Document:

Unassociated Document

    
       

      EXHIBIT
        10.1 

    

    LETTER
      OF INTENT

     

    THIS
      LETTER OF INTENT,
      hereinafter referred to as the “LOI”, is entered into, dated and made effective
      this 7th day of September, 2007, 

     

    

      
        	
                AMONG: 

              	
                RADIAL
                  ENERGY INC. (a Washington corporation)

              
	 	 
	 	
                (“RADIAL”)

              
	 	 
	
                AND:

              	
                MINERA
                  DEL PACIFICO SA (a company organized under the laws of
                  Ecuador)

              
	 	 
	 	
                (“PACIFICO”)

              
	 	 
	
                AND:

              	
                SPIRIT
                  EXPLORATION INC. (a British Columbia
                  corporation)

              
	 	 
	 	
                (“SPIRIT”)

              
	 	 
	
                AND:

              	
                JOHN
                  E. DHONAU, an individual

              
	 	 
	
                AND:

              	
                ROGER
                  MCCLAY, an
                  individual

              

      

    

     

     

    WHEREAS
      Pacifico
      has the exclusive rights to forty five percent (45%) ownership in the EMPEC
      floatation mill and sixteen (16) individual mining concessions (“EMPEC”),
      certain rights to the remaining fifty five percent (55%) ownership in EMPEC,
      one
      hundred percent (100%) ownership of two-10 year production leases to mine Adua
      Dulce and Maria Christina and the mining rights to the Jorupe mine, all located
      in Ecuador (“Adua Dulce,” “Maria Christina” and “Jorupe,” collectively, the
“Mines”) (“Mines” and “EMPEC” referred hereinafter as the
“Project”).

    

    AND
      WHEREAS
      Radial and Spirit wish to acquire, and Pacifico wishes to sell and transfer
      to
      Radial and Spirit, the interest of Pacifico in the Project such that Pacifico
      and Spirit would acquire all of the beneficial right, title and interest of
      Pacifico (the “Interest” or the “Assets”) in and to the Project.

    

    AND
      WHEREAS
      the parties wish to enter into a binding letter of intent which states that,
      upon completion of a thirty (30) day due diligence period, and assuming that
      Radial is satisfied with the results of its due diligence, the parties will
      negotiate a formal, definitive acquisition agreement or other transaction
      structure whereby Radial and Spirit would acquire the Interest.

     

    NOW,
      THEREFORE,
      in consideration of $10.00 and other good and valuable consideration, the
      parties agree as follows: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	1.  	
              The
                parties hereto agree that they will act together towards ensuring
                that the
                parties hereto enter into a definitive agreement containing substantially
                the same terms and provisions as this LOI within ninety (90) days
                from the
                date first set forth above (the “Definitive
                Agreement”).

            

    

     

    
      	2.
               	
              The
                Definitive Agreement shall include the following material
                terms:

            

    

     

    
      	(a)  	
              Radial
                will acquire thirty percent (30%) ownership interest in EMPEC owned
                by
                Pacifico and eighty five percent (85%) ownership rights to Pacifico’s
                rights in the Mines by (i) paying Pacifico $300,000 in cash (the
“John E.
                Dhonau Payment”); (ii) issuing 2,000,000 of Radial common stock to Spirit;
                and (iii) issuing in the aggregate 3,200,000 of Radial common stock
                to
                Pacifico, John E. Dhonau and Roger McClay. Radial will issue 1,000,000
                of
                such shares of its common stock prorata to Spirit and Pacifico based
                on
                the amounts set forth in this Paragraph 2(a) after receiving the
                first
                $100,000 payment from production at the EMPEC mill or other third
                party
                processing mills. Thereafter, Radial will issue an additional 1,000,000
                shares prorata to Spirit and Pacifico for every $100,000 of “Net Revenue”
                earned by Radial until the total 5,200,000 shares as set forth in
                this
                Paragraph 2(a) are issued. “Net Revenue” shall mean revenue less NRI,
                production costs and revenue due to Spirit. The shares issued by
                Radial in
                this Paragraph 2(a) are not registered under the Securities Act of
                1933,
                as amended, and Radial has no obligation to register them;
                

            

    

     

