BIRKS GROUP INC. (Form: 20-F, Received: 07/03/2018 14:23:39)

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

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended March 31, 2018

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

[ ] 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 Québec

Canada

H3A 2A5

(Address of principal executive offices)

Pat Di Lillo, 514-397-2592 (telephone), 514-397-2537 (facsimile)

2020 Robert-Bourassa Blvd.

Suite 200

Montreal Québec

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		Name of each exchange on which registered
Class A Voting Shares, without nominal or par value		NYSE 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:


10,242,911		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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” 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 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 by the International Accounting Standards Board ☐ Other ☐

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 17 ☐ Item 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

TABLE OF CONTENTS


		Page
Part I

Item 1.	Identity of Directors, Senior Management and Advisers		3

Item 2.	Offer Statistics and Expected Timetable		3

Item 3.	Key Information		3

Item 4.	Information on the Company		12

Item 4A.	Unresolved Staff Comments		19

Item 5.	Operating and Financial Review and Prospects		19

Item 6.	Directors, Senior Management and Employees		40

Item 7.	Major Shareholders and Related Party Transactions		50

Item 8.	Financial Information		53

Item 9.	The Offer and Listing		54

Item 10.	Additional Information		55

Item 11.	Quantitative and Qualitative Disclosures About Market Risk		60

Item 12.	Description of Securities Other than Equity Securities		61

Part II

Item 13.	Defaults, Dividend Arrearages and Delinquencies		61

Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		61

Item 15.	Controls and Procedures		62

Item 16A.	Audit Committee Financial Expert		63

Item 16B.	Code of Ethics		63

Item 16C.	Principal Accountant Fees and Services		63

Item 16D.	Exemptions from the Listing Standards for Audit Committees		63

Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		63

Item 16F.	Change in Registrant’s Certifying Accountant		64

Item 16G.	Corporate Governance		64

Item 16H.	Mine Safety Disclosure		64

Item 17.	Financial Statements		64

Item 18.	Financial Statements		64

Part III

Item 19.	Exhibits		64

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

The consolidated financial statements of Birks Group contained in this Annual Report are reported in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. Unless otherwise indicated, all monetary references herein are denominated in U.S. dollars; references to “dollars” or “$” are to U.S. dollars and references to “CAD$” or “Canadian dollars” are to Canadian dollars.

Throughout this Annual Report, we refer to our fiscal year ending March 31, 2018, as fiscal 2018, and our fiscal years ended March 25, 2017 and March 26, 2016, as fiscal 2017 and fiscal 2016, respectively. Our fiscal year ends on the last Saturday in March of each year. The fiscal year ended March 31, 2018 consisted of 53 weeks. The fiscal years ended March 25, 2017, and March 26, 2016 consisted of 52 weeks with four thirteen-week periods.

Significant 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 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 collections will continue to be sold in the United States through Mayors stores in Florida and Georgia. The Distribution Agreement is an important achievement in the Company’s strategy to develop the Birks brand into a global luxury brand. The Aurum Transaction constitutes a significant step in the Company’s efforts to strengthen its balance sheet and to execute its strategic vision of investing in the Birks brand together with the retailing of internationally-renowned jewelry and timepiece brands in Canada.

On October 23, 2017, as a condition to the closing of the Aurum Transaction, the Company entered into (i) an Inventory Purchase Agreement whereby Birks purchased approximately $1.8 million in inventory from Mayors; (ii) a Transition Services Agreement whereby Birks agreed to provide certain transition services to Mayors and its wholly-owned subsidiaries for a period of six months following the closing of the Aurum Transaction, subject to certain renewal rights, (iii) a Services Agreement whereby Mayors agreed to provide certain services to Birks for a period of one year following the closing of the Aurum Transaction, subject to certain renewal rights and (iv) an Authorized Dealer Agreement with Mayors Jewelers of Florida, Inc. (Mayors together Mayors Jewelers of Florida, Inc., the “Authorized Dealer”) whereby the Authorized Dealer will promote the sale of Birks-branded products and trademarks in the United States.

transaction proceeds will be used by Birks to continue its strategic growth initiatives, specifically to invest in its Canadian flagship stores and new store concepts, as well as in its Birks brand wholesaling activities and e-commerce, as part of the Company’s omni-channel strategy. The Company expects that the next two years will be a capital intensive spending period during which the Company intends to fully renovate its three flagship stores (Montreal, Toronto, and Vancouver) which may result in temporarily lower sales and contribution margin at these specified locations in order to generate future long-term returns for the Company. As a result of the Aurum Transaction, the Company has presented Mayors’ results as a discontinued operation in the consolidated statements and cash flows for all periods presented. Furthermore, the assets and liabilities of Mayors have been segregated and reported as held for sale in all periods presented. See “Significant Transaction” in Item 5 below for a reconciliation of the Company’s results from continuing operations and from discontinuing operations for the fiscal years 2018, 2017, and 2016, respectively.

References to the Company exclude the cash flows, operations, assets and liabilities of the discontinued operations unless otherwise noted.

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.

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.

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

Selected Financial Data

The following financial data as of March 31, 2018 and March 25, 2017 and for the years ended March 31, 2018, March 25, 2017, and March 26, 2016 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, 2016, March 28, 2015, and March 29, 2014 and for the years ended March 28, 2015, and March 29, 2014 have been derived starting with our audited consolidated financial statements not included in this Annual Report, and then adjusted to reflect the effects of the discontinued operations (see footnote * below), which adjustments are unaudited. All fiscal years, except for fiscal 2018, in the table below consisted of 52 weeks. Fiscal 2018 consisted 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.


Income Statement Data – from continuing operations:
	Fiscal Year Ended
	March 31, 2018			March 25, 2017*			March 25, 2016*			March 28, 2015*			March 29, 2014*

	(In thousands, except per share data)
Net sales	$	114,378		$	116,436		$	128,651		$	143,384		$	146,278
Cost of sales		70,824			69,654			75,682			84,232			82,527

Gross profit		43,554			46,782			52,969			59,152			63,751
Selling, general and administrative expenses		51,823			47,183			48,333			52,897			60,991
Restructuring charges ⁽¹⁾		688			682			549			781			-
Depreciation and amortization		2,549			2,618			2,791			3,048			2,942
Gain on sale of assets ⁽²⁾		-			-			(3,229	)		-			-
Impairment of long-lived assets ⁽³⁾		2,156			-			-			238			-

Total operating expenses		57,216			50,483			48,444			56,964			63,933

Operating (loss) income		(13,662	)		(3,701	)		4,525			2,188			(182	)
Interest and other financial costs		3,116			3,355			4,300			2,676			4,949
Debt extinguishment charges ⁽⁴⁾		-			-			-			2,643			-

Income (loss) from continuing operations before income taxes		(16,778	)		(7,056	)		225			(3,131	)		(5,131	)
Income tax (recovery) expense		-			-			-			-			18

Net (loss) income from continuing operations		(16,778	)		(7,056	)		225			(3,131	)		(5,149	)
Discontinued operations:
(Loss) income from discontinued operations, net of tax		(1,405	)		11,984			5,213			(5,501	)		(652	)
Gain on disposal of discontinued operations, net of tax		29,882			-			-			-			-

Net income from discontinued operations		28,477			11,984			5,213			(5,501	)		(652	)


Net income (loss) attributable to common shareholders	$	11,699		$	4,928		$	5,438	$	(8,632	)	$	(5,801	)


Net income (loss) per common share, basic	$	0.65		$	0.27		$	0.30	$	(0.48	)	$	(0.35	)
Net income (loss) per common share, diluted	$	0.64		$	0.27		$	0.30	$	(0.48	)	$	(0.35	)
Net income (loss) from continuing operations per common share – basic	$	(0.93	)	$	(0.39	)	$	0.01	$	(0.17	)	$	(0.31	)
Net income (loss) from continuing operations per common share – diluted	$	(0.91	)	$	(0.38	)	$	0.01	$	(0.17	)	$	(0.31	)
Weighted average common shares outstanding		17,961			17,961			17,961		17,937			16,617

Weighted average common shares outstanding – diluted		18,393			18,418			17,961		17,937			16,617

Dividends per share		-			-			-		-			-

Balance Sheet Data:


	March 31, 2018		March 25, 2017*		March 25, 2016*		March 28, 2015*		March 29, 2014*
	(In thousands)

Working capital	$	17,698	$	1,144	$	7,466	$	10,917	$	17,410

Total assets	$	93,287	$	86,116	$	90,016	$	93,018	$	100,454

Bank indebtedness	$	28,640	$	44,840	$	35,149	$	36,156	$	37,355

Long-term debt (including current portion)	$	6,368	$	6,450	$	16,979	$	21,142	$	23,785

Stockholders’ equity	$	25,187	$	12,796	$	7,704	$	2,823	$	13,622

Common Stock:
Value	$	69,601	$	69,601	$	69,601	$	69,601	$	69,475
Shares		17,961		17,961		17,961		17,961		17,850

(*)

Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report). For working capital, total assets, bank indebtedness and long-term debt for the years ended March 29, 2014 to March 25, 2017 inclusively, the assets and liabilities of the disposal group were retrospectively determined and excluded to reflect the remaining balances after the Aurum Transaction.

(1)

Restructuring charges related to consolidating most of our corporate administrative workforce to Montreal as well as outsourcing a portion of our jewelry manufacturing and other corporate staff reductions. Refer to note 12 to our consolidated financial statements.

(2)

On August 4, 2015, the Company entered into an asset purchase agreement for the sale of the assets of the corporate sales division to Rideau Recognition Solutions Inc. (“Rideau”) for $4.3 million (refer to note 6 to our consolidated financial statements) and executed a supply and licensing agreement for Birks products and Birks-branded products.

(3)

Impairment of long-lived assets for the fiscal year ended March 31, 2018 represents a non-cash impairment of leasehold improvements at a retail location due to its projected operating performance and a non-cash impairment of software associated with a decision to modify the scope of the implementation of the Company’s new enterprise resource planning system. For the fiscal year ended March 28, 2015, impairment of long-lived assets represents a non-cash impairment of a retail shop-in-shop location due to its projected operating performance.

(4)

Debt extinguishment charges in fiscal 2015 arising from amendments to the then existing senior secured term loan and senior secured revolving credit facilities.

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.”

RISK FACTORS

Risks Related to the Company

Our business depends, in part, on factors affecting consumer spending that are out of our control.

Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that are beyond our control that influence consumer spending, including general economic conditions, consumer confidence in future economic conditions and political conditions, tourism, recession and fears of recession, consumer debt, disposable consumer income, conditions in the housing market, consumer perceptions of personal well-being and security, fuel prices, inclement weather, interest rates, foreign exchange rates, sales tax rate increases, inflation, and war and fears of war. In particular, we have seen that the unpredictable economic conditions in the past years have contributed to declining revenues for our business. Jewelry 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 and operating results. 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. 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 bad debts, which in turn, could lead to an unfavorable impact on our overall profitability. 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.

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 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 2018, merchandise supplied by our largest luxury jewelry supplier and sold through our stores accounted for approximately 15% of our total net sales from continuing operations. 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 affect our manufacturing capabilities or 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 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.

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. However, 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.

As of May 31, 2018, we had 29 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. Some of our leases are up for renewal within the next two years and many uncontrollable factors can impact our ability to renew these leases, including but not limited to competition for key locations from other retailers. Approximately 17% of the Company’s store leases are renewable within two years. These stores generated approximately 9% of our fiscal 2018 sales from continuing operations. The capital expenditures related to our retail stores are estimated to be approximately $13.2 million over the next two years to remodel, relocate or open new stores, in accordance with our strategic plan. Of the $13.2 million, we estimate that $9.4 million will be spent in fiscal 2019 leaving the balance to fiscal 2020. These planned capital expenditures are at the discretion of management and not required by our landlords. We are able to finance these capital expenditures with internally generated funds and existing financing arrangements.

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, charms, 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 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 and gross margins.

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. The following table sets forth our total indebtedness (including bank indebtedness and current and long-term portion of debt), total stockholders’ equity, total capitalization and ratio of total indebtedness to total capitalization as of:


	March 31, 2018	March 25, 2017*
Total indebtedness (consisting of bank indebtedness and long-term debt, including current portion)	$35,008,000	$51,290,000
Total stockholders’ equity	25,187,000	12,796,000
Total capitalization	$60,195,000	$64,086,000
Ratio of total indebtedness to total capitalization	58.2%	80.0%
Debt to equity ratio	1.39	4.01

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

We believe that our financial situation has improved compared to the prior fiscal year. A high level of debt could adversely affect our results of operations, liquidity and financial condition. Some examples of how high level 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;

•

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.

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.

On October 23, 2017, in connection with the Aurum Transaction, the Company entered into a new senior secured credit facility with Wells Fargo Canada Corporation for a maximum amount of CAD$85.0 million (US$65.9 million) (the “New Credit Facility”). The New Credit Facility, which matures in October 2022, replaced the Company’s prior $110.0 million revolver credit facility and its prior senior secured $31.0 million term loan facility which were repaid in full as a result of the Company’s divestiture of Mayors. The New Credit Facility also provides the Company with an option to increase the total commitments thereunder by up to CAD$13.0 million (US$10.1 million). The Company will only have the ability to exercise this accordion option if it has the required borrowing capacity at such time. The New Credit Facility bears interest at a rate of CDOR plus a spread ranging from 1.5% - 3.0% depending on the Company’s excess availability levels. Under the New Credit Facility, the Company is not required to comply with a minimum adjusted EBITDA financial covenant. The sole financial covenant which the Company is required to adhere to is to maintain minimum excess availability of not less than CAD$8.5 million (US$6.6 million) at all times, except that the Company shall not be in breach of this covenant if excess availability falls below CAD$8.5 million (US$6.6 million) for not more than two consecutive business days once during any fiscal month.

On June 29, 2018, the Company secured a CAD$12.5 million (US$ 9.7 million) senior secured term loan (the “New Term Loan”) with Crystal Financial LLC (“Crystal”). The New Term Loan, which matures in October 2022, is subordinated in lien priority to the New Credit Facility and bears interest at a rate of CDOR plus 8.25%. Under the New Term Loan, the Company will be required to adhere to similar financial covenants as under the New Credit Facility (maintain minimum excess availability of not less than CAD$8.5 million (US$6.6 million) at all times, except that the Company shall not be in breach of this covenant if excess availability falls below CAD$8.5 million (US$6.6 million) for not more than two consecutive business days once during any fiscal month). In addition, the New Term Loan includes seasonal availability blocks imposed from December 20th to January 20th of each year of CAD$9.5 million (US$7.4 million) and from January 21st to February 20th of each year of CAD$4.5 million (US$3.5 million). The long term senior secured term loan is required to be repaid upon maturity. The New Term Loan does not require the Company to comply with a minimum adjusted EBITDA financial covenant.

The Company’s borrowing capacity under the New Credit Facility and New Term Loan is based upon the value of the Company’s inventory and accounts receivable, which is periodically assessed by its lender and based upon these reviews the Company’s borrowing capacity could be significantly increased or decreased.

million (US$6.6 million) for more than two consecutive business days once during any fiscal month, this would be considered an event of default under the New Credit Facility and New Term Loan agreements, that provides the lenders the right to require the outstanding balances borrowed under the Company’s New Credit Facility and New 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 CAD$8.5 million (US$6.6 million) for at least the next twelve months.

The New Credit Facility and New 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 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 New Credit Facility and New Term Loan provide that no financial covenants are required to be met other than already described.

The Company’s lenders under its New Credit Facility and its New 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 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 2018, fiscal 2017, and fiscal 2016 by the Company’s current or former lenders.

Additional financing or capital that may be required may not be available on commercially reasonable terms, or may not be available at all. Capital raised through the sale or issuance of equity securities may result in dilution to our current shareholders. 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.

In order to invest in growth initiatives, the Company 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 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. The terms of our New Credit Facility and New Term Loan expire in October 2022, as such, financing may be unavailable in amounts or on terms acceptable to us, or at all, which could have a material adverse impact on our business.

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.

We are exposed to currency exchange risks that could have a material adverse effect on our results of operations and financial condition. Prior to October 23, 2017, the date of the Aurum Transaction, a substantial portion of our sales were recorded in U.S. dollars.

Prior to October 23, 2017, the date of the Aurum transaction, a substantial portion of our sales were received in U.S. dollars. Subsequent to the Aurum Transaction, our sales and expenses are primarily entered into in Canadian dollars; however, there remains a portion of the purchases we make from our suppliers that 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. Subsequent to the Aurum Transaction, foreign exchange gain or losses recorded in earnings relate to non-Canadian dollar transactions.

For purposes of financial reporting, our financial statements are reported in U.S. dollars by translating, net sales and expenses from Canadian dollars at the average exchange rates prevailing during the period, while assets and liabilities are translated at year-end exchange rates, with the effect of such translation recorded in accumulated other comprehensive income. For fiscal 2019, we are considering changing the Company’s reporting currency from U.S. dollars to Canadian dollars and to begin reporting our financial results in Canadian dollars.

We operate in a highly competitive and fragmented industry.

The retail jewelry 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 retailers and other types of retailers who sell jewelry and gift items, such as department stores and mass merchandisers. We also compete with e-commerce sellers of jewelry. 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, 2018, The Grande Rousse Trust (“Grande Rousse”) beneficially owns or controls 76.0% of all classes of our outstanding voting shares, which are directly owned by Montrovest B.V. (“Montrovest”) and Mangrove Holding S.A. (“Mangrove”). Montrovest and Mangrove own 49.3% and 26.7% 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 Montrovest and Mangrove. Under our restated articles, Montrovest 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, Montrovest 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. For example, in the aftermath of the terrorist attacks carried out on September 11, 2001, tourism and business travel was significantly reduced in all of our markets, which had an adverse impact on our net sales. Similarly, the SARS epidemic in Toronto, Ontario in the spring of 2003 had an adverse impact on net sales in our stores in that region. Similar future events could have a material adverse impact on our business and results of operations.

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 retail 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.

A significant privacy 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. 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. To date, our business and operations have not been materially impacted by a cyber-attack or data breach, however 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, 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 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.

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 have begun to implement since fiscal 2016, 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.

The Company conducts retail operations in Canada and conducts wholesale operations in Canada, the United States and the United Kingdom. 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.

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.

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, Montrovest, 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, 2018, we had 10,242,911 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 retail jeweler 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 some of 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 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. Further, 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 LLC (“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.

Item 4. Information on the Company

THE COMPANY

Corporate History and Overview

Birks Group is a leading designer of fine jewelry, timepieces and gifts and operator of luxury jewelry stores in Canada, with wholesale operations in North America and the U.K.. As of May 31, 2018, Birks Group operated 27 stores under the Birks brand in most major metropolitan markets in Canada and 2 retail locations in Calgary and Vancouver under the Brinkhaus brand. Birks fine jewelry collections are also available through 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. For fiscal 2018, we had net sales of $114.4 million from continuing operations.

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 designer and producer of jewelry. We believe that operating our stores under the 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.á.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. 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 $15.05 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 transferred a portion of its Class A and Class B voting shares to Mangrove and as a result Montrovest owns 49.3% of the voting shares of the Company and Mangrove owns 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 closed on October 23, 2017 for total cash consideration of $106.8 million (net of closing adjustments). 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 the last three fiscal years, we invested a total of approximately $18.2 million in capital expenditures primarily associated with remodeling existing stores and the opening of new stores. We expect to continue to invest in capital expenditures in fiscal 2019 primarily related to store remodels, store relocations associated with lease renewals and the new enterprise resource planning (“ERP”) implementation. We expect to finance these capital expenditures from operating cash flows, existing financing arrangements and when possible from other additional external sources of 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 2018, we opened a new store in Oshawa, Ontario and a new store in Surrey, British Columbia and closed no stores. In fiscal 2017, we did not open or close any stores. During fiscal 2016, we closed one Birks store in St. John, New Brunswick, and opened one Birks store in Edmonton, Alberta. During fiscal 2016, two Birks stores were relocated in Laval, Quebec and Etobicoke, Ontario.

The Company temporarily closed its Montreal flagship store in early 2018 to undertake a complete renovation of the store. The renovations were completed and the store re-opened in June 2018. During 2017, the Toronto flagship store moved to a smaller temporary location in the mall, which itself is undergoing significant construction activities. These two events have significantly affected the sales of the Company.

Our sales are divided into two principal product categories: jewelry and timepieces. Jewelry 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 from continuing operations of each product category for the last three fiscal years (dollars in thousands):


	Fiscal Year-Ended
	March 31, 2018			March 25, 2017*			March 26, 2016*

Jewelry and other	$	80,453	70.3%	$	80,503	69.1%	$	90,793	70.6%
Timepieces		33,925	29.7%		35,933	30.9%		37,858	29.4%

Total	$	114,378	100.0%	$	116,436	100.0%	$	128,651	100.0%

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

Birks Group is a Canadian corporation. Our corporate headquarters are located at 2020 Robert-Bourassa Boulevard, Suite 200, Montreal, Québec, Canada H3A 2A5. Our telephone number is (514) 397-2501. Our website is www.birksgroup.com .

Products

We offer distinctively designed, exclusive products and a large selection of distinctive high quality merchandise at various price points. This merchandise includes designer jewelry, our own designed jewelry, diamond, gemstone, and precious metal jewelry, timepieces and giftware. Part of our strategy is to increase our exclusive offering of internally-designed and/or produced goods sold to our customers, consisting primarily of fine jewelry, bridal, and timepieces, all of which leverage the Birks brand loyalty in their respective markets and in order to differentiate our products with unique and exclusive designs.

Our stores, operating under the Birks and Brinkhaus brands, carry a large selection of prestigious brand name timepieces, including our own proprietary Birks watch line as well as timepieces made by Baume & Mercier, Breitling, Bvlgari, Cartier, Frédérique Constant, Graff, IWC, Montblanc, Panerai, Patek Phillippe, Rolex, Tag Heuer, Tudor, Vacheron Constantin, Van Cleef & Arpels and soon we will also be offering Richard Mille. We also carry an exclusive collection of high quality jewelry and timepieces that we design. We emphasize Birks brand jewelry offerings but also include other designer jewelry made by Bvlgari, Chaumet, Graff, Marco Bicego, Messika, Roberto Coin, Van Cleef & Arpels and soon Vhernier. 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 96% of net sales, as well as two other channels of distribution, namely e-commerce and wholesale, which combined account for approximately 4% of net sales.

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 2018, fiscal 2017 and fiscal 2016, approximately 52%, 45%, and 45%, respectively, of our jewelry products acquired for sale were internally designed, sourced or produced. 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 2018, we purchased jewelry, timepieces and giftware for sale in our stores from several suppliers. Many of these suppliers have long-standing relationships with us. We compete with other jewelry 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 2018, merchandise supplied by our largest luxury jewelry supplier and sold through our stores operating under the Birks and Brinkhaus brands accounted for approximately 15% of our total net sales. If our largest luxury jewelry supplier

terminated its distribution agreements with us, such termination would have a material adverse effect on our business, financial condition and operating results. We believe that current relationships with our key vendors are strong.

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. Net sales from continuing operations in the first, second, third and fourth quarters in fiscal 2018 were 23%, 20%, 36% and 20% respectively, in fiscal 2017 were 24%, 21%, 35% and 20%, respectively, and in fiscal 2016 were 25%, 22%, 32% and 21%, respectively.

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 Visual Display 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 Christmas, Chinese New Year, 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 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.

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 classroom training, the use of detailed operational manuals, in-store mentorship programs and a leading edge product knowledge program which includes on-line testing. 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 such as Cartier, Patek Philippe, Rolex, and Van Cleef & Arpels, among others. 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), billboards, print, direct mail, magazine, 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, Birks, as well as the 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 bank that owns the credit card receivable balances. As of April 2018, 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 cards accounted for approximately 14.6% of our net sales during fiscal 2018 and 16.0% during fiscal 2017. The reduction in % penetration of our net sales is substantially due to the implementation of certain mandatory down payment requirements on certain interest-free plans. Sales under the Birks private label credit cards are generally made without credit recourse to us. However, we are permitted to ask the bank to approve credit purchases under these private label credit cards, for which the bank holds credit recourses against the Company if the customer does not pay. These recourse credit lines are limited to 25% of the nonrecourse credit lines issued by the banks for the private label Birks credit card.

Distribution

Our retail locations receive the majority of their merchandise directly from our distribution warehouse located in Montreal, Québec. 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 very small 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 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 ^® , Discover ^® , MasterCard ^® , Union Pay ^® and Visa ^® , 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.

Diamonds extracted from certain regions in Africa, including Zimbabwe, that are believed to be used to fund terrorist activities, are considered conflict diamonds. 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 a 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.

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 fourth disclosure report on May 30, 2017 for the calendar year ended December 31, 2016 and our fifth disclosure report on May 31, 2018 for the calendar year ended December 31, 2017. 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 created by our in-house designers and have entered into agreements with several outside designers pursuant to which these designers have assigned to us the rights to use copyrights of designs and products created for us.

Organizational Structure

Not applicable.

Properties

In December 2000, we entered into a capital lease agreement for our Montreal head office and store pursuant to which we sold and leased back the building, including the Montreal flagship store, for a term of 20 years ending December 11, 2020. The net annual rental rate was CAD$2.2 million (approximately $1.6 million U.S. dollars) for the period that ended on December 11, 2016. On November 1, 2016, we entered into an agreement with the new owner of the building to terminate the then existing lease agreement for the building in advance of its expiry date in December 2020 and to lease the premises for our flagship store at its current location, which is an operating lease. As a result, a capital lease asset of CAD$8.7 million (approximately $6.5 million in U.S. dollars) and a capital lease obligation of CAD$11.6 million (approximately $8.7 million in U.S. dollars) at November 1, 2016 were derecognized and a non-cash gain of CAD$2.9 million (approximately $2.2 million in U.S. dollars) (included as part of other long-term liabilities) is being deferred and amortized over the term of the new lease of the flagship store.

We lease all of our store locations. We believe that all of our facilities are well maintained and in good condition and are adequate for our current needs. We are actively reviewing all leases that expire in the next 12 months to determine whether to renew the leases.

Following is a listing of all our properties as of March 31, 2018:

Size
(Square Feet)

Expiration of Lease

Location

Operating Stores

Bayshore Centre

1,099

September 2027

Ottawa, ON

Bloor

4,820

July, 2028

Toronto, ON

Brinkhaus

1,946

March 2022

Calgary, AB

Brinkhaus

750

October 2028

Vancouver, BC

Carrefour Laval

2,545

April 2025

Laval, QC

Chinook Shopping Centre

3,661

September 2024

Calgary, AB

Dix-30 Mall

1,691

July 2023

Brossard, QC

Edmonton Manulife Centre ⁽¹⁾

4,196

May 2018

Edmonton, AB

Fairview Pointe-Claire

4,210

March 2020

Pointe-Claire, QC

First Canadian Place

2,243

August 2028

Toronto, ON

Guildford Town Centre

1,172

September 2027

Surrey, BC

Mapleview Centre

1,384

June 2023

Burlington, ON

Montreal Flagship Store

7,714

April 2032

Montreal, QC

Oakridge Shopping Centre ⁽²⁾

2,244

August 2018

Vancouver, BC

Oshawa

1,043

September 2027

Oshawa, ON

Park Royal

1,797

October 2024

West Vancouver, BC

Place Ste-Foy

1,472

September 2027

Ste-Foy, QC

Rideau Centre

2,745

May 2024

Ottawa, ON

Saskatoon

3,486

October 2020

Saskatoon, SK

Sherway Gardens

2,726

September 2025

Etobicoke, ON

Southgate Shopping Centre

2,915

April 2028

Edmonton, AB

Square One

1,825

May 2024

Mississauga, ON

Toronto Dominion Square

5,568

January 2022

Calgary, AB

Toronto Eaton Centre ⁽³⁾

1,042

August 2018

Toronto, ON

Vancouver

20,221

January 2026

Vancouver, BC

Victoria ⁽⁴⁾

1,561

March 2019

Victoria, BC

West Edmonton Mall

2,244

August 2024

Edmonton, AB

Willowdale Fairview Mall ⁽⁵⁾

2,353

February 2019

North York, ON

Winnipeg

3,187

February 2023

Winnipeg, MB

Yorkdale

2,930

October 2026

Toronto, ON

Other Properties

Montreal corporate office

26,423

May 2033

Montreal, QC

(1)	The Edmonton Manulife Centre store closed at the end of April 2018.

(2)	As of May 31, 2018, we are currently in advanced negotiations with the landlord to finalize a relocation of the Oakridge Shopping Centre store in Vancouver, British Columbia.

(3)	The Toronto Eaton Centre store is expected to close at the end of August 2018.

(4)	The Victoria store is expected to close at the end of March 2019.

(5)	As of May 31, 2018, we are currently in advanced negotiations with the landlord to finalize a relocation of the Willowdale Fairview Mall store in North York, Ontario.

Total annual base rent for the above locations for fiscal 2018 was approximately $11.1 million.

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 years ended March 31, 2018, March 25, 2017, and March 26, 2016, as fiscal 2018, fiscal 2017, and fiscal 2016, respectively. Our fiscal year ends on the last Saturday in March of each year. The financial reporting period referred to as fiscal 2018 consisted of 53 weeks while fiscal 2017 and fiscal 2016, consisted of 52 weeks.

Overview

Birks Group is a leading designer of fine jewelry, timepieces and gifts and operator of luxury jewelry stores in Canada, with wholesale operations in North America and the U.K. As of March 31, 2018, we have two reportable segments, “Retail” and “Other.” Retail consists of our retail operations whereby we operate stores in Canada, under the Birks brand except for two stores operated under the Brinkhaus brand. Other consists primarily of our e-commerce business and wholesale business. Prior to the Aurum Transaction, we operated stores in Florida and Georgia under the Mayors brand except for one store operated under the Rolex brand, which was included in the “Retail” segment in prior periods.

As of March 31, 2018, our retail operation’s total square footage was approximately 100,000. The average square footage of our three Birks flagship stores was approximately 11,700, while the average square footage for all other Birks retail stores was approximately 2,400. The average square footage of our two Brinkhaus locations was 2,600.

Significant Transaction

In addition to the Aurum Transaction, Birks entered into a 5 year distribution agreement with Aurum (the “Distribution Agreement”) to sell Birks fine jewelry 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 collections will continue to be sold in the United States through Mayors stores in Florida and Georgia. The Distribution Agreement is an important achievement in the Company’s strategy to develop the Birks brand into a global luxury brand. The Aurum Transaction constitutes a significant step in the Company’s efforts to strengthen its balance sheet and to execute its strategic vision of investing in the Birks brand together with the retailing of internationally-renowned jewelry and timepiece brands in Canada.

On October 23, 2017, as a condition to the closing of the Aurum Transaction, the Company entered into (i) an Inventory Purchase Agreement whereby Birks purchased approximately $1.8 million in inventory from Mayors; (ii) a Transition Services Agreement whereby Birks agreed to provide certain transition services to Mayors and its wholly-owned subsidiaries for a period of six months following the closing of the Aurum Transaction, subject to certain renewal rights, (iii) a Services Agreement whereby Mayors agreed to provide certain services to Birks for a period of one year following the closing of the Aurum Transaction, subject to certain renewal rights and (iv) an Authorized Dealer Agreement with Mayors Jewelers of Florida, Inc. (Mayors together Mayor’s Jewelers of Florida, Inc., the “Authorized Dealer”) whereby the Authorized Dealer will promote the sale of Birks branded products and trademarks in the United States.

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 does not intend on paying dividends as a result of the Aurum Transaction, but rather, the remaining transaction proceeds will be used by Birks to continue its strategic growth initiatives, specifically to invest in its Canadian flagship stores and new store concepts, as well as in its high-growth Birks brand wholesaling activities and e-commerce, as part of the Company’s omni-channel strategy. The Company expects that the next two years will be a capital intensive spending period during which the Company intends to fully renovate its three flagship stores

(Montreal, Toronto, and Vancouver) which may result in temporarily lower sales and contribution margin at these specified locations in order to generate future long-term returns for the Company.

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. Furthermore, the assets and liabilities of Mayors have been segregated and reported as assets or liabilities of disposal group in the consolidated balance sheet of the comparative period of March 25, 2017. The tables below reconcile the Company’s results from continuing operations and from discontinuing operations for the fiscal years 2018, 2017, and 2016, respectively.


	Year ended March 31, 2018
	Continuing		Discontinued		Combined
	operations		Operations*		operations

(in $ 000’s)

Net sales		114,378		85,274		199,652
Cost of sales		70,824		55,917		126,741
Gross profit		43,554		29,357		72,911
Selling, general, and administrative expenses		51,823		23,871		75,694
Restructuring charges		688		-		688
Depreciation and amortization		2,549		1,285		3,834
Impairment of long-lived assets		2,156		-		2,156
Operating (loss) income		(13,662)		4,201		(9,461)
Interest and other financial costs		3,116		2,829		5,945
Debt extinguishment charges		-		2,702		2,702
Income tax expense				75		75
Gain on disposal of discontinued operations		-		(29,882)		(29,882)
Net (loss) income		(16,778)		28,477		11,699

*Results from discontinued operations are included in the Company’s consolidated results for the period up to and including October 22, 2017.


	Year ended March 25, 2017
	Continuing		Discontinued		Combined
	operations		operations		operations

(in $ 000’s)

-
Net sales		116,436		170,485		286,921
Cost of sales		69,654		108,833		178,487
Gross profit		46,782		61,652		108,434
Selling, general, and administrative expenses		47,183		47,043		94,226
Restructuring charges		682		160		842
Depreciation and amortization		2,618		2,416		5,034
Operating (loss) income		(3,701)		12,033		8,332
Interest and other financial costs		3,355		5,326		8,681
Income tax expense		-		(5,277)		(5,277)
Net (loss) income		(7,056)		11,984		4,928

	Year ended March 26, 2016
	Continuing		Discontinued		Combined
	operations		operations		operations

(in $ 000’s)

-
Net sales		128,651		157,175		285,826
Cost of sales		75,682		100,757		176,439
Gross profit		52,969		56,418		109,387
Selling, general, and administrative expenses		48,333		42,792		91,125
Restructuring charges		549		205		754
Depreciation and amortization		2,791		2,438		5,229
Gain on sale of assets		(3,229)		-		(3,229)
Operating income		4,525		10,983		15,508
Interest and other financial costs		4,300		5,720		10,020
Income tax expense		-		50		50
Net (loss) income		225		5,213		5,438

Description of operations – continuing 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, checks, debit cards, third-party credit cards, private label credit cards and house accounts to make purchases. The level of our sales is impacted by the number of transactions we generate and the size of our average retail sale.

