebtedness, obligations, or liabilities or in realizing on or protecting or
preserving any security therefor, if any (all of the

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foregoing being hereinafter referred to as the “Guaranteed Indebtedness”). In
case of failure by the Borrower to punctually pay any Guaranteed Indebtedness,
each Guarantor hereby jointly and severally agrees to make such payment or to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at stated maturity, by acceleration or otherwise. All
payments hereunder by any Guarantor shall be made in immediately available and
freely transferable funds in Dollars without set-off, counterclaim or other
defense or withholding or deduction of any nature. Notwithstanding anything in
this Guaranty to the contrary, the right of recovery against a Guarantor under
this Guaranty shall not exceed $1.00 less than the amount which would render
such Guarantor’s obligations under this Guaranty void or voidable under
applicable law, including fraudulent conveyance law.

          Section 3. Each Guarantor further jointly and severally agrees to pay
on demand all reasonable out of pocket expenses, legal and/or otherwise
(including court costs and reasonable attorneys’ fees), paid or incurred by the
Guaranteed Creditor in endeavoring to collect the Guaranteed Indebtedness or any
part thereof, or in enforcing or endeavoring to enforce any Guarantor’s
obligations hereunder, or any part thereof, or in protecting, defending or
enforcing this Guaranty in any litigation, bankruptcy or insolvency proceedings
or otherwise.

          Section 4. Each Guarantor agrees that, upon demand, such Guarantor
shall pay to the Guaranteed Creditor the full amount of the indebtedness hereby
guaranteed when due (subject to the right of recovery from such Guarantor
pursuant to the last sentence of Section 2 above) whether or not any one or more
of the other Guarantors shall then or thereafter pay any amount whatsoever in
respect to their obligations hereunder, provided, however, that the aggregate
amount payable by the Guarantors shall in no event exceed the amount due and
owing to the Guaranteed Creditor by the Borrower.

          Section 5. Each Guarantor agrees that such Guarantor will not exercise
or enforce any right of exoneration, contribution, reimbursement, recourse or
subrogation available to such Guarantor against any Person liable for payment of
the indebtedness hereby guaranteed, or as to any security therefor, unless and
until the full amount owing and payable to the Guaranteed Creditor of the
Guaranteed Indebtedness has been fully paid and satisfied and the Facility
Letter shall have expired or otherwise terminated. The payment by any Guarantor
of any amount or amounts to the Guaranteed Creditor pursuant hereto shall not in
any way entitle any such Guarantor, either at law, in equity or otherwise, to
any right, title or interest (whether by way of subrogation or otherwise) in and
to the Guaranteed Indebtedness or any part thereof or any collateral security
therefor, if any, or any other rights or remedies in any way relating thereto or
in and to any amounts theretofore, then or thereafter paid or applicable to the
payment thereof howsoever such payment may be made and from whatsoever source
such payment may be derived unless and until all of the Guaranteed Indebtedness
and all costs and expenses suffered or incurred by the Guaranteed Creditor in
enforcing this Guaranty have been paid and satisfied in full and the uncommitted
agreement by the Guaranteed Creditor to extend any Guaranteed Indebtedness shall
have expired or otherwise terminated and unless and until such payment in full
and termination, any payments made by any Guarantor hereunder and any other
payments from whatsoever source derived on account of or applicable to the
Guaranteed Indebtedness or any part thereof shall be held and taken to be merely
payments to the Guaranteed Creditor reducing pro tanto the indebtedness hereby
guaranteed.

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          Section 6. This Guaranty is a continuing, absolute and unconditional
guaranty of payment and not merely of collection, and shall remain in full force
and effect as against each Guarantor until all of the Guaranteed Indebtedness
shall be fully paid and satisfied and the Facility Letter shall have expired or
have been terminated. The Guaranteed Creditor may at any time or from time to
time release any Guarantor from its obligations hereunder or effect any
compromise with any Guarantor and no such release or compromise shall in any
manner impair or otherwise affect the obligations hereunder of the other
Guarantors. No release, compromise, or discharge of any one or more of the
Guarantors shall release, compromise or discharge the obligations of the other
Guarantors hereunder.