    
      	(b)  	
              Spirit
                will acquire fifteen percent (15%) ownership interest in EMPEC owned
                by
                Pacifico and fifteen percent (15%) ownership rights to Pacifico’s rights
                in the Mines by issuing 3,000,000 shares of its common stock at a
                price of
                $3.00 per share for an aggregate purchase price of $9,000,000 to
                Roland
                Glassier, the current owner of the EMPEC floatation mill. These shares
                are
                not registered under the Securities Act of 1933, as amended, and
                Spirit
                has no obligation to register them;

            

    

     

    
      	(c)  	
              In
                further consideration for acquiring Pacifico’s ownership rights in the
                Project, Radial and Spirit agree to pay to Roland Glassier their
                respective proportion of up to $300,000 per calendar quarter for
                ten
                consecutive quarters beginning January 1, 2008, for a total payment
                of
                $3,000,000. Such quarterly payment shall be derived through production
                from the Mines and will be capped at the lesser of (i) fifty percent
                (50%)
                of net quarterly revenue (revenue received less 5% NRI and production
                costs) or (ii) $300,000.

            

    

     

    
      	(d)  	
              Radial
                will be the “Operator of Record” for the EMPEC floatation mill and the
                Mines with the Ecuadorian
                Government;

            

    

     

    
      	(e)  	
              Radial
                and Pacifico will enter into a “Joint Operating Agreement” whereby
                Pacifico agrees to operate the EMPEC floatation mill and the Mines
                on
                behalf of Radial and Spirit;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	(f)  	
              Pacifico
                and its principals will receive five percent (5%) net smelter royalty
                (NSR) from the Mines; 

            

    

     

    
      	(g)  	
              Radial
                agrees to invest up to $1,000,000 in EMPEC over the next twelve (12)
                months upon receipt from Pacifico of a detailed capital expenditure
                plan
                and subject to Radial receiving the first production revenue payment
                from
                the Mines. $300,000 shall have been paid in accordance with Paragraph
                4(a)
                and 4(b) of the LOI and the remaining $700,000 will be paid in increments
                of $100,000 once Radial approves the use of such funds. Any capital
                expenditures in EMPEC and the Mines thereafter will be apportioned
                between
                Radial and Spirit in accordance with their ownership
                percentage;

            

    

     

    
      	(h)  	
              Pacifico
                will use its best efforts to ensure that the remaining fifty five
                percent
                (55%) of EMPEC is freed from escrow (the “Additional Interest”). Pacifico
                and Spirit acknowledge and agree that Radial has exclusive right
                to
                acquire all or a portion (at its sole discretion) of the Additional
                Interest awarded to Pacifico, John E. Dhonau, or any related affiliates
                by
                the Ecuadorian courts and/or Roland Glassier. The purchase price
                of the
                Additional Interest will be valued on a pro-rated basis based on
                the
                original purchase price of USD $12,000,000 for forty five percent
                (45%) of
                EMPEC ($266,667 per 1% ownership) and will be paid one quarter (1⁄4) in cash
                and three quarters (3⁄4) in shares of common stock of Radial issued at a
                price of $0.50 per share. Such Radial shares will be held in escrow
                and
                delivered in equal installments of 1,000,000 shares for every $100,000
                of
                net production achieved from the Mines. The cash payment to Pacifico
                and
                Roland Glassier shall be capped at fifty percent (50%) of total production
                achieved from the Mines on a quarterly basis. Pacifico will not receive
                its proportion of such cash payment each quarter until Roland Glassier
                is
                paid in full amounts due to him each quarter under Paragraph 2(c).
                Pacifico and John E. Dhonau represent and warrant that Radial has
                no
                further financial obligations related to the purchase of Additional
                Interest other than the previously stated $266,667 for every additional
                percentage of interest if acquired by Radial. The
                shares issued by Radial in this Paragraph 2(h) are not registered
                under
                the Securities Act of 1933, as amended, and Radial has no obligation
                to
                register them.