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 obsolescence, 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 retail brands. Marketing has historically represented a significant portion of our SG&A. As a percentage of net sales, marketing expenses represented 6.5%, 4.8% and 4.4% of sales for fiscal 2018, 2017, and 2016, respectively. Additionally, SG&A includes indirect costs such as freight, including inter-store transfers, receiving costs, distribution costs, and warehousing costs. The amount of these indirect costs in SG&A was approximately $1.1 million, $1.1 million and $1.2 million for fiscal 2018, 2017, and 2016, respectively. Depreciation and amortization includes depreciation and amortization of our stores and head office, including buildings, leasehold improvements, furniture and fixtures, computer hardware and software and amortization of intangibles.

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 EBITDA;

•

streamline the operational overhead costs that were incurred to support the operations of the Company prior to the Aurum Transaction;

•

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 design, 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 retail 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, magazine, in-store events, community relations, media and public relations, partnerships with key suppliers, and associations with prestige institutions;

•

provide a superior omni-channel client experience through consistent outstanding customer service that will ensure customer satisfaction and promote frequent customer visits, customer loyalty, and strong customer relationships; increase our retail stores’ average retail transaction, conversion rate, productivity of our store professionals and inventory and four-wall profitability; and

•

recruit and retain top talent whose values are aligned with our omni-channel strategic visions.

Foreign Currency

Because our operations are based in Canada but our financial results are reported in U.S. dollars, our results are affected by foreign exchange rate changes. Revenue and expenses incurred in Canadian dollars are translated into U.S. dollars for reporting purposes. Changes in the value of the Canadian dollar compared to the U.S. dollar between

periods may materially impact our results and may materially affect period over period comparisons. Over the past several years, the value of the Canadian dollar has varied significantly compared to the U.S. dollar which has impacted the level of our borrowing capacity and, for reporting purposes, in some instances, has resulted in significant fluctuations in our net sales, expenses and our profits when expressed in U.S. dollars. As of March 31, 2018, we had not hedged these foreign exchange rate risks.

Fiscal 2018 Summary – results from continuing operations

●

Net sales were $114.4 million for fiscal 2018, a decrease of $2.0 million compared to net sales of $116.4 million in fiscal 2017. Net sales were $4.7 million lower than last year on a constant currency basis (see “Non-GAAP measures”) after excluding $2.6 million of higher sales due to the translation of the Company’s Canadian sales into U.S. dollars with a stronger Canadian dollar. The decrease in sales in fiscal 2018 was driven primarily by the fact that, as part of its strategic plan, the Company began the renovation of two of its flagship stores (Montreal and Toronto);

●

Comparable store sales decreased by 2% and comparable store sales calculated on a constant-exchange rate basis (see “Non-GAAP measures”) decreased by 4% compared to the prior fiscal year ended March 25, 2017. When excluding the impact of lower sales at the Montreal and Toronto flagship locations which were under-going major renovations for a significant portion of the fiscal year, comparable store sales increased by 1% ;

●

Gross profit was $43.6 million, or 38.1% of net sales, for fiscal 2018, compared to $46.8 million, or 40.2% of net sales, for fiscal 2017. The reduction of 210 basis points in gross margin percentage was mainly attributable to product sales mix and increased sales promotions as a result of the Montreal and Toronto flagship locations undergoing major renovations during the fiscal year;

●

SG&A expenses were $51.8 million, or 45.3% of net sales, in fiscal 2018 compared to $47.2 million, or 40.5% of net sales, in fiscal 2017. The increase is driven in part by higher marketing and operational costs related to the Company’s strategic focus on the promotion and development of the Birks brand as well as by higher professional fees incurred in relation to the Company’s new strategic plan;

●

The Company’s fiscal 2018 reported operating loss from continuing operations was $13.7 million, an increase of $10.0 million compared to a reported operating loss from continuing operations of $3.7 million for fiscal 2017. Adjusted operating loss from continuing operations (see “Non-GAAP measures”), which excludes restructuring costs and impairment charges was $10.8 million, a decrease of $7.8 million compared to an adjusted operating loss from continuing operations of $3.0 million in fiscal 2017 (excluding restructuring costs);

The Company recognized a net income for fiscal 2018 of $11.7 million, or $0.65 per share, comprised of a net loss from continuing operations of $16.8 million, or $0.93 per share, and a net income from discontinued operations of $28.5 million (including a one-time gain on disposal of discontinued operations of $29.9 million), or $1.59 per share, compared to net income of $4.9 million, or $0.27 per share in fiscal 2017 comprised of a net loss from continuing operations of $7.1 million, or $0.39 per share, and a net income from discontinued operations of $12.0 million, or $0.66 per share.

Results of Operations

The following is a discussion of factors affecting our results of operations for fiscal 2018 and fiscal 2017. This discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Annual Report.

Comparable Store Sales – from continuing operations

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 is calculated on a constant-exchange rate basis (see “Non-GAAP measures”) which eliminates the positive and negative effects that result from translating Canadian dollar sales into U.S. dollars due to the strengthening or weakening of the Canadian dollar in comparison to the U.S. dollar. 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.

The percentage increase in comparable store sales, calculated on a constant-exchange rate basis (see “Non-GAAP measures”) for the periods presented below is as follows:


	Fiscal Year Ended
	March 31, 2018			March 25, 2017*			March 26, 2016*


Comparable store sales from continuing operations		(4	)%		(8	)%		6%

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

The decrease in comparable store sales of 4% in fiscal 2018 is related to a decrease in sales of third party branded fine jewelry and bridal offerings, primarily driven by the fact that, as part of its strategic plan, the Company began the renovation of two of its flagship stores (Montreal and Toronto), leading to a greater than anticipated temporary decline in sales volume during the construction period. When excluding the impact of lower sales at the Montreal and Toronto flagship locations, comparable store sales increased by 1% despite a softening of the luxury retail environment in Canada and overall weaker retail conditions during the holiday period. This is attributable to the increased sales of Birks branded products across the retail and e-commerce channels as well as the successful execution of targeted marketing campaigns. In fiscal 2017, the decrease in comparable store sales in Canada was primarily driven by a significant decrease in discretionary spending, partially related to difficult economic conditions in Western Canada. In fiscal 2016, the increase in comparable store sales was primarily related to an increase in our average retail sale transaction.

Fiscal 2018 Compared to Fiscal 2017

The following table sets forth, for fiscal 2018 and fiscal 2017, the amounts in our consolidated statements of operations:


	Fiscal Year Ended
	March 31, 2018			March 25, 2017*
	(In thousands)
Net sales	$	114,378		$	116,436
Cost of sales		70,824			69,654

Gross profit		43,554			46,782

Selling, general and administrative expenses		51,823			47,183
Restructuring charges		688			682
Depreciation and amortization		2,549			2,618
Impairment of long-lived assets		2,156			-

Total operating expenses		57,216			50,483

Operating income		(13,662	)		(3,701	)
Interest and other financing costs		3,116			3,355
Income taxes		-			-

Net (loss) from continuing operations,		(16,778	)		(7,056	)
Discontinued operations:
(Loss) income from discontinued operations, net of tax		(1,405	)		11,984
Gain on disposal of discontinued operations, net of tax		29,882			-

Net income from discontinued operations		28,477			11,984

Net income	$	11,699		$	4,928

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

Net Sales – from continuing operations


	Fiscal Year Ended
	March 31, 2018		March 25, 2017*
	(In thousands)

Net sales – Retail	$	110,225	$	113,644
Net sales – Other		4,153		2,792

Total Net Sales	$	114,378	$	116,436

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

Net sales for fiscal 2018 were $114.4 million compared to $116.4 million for fiscal 2017, which is a decrease of $2.0 million, or 1.7%, as compared to fiscal 2017. Net retail sales were $5.9 million lower than last year on a constant currency basis (see “Non-GAAP measures”) after excluding the $2.5 million of higher sales due to the translation of the Company’s Canadian sales into U.S. dollars with a stronger Canadian dollar, primarily driven by the renovation of our Montreal and Toronto flagship stores during fiscal 2018, and the temporary closure of the Montreal flagship store for the last two months of the fiscal year, as well as a softer luxury retail environment in Canada throughout the fiscal year and particularly during the holiday season. The increase in Net Sales – Other of $1.4 million related primarily to an increase in wholesale sales of $1.7 million driven by the Company’s entrance into the U.K market through its newly signed exclusive distribution agreement for Birks branded jewelry with Aurum, as well as greater e-commerce sales of $0.2 million driven by increased traffic to the Company’s updated website, partially offset by lower corporate sales of $0.5 million.

Gross Profit – from continuing operations


	Fiscal Year Ended
	March 31, 2018		March 25, 2017*
	(In thousands)

Gross Profit – Retail	$	42,019	$	45,784
Gross Profit – Other		1,535		998

Total Gross Profit	$	43,554	$	46,782

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

Total gross profit for fiscal 2018 was $43.6 million or 38.1% of net sales, as compared to $46.8 million or 40.2% of net sales, in fiscal 2017. Excluding $2.1 million of higher gross profit from the impact of translating the gross profit from Canadian dollars to U.S. dollars with a relatively stronger Canadian dollar, gross profit on a constant currency basis (see “Non-GAAP measures”) decreased by $5.3 million compared to the prior fiscal year period. The reduction of 210 basis points in gross margin percentage was mainly attributable to product sales mix and increased sales promotions as a result of the Montreal and Toronto flagship locations undergoing major renovations during the fiscal year. Gross Profit – Other for fiscal 2018 was $1.5 million compared to $1.0 million for fiscal 2017, which is an increase of $0.5 million or 53.8%, as compared to fiscal 2017. This 53.8% increase is driven by increased wholesale and e-commerce activity during the fiscal year, as the Company continues its focus on growth in these high gross margin channels.

SG&A Expenses – from continuing operations

In fiscal 2018, SG&A expenses were $51.8 million or 45.3% of net sales, compared to $47.2 million or 40.5% of net sales in fiscal 2017. The increase is driven in part by higher marketing and operational costs related to the Company’s strategic focus on the promotion and development of the Birks brand as well as by higher professional fees incurred in relation to the Company’s new strategic plan.

Restructuring Charges – from continuing operations

During fiscal 2018, we incurred $0.7 million of restructuring charges associated with the third phase of our operational restructuring plan launched in fiscal 2015, compared to $0.7 million in fiscal 2017 as part of the second phase of the restructuring plan. In July 2014, we provided to our senior secured lenders and announced an operational restructuring plan to reduce corporate overhead costs, improve profitability and drive efficiency within the organization. The restructuring plan included consolidating most of our corporate administrative workforce from our regional office in Tamarac, Florida to our Montreal corporate head office as well as the outsourcing of a portion of our jewelry manufacturing and other corporate head office staff reductions. In February 2018, we began the third phase of the operational restructuring plan, incurring restructuring charges of approximately $0.7 million, primarily associated with severance, as we eliminated certain head office positions to further increase efficiency and to align corporate functions with the Company’s strategic direction following the Aurum Transaction.

Depreciation and Amortization – from continuing operations

Depreciation and amortization expense during fiscal 2018 was $2.5 million compared to $2.6 million during fiscal 2017.

Interest and Other Financing Costs – from continuing operations

Interest and financing costs in fiscal 2018 were $3.1 million compared to $3.4 million in fiscal 2017, a decrease of $0.3 million driven by lower average outstanding working capital debt during the period of $6.6 million as a result of the significant debt repayments made by the Company as a result of the Aurum Transaction.

Income Tax Expense – from continuing operations

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of March 31, 2018, the Company had no accrued interest related to uncertain tax positions due to available tax loss carry forwards. The tax years 2011 through 2018 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 from our continuing operations during these periods as the criteria for recognition of these assets was not met at March 31, 2018.

Fiscal 2017 Compared to Fiscal 2016

The following table sets forth, for fiscal 2017 and fiscal 2016, the amounts in our consolidated statements of operations:


	Fiscal Year Ended
	March 25, 2017*			March 26, 2016*
	(In thousands)
Net sales	$	116,436		$	128,651
Cost of sales		69,654			75,682

Gross profit		46,782			52,969

Selling, general and administrative expenses		47,183			48,333
Restructuring charges		682			549
Depreciation and amortization		2,618			2,791
Gain on sale of assets		-			(3,229	)

Total operating expenses		50,483			48,444

Operating income		(3,701	)		4,525
Interest and other financing costs		3,355			4,300
Income taxes		-			-

Net (loss) from continuing operations		(7,056	)		225
Discontinued operations:
(Loss) income from discontinued operations, net of tax		11,984			5,213
Gain on disposal of discontinued operations		-			-

Net income from discontinued operations		11,984			5,213

Net income	$	4,928		$	5,438

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

Net Sales – from continuing operations


	Fiscal Year Ended
	March 25, 2017		March 26, 2016
	(In thousands)

Net sales – Retail	$	113,644	$	125,122
Net sales – Other		2,792		3,529

Total Net Sales	$	116,436	$	128,651

Net sales for fiscal 2017 were $116.4 million compared to $128.7 million for fiscal 2016, which is a decrease of $12.3 million, or 9.5%, as compared to fiscal 2016. Net retail sales were $11.1 million lower than in fiscal 2017 versus fiscal 2016 on a constant currency basis after excluding the $0.3 million of lower sales due to the translation of the Company’s Canadian sales into U.S. dollars with a relatively weaker Canadian dollar (see “Non-GAAP measures”), primarily driven by a significant decrease in discretionary spending partially related to difficult economic conditions (particularly in Western Canada) as well as a significant reduction in luxury spending by certain affluent tourists within our customer base. The decrease in Net Sales – Other of $0.7 million related primarily to a decrease in corporate sales (division sold in fiscal 2016), partially offset by higher e-commerce sales.

Gross Profit – from continuing operations


	Fiscal Year Ended
	March 25, 2017		March 26, 2016
	(In thousands)

Gross Profit – Retail	$	45,784	$	51,428
Gross Profit – Other		998		1,541

Total Gross Profit	$	46,782	$	52,969

Total gross profit for fiscal 2017 was $46.8 million or 40.2% of net sales, as compared to $53.0 million or 41.2% of net sales, in fiscal 2016. Excluding $0.2 million of lower gross profit from the impact of translating the gross profit from Canadian dollars to U.S. dollars with a relatively weaker Canadian dollar, gross profit on a constant currency basis (see “Non-GAAP measures”) decreased by $6.0 million compared to the prior fiscal year period. The reduction of 100 basis points in gross margin percentage was mainly attributable to product sales mix and the impact of foreign exchange. Gross Profit – Other for fiscal 2017 was $1.0 million compared to $1.5 million for fiscal 2016, which is a decrease of $0.5 million or 35.2%, as compared to fiscal 2016. This decrease is driven by the decline in corporate sales (as the corporate sales division sold in fiscal 2016).

SG&A Expenses – from continuing operations

In fiscal 2017, SG&A expenses were $47.2 million or 40.5% of net sales, compared to $48.3 million or 37.6% of net sales in fiscal 2016. The decrease was driven in part by the efficiencies that resulted from second phase of the operational restructuring plan that was initiated in fiscal 2015 as well as by lower direct variable costs driven by lower sales during the fiscal period.

Restructuring Charges – from continuing operations

During fiscal 2017, we incurred $0.7 million of restructuring charges associated with the second phase of our operational restructuring plan launched in fiscal 2015, compared to $0.5 million in fiscal 2016 as part of the first phase of the restructuring plan. In July 2014, we provided to our senior secured lenders and announced an operational restructuring plan to reduce corporate overhead costs, improve profitability and drive efficiency within the organization. The restructuring plan included consolidating most of our corporate administrative workforce from our regional office in Tamarac, Florida to our Montreal corporate head office as well as the outsourcing of a portion of our jewelry manufacturing and other corporate head office staff reductions. In February 2017, we began the

second phase of the operational restructuring plan, incurring restructuring charges of approximately $0.7 million in fiscal 2017 primarily associated with severance, as we eliminated certain corporate administrative positions to further increase efficiency.

Depreciation and Amortization – from continuing operations

Depreciation and amortization expense during fiscal 2017 was $2.6 million compared to $2.8 million during fiscal 2016.

Interest and Other Financing Costs – from continuing operations

Interest and financing costs in fiscal 2017 were $3.4 million compared to $4.3 million in fiscal 2016, a decrease of $0.9 million, driven by lower average long-term debt outstanding in fiscal 2017 as compared to fiscal 2016 due to the termination on November 1, 2016 of an obligation under capital lease of approximately $8.7 million (at November 1, 2016) pursuant to a sale-leaseback transaction on the former Montreal head-office building.

NON-GAAP MEASURES

The Company reports financial information in accordance with U.S Generally Accepted Accounting Principles (“U.S GAAP”). 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 investors and other external stakeholders to provide them with useful complimentary information which 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.

Constant currency basis

The Company evaluates its sales performance using non-GAAP measures which eliminates the foreign exchange effects of translating net sales, comparable store sales and gross profit made in Canadian dollars to U.S dollars (constant currency basis or constant exchange rate basis). Net sales, comparable store sales, gross profit and expenses on a constant exchange rate basis are calculated by taking the current period’s sales, gross profit and expenses in local currency and translating them into U.S dollars using the prior period’s foreign exchange rates. The Company believes that such measures provide useful supplemental information with which to assess the Company’s performance relative to the corresponding period in the prior fiscal year. The following tables reconcile the net sales, comparable store sales and gross profit increases (decreases) from GAAP to non-GAAP versus the previous fiscal year:


Constant Exchange Rate Basis Reconciliation	Fiscal 2018 vs. Fiscal 2017 Change								Fiscal 2017 vs. Fiscal 2016 Change
	GAAP			Translation Effect		Constant- Exchange Rate Basis			GAAP			Translation Effect			Constant- Exchange Rate Basis

Net Sales – from continuing operations (in $000’s)

Net sales - Retail		(3,419	)		2,455		(5,874	)		(11,477	)		(349	)		(11,128	)
Net sales - Other		1,361			183		1,178			(737	)		(78	)		(659	)
Total Net Sales		(2,058	)		2,638		(4,696	)		(12,214	)		(427	)		(11,787	)

Gross Profit from continuing operations (in $ 000’s)

Total Gross Profit		(3,228	)		2,106		(5,334	)		(6,187	)		(208	)		(5,979	)


Constant Exchange Rate Basis Reconciliation	Fiscal 2018 vs. Fiscal 2017 Change
	GAAP	Translation Effect			Constant- Exchange Rate Basis
Comparable store sales decrease – from continuing operations (in %)

Comparable store sales	-2%		2	%		-4	%

	Fiscal 2017 vs. Fiscal 2016 Change
	GAAP	Translation Effect			Constant- Exchange Rate Basis
Comparable store sales decrease – from continuing operations (in %)

Comparable store sales	-8%		0	%		-8	%

Adjusted operating expenses and adjusted operating income

The Company evaluates its operating earnings performance using financial measures which exclude expenses associated with operational restructuring plans and impairment losses, as well as a non-recurring gain on disposal of assets. 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. The table below provides a reconciliation of the non-GAAP measures presented to the most directly comparable financial measures calculated with GAAP.

Reconciliation of non-GAAP

measures

Fiscal year ended March 31, 2018

($‘000)

GAAP

Restructuring

costs (a)

Impairment
of long lived
assets (b)

One-

time
gain (c)

Non-GAAP

Total operating expenses – from

continuing operations

57,216

(688)

(2,156)

54,372

as a % of net sales from continuing operations

50.0%

47.5%

Operating loss – from continuing operations

(13,662)

688

2,156

(10,818)

as a % of net sales from continuing operations

(11.9)%

(9.5)%

Reconciliation of non-GAAP

measures

Fiscal year ended March 25, 2017

($‘000)

GAAP

Restructuring
costs (a)

Impairment
of long lived
assets (b)

One-

time
gain (c)

Non-GAAP

Total operating expenses – from

continuing operations

50,483

(682)

49,801

as a % of net sales from continuing operations

43.4%

42.8%

Operating loss – from continuing operations

(3,701)

682

(3,019)

as a % of net sales from continuing operations

(3.2)%

(2.6)%

Reconciliation of non-GAAP measures

Fiscal year ended March 26, 2016

($‘000)

GAAP

Restructuring
costs (a)

Impairment
of long lived
assets (b)

One-

time
gain (c)

Non-GAAP

Total operating expenses – from

continuing operations

48,444

(549)

3,229

51,124

as a % of net sales from continuing operations

37.7%

39.7%

Operating loss – from continuing

operations

4,525

549

(3,229)

1,845

as a % of net sales from continuing operations

3.5%

1.4%

(a)	Expenses associated with the Company’s operational restructuring plan

(b)	Non-cash impairment associated with the impairment of long-lived assets at a retail location due to the projected operating performance of the location and software impairment associated with a decision to modify the scope of the implementation of the Company’s new ERP

(c)	Non-recurring gain on disposal of assets resulting from the Company’s sale of its corporate sales division in fiscal 2016

Liquidity and Capital Resources

Our ability to fund our operations and meet our cash flow requirements in order to fund our operations is dependent upon our ability to maintain positive excess availability under the Company’s New Credit Facility which, as of March 31, 2018, had a balance owing of approximately $28.6 million. The New Credit Facility is used to finance working capital, finance capital expenditures, provide liquidity to fund our day-to-day operations and for other general corporate purposes. The terms of the New Credit Facility require us to maintain positive excess availability at all times.

On October 23, 2017, in connection with the closing of the Aurum Transaction, the Company entered into a new senior secured credit facility with Wells Fargo Canada Corporation for a maximum amount of CAD$85.0 million (US$65.9 million) (the “New Credit Facility”). The New Credit Facility, which matures in October 2022, replaced the Company’s prior $110.0 million revolver credit facility and its prior senior secured $31.0 million term loan facility which were repaid in full as a result of the Company’s divestiture of Mayors. The New Credit Facility also provides the Company with an option to increase the total commitments thereunder by up to CAD$13.0 million (US$10.1 million). The Company will only have the ability to exercise this accordion option if it has the required borrowing capacity at such time. The New Credit Facility bears interest at a rate of CDOR plus a spread ranging from 1.5% - 3.0% depending on the Company’s excess availability levels. Under the New Credit Facility, the Company is not required to comply with a minimum adjusted EBITDA financial covenant. The sole financial covenant which the Company is required to adhere to is to maintain minimum excess availability of not less than CAD$8.5 million (US$6.6 million) at all times, except that the Company shall not be in breach of this covenant if excess availability falls below CAD$8.5 million (US$6.6 million) for not more than two consecutive business days once during any fiscal month.

The Company’s borrowing capacity under both the New Credit Facility and the New Term Loan is based upon the value of the Company’s inventory and accounts receivable, which is periodically assessed by the lenders, and based upon these reviews the Company’s borrowing capacity could be significantly increased or decreased.

The Company’s New Credit Facility and New 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 New Credit Facility and the New Term Loan. In the event that excess availability falls below CAD$8.5 million (US$6.6 million) for more than two consecutive business days once during any fiscal month, this would be considered an event of default under the New Credit Facility and New Term Loan, that provides the lenders the right to require the outstanding balances borrowed under the Company’s New Credit Facility and New 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 CAD$8.5 million (US$6.6 million) for at least the next twelve months.

the borrowing base in the month preceding payment or ii) maintain excess availably 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 New Credit Facility and New Term Loan provide that no financial covenants are required to be met other than already described.

The Company’s lenders under its New Credit Facility and its New 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 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 2018, fiscal 2017, and fiscal 2016 by the Company’s current or former lenders.

Borrowings under our credit facility for the periods indicated in the table below were as follows:


	Fiscal Year Ended
	March 31, 2018 ⁽¹⁾		March 25, 2017 ⁽²⁾
	(In thousands)

Credit facility availability	$	44,101	$	85,026
Amount borrowed at year end – continuing operations	$	28,640	$	44,840
Amount borrowed at year end – discontinued operations	$	-	$	25,602

Excess borrowing capacity at year end (before minimum threshold)	$	15,461	$	14,584

Average outstanding balance during the year – continuing operations	$	35,187	$	41,751
Average excess borrowing capacity during the year – continuing operations	$	14,368	$	13,683
Maximum borrowing outstanding during the year – continuing operations	$	48,653	$	50,250
Minimum excess borrowing capacity during the year – continuing operations ⁽³⁾	$	2,594	$	6,174
Weighted average interest rate for year		3.3%		3.2%

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

⁽¹⁾

Note that for fiscal 2018, credit facility availability, excess borrowing capacity and outstanding borrowings related to the period prior to the Aurum Transaction (up to and including October 22, 2017) are calculated based on the terms existing under the then existing senior secured credit facilities, while credit facility availability, excess borrowing capacity and outstanding borrowings related to the period subsequent to the Aurum Transaction (October 23, 2017 and thereafter) are calculated based on the terms existing under the New Credit Facility

⁽²⁾	Note that for fiscal 2018, credit facility availability, excess borrowing capacity and outstanding borrowings are calculated based on the terms existing under the Prior Credit Facilities

⁽³⁾

The Company’s former lenders consented to the Company having an excess borrowing capacity lower than the minimum threshold of $6.0 million under its then existing credit facilities for the 4 days leading up to the closing of the Aurum Transaction to allow the Company to hold excess cash on hand during the Company’s transition period towards the new lender’s banking operations.

Investissement Québec

The Company has term loans outstanding in the aggregate amount of $1.8 million (CAD$2.4 million) at March 31, 2018 with Investissement Québec.

In November 2015, the Company amended the monthly capital requirements amounts of all term loans with Investissement Québec in order to reduce its short-term capital requirements. The impact of the amendment on the first twelve months following the effective date of the amendment translated to a reduction of CAD$2.0 million (approximately $1.6 million in U.S. dollars) of the monthly capital requirements. This amendment was agreed to by the senior secured lenders.

As of March 31, 2018, the Company had the following loans with Investissement Québec:

CAD$2.0 million ($1.6 million in U.S. dollars) secured term loan of which CAD$0.8 million ($0.6 million in U.S dollars) remained outstanding, bearing interest at a rate of Canadian prime plus 10%

per annum, which equated to 13.4% at March 31, 2018 and is repayable in 48 equal monthly payments of CAD$41,667 ($32,315 in U.S dollars) beginning in August 2015.

CAD$5.0 million ($3.9 million in U.S. dollars) secured term loan of which CAD$1.6 million ($1.2 million in U.S. dollars) remained outstanding, bearing interest at a rate of Canadian prime plus 7.0% per annum, which equated to 10.4% at March 31, 2018 and is repayable in 60 equal monthly payments of CAD$83,333 ($64,629 in U.S. dollars) beginning in October 2014.

The term loans with Investissement Québec require the Company on an annual basis to have a working capital ratio of at least 1.15. The Company was in compliance with the working capital ratio as of March 31, 2018.

Capital Leases and Other Financing

As of March 31, 2018, we had a balance of $1.5 million outstanding from an original $5.0 million cash advance from our controlling shareholder, Montrovest. This advance is payable upon demand by Montrovest once conditions stipulated in our senior credit facilities permit such a payment. Commensurate with the amendment of our senior credit facilities, in June 2011, we amended the terms of the $5.0 million cash advance, reducing the annual interest rate from 16%, net of any withholding taxes, representing an effective interest of 17.8% to 11%, net of any withholding taxes, representing an effective interest rate of approximately 12.2%. In addition, the amended terms (i) eliminated the 7% fee required to be paid to Montrovest upon conversion of the advance into a convertible debenture or Class A voting shares, (ii) eliminated the convertibility of the cash advance into a convertible debenture or Class A voting share in the event of a private placement and (iii) required a one-time payment of a closing fee of $75,000. In August 2012, a partial repayment of $3.5 million was made on these cash advances as a result of the proceeds from a stock rights offering that we undertook in 2012.

On July 28, 2017, the Company received a $2.5 million loan from Montrovest. The loan bears interest at an annual rate of 11%, net of withholding taxes and is due and payable in two equal payments of $1.25 million in each of July 2018 and July 2019.

The Company entered into a financing agreement effective May 11, 2017 with a new lender for a credit facility of up to $4.75 million of lease financing relating to certain equipment consisting of furniture, fixtures, and computer systems. During fiscal 2018, the Company borrowed approximately $2.7 million against this facility. The $2.7 million borrowed was repaid in full by the Company on March 31, 2018.

Cash Flows from Operating, Investing and Financing Activities – from continuing operations

The following table summarizes cash flows from operating, investing and financing activities:


(in thousands)	Fiscal 2018		Fiscal 2017		Fiscal 2016

Net cash provided by (used in):
Operating activities	$	(15,030)	$	(3,349)	$	1,395
Investing activities		(6,777)		(4,390)		(745)
Financing activities		(17,206)		7,342		(489)
Net cash provided by discontinued operations:		38,123		-		-
Effect of changes in exchange rate on cash and cash equivalents		(275)		(3)		(173)

Net increase (decrease) in cash and cash equivalents	$	(1,165)	$	(400)	$	(12)

Net cash used in operating activities from continuing operations was $15.0 million in fiscal 2018 as compared to $3.3 million in fiscal 2017. The $11.7 million decrease in cash flows related to operating activities from continuing operations was primarily the result of a $9.7 million increase in operating loss from continuing operations in fiscal 2018 versus fiscal 2017, a $2.4 million increase in the level of prepaid expenses growth during fiscal 2018 compared to fiscal 2017, as well as a $1.7 million increase in the level of in accounts receivable growth during fiscal 2018 compared to fiscal 2017, partially offset by a $2.1 million non-cash impairment of long-lived assets in fiscal 2018.

Net cash used in operating activities from continuing operations was $3.3 million in fiscal 2017 as compared to net cash provided by operating activities from continuing operations of $1.4 million in fiscal 2016. The $4.7 million decrease in cash flows related to operating activities from continuing operations was primarily the result of a $7.3 million decrease in net income from continuing operations in fiscal 2017 versus fiscal 2016, as well as an increase in the level of accounts receivable growth of $1.0 million during fiscal 2017 versus fiscal 2016, and an increase in the level of inventory growth of $2.2 million in fiscal 2017 versus fiscal 2016, partially offset by a $3.2 million non-cash gain on sale of assets in fiscal 2016 and by an increase in the level of accounts payable and accrued liabilities growth of $2.7 million in fiscal 2017 versus fiscal 2016.

During fiscal 2018, net cash used in investing activities from continuing operations was $6.8 million compared to $4.4 million used during fiscal 2017. The $2.4 million increase in net cash used in investing activities from continuing operations was primarily attributable to an increase in capital expenditures and additions to intangibles assets over fiscal 2017.

During fiscal 2017, net cash used in investing activities from continuing operations was $4.4 million compared to $0.7 million used during fiscal 2016. The $3.7 million increase in net cash used in investing activities from continuing operations was primarily attributable to net proceeds of $4.1 million received related to the disposal of corporate sales division assets in fiscal 2016, partially offset by a decrease in capital expenditures over the prior fiscal year of $0.4 million.

Net cash used in financing activities from continuing operations was $17.2 million in fiscal 2018, as compared to $7.3 million of cash flows provided by financing activities from continuing operations during fiscal 2017. The $24.5 million decrease in cash flows related to financing activities from continuing operations was primarily due to a decrease in bank indebtedness of $16.2 million in fiscal 2018 as compared to an increase in bank indebtedness of $10.4 million in fiscal 2017, partially offset by a decrease in net repayments of long-term debt of $2.2 million in fiscal 2018 as compared to fiscal 2017.

Net cash provided by financing activities from continuing operations was $7.3 million in fiscal 2017, as compared to $0.5 million used during fiscal 2016. The $7.8 million increase in cash flows related to financing activities from continuing operations was primarily due an increase in bank indebtedness in fiscal 2017 of $8.4 million as compared to fiscal 2016, partially offset by an increase in net repayments of long-term debt of $0.8 million in fiscal 2017 as compared to fiscal 2016.

Net cash provided by discontinued operations amounted to $38.1 million in fiscal 2018 and represents the excess proceeds received as a result of the Aurum Transaction, net of the repayment of Mayors’ outstanding term and working capital debt and transaction related costs.

The following table details capital expenditures in fiscal 2018, 2017, and 2016:


	Fiscal Year Ended
	March 31, 2018		March 25, 2017*		March 26, 2016*
	(In thousands)

New stores and renovations	$	3,774	$	1,583	$	2,792
Electronic equipment, computer hardware and software		2,717		2,312		1,044
Furniture and fixtures		1,560		504		1,571
Manufacturing equipment		-		4		6

Total capital expenditures ⁽¹⁾	$	8,051	$	4,403	$	5,413

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

(1)

Includes capital expenditures financed by capital leases of $843,000 in fiscal 2018, $376,000 in fiscal 2017, and $43,000 in fiscal 2016 as well as capital expenditures included in accounts payable as of the end of the fiscal year.

Capital expenditures for fiscal 2019 are projected to be approximately $11.2 million and are expected to be used primarily for store remodeling and store relocations associated with lease renewals, as well as the implementation of our new ERP system. The amount of planned capital expenditures for fiscal 2019 is higher than the amount spent in

fiscal 2018. Approximately 17% of the company’s store leases are renewable within the next two years and we are currently in discussions with a number of landlords with respect to renewing at existing locations and/or moving to new locations, and such lease renewals or new leases may require capital expenditures. The capital expenditures related to retail store locations are estimated to be approximately $13.2 million over the next two years to remodel, relocate or open new stores. Of the $13.2 million, we estimate that $9.4 million will be spent in fiscal 2019 leaving the balance to fiscal 2020. The availability of financing will impact our ability to renew leases or enter into new ones, which can in turn, impact the number of retail locations we operate and the level of sales we generate in the future.

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 and our 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 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.

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. These financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate.

Research and development, patents and licenses, etc.

None.

Trend Information

During fiscal 2018, we were faced with several challenges such as an overall softening of the retail industry in Canada in calendar 2017 leading to an industry-wide decrease in traffic and transaction volume, a weaker holiday season in the luxury retail industry globally, a depressed bridal market throughout Canada caused by increased competition in the industry, the major renovations of two of our flagship store locations (Montreal and Toronto), the temporary closure of our flagship store in Montreal, and a significant reduction in luxury spending by certain affluent tourists within our customer base. Increased competition for space in Canada continued to put pressure on occupancy costs and space retention for key locations. Third party brands continue to follow through on opening their own stores and closing distribution in select retail centers and lowering the margins that are earned by retailers impacting our gross margin levels.

We continue to pursue our strategy to develop the Birks product brand and in fiscal 2018, 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 included the remodeling of Birks stores in Canada to provide our clients with an engaging buying experience.