          Section 7. In case of the dissolution, liquidation or insolvency
(howsoever evidenced) of, or the institution of voluntary bankruptcy or
receivership proceedings against the Borrower or the institution of involuntary
bankruptcy proceedings against the Borrower that are not dismissed within sixty
(60) days following the commencement thereto, all of the Guaranteed Indebtedness
relating to the Borrower which is then existing shall immediately become due or
accrued and payable from the Guarantors. All payments received from the Borrower
or on account of the Guaranteed Indebtedness from whatsoever source, shall be
taken and applied as payment on the indebtedness hereby guaranteed, and this
Guaranty shall apply to and secure any ultimate balance that shall remain owing
to the Guaranteed Creditor.

          Section 8. The liability hereunder shall in no way be affected or
impaired by (and the Guaranteed Creditor is hereby expressly authorized to make
from time to time, without notice to any of the Guarantors), any sale, pledge,
surrender, compromise, settlement, release, renewal, extension, impairment,
indulgence, alteration, substitution, exchange, change in, modification or other
disposition of any of the Guaranteed Indebtedness, either express or implied, or
of the Facility Letter or any other contract or contracts evidencing any
thereof, or of any security or collateral therefor or any guaranty thereof. The
liability hereunder shall in no way be affected or impaired by any acceptance or
release by the Guaranteed Creditor of any security for or other guarantors upon
any of the Guaranteed Indebtedness, or by any failure, neglect or omission on
the part of the Guaranteed Creditor to realize upon or protect any of the
Guaranteed Indebtedness, or any collateral or security therefor, if any,
(including, without limitation, impairment of collateral and failure to perfect
security interest in any collateral), or to exercise any lien upon or right of
appropriation of any moneys, credits or property of the Borrower or any
Guarantor, possessed by the Guaranteed Creditor, toward the liquidation of the
Guaranteed Indebtedness, or by any application of payments or credits thereon.
In order to hold any Guarantor liable hereunder, there shall be no obligation on
the part of the Guaranteed Creditor, at any time, to resort for payment to the
Borrower or to any other Guarantor, or to any other Person, its property or
estate, or resort to any collateral, security, property, liens or other rights
or remedies whatsoever, and the Guaranteed Creditor shall have the right to
enforce this Guaranty against any Guarantor irrespective of whether or not other
proceedings or steps are pending seeking resort to or realization upon or from
any of the foregoing are pending.

          Section 9. All diligence in collection or protection, and all
presentment, demand, protest and/or notice, as to any and everyone, whether or
not the Borrower or the Guarantors or others, of dishonor and of default and of
non-payment and of the creation and existence of any and all of said Guaranteed
Indebtedness, and of any security and collateral therefor, and of the

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acceptance of this Guaranty, and of any and all extensions of credit and
indulgence hereunder, are expressly waived.

          Section 10. The Guarantors waive any and all defenses, claims and
discharges of the Borrower, or any other obligor or guarantor, pertaining to the
Guaranteed Indebtedness, except the defense of discharge by irrevocable payment
in full. Without limiting the generality of the foregoing, the Guarantors will
not assert, plead or enforce against the Guaranteed Creditor any defense of
waiver, release, discharge in bankruptcy, statute of limitations, res judicata,
statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury,
illegality or unenforceability which may be available to the Borrower or any
other Person liable in respect of any of the Guaranteed Indebtedness, or any
set-off available against the Guaranteed Creditor to the Borrower or any such
other Person, whether or not on account of a related transaction. The Guarantors
agree that the Guarantors shall be and remain jointly and severally liable for
any deficiency remaining after foreclosure or other realization on any lien or
security interest, if any, securing the Guaranteed Indebtedness, whether or not
the liability of the Borrower or any other obligor for such deficiency is
discharged pursuant to statute or judicial decision.