            

    

     

    
      	3.  	
              The
                Closing shall occur as promptly as practicable, but in all events
                on or
                before November 30, 2007 unless otherwise agreed by the parties hereto.
                In
                the event that Closing does not occur on or before November 30, 2007:
                

            

    

     

    
      	(a)  	
              And
                any party hereto decides to not pursue the transactions contemplated
                by
                this LOI and the Definitive Agreement, all funds advanced by Radial
                pursuant to this LOI and the Definitive Agreement will be due immediately
                and shall be repaid in full to Radial from revenue derived from the
                production of the Mines in order of first priority. Any outstanding
                balance shall be subject to a late charge interest rate of one percent
                (1%) per month. 

            

    

     

    
      	(b)  	
              The
                parties hereto may extend the Closing for thirty (30) days.
                

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	   4.     
              	
              Upon
                execution of this LOI, the parties hereto agree to the
                following:

            

    

     

    
      	(a)  	
              Radial
                will advance Pacifico the amount of $150,000 to pay for legal fees
                related
                to the intervention of the EMPEC mill. Prior to entering into the
                Definitive Agreement, Pacifico agrees to provide a detailed accounting,
                including invoices where applicable, of the use of such funds.
                

            

    

     

    
      	(b)  	
              Radial
                will advance Pacifico an additional $150,000 for working capital
                upon
                receipt from Pacifico of a detailed use of funds and: (i) Pacifico
                obtaining fifty one percent (51%) or more ownership or controlling
                interest in EMPEC or the Ecuadorian courts granting Pacifico the
                right to
                operate EMPEC during the arbitration process; or (ii) Pacifico receiving
                revenue through third party production
                mills.

            

    

     

    
      	(c)  	
              Radial
                will pay John E. Dhonau the sum of $300,000 within thirty (30) days
                from
                the date first set forth above. 

            

    

     

    
      	(d)  	
              Radial,
                Pacifico and John E. Dhonau shall execute the Security Agreement
                attached
                hereto as Exhibit A. 

            

    

     

    
      	   5.         
                 	
              Radial
                will use best efforts to obtain shareholder approval to increase
                its
                authorized capital from 75,000,000 to 500,000,000 shares.
                

            

    

     

    
      	   6.         
              	
              Prior
                to signing the Definitive Agreement, Radial shall have obtained a
                signed
                agreement by Cornell Capital agreeing to defer repayment of any
                outstanding debentures owed to Cornell Capital for a minimum period
                of one
                (1) year from the closing of the Definitive Agreement.
                

            

    

     

    
      	   7.         
              	
              The
                Definitive Agreement will provide that closing of the transactions
                 contemplated
                in the Definitive Agreement (the “Closing”) will be conditional
                 upon
                the following:

            

    

    

    
      	(a)  	
              Pacifico
                shall operate its business only in the ordinary course and will not
                sell,
                distribute, license or encumber any of the
                Assets;

            

    

    

    
      	(b)  	
              the
                receipt of any certificates, legal opinions (including the Legal
                Opinion
                defined in section 7(d)), tax opinions, other opinions and documents
                which
                Radial may reasonably request, including documents relating to any
                tests
                or geological work performed or studies or reports completed (provided
                these are not subject to non-disclosure covenants by Pacifico in
                connection with any third-party agreements) related to the Project
                and
                Assets;

            

    

    

    
      	(c)  	
              the
                receipt of all consents, approvals, authorizations and orders required
                of
                or for the completion of any document required hereunder related
                to the
                Project and Assets; 

            

    

    

    
      	(d)  	
              satisfactory
                completion of due diligence related to the Project and Assets, to
                be
                conducted by Radial and/or Spirit’s legal counsel, at the absolute and
                sole discretion of Radial, concerning the Project and Assets and
                the legal
                status of the Interest as well as the receipt of a legal opinion
                (the
                “Legal Opinion”) which Legal Opinion shall contain opinions given by a
                qualified Ecuadorian lawyer stating that the Assets are in good standing
                under applicable Ecuadorian laws and that the Assets will be transferrable
                to Radial and Spirit upon closing of the Definitive Agreement;
                and

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	(e)  	
              satisfactory
                completion of due diligence, at the absolute and sole discretion
                of
                Pacifico, concerning the Project and
                Assets.