Our gross profit margin from continuing operations has declined over the past five years primarily due to changes in our product sales mix and the increased efforts over the past years to more quickly and aggressively sell through slow moving and discontinued product brands in an effort to improve the productivity and turnover of our inventory. 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. Going forward, we also intend to execute our merchandising strategy to expand gross margins by developing and marketing exclusive and unique third-party branded products with higher margins.

Over the past few years we have also decreased the number of stores we operate through our closure of underperforming stores. Going forward we will continue to evaluate the productivity of our existing stores and close unproductive stores. In addition, we will be continuing to review opportunities to open new stores in new prime retail locations when the right opportunities exist.

Off-balance sheet arrangements

From time to time, we guarantee a portion of our private label credit card sales to our credit card vendor. As of March 31, 2018 and March 25, 2017, the amount guaranteed under such arrangements was approximately $2.1 million and $2.6 million, respectively. The bad debt experienced under these guarantees has not been material. See Note 14(b) to the consolidated financial statements included in this Annual Report on Form 20-F for additional discussion. We had no other off-balance sheet arrangements as of March 31, 2018 other than our operating lease commitments as detailed below and in Note 13 to our consolidated financial statements.

Commitments and Contractual Obligations

The following table discloses aggregate information about our contractual cash obligations as of March 31, 2018 and the periods in which payments are due:


	Payments due by Period*
	Total		Less Than 1 Year		2-3 Years		4-5 Years		More than 5 Years


			(In thousands)

Contractual Obligations
Debt maturities ⁽¹⁾	$	34,430	$	2,391	$	1,899	$	28,640	$	1,500
Capital lease obligations		578		220		229		129		–
Interest on debt ⁽²⁾		1,441		497		436		343		165
Operating lease obligations ⁽³⁾		66,135		8,243		14,615		13,784		29,493

Total ⁽⁴⁾	$	102,584	$	11,351	$	17,179	$	42,896	$	31,158

* Retrospectively revised (refer to “Significant Transaction” above and to note 18 of our audited consolidated financial statements which are included elsewhere in this Annual Report)

(1)	Includes bank indebtedness in the 4-5 year category to reflect the current expiration date of the line of credit.

(2)	Excludes interest payments on amounts outstanding under our credit facility as the outstanding amounts fluctuate based on our working capital needs. Interest expense on other variable rate long-term debts was calculated assuming the rates in effect at March 31, 2018.

(3)	The operating lease obligations do not include insurance, taxes and common area maintenance (CAM) charges to which we are obligated. CAM charges were $1.5 million in fiscal 2018, $2.4 million in fiscal 2017 and $2.1 million in fiscal 2016.

(4)	In addition to the above and as of March 31, 2018, we had $0.9 million of outstanding letters of credit.

Leases

We lease all of our retail locations under operating leases. Additionally, we have operating leases for certain equipment.

Operating leases for store locations are expensed over the term of the initial lease period. While lease renewal periods are available on most leases, renewal periods are not included in the accounting lease term because we believe there are no punitive terms or circumstances associated with non-renewal that would reasonably assure renewal. The accounting lease term typically includes a fixturing period and the rental payments are expensed on a straight-line basis over the lease term. All reasonably assured rent escalations, rent holidays, and rent concessions are included when considering the straight-line rent to be expensed. Lease incentives are recorded as deferred rent and amortized as reductions to lease expense over the lease term. Contingent rent payments vary by lease, are based on a percentage of revenue above a predetermined sales level and are expensed when it becomes probable the sales levels will be achieved. This level is different for each location and includes and excludes various types of sales.

Leasehold improvements are capitalized and typically include fixturing and store renovations. Amortization of leasehold improvements begins on the date the asset was placed in service and extends to the lesser of the economic life of the leasehold improvement and the initial lease term.

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.

Revenue recognition

Sales are recognized at the point of sale when merchandise is picked up by the customer or shipped. 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, a portion of certificates outstanding and not subject to unclaimed property laws are recorded as income. Certificates outstanding and subject to unclaimed property laws are maintained as accrued liabilities until remitted in accordance with local ordinance. Sales of consignment merchandise are recognized at such time as the merchandise is sold and are recorded on a gross basis because we are the primary obligor of the transaction, have general latitude on setting the price, have discretion as to the suppliers, are involved in the selection of the product and have inventory loss risk. Sales are reported net of returns and sales taxes. We generally give our customers the right to return merchandise purchased by them within 10 to 90 days, depending on the products sold and record a provision at the time of sale for the effect of the estimated returns. Repair sales are recorded at the time the service is rendered. Licensing fees are recognized when the product is delivered to and accepted by the customer. Sales to our wholesale customers are recognized at the time the product is shipped out of our facilities.

Allowance for inventory shrink and slow moving inventory

We write down inventory for estimated slow moving inventory equal to the difference between the cost of inventory and the estimated market value based on assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Impairment of long-lived assets

We periodically review the estimated useful lives of our 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, we review our 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 is 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. During fiscal 2018, the Company recorded impairment charges on long-lived assets of $2.2 million associated the projected operating performance of a retail location and software impairment associated with a decision to modify the scope of the implementation of the Company’s new ERP. No impairment charges were recorded in fiscal 2017 and fiscal 2016 in our consolidated financial statements.

Inflation

The impact of inflation on our operations has not been significant to date.

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.

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 June 1, 2018:


Name	Age	Position

Niccolò Rossi di Montelera	45	Executive Chairman of the Board & Director
Jean-Christophe Bédos	53	President, Chief Executive Officer & Director
Davide Barberis Canonico	52	Director
Emily Berlin	71	Director
Shirley A. Dawe	71	Director
Frank Di Tomaso	71	Director
Louis L. Roquet	75	Director
Joseph F.X Zahra	62	Director
Pat Di Lillo	56	Vice President, Chief Financial & Administrative Officer
Maryame El Bouwab	40	Vice President, Planning and Supply Chain
Eva Hartling	37	Vice President, Birks Brand & Chief Marketing Officer
Miranda Melfi	54	Vice President, Legal Affairs & Corporate Secretary


Hélène Messier	58	Vice President & Chief Talent Officer
Aurélie Pépion	37	Vice President, Omni-Channel Sales & Operations

Directors

Niccolò Rossi di Montelera , age 45, was elected to the Company’s Board of Directors on September 23, 2010 and has 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 2018. 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 Bédos, age 53, 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 2018. He has over 25 years of experience in merchandising, marketing, branding and product development in the global retail luxury sector. Mr. Bédos 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. Bédos started his career in the jewelry industry at Cartier in 1988.

Davide Barberis Canonico, age 52, was elected to the Company’s Board of Directors in September 2013. Mr. Canonico’s term as a director of Birks Group expires in 2018. He was a member of the board of directors of Mayors from November 2005 until October 2017. 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.

Emily Berlin , age 71, has been a member of the Company’s Board of Directors since November 2005. Ms. Berlin’s term as a director of Birks Group expires in 2018. She was a member of the board of directors of Mayors from October 2002 until November 14, 2005. She was a Senior Managing Director of Helm Holdings International from 2001 until December 2012, which was a member of a diversified privately owned group of companies operating principally in Central and South America where she focused principally on the banking and energy sectors. Since January 2013, Ms. Berlin has been a strategic consultant to SoEnergy International Inc., an affiliate of Helm Holdings International, operating in the energy sector. From 1974 to 2000, she was a member of the law firm Shearman & Sterling, becoming a partner in 1981.

Shirley A. Dawe , age 71, has been a member of the Company’s Board of Directors since 1999. Ms. Dawe’s term as a director of Birks Group expires in 2018. She is also a corporate director and has been President of Shirley Dawe Associates Inc., a Toronto-based management advisory company specializing in the retail sector since 1986. From 1969 to 1985, she held progressively senior executive positions with Hudson’s Bay Company. Her expertise in the retail sector led to her appointment on industry-specific public task forces and to academic and not-for-profit boards of directors. Her wide management and consumer marketing experience brought Ms. Dawe to the board of directors of numerous public and private companies in Canada and the U.S.

Frank Di Tomaso, age 71, was elected to the Company’s Board of Directors in September 2014. Mr. Di Tomaso’s term as a director of Birks Group expires in 2018. Mr. Di Tomaso is a corporate director. He has been a Chartered

Professional Accountant since 1972. He was an audit and advisory partner at Raymond Chabot Grant Thornton LLP from 1981 to 2012 where he held the position of Managing Partner Audit – Public Companies until he retired in 2012. Mr. Di Tomaso also has been and currently is a member of a number of other public company corporate boards, namely Intertape Polymer Group Inc. and ADF Group Inc.

Louis L. Roquet, age 75, was appointed to the Company’s Board of Directors on May 11, 2016. Mr. Roquet’s term as a director of Birks Group expires in 2018. Mr. Roquet is the Chancellor and Chairman of the Board of Université de Montréal since June 2018. Mr. Roquet was previously a member of the Company’s Board of Directors from August 2007 to July 2014 before being appointed by the Québec Government to the position of Chairman of the Board of Investissement Québec in July 2014 from which he resigned on May 2, 2016. From 2012 to 2014, Mr. Roquet was Managing Director of Cevital Spa, a large Algerian manufacturer of food products. Mr. Roquet has served as General Manager of the City of Montréal from January 2010 to January 2012. From April 2004 to October 2009, he was President and Chief Operating Officer of Desjardins Venture Capital and was responsible for managing Desjardins’ venture capital funds together with those of Capital Régional and Coopératif Desjardins, a publicly-traded company established in 2001 with an authorized capitalization of $1.0 billion. From 2002 to 2004, Mr. Roquet served as President and General Manager of Société des alcools du Québec (“SAQ”), Québec’s Liquor Board. Prior to 2002 he held the title of President and Chief Executive Officer of Investissement Québec, Secretary General of the City of Montréal and General Manager of Montréal Urban Community. He also serves as a director of numerous non-profit organizations .

Joseph F.X. Zahra, age 62, 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 2018. 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 Forestals Investments Ltd. and of Multi Risk Ltd. and chairman of the audit committee of Corinthia Palace Hotel Co. Ltd., Medserv plc and member of the audit committee of United Finance plc. He also serves as chairman of the investment committee of Pendergardens Developments plc and of Multi Risk Indemnity Ltd. and is a member of the investment committee of Chasophie Group Limited. 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 the vice coordinator of the newly formed Council for the Economy of the Holy See since 2014.

Other Executive Officers

Pasquale (Pat) Di Lillo, age 56, is our Vice President, Chief Financial and Administrative Officer and has been with Birks Group since January 2015. Prior to joining us, he was Senior Vice President, and Corporate Controller at SNC-Lavalin Group Inc., one of the world’s largest engineering and construction companies from May 2010 to December 2014 and was Vice-President, Taxation from August 2007 to May 2010. From October 1983 to August 2007, he was with KPMG LLP, where he was appointed a partner in 1995.

Maryame El Bouwab , age 40, is the Company’s Vice President, 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, Merchandise Planning from February 1, 2017 to April 30, 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.

Eva Hartling , age 37, is our Vice President, Birks Brand and Chief Marketing Officer. She has been with the Company since August 2010. Prior to her current position, she was the Company’s Vice President, Marketing and Communications from November 2013 to January 2017. From August 2010 to November 2013, she was Director, Public Relations . Prior to joining Birks Group, Ms. Hartling, from 2009 to 2010, was with Telefilm Canada and held the position of Senior Advisor, External Communications. From 2007 to 2009, Ms. Hartling was Director, External Communications at Rona Inc., a publicly-traded retailer and distributor of hardware, building materials and home renovation products. From 2002 to 2007, she held various positions in public relations.

Miranda Melfi, age 54, is our Vice President, Legal Affairs and Corporate Secretary and has been with Birks Group since April 2006. 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.

Hélène Messier, age 58, is our Vice President & Chief Talent Officer and has been with Birks since November 2000. Prior to joining Birks, she was Assistant General Manager of the Federation des Producteurs de Lait du Qu é bec (Quebec’s Federation of Milk Producers) from November 1997 to November 2000. From 1982 to 1997, she held various management positions both in operations and human resources with Bell Canada.

Aurélie Pépion , age 37, is our Vice President, Omni-Channel Sales and Operations, and has been with the Company since April 2018. Prior to joining us, Ms. Pépion was the Managing Director Canada of Swarovski (Consumer Goods Business) from March 2016 to March 2018 and prior thereto, she held various positions with Swarovski since February 2009, namely, Director Multibrand (Europe, Middle East, Africa), Head of Retail Multibrand (France), Key Account Manager (France), and Watch Distribution Manager (France). Prior thereto, she was with Gucci Group Watches sales management from February 2007 to January 2009 and was a District Manager for Puig Prestige in 2005 and 2006.

COMPENSATION OF DIRECTORS AND OFFICERS

Director Compensation

During fiscal 2018, each director who was not an employee of the Company received an annual fee of $25,000 for serving on our Board of Directors, $1,500 for each Board meeting attended in person and $750 for each Board meeting attended by phone. The chairperson of each of the audit committee, compensation committee and corporate governance and nominating committee received an additional annual fee of $10,000, $8,000 and $5,000, respectively. The members of each of the audit committee, compensation committee and corporate governance and nominating committee received an additional annual fee of $5,000, $4,000 and $2,500, respectively, and the independent member of the executive committee received an additional annual fee of $4,000. 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. Each director who is not an employee of the Company is entitled to receive deferred stock units equal to a value of $25,000 in September 2018 and every September thereafter. In November 2016 and September 2017, the directors received deferred stock units equal to a value of $10,000 and $20,000, respectively. In April 2014 and April 2015, 5,000 stock appreciation rights were granted to each non-employee director. In addition, in September 2014, 2,000 stock appreciation rights were granted to a new member of the Company’s Board of Directors. All directors were reimbursed for reasonable travel expenses incurred in connection with the performance of their duties as directors.

On November 15, 2016, the Company’s Board of Directors approved annual payments of €200,000 (approximately $225,000 in U.S dollars) and €50,000 (approximately $56,300 in U.S dollars) to Mr. Niccolò 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 eight executive officers in fiscal 2018, including one who left the Company during the year, was approximately $1,989,870 (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 2018 Annual Meeting of Shareholders.

Birks Group Incentive Plans

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, 2018, there were 118,000 cash-based stock appreciation rights exercisable by members of the Company’s Board of Directors and outstanding stock options to purchase 615,000 shares of the Company’s Class A voting shares granted to eight members of the Company’s senior management team under the Long-Term Incentive Plan. The stock appreciation rights outstanding as of May 31, 2018, under the Long-Term Incentive Plan, have a weighted average exercise price of $1.16 and the stock options outstanding as of May 31, 2018, under the Long-Term Incentive Plan have a weighted average exercise price of $1.03.

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. The Long-Term Incentive Plan provides for the grant of incentive stock options that qualify under Section 422 of the U.S Internal Revenue Code and non-statutory options, stock appreciation rights, restricted stock awards, restricted stock units and performance unit or share awards, as such terms are defined in the Long-Term Incentive Plan.

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.

Employee Stock Purchase Plan

In 2006, Birks Group adopted an Employee Stock Purchase Plan (“ESPP”), which was approved in September 2006. The ESPP permits eligible employees, which do not include executives of Birks Group Inc., to purchase our Class A voting shares from Birks Group at 85% of their fair market value through regular payroll deductions. A total of 100,000 shares of our Class A voting shares are reserved for issuance under the ESPP. From its inception until

February 2009, a total of, 99,995 Class A voting shares were issued under the ESPP and no additional shares will be issued under this plan.

CEO and Senior Executives Long-Term Cash Incentive Plans

During the fiscal year ended March 30, 2013, the Board of Directors approved the long-term cash incentive plans (“LTCIPs”) for the Chief Executive Officer and Senior Executive members. The intention of the LTCIPs are to reward the Chief Executive Officer and other members of senior management based on our performance over three-year cycles, the first of which began with the fiscal 2013 through fiscal 2015 period. The approval of a new three-year cycle is at the discretion of the Board of Directors on recommendation of the compensation committee. The payouts under the LTCIPs will be based on our earnings before tax (“EBT”) performance with the payout level earned during the three-year period either increasing or decreasing based on our EBT performance levels versus thresholds established in each of the three years of the three-year cycle and afterwards, if the LTCIPs are continued. The payout will be 1/3 of the LTCIPs value earned at the end of the first three year cycle and 1/3 of the LTCIPs value for every year thereafter, subject to the Chief Executive Officer and participating executives continued employment and subject to the payment not causing any default on the Company’s credit facilities. The LTCIPs payouts will continue to rise or fall based on the Company’s performance each year. The total LTCIPs pool is only created to compensate if EBT is above a certain growth rate and the payout is capped so that the total three-year costs of the programs combined does not exceed 10% of our total earnings before taxes for the three-year period. As of March 28, 2015 and March 29, 2014, no amounts were earned under the LTCIP and no new three-year cycles have been approved by the Board of Directors. The LTCIPs are no longer applicable to the Chief Executive Officer or any other Senior Executive.

CEO Long-Term Cash Incentive Plan

In April 2015, our Board of Directors approved a long-term cash incentive plan for the Chief Executive Officer (“CEO LTCIP”). The intent of the CEO LTCIP is to reward the Chief Executive Officer based on the Company’s performance over three-year cycles, the first of which begins with the fiscal 2016 through fiscal 2018 period. The approval of this three-year cycle is at the discretion of the Board of Directors on recommendation of the Compensation Committee. The CEO LTCIP for fiscal 2016-2018 is structured to fund a pool of dollars based on the successful achievement of earnings before tax (“EBT”) and the level of achievements of three key metrics that can modify the amount achieved based on EBT over three one-year periods. The amount of money funded each year, if earned, is added together at the end of the three-year cycle (with each year comprising 1/3 of the total payout opportunity). Fifty percent (50%) of the final value of the pool following completion of the three year cycle (early fiscal year 2019) is payable at the end of the three year cycle, with the remaining 50% payable one year thereafter (early fiscal 2020) subject to the Chief Executive Officer remaining employed at the time of payout and the payout not causing any default under our senior secured credit facilities. As of March 31, 2018 and March 25, 2017, no amounts were earned under the CEO LTCIP for fiscal 2016-2018.

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. 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, 2018, the only awards outstanding under the Omnibus LTIP were 130,410 deferred stock units granted to members of the Company’s Board of Directors, 112,000 restricted stock units granted to members of the Company’s senior management team and 193,000 Class A voting shares underlying options granted to members of the Company’s senior management team.

Birks Employee Stock Option Plan

Effective May 1, 1997, Birks adopted an Employee Stock Option Plan (the “Birks ESOP”) designed to attract and retain the services of selected employees or non-employee directors of Birks or its affiliates who are in a position to make a material contribution to the successful operation of our business. The Birks ESOP was amended as of June 20, 2000. Effective as of November 15, 2005, no awards will be granted under the Birks ESOP. However, the Birks ESOP will remain in effect until the outstanding awards thereunder terminate or expire by their terms. As of May 31, 2018, there were 5,666 Class A voting shares underlying options granted under the Birks ESOP at a weighted average exercise price of $1.05 per share.

Mayors Equity-Incentive Plans

Mayors’ 1991 Stock Option Plan

Mayors also adopted a stock option plan in 1991, in order to make option awards to key employees and directors. Effective as of November 15, 2005 no further awards will be granted under this plan. However, this plan will remain in effect until the outstanding awards thereunder terminate or expire by their terms. In connection with the Aurum Transaction, option holders under this plan were offered to cash-out their options. As of June 30, 2018, there were no Class A voting shares underlying options granted under this plan.

Stock Option Amendments

On March 18, 2010, the Company filed with the SEC a Tender Offer Statement on Schedule TO which included therein an “Offer to Amend Certain Outstanding Options” (the “Offer to Amend”), relating to an offer by the Company to its current employees and subsidiaries’ employees to amend certain of their outstanding options to purchase the Company’s Class A voting shares. Only options granted under the Henry Birks & Sons Inc. Employee Stock Option Plan effective as of May 1, 1997 and amended as of June 20, 2000 and Mayor’s Jewelers, Inc. 1991 Amended Stock Option Plan, with an exercise price per share greater than $4.00 (in the currency in which such option was granted) that remained outstanding as of the expiration of the offer on April 16, 2010, were eligible to be amended in the offer. Pursuant to the Offer to Amend, the Company received, as of April 16, 2010, tendered eligible stock options covering 85,786 shares of its Class A voting shares and provided amended options to purchase up to 12,077 shares of the Company’s Class A voting shares, thereby reducing the number of shares issuable upon exercise of outstanding options by 73,709 shares. The amended stock options have exactly the same terms as the eligible stock options, but they are exercisable for a lesser number of Class A voting shares, they have a new exercise price of $1.05 per share, a new ten-year term, and different terms in the event of a change in control, going-private transaction, or a liquidation or dissolution of the Company, as described in the Offer to Amend.

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. Bédos, our President and Chief Executive Officer. See “Item 10. Additional Information—Material Contracts—Employment Agreements.”

Our Board of Directors has determined that five of our eight directors (Emily Berlin, Shirley A. Dawe, Frank Di Tomaso, Louis L. Roquet 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, Corporate Governance and Audit committees are independent. 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. Bédos, 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 a Corporate Governance and Nominating Committee and a Compensation Committee comprised solely of independent directors.

During fiscal 2018, our Board of Directors held a total of eleven board of directors meetings and twenty-one committee meetings. During such period, all of the directors attended 100% of the meetings of the Board of Directors, except for two members who attended 82% of these 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 2018, our Board of Directors was composed of the four main committees below. The Board of Directors may from time to time also create special committees of the Board as needed.

1. Audit Committee . We have a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The audit committee operates under a written charter adopted by the Board of Directors. The audit 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 committee also examines and considers other matters relating to our financial affairs and accounting methods, including selection and retention of our independent auditors. During fiscal 2018, the audit committee held five meetings. During such period, all the members of the audit committee attended 100% of these meetings. During fiscal year 2018, the audit committee was comprised of Frank Di Tomaso (Chair), Emily Berlin, Louis L. Roquet and Joseph F.X. Zahra , 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 Frank Di Tomaso is an “audit committee financial expert” 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.birksgroup.com .

2. Compensation Committee . We have a standing compensation committee. The compensation committee operates under a written charter adopted by the Board of Directors. The purpose of the compensation 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 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. During fiscal 2018, the compensation committee held five meetings and all of the members of the compensation committee attended 100% of these meetings during such period. During fiscal 2018, the compensation committee was comprised of Shirley A. Dawe (Chair), Frank Di Tomaso and Louis L. Roquet. Each member of the compensation committee is an independent (as defined by the NYSE American listing standards), non-employee director of the Company.

3. Corporate Governance and Nominating Committee . The corporate governance and nominating committee is responsible for overseeing all aspects of our corporate governance policies. The corporate governance and nominating committee is also responsible for the oversight and review of all related party transactions and for nominating potential nominees to the Board of Directors. Our policy with regard to the consideration of any director candidates recommended by a shareholder is that we will consider such candidates and evaluate such candidates by the same process as candidates identified by the corporate governance and nominating committee. During fiscal 2018, the corporate governance and nominating committee held five meetings and all members of the corporate governance and nominating committee attended 100% of these meetings during such period. Our corporate governance and nominating committee is comprised of three directors and operates under a written charter adopted by the Board of Directors. During fiscal 2018, the corporate governance and nominating committee was comprised of: Emily Berlin (Chair), Shirley Dawe, and Frank Di Tomaso. Every member of the corporate governance and

nominating committee is an independent (as defined by the NYSE American listing standards), non-employee director of Birks Group.

4. 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 2018, the executive committee consisted of: Niccolò Rossi di Montelera (Chair), Jean-Christophe Bédos, Davide Barberis Canonico, Louis L. Roquet and Joseph F.X. Zahra. For fiscal 2018, the executive committee held six meetings. All of the members of the executive committee attended 100% of these meetings during such period. Messrs. Roquet and Zahra are independent, non-employee directors of the Company.

EMPLOYEES

As of March 31, 2018, we employed approximately 348 persons. 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 and wholesale sales. The table below sets forth headcount by category for our continuing operations in the periods indicated.


	Total
As of March 31, 2018:
Administration		124
Retail		224

Total		348


As of March 25, 2017:
Administration		135
Retail		224

Total		359


As of March 26, 2016:
Administration		144
Retail		231

Total		375

SHARE OWNERSHIP

The following table sets forth information regarding the beneficial ownership of our Class A voting shares as of June 1, 2018, based on 10,242,911 Class A voting shares, by each executive officer and each director:


Name of Beneficial Owner	Number of Class A Voting Shares Beneficially Owned		Percentage of Beneficially Owned

Niccolò Rossi di Montelera		—		—
Jean-Christophe Bédos ⁽¹⁾		349,999		3.4%
Davide Barberis Canonico		—		—
Shirley A. Dawe ⁽²⁾		1,545		*
Emily Berlin ⁽³⁾		46,952		*
Frank Di Tomaso		—		—
Louis L. Roquet		—		—
Joseph F.X. Zahra		—		—
Pat Di Lillo ⁽⁴⁾		65,332		*
Maryame El-Bouwab		—		—
Miranda Melfi ⁽⁵⁾		71,666		*
Hélène Messier ⁽⁶⁾		35,399		*
Aurélie Pépion		—		—

*	Less than 1%.


(1)		Includes (a) an option to purchase 150,000 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018, at a price of $1.04 per share and which expires on January 4, 2022; (b) an option to purchase 100,000 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018, at a price of $0.84 per share and which expires on April 18, 2023, and (c) an option to purchase 100,000 Class A voting shares, of which 66,666 shares are exercisable or exercisable within 60 days of May 31, 2018, at a price of $0.78 per share and which expires on September 16, 2025; and (d) an option to purchase 100,000 Class A voting shares, of which 33,333 shares are exercisable or exercisable within 60 days of May 31, 2018, at a price of $1.43 per share and which expires on November 15, 2026.
(2)		Includes 1,545 Class A voting shares.
(3)		Includes 46,952 Class A voting shares.
(4)		Includes (a) an option to purchase 50,000 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018, at a price of $1.94 per share and which expires on January 5, 2025; (b) an option to purchase 10,000 Class A voting shares, of which 6,666 shares are exercisable or exercisable within 60 days of May 31, 2018, at a price of $0.78 per share and which expires on September 16, 2025, and (c) an option to purchase 26,000 Class A voting shares, of which 8,666 are exercisable or exercisable within 60 days of May 31, 2018, at a price of $1.43 per share and which expires on November 15, 2026.
(5)		Includes (a) an option to purchase 15,000 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018, at a price of $1.25 per share and which expires on September 23, 2020; (b) an option to purchase 10,000 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018, at a price of $0.89 per share and which expires on November 14, 2022; (c) an option to purchase 25,000 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018 at a price of $1.66 per share and which expires on September 12, 2023; (d) an option to purchase 25,000 Class A voting shares, of which 16,666 shares are exercisable or exercisable within 60 days of May 31, 2018, at a price of $0.78 per share and which expires on September 16, 2025; and (e) an option to purchase 15,000 Class A voting shares, of which 5,000 shares are exercisable or exercisable within 60 of May 31, 2018, at a price of $1.43 per shares and which expires on November 15, 2026.
(6)		Includes (a) an option to purchase 2,400 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018, at a price of $1.05 per share and which expires on April 16, 2020; (b) an option to purchase 15,000 Class A voting shares, currently exercisable or exercisable within 60 days of May 31, 2018, at a price of $0.89 per share and which expires on November 14, 2022; (c) an option to purchase 20,000 Class A voting shares, of which 13,333 shares are exercisable or exercisable within 60 days of May 31, 2018, at a price of $0.78 per share and which expires on September 16, 2025, (d) an option to purchase 14,000 Class A voting shares of which 4,666 shares are exercisable or exercisable within 60 days of May 31, 2018, at a price of $1.43 per share and which expires on November 15, 2026.

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.”

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, 2018 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 10,242,911 Class A voting shares and 7,717,970 Class B multiple voting shares outstanding on May 31, 2018, 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, 2018 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.”


Name of Beneficial Owner ⁽¹⁾	Number of Class A Voting Shares Beneficially Owned		Percentage of Beneficially Owned
The Grande Rousse Trust ⁽²⁾		13,646,692		76.0	%
Meritus Trust Company Limited ⁽³⁾		13,646,692		76.0	%
Montrovest B.V ⁽⁴⁾		8,846,692		63.4	%
Mangrove Holding S.A. ⁽⁵⁾		4,800,000		33.7	%

(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 Montrovest B.V. (“Montrovest”) and Mangrove Holding S.A. (“Mangrove”) collectively would be entitled upon conversion of the Class B multiple voting shares held by Montrovest 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. 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 Montrovest and Mangrove collectively would be entitled upon conversion of the Class B multiple voting shares held by Montrovest 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 Montrovest and Mangrove collectively are beneficially owned by The Grande Rousse Trust. Meritus Trust Company Limited replaced Rohan Private Trust Company Limited as trustee of The Grande Rousse Trust on December 21, 2017.

(4)

Comprised of 8,846,692 Class A voting shares, of which 3,717,970 Class A voting shares, to which Montrovest would be entitled upon conversion of the Class B multiple voting shares held by Montrovest 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.

As of May 31, 2018, there were a total of 248 holders of record of our Class A voting shares, of which 185 were registered with addresses in the United States. Such United States record holders were, as of such date, the holders of record of approximately 74.0% 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 ordinary 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).

RELATED PARTY TRANSACTIONS

Management Consulting Services Agreement

In June 2011, the Company entered into a management consulting services agreement with Montrovest. Under the agreement, the Company paid Montrovest an annual retainer fee of €140,000 (equivalent to approximately $152,000 in U.S. dollars) in exchange for services related to the raising of capital for international expansion projects and such other services relating to merchandising and/or marketing of the Company’s products as the Company may request. The original term of the agreement was until June 8, 2012 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 April 2015, the agreement was renewed for an additional one year period ending June 8, 2016 with the approval of the Company’s Board of Directors. Mr. Davide Barberis Canonico, a Company director, was a director of the Supervisory Board of Directors of Montrovest until April, 2018 and Mr. Carlo Coda-Nunziante, was the Company’s Vice President, Strategy until March 31, 2018 and was a Managing Director of Montrovest until June 30, 2012.

In fiscal year 2016 and fiscal year 2015, the Company paid €105,000 and €140,000 (approximately $116,000 and $178,000, respectively in U.S. dollars) under this agreement to Montrovest. In February 2015, the Company’s Board of Directors approved the reimbursement to Montrovest of legal fees incurred by Montrovest in connection with the issuance of a $5 million irrevocable standby letter of credit (“LC”) that Montrovest arranged for the Company’s benefit up to a total amount of CAD$75,000 (approximately $60,000 in U.S. dollars).

On November 17, 2015, the Company’s Board of Directors approved the termination of the management consulting services agreement with Montrovest effective December 31, 2015 and entering into a management consulting services agreement with Gestofi S.A. (“Gestofi”) effective January 1, 2016 on the same terms and conditions as the agreement with Montrovest, all in accordance with the Company’s Code of Conduct relating to related party transactions. In fiscal year 2018 and fiscal year 2017, the Company paid €115,000 and €140,000 (approximately $142,000 and $154,000 in U.S. dollars) respectively under this agreement to Gestofi.

Cash Advance Agreements

In February 2009 and May 2009, the Company received $2.0 million and $3.0 million, respectively, in the form of cash advances from our controlling shareholder, Montrovest, to finance our working capital needs and for general corporate purposes. These advances and any interest thereon are subordinated to the indebtedness of our existing senior credit facilities and secured term loans and were convertible into a convertible debenture or Class A voting shares in the event of a private placement or, are repayable upon demand by Montrovest subject to the conditions stipulated in our senior credit facilities. These cash advances bore interest at an annual rate of 16%, net of any withholding taxes, representing an effective interest rate of approximately 17.8%. If converted into convertible debentures or Class A voting shares, a fee of 7% of the outstanding principal amount of the cash advance would have been paid to Montrovest. In June 2011, the cash advance agreements were amended and restated reducing the annual interest rate to 11%, net of any withholding taxes, representing an effective interest rate of approximately 12.2%, removing the requirement to pay a 7% fee to Montrovest upon conversion into convertible debentures or Class A voting shares and eliminating the convertibility of the cash advance into a convertible debenture or Class A voting shares in the event of a private placement. The Company also amended the management subordination agreement with Montrovest and our senior lenders, eliminating the payment of any success fee to Montrovest if the Company received net cash proceeds of $5 million or more related to an equity issuance. In addition, the amended and restated cash advance agreements required a one-time payment of an amendment fee of $75,000 in fiscal 2012. In August 2012, the Company repaid $3.5 million of these cash advances from the proceeds of our stock rights offering. On July 28, 2017, the Company received a $2.5 million loan from Montrovest. The loan bears interest at an annual rate of 11%, net of withholding taxes and is due and payable in two equal payments of $1.25 million in each of July 2018 and July 2019. As of March 31, 2018 and March 25, 2017, advances payable to Montrovest amounted to $4.0 million and $1.5 million, respectively.

Consulting Services Agreement

On June 30, 2009, our Company’s Board of Directors approved our Company entering into a consulting services agreement with Gestofi in accordance with our Company’s Code of Conduct relating to related party transactions. Under the agreement, Gestofi undertook to assign Mr. Niccolò Rossi di Montelera as the employee of Gestofi responsible for providing the consulting services. The consulting services relate to providing advice and assistance in (i) new product development and product brand collection assortment, (ii) strategic and business development projects and financial matters, (iii) the implementation of the Company’s strategy and planning, and

(iv) such other services reasonably requested by our Chief Executive Officer or Chairman (collectively, the “Consulting Services”). The initial one-year term of the agreement began on August 1, 2009 and the agreement may be renewed for additional one-year terms. The agreement has been renewed yearly. The Consulting Services prior to June 2014, were provided to us for a fee of approximately CAD$13,700 ($10,324 in U.S. dollars) per month less any applicable taxes plus out of pocket expenses. In June 2014, upon the renewal of the agreement for an additional one-year term, the monthly fee changed to 13,000 Swiss francs ($13,310 in U.S. dollars). On August 1, 2015, an amended and restated consulting agreement was entered into on substantially the same terms and conditions until July 31, 2016. In June 2016, the agreement was renewed for an additional one-year term. In addition, in February 2015, our Board of Directors approved the payment of an annual fee of $12,500 to Gestofi for services it provided in connection with the issuance and maintenance of the Montrovest LC for our benefit. The agreement as it relates to the Consulting Services provided by Mr. Niccolò Rossi di Montelera was terminated effective December 31, 2016. Mr. Niccolò Rossi di Montelera is a member of the Company’s Board of Directors and is the son of Dr. Rossi di Montelera, the Company’s former Chairman and a director and chairman of the board of Gestofi.