          Section 11. If any payment applied by the Guaranteed Creditor to the
indebtedness hereby guaranteed is thereafter set aside, recovered, rescinded or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Borrower or any other obligor),
the Guaranteed Indebtedness to which such payment was applied shall for the
purposes of this Guaranty be deemed to have continued in existence,
notwithstanding such application, and this Guaranty shall be enforceable as to
such of the Guaranteed Indebtedness as fully as if such application had never
been made.

          Section 12. The liability of the Guarantors under this Guaranty is in
addition to and shall be cumulative with all other liabilities of the Guarantors
after the date hereof to the Guaranteed Creditor as a guarantor of the
indebtedness hereby guaranteed, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary.

          Section 13. Any invalidity or unenforceability of any provision or
application of this Guaranty shall not affect other lawful provisions and
applications hereof, and to this end the provisions of this Guaranty are
declared to be severable. Without limiting the generality of the foregoing, any
invalidity or unenforceability against any Guarantor of any provision or
application of the Guaranty shall not affect the validity or enforceability of
the provisions or application of this Guaranty as against the other Guarantors.

          Section 14. Any demand for payment on this Guaranty or any other
notice required or desired to be given hereunder to any Guarantor shall be in
writing (including, without limitation, notice by telecopy) and shall be given
to the relevant party at its address or telecopier number set forth on the
appropriate signature page hereof, or such other address or telecopier number as
such party may hereafter specify by notice to the Guaranteed Creditor given by
United States certified or registered mail or by telecopy. Each such notice,
request or other communication shall be effective (i) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section and a confirmation of such telecopy has been received by the

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sender, or (ii) if given by mail, 5 days after such communication is deposited
in the mail, certified or registered with return receipt requested, addressed as
aforesaid.

          Section 15. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED ACCORDING
TO THE LAW OF THE STATE OF NEW YORK (without regard to principles of conflicts
of laws) in which state it shall be performed by the Guarantors and may not be
waived, amended, released or otherwise changed except by a writing signed by the
Banks. This Guaranty and every part thereof shall be effective upon delivery to
the Guaranteed Creditor without further act, condition or acceptance by the
Guaranteed Creditor, shall be binding upon the Guarantors and upon the legal
representatives, successors and assigns of the Guarantors, and shall inure to
the benefit of the Guaranteed Creditor, its successors, legal representatives
and assigns. The Guarantors waive notice of the Guaranteed Creditor’s acceptance
hereof. This Guaranty may be executed in counterparts and by different parties
hereto on separate counterparts each of which shall be an original, but all
together to be one and the same instrument.

          Section 20. Each Guarantor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any State court sitting in New York City, for purposes of all
legal proceedings arising out of or relating to this Guaranty or the
transactions contemplated hereby. Each Guarantor irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such court has been brought in
an inconvenient forum. EACH GUARANTOR AND, BY ACCEPTING THE BENEFITS OF THIS
AGREEMENT, THE GUARANTEED CREDITOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[SIGNATURE PAGES TO GUARANTY AGREEMENT TO FOLLOW]

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          IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be
executed and delivered as of the date first above written.

 

 

 

 

GUARANTORS:

 

 

 

 

LAZARE KAPLAN EUROPE INC.

Address:

 

 

c/o Lazare Kaplan International Inc.

 

 

529 Fifth Avenue

 

 

New York, New York 10017

By: 

 

Telecopier No. 212-697-3197

 

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Its:

 

 

 

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LAZARE KAPLAN JAPAN INC.

Address:

 

 

c/o Lazare Kaplan International Inc.

 

 

529 Fifth Avenue

 

 

New York, New York 10017

By: 

 

Telecopier No. 212-697-3197

 

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Its:

 

 

 

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LAZARE KAPLAN AFRICA INC.

Address:

 

 

c/o Lazare Kaplan International Inc.

 

 

529 Fifth Avenue

 

 

New York, New York 10017

By: 

 

Telecopier No. 212-697-3197

 

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Its:

 

 

 

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