            

    

     

    8.   
Radial
      will, in the Definitive Agreement, represent and warrant to Pacifico
      that:

    

    
      	    (a)   	
              it
                is a public corporation incorporated and is in good standing with
                all
                regulatory agencies and its shares are authorized to trade on the
                OTC
                Bulletin Board; 

            

    

    

    
      	    (b)  	
              there
                are no legal actions against Radial or its directors or officers
                and the
                company knows of no intended legal actions against the company and
                is not
                engaged in any legal actions against other parties;
                

            

    

    

    
      	    (c)   
               	
              its
                business and financial condition are as set forth in its filings
                with the
                SEC on the EDGAR database and is the filings are current as of the
                date
                hereof; 

            

    

    

    
      	    (d)  	
              there
                are no outstanding mergers, acquisitions, financial commitments,
                obligations, liabilities, etc. other than those contemplated in this
                transaction and publicly disclosed concerning
                Radial;

            

    

     

    
      	    (e)  	
              there
                are no legal actions against Radial or its directors, officers and/or
                shareholders nor does Radial know of any intended legal actions against
                it
                or any of its directors and Radial is not engaged in any legal actions
                against other parties, and is current in all filings with tax and
                regulatory authorities; and

            

    

    

    
      	    (f)   
              	
              there
                have been no other issuances of shares of its capital stock, or
                instruments exercisable for, convertible into or otherwise entitling
                the
                holder to acquire shares of its capital stock, other than in connection
                with the Closing or financing of the transactions to be contemplated
                in
                the Definitive Agreement (and then only on the terms contemplated
                by the
                Definitive Agreement).

            

    

     

    9.      
               Pacifico,
      John E. Dhonau and Roger McClay will, in the Definitive Agreement, represent
      and
      warrant to Radial and Spirit that:

    

    
      	    (a)  	
              Pacifico
                is a company organized under the laws of Ecuador and is in good standing
                with all regulatory agencies;

            

    

    

    
      	    (b)  	
              Except
                for the actions related to the fifty five percent (55%) ownership
                in EMPEC
                not already owned by Pacifico, there are no legal actions against
                Pacifico
                or its directors nor does Pacifico know of any intended legal actions
                against it or any of its directors and Pacifico is not engaged in
                any
                legal actions against other parties, and is current in all filings
                with
                tax and regulatory authorities;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	    (c)  	
              Pacifico’s
                business and financial condition remain materially unchanged from
                any due
                diligence or financial statement documentation provided to Radial
                prior to
                Closing; 

            

    

    

    
      	    (d)  	
              Pacifico
                has the exclusive rights to forty five percent (45%) ownership in
                EMPEC,
                certain rights to the remaining fifty five percent (55%) ownership
                in
                EMPEC, one hundred percent (100%) ownership of two-10 year production
                leases to mine Adua Dulce and Maria Christina and the mining rights
                to the
                Jorupe mine, all located in Ecuador, subject to any liens, charges,
                securitizations or debts disclosed in the financial statements of
                Pacifico
                provided to Radial prior to
                Closing;

            

    

     

    
      	        (e)  	
              there
                have been no other issuances of shares of its capital stock, or
                instruments exercisable for, convertible into or otherwise entitling
                the
                holder to acquire shares of its capital stock, other than in connection
                with the Closing or financing of the transactions to be contemplated
                in
                the Definitive Agreement (and then only on the terms contemplated
                by the
                Definitive Agreement); 

            

    

    

    
      	    (f)   
                	
              there
                are no outstanding mergers, acquisitions, financial commitments,
                obligations, liabilities, etc. related to the Assets other than those
                contemplated in this transaction.

            

    

     

    10.     
          The
      Definitive Agreement shall provide that each and every obligation of Radial
      to
      be performed hereunder shall be subject to the satisfaction prior thereto of
      the
      following conditions: 

     

    
      	     a)   
                	
              the
                representations and warranties made by Pacifico, John E. Dhonau and
                Roger
                McClay in this LOI and the Definitive Agreement or given on its behalf
                hereunder shall be substantially accurate in all material respects
                on and
                as of the closing date with the same effect as though such representations
                and warranties had been made or given on and as of the closing
                date;

            

    

     

    
      	b)
                	
              Pacifico,
                John E. Dhonau and Roger McClay shall have performed and complied
                with all
                obligations and covenants required by the Definitive Agreement to
                be
                performed or complied with by them prior to or at Closing;
                