Reimbursement Letter Agreement

In accordance with our Company’s Code of Conduct related to related party transactions, in April 2011, our Corporate Governance and Nominating Committee and Board of Directors approved the reimbursement to Regaluxe S.r.l. of certain expenses, such as rent, communication, administrative support and analytical service costs, incurred in supporting the office of Dr. Lorenzo Rossi di Montelera, our former Chairman, and of Mr. Niccolò Rossi di Montelera, the Chairman of our Executive Committee and our current Executive Chairman of the Board, for work performed on behalf of the Company, up to a yearly maximum of $260,000. This agreement has been renewed yearly and was renewed in March 2018 for an additional one year term. During fiscal 2018, 2017, and 2016, we paid $245,000, $178,000, and $201,000 respectively, to Regaluxe S.r.l. under this agreement.

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 2018, the agreement was renewed for an additional one-year term. During fiscal year 2018 and fiscal 2017, the Company did not make any payments to Regaluxe Srl under this agreement.

Advisory Consulting Services Agreement

On November 15, 2016, the Company’s Board of Directors approved entering into a consulting services agreement with Gestofi effective January 1, 2017. Under the agreement, Dr. Lorenzo Rossi di Montelera is providing advice and assistance on strategic and development projects and financial matters for a total fee of $50,000 during the period from January to September 2017. In fiscal 2018, the Company paid US$33,333 in relation to this agreement. In fiscal 2017, the Company paid US$16,667 in relation to 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, is providing advice and assistance on the Company’s strategic planning and business strategies for a total annual fee of €126,801($148,853 in U.S dollars).

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.” The following table sets forth, for all recently completed full financial years since we began trading on the NYSE American, the reported high and low sale prices for the Class A voting shares:


Birks Group Inc. Highest/Lowest Stock Price for the Five Most Recent Full Financial Years
Fiscal year	Highest	Lowest
2018	$2.77	$1.01
2017	$5.15	$0.35
2016	$1.40	$0.19
2015	$2.15	$0.81
2014	$2.50	$0.68

The following table sets forth, for each of the most recent six months, the reported high and low sale prices for the Class A voting shares:


Birks Group Inc. Highest/Lowest Stock Price for the Most Recent Six Months
Month	Highest	Lowest
May 2018	$2.35	$1.12
April 2018	$1.39	$1.01
March 2018	$2.77	$1.01
February 2018	$1.50	$1.16
January 2018	$1.58	$1.28
December 2017	$1.85	$1.19

The following table sets forth, for each quarter in fiscal 2018 and 2017 and any subsequent period, the reported high and low sale prices for the Class A voting shares:


Birks Group Inc. Highest/Lowest Stock Price for Each Quarter in fiscal 2018 and 2017 and Any Subsequent Period

Subsequent Period	Highest		Lowest
Quarter ended June 30, 2018 (through May 31, 2018)		$2.35		$1.01
Fiscal 2018
Quarter ended March 31, 2018		$2.77		$1.01
Quarter ended December 30, 2017		$2.72		$1.19
Quarter ended September 23, 2017		$2.05		$1.22
Quarter ended June 24, 2017		$1.74		$1.20
Fiscal 2017
Quarter ended March 25, 2017		$2.12		$1.02
Quarter ended December 24, 2016		$2.20		$1.00
Quarter ended September 24, 2016		$5.15		$0.43
Quarter ended June 25, 2016		$0.53		$0.35

Item 10. Additional Information

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 (CAD$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 Bédos

On January 4, 2012, we entered into an employment agreement, or the “Agreement”, with Jean-Christophe Bédos, who became the President & Chief Executive Officer effective April 1, 2012, and prior to that was our Chief Operating Officer. The Agreement provides Mr. Bédos with a base salary of CAD$700,000 ($561,572 in U.S. dollars based on foreign exchange rates as of May 31, 2015), an annual cash bonus set at a minimum of CAD$282,500 ($226,635 in U.S. dollars based on foreign exchange rates as of May 31, 2015) for fiscal year ended March 30, 2013, of which CAD$141,250 ($136,738 in U.S. dollars based on foreign exchange rates as of May 31, 2012) was paid during fiscal 2012 and CAD$141,250 ($130,184 in U.S. dollars based on foreign exchange rates as of May 31, 2014) 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. Effective October 1, 2015, Mr. Bédos’ base salary was increased to CAD$730,000 ($557,209 in U.S. dollars based on foreign exchange rates as of May 31, 2016). Effective November 1, 2016, Mr. Bédos’ base salary was increased to CAD$750,000 ($560,831 in U.S. dollars). If Mr. Bédos is terminated without “cause” or resigns for “good reason,” as these terms are defined in the Agreement, the Agreement provides that Mr. Bédos 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 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. Bédos 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.

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.

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.

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 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%.

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, 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”.

As long as Class A voting shares are listed on a “recognized stock exchange” (which includes the NYSE American), a Non-resident Holder who disposes of Class A voting shares that are taxable Canadian property will not be required to satisfy the obligations imposed under section 116 of the Canadian Tax Act.

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. You may read and copy any materials filed with the SEC at the following location of the SEC, Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. 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 .

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 credit facility and the term loans from Investissement Québec bear interest at floating rates, which are based on LIBOR or prime plus a fixed additional interest rate. As of March 31, 2018, we have not hedged these interest rate risks. As of March 31, 2018, we had approximately $30.4 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 $0.3 million.

Currency Risk

While we report our financial results in U.S. dollars, a substantial portion of our sales are earned in Canadian dollars. Non-Canadian currency transactions and assets and liabilities subject us to foreign currency risk. For purposes of our financial reporting, our financial statements are reported in U.S. dollars by translating, where

necessary, net sales and expenses from Canadian dollars at the average exchange rates prevailing during the period, while assets and liabilities are translated at year-end exchange rates, with the effect of such translation recorded in accumulated other comprehensive income. As a result, for purposes of our financial reporting, foreign exchange gains or losses recorded in earnings relate to non-Canadian dollar transactions. Management is considering the possibility of reporting our financial results in Canadian dollars as of fiscal 2019. If this change is not adopted, our reported earnings could fluctuate materially as a result of foreign exchange translation gains or losses.

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 31, 2018, we had not hedged these foreign exchange rate risks. As of March 31, 2018, we had approximately $1.7 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 31, 2018, our earnings would have increased or decreased, respectively, by approximately $0.2 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.

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 31, 2018, 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 31, 2018, 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 was no change 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 Frank Di Tomaso, 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.”

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 our Chief Executive Officer, Chief Financial Officer, and Controller. Our code of ethics is available on our website at www.birksgroup.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. 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 2018 and fiscal 2017, we retained KPMG LLP, our independent registered public accountant, to provide services in the following categories and amounts:

Audit Fees

The aggregate fees billed by KPMG LLP for professional services rendered for the audit and interim review of our consolidated financial statements was CAD$438,000 ($340,830 in U.S. dollars) in fiscal 2018 and CAD$483,700 ($368,141 in U.S. dollars) in fiscal 2017.

Audit Related Fees

During fiscal 2018 and 2017, KPMG LLP provided audit related services for a total amount of CAD$5,000 ($3,891 in U.S. dollars) and CAD$9,325 ($7,097 in U.S. dollars), respectively.

Tax Fees

During fiscal 2018 and fiscal 2017, KPMG LLP provided tax advisory services for a total amount of CAD$28,000 ($21,788 in U.S. dollars) and CAD$139,252 ($105,984 in U.S. dollars), respectively.

All Other Fees

During fiscal 2018, KPMG LLP provided advisory services for a total amount of CAD$4,000 ($3,113 in U.S. dollars). Infiscal 2017, KPMG LLP did not provide other services.

Pre-Approval Policies and Procedures

The audit committee has established a pre-approval policy as described in Rule 2-01(c)(7)(i) of Regulation S-X. The audit 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 committee pursuant to Rule 2-01(c)(7)(i)(C).

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 2018.

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.

Item 16H. Mine Safety Disclosure

Not applicable.

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.

PART III

Item 19. Exhibits

The following exhibits are part of this Annual Report on Form 20-F.


Exhibit Number		Description of Document
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. 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. 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. Form 20-F filed with the SEC on July 25, 2014.



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 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.

4.3		Henry Birks & Sons Inc. Employee Stock Option Agreement, dated as of May 1, 1997, amended as of June 20, 2000. 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.

4.4		Henry Birks & Sons Inc., Form of Amended Stock Option Agreement under the 1997 Stock Option Plan. Incorporated by reference from the Birks Group Inc. Schedule TO-1 filed with the SEC on March 18, 2010.

4.5		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. Form 6-K filed with the SEC on May 12, 2017.



4.6		Employment Agreement between Albert Rahm and Mayor’s Jewelers, Inc., dated as of April 30, 2007 as subsequently amended as of January 12, 2015. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on June 30, 2016.

4.7		Second Amendment to Employment Agreement on Albert H. Rahm, II. Incorporated by reference from the Birks Group Inc. Form 6-K filed with the SEC on August 11, 2017.

4.8		Employment Agreement between Miranda Melfi and Birks Group dated February 24, 2006. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.

4.9		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. Form 20-F filed with the SEC on June 30, 2016.

4.10		Mayor’s Jewelers, Inc., (f/k/a Jan Bell Marketing, Inc.) 1991 Stock Option Plan. Incorporated by reference from the Birks Group Inc. Registration Statement on Form S-8 filed with the SEC on April 26, 2006.

4.11		Mayor’s Jewelers, Inc., 2004 Long-Term Incentive Plan. Incorporated by reference from the Birks Group Inc. Registration Statement on Form S-8 filed with the SEC on April 26, 2006.

4.12		Birks Group Inc. 2006 Employee Stock Purchase Plan. Incorporated by reference from Birks Group Inc.‘s Form 20-F filed with the SEC on July 19, 2006.

4.13		Birks Group Inc. Long-Term Incentive Plan. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.

4.14		Birks Group Inc. Omnibus Long-Term Incentive Plan. Incorporated by reference from the Birks Group Inc. Form 6-K filed with the SEC on August 26, 2016.

4.15		Warrant Agreement dated November 14, 2005 between Mayor’s Jewelers, Inc. and Carlo Coda-Nunziante. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.

4.16		Warrant Agreement dated November 14, 2005 between Mayor’s Jewelers, Inc. and Joseph A. Keifer. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.

4.17		Warrant Agreement dated November 14, 2005 between Mayor’s Jewelers, Inc. and Marco Pasteris. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.

4.18		Amended and Restated Warrant Agreement dated November 14, 2005 between Mayor’s Jewelers, Inc. and Henry Birks & Sons Inc. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.

4.19		Amended and Restated Warrant Agreement dated November 14, 2005 between Mayor’s Jewelers, Inc. and Henry Birks & Sons Inc. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.



4.20		Amended and Restated Warrant Agreement dated November 14, 2005 between Mayor’s Jewelers, Inc. and Henry Birks & Sons Inc. Incorporated by reference the from Birks Group Inc. Form 20-F filed with the SEC on July 19, 2006.

4.21		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.

4.22		Loan Agreement between Birks Group Inc. and Investissement Québec entered into on September 12, 2013. Incorporated by reference from the Birks Group Inc. Annual Report on Form 20-F filed with the SEC on July 25, 2014.

4.23		Loan Agreement between Birks Group Inc. and Investissement Québec entered into on July 25, 2014. Incorporated by reference from the Birks Group Inc. Annual Report on Form 20-F filed with the SEC on June 26, 2015.

4.24		Letter Agreement entered into on August 19, 2015 which amends the loan agreements between Birks Group Inc. and Investissement Québec. Incorporated by reference from the Birks Group Inc. Form 6-K filed with the SEC on December 4, 2015.

4.25		Letter Agreement entered into on November 19, 2015 which amends the loan agreements between Birks Group Inc. and Investissement Québec. Incorporated by reference from Birks Group Inc. Form 6-K filed with the SEC on December 4, 2015.

4.26		Letter Agreement between Birks Group Inc. and Investissement Québec dated October 28, 2016 which amends the loan agreement between Birks Group Inc. and Investissement Québec. Incorporated by reference from the Birks Group Inc. Form 6-K filed with the SEC on January 24, 2017.

4.27		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.

4.28		Master Lease Agreement dated March 15, 2017 among Birks Group Inc., Mayors Jewelers of Florida, Inc. and Onset Financial, Inc. Incorporated by reference from the Birks Group Inc. Form 6-K filing with the SEC on May 12, 2017.

4.29		Letter Agreement between Mayor’s Jewelers and Thomas A. Andruskevich, dated November 14, 2005. Incorporated by reference from the Birks Group Inc. Registration Statement on Form F-3 filed with the SEC on March 25, 2011.

4.30		Letter Agreement between Mayor’s Jewelers and Filippo Recami, dated November 14, 2005. Incorporated by reference from the Birks Group Inc. Registration Statement on Form F-3 filed with the SEC on March 25, 2011.

4.31		Letter Agreement between Mayor’s Jewelers and Joseph Keifer, dated November 14, 2005. Incorporated by reference from the Birks Group Inc. Registration Statement on Form F-3 filed with the SEC on March 25, 2011.

4.32		Letter Agreement between Mayor’s Jewelers and Marco Pasteris, dated November 14, 2005. Incorporated by reference from the Birks Group Inc. Registration Statement on Form F-3 filed with the SEC on March 25, 2011.

4.33		Letter Agreement between Mayor’s Jewelers and Carlo Coda-Nunziante, dated November 14, 2005. Incorporated by reference from the Birks Group Inc. Registration Statement on Form F-3 filed with the SEC on March 25, 2011.



4.34		Employment Agreement between Birks Group Inc. and Jean-Christophe Bédos, dated January 4, 2012. Incorporated by reference from the Birks Group Inc. Registration Statement on Form F-1 filed with the SEC on April 27, 2012.

4.35		Amendment Letter to Employment Agreement between Birks Group Inc. and Jean-Christophe Bédos dated April 18, 2013. Incorporated by reference from the Birks Group Inc. Annual Report on Form 20-F filed with the SEC on June 26, 2015.

4.36		Amendment Letter to Employment Agreement between Birks Group Inc. and Jean-Christophe Bédos effective October 1, 2015. Incorporated by reference from the Birks Group Inc. Form 20-F filed with the SEC on June 30, 2016.

4.37		Employment Agreement between Birks Group Inc. and Pasquale (Pat) Di Lillo, dated October 30, 2014. Incorporated by reference from the Birks Group Inc. Form 6-K filed with the SEC on November 11, 2014.

4.38		Asset Purchase Agreement entered into between Birks Group Inc. and Rideau Recognition Solutions Inc. on July 29, 2015.

4.39		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.

4.40		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.

4.41*		Employment Agreement between Aurelie Pepion and Birks Group Inc., dated as of April 2, 2018.

4.42*		Consulting Services Agreement between Carlo Coda Nunziante and Birks Group Inc., dated March 31, 2018.

4.43		Stock Purchase Agreement entered into between Birks Group Inc., and Aurum Holdings. Ltd. dated August 11, 2017. Incorporated by reference from the Birks Group Inc. Form 6-K filed with the SEC on August 11, 2017.

4.44		Credit Agreement by and among Wells Fargo Canada Corporation, as Administrative Agent, the Lenders that are parties thereto as the Lenders, and Birks Group Inc. dated as of October 23, 2017. Incorporated by reference from the Birks Group Inc. Form 6-K filed with the SEC on October 27, 2017.

4.45*		Amendment No. 1 to the Credit Agreement by and among the Lenders thereto as Lenders, Wells Fargo Canada Corporation as administrative agent, and Birks Group Inc. dated June 29, 2018.

4.46*		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.

8.1*		Subsidiaries of Birks Group Inc.

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 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.

101.INS*		XBRL Instance Document*

101.SCH*		XBRL Taxonomy Extension Schema Document*

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document*



101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document*

* Filed herewith.

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 3, 2018		/s/ Pasquale (Pat) Di Lillo
		*Pasquale (Pat) Di Lillo,*
		*Vice President, Chief Financial & Administrative* *Officer*

INDEX TO FINANCIAL STATEMENTS


	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of March 31, 2018 and March 25, 2017		F-3
Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2018, March 25, 2017, and March 26, 2016		F-4
Consolidated Statements of Other Comprehensive Income for the Fiscal Years Ended March 31, 2018, March 25, 2017, and March 26, 2016		F-5
Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended March 31, 2018, March 25, 2017, and March 26, 2016		F-6
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2018, March 25, 2017, March 26, 2016		F-7
Notes to Consolidated Financial Statements		F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Birks Group Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Birks Group Inc. (the “Company”) as of March 31, 2018 and March 25, 2017, the related consolidated statements of operations, other comprehensive income, stockholders’ equity, and cash flows for the years ended March 31, 2018, March 25, 2017 and March 26, 2016, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2018 and March 25, 2017, and its results of operations and its cash flows for the years ended March 31, 2018, March 25, 2017 and March 26, 2016, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 purposes 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP*

We have served as Company’s auditor since 2000.

Montreal, Canada

June 29, 2018

*CPA auditor, CA, public accountancy permit No. A125211

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP

F-2

BIRKS GROUP INC.

Consolidated Balance Sheets


	As of
	March 31, 2018		March 25, 2017*
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	779	$	1,944
Accounts receivable and other receivables		4,817		2,554
Inventories		65,793		65,894
Prepaids and other current assets		3,824		1,411
Assets of disposal group		-		77,962

Total current assets		75,213		149,765

Property and equipment		15,067		11,606
Intangible assets and other assets		3,007		2,707
Assets of disposal group		-		14,860

Total non-current assets		18,074		29,173

Total assets	$	93,287	$	178,938


Liabilities and Stockholders’ Equity
Current liabilities:
Bank indebtedness	$	28,640	$	44,840
Accounts payable		20,457		18,475
Accrued liabilities		5,807		4,951
Current portion of long-term debt		2,611		2,393
Liabilities of disposal group		-		57,628

Total current liabilities		57,515		128,287

Long-term debt		3,757		4,057
Other long-term liabilities		6,828		5,040
Liabilities of disposal group		-		28,758

Total long-term liabilities		10,585		37,855
Commitments and Contingencies
Stockholders’ equity:
Class A common stock – no par value, unlimited shares authorized, issued and outstanding 10,242,911		30,988		30,988
Class B common stock – no par value, unlimited shares authorized, issued and outstanding 7,717,970		38,613		38,613
Preferred stock – no par value, unlimited shares authorized, none issued		–		–
Additional paid-in capital		16,358		16,372
Accumulated deficit		(62,222)		(73,921)
Accumulated other comprehensive income		1,450		744

Total stockholders’ equity		25,187		12,796

Total liabilities and stockholders’ equity	$	93,287	$	178,938

*Retrospectively revised (see note 18)

See accompanying notes to consolidated financial statements

On behalf of the Board of Directors:


/s/ Jean-Christophe Bédos		/s/ Frank Di Tomaso
Jean-Christophe Bédos, Director		Frank Di Tomaso, Director

F-3

BIRKS GROUP INC.

Consolidated Statements of Operations


	Fiscal Year Ended
	March 31, 2018			March 25, 2017*			March 26, 2016*
	(In thousands, except per share amounts)
Net sales	$	114,378		$	116,436		$	128,651
Cost of sales		70,824			69,654			75,682

Gross profit		43,554			46,782			52,969

Selling, general and administrative expenses		51,823			47,183			48,333
Restructuring charges		688			682			549
Depreciation and amortization		2,549			2,618			2,791
Impairment of long-lived assets		2,156			-			-
Gain on sale of assets		-			-			(3,229	)

Total operating expenses		57,216			50,483			48,444

Operating (loss) income		(13,662	)		(3,701	)		4,525
Interest and other financial costs		3,116			3,355			4,300


(Loss) income from continuing operations		(16,778	)		(7,056	)		225
Income taxes (benefits)		-			-			-

Net (Loss) income from continuing operations		(16,778	)		(7,056	)		225

Discontinued operations:
(Loss) income from discontinued operations, net of tax		(1,405	)		11,984			5,213
Gain on disposal of discontinued operations, net of tax		29,882			-			-

Net income from discontinued operations, net of tax		28,477			11,984			5,213



Net income	$	11,699		$	4,928		$	5,438


Weighted average common shares outstanding:
Basic		17,961			17,961			17,961
Diluted		18,393			18,418			17,961

Net income per common share:
Basic	$	0.65		$	0.27		$	0.30
Diluted		0.64			0.27			0.30

Net (loss) income from continuing operations per common share:
Basic	$	(0.93	)	$	(0.39	)	$	0.01
Diluted		(0.91	)		(0.38	)		0.01

*Retrospectively revised (see note 18)

See accompanying notes to consolidated financial statements.

F-4

BIRKS GROUP INC.

Consolidated Statements of Other Comprehensive Income


	Fiscal Year Ended
	March 31, 2018		March 25, 2017		March 26, 2016
	(In thousands, except per share amounts)
Net income	$	11,699	$	4,928	$	5,438
Other comprehensive income (loss):

Foreign currency translation adjustments ⁽¹⁾		706		8		(666)

Total other comprehensive income	$	12,405	$	4,936	$	4,772

(1)

Item that may be reclassified to the Statement of Operations in future periods

See accompanying notes to consolidated financial statements.

F-5

BIRKS GROUP INC.

Consolidated Statements of Stockholders’ Equity

(In thousands of dollars except shares amounts)


	Voting common stock outstanding		Voting common stock		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income (loss)			Total

Balance at March 28, 2015		17,960,881	$	69,601	$	16,107		$	(84,287	)	$	1,402		$	2,823
Net income		–		–		–			5,438			–			5,438
Cumulative translation adjustment ⁽¹⁾		–		–		–			–			(666	)		(666	)

Total comprehensive loss		–		–		–			–			–			4,772
Compensation expense resulting from stock options granted to Management		–		–		109			–			–			109

Balance at March 26, 2016		17,960,881	$	69,601	$	16,216		$	(78,849	)	$	736		$	7,704
Net income		–		–		–			4,928			–			4,928
Cumulative translation adjustment ⁽¹⁾		–		–		–			–			8			8

Total comprehensive income		–		–		–			–			–			4,936
Compensation expense resulting from stock options granted to Management		–		–		156			–			–			156

Balance at March 25, 2017		17,960,881	$	69,601	$	16,372		$	(73,921	)	$	744		$	12,796
Net income		–		–		–			11,699			–			11,699
Cumulative translation adjustment ⁽¹⁾		–		–		–			–			706			706

Total comprehensive income		–		–		–			–			–			12,405
Re-classification to Net income from discontinued operations		-		-		(150	)		–			-			(150	)
Compensation expense resulting from stock options granted to Management		–		–		136			–			–			136

Balance at March 31, 2018		17,960,881	$	69,601	$	16,358		$	(62,222	)	$	1,450		$	25,187

(1)	The change in cumulative translation adjustments is not due to reclassifications out of accumulated other comprehensive income.

See accompanying notes to consolidated financial statements.

F-6

BIRKS GROUP INC.

Consolidated Statements of Cash Flows


	Fiscal Year Ended
	March 31, 2018			March 25, 2017*			March 26, 2016*
	(In thousands)

Cash flows from (used in) operating activities:

Net income attributable to owners of the Company	$	11,699		$	4,928		$	5,438
Net income from discontinued operations		28,477			11,984			5,213

Net income (loss) from continuing operations		(16,778	)		(7,056	)		225
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		2,549			2,649			2,837
Impairment of long-lived assets		2,156			-			-
Amortization of debt costs		232			300			349
Other operating activities, net		(69	)		795			293
Gain on sale of assets		-			-			(3,229	)
(Increase) decrease in:
Accounts receivable and other receivables		(2,263	)		(545	)		505
Inventories		101			809			2,977
Prepaids and other current assets		(2,413	)		3			483
Increase (decrease) in:
Accounts payable		599			(282	)		(3,866	)
Accrued liabilities and other long-term liabilities		856			(22	)		820

Net cash (used in) provided by operating activities from continuing operations		(15,030	)		(3,349	)		1,394

Net cash (used in) provided by operating activities from discontinued operations		(14,246	)		10,611			3,310

		(29,276	)		7,262			4,704

Cash flows (used in) from investing activities:
Additions to property and equipment		(5,089	)		(4,378	)		(4,780	)
Additions to intangible assets and other assets		(1,688	)		-			-
Proceeds from sale of assets (net of fees of $0.2 million)		-			-			4,072
Other investing activities, net		-			(12	)		(37	)

Net cash used in investing activities from continuing operations		(6,777	)		(4,390	)		(745	)

Net cash (used in) provided by investing activities from discontinued operations		105,680			(682	)		(1,696	)

		98,903			(5,072	)		(2,441	)

Cash flows (used in) provided by financing activities:
Increase (decrease) in bank indebtedness		(16,192	)		10,400			1,952
Repayment of obligations under capital leases		(2,944	)		(487	)		(677	)
Proceeds from capital lease funding		2,966			376			43
Payment of loan origination fees and costs		(618	)		(370	)		(76	)
Repayment of long-term debt		(5,757	)		(2,527	)		(1,706	)
Increase in long-term debt		2,981			-			-
Advance from shareholder		2,500			-			-
Other financing activities		(142	)		(50	)		(25	)

Net cash provided by (used in) financing activities from continuing operations		(17,206	)		7,342			(489	)

Net cash used in financing activities from discontinued operations		(53,311	)		(9,929	)		(1,613	)

		(70,517	)		(2,587	)		(2,102	)

Effect of exchange rate on cash		(275	)		(3	)		(173	)

Net decrease in cash and cash equivalents		(1,165	)		(400	)		(12	)
Cash and cash equivalents, beginning of year		1,944			2,344			2,356

Cash and cash equivalents, end of year	$	779		$	1,944		$	2,344

Supplemental disclosure of cash flow information:
Interest paid	$	3,584		$	3,430		$	3,647
Non-cash transactions:
Property and equipment additions acquired through capital leases	$	1,088		$	375		$	43
Property and equipment and intangible asset additions included in accounts payable and accrued liabilities	$	2,439		$	1,023		$	1,005

*Retrospectively revised (see note 18)

See accompanying notes to consolidated financial statements.

F-7

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

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, development and retail sale of luxury jewelry, timepieces and giftware. 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 31, 2018 includes 53 weeks. The fiscal years ended March 25, 2017, and March 26, 2016 include 52 weeks.

1.	Basis of presentation:

These consolidated financial statements, which include the accounts of the Canadian parent company Birks Group Inc. and its former wholly owned subsidiary Mayor’s Jewelers, Inc. (“Mayors”), are reported in U.S. dollars and 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. During the year, the Company made a non-material correction to comparative information to classify certain assets from property and equipment to intangibles that had a net book value of $2.3 million.

The most significant estimates and judgments include assessing the valuation of inventories, accounts receivable, deferred tax assets, the recoverability of long-lived assets and the substantial doubt assessment of the going concern assumption. 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.

References to the Company exclude the cash flows, operations, assets and liabilities of the discontinued operations.

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’s ability to fund its operations is dependent upon its ability to achieve profitable operations as well as specified excess availability levels under its New Credit Facility (defined in note 7) and its New Term Loan (defined in note 7) and adhering to the financial covenant described in note 7. The sole financial covenant which the Company is required to adhere to under the New

F-8

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

Credit Facility is to maintain minimum excess availability of not less than CAD$8.5 million (US$6.6 million) at all times, except that the Company shall not be in breach of this covenant if excess availability falls below CAD$8.5 million (US$6.6 million) for not more than two consecutive business days once during any fiscal month. The Company expects to have excess availability of at least CAD$8.5 million (US$6.6 million) for at least the next twelve months.

The Company’s lenders under its New Credit Facility and its New 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 2018, fiscal 2017, and fiscal 2016 by the Company’s current or former lenders.

The Company reported net losses from continuing operations of $16.8 million and $7.1 million for fiscal 2018, and fiscal 2017 respectively. In fiscal 2016, the Company reported net income from continuing operations of $0.2 million. The Company used cash in operating activities from continuing operations of $15.0 million and $3.3 million for fiscal 2018 and fiscal 2017 respectively. In fiscal 2016, the Company provided cash from operating activities from continuing operations of $1.4 million. 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. 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 store operations will depend on its ability to maintain adequate levels of available borrowing 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.

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 at the time the product is shipped out of our facilities. 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, a portion of gift certificates and store credits, not subject to unclaimed property laws, are recorded as income. Gift certificates and store credits outstanding and subject to unclaimed property laws are maintained as accrued liabilities until remitted in accordance with local ordinances.

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.

F-9

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

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.

Revenues for repair services are recognized when the service is delivered to and accepted by the customer.

Licensing fees are recognized when the product is delivered to and accepted by the customer.

F-10

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

(b)	Cost of sales:

Cost of sales includes direct inbound freight and duties, direct labor related to repair services, design and creative, the jewelry studio, 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. Purchase discounts are recorded as a reduction of inventory cost and are recorded to cost of sales as the items are sold. 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 balance 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 $0.8 million and $1.9 million at March 31, 2018 and March 25, 2017, respectively.

(d)	Accounts receivable:

Accounts receivable arise primarily from customers’ use of our private label and proprietary credit cards and wholesale sales. Several installment sales plans are offered to our private label 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 10.99% per annum for financing plans. The Company maintains allowances for doubtful accounts 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 is determined based on a combination of factors including, but not limited to, the length of time that the receivables are past due, the Company’s knowledge of the customer, economic and market conditions and historical write-off experiences. 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 put on nonaccrual status and may be 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 doubtful accounts, 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.

(e)	Inventories:

F-11

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

Retail inventories and inventories of raw materials are valued at the lower of average cost or market. Inventories of work in progress and Company manufactured finished goods are valued at the lower of average cost (which includes material, labor and overhead costs) or market. The Company records provisions for lower of cost or market, damaged goods, and slow-moving inventory. The cost of inbound freight and duties are included in the carrying value of the inventories.

The allowance 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 allowance. Inventory is written down for estimated slow moving inventory equal to the difference between the cost of inventory and the estimated market value based on assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

(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

(g)	Intangible 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. Eligible costs include those related to the purchase, development, and installation of the related software. Trademarks and tradenames are amortized using the straight-line method over a period of 15 to 20 years. The Company had $3.6 million and $3.1 million of intangible assets at cost as at March 31, 2018 and March 25, 2017, respectively. The Company had $0.6 million and $0.4 million of accumulated amortization of intangibles at March 31, 2018 and March 25, 2017, respectively.

(h)	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 long-term debt in the accompanying consolidated balance sheets.

(i)	Warranty accrual:

The Company generally provides warranties on its jewelry and watches for periods extending up to five years and has a battery replacement policy for its private label watches. The Company accrues a liability based on its historical repair costs for such warranties.

F-12

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

(j)	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 10(a)).

(k)	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, ($0.2) million and ($0.3) million were recorded in cost of goods sold for the years ended March 31, 2018, March 25, 2017 and March 26, 2016, respectively and $0.1 million, $0.1 million and ($0.2) 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 31, 2018, March 25, 2017 and March 26, 2016, respectively.

Birks Group’s functional currency is the Canadian dollar while the reporting currency of the Company is the U.S. dollar. The assets and liabilities denominated in Canadian dollars are translated for reporting purposes at exchange rates in effect at the balance sheet dates. Revenue and expense items are translated at average exchange rates prevailing during the periods. The resulting gains and losses are accumulated in other comprehensive income.

(l)	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. During fiscal 2018, the Company recorded non-cash impairment charges on long-lived assets of $2.2 million. These charges are related to the leasehold improvements at a retail location due to its projected operating performance and certain software costs associated with a decision to modify the scope of the implementation of the Company’s new ERP system No impairment charges were recorded in fiscal 2017 and fiscal 2016.

(m)	Advertising and marketing costs:

Advertising and marketing costs are charged to expense as incurred and are included in selling, general and administrative expenses in the consolidated statements of operations. However, certain expenses such as those related to catalogs are expensed at the time such catalogs are shipped to recipients. 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 $0.8 million, $0.9 million and $0.9 million for each of the years ended March 31, 2018, March 25, 2017, and March 26, 2016, respectively. Advertising and marketing expense,

F-13

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

net of vendor cooperative advertising allowances, amounted to $7.5 million, $5.6 million and $5.7 million in the years ended March 31, 2018, March 25, 2017, and March 26, 2016, respectively.

(n)	Restructuring charges:

Restructuring charges consist of exit costs and other costs associated with the reorganization of the Company’s operations to achieve operational efficiencies, including the consolidation of most of the Company’s administrative workforce from its regional office in Tamarac, Florida to its Montreal corporate head office in fiscal 2017 and 2016. Restructuring charges include severance and stay bonuses for employees being terminated, and other costs related to the transition of administrative positions to Montreal including employee recruitment costs, temporary duplication of salaries related to the transition and travel and relocation costs. Costs associated with restructuring activities are recorded when the liability is incurred or when such costs are deemed probable and estimable and represent the Company’s best estimate.

(o)	Pre-opening expenses:

Pre-opening expenses related to the opening of new and relocated stores are expensed in the period incurred.

(p)	Operating leases:

Lessor incentive amounts on operating leases are deferred and amortized as a reduction of rent expense over the term of the lease. Rent expense is recorded on a straight-line basis, which takes into effect any rent escalations, rent holidays and fixturing periods. Deferred operating lease liabilities amounted to $4.9 million at March 31, 2018 ($3.2 million at March 25, 2017) presented as other long-term liabilities. Lease terms are from the inception of the fixturing period until the end of the initial lease term and generally exclude renewal periods. However, renewal periods would be included in instances in which the exercise of the renewal period option would be reasonably assured and failure to exercise such option would result in an economic penalty. Contingent rent payments vary by lease, are based on a percentage of revenue above a predetermined sales level and are expensed when it becomes probable the sales levels will be achieved. This level is different for each location and includes and excludes various types of sales. In December 2000, the Company entered into a capital lease agreement for its Montreal head office and store pursuant to which the Company sold and leased back the building, including the Montreal flagship store, for a term of 20 years ending December 11, 2020. The net annual rental rate was CAD$2.2 million (approximately $1.6 million U.S. dollars) for the period that ended on December 11, 2016. On November 1, 2016, the Company entered into an agreement with the new owner of the building to terminate the then existing lease agreement for the building in advance of its expiry date in December 2020 and to lease the premises for the Company’s Montreal flagship store at its current location, which is an operating lease. As a result, a capital lease asset of CAD$8.7 million (approximately $6.5 million in U.S. dollars) and a capital lease obligation of CAD$11.6 million (approximately $8.7 million in U.S. dollars) at November 1, 2016 were derecognized and a non-cash gain of CAD$2.9 million (approximately $2.2 million in U.S. dollars) (included as part of other long-term liabilities) is being deferred and amortized over the term of the new lease of the flagship store.

(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, warrants and equity settled stock appreciation rights.

F-14

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

The following table sets forth the computation of basic and diluted earnings per common share for the years ended March 31, 2018, March 25, 2017, and March 26, 2016:


	Fiscal Year Ended
	March 31, 2018		March 25, 2017		March 25, 2016
	(In thousands, except per share data)

Basic income per common share computation:
Numerator:
Net income	$	11,699	$	4,928	$	5,438
Denominator:
Weighted-average common shares outstanding		17,961		17,961		17,961

Income per common share	$	0.65	$	0.27	$	0.30

Diluted income per common share computation:
Numerator:
Net income	$	11,699	$	4,928	$	5,438
Denominator:
Weighted-average common shares outstanding		17,961		17,961		17,961
Dilutive effect of stock options and warrants		432		457		-

Weighted-average common shares outstanding – diluted		18,393		18,418		17,961
Diluted income per common share	$	0.64	$	0.27	$	0.30

The following table sets forth the computation of basic and diluted earnings from continuing operations per common share for the years ended March 31, 2018, March 25, 2017, and March 26, 2016:


	Fiscal Year Ended
	March 31, 2018			March 25, 2017			March 25, 2016
	(In thousands, except per share data)

Basic income from continuing operations per common share computation:
Numerator:
Net (loss) income from continuing operations	$	(16,778	)	$	(7,056	)	$	225
Denominator:
Weighted-average common shares outstanding		17,961			17,961			17,961

Income (loss) per common share	$	(0.93	)	$	(0.39	)	$	0.01

Diluted income per common share computation:
Numerator:
Net income	$	(16,778	)	$	(7,056	)	$	225
Denominator:
Weighted-average common shares outstanding		17,961			17,961			17,961

F-15

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016


Dilutive effect of stock options and warrants		432			457			-

Weighted-average common shares outstanding – diluted		18,393			18,418			17,961

Diluted income (loss) per common share	$	(0.91	)	$	(0.38	)	$	0.01

For the year ended March 31, 2018, the effect from the assumed exercise of 381,487 Class A voting shares underlying outstanding stock options and 382,693 Class A voting shares underlying outstanding warrants was excluded from the computation of diluted earnings per share due to their antidilutive effect. For the year ended March 25, 2017, the effect from the assumed exercise of 417,377 Class A voting shares underlying outstanding stock options and 382,693 Class A voting shares underlying outstanding warrants was excluded from the computation of diluted earnings per share due to their antidilutive effect. For the year ended March 26, 2016, the effect from the assumed exercise of 666,789 Class A voting shares underlying outstanding stock options and 382,693 Class A voting shares underlying outstanding warrants was excluded from the computation of diluted earnings per share due to their antidilutive effect.

(r)	Commodity and currency risk:

The Company has exposure to market risk related to gold, silver, platinum and diamond purchases and foreign exchange risk. The Company may periodically enter into gold futures contracts to economically hedge a portion of these risks. During the years ended and as of March 31, 2018 and March 25, 2017, there were no such contracts outstanding.

(s)	Recent Accounting Pronouncement not yet adopted:

In May 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In 2016, the FASB issued three additional ASUs to provide clarification to Topic 606. The ASUs will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company for its fiscal year beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company’s revenue is primarily generated from the sale of finished products to customers through its retail, e-commerce or wholesale channels. While management is currently finalizing its evaluation of the impact the adoption of this guidance will have on the Company’s financial position and results of operations, it does not believe that the adoption of this ASU will have a significant impact to the financing position and results of operations.

In February 2016, the FASB issued ASU No. 2016-02 - “Leases (Topic 842).” The new guidance primarily impacts lessee accounting by requiring the recognition of a right-of-use asset and a corresponding lease liability on the balance sheet for long-term lease agreements. The lease liability will be equal to the present value of all reasonably certain lease payments. The right-of-use asset will be based on the liability, subject to adjustment for initial direct costs. Lease agreements that are 12 months or less are permitted to be excluded from the balance sheet. In general, leases will be amortized on a straight-line basis with the exception of finance lease agreements. ASU 2016-02 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. Management is currently evaluating the impact the adoption of this guidance will have on the Company’s financial position and results of operations.

F-16

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

The Company is reviewing all lease contracts and expects that the majority of operating leases will be recognized on the consolidated balance sheet.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments – Credit Losses (Topic 326) , which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost, the new guidance eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. ASU 2016-13 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Management is currently evaluating the impact the adoption of this guidance will have on the Company’s financial position and results of operations.

In August 2016, the FASB issued ASU 2016-15 - Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (Topic 230) . The new guidance primarily addresses the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The following eight specific cash flows issues are addressed: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Management does not believe that the adoption of this ASU will have a significant impact to the consolidated financial statements and related disclosures.

F-17

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

3.	Accounts receivable and other receivables:

Accounts receivable, net of allowance for doubtful accounts, at March 31, 2018 and March 25, 2017 consist of the following:


	As of
	March 31, 2018		March 25, 2017*
	(In thousands)
Customer trade receivables	$	1,510	$	612
Other receivables		3,307		1,942

	$	4,817	$	2,554

Continuity of the allowance for doubtful accounts for continuing operations is as follows (in thousands):


*Balance March 28, 2015	$	218
Net write-offs		(52	)

*Balance March 26, 2016		166
Additional provision recorded		61
Net write-offs		(13	)

*Balance March 25, 2017		214
Additional provision recorded		184

Balance March 31, 2018	$	398

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 $0.4 million and $0.2 million at March 31, 2018 and March 25, 2017, respectively, and are included in customer trade receivables. Other receivables mainly relate to receivables from wholesale revenues.

*Retrospectively revised (see note 18)

4.	Inventories:

Inventories, net of obsolescence reserve, are summarized as follows:


	As of
	March 31, 2018		March 25, 2017*
	(In thousands)

Raw materials and work in progress	$	2,980	$	2,932
Retail inventories and finished goods		62,813		62,962

	$	65,793	$	65,894

Continuity of the obsolescence reserve from continuing operations for inventory is as follows (in thousands):


*Balance March 28, 2015	$	2,178
Additional charges		533
Deductions		(1,040)

F-18

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016



*Balance March 26, 2016		1,671
Additional charges		300
Deductions		(639	)

*Balance March 25, 2017		1,332
Additional charges		592
Deductions		(436	)

Balance March 31, 2018	$	1,488

*Retrospectively revised (see note 18)

5.	Property and equipment:

The components of property and equipment are as follows:


	As of
	March 31, 2018			March 25, 2017*
	(In thousands)

Leasehold improvements		24,082			23,324
Equipment		317			1,264
Molds		34			33
Furniture and fixtures		5,222			4,320
Software and electronic equipment		9,936			10,560

		39,591			39,501
Accumulated depreciation and impairment charges		(24,524	)		(27,895	)

	$	15,067		$	11,606

*Retrospectively revised (see note 18)

The Company wrote off $7.5 million of gross fixed assets that were fully amortized during the year ended March 31, 2018 (March 25, 2017 - $7.9 million), mostly related to leasehold improvements. Property and equipment, having a cost of $0.8 million and a net book value of $0.7 million at March 31, 2018, and a cost of $0.7 million and a net book value of $0.4 million at March 25, 2017, are under capital leasing arrangements.

6.	Sale of assets:

On August 4, 2015, the Company sold the assets of its corporate sales division to Rideau for $4.3 million. The disposal is consistent with the Company’s long-term strategy to concentrate on its retail operations and develop its Birks product brand through its current retail network, as well as internationally through other channels, and to concentrate the Company’s resources and efforts on its core activities. On August 4, 2015, the carrying amount of the major classes of assets that were sold was comprised primarily of inventory of $0.8 million, resulting in a gain on disposal of assets in the amount of approximately $3.2 million. Furthermore, as part of the agreement, the Company will supply Rideau, with Birks-branded time pieces and jewelry and will receive ongoing royalty payments from Rideau, related to future sales of all Birks-branded products. Rideau has agreed to purchase a minimum aggregate amount of $4.5 million for the first three years, and $2.0 million per year for each contract year thereafter for a period of 7 years.

7.	Bank indebtedness:

F-19

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

As of March 31, 2018, bank indebtedness consisted solely of amounts owing under the Company’s New Credit Facility (defined below), which had an outstanding balance of $28.6 million. As of March 25, 2017, bank indebtedness consisted solely of amounts owing under the Company’s then existing senior secured revolving credit facility (the “Prior Revolving Credit Facility”), which had an outstanding balance of $44.8 million and a maximum amount of $110.0 million. The New Credit Facility is collateralized by substantially all of the Company’s assets, as was the Prior Revolving Credit Facility. The Company’s excess borrowing capacity was $15.5 million as of March 31, 2018 and $14.6 million as of March 25, 2017. The Company met its excess availability requirements throughout fiscal 2018 and as of the date of these financial statements.

As of March 25, 2017 and until the repayment on October 23, 2017, the Company’s ability to fund its operations and meet its cash flow requirements was dependent upon its ability to maintain positive excess availability of at least $6.0 million under the Prior Credit Facility. Under the terms of the Prior Credit Facility, the Company was required to maintain minimum adjusted EBITDA levels (calculated on a twelve-month rolling basis) if the Company’s availability was below $6.0 million for any five consecutive business days. Failure to meet the minimum adjusted EBITDA covenant in the event that excess availability fell below $6.0 million for any five consecutive business days was considered an event of default that could have resulted in the outstanding balances borrowed under the Company’s Prior Credit Facility becoming due immediately, which would have resulted in cross defaults on the Company’s other borrowings.

On October 23, 2017, in connection with the closing of the stock purchase agreement between the Company and Aurum, the Company entered into a new senior secured credit facility with Wells Fargo Canada Corporation for a maximum amount of CAD$85.0 million (US$65.9 million) (the “New Credit Facility”). The New Credit Facility, which matures in October 2022, replaced the Company’s Prior Revolving Credit Facility and its prior senior secured $31.0 million term loan facility which were repaid in full as a result of the Company’s divestiture of Mayors. The New Credit Facility also provides the Company with an accordion option to increase the total commitments thereunder by up to CAD$13.0 million (US$10.1 million). The Company will only have the ability to exercise this accordion option if it has the required borrowing capacity at such time. The New Credit Facility bears interest at a rate of CDOR plus a spread ranging from 1.5% - 3.0% depending on the Company’s excess availability levels. Under the New Credit Facility, the Company is not required to comply with a minimum adjusted EBITDA financial covenant. The sole financial covenant which the Company is required to adhere to is to maintain minimum excess availability of not less than CAD$8.5 million (US$6.6 million) at all times, except that the Company shall not be in breach of this covenant if excess availability falls below CAD$8.5 million (US$6.6 million) for not more than two consecutive business days once during any fiscal month.

On June 29, 2018, the Company secured a CAD$12.5 million (US$9.7 million) long-term senior secured term loan (the “New Term Loan”) with Crystal Financial LLC (“Crystal”). The New Term Loan, which matures in October 2022, is subordinated in lien priority to the New Credit Facility and bears interest at a rate of CDOR plus 8.25%. Under the New Term Loan, the Company will be required to adhere to similar financial covenants as under the New Credit Facility (maintain minimum excess availability of not less than CAD$8.5 million (US$6.6 million) at all times, except that the Company shall not be in breach of this covenant if excess availability falls below CAD$8.5 million (US$6.6 million) for not more than two consecutive business days once during any fiscal month). In addition, the New Term Loan includes seasonal availability blocks imposed from December 20 ^th to January 20 ^th of each year of CAD$9.5 million (US$7.4 million) and from January 21 ^st to February 20 ^th of each year of CAD$4.5 million (US$3.5 million). The long term senior secured term loan is required to be repaid upon maturity.

F-20

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

The Company’s borrowing capacity under both the New Credit Facility and New 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 lenders under its New Credit Facility and its New 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 2018, fiscal 2017, and fiscal 2016 by the Company’s current or former lenders.

Both the Company’s New Credit Facility and New 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 New Credit Facility and the New Term Loan. In the event that excess availability falls below CAD$8.5 million (US$6.6 million) for more than two consecutive business days once during any fiscal month, this would be considered an event of default under the agreements, that provides the lenders the right to require the outstanding balances borrowed under the Company’s New Credit Facility and New Term Loan to become due immediately, which would result in cross defaults on the Company’s other borrowings. The New Credit Facility and New 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 New Credit Facility and New Term Loan provide that no financial covenants are required to be met other than already described.

The information concerning the Company’s bank indebtedness related to continuing operations is as follows:


	Fiscal Year Ended
	March 31, 2018		March 25, 2017*
	(In thousands)

Maximum borrowing outstanding during the year	$	48,653	$	50,250
Average outstanding balance during the year	$	35,187	$	41,751
Weighted average interest rate for the year		3.3%		3.2%
Effective interest rate at year-end		3.4%		3.0%

*Retrospectively revised (see note 18)

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 (Québec) of CAD$200.0 million (US$155.1 million); (v) lien on machinery, equipment and molds and dies; and (vi) a pledge of trademarks and stock of the Company’s subsidiaries.

F-21

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

8.	Long-term debt:

(a)	Long-term debt consists of the following:


	As of
	March 31, 2018		March 25, 2017*
	(In thousands)
Cash advance provided by the Company’s controlling shareholder, Montrovest, bearing interest at an annual rate of 11%, net of withholding taxes (note 16(c))		4,000		1,500
Term loan from Investissement Quebec, bearing interest at an annual rate of Canadian prime plus 7.0%, repayable beginning in October 2014 in 60 equal monthly principal payments of $64,634 (CAD$83,333), secured by the assets of the Company. The balance at March 31, 2018 and March 25, 2017 was CAD$1.6 million and CAD$2.9 million, respectively (b).		1,204		2,141
Term loan from Investissement Québec, bearing interest at an annual rate of Canadian prime plus 10%, repayable beginning in August 2015 in 48 equal monthly principal payment of $32,318 (CAD$41,667), secured by the assets of the Company. The balance at March 31, 2018 and March 25, 2017 was CAD$0.8 million and 1.4 million respectively (b)		586		1,061
Obligations under capital leases, at annual interest rates between 3.6% and 25.8%, secured by leasehold improvements, furniture, and equipment, maturing at various dates to March 2023.		578		469
Senior secured term loans that are subordinated in lien priority to the Company’s senior secured revolving credit facility. The loan bore interest at an annual rate of LIBOR plus 9.75%. The load was fully repaid in October 2017.	$	-	$	500

Term loan from Investissement Québec, which bore interest at an annual rate of Canadian prime plus 5.5%. The loan was fully repaid in June 2017. The balance at March 25, 2017 was CAD$1.0 million (b).		-		779


		6,368		6,450
Current portion of long-term debt		2,611		2,393

	$	3,757	$	4,057


*Retrospectively revised (see note 18)

(c)	Future minimum lease payments for capital leases required in the following five years and thereafter are as follows (in thousands):


Year ending March:
2019	$	279
2020		156
2021		119
2022		101
2023		40
Thereafter		-

		695

F-22

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016


Less imputed interest		117

	$	578

(d)	Principal payments on long-term debt required in the following five years and thereafter, including obligations under capital leases, are as follows (in thousands):


Year ending March:
2019	$	2,611
2020		2,026
2021		101
2022		92
2023		38
Thereafter		1,500

	$	6,368

(e)	As of March 31, 2018 and March 25, 2017, the Company had $0.8 million of outstanding letters of credit which were provided to certain lenders.

9.	Benefit plans and stock-based compensation:

(a)	Stock option plans and arrangements:

(i)

The Company can issue stock options, SARs, deferred share units and restricted stock units to executive management, key employees and directors under the following stock-based compensation plans.

The Company 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 31, 2018, there were 118,000 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 $1.16. As of March 31, 2018, there were stock options to purchase 615,000 Class A voting shares outstanding under the Long-Term Incentive Plan. During fiscal 2018 and 2017 no stock options were issued under the Long-Term Incentive Plan. During fiscal 2016, stock options to purchase 235,000 shares of the Company’s Class A voting shares were issued with a three year vesting period, with an average exercise price of $0.78, and an expiration date of 10 years after the grant date. The weighted-average grant-date fair value of the options granted during fiscal 2016 was $0.69. The fair value of the newly issued options in fiscal 2016 was calculated as of the date of their grant, using the Black-Scholes option pricing model with the following weighted-average assumptions: Dividend yield – 0%; Expected volatility – 95.3%; Risk-free interest rate – 2.3%; and expected term in years – 10 years. The outstanding options as of March 31, 2018 had no intrinsic value. The unrecognized compensation related to the non-vested portion of stock options granted as of March 31, 2018 was $8,000. Total compensation cost for options recognized in expenses was $39,000, $92,000 and $109,000 during fiscal 2018, 2017, and 2016, respectively. This 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.

F-23

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

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. A total of 1,000,000 shares of the Company’s Class A voting shares are reserved for issuance under the Omnibus LTIP. 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 31, 2018, there were stock options to purchase 193,000 Class A voting shares outstanding under the Omnibus LTIP, all of which were issued during fiscal 2017, with a three year vesting period, with an average exercise price of $1.43 and an expiration date of 10 years after the grant date. The weighted-average grant-date fair value of the options granted during fiscal 2017 was $1.34. The fair value of the newly issued options in fiscal 2017 was calculated as of the date of their grant, using the Black-Scholes option pricing model with the following weighted-average assumptions: Dividend yield – 0%; Expected volatility – 114.63%; Risk-free interest rate –2.2%; and expected term in years – 10 years. The outstanding options as of March 31, 2018 had no intrinsic value. The unrecognized compensation related to the non-vested portion of stock options granted as of March 31, 2018 was $74,000. Total compensation cost for options recognized in expenses was $139,000 during fiscal 2018 and $65,000 during fiscal 2017.

F-24

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

The Company has outstanding employee stock options issued under the Birks Employee Stock Option Plan (the “Birks ESOP”). Effective November 15, 2005, no awards are permitted to be granted under the Birks ESOP. However, the Birks ESOP will remain in effect until the outstanding awards issued under the plan terminate or expire by their terms. In March 2010, the Company offered employees who held options under this plan the right to amend their current options. The amended options terms would be consistent with the original grant except that the new options would have a lower exercise price, be exercisable for a lesser number of the Company’s Class A voting shares, have a new ten-year term and be subject to different terms in the event of a change in control or if the Company had a going-private transaction. The amended options have an exercise price of $1.05 per share. As of March 31, 2018, March 25, 2017, and March 26, 2016 there were 5,666, 6,162 and 6,162 Class A voting shares underlying options granted under the Birks ESOP, respectively. No compensation expense was required to be recorded related to the amended option transaction and no compensation expense was required to be recorded for the outstanding option under this plan for the years ended March 31, 2018, March 25, 2017, and March 26, 2016.

The following is a summary of the activity of Birks’ stock option plans and arrangements.


	Options		Weighted average exercise price
Outstanding March 28, 2015		441,162	$	1.15
Granted		235,000		0.78
Forfeited		(10,000)		1.10

Outstanding March 26, 2016		666,162		1.02
Granted		218,000		1.43
Forfeited		(10,000)		0.78

Outstanding March 25, 2017		874,162		1.13
Equity cash-out payment(a)		(60,000)		1.08
Forfeited		(496)		1.05

Outstanding March 31, 2018		813,666	$	1.13

^(a)

In connection with the Aurum Transaction, the Company offered an equity cash-out payment of $42,000 to a former senior executive for 35,000 options under the Long-term incentive plan and 25,000 options under the Omnibus LTIP.

A summary of the status of Birks’ stock options at March 31, 2018 is presented below:


	Options outstanding						Options exercisable
Exercise price	Number outstanding		Weighted average remaining life (years)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$ 0.78		205,000		7.5	$	0.78		136,663	$	0.78
$ 0.84		100,000		5.1		0.84		100,000		0.84
$ 0.89		40,000		4.6		0.89		40,000		0.89
$ 1.04-1.05		155,666		3.7		1.04		155,816		1.04
$ 1.25-1.66		70,000		4.2		1.48		70,000		1.48
$ 1.43		193,000		8.7		1.43		64,331		1.43
$ 1.94		50,000		6.8		1.94		50,000		1.94

		813,666		7.2	$	1.13		616,810	$	1.10

(ii)

Under plans approved by the former Board of Directors of Mayors, the Company has outstanding stock options issued to employees and members of the Company’s Board of Directors. No further awards will be granted under these plans. As of March 31, 2018, there are 41 options outstanding with a weighted average remaining estimated life of 4 years. No compensation expense was required to be recorded related to the options outstanding under this program for the years ended March 31, 2018, March 25, 2017, and March 26, 2016, respectively. During fiscal 2018, as a result of the Aurum Transaction, the Company settled 586

F-25

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

options in cash for $0.73 per share underlying the option. Subsequent to year-end, the remaining 41 options were settled in cash for $0.73 per share underlying the option and no options remain outstanding.

The following is a summary of the activity of Mayors stock option plans:


	Options		Weighted average exercise price
Outstanding March 28, 2015		926	$	1.05
Expired		(299)		1.05

Outstanding March 26, 2016 and March 25, 2017		627		1.05
Settled in cash		(586)		1.05

Outstanding March 31, 2018		41		1.05

(iii)

The Company issues new shares to satisfy share-based awards and exercise of stock options. During fiscal 2018, 586 options were settled in cash for $0.73 per share underlying the option, during fiscal 2017 and fiscal 2016, respectively, no cash was used to settle equity instruments granted under share-based payment arrangements other than described above.

(b)

As of March 31, 2018, the Company had outstanding warrants exercisable into 382,693 shares of the Company’s Class A voting shares. These warrants have a weighted average exercise price of $3.42 per share and expire on August 20, 2022. As of November 1, 2005, these awards were fully vested and no additional compensation expense will be recognized.

(c)	Restricted stock units and deferred share unit plans:

On November 15, 2016, the Company issued 121,500 cash settled restricted stock units (RSU) to members of senior management under the Omnibus LTIP. At March 31, 2018, 112,000 RSU are outstanding. These units vest after three years and expire one month following the vesting date. On September 7, 2017 and November 15, 2016, the Company also issued 74,466 and 55,944 of cash settled deferred share units (DSU) to members of the board of directors. These units vest immediately upon the date the member ceases being a director and expire on December 31 of the following year. Compensation expense is based on the fair value of the DSU and the liability is re-measured at each reporting period. As at March 31, 2018, the Company has recognized a liability of $97,000 in relation to these units (March 25, 2017 - $34,000). Total compensation cost for options recognized in expenses was $63,000 during fiscal 2018 and $34,000 during fiscal 2017

(d)	Employee stock purchase plan:

The Company has an Employee Stock Purchase Plan (“ESPP”) that permits eligible employees, which does not include executives of the Company, to purchase the Company’s Class A voting stock at 85% of the Class A voting shares fair market value through regular payroll deductions. A total of 100,000 shares of the Company’s Class A voting shares are reserved for issuance under the ESPP. As of March 31, 2018, 99,995 Class A voting shares were outstanding under the ESPP and no additional shares will be issued under this plan.

No shares were issued under the ESPP in fiscal 2018, 2017, and 2016.

F-26

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

(e)	CEO Long-term Cash Incentive Plan:

In April 2015, the Company’s Board of Directors approved a long-term cash incentive plan for the Chief Executive Officer (“CEO LTCIP”). The intent of the CEO LTCIP is to reward the Chief Executive Officer based on the Company’s performance over three-year cycles, the first of which begins with the fiscal 2016 through fiscal 2018 period. The approval of this three-year cycle is at the discretion of the Board of Directors on recommendation of the Compensation Committee. The CEO LTCIP for fiscal 2016 – 2018, is structured to fund a pool of dollars based on the successful achievement of earnings before tax (“EBT”) and the level of achievement of three key metrics that can modify the amount achieved based on EBT over three one-year periods. The amount of money funded each year, if earned, is added together at the end of the three-year cycle (with each year comprising one third of the total payout opportunity). Fifty percent (50%) of the final value of the pool following completion of the three year cycle is payable at the end of the three year cycle (early fiscal year 2019). with the remaining 50% payable one year thereafter (early fiscal 2020) subject to the Chief Executive Officer remaining employed at the time of payout and the payout not causing any default under our senior secured credit facilities. As of March 31, 2018 and March 25, 2017, no amounts were earned under the CEO LTCIP for fiscal 2016 – 2018..

10.

Income taxes:

(a)

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of March 31, 2018, the Company had no accrued interest or penalties related to uncertain tax positions due to available tax loss carry forwards. The tax years 2011 through 2018 remain open to examination by the major taxing jurisdictions to which the Company is subject.

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 $10.0 million against the Company’s net deferred tax assets.

The significant items comprising the Company’s net deferred tax assets related to continuing operations at March 31, 2018 and March 25, 2017 are as follows:


	Fiscal Year Ended

	March 31, 2018		March 25, 2017*

Deferred tax assets:	(In thousands)

Loss and tax credit carry forwards	$	6,997	$	7,030
Difference between book and tax basis of property and equipment		2,515		1,392

Other reserves not currently deductible		53		51

Expenses not currently deductible		511		336

Other		(74)		(28)


Net deferred tax asset before valuation allowance		10,002		8,781

Valuation allowance		(10,002)		(8,781)


Net deferred tax asset	$	-	$	-

F-27

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

The Company’s income tax expense (benefit) from continuing operations consists of the following components:


	Fiscal Year Ended
	March 31, 2018		March 25, 2017*		March 26, 2016*
	(In thousands)
Income tax expense (benefit):

Current	$	-	$	-	$	-

Deferred		(2,640)		(1,866)		(278)

Valuation allowance		2,640		1,866		278


Income tax expense	$	-	$	-	$	–

The Company’s current tax payable was nil at March 31, 2018, March 25, 2017, and March 26, 2016.

The Company’s provision for income taxes from continuing operations varies from the amount computed by applying the statutory income tax rates for the reasons summarized below:


	Fiscal Year Ended

	March 31, 2018		March 25, 2017*		March 26, 2016*
Canadian statutory rate		26.6%		26.6%		26.6%

Rate differential for U.S. operations		0.4%		0.7%		(21.2%)

Utilization of unrecognized losses and other tax attributes		(27.1%)		(26.9%)		123.6%

Permanent differences and other		0.1%		(0.4%)		(129%)


Total		0%		0%		0%

*Retrospectively revised (see note 18)

(b)

At March 31, 2018, the Company had federal non-capital losses of CAD$35.2 million ($27.3 million in U.S. dollars) available to reduce future Canadian federal taxable income and investment tax credits (“ITC’s”) in Canada of CAD$260,000 ($202,000 in U.S. dollars) available to reduce future Canadian federal income taxes payable which will expire between 2023 and 2038. The Company also has capital losses of CAD$0.2 million ($0.1 million in U.S. dollars) available to reduce future Canadian capital gains. The capital losses will not expire.

11.

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

F-28

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

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 Shares		Amount		Number of Shares		Amount		Number of Shares		Amount

Balance as of March 26, 2016		10,242,911	$	30,988		7,717,970	$	38,613		17,960,881	$	69,601
Exercise of stock options		–		–		–		–		–		–

Balance as of March 25, 2017		10,242,911	$	30,988		7,717,970	$	38,613		17,960,881	$	69,601

Exercise of stock options		–		–		–		–		–		–

Balance as of March 31, 2018		10,242,911	$	30,988		7,717,970	$	38,613		17,960,881	$	69,601

12.

Restructuring Charges:

In July 2014, the Company provided to its former senior secured lenders and announced an operational restructuring plan to reduce corporate overhead costs, improve profitability and drive efficiency within the organization. The restructuring plan included consolidating most of its corporate administrative workforce from its regional office in Tamarac, Florida to its Montreal corporate head office as well as the outsourcing of a portion of the Company’s jewelry manufacturing and other corporate office staff reductions. In March 2018, the Company began the third phase of the operational restructuring plan, incurring restructuring charges of approximately $0.7 million in fiscal 2018 primarily associated with severance as the Company eliminated certain corporate administrative positions that became redundant as a result of the Aurum Transaction. As at March 31, 2018, $0.5 million remains payable. During fiscal 2017 and 2016, the Company recorded $0.7 million and $0.5 million of restructuring charges respectively. These charges were primarily associated with severance and temporary duplication of salaries during the transition of positions from Tamarac to Montreal.

13.

Commitments:

Operating leases:

The Company leases all of its retail stores under operating leases. The rental costs are based on minimum annual rentals and for some of the stores, a percentage of sales. Such percentage of sales varies by location. In addition, most leases are subject to annual adjustments for increases in real estate taxes and common area maintenance costs. The Company also has operating leases for certain equipment.

Future minimum lease payments for the next five years and thereafter are as follows (in thousands):


Year ending March:
2019	$	8,243
2020		7,398
2021		7,217
2022		7,039
2023		6,745
Thereafter		29,493

	$	66,135

F-29

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

Rent expense from continuing operations for the Company was approximately $11.0 million for year ended March 31, 2018, $10.7 million, for the year ended March 25, 2017 and $10.0 million for the year ended March 26, 2016.

14.

Contingencies:

(a)

The Company and its subsidiaries, in the normal course of business, become involved from time to time in litigations and claims. While the final outcome with respect to claims and legal proceedings pending at March 31, 2018 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.

(b)

From time to time, the Company guarantees a portion of its private label credit card sales to its credit card vendor. At March 31, 2018, and March 25, 2017, the amount guaranteed under such arrangements was approximately $2.1 million and $2.6 million, respectively. At March 31, 2018 and March 25, 2017, the Company has recorded in accrued liabilities a reserve of $0.1 million and $0.2 million, respectively, associated with this guaranteed amount.

15.

Segmented information:

The Company has two reportable segments Retail and Other. As of March 31, 2018, Retail operated 28 stores across Canada under the Birks brand and 2 retail locations in Calgary and Vancouver under the Brinkhaus brand. Other consists primarily of our e-commerce business, wholesale business, and until August 2015, the corporate sales division which was sold.

The two segments are managed and evaluated separately based on 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 31, 2018, March 25, 2017, and March 26, 2016, respectively, is set forth below:



	Retail						Other						Total
	2018		2017*		2016*		2018		2017*		2016*		2018		2017*		2016*
	(In thousands)
Sales to external customers	$	110,225	$	113,644	$	125,122	$	4,153	$	2,792	$	3,529	$	114,378	$	116,436	$	128,651
Inter-segment sales		–		–		–		10,158		11,909		12,745		10,158		11,909		12,745
Unadjusted Gross profit		43,457		46,715		52,840		1,702		1,073		1,603		45,159		47,788		54,443

The following sets forth reconciliations of the segments’ gross profits and certain unallocated costs to the Company’s consolidated gross profits for the years ended March 31, 2018, March 25, 2017, and March 26, 2016:

F-30

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016


	Fiscal Year Ended
	March 31, 2018		March 25, 2017*		March 26, 2016*
	(In thousands)
Unadjusted gross profit	$	45,159	$	47,788	$	54,443
Inventory provisions		(1,114)		(317)		(721)
Other unallocated costs		(551)		(787)		(1,065)
Adjustment of intercompany profit		60		98		312

Gross profit	$	43,554	$	46,782	$	52,969

*Retrospectively revised (see note 18)

Sales by classes of similar products were as follows:


	Fiscal Year Ended
	March 31, 2018		March 25, 2017*		March 26, 2016*
	(In thousands)

Classes of Similar Products
Net sales:
Jewelry and other	$	80,453	$	80,503	$	90,793
Timepieces		33,925		35,933		37,858

	$	114,378	$	116,436	$	128,651

*Retrospectively revised (see note 18)

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 31, 2018		March 25, 2017		March 26, 2016
	(In thousands)
Transactions:
Purchases of inventory from supplier related to a shareholder (d)	$	-	$	-	$	503
Management fees to related parties (b)		135		154		155
Consultant fees to a related party (e)		33		150		173
Expense reimbursement to a related party (f)		245		178		201
Interest expense on cash advance received from controlling shareholder (c)		382		165		165
Compensation paid to a related party (g)		295		67		-
Balances:
Accounts payable to a supplier related to shareholder (d)		-		-		17
Accounts payable to related parties		4		57		38
Interest payable on cash advance received from controlling shareholder(c)		21		24		25

(b)	On June 8, 2011, the Board of Directors approved the Company entering into a Management Consulting Service Agreement with Montrovest. Under the agreement, the Company paid Montrovest an annual retainer fee of

F-31

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

€140,000 in exchange for services related to the raising of capital for international expansion projects and such other services relating to merchandising and/or marketing of the Company’s products as the Company may request. The agreement was in effect until June 8, 2012 and was extended automatically for successive terms of one year unless either party gave a 60 days’ notice of its intention not to renew. The yearly renewal of the agreement is subject to the review and approval of the Company’s Corporate Governance and Nominating Committee and the Board of Directors. In April 2015, the agreement was renewed for an additional one-year term ending June 8, 2016. In fiscal 2018, fiscal 2017 and fiscal 2016, the Company paid nil, nil, and €105,000 respectively (approximately nil, nil, and $116,000 in U.S. dollars, respectively), under this agreement to Montrovest. The Company’s Board of Directors approved entering into the agreement and its renewal with Montrovest in accordance with the Company’s Code of Conduct relating to related party transactions. Mr. Davide Barberis Canonico, one of our directors, was a member of the Supervisory Board of Directors of Montrovest until April 2018. On November 17, 2015, our Board of Directors approved the termination of the Management Consulting Services Agreement with Montrovest effective December 31, 2015 and the entering into the Management Consulting Services Agreement with Gestofi S.A. (“Gestofi”) effective January 1, 2016 on the same terms and conditions as the agreement with Montrovest, all in accordance with the Company’s Code of Conduct relating to related party transactions. In fiscal 2018, 2017 and fiscal 2016, €115,000, €140,000 and €35,000 respectively (approximately $135,000, $154,000 and $39,000 in U.S. dollars) was paid to Gestofi under this agreement.