            

    

     

    
      	    c)
                	
              Radial
                shall have been furnished that information on the business and affairs
                of
                Pacifico which it deems, in its sole and absolute discretion, to
                be
                necessary for it to meet its continuous disclosure obligations under
                the
                Securities Exchange Act of 1934 upon Closing;

            

    

     

    
      	d)
                	
              as
                of Closing there shall not have occurred any material adverse change
                to
                Pacifico or to the Assets, financially or otherwise, which materially
                impairs the ability of Radial to conduct its
                business;

            

    

     

    
      	e)
                	
              the
                completion, by Radial and Pacifico, of any financial statements required
                to be filed following the Closing by Radial as a reporting issuer
                under
                the Securities Exchange Act of 1934;
                and

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	f)
                	
              the
                opinion of counsel to Radial that the Closing will not result in
                Radial
                breaching any applicable securities law, rules and
                regulations.

            

    

     

    11.    
               The
      Definitive Agreement shall provide that each and every obligation of Pacifico
      to
      be performed on Closing shall be subject to the satisfaction prior thereto
      of
      the following conditions: 

    

     

    
      	(a)  	
              the
                representations and warranties made by Radial and Spirit in this
                LOI and
                the Definitive Agreement or given on its behalf hereunder shall be
                substantially accurate in all material respects on and as of the
                closing
                date with the same effect as though such representations and warranties
                had been made or given on and as of the closing
                date;

            

    

     

    
      	(b)  	
              Radial
                and Spirit shall have performed and complied with all obligations
                and
                covenants required by the Definitive Agreement to be performed or
                complied
                with by them prior to or at Closing;
                and

            

    

     

    
      	(c)
                	
              as
                of Closing there shall not have occurred any material adverse change
                to
                Radial, financially or otherwise, which materially impairs the ability
                to
                conduct its business.

            

    

     

    12.  
              No
      party hereto will make any disclosure or public announcements of the proposed
      transactions, the Definitive Agreement or the terms thereof without the prior
      knowledge of the other parties, which shall not be unreasonably withheld, or
      except as required by relevant securities laws; provided, however, Radial may
      issue press releases in the ordinary course of business but will make no
      reference to the parties hereto unless their prior written consent is
      received.

     

    13.      Each
      party agrees and acknowledges that such party and its directors, officers,
      employees, agents and representatives will disclose business information and
      information about the proposed transaction in the course of securing financings
      for Radial and Pacifico and that both parties and their representatives may
      be
      required to disclose that information under the continuous disclosure
      requirements of the Securities Exchange Act of 1934. 

    

    14.          Pacifico,
      John E. Dhonau and Roger McClay hereby agree that neither will solicit any
      third
      party for the licensing, lease, transfer or sale of any of the Assets, or
      solicit opportunities for either party to enter into any discussions with any
      third party for the licensing, lease, transfer or sale of any of the Assets,
      from the date first set forth above until the end of the term of the Definitive
      Agreement. This section shall not be read to prohibit the parties from
      conducting such discussions which are in the ordinary course of business but
      is
      intended to be read as protecting each of the parties from the other entering
      into negotiations which would conflict with the transactions contemplated by
      this LOI and by the Definitive Agreement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    15.     This
      LOI shall be construed in accordance with, and governed by, the laws of the
      State of Washington, and each party separately and unconditionally subjects
      to
      the jurisdiction of any court of competent authority in the State of Washington,
      and the rules and regulations thereof, for all purposes related to this
      agreement and/or their respective performance hereunder.

    

    16.     This
      LOI,
      including any instruments incorporated herein by reference, constitutes the
      final, complete and exclusive agreement between the parties with respect to
      the
      subject matter hereof, and supersedes all prior and contemporaneous
      understandings or agreements of the parties relating to the subject matter
      of
      this LOI, and
      may be modified only by a written document signed by all parties. 

    

    17.     The
      parties shall prepare, execute and file any and all documents necessary to
      comply with all applicable federal and state securities laws, rules and
      regulations in any jurisdiction where they are required to do so. 

    

    18.     
      If
      any term or provision hereof shall be held illegal or invalid, this LOI shall
      be
      construed and enforced as if such illegal or invalid term or provision had
      not
      been contained herein. 

    

    19.     All
      references to currency in this LOI are references to the lawful currency of
      the
      United States of America.

    

    20.     This
      LOI
      may be executed in counterparts, by original or facsimile signature, with the
      same effect as if the signatures to each such counterpart were upon a single
      instrument; and each counterpart shall be enforceable against the Party actually
      executing such counterpart. All counterparts shall be deemed an original
      copy.

    

    21.     The
      delay
      or failure of a party to enforce at any time any provision of this LOI shall
      in
      no way be considered a waiver of any such provision, or any other provision
      of
      this LOI. No waiver of, delay or failure to enforce any provision of this LOI
      shall in any way be considered a continuing waiver or be construed as a
      subsequent waiver of any such provision, or any other provision of this
      LOI.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    DATED
      EFFECTIVE THIS 7TH DAY OF SEPTEMBER, 2007

    

    RADIAL
      ENERGY INC.

    

    ____________________________

    Gregory
      Leigh Lyons, President

    

    

    The
      above terms are hereby read, understood, acknowledged and accepted effective
      the
      7th day of September, 2007.

    

    MINERA
      DEL PACIFICO SA

    

    ____________________________

    John
      E.
      Dhonau

    Title:
      _______________________

    

    

    SPIRIT
      EXPLORATION INC.

    

    ____________________________

    Peter
      Laipnieks

    Title:
      _______________________

    

    

    JOHN
      E. DHONAU

    

    ____________________________

    

    

    ROGER
      MCCLAY

    

    ____________________________

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    

    Security
      AgreementEXHIBIT
        10.8(f)

    

     

    AMENDMENT
      NO. 5

     

    AMENDMENT
      NO. 5, dated as of June 20, 2007 (this “Amendment”),
      to
      the Third Amended and Restated Credit Agreement, dated as of May 19, 2005 (as
      amended by the Amendment, dated as of April 7, 2006, the Amendment dated as
      of
      April 24, 2006, the Amendment No. 3 dated as of November 30, 2006, the Amendment
      No. 4 dated as of December 27, 2006, the “Credit
      Agreement”),
      among
      FINLAY FINE JEWELRY CORPORATION, a Delaware corporation (“Finlay”
or
      the
“Borrower
      Representative”)
      and
      CARLYLE & CO. JEWELERS, a Delaware corporation (“Carlyle”)
      (Finlay and Carlyle are collectively referred to herein as the “Borrowers”
and
      individually as a “Borrower”),
      FINLAY ENTERPRISES, INC., a Delaware corporation (the “Parent”),
      and
      GENERAL ELECTRIC CAPITAL CORPORATION (“GE
      Capital”),
      individually and as administrative agent for each of the Lenders thereunder
      (GE
      Capital, in such capacity, the “Agent”),
      and
      the other banks and other financial institutions party thereto. Capitalized
      terms used herein without definition shall have the respective meanings ascribed
      to those terms in the Credit Agreement.

     

    WITNESSETH:

     

    WHEREAS,
      pursuant to Section 2.2(c) of the Credit Agreement, the Borrowers have requested
      a facilities increase in an aggregate principal amount of $75,000,000; and
      

     

    WHEREAS,
      the Lenders party hereto are willing to provide additional commitments pursuant
      to Section 2.2(c) of the Credit Agreement; and 

     

    WHEREAS,
      the Borrowers, the Agent and the Lenders party hereto have agreed to amend
      the
      Credit Agreement on the terms and subject to the conditions herein provided;
      and

     

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, the parties hereto agree as follows:

     

    Section
      1. Amendment
      to the Credit Agreement.
      (a)
Section
      8.8(a) of the Credit Agreement.
      Section
      8.8(a) of the Credit Agreement is hereby deleted in its entirety and replaced
      as
      follows:

     

    “(a)
      Borrowers shall make full and timely payment of all payments required to be
      made
      by the Borrowers in respect of the Obligations, including without limitation,
      the Loan, whether now existing or hereafter arising. Borrowers acknowledge
      that
      the Obligations of Borrowers under the Credit Agreement are joint and
      several.”