(c)

In February 2009 and May 2009, the Company received a $2.0 million and a $3.0 million, respectively, cash advance from its controlling shareholder, Montrovest, to finance working capital needs and for general corporate purposes. These advances and any interest thereon are subordinated to the indebtedness of the Company’s existing senior credit facilities and secured term loans and were convertible into a convertible debenture or Class A voting shares in the event of a private placement or repayable upon demand by Montrovest once conditions stipulated in the Company’s senior credit facilities permit such a payment. The cash advances bore interest at an annual rate of 16%, net of any withholding taxes, representing an effective interest rate of approximately 17.8%. If converted into convertible debentures or Class A voting shares, a fee of 7% of the outstanding principal amount of the cash advance would have been paid to Montrovest. In June 2011, the Company amended its cash advance agreements with Montrovest. Under the terms of the amended agreements, the annual interest rate on the $5.0 million in cash advances outstanding was reduced from 16%, net of withholding taxes to 11%, net of withholding taxes representing an effective interest rate of approximately 12.2%. The amended agreements eliminated the convertibility of the cash advances into convertible debentures or Class A voting shares in the event of a private placement and also eliminated the payment of a 7% fee if the debt was converted into convertible debentures or Class A voting shares. The Company also amended its management subordination agreement with Montrovest and its senior lenders, eliminating the payment of any success fee to Montrovest if the Company receives net cash proceeds of $5.0 million or more related to an equity issuance. The Company paid a one-time fee of $75,000 to Montrovest associated with the amendment of the cash advance agreements. In August 2012, a partial repayment of $3.5 million was made on these cash advances. On July 28, 2017, the Company received a $2.5 million cash advance from Montrovest. The loan bears interest at an annual rate of 11%, net of withholding taxes representing an effective interest rate of approximately 12.2%, and is due and payable in two equal payments of $1.25 million in each of July 2018 and July 2019. At March 31, 2018 and March 25, 2017, advances payable to the Company’s controlling shareholder, Montrovest, amounted to $4.0 million and $1.5 million.

(d)

In August 2002, the Company entered into a Diamond Inventory Supply Agreement with Prime Investments S.A. and a series of conditional sale agreements with companies affiliated with Prime Investments S.A. pursuant to which Prime Investments S.A. or a related party is entitled to supply Birks and its subsidiaries or

F-32

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

affiliates with at least 45%, on an annualized cost basis, of such company’s aggregate loose diamond requirements, conditional upon the prices remaining competitive relative to market and needs in terms of quality, cut standards and specifications being satisfied. During fiscal 2018, the Company purchased approximately nil (nil in fiscal 2017, and $0.5 million in fiscal 2016, of diamonds from Prime Investments S.A. and related parties. As of March 26, 2016, Asiya Trust, as trustee of Beech Settlement Trust, which is the ultimate beneficial owner of Prime Investments S.A., owned 15.0% of the Company’s outstanding Class A voting shares. During fiscal 2017, Asiya Trust disposed of their shares to third parties.

(e)

On June 30, 2009, the Company’s Board of Directors approved the Company entering into a consulting services agreement with Gestofi S.A. (“Gestofi”) in accordance with the Company’s Code of Conduct relating to related party transactions. Under the agreement, Gestofi undertook to assign Mr. Niccolò Rossi di Montelera as the employee of Gestofi responsible for providing the consulting services. The consulting services relate to providing advice and assistance in (i) new product development and product brand collection assortment, (ii), strategic and business development projects and financial matters, (iii) the implementation of the Company’s strategy and planning, and (iv) such other services reasonably requested by the Company’s Chief Executive Officer or Chairman (collectively, the “Consulting Services”). The initial one-year term of the agreement began on August 1, 2009, and the agreement may be renewed for additional one-year terms. The agreement has been renewed yearly. The Consulting Services, prior to June 2014, were provided to the Company for a fee of approximately CAD$13,700 ($10,324 in U.S. dollars) per month less any applicable taxes plus out of pocket expenses. In June 2014, upon the renewal of the agreement for an additional one-year term, the monthly fee changed to 13,000 Swiss francs ($13,310 in U.S. dollars) per month. In February 2015, the Company’s Board of Directors approved the payment of an annual fee of $12,500 to Gestofi for services it provided in connection with the issuance of the Montrovest LC for the benefit of the Company. Mr. Niccolò Rossi di Montelera is a member of the Board of Directors and the son of Dr. Lorenzo Rossi di Montelera, Birks Group’s former Chairman and a director and chairman of the board of Gestofi. On August 1, 2015 an amended and restated consulting agreement was entered into on substantially the same terms and conditions until July 31, 2016. In June 2016, the agreement was renewed for an additional one-year term. The amended and restated consulting agreement as it relates to the consulting services provided by Mr. Niccolò Rossi di Montelera was terminated effective December 31, 2016 as a result of his appointment as Executive Chairman of the Board.

Additionally, in November 2016, the Company also entered into a consulting services agreement with Gestofi for the services of Dr. Lorenzo Rossi di Montelera, Birks Group’s former Chairman and a director and chairman of the board of Gestofi. The agreement expired in September 2017. In fiscal 2018 and 2017, the Company paid $33,333 and $16,666 in relation to this agreement.

(f)

In accordance with the Company’s Code of Conduct related to related party transactions, in April 2011, the Corporate Governance and Nominating Committee and Board of Directors approved the reimbursement of expenses to Regaluxe S.R.L., such as rent, communication, administrative support and analytical service costs, incurred in supporting the office of Dr. Lorenzo Rossi di Montelera, the Company’s Chairman of the Board of Directors, and of Mr. Niccolò Rossi di Montelera, the Chairman of the Company’s Executive Committee, for work performed on behalf of the Company, up to a yearly maximum of $250,000. The yearly maximum was increased to $260,000 in fiscal 2014. During fiscal 2018, 2017, and 2016, the Company paid $245,000, $178,000 and $201,000, respectively, to Regaluxe under this agreement. This agreement was renewed in March 2018 for an additional one year term, and the yearly maximum was decreased to $130,000.

(g)	Effective January 1, 2017, the Company agreed to total annual compensation of €250,000 with Mr. Niccolò Rossi di Montelera in connection with his appointment as Executive Chairman of the Board and Chairman of

F-33

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

the Executive Committee. In fiscal 2018 and 2017, the Company paid $295,000 and $67,000, respectively in connection with this agreement.

(h)

17.

Financial instruments:

(a)	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.

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 and accounts payable and accrued liabilities approximates fair values as at the balance sheet date. As of March 31, 2018 and March 25, 2017, for the $28.6 million and $44.8 million, respectively, of bank indebtedness and the $1.8 million and $4.5 million, respectively of long-term debt bearing interest at variable rates, the fair value is considered to approximate the carrying value.

As of March 31, 2018 and March 25, 2017, the fair value of the remaining $4.6 million and $2.0 million, respectively of fixed-rate long-term debt is estimated to be approximately $4.5 million and $1.9 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.

18.

Discontinued operations and disposal group

The Company considers a component to be classified as discontinued operations when it meets the criteria established under GAAP related to reporting discontinued operations and disclosures of disposals of components of the Company. The disposal of such components that represents a strategic shift that should have

F-34

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

or will have a major effect on the Company’s operations and financial results qualify as discontinued operations. The results of discontinued operations are reported in discontinued operations in the consolidated statements of operations for current and prior periods commencing in the period in which the business meets the criteria of an asset held for sale and discontinued operation, and will include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

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 Purchase Agreement to Aurum Group USA, Inc., a Delaware corporation (“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 $106.8 million (“the Aurum Transaction”). This disposal is in line with the Company’s objective to accelerate the transformation of Birks into an international omni-channel business and into a globally-renowned luxury brand. With the sale of Mayors, the Company will solely focus its retail operations in Canada through the renovation of its new flagship stores and new concepts stores, and will shift its strategic focus towards growing the Birks brand internationally through the growing of its e-commerce and wholesale businesses. Because the Company’s retail operations in the U.S market were a significant part of the Company’s operations and financial results, the Company has determined that the disposal of Mayors represents a strategic shift. Accordingly, the assets and liabilities of Mayors have been segregated and classified as disposal group in the consolidated balance sheet of the comparative period of March 25, 2017. Furthermore, the activities of Mayors have been segregated and classified as discontinued operations in the consolidated statements of operations and cash flows for all periods presented. Legal and professional fees of approximately $2.9 million have been incurred as a result of the Aurum Transaction and have been included in the calculation of the gain on disposal of Mayors. Debt extinguishment charges of approximately $2.7 million have been incurred as a result of the Aurum Transaction. These transaction fees along with the interest expense generated by the Prior Revolving Credit Facility associated with Mayors have been allocated to the results of the discontinued operations. Included in the results of the discontinued operations is an obsolescence reserve on inventory of $2.1 million.

As a condition to the closing of the Aurum Transaction, the Company and Mayors entered into (i) an inventory purchase agreement whereby the Company purchased approximately $1.8 million in inventory from Mayors; (ii) a transition services agreement whereby the Company agreed to provide certain transition services to Mayors for a period of six months following the closing date of the transaction, subject to certain renewal rights; (iii) a services agreement whereby Mayors agreed to provide certain services to the Company for a period of twelve months following the closing date of the transaction, subject to certain renewal rights and; (iv) an authorized five-year dealer agreement with Mayors whereby Mayors will promote the sale of Birks branded products and trademarks at its existing locations in the United States.

F-35

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016

The following table presents the net income from discontinued operations for the year ended March 31, 2018, March 25, 2017 and March 26, 2016:


	Fiscal Year Ended
	March 31, 2018			March 25, 2017			March 26, 2016
	(In thousands, except per share amounts)

Net sales	$	85,274		$	170,485		$	157,175
Cost of sales		55,917			108,833			100,757

Gross profit		29,357			61,652			56,418

Selling, general and administrative expenses		23,871			47,043			42,792
Restructuring charges		-			160			205
Depreciation and amortization		1,285			2,416			2,438

Total operating expenses		25,156			49,619			45,435


Operating income		4,201			12,033			10,983
Interest and other financial costs		2,829			5,326			5,720
Debt extinguishment charges		2,702			-			-

(Loss) income from discontinued operations		(1,330	)		6,707			5,263
Income taxes (benefits)		75			(5,277	)		50

(Loss) income from discontinued operations, net of taxes		(1,405	)		11,984			5,213
Gain on disposal, net of taxes		29,882			-			-

Net income from discontinued operations,	$	28,477		$	11,984		$	5,213


Weighted average common shares outstanding:
Basic		17,961			17,961			17,961
Net income from discontinued operations per common share:
Basic	$	1.58		$	0.66		$	0.29

Diluted		18,393			18,418			17,961
Net income from discontinued operations per common share:
Diluted	$	1.55		$	0.65		$	0.29

The table below presents the reconciliation of the gain on the sale of Mayors:


	October 23, 2017
Cash proceeds on disposal	$	106,756
Legal and professional fees incurred as a result of the Aurum Transaction	$	(2,893	)
Cash	$	2,438
Accounts receivable		12,421

F-36

BIRKS GROUP INC.

Notes to Consolidated Financial Statements

Years ended March 31, 2018, March 25, 2017 and March 26, 2016


Inventory		70,469
Prepaid expenses		878
Property and equipment		8,839
Intangible assets		271
Other assets		193
Deferred income tax asset		5,303
Accounts payable		(21,518	)
Accrued expenses		(2,809	)
Long-term debt		(263	)
Other long-term liabilities		(2,241	)

Total identifiable net assets		73,981

Gain on disposal, net of taxes of nil	$	29,882

The assets and liabilities of the disposal group are presented as current or long-term as at March 25, 2017. The assets and liabilities of the disposal group were as follows as at March 25, 2017:


	As of
		March 25, 2017
		(In thousands)
Assets
Current assets:
Accounts receivable			11,007
Inventories			66,175
Prepaids and other current assets			780

Total current assets			77,962

Property and equipment			9,076
Intangible assets			298
Other assets			183
Deferred income taxes			5,303

Total non-current assets			14,860

Total assets		$	92,822


Liabilities
Current liabilities:
Bank indebtedness			25,594
Accounts payable			28,182
Accrued liabilities			3,435
Current portion of long-term debt			417

Total current liabilities			57,628

Long-term debt			26,468
Other long-term liabilities			2,290

Total long-term liabilities			28,758

Total liabilities		$	86,386

19. Subsequent events

As discussed in notes 1 and 7, on June 29, 2018, the Company secured a CAD$12.5 million (US$ 9.7 million) senior secured term loan with Crystal. Refer to note 7 for further details.

F-37

Exhibit 4.41

EMPLOYMENT AGREEMENT

This Agreement is made as of April 2, 2018 by and between Aurélie Pépion (the “Executive”) and Birks Group Inc., a corporation incorporated under the laws of Canada (the “Company”).

WHEREAS the Executive received and accepted a conditional offer of employment from the Company on February 9, 2018;

WHEREAS the parties declare and acknowledge that the pre-employment conditions set out in such offer have all been duly satisfied;

NOW, THEREFORE , in consideration of the foregoing and of their respective covenants and agreements, the parties agree as follows:

1.	Position, Responsibilities and Term of Agreement

1.1 Employment and Duties . Subject to the terms and conditions of this Agreement, the Company employs the Executive to serve, effective April 2, 2018 or as may be otherwise mutually agreed between the Company and the Executive, as its Vice-President, Omni-Channel Sales & Operations, reporting to the Company’s President and Chief Executive Officer. The Executive accepts such employment and agrees to perform in a diligent, careful and proper manner such responsibilities and duties commensurate with such a position as may be assigned to the Executive. The Executive agrees to devote substantially all business time and efforts to and give undivided loyalty to the Company.

1.2 Place of work : The Executive shall be based in Montreal, Quebec, Canada, and provide her services to the Company primarily in Canada, with the requirement to travel across Canada on a regular basis and abroad as needed and/or directed by the Company and any other traveling needs required by the position.

1.3 Effective Date : Subject to the provisions of this Agreement, the Executive’s employment will begin on April 2, 2018 or as may be otherwise mutually agreed between the Company and the Executive and this Agreement shall be effective as of that date (the “Effective Date”) and shall continue for an indefinite term thereafter unless otherwise terminated as provided for in this Agreement (the “Term”).

2.	Compensation

2.1 Base Salary . As of the Effective Date and during the Term of this Agreement, the Company shall pay the Executive an annual gross base salary of $250,000 (“Base Salary”) less all applicable taxes, and withholdings, payable in the manner dictated by the Company’s standard payroll policies. The Base Salary may be adjusted from time to time at the Company’s discretion.

2.2 Incentive Compensation .

“Fiscal Year” in this Agreement shall mean such period of approximately twelve (12) months defined as such from time to time by the Company’s Board of Directors. In the event of any change in the definition of “Fiscal Year” it should not adversely affect any bonus payment or other compensation based or calculated on the Fiscal Year.

a) Annual Cash Bonus. Commencing with the 2019 Fiscal Year and for each Fiscal Year of the Company thereafter through which the Executive remains an active employee of the Company, the Executive will have the opportunity to earn a bonus, when available, based on achievement of a targeted level of performance, as reflected in an annual bonus letter, if applicable, and based on performance criteria set by the Company. The target bonus would be 50% of the Base Salary. The Executive is required to be an active employee continuously from the Effective Date through the date of the payment of the bonus in order to receive any payment of bonus. The maximum bonus pay out for any Fiscal Year is the maximum allowed under the then current Management Bonus Plan.

b) FY2019 Guaranteed Bonus. Notwithstanding the foregoing, for Fiscal Year 2019 commencing April 1, 2018 and ending March 30, 2019, the Executive will receive a minimum guaranteed bonus of $62,500 to be paid following the Board approval of the Company’s Fiscal Year 2019 audited financial statements, subject in all cases to the Executive remaining an active employee of the Company through the time of payout, and less all applicable taxes and withholdings. This guaranteed bonus will be deducted from the total amount of any other bonus that may be earned for Fiscal Year 2019.

2.3 Participation in Benefit Plans and Discount Policy . If acceptable by the Company’s group insurers, the Company will provide the Executive with the group insurance coverages, currently including life, dental, medical insurance benefits and short-term and long-term disability benefits, the cost of which shall be borne by the Company according to the prevailing policies applicable to other Senior Management members. In addition, the Executive will be entitled to participate in the Company’s Discount Policy for Officers and Members of the Board. The Company may, at its discretion, modify said policies from time to time.

2.4 Vacation Days . The Executive shall be entitled to twenty (20) days of vacation for each Fiscal Year consistent with the Company’s vacation policy for Senior Management officers. The vacation days are earned for a given Fiscal Year during that same Fiscal Year; as a result, for any portion of a Fiscal Year worked, the vacation shall be prorated on the basis of the number of days worked during the Fiscal Year. Unused vacation days may not be carried over from year to year, unless otherwise approved by the Company.

2.5 Expenses. During the term of employment hereunder, the Executive shall be entitled, without duplication, to receive reimbursement for all reasonable and pre-

approved business expenses incurred by the Executive in accordance with the policies and procedures established by the Company.

2.6 Car Allowance : In addition but without duplication, the Executive shall receive the following gross all-inclusive car allowance, in a lump sum amount equal to $1,000 per month in accordance with the car allowance policy applicable to other members of Senior Management as may be amended from time to time. Any other automobile costs or expenses including, without limitation, maintenance, insurance, repairs, lease or financing costs, and mileage, are the sole responsibility of the Executive.

2.7 Annual Retirement Benefit Contribution : During the term of employment hereunder, the Company will pay the Executive an annual retirement benefit contribution of $25,000 payable by installment on a quarterly basis, less applicable taxes and withholdings. At the option of the Executive and to the extent permitted by applicable laws, this amount may be paid to the Executive’s registered retirement savings plan.

2.8 Taxable Benefits : It is understood that to the extent these provisions in this Section 2 generate a taxable benefit for income tax purposes, these taxes will be the sole responsibility of the Executive and the Company reserves the right to withhold the taxes as applicable.

3.	Termination

3.1 Certain Definitions . For purposes of this Agreement, the following terms have the meanings indicated:

a) “Change in Control” shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied:

(i) any “Person” (other than members of the Controlling Shareholder Group, the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company controlled, directly or indirectly, by the Controlling Shareholder Group), is or becomes the “beneficial owner”, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;

(ii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation or entity, OTHER THAN a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or a merger or consolidation with or into any company the voting securities of which are beneficially owned 50% or more by the Controlling Shareholder Group;

(iii) the shareholders of the Company approve a plan of liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(iv) the total combined voting power of the Company (or any successor entity) represented by shares of voting stock owned by members of the Controlling Shareholder Group is reduced to less than 50%.

The “Controlling Shareholder Group” includes: (i) Montrovest B.V.; (ii) Grande Rousse Trust; (iii) Meritus Trust Company Limited; (iv) Dr. Lorenzo Rossi di Montelera, (v) the spouse and lineal descendants of Dr. Lorenzo Rossi di Montelera; and/or (vi) any trust whose principal beneficiaries are persons described in clauses (iv) and (v).

A “Person” includes any natural person and any corporation, limited liability company, partnership, trust or other entity.

b) “Cause” shall mean: (i) the willful and continued failure by the Executive to substantially perform the Executive’s duties for the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness, or any such actual or anticipated failure after the Executive announces her intention to resign for Good Reason), (ii) the willful engaging by the Executive in misconduct which is financially injurious to the Company, or (iii) the Executive’s conviction or a pleading of guilty or nolo contendere with respect to the commission of an indictable offence or a crime involving bad faith or dishonesty; (iv) the Executive’s insubordination or any act or omission of the Executive, which pursuant to applicable law, constitutes a serious reason for termination of employment without notice, payment in lieu of notice or any indemnity whatsoever; (v) any breach by the Executive of any material term of this Agreement or any other written agreement between the Executive and the Company; or (vi) the Executive’s material violation of any of the Company’s policies. No act, or failure to act, on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interest of the Company.

c) “Disability” shall mean the Executive’s inability to perform the Executive’s duties by reason of mental or physical disability for at least ninety (90) days in any three-hundred sixty-five (365) day period. In the event of a dispute as to whether the Executive is disabled within the meaning hereof, either party may from time to time request a medical examination of the Executive by a doctor appointed by the Chief of Staff of a hospital selected by mutual agreement of the parties, or as the parties may otherwise agree, and the written medical opinion of such doctor shall be conclusive and binding upon the parties as to whether the Executive has become disabled and the date when such disability arose. The cost of any such medical examination shall be borne by the Company.

d) “Good Reason” shall mean (i) the Executive ceases to be a member of the senior management of the Company, or (ii) the Company breaches any material provision of this Agreement. In the event of a resignation for Good Reason, Executive must provide the Company with a written “Notice of Resignation for Good Reason.” The “Notice of Resignation for Good Reason” shall include the specific reason that the Company’s act or failure to act has given rise to the Executive’s resignation for Good Reason in accordance with this Agreement.

3.2 Termination of Agreement by the Executive.

Executive may terminate this Agreement by giving the Company written notice of such termination in accordance with Section 6.2 at least 90 days prior to the termination date; such notice may be waived or curtailed at the Company’s option.

3.3 Termination without Cause or Resignation for Good Reason.

In the event at any time of (a) the termination of the employment of the Executive by the Company without Cause (for any reason other than by death or Disability) or (b) the resignation of the Executive from the Company within thirty (30) days of an event constituting Good Reason, the Company shall pay or provide to the Executive only the following:

(i) Any earned and accrued but unpaid installment of base salary through the date of the Executive’s resignation for Good Reason or termination at the rate in effect immediately prior to such resignation for Good Reason or termination (or the rate in effect immediately prior to the occurrence of an event that constitutes Good Reason, whichever is greater) and all other unpaid amounts to which the Executive is entitled as of such date under any compensation plan or program of the Company (including payment for any vacation time earned and not taken during the Fiscal Year in which termination occurs and reimbursements not yet paid but due for business expenses previously incurred), such payments to be made in a lump sum within fifteen (15) days following the date of resignation for Good Reason or termination;

(ii) The amount of annual Cash Bonus the Executive would have been entitled to pursuant to Section 2.2(b), had Executive remained employed through the end of the Fiscal Year in which termination occurs, multiplied by a fraction, the numerator of which is the number of days from the beginning of such Fiscal Year to the date of termination, and the denominator of which is 365, such amount to be paid no later than the time annual bonuses are paid to other executives of the Company;

(iii) In lieu of any further salary, or of any severance payments or notice of termination of employment to the Executive, the Executive will receive up to six (6) months of salary continuation at the same rate of base salary in effect immediately prior to the Executive’s resignation for Good Reason or termination (or the base salary in effect immediately prior to the occurrence of an event that constitutes Good Reason, whichever is greater). The Company will make the salary continuation payments, less applicable taxes and other withholdings, on the Company’s regular payroll dates. In addition, the Executive will receive the equivalent of up to six (6) months average annual

cash bonus (based on the average annual cash bonus paid to her over the previous three Fiscal Years); the amount of such average bonus will be paid out in equal installments, less applicable taxes and other withholdings, on the same regular payroll dates referred to above. In the event the Company terminates the Executive without Cause or if the Executive resigns for Good Reason, the Company may at its sole discretion, require the Executive to continue providing services for a three (3) month working notice period while said salary continuation payments are being made;

All payment of salary and of bonus continuation shall cease upon the Executive commencing alternate employment or other gainful activities.

The maximum period of six (6) months referred to above shall be increased by one (1) additional month after two (2) years of service for each additional year of service thereafter, up to a maximum of twelve (12) months after eight (8) years of service.

However, should the Executive be terminated without Cause within six (6) months of a Change in Control, then the Executive shall receive instead of the salary continuation set forth above a lump sum amount equal to twelve (12) months of base salary and annual cash bonus (based on the average annual cash bonus paid to her over the previous three (3) Fiscal Years) regardless of the Executive’s length of service at that time.

(iv) The Company shall maintain in full force and effect for the period described in Section 3.3(iii), following the date of the Executive’s resignation for Good Reason or termination without Cause, health and dental insurance programs (not disability and life insurance programs) in which the Executive was entitled to participate either immediately prior to the Executive’s resignation for Good Reason or termination without Cause or immediately prior to the occurrence of an event that constitutes Good Reason, provided that the Executive’s continued participation is possible under the general terms and provisions of such programs.

The health and dental insurance program coverage shall cease upon the Executive commencing alternate employment or other gainful activities.

(v) As a condition to her entitlement to receive termination payments and benefits under clauses (ii)-(iv) of this Section, the Executive shall have executed and delivered to the Company a release substantially in the form attached hereto as Exhibit A.

For greater clarity, except as set forth above, no other payment whatsoever shall be due by the Company to the Executive.

3.4 Termination for Cause or Resignation without Good Reason . In the event of the Executive’s termination of employment for Cause, or her resignation without Good

Reason, only the amounts set forth in clause (i) of Section 3.3 shall be payable to the Executive. No other payment whatsoever shall be due by the Company to the Executive.

3.5 Termination for Disability or Death . In the event of the Executive’s termination of employment because of death or Disability, the Company shall pay or provide to the Executive only the following:

(i) the amount set forth in clause (i) of Section 3.3;

(ii) the amount set forth in clause (ii) of Section 3.3;

(iii) any vested stock option shall expire in accordance with the Company’s long-term incentive plan and grant agreement under which the stock option was granted.

No other payment whatsoever shall be due by the Company to the Executive.

3.6 Withholding . The Company shall have the right to deduct from any amounts payable under this Agreement an amount necessary to satisfy its obligations, under applicable laws, to withhold income or other taxes of the Executive attributable to payments made hereunder.

4.	Non-Competition/Confidentiality

4.1 The Executive agrees that during the Executive’s employment with the Company, and for a twelve-month period thereafter, the Executive will not, directly or indirectly, do or allow any of the following:

a) (i) Compete, in any manner, for herself or, in any capacity, for any other person or business entity whatsoever which competes with the business of the Company or any of its affiliates of the designing, manufacturing and/or retail and/or wholesale sale of precious stones, jewellery, watches and other related products and the provision of related services and any other business as conducted on the date the Executive ceases to be employed by the Company in any capacity, including as a consultant (a “Prohibited Business”) in Canada or any of the foreign countries, including without limitation in the states in the United States of America, in which the Company or any of its affiliates is doing business (a “Competing Business”);

(ii) solicit any person or business that was at the time of the Executive’s termination of employment, or within one year prior thereto, a customer or supplier of the Company or any of its affiliates;

This prohibition shall not apply provided the two following conditions are both met: the competitor does not derive 5% or more of its revenues (including those of its affiliates in aggregate) from the aggregate of all its Prohibited Businesses; and such

revenues are less than 25% of the revenues of the Company and its affiliates in such Prohibited Business;

b) Employ, assist in employing, or otherwise engage in business with any present executive, officer, employee or agent of the Company or its affiliates; or

c) Induce any person who is an executive, officer, employee or agent of the Company, or any member of the Company or its affiliates, to terminate their relationship with the Company or any of its affiliates.

4.2 The Executive agrees that during her employment with the Company and for so long thereafter as the Company has not allowed public disclosure of the business information referred to below, the Executive will not, directly or indirectly, disclose, divulge, discuss, copy or otherwise use or allow to be used in any manner, the customer lists, manufacturing and marketing methods, product research or engineering data, vendors lists, contractors lists, financial information, business plans and methods or other confidential business information or trade secrets of the Company, its direct or indirect subsidiaries or its affiliates, it being acknowledged by the Executive that all such information regarding the business of the Company, its direct or indirect subsidiaries or its affiliates compiled or obtained by, or furnished to, the Executive while the Executive shall have been employed by or associated with the Company is confidential information and the Company’s exclusive property (it being understood, however, that the information publicly disclosed by the Company shall not be subject to this Section 4.2).

4.3 Upon the termination of the Executive’s employment with the Company, or at any time upon the request of the Company, the Executive (or the Executive’s heirs or personal representatives) shall deliver to the Company (a) all documents and materials (including, without limitation, computer files) containing confidential information relating to the business and affairs of the Company, its direct and indirect subsidiaries and its affiliates, and (b) all documents, materials and other property (including, without limitation, computer files) belonging to the Company, its direct or indirect subsidiaries and its affiliates, which in either case are in the possession or under the control of the Executive (or Executive’s heirs or personal representatives).

4.4 The Executive expressly agrees and understands that the remedy at law for any breach by the Executive of any of the provisions of this Section 4 will be inadequate and that damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that upon adequate proof of the Executive’s violation of any legally enforceable provision of this Section 4, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Section 4 shall be deemed to limit the Company’s remedies at law or in equity for any breach by the Executive of any of the provisions of this Section 4, which may be pursued or availed of by the Company.

4.5 In the event the Executive shall violate any legally enforceable provision of this Section 4 as to which there is a specific time period during which she is prohibited from taking certain actions or from engaging in certain activities, as set forth in such

provision, then, such violation shall toll the running of such time period from the date of such violation until such violation shall cease; provided, however, the Company shall seek appropriate remedies in a reasonably prompt manner after discovery of a violation by the Executive.

4.6 The Executive has carefully considered the nature and extent of the restrictions upon her and the rights and remedies conferred upon the Company under this Section 4, and hereby acknowledges and agrees that the same are reasonable in time, territory and scope, are designed to eliminate competition which otherwise would be unfair to the Company, are not designed to stifle the inherent skill and experience of the Executive, would not operate as a bar to the Executive’s sole means of support, are fully required to protect the legitimate interests of the Company and do not confer a benefit upon the Company disproportionate to the detriment to the Executive.

4.7 If any court or arbitrators determine that any of the covenants contained in this Section 4 (the “Restrictive Covenants”), or any part thereof, is unenforceable because of the duration or territory of such provision, the duration or territory of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.

4.8 The Company and the Executive intend to and hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographical scope of the Restrictive Covenants. If the courts of any one or more or such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of breach of scope or otherwise, it is the intention of the Company and the Executive that such determination not bar or in any way affect the Company’s right to the relief provided above in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenants as to breaches of such Restrictive Covenants in such other respective jurisdiction, such Restrictive Covenants as they relate to each jurisdiction being, of this purpose, severable, diverse and independent covenants, subject, where appropriate, to the doctrine of res judicata .

5.	Intellectual Property

5.1 The Executive hereby acknowledges that the Company is the sole and exclusive owner of all rights, title and interest in and with regard to the Products (as hereinafter defined). Consequently, the Executive, expressly and irrevocably, hereby assigns, to the Company and its successors and assigns, exclusively and globally, all rights, title and interest in the Products in their final form and as they are developed from time to time, including, without limiting the scope of the foregoing, all copyrights, trade secrets, trademarks, industrial designs, patent rights, and any other intellectual property rights in any work product carried out as part of or in connection with his/her duties as Executive of the Company, during or outside of business hours, relating to any current, planned or future activities of the Company or any company in connection with the Company or its affiliated entities, including, but not limited to, designs, mock-ups, documents, publications, promotional material, advertisements, texts, data and other

information, programs and software, developments, inventions, models, databases, business methods, technical and non-technical procedures, manuals, reports and any improvements, modifications or additions made to the products that have been, are being or will be made or designed by the Executive (alone or jointly with others, whether carried out on the Company’s premises or not), during the Term (collectively referred to as “Products”).

5.2 The Executive hereby waives in favour of the Company, its successors and assigns, all moral rights that she may have or claim to have with respect to the Products, including (i) the right to being recognized as the author or creator of the Products as well as (ii) the right to challenge any modification or use of the Products.

5.3 The Executive acknowledges that the Products are and shall remain the sole property of the Company and may not be used by the Executive for any purpose other than for the Company’s benefit, with its consent and according to its instructions.

5.4 The Executive hereby agrees to sign any document that the Company, its successors or assigns consider necessary or useful to give full effect to the Company’s rights concerning the Products. All Products and any media containing the Products that are in the Executive’s possession shall be immediately returned to the Company upon termination of this Agreement and no copy shall be retained by the Executive without the Company’s explicit, prior written consent.

6. Assignment . The rights and obligations of the parties under this Agreement shall not be assignable by either the Company or the Executive, provided that this Agreement is assignable by the Company to any affiliate of the Company, to any successor in interest to the business of any of the Company, or to a purchaser of all or substantially all of the assets of any of the Company including without limitation by way of merger or stock purchase.

7.	Miscellaneous.

7.1 Governing Law . This Agreement shall be construed in accordance with and governed for all purposes by the laws of the Province of Quebec and the laws of Canada applicable thereto.

7.2 Notices . Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or delivered by a nationally recognized delivery service, or three days after being sent by certified mail, postage prepaid, with return receipt requested to, the parties at their respective addresses set forth below:

a) To the Company:

Birks Group Inc.

2020 Robert-Bourassa Blvd.

Suite 200

Montreal, Quebec

H3A 2A5

Attention: Vice President and Chief Talent Officer

b) To the Executive:

Mrs. Aurélie Pépion

11 Saguenay Avenue

Toronto, Ontario

M5N 2Y5

7.3 Severability . If any paragraph, subparagraph or provision hereof is found for any reason whatsoever to be invalid or inoperative, that paragraph, subparagraph or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Executive in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement.

7.4 Entire Agreement, Amendment and Waiver . This Agreement constitutes the entire agreement and supersedes all prior agreements of the parties hereto relating to the subject matter hereof, and there are no oral terms or representations made by either party other than those herein. This Agreement may not be amended, supplemented or waived except by a writing signed by the party against which such amendment or waiver is to be enforced. The waiver by any party of a breach of any provision of this Agreement shall not operate to, or be construed as a waiver of, any other breach of that provision nor as a waiver of any breach of another provision.

7.5 Jurisdiction. Subject to Section 4.8, any legal action or proceeding arising out of or relating to this Agreement shall be brought exclusively in the courts of the Province of Quebec and, by execution and delivery of this Agreement, the Executive and the Company irrevocably consent to the jurisdiction of those courts. The Executive and the Company irrevocably waive any objection, including any objection based on the grounds of forum non-conveniens, which either may now or hereinafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any transaction related thereto.

7.6 Enforcement .

a) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to the Executive hereunder, all such amounts shall be paid in accordance with the terms of this Agreement to the Executive’s estate or beneficiary.

b) If either party is required to institute litigation or arbitration to enforce their rights under this Agreement, then the prevailing party, as determined by a court of competent jurisdiction, shall be entitled to recover reasonable attorney’s fees and costs.

7.7 Survival of Rights and Obligations . The provisions of Sections 3.2, 3.3, 3.4, 3.5, 4.1, subject to the time limitation set out therein, 4.2 to 4.4 and 5 shall survive the termination or expiration of this Agreement. Section 4.1a) shall not survive the termination or expiration of this Agreement if the Company terminates the Executive without Cause, or if the Executive resigns with Good Reason. However, nothing in this subsection prohibits the Company from seeking relief under Section 4 of this Agreement, including circumstances where the Executive purports to resign with Good Reason.

7.8 Counterparts . This Agreement may be executed in two counterparts, each of which is an original but which shall together constitute one and the same instrument.