     

    (b)
      Section
      12.19 of the Credit Agreement.
      A new
      Section 12.19 shall be inserted in the Credit Agreement as follows:

     

    “§
      12.19. ROLEX
      INTERCREDITOR AGREEMENT. With respect to that certain Intercreditor Agreement,
      dated as of May 19, 2005, by and among Rolex Watch U.S.A., Inc., GE Capital,
      Finlay and Carlyle (the “Rolex
      Intercreditor Agreement”),
      GE
      Capital hereby acknowledges that it entered into the Rolex Intercreditor
      Agreement individually and in its capacity as agent for the Senior Creditors
      (as
      such term is defined in the Rolex Intercreditor Agreement).”

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)
      Exhibit
      A to the Credit Agreement.
      Exhibit
      A to the Credit Agreement is hereby deleted in its entirety and replaced by
      Exhibit A attached hereto.

     

    Section
      2. Conditions
      to Effectiveness.
      This
      Amendment shall become effective as of the date hereof (the “Effective
      Date”)
      upon
      receipt by the Agent of the following:

     

    (a) Counterparts
      of this Amendment duly executed by the Agent, each Lender party hereto and
      each
      Borrower; 

     

    (b) Duly
      executed favorable opinions of counsel to the Borrowers in form and substance
      satisfactory to the Agent;

     

    (c) Certified
      copies of each Borrower’s board of directors or other appropriate governing body
      approving and authorizing the execution, delivery and performance of each
      document executed as part of the Facilities Increase to which such Borrower
      is a
      party; and

     

    (d) Such
      other document as the Agent may reasonably request or as any Lender
      participating in the Facilities Increase may require as a condition to its
      commitment in the Facilities Increase.

     

    Section
      3. Representations
      and Warranties.
      Each of
      the Borrowers represents and warrants as follows (which representations and
      warranties shall survive the execution and delivery of this
      Amendment):

     

    (a) Each
      of
      the Borrowers has taken all necessary action to authorize the execution,
      delivery and performance of this Amendment.

     

    (b) This
      Amendment has been duly executed and delivered by the Borrowers. This Amendment
      and the Credit Agreement as amended hereby constitute the legal, valid and
      binding obligation of the Borrowers, enforceable against them in accordance
      with
      their respective terms, subject to applicable bankruptcy, reorganization,
      insolvency, moratorium and similar laws affecting the enforcement of creditors’
rights generally and by general equity principles.

     

    (c) No
      consent or approval of any person, firm, corporation or entity, and no consent,
      license, approval or authorization of any governmental authority is or will
      be
      required in connection with the execution, delivery, performance, validity
      or
      enforcement of this Amendment other than any such consent, approval, license
      or
      authorization which has been obtained and remains in full force and effect
      or
      where the failure to obtain such consent, license, approval or authorization
      would not result in a Material Adverse Effect.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (d) After
      giving effect to this Amendment, each of the Borrowers is in compliance with
      all
      of the various covenants and agreements set forth in the Credit Agreement and
      each of the other Loan Documents.

     

    (e) After
      giving effect to this Amendment, no event has occurred and is continuing which
      constitutes a Default or an Event of Default.

     

    (f)
       All
      representations and warranties contained in the Credit Agreement and each of
      the
      other Loan Documents are true and correct in all material respects as of the
      date hereof, except to the extent that any representation or warranty relates
      to
      a specified date, in which case such are true and correct in all material
      respects as of the specific date to which such representations and warranties
      relate.

     

    Section
      4. Effective
      Date.
      The
      amendments to the Credit Agreement contained herein shall become effective
      as of
      June 30, 2007 (the “Effective
      Date”)
      only
      at such time as this Amendment has been duly executed by the Borrowers and
      the
      Lenders.

     

    Section
      5. Continued
      Effectiveness.
      The
      term “Agreement”, “hereof”, “herein” and similar terms as used in the Credit
      Agreement, and references in the other Loan Documents to the Credit Agreement,
      shall mean and refer to, from and after the Effective Date, the Credit Agreement
      as amended by this Amendment. Each of the Borrowers hereby agrees that all
      of
      the covenants and agreements contained in the Credit Agreement and the Loan
      Documents are hereby ratified and confirmed in all respects.