7.9 Written Resignation . In the event this Agreement is terminated for any reason (except by death), the Executive agrees that if at the time Executive is a director or officer of the Company or any of its direct or indirect subsidiaries, Executive will immediately deliver a written resignation as such director or officer, such resignation to become effective immediately.

7.10 Executive’s Representations . The Executive represents and warrants to the Company that (i) the Executive is able to perform fully the Executive’s duties and responsibilities contemplated by this Agreement and (ii) there are no restrictions, covenants, agreements or limitations of any kind on her right or ability to enter into and fully perform the terms of this Agreement.

7.11 Currency . For the avoidance of doubt, any references to monies or dollars set forth in this Agreement shall be in Canadian Dollars.

7.12 Language . The parties hereto acknowledge that they have requested and are satisfied that this Agreement and all related documents be drawn up in the English language. Les parties aux pr é sentes reconnaissent avoir requis que la pr é sente entente et les documents qui y sont relatifs soient r é dig é s en anglais.

IN WITNESS WHEREOF , the parties hereto have entered into this Agreement upon the date first above written.


		BIRKS GROUP INC.

		By:		/s/ Jean-Christophe Bédos
				Jean-Christophe Bédos
				President and Chief Executive Officer

		EXECUTIVE

		/s/ Aurélie Pépion
		Aurélie Pépion

EXHIBIT A

RELEASE

Birks Group Inc. (the “Company”) and Aurélie Pépion (the “Executive”) entered into an Employment Agreement (“Employment Agreement”) made as of April 2, 2018. To satisfy the requirement of Section 3.3 of the Employment Agreement, Executive hereby grants the Company the Release set forth below:

1. Release . The Executive, for herself, her heirs, and personal and legal representatives, except as provided in Section 2 hereof, does hereby irrevocably and unconditionally release, remise, and forever discharge the Company and any of its parent companies, subsidiaries or affiliates and each of their respective officers, directors, and employees (the “Releasees”), however denominated, past, present, and future, and their predecessors, successors, and assigns, of and from any and all manner of actions, causes, matters, suits, dues, bonds, judgments, debts, accounts, covenants, agreements, claims, controversies, guarantees, warranties, damages, liabilities, or demands of any nature whatsoever in law or equity, whether or not now known to her that she ever had, now has, or hereafter can, shall, or may have, for, upon, or by reason of any matter, action, omission to act, transaction, practice, conduct, cause, or thing of any kind whatsoever to the date she executes this Release. Such release, remise, and discharge of the Releasees includes, without limitation, any and all claims under any and all federal, provincial, state and local statutes or common law and extends without limitation to any and all acts, practices, or conduct by the Releasees, or the effects thereof, whether or not Executive now has knowledge thereof, or if any such effects exist or may in the future exist as a result of any act, omission, practice, or conduct that occurred prior to the date she executes this Release. Except as provided in Section 2, this Release shall specifically include, but not be limited to, the following:

(a) any and all claims and matters of any kind which arise or might arise, or which otherwise relate to the Executive’s employment with the Company or any of the Company’s parent companies, subsidiaries, affiliates, or the Executive’s termination of employment;

(b) any and all claims for wages and benefits (including without limitation salary, stock, stock options, commissions, bonuses, severance pay, health and welfare benefits, vacation pay, and any other fringe-type benefit);

(c) any and all claims for wrongful discharge, breach of contract (whether written or oral, express or implied), and implied covenants of good faith and fair dealing;

(d) any and all claims for alleged employment discrimination on the basis of age, race, color, religion, sex, national origin, veteran status, disability and/or handicap or any other prohibited ground of discrimination, in violation of any federal, provincial, state, or local statute, ordinance, judicial precedent, or executive order;

(e) any and all claims under any federal, provincial, state or local statute relating to employee benefits;

(f) any and all claims in tort, including but not limited to any claims for fraud, misrepresentation, defamation, interference with contract or prospective economic advantage, intentional infliction of emotional distress, and/or negligence;

(g) any and all claims for additional commissions, compensation, or damages of any kind; and

(h) any and all claims for attorneys’ fees and costs.

2. Review . The Executive acknowledges that she has had the opportunity to review the Employment Agreement and this Release and to consider their terms with her attorneys and advisors and that she understands their meaning and effect. The Executive hereby acknowledges that the execution of this Release is the Executive’s own free and voluntary act and that the only inducement for Executive’s granting this Release is the payment provided for in Section 3.3 of the Employment Agreement. The Executive understands and acknowledges that the agreement with the Company constitutes a transaction within the terms of articles 2631 et seq. of the Civil Code of Québec and is made without prejudice and without any admission whatsoever of responsibility, fault or liability on the part of the Company.

3. General .

(a) This Release shall be deemed to have been made in and shall be construed in accordance with the laws of the Province of Québec.

(b) This Release shall enure to the benefit of and be binding upon the Executive and the Company and their respective heirs, executors, administrators, legal personal representatives, successors and assigns.

(c) The Executive has requested that this Release be drawn up in the English language. / Le soussigné a requis que la présente Quittance soit rédigée en anglais .

UNDERSTOOD AND AGREED:



Aurélie Pépion				Date


Witness				Date

Exhibit 4.42

CONSULTING AGREEMENT

This Consulting Agreement (the “Agreement”) made this 29 ^th day of March 2018.


BETWEEN:		BIRKS GROUP INC. , a corporation incorporated under the laws of Canada with its head office located at 2020 Boul. Robert-Bourassa, bureau 200, Montreal, Québec, Canada, H3A 2A5, herein represented by Jean-Christophe Bédos, duly authorized as he so declares;

		(the “Company”)

AND:		Mr. Carlo Coda Nunziante, residing at Via Benedetto Marcello n.6, 20124 Milano (MI), Italy;

		(the “Consultant”)

WHEREAS , the Company seeks assistance in Strategic Planning, Market and Competitor Intelligence; and

WHEREAS , Consultant has agreed to perform consulting work for the Company in Strategic Planning, Market and Competitor Intelligence;

NOW, THEREFORE , the parties hereby agree as follows:

1.	C ONSULTANT ’ S S ERVICES

1.1

Consultant shall work directly with the Company’s CEO and CFO, to provide to the Company the following services (“Consulting Services”):

1.1.1

consulting advice on the Company’s Strategic Planning and Business Strategies;

1.1.2

provide studies and analyses in Market and Competitor Intelligence; and

1.1.3

such other services that may be reasonably requested by the Company’s CEO or CFO.

1.2

In providing the Consulting Services, Consultant undertakes to furnish to the Company, his best advice, information, judgment and knowledge.

1.3

Consultant will be expected to travel to Canada to attend various meetings as may be requested from time to time by the Company’s CEO, CFO or Chairman.

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2.	C ONSULTANT ’ S S TANDARD OF C ARE

2.1

Consultant represents that the Consulting Services shall be performed in a manner consistent with that level of care and skill ordinarily exercised by any professional consultants under similar circumstances at the time and location the Consulting Services are performed.

3.	C ONSIDERATION

3.1

Fees. In consideration for the Consulting Services to be performed by Consultant under this Agreement, the Company will pay Consultant the following:

3.1.1

a fee of €9,650 (Euros) per month (“Fee”) for an average minimum of 80 hours of work per month; and

3.1.2

an administrative fee of 9.5% of the Fee.

Consultant shall submit written invoices to the Company for the Consulting Services on a monthly basis and indicate on the invoices any time spent in Canada providing the Consulting Services. The Company shall pay Consultant the amounts due pursuant to submitted invoices within fourteen (14) days after such invoices are received by the Company. Consultant shall however be solely responsible for its administrative and overhead costs and taxes.

3.2

Expenses. The Company will reimburse Consultant for the following direct out-of pocket expenses reasonably incurred by Consultant in the performance of the Consulting Services:

3.2.1

pre-approved lodging, meals and transportation expenses of Consultant in accordance with the Company’s travel policy as may be amended from time to time.

In no event shall these expenses exceed €5,000 (Euros) in any quarter without the prior written consent of Company.

3.2.2

Consultant shall submit written documentation and receipts itemizing the dates on which expenses were incurred on a monthly basis for expenses incurred during the previous month. The Company shall pay Consultant the amounts due pursuant to submitted reports within fourteen (14) days after a report is received by the Company.

4.	T AXES

4.1

Company will withhold from any payments it makes to Consultant under this Agreement, such amounts, if any, as it may be required to withhold or remit to

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appropriate tax authorities in Canada, the United States, Italy or any other country pursuant to applicable tax legislation.

4.2

Company will be billed by Consultant and pay to Consultant the applicable Instituto Nazionale Previdenza social taxes which Consultant shall remit to the Italian authorities. For 2018, the applicable rate for such taxes is 2/3 of 25.72% up to total maximum taxes of €17,392 (Euros) on total gross Fees of €101, 428 (Euros).

T ERM

5.1

This Agreement shall commence on April 1, 2018 and shall terminate on March 31, 2019, unless earlier terminated by either party hereto in accordance with this Agreement. Either party may terminate this Agreement upon sixty (60) days prior written notice. The parties may agree to renew this Agreement at least sixty (60) days prior to its expiration by mutual agreement in writing for additional one (1) year terms on the same terms and conditions as set forth herein; such renewal will take effect at the expiration of its then current term.

6.	P ERMIT

6.1

In the event that a work permit is required for Consultant to provide the Consulting Services, the Company will endeavour, on behalf of Consultant, to obtain applicable work permits required in order for Consultant to render the Consulting Services, provided that if the Company is unable to obtain such required work permits on behalf of Consultant, the Company shall not be held responsible or incur any liability under this Agreement or otherwise.

7.	C OMPANY P OLICIES

7.1

Consultant shall be advised of the Company’s applicable policies and agrees to comply with such policies in the performance of the Consulting Services.

8.	I NDEPENDENT C ONTRACTOR

8.1

The relationship of Consultant to the Company in connection with the furnishing of the Consulting Services under this Agreement shall be that of an independent contractor. Consultant shall in no way be considered an employee, agent or legal representative of the Company for any purpose whatsoever. Consultant shall have sole responsibility for the payment of all applicable governmental taxes including federal, state, and local income taxes for fees it receives under this Agreement. Consultant does not have, and does not have the right to exercise, any authority to enter into any agreements for or on behalf of the Company.

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9.	C ONFIDENTIALITY

9.1

In the course of performing Consulting Services, Consultant acknowledges that it will have access to and/or become familiar with confidential information. Confidential information means all information and know-how, whether or not in writing of a private, secret or confidential nature concerning the business or financial affairs of the Company and its affiliates, including, but not limited to, inventions, products, processes, methods, techniques, projects, developments, plans, research data, clinical data, financial data, personnel data, computer programs and customer and supplier lists. It also refers to and includes all files, letters, reports, analyses, compilations, studies or other documents prepared by the Company, or by its agents, representatives or employees. Consultant undertakes, during the term of this Agreement and after termination thereof, not to divulge to anyone and not to use, directly or indirectly, for its own purposes or for any purpose that is not in the best interest of the Company, any and all such confidential information. Consultant hereby acknowledges expressly the confidentiality nature of that information.

10.

N ON - SOLICITATION

10.1

Consultant undertakes and agrees that during the term of this Agreement and for a six-month period thereafter, Consultant will not:

10.1.1

solicit, do or endeavour to do business with or hire, directly or indirectly, in any manner whatsoever, in the capacity of employee, consultant or in any other capacity whatsoever, one or more employees, directors, officers or other persons (hereinafter collectively referred to as the “Employees”) working for the Company at the time of termination of this Agreement, nor endeavour, directly or indirectly, in any manner whatsoever, to encourage any of said Employees to leave his/her post with the Company;

10.1.2

endeavour, directly or indirectly and in any manner whatsoever, to solicit, accept orders or negotiate agreements for services or products competitive with those of the Company from or with any prior or existing clients of the Company at the time of termination of this Agreement, or incite or induce any clients or suppliers to terminate, in whole or in part, its business relations with the Company at the time of the termination of this Agreement.

10.2

Consultant hereby acknowledges and agrees that all restrictions contained in this section 10 are necessary, valid and reasonable with regard to time, scope of activity and geographical area and are necessary to protect the Company’s legitimate interests. Consultant hereby expressly agrees that damages may not be an adequate remedy to compensate the Company for any breach of its obligations contained in this section 10, and accordingly agrees that in addition to any and all other remedies available, the Company shall be entitled to obtain relief by way of injunction to enforce the obligations in this section 10.

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10.3

In the event that any part of the foregoing covenants in this section 10 should be held to be invalid, the remainder thereof shall continue in full force and effect so as to protect the legitimate interests of the Company in its respective business. In addition, should any provision of this section 10 be declared or be determined by any court of competent jurisdiction to be unreasonable or excessively broad as to time, scope of activity or geographical area, it is agreed that the Company shall be entitled to enforce said provision for such period of time, for such activity and/or within such area as may be determined to be reasonable and appropriate in said court.

11.

N OTICE

11.1

Any notice or communication permitted or required by this Agreement shall be deemed effective when personally delivered or deposited, postage prepaid, in the first class mail properly addressed to the appropriate party at the address set forth below:

11.1.1

if to Consultant:

Mr. Carlo Coda-Nunziante

Via Benedetto Marcello, 6

20124 Milano (MI)

Italy

Telecopier: 011 39 02 4550 0991

11.1.2

if to Company:

Birks Group Inc.

2020 Boul. Robert-Bourassa, Suite 200

Montreal, Québec

Canada, H3A 2A5

Telecopier: (514) 397-2537

Attention: Vice-President, Legal Affairs and Corporate Secretary

12.

M ISCELLANEOUS .

12.1

Entire Agreement and Amendments

This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and replaces and supersedes all other agreements or understandings, whether written or oral. No amendment or extension of the Agreement shall be binding unless in writing and signed by both parties.

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12.2

Binding Effect, Assignment

This Agreement shall be binding upon and shall inure to the benefit of Consultant and the Company and to the Company’s successors and assigns. Nothing in this Agreement shall be construed to permit the assignment by Consultant of any of its rights or obligations hereunder, and such assignment is expressly prohibited without the prior written consent of the Company.

12.3

Governing Law, Severability

This Agreement shall be governed by the laws of the Province of Québec and the laws of Canada applicable thereto. The invalidity or unenforceability of any provision of the Agreement shall not affect the validity or enforceability of any other provision.

12.4

Language

This Agreement and related documents have been drawn up in English at the express request of the parties. Cette entente et les documents y afférents ont été rédigés en anglais à la demande formelle des parties.

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NOW THEREFORE , the parties have executed this Agreement as of the date first written above.

BIRKS GROUP INC.

per: /s/ Jean-Christophe Bédos

Jean-Christophe Bédos

President and Chief Executive Officer

/s/ Carlo Coda Nunziante

CARLO CODA NUNZIANTE

Exhibit 4.45

Execution Copy

AMENDMENT NO. 1 TO THE CREDIT AGREEMENT

THIS AMENDMENT NO. 1 TO THE CREDIT AGREEMENT is made as of June 29, 2018, 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 ”), WELLS FARGO CANADA CORPORATION , a Nova Scotia unlimited company, as administrative 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 ”) and BIRKS GROUP INC. and together with each other Person organized under the laws of Canada or a province thereof that joins under the Credit Agreement as a “Borrower” after the Closing Date in accordance with the terms of the Credit Agreement (each, a “ Borrower ” and all references herein to “Borrower” shall include each such additional Borrower who so joins).

WHEREAS the Borrower, the Agent and the initial Lender signatory thereto are parties to a Credit Agreement dated as of October 23, 2017 (as amended, supplemented, restated or otherwise modified from time to time, the “ Credit Agreement ”);

AND WHEREAS the Borrower, Crystal Financial LLC, as agent (the “ Term Loan Agent ”) and the lenders signatory thereto (the “ Term Loan Lenders ”) are parties to a Credit Agreement dated as of the date hereof (as amended, supplemented, restated or otherwise modified from time to time, the “ Term Loan Agreement ”);

AND WHEREAS in connection with the Credit Agreement and the Term Loan Agreement, the Borrower, the Agent, the Term Loan Agent, Montrovest B.V. (“ Montrovest ”), Cash, Gold & Silver Inc. and Cash, Gold & Silver USA, Inc. have entered into a postponement and subordination agreement dated as of the date hereof, pursuant to which, inter alia , Montrovest agreed that all indebtedness owing by the Borrower to Montrovest is subordinate to all indebtedness owing by the Borrower to each of the Lender and the Term Loan Lenders pursuant to or in connection with the Credit Agreement and the Term Loan Agreement on the terms set out therein, as applicable;

AND WHEREAS Montrovest, a corporation formed under the laws of the Netherlands, proposes to merge into Montel Sàrl (“ Montel ”), being its parent company, and will continue under the laws of Luxembourg as Montel (the “ Montrovest Merger ”);

AND WHEREAS the Borrower has requested certain amendments to the Credit Agreement in connection with the Term Loan Agreement, the Montrovest Merger and to permit certain payments under Section 6.7 of the Credit Agreement to be made to Carlo Coda Nunziante under a consulting arrangement with the Borrower;

AND WHEREAS in connection with the foregoing, the parties hereto agree to make certain amendments to the Credit Agreement;

NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual 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:

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ARTICLE 1

DEFINITIONS AND INTERPRETATION

1.1 Definitions . All capitalized terms used in this Agreement that are defined in the Credit Agreement 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. 1 to the Credit Agreement, as it may be amended, supplemented, restated or otherwise modified from time to time.

ARTICLE 2

AMENDMENTS TO CREDIT AGREEMENT

2.1 Effective as of the Effective Date (as defined below), the Credit Agreement is hereby amended as follows:

(a)

Schedule 1.1 ( Definitions ) is hereby amended as follows:

(i)

The following definition of “ Availability Block ” is added immediately after the definition of “ Authorized Person ”:

“ 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, $9,500,000, or (B) from January 21 to February 20 of any given Fiscal Year, $4,500,000.

(ii)

The definition of “ Borrowing Base ” is amended and restated in its entirety to read as follows:

“ Borrowing Base ” means, as of any date of determination, the Canadian Dollar Equivalent amount of the result of:

(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 the Borrowing Base shall not exceed 20% of the aggregate amount of the Borrowing Base, plus

(c) 90% of the amount 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 Inventory provided

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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, Inventory Reserves, 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.

(iii)

Part (a) of the defined term “ Change of Control ” is amended to change “Montrovest B.V.” to “Montrovest B.V. (which, following the Montrovest Merger, shall mean Montel)”.

(iv)

The following definition of “ Intercreditor Agreement ” is added immediately after the definition of “ Intercompany Subordination Agreement ”:

“ Intercreditor Agreement ” means the Intercreditor Agreement dated June 29, 2018, by and among the Agent and the Term Loan Agent, and acknowledged by each Loan Party, as it may be amended, supplemented or otherwise modified from time to time.

(v)

The following definition of “ Loan to Value Reserve ” is added immediately after the definition of “ Loan Party ”:

“ Loan to Value Reserve ” as of the date of determination by the Agent, from time to time an 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 to Value Reserve) set forth 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.

(vi)

The definition of “ Management Subordination Agreement ” is amended and restated in its entirety to read as follows:

“Management Subordination 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 or otherwise modified with the consent of Agent.

(vii)

The definition of “ Material Contract ” is amended and restated in its entirety to read as follows:

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“ Material Contract ” means any agreement or arrangement to which any Loan Party or any of its Subsidiaries is party (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 the Canadian 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 Subordinated Debt Documents, (ii) the Rolex Canada Documents, (iii) the Montrovest Debt Documents, (iv) the Management Agreement; (v) any Additional Subordinated Debt Documents; (v) the Closing Date US Divestiture Agreements; (vi) the Term Loan Documents, (vii) the Franchise Agreement dated as of October 18, 2017 between Borrower and GD Overseas SA, and (viii) the Concession Agreement dated as of November 30, 2015 between Borrower and Patek Philippe SA Geneve.

(viii)

The following definition of “ Montel ” is added immediately after the definition of “ Maximum Credit Amount ”:

“ Montel ” means Montel Sàrl, a corporation formed under the laws of Luxembourg, and its successors and permitted assigns.

(ix)

The definition of “ Montrovest Debt ” is amended and restated in its entirety to read as follows:

“ Montrovest Debt ” means all Indebtedness owing to Montrovest B.V. (which, following the Montrovest Merger, shall mean Montel) under the Montrovest Debt Documents that constitutes Permitted Indebtedness.

(x)

The definition of “ Montrovest Debt 2017 ” is amended and restated in its entirety to read as follows:

“ Montrovest Debt 2017 ” means Montrovest Debt incurred by the Borrower as of July 28, 2017 and owing to Montrovest 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.

(xi)

The definition of “ Montrovest Debt Documents ” is amended and restated in its entirety to read as follows:

“ Montrovest Debt Documents ” means, collectively, (i) the Amended and Restated Cash Advance Agreement dated 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 Montrovest B.V., (original principal amount of US$3,000,100), (iii) the

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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 by and 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 and shall be subject to the Montrovest Subordination Agreement.

(xii)

The following definition of “ Montrovest Merger ” is added immediately after the definition of “ Montrovest Debt Documents ”:

“ Montrovest Merger ” means the merger, pursuant to the laws of Netherlands, of Montrovest B.V. into Montel Sàrl.

(xiii)

The definition of “ Montrovest Subordination Agreement ” is amended and restated in its entirety to read as follows:

“ Montrovest Subordination Agreement ” 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 and Subordination 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 or otherwise modified with the consent of Agent and the Required Lenders.

(xiv)

Part (i) of the definition of “ Permitted Indebtedness ” is amended and restated in its entirety to read as follows:

(i) secured Indebtedness in an aggregate amount not to exceed $20,000,000 at any time, which amount shall include the Term Loan 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 Lien priority 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 are satisfied at the time of the incurrence of such Indebtedness;

(xv)

Part (y) of the definition of “ Permitted Liens ” is amended and restated in its entirety to read as follows:

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 subordinate and junior in priority to the Liens securing the Obligations; and

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(xvi)

The definition of “ Quebec Subordination Agreement ” is amended and restated in its entirety to read as follows:

“Quebec Subordination Agreement” means the subordination agreement dated as of June 29, 2018 between Investissement Québec, the Term Loan Agent and Agent, as the same may hereafter be amended, restated, supplemented or otherwise modified with the consent of Agent.

(xvii)

The definition of “ Reserves ” is amended and restated in its entirety to read as follows:

“ Reserves ” means, as of any date of determination, those reserves (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 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 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 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 or deemed 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.

(xviii)

The following definition of “ Term Loan ” is added immediately after the definition of “ Tax Lender ”:

“ Term Loan ” means the credit extensions (including, without limitation, the “Loan” as defined in the Term Loan Agreement) provided to the Borrower by the Term Loan Lenders under the Term Loan Documents.

(xix)

The following definition of “ Term Loan Agent ” is added immediately after the definition of “ Term Loan ”:

“ Term Loan Agent ” means the “Agent”, as defined in the Term Loan Agreement.

(xx)

The following definition of “ Term Loan Agreement ” is added immediately after the definition of “ Term Loan Agent ”:

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“ Term Loan Agreement ” means the Credit Agreement dated as of June 29, 2018, by and between, among others, the Term Loan Agent, as administrative 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 Intercreditor Agreement.

(xxi)

The following definition of “ Term Loan Borrowing Base ” is added immediately after the definition of “ Term Loan Agreement ”:

“ Term Loan Borrowing Base ” means the “Borrowing Base” as defined in the Term Loan Agreement.

(xxii)

The following definition of “ Term Loan Debt ” is added immediately after the definition of “ Term Loan Borrowing Base ”:

“ 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.

(xxiii)

The following definition of “ Term Loan Documents ” is added immediately after the definition of “ Term Loan Debt ”:

“ Term Loan Documents ” means the “Loan Documents” under and as defined in the Term Loan Agreement.

(xxiv)

The following definition of “ Term Loan Lenders ” is added immediately after the definition of “ Term Loan Documents ”:

“ Term Loan Lenders ” means the “Lenders” as defined in the Term Loan Agreement.

(xxv)

The following definition of “ Term Loan Secured Parties ” is added immediately after the definition of “ Term Loan Lenders ”:

“ Term Loan Secured Parties ” means the “Lender Group”, as defined in the Term Loan Agreement.

(xxvi)

The following definition of “ Term Loan Usage ” is added immediately after the definition of “ Term Loan Secured Parties ”:

“ Term Loan Usage ” means the aggregate principal balance of the Term Loan owing to all Term Loan Lenders.

(b)

Section 2.1(c) ( Revolving Loans ) is amended and restated in its entirety to read as follows:

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(c) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right (but not the obligation), 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 the Borrowing 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 such notice; (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 of calculation 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 in respect 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 Reserve shall 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 established 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)

Section 2.15 ( Interest Act (Canada); Criminal Rate of Interest; Nominal Rate of Interest ) is amended by adding the following new part (b) after part (a), and each subsequent part is re-lettered alphabetically accordingly thereafter:

(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 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 or any other Loan Documents, that the interest payable under this Agreement and the calculation thereof has not been adequately disclosed to the Borrower as required pursuant to Section 4 of the Interest Act (Canada).

(d)

Section 5.12 ( Further Assurances ) is amended by adding the following at the end of the Section:

Without limiting the generality of the foregoing, the Borrower shall ensure that promptly, and in no event more than 15 days, following the Montrovest Merger, Montel shall sign an acknowledgment and confirmation in respect of the

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Montrovest Subordination Agreement in form and substance satisfactory to the Agent.

(e)

Section 6.6(b)(i) ( Prepayments and Amendments ) is amended and restated in its entirety to read as follows:

(i) the Term Loan Documents (except to the extent expressly 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 Montrovest Debt Documents (except to the extent expressly permitted 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 in right of payment to the Obligations; or

(f)

Section 6.6 ( Prepayments and Amendments ) is amended by adding the following new part (c):

(c) make any payments in respect of the Term Loan Debt other than regularly scheduled interest payments pursuant to the terms of the Term Loan Agreement.

(g)

The final paragraph of Section 6.6 ( Prepayments and Amendments ) is amended and restated in its entirety to read as follows:

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 Montrovest Debt Documents, any Additional Subordinated Debt Documents, any Term Loan Document or Governing Documents.

(h)

Section 6.7(d) is amended to change each reference of “Montrovest B.V.” to “Montrovest B.V. (which, following the Montrovest Merger, shall mean Montel)”.

(i)

Section 6.7 ( Restricted Payments ) is hereby amended by deleting “and” at the end of subsection (d), adding “and” to the end of subsection (e) and adding a new subsection (f) as follows:

“the Borrower shall be permitted to pay Carlo Coda Nunziante up to an amount not greater than EUR€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 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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(j)

The following new Section is added immediately after Section 8.6 ( Default Under Other Agreements ), and each Section is re-numbered accordingly thereafter:

8.7. Default Under Term Loan Documents . If there is (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 Secured Hedging 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 waived under the terms of the Term Loan Documents or any Secured Hedging Agreement;

(k)

The following new Section 17.16 ( Intercreditor Agreement ) is added immediately after Section 17.15 ( No Setoff ):

17.16. Intercreditor Agreement . 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 arrangements among 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 the exercise 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 Intercreditor Agreement 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 Intercreditor Agreement 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.

(l)

Exhibit B-1 ( Form of Borrowing Base Certificate ) is deleted and replaced by Exhibit B-1 attached hereto.

ARTICLE 3 MISCELLANEOUS PROVISIONS

3.1 Conditions to Effectiveness . This Agreement shall become effective as of the date upon which all of the following conditions have been satisfied (the “ Effective Date ”):

(a)

Agent shall have received this Agreement or counterparts hereof duly executed and delivered by the Borrower, the Agent and Lender, all in accordance with Section 14.1 of the Credit Agreement;

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(b)

Agent shall have received the Intercreditor Agreement duly executed and delivered by each of the Term Loan Agent and the Agent, as acknowledged by the Borrower and each other Loan Party that is party thereto;

(c)

Agent shall have received the Montrovest Subordination Agreement duly executed and delivered by each of Montrovest B.V., the Borrower, Agent and Term Loan Agent;

(d)

Agent shall have received the Quebec Subordination Agreement duly executed and delivered by each of Investissement Quebec, Agent, Term Loan Agent and the Borrower;

(e)

Agent shall have received the Management Subordination Agreement duly executed and delivered by each of the Borrower, Gestofi S.A., Agent and Term Loan Agent;

(f)

Agent shall have received an officer’s certificate of the Borrower as to certain factual matters signed by a senior officer of the Borrower, satisfactory to Agent’s counsel;

(g)

Agent shall have received a certified copy of the Borrower’s resolutions authorizing the Borrower to, inter alia , enter into and execute this Agreement, together with certified copies of its constating documents;

(h)

Agent shall have received a certified executed copy of the Term Loan Agreement together with evidence satisfactory to Agent that all Restricted Payment Conditions after giving effect to the incurrence of the Term Loan Debt are satisfied;

(i)

no Default or Event of Default shall have occurred and be continuing on the Effective Date, nor shall either result from giving effect to the terms of this Agreement or the Term Loan Documents and the transactions contemplated thereunder;

(j)

the representations and warranties of the Loan Parties or their respective Subsidiaries contained in this Agreement 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 by materiality in the text thereof) on such date (except to the extent that such representations and warranties relate solely to an earlier date); and

(k)

all action on the part of the Loan Parties necessary for the valid execution, delivery and performance by the Borrower of this Agreement shall have been duly and effectively taken.

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3.2 Credit Card Notifications . By October 31, 2018 (or such later date as Agent may agree in writing), Borrower shall deliver to Agent Credit Card Notifications executed by Borrower and delivered to Borrower’s Credit Card Issuers and Credit Card Processors in accordance with Section 5.18 of the Credit Agreement.

3.3 Representations and Warranties . The Borrower represents and warrants to the Lender Group and the Agent that: (i) as of the Effective Date, 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 be limited 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 a proceeding at law or in equity), and (ii) the consummation of the Montrovest Merger will not constitute a Change of Control under the Credit Agreement.

3.4 Continuance of the Loan Documents and the Credit Agreement. The Credit Agreement and 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 or prejudiced in any manner except as specifically provided for in this Agreement.

3.5 Confirmation of Existing Security. 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 and each of the Bank Product Providers (i) remains in full force 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 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 as valid and enforceable security subject to the qualifications set forth above for the Obligations.

3.6 Reservation of Rights. 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 absolute discretion of Agent or Lender Group in accordance with the Credit Agreement, the other Loan Documents, or at law or in equity.

3.7 Reference to and Effect on the Credit Agreement . On and after the Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, “hereto”, “hereby” and similar expressions, and each reference to “the Credit Agreement” and “the Agreement” 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.

3.8 Cost and Expenses . Borrower agrees to pay on demand all reasonable costs and expenses of the Agent or any Lender in connection with the preparation, negotiation, execution,

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delivery, and administration of this Agreement and related documents including, without limitation, the reasonable fees and out-of-pocket expenses of Goodmans LLP, counsel for the Agent or any Lender with respect thereto and with respect to advising the Agent or any Lender as to its rights and responsibilities hereunder.

3.9 Section Headings. 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.

3.10 Interpretation. To the fullest extent permitted by applicable law, neither this Agreement nor any uncertainty or ambiguity 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 interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

3.11 Severability of Provisions. 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.

3.12 Counterparts; 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 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 this Agreement. 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 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.

3.13 Governing Law .

THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED 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 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.

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THE PARTIES AGREE THAT ALL 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 OTHER PROPERTY 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 EXTENT PERMITTED 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 3.13.

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE 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 LOAN DOCUMENTS 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 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 EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS LOCATED 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 OR PROCEEDING 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 TO BRING 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.

NO CLAIM 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

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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.

[Signature page to follow]

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


BIRKS GROUP INC.

By:	/s/ Pasquale Di Lillo
	Name:	Pasquale Di Lillo
	Title:	Vice President, Chief Financial and Administrative Officer

By:	/s/ Miranda Melfi
	Name:	Miranda Melfi
	Title:	Vice President, Legal Affairs and Corporate Secretary

WELLS FARGO CANADA CORPORATION , as Agent and as the initial Lender

By:	/s/ David G. Phillips
	Name:	David G. Phillips
	Title:	Senior Vice President

[Signature Page to Amendment No. 1 to the Credit Agreement]

AGREED TO AND ACKNOWLEDGED by the undersigned as of the date first indicated above.