     

    Section
      6. Counterparts.
      This
      Amendment may be executed in counterparts, each of which shall be an original,
      and all of which, taken together, shall constitute a single instrument. Delivery
      of an executed counterpart of a signature page to this Amendment by telecopier
      shall be effective as delivery of a manually executed counterpart of this
      Amendment.

     

    Section
      7. Governing
      Law.
      This
      Amendment shall be governed by, and construed in accordance with, the laws
      of
      the State of New York without giving effect to the conflict of laws provisions
      thereof.

     

    [SIGNATURE
      PAGES FOLLOW]

     

    
      
         

      

      
        3

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
      executed by their respective officers as of the date first written
      above.

    
      	 	 	 
	 	
              FINLAY
                FINE JEWELRY CORPORATION 

            
	 
 	 
 	 
 
	
            	By:  	/s/ Bruce
              Zurlnick 
	 	
              

              Name:
                Bruce Zurlnick

            
	 	
              Title:
                Sr. VP & CFO    

            

    

    
      	 	 	 
	 	
              CARLYLE
                & CO. JEWELERS

            
	 
 	 
 	 
 
	
            	By:  	/s/ Bruce
              Zurlnick 
	 	
              

              Name:
                Bruce Zurlnick

            
	 	
              Title:
                Sr. VP & CFO

            

    

    
      	 	 	 
	 	
              FINLAY
                ENTERPRISES, INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/ Bruce
              Zurlnick 
	 	
              

              Name:
                Bruce Zurlnick

            
	 	
              Title:
                Sr. VP & CFO 

            

    

    
      	 	 	 
	 	
              GENERAL
                ELECTRIC CAPITAL

              
                CORPORATION,
                  

                as
                  Agent

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ Charles
              Chiodo 
	 	
              

              Name:
                Charles Chiodo

            
	 	
              Title:
                Duly Authorized Signatory 

            

      	 	 	 
	 	
              WELLS
                FARGO FOOTHILL, LLC,

              
                as
                  Lender

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ Yelena
              Kravchuk 
	 	
              

              Name:
                Yelena Kravchuk

            
	 	
              Title:
                AVP 

            

    

     

    
      
        [SIGNATURE
          PAGE
          TO
          AMENDMENT
          NO.
          5]

         

      

    

    
      
         

      

      
         

        
          

        

      

       

    

     

    
      	 	 	 
	 	
              THE
                CIT GROUP/BUSINESS CREDIT, INC.,

              
                as
                  Lender

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ Andrew
              Loughlin 
	 	
              

              Name:
                Andrew Loughlin

            
	 	
              Title:
                Assistant Vice President 

            

      	 	 	 
	 	
              BURDALE
                FINANCIAL LIMITED,

              
                as
                  Lender

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ David
              Grende 
	 	
              

              Name:
                David Grende

            
	 	
              Title:
                Mg. Dir. 

            

    

    
      	 	 	 
	 	
              ISRAEL
                DISCOUNT BANK OF NEW YORK,

              
                as
                  Lender

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ Ronald
              Bongiovanni 
	 	
              

              Name:
                Ronald Bongiovanni

            
	 	
              Title:
                SVP 

            

    

    
      	 	 	 
	 	 	 
	
            	By:  	/s/ David
              Herzog 
	 	
              

              Name:
                David Herzog

            
	 	
              Title:
                FVP 

            

    

    
      	 	 	 
	 	
              NORTH
                FORK BUSINESS CAPITAL CORPORATION,

              
                as
                  Lender

              

            
	 
 	 
 	 
 
	
            	By:  	/s/ Michael
              S. Burns 
	 	
              

              Name:
                Michael S. Burns

            
	 	
              Title:
                Sr. Vice Pres.

            

    

     

    
      
        
          [SIGNATURE
            PAGE
            TO
            AMENDMENT
            NO.
            5]

           

        

      

    

    
      
         

      

      
         

        
          

        

      

       

    

    Exhibit
      A
      -- Lenders, Commitments and Initial Eurodollar Offices to Amendment No. 5 to
      the
      Third Amended and Restated Credit Agreement is omitted pursuant to Item
      601(b)(2) of Regulation S-K. Finlay agrees to furnish supplementally a copy
      of
      this exhibit to the Securities and Exchange Commission upon
      request.

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