CASH, GOLD & SILVER INC. , as guarantor

By:	/s/ Jean-Christophe Bédos
	Name:	Jean-Christophe Bédos
	Title:	Authorized Person

By:	/s/ Miranda Melfi
	Name:	Miranda Melfi
	Title:	Authorized Person

Exhibit 4.46

EXECUTION VERSION

CREDIT AGREEMENT

by and among

CRYSTAL FINANCIAL LLC,

as Agent,

THE LENDERS THAT ARE PARTIES HERETO

as the Lenders,

and

BIRKS GROUP INC.,

as Borrower

Dated as of June 29, 2018

TABLE OF CONTENTS


			Page

1.	DEFINITIONS AND CONSTRUCTION			1

	1.1.	Definitions		1
	1.2.	Accounting Terms		1
	1.3.	PPSA		1
	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		3

2.	TERM LOAN AND TERMS OF PAYMENT			4

	2.1.	Term Loan Facility		4
	2.2.	Borrowing Base		4
	2.3.	Payments; Apportionment and Application; Use of Proceeds; Repayments; Prepayments		8
	2.4.	Interest Rates; Payment of Interest		11
	2.5.	Fees and Expenses		12
	2.6.	Reimbursement Obligations		13
	2.7.	Capital Adequacy; Increased Costs		14
	2.8.	Currencies		15
	2.9.	Interest Act (Canada); Criminal Rate of Interest; Nominal Rate of Interest		16
	2.10.	Tax Treatment		17

3.	CONDITIONS; TERM OF AGREEMENT			17

	3.1.	Conditions Precedent to Effectiveness of Agreement		17
	3.2.	[Reserved]		20
	3.3.	Maturity		20
	3.4.	Effect of Maturity		20
	3.5.	Post-Closing Covenants		21

4.	REPRESENTATIONS AND WARRANTIES			21

	4.1.	Due Organization and Qualification; Subsidiaries		21
	4.2.	Due Authorization; No Conflict		22
	4.3.	Governmental Consents		22
	4.4.	Binding Obligations; Perfected Liens		22
	4.5.	Title to Assets; No Encumbrances		23
	4.6.	Litigation		23
	4.7.	Compliance with Laws		23
	4.8.	Financial Statements; No Material Adverse Effect		24
	4.9.	Solvency		24
	4.10.	Canadian Pension Plan		24
	4.11.	Environmental Condition		24
	4.12.	Complete Disclosure		24

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TABLE OF CONTENTS

(cont’d)


			Page

	4.13.	Patriot Act; Canadian AML and Anti-Terrorism Laws		25
	4.14.	Indebtedness		25
	4.15.	Payment of Taxes		25
	4.16.	Margin Stock		26
	4.17.	Governmental Regulation		26
	4.18.	OFAC		26
	4.19.	Employee and Labor Matters		26
	4.20.	Intellectual Property		27
	4.21.	Eligible Accounts		27
	4.22.	Eligible Inventory		27
	4.23.	Location of Inventory and Equipment		27
	4.24.	Inventory Records		27
	4.25.	Credit Card Arrangements		28
	4.26.	No Defaults; Material Contracts		28
	4.27.	Operations of Certain Subsidiaries		28
	4.28.	Trade Relations		28

5.	AFFIRMATIVE COVENANTS			28

	5.1.	Financial Statements, Reports, Certificates		28
	5.2.	Reporting		29
	5.3.	Existence		29
	5.4.	Maintenance of Properties		29
	5.5.	Taxes		29
	5.6.	Insurance		29
	5.7.	[Reserved]		30
	5.8.	[Reserved]		30
	5.9.	[Reserved]		30
	5.10.	Inspection		30
	5.11.	Compliance with Laws and Material Contracts		30
	5.12.	Environmental		30
	5.13.	Disclosure Updates		31
	5.14.	Formation of Subsidiaries		31
	5.15.	Further Assurances		32
	5.16.	Location of Inventory; Chief Executive Office, Etc.		33
	5.17.	Canadian Compliance		33
	5.18.	Credit Card Notifications		33
	5.19.	Sales Taxes		34
	5.20.	[Reserved]		34
	5.21.	Lenders’ Meetings		34

6.	NEGATIVE COVENANTS			34

	6.1.	Indebtedness		34
	6.2.	Liens		34
	6.3.	Restrictions on Fundamental Changes		34
	6.4.	Disposal of Assets		35

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TABLE OF CONTENTS

(cont’d)


			Page

	6.5.	Nature of Business		35
	6.6.	Prepayments and Amendments		35
	6.7.	Restricted Payments		36
	6.8.	Accounting Methods		37
	6.9.	Investments		37
	6.10.	Transactions with Affiliates		37
	6.11.	Use of Proceeds		38
	6.12.	Limitation on Issuance of Equity Interests		38
	6.13.	Canadian Employee Benefits		38
	6.14.	Sale and Leaseback Transactions		39
	6.15.	Negative Pledges		39
	6.16.	Restrictions on Subsidiary Distributions		40
	6.17.	Business Activities; Permitted Store Closings		41
	6.18.	Margin Regulations		41
	6.19.	No Speculative Transactions		41
	6.20.	Amendment of Rolex Canada Documents		41
	6.21.	[Reserved]		41
	6.22.	Anti-layering		41

7.	[RESERVED]			41

8.	EVENTS OF DEFAULT			41

	8.1.	Payments		41
	8.2.	Covenants		42
	8.3.	Judgments		42
	8.4.	Voluntary Bankruptcy, etc.		42
	8.5.	Involuntary Bankruptcy, etc.		42
	8.6.	Default Under Other Agreements		43
	8.7.	Default under Revolving Loan Documents		43
	8.8.	Subordinated Debt Documents		43
	8.9.	Compliance Certificate; Borrowing Base Certificate		43
	8.10.	Guarantee		44
	8.11.	Security Documents		44
	8.12.	Loan Documents		44
	8.13.	Change of Control		44
	8.14.	Material Damage or Loss		44

9.	RIGHTS AND REMEDIES			44

	9.1.	Rights and Remedies		44
	9.2.	Remedies Cumulative		45

10.	WAIVERS; INDEMNIFICATION			45

	10.1.	Demand; Protest; etc		45
	10.2.	The Lender Group’s Liability for Collateral		45
	10.3.	Indemnification		45
	10.4.	Subordination; Subrogation		46

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TABLE OF CONTENTS

(cont’d)


			Page

11.	NOTICES			47

12.	CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION			48

13.	ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS			50

	13.1.	Assignments and Participations		50
	13.2.	Successors		54

14.	AMENDMENTS; WAIVERS			54

	14.1.	Amendments and Waivers		54
	14.2.	Replacement of Certain Lenders		56
	14.3.	No Waivers; Cumulative Remedies		57

15.	AGENT; THE LENDER GROUP			57

	15.1.	Appointment and Authorization of Agent		57
	15.2.	Liability of Agent		58
	15.3.	Reliance by Agent		58
	15.4.	Notice of Default or Event of Default		58
	15.5.	Credit Decision		59
	15.6.	Costs and Expenses; Indemnification		59
	15.7.	Crystal Financial LLC in Individual Capacity		60
	15.8.	Successor Agent		60
	15.9.	Lender in Individual Capacity		61
	15.10.	Collateral Matters		61
	15.11.	Restrictions on Actions by Lenders; Sharing of Payments		63
	15.12.	Agency for Perfection		63
	15.13.	Payments by Agent to the Lenders		64
	15.14.	Concerning the Collateral and Related Loan Documents		64
	15.15.	Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information		64
	15.16.	Several Obligations; No Liability		65
	15.17.	Quebec Security		65

16.	WITHHOLDING TAXES			66

	16.1.	Payments		66
	16.2.	Exemptions		66
	16.3.	Reductions		67
	16.4.	Refunds		67

17.	GENERAL PROVISIONS			68

	17.1.	Effectiveness		68
	17.2.	Section Headings		68
	17.3.	Interpretation		68
	17.4.	Severability of Provisions		68
	17.5.	Debtor-Creditor Relationship		68

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TABLE OF CONTENTS

(cont’d)


		Page

17.6.	Counterparts; Electronic Execution		69
17.7.	Revival and Reinstatement of Obligations; Certain Waivers		69
17.8.	Confidentiality		69
17.9.	Survival		71
17.10.	Patriot Act; Canadian Anti-Money Laundering & Anti-Terrorism Legislation		71
17.11.	Integration		72
17.12.	Birks Group Inc. as Agent for Borrower		72
17.13.	Judgment Currency		73
17.14.	Intercreditor Agreement		73
17.15.	No Setoff		74

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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		[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

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “ Agreement ”), is entered into as of June 29, 2018, 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 is hereinafter further defined), CRYSTAL FINANCIAL LLC 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 each other 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 specified therefor on Schedule 1.1 .

1.2. Accounting Terms . All accounting terms not specifically 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 Change occurring after the 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, 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 intent of 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 to by 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 to the 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 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 or report 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 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 PPSA shall 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 the Collateral 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, agency or 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 requires 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 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 Agreement 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 clearly requires 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 or arbitral 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 administration thereof, and all 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 otherwise specified. 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, 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 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 in Canadian 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 that have 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 Canadian Dollars 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 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 appropriate to secure such contingent Obligations, but in no event greater than 103% of the face

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amount of such claim or demand to the extent a specific amount has been claimed or demanded, and (c) 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 other Loan 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 Montreal, Quebec on such day. For purposes of the computation of a period of 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 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 Agreement shall be deemed incorporated herein by reference.

1.7. Exchange Rates; Currency Equivalents .

(a) All references to “Dollars” or “$” shall mean Canadian Dollars unless otherwise specified 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 be determined 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, amounts denominated 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 of financial 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 of any 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 document delivered 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 off mechanisms 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 expressed in whole Canadian Dollars or in whole cents, as may be necessary or appropriate.

1.8. Quebec Interpretation . For all purposes of any 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

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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” 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’ or similar 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 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”.

2.	TERM LOAN AND TERMS OF PAYMENT.

2.1. Term Loan Facility . Subject to the terms and conditions set forth in this Agreement, on the Closing 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 no event 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 permanently reduce 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 in accordance 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 Borrower contained 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 the Obligations (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 termination of 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.

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(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, to establish 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 Borrowing 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) 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 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 over Agent’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 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 established 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 other Loan 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 to time, 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 the Collateral, 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 Protective Advances 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 the Commitment (unless Required Lenders otherwise agree to a higher amount).

(ii) Each Protective Advance shall be 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, constitute Obligations 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 benefit Borrower (or any other Loan Party) in any way.

(iii) Notwithstanding anything contained in this Agreement or 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 to 10% of the Commitments (unless

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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. Each Lender shall reimburse the Agent, on demand, its Pro Rata Share of any Protective Advances.

(d) Notation . Agent, as a non-fiduciary agent for 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 manifest error, 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 to a 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 such transfer 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 Protective Advances that were made by Agent and that were required to be, but were not, paid by the Defaulting 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 such other 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 such Defaulting 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 matters with 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 the amounts 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 is continuing, 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 the Commitment 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 to Agent, or to the Lenders other than such Defaulting Lender. Any failure by a

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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 entitle Borrower, 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 Defaulting Lender, 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 a completed 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 outstanding Obligations (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 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 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 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 as aforesaid, the terms and provisions of this Section 2.2(e) shall control and govern.

(f) Replacement of Lenders . In the event that any 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 of Default 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 Lender must 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 Pro Rata 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 such sale; 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 the Borrower 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 Affected Lender 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) no Lender 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 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.

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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 Loan Account 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 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 to the 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 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 make such 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 the date 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), at any 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 the Obligations, 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 Group Expenses owing to the Lenders;

(D) fourth , to all Obligations constituting the Early Termination Fee;

(E) fifth , to all other Obligations owing to the Lenders; and

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(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 the next 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 and priorities 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) shall be so applied in accordance with each Lender’s Pro Rata Share of the Term Loan.

(iii) Agent shall promptly distribute to each Lender, pursuant to the applicable wire instructions received from each Lender in writing, such funds as it may be entitled to receive.

(iv) In each instance, so long as no Application Event has occurred 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) under any 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 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 2.3 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 the fullest extent possible, to be in concert with each other. In the event of any 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 and govern, 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-appealable 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 sole recourse 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 willful misconduct 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 this credit

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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 and its Subsidiaries in accordance with this Agreement and the Revolving Credit Agreement.

(d) Repayment of the Term Loan . The Term 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 payment is 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 accrued and 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 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 any Obligations. 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 to be 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 been received and any enforcement or setoff had not occurred.

(g) Mandatory Prepayments . If at any time 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 Borrower shall 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 of the 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 Early Termination 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 be accompanied 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) 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 Early Termination Fee, if any, payable pursuant to Section 2.5(d) in connection with such prepayment of the Term Loan. Each such prepayment shall be applied (subject to

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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 of immediately 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 be deemed 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 on a 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), it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day.

(j) Maintenance of Loan Account; Statements of Obligations . Agent shall maintain accounts on its books in the name of Borrower, the “ Loan Account ” on which Borrower 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 accrued interest, 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 Term Loan, 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, and each 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 to Administrative 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 to Section 2.4(b), the Obligations under the Term Loan shall bear interest at a rate equal to Adjusted CDOR plus the Applicable Margin.

(b) Default Rate . Upon the occurrence and during 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 bear interest, 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 each Interest Payment Date, (ii) on any date of prepayment, with respect to the principal amount of the Term

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Loan being prepaid, and (iii) on the Termination Date. Interest accrued on any other Obligations shall be due and payable as provided in 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 days elapsed, 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 and shall not be subject to rebate or refund, nor subject to proration except as specifically provided herein.

(e) Intent to Limit Charges 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 competent jurisdiction 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 the rate 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 applicable law, 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, shall be 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, the fees 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, 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 perform field 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, or more 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 Combined Loan Cap for a period of 5 consecutive Business Days at any time during any 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. Notwithstanding the foregoing or anything to the contrary contained herein, unless an Event of Default has occurred and is continuing, Agent shall not require that any such

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field examinations be conducted at Borrower’s expense so long as the Revolving Agent has conducted two (2) such field examinations (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-month period) 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, the Early 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 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 liquidated damages 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 be payable 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 OF ANY 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 is reasonable 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 time payment 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 estopped hereafter 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 Fee represents 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 the Lenders 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, and other 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 transactions contemplated 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 the Agent’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,

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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 an Event 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, Loan Documents 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 by the Agent or the applicable Lender to the Borrower of a reasonably detailed itemization of such amounts.

2.7. Capital Adequacy; Increased Costs .

(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 by a 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 amount of 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 the Term 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 forth the 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 or maintaining 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 or amounts 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 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 the reasonable judgment of such Affected Lender, such designation 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 of such Affected Lender, such

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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 and expenses 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 of its 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, then Administrative 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 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 assign to 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 cease to 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 the invalidity 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 comply therewith. 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 similar circumstances under comparable provisions of other credit agreements, if any.

(e) Dodd-Frank Act . Notwithstanding anything herein 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 for International 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 been adopted 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 expressly provide 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). 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. Payments made 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

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may convert the payment made to the currency of the applicable Obligations at the applicable Spot Rate in accordance with 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 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 which such rate is to be ascertained and divided by the number of days used as the basis of such calculation.

(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 under this 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 any payment, 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 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 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 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 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 or affected 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 by Borrower 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, a certificate of a Fellow of the Institute of Actuaries appointed by Agent for the account of

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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 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 that there 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 on any 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 to Borrower, 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 Section 2.9 and any other Section of this Agreement or any other Loan Document 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 for federal 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 Agreement for 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 is subject to United States taxation.

3.	CONDITIONS; TERM OF AGREEMENT.

3.1. Conditions Precedent to Effectiveness of Agreement . This Agreement shall not be effective and the 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 the Lenders):

(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 compliance with 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 the Collateral (subject only to the first priority security interest and Lien in favor of the

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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 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) and other 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 the Agent 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 Loan Agreement, the Montrovest 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 the Borrower 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 its commercially 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 such Person’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 all agreements 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 contemplated hereby 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;

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(v) the Revolving Loan Documents shall be in full force and effect and no default or event of default shall exist thereunder on the Closing Date;

(vi) all accounts payable, leases, payments due under other Indebtedness and Taxes are not past due, excluding any good faith disputes; and

(vii) there is no default in existence under any Material Contract by a Loan Party.

(f) The Agent shall have received a certificate of a duly authorized 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 Loan Party’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 resolutions authorizing 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 respect to 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 connection with 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 no such 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 reasonably satisfactory 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 and perfection matters in the applicable provinces and territories of Canada.

(h) The Agent shall have received good standing or subsistence 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.

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(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 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 Investissement Québec, each of which agreement shall be in form and substance satisfactory to the Agent.

(m) The Agent shall have received a Borrowing Base Certificate 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 statements of 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 Fiscal Year 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 the Maturity Date.

3.4. Effect of Maturity . 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 and Borrower shall be required to repay all of the Obligations in full. No termination 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 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 the Obligations 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 termination statements, lien releases, discharges of security interests, and other similar discharge

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or release 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 by Agent.

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.	R EPRESENTATIONS AND WARRANTIES.

In order to induce the Lender Group to enter into this Agreement, Borrower makes the following representations 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 qualified or 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 that already 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 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 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 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 standing under 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 the Loan 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 and accurate 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 its Equity 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 and accurate list of the Loan Parties’ direct and indirect Subsidiaries, showing: (i) the

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number of 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 class owned 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’ Equity Interests 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 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 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 its Subsidiaries, 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 Material Adverse 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 any Loan 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 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 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 the case 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 of the 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, or otherwise 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, 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’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 the case 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 such financial 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 to utilize 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 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 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, 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 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 in violation 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 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 governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, in each case that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect.

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4.8. Financial Statements; No Material Adverse Effect . All historical financial statements relating 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 to year-end audit adjustments) 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 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 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, or by 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 any respect, 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 its Subsidiaries’ 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 notice that 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 facilities or 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-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 than forward-looking information and projections and information of a general economic

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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 any Lender 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 any material 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 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 assumptions 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 Loan Parties 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 to be 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 States Treasury 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 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 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 of each Loan Party and each of its Subsidiaries outstanding immediately prior to the Closing Date that is to remain outstanding immediately after giving effect to the closing hereunder on the Closing Date and such Schedule accurately sets forth the aggregate principal amount of such Indebtedness as of the Closing Date.

4.15. Payment of Taxes . All Federal, provincial and state income Tax returns and all other material 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 due and 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 each of its Subsidiaries

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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 actively contested 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 or provided therefor.

4.16. Margin Stock . No Loan Party nor any of its Subsidiaries is engaged 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 any Margin 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 to regulation 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 or any 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 “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 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 in Sanctioned 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 any operations 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 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 its Subsidiaries 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 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 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 its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or similar state or foreign law, which remains unpaid or

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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 Labor Standards 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 or its 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 employee contribution 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 to use 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 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 or any other applicable Governmental Authority is identified on Schedule 4.20 .

4.21. Eligible Accounts . 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 of the 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 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 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 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 locations identified 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 such Schedule may be updated pursuant to Section 5.16 ).

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.

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4.25. Credit Card Arrangements . Schedule 4.25 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 charges for sales made by such Loan Party.

4.26. No Defaults; Material Contracts . No event or circumstance has occurred or exists as of the date 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 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 Contract which 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.

4.27. Operations of Certain Subsidiaries . As of the Closing Date, CGS is inactive and does not 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 limited support 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 by CGS 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 modification of 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 a Material 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 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 shows all 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 satisfies this 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

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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, with copies 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 electronic collateral 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 would not 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 of Properties . 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 before delinquency 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’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 insured against 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 such policies 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 as of 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 scope reasonably 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 to be 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 “secured party” clause and are to contain such other provisions as Agent may reasonably require to fully protect

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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 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 of non-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 at Borrower’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 of any 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 any property 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. [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 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, and to 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 long as no Default or Event of Default has occurred and is continuing, with reasonable prior notice to Administrative Borrower and during regular business hours.

(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 in connection therewith shall be subject to any applicable limitation set forth in Section 2.5(c) .

5.11. Compliance with Laws and Material Contracts . 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,

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(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 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 expected to 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 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 its Subsidiaries 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 result in, 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 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 an Environmental 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 other administrative order from a Governmental Authority that would reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect.

5.13. Disclosure Updates . 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 time it 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 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 of any material fact nor shall any such notification have the effect of amending or modifying this Agreement or any of the Schedules hereto.

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 its sole 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 Borrower hereunder), 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 to reflect the formation of such Subsidiary under the laws of a jurisdiction

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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 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 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 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 unreasonably excessive (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 or more 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 other documentation 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 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 opinions of 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 certification documentation (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 to this Section 5.14 shall constitute a Loan Document.

5.15. Further Assurances . 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, 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 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 transactions contemplated 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 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

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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 the Guarantors 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 that promptly, and in no event more than 15 days, following the Montrovest Merger, Montel Sàrl 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 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 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 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 chief executive office and the registered office of a Loan Party. 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 any landlord, 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 any Collateral.

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 Income Tax 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 Material Adverse 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 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 its Subsidiaries 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 applicable workplace 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 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 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 and

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substance 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 4.25 . No Loan Party shall enter into any agreements with Credit Card Issuers or Credit Card 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 in Canadian 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 in a 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 Borrower and 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 its Subsidiaries to,

(a) other than in order to consummate a Permitted 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 Borrower must 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) any merger 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 or amalgamation between Subsidiaries of Borrower that are not Loan Parties,

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(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 with nominal 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 such liquidating 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 such Subsidiary 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 liquidating or 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 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 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 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.

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 ,

(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 in 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 Montrovest Debt 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 consent of Agent in its sole discretion,

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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 has been 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 Restricted Payment Conditions have not been satisfied,

(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), the Management Agreement (except to the extent expressly permitted by the Management Subordination Agreement), the Quebec Subordinated Debt Documents, the Montrovest Debt Documents (except to the extent expressly permitted 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 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, either individually or in the aggregate, could reasonably be expected to be materially adverse to the interests of the Lenders.

6.7. Restricted Payments . Borrower will not, and will 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 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 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 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 of Default shall have occurred and be continuing at the time of such payment or would result therefrom,

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(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 Fiscal Year (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 the Borrower 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 his duties 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 the Board 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 of not 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 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, 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 by Borrower in connection therewith.

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 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 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 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,

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(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, any indemnity 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, 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 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 proceeds of 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 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 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 direct Subsidiary, (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 or replacements 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 of Equity 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 Qualified Equity 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 Person if 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

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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 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 would reasonably be expected to result in a Material Adverse Effect.

6.14. 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 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 property being 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 be permitted 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 not to exceed the gross proceeds of the sale.

6.15. Negative Pledges . Borrower will not, and will not permit 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 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 assets financed thereby), (c) the Revolving Loan Documents, (d) any provision limiting the disposition 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 similar agreement 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 or assets 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 not restrict 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 applicable law, (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 interests contained 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 in contemplation 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

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Person, other than the Person or 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 by the 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 of Borrower.

6.16. Restrictions on Subsidiary Distributions . 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 such Subsidiary 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 Borrower or 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 securing Capitalized 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 customary restrictions 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 Party governing 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 the properties 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, or acquired 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 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 the encumbrances 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 any Subsidiary 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 such property 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 in agreements or instruments relating to Indebtedness permitted hereunder that

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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 the obligor 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 its Subsidiaries 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 or amendment 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 in clause (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 or any 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.

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 Subsidiaries to, 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 Loan Party 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 same manner 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 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

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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 failure continues 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 the Borrower 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 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), (ii) Section 6 , (iii) Section 7 , or (iv) Section 7 of the Canadian Security Agreement;

(b) fails to perform or observe 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 , 5.11 , 5.14 , 5.15 , 5.16 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 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 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 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 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 at any time after the entry 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 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 Loan Party or any of its Subsidiaries and any of the following events occur: (a) such

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Loan Party or such Subsidiary consents to the institution of such Insolvency Proceeding against it, (b) the petition 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 appointed to 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 or entered therein;

8.6. Default Under Other Agreements . If there is (a) a breach or default in one or 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 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 obligations 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) 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 or required 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. Subordinated Debt Documents . (i) the earlier of (A) receipt by 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 the occurrence 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 its Subsidiaries 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 of the 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 maturity thereof;

8.9. Compliance Certificate; Borrowing Base Certificate; Representations . If (i) any information 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 Party herein, in connection with any Loan Document or transaction contemplated thereby, or in any written statement, report,

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financial statement or certificate (other than a Borrowing Base Certificate or Compliance Certificate) is untrue, incorrect or misleading 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).

8.10. Guarantee . If the obligation of any Guarantor under 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 this Agreement);

8.11. Security Documents . If any Canadian Security Document or any other Loan Document that 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 Money Liens, 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 permitted under this Agreement, or (b) as the result of an action or failure to act on the part of Agent;

8.12. 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 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 Loan Party 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; or

8.14. 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, the cessation 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 the continuation 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 remedies provided 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 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 to be immediately due and payable, whereupon the same

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shall become and be immediately due and payable 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

(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 principal of, 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 and Borrower 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 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, by law, 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 a waiver, election, or acquiescence by it.

10. WAIVERS; INDEMNIFICATION.

10.1. Demand; Protest; etc . Borrower waives demand, protest, notice of protest, notice of default 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 Loan Documents on which Borrower may in any way be liable.

10.2. The Lender Group’s Liability for Collateral . 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 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 therewith

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or 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 Indemnified Person pursuant to Section 2.7 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 shall not be liable for costs and expenses (including lawyers’ fees) of any Lender (other than Crystal Financial LLC) 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 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 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 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 or prospective 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 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 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 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 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 Borrower were 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 SHALL APPLY 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 agrees not 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 prove any claim in competition with any Agent or any Lender in respect of any payment hereunder in any

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proceedings of any nature in any Insolvency Proceeding; the Borrower will not claim any set-off, recoupment or counterclaim against any other Loan Party in respect of any liability of a Loan Party to any other Loan Party; and the Borrower waives any benefit of and any right to participate in 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 any Debt 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 in violation 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 and the 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 of this 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 Document shall 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 receipt requested), 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 to the respective address set forth below:


If to Borrower or Administrative Borrower:		Birks Group Inc. 2020 Robert-Bourassa Blvd., Suite 200 Montreal, Quebec H3A 2A5 Attn: Chief Financial Officer Fax No.: 514-397-2537 Email: pdilillo@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

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If to Agent:

Crystal Financial LLC

Two International Place, 17 ^th Floor

Boston, MA 02110 USA

Attn: Rebecca E. Tarby

Fax No.: 617-428-8701

Email:rtarby@crystalfinco.com

And a copy (which shall not constitute notice) to:

Proskauer Rose LLP

One International 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 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 deposit thereof 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 given during 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 receipt of an acknowledgment 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 credit inquiries 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 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 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

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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 OTHER LOAN 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 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 EXTENT PERMITTED 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 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 LOAN DOCUMENTS 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 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 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 LOCATED 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 OR PROCEEDING 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 TO BRING 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, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT,

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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 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 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 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 (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 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 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 and under 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 each other 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 of a 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, 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 separate account, a processing fee in the amount of $3,500, and

(G) the Assignee, if it is not a Lender, shall deliver 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 shall be 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 Loan Documents, 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 with respect 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 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’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 parties hereto 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 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 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 and Acceptance, (iv) such Assignee will,

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independently 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 credit decisions 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 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 notice to 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 arising therefrom. 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 Loan Documents; 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, 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 and the 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 shall continue 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 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 Loan Document, 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 is participating, (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 provided herein 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 be sold 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 off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were

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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 the other 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 in this 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 in this 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 which it 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 with an 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 or sold 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, if any, 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 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 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 the registered 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 all or 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 the Register.

(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 (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

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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 as Borrower may reasonably request.

13.2. Successors . This Agreement shall bind and inure to the benefit 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 assignment shall 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 Loan Party 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 consent shall 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 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,

(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 of the Term Loan pursuant to Section 2.3 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, or reduce any fees or other amounts payable hereunder or under

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any other Loan Document (except in connection with the waiver of applicability of Section 2.3 (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 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”, “Supermajority Lenders” or “Pro Rata Share”,

(ix) contractually subordinate any of Agent’s Liens (other than in 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 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 Borrower or any Guarantor of any of its rights or duties under this Agreement 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 and Borrower (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 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 such definition 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; and

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(d) Anything in this Section 14.1 to the contrary 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 the Lender 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 respect to 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 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 all Lenders, 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 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 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. Such notice to replace the Non-Consenting Lender (and its Affiliates) or Tax Lender (and its Affiliates), as applicable, shall specify an 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 execute and 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 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) an assumption 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 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 such Assignment 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 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 the Non-Consenting Lender (and its Affiliates) or Tax Lender (and its Affiliates),

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as applicable, hereunder and 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 the Term Loan.

14.3. No Waivers; Cumulative Remedies . No failure by Agent or any Lender to exercise any right, 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 then only 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 and appoints Crystal Financial LLC 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 action on 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 such powers 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 agrees to 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 any duties 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 Loan Documents 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 intended to 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 Agent expressly 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 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

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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 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 responsible in any manner to 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 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-Related Person shall be under any obligation to any Lenders 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 its Subsidiaries.

15.3. Reliance by Agent . 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 or telephone 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 to Borrower 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 first receive 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 reasonable satisfaction by the Lenders 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 fully protected 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 be binding upon all of the Lenders.

15.4. Notice of Default or Event of Default . 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 for the account of the Lenders and, except with respect to Events of Default of which Agent has

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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 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 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 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 not be 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.

15.5. Credit Decision . Each Lender acknowledges that none of the Agent-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 or warranty by any Agent-Related Person 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 an investigation 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 transactions contemplated 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 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 such investigations 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, and other documents expressly herein 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 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 that Agent does not have any duty or responsibility, either initially 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 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 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,

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whether or not Borrower is obligated 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 reimburse Agent for such out-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 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-Related Persons (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 any Agent-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 an 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, or legal 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 the payment of all Obligations hereunder and the resignation or replacement of Agent.

15.7. Crystal Financial LLC in Individual Capacity . Crystal Financial LLC and its Affiliates may 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 and any other Person party to any Loan Document as though Crystal Financial LLC 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 the Lender Group acknowledge that, pursuant to such activities, Crystal Financial LLC 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 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 Crystal Financial LLC in its individual capacity.

15.8. Successor Agent . Agent may resign as 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). If Agent resigns under this 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 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, 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 in

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writing 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 and the 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 or omitted 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 resignation shall 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.

15.9. Lender in Individual Capacity . Any Lender and its respective Affiliates may 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 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. The other members of the Lender Group acknowledge that, pursuant to such activities, such Lender and its respective 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 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 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. Collateral Matters .

(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 Borrower of 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 was granted 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 connection with 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 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 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

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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 or indirectly 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 legal or equitable remedy. In connection with any such credit bid or purchase, (i) the Obligations 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 not impair 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 to credit 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 credit bid 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 (or in 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 securities issued 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 aggregate amount 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) if the 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 any such 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 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 of such 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 respect of) 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 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 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, 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 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

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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 and that Agent shall have no other duty or liability whatsoever to any Lender 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 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 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 to enforce 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 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 the same 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 or warranty, 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 the extent 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 therefor shall 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.

15.12. Agency for Perfection . Agent hereby appoints each other Lender 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,

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promptly upon Agent’s request therefor shall deliver possession or control of such Collateral to Agent or in accordance with Agent’s instructions.

15.13. Payments by Agent to the Lenders . 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 and directs 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 and the 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 . 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 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 any information 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 only specific 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 business plans in a confidential manner in accordance with Section 17.8 , 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 or other 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 and protect, 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)

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incurred by 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 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 such Lender, 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 from Borrower 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 or information 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 the Loan Account, Agent shall send a copy of such statement to each Lender.

15.16. 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 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 have any 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 shall be 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 Lender hereunder or in connection with the financing contemplated herein.

15.17. Quebec Security . In its capacity as Agent, for the purposes of holding any hypothec granted to Agent, Crystal Financial LLC is hereby appointed and shall serve as the hypothecary representative for all present and future Lenders as contemplated by Article 2692 of the Civil Code of Québec. 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 holding the aforesaid 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.

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16. WITHHOLDING TAXES.

16.1. Payments . All payments will be made free and clear of, and without deduction 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 or withholding 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 applicable law, 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, intangible transfer 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 or filing 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, any Indemnified 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 or asserted 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 such Tax 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 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 or forms, 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, or submission of such forms or other documentation in the reasonable judgment of such Lender would not subject

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such Lender to any material unreimbursed cost or expense or materially prejudice the legal 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 without limitation, 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 the Lender 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 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 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 shall be 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 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 any Participant (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 which rendered 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 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 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 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 such refund to Borrower (but only to the extent of payments made, or additional

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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 the Agent 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 Lender and 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 such Lender 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 the right 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 other Person. 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 such Agent 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 or additional 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. Section Headings . 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 construed against 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 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 from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

17.5. Debtor-Creditor Relationship . The relationship between 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 Party arising out of or in connection with the Loan Documents or the transactions contemplated thereby, and there is no agency or joint venture relationship

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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; 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 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 this Agreement. 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 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.

17.7. Revival and Reinstatement of Obligations; Certain Waivers . If any member of the Lender Group 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 in full or partial satisfaction of any Obligation or on account 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 relating to 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 the amount 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 the Lender 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 Liens shall 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 .

(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:

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(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 member of 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 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 is practicable 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 to in 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 disclosing party agrees to provide Borrower with prior written 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 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 the Confidential 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 of prohibited 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 of Confidential 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 requirements substantially 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 any litigation 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 extent reasonably necessary for, the exercise of any secured creditor remedy under this Agreement or under any other Loan Document.

(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 loan syndication 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 may otherwise use the name, logos, and other insignia of Borrower or the other Loan Parties and the Commitments

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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 approval of 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 its Affiliates 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 similar electronic 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 not containing 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 available through 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 at any 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 Documents 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 and delivery of 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 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 interest on, any Loan or any fee or any other amount payable under this Agreement 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 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 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

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(b) OFAC/PEP searches and customary individual 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 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-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, direct or 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 be reasonably 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 or hereafter 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 shall constitute 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 representation or warranty as to its accuracy or completeness.

Notwithstanding the provisions of this Section and except as may otherwise be 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 any information it obtains from the Loan Parties or any such authorized signatory in doing so.

17.11. Integration . This Agreement, 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 the date hereof.

17.12. Birks Group Inc. as Agent for Borrower . To the extent a Person other than Birks Group Inc. 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 effect unless 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 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 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

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shall bind Borrower), (b) to receive notices and instructions from members of the 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 the Administrative 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 Loan Account 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 their request, 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 successful operation 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 the Lender 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 reason of (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 relevant Agent-Related 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 willful misconduct of such Agent-Related Person or Lender-Related Person, as the case may be.

17.13. Judgment Currency . 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 in accordance 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 to Agent 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 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 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 due to 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 Agreement Currency 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, 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’s rights and remedies hereunder may be subject to, and restricted by, the provisions of the Intercreditor Agreement regarding intercreditor arrangements among the Agent

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and the Revolving 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 the exercise 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 Intercreditor Agreement 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 Intercreditor Agreement 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.

17.15. 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 page to follow]

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


BIRKS GROUP INC.
By:		/s/ Pasquale Di Lillo
		Name: Pasquale Di Lillo
		Title: Authorized Person

By:		/s/ Miranda Melfi
		Name: Miranda Melfi
		Title: Authorized Person


CRYSTAL FINANCIAL LLC, as Agent,

By:		/s/ Rebecca E. Tarby
		Name: Rebecca E. Tarby
		Title: Managing Director

CRYSTAL FINANCIAL SPV LLC, as a Lender,

By:		/s/ Rebecca E. Tarby
		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 Chartered Professional Accountants Canada).

“ Acquired Indebtedness ” means Indebtedness of a Person whose assets or 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 mortgage financing 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 or substantially 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 all or substantially all of the Equity Interests of any other Person.

“ Additional Documents ” has the meaning 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 and conditions 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 in connection 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 Reuters Screen CDOR Page (or any successor page or such other page or commercially available service

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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 quoted by 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 (and, if any such reported rate is below one percent, then the rate determined pursuant to this clause (b) shall be deemed to be one percent), two (2) Business Days prior to the Closing Date and each Interest Payment Date thereafter for any subsequent month. Each determination of the Adjusted CDOR rate shall be made by the Agent and shall be conclusive in the absence of manifest error.

“ 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) of the Agreement.

“ Affiliate ” means, as applied to any Person, 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 power to 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 the Agreement: (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 or other 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-Related Persons ” means Agent, together with its Affiliates, officers, directors, employees, attorneys, and agents.

“ Agent’s Loan Account ” means the Deposit Account identified 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 Loan Documents and securing all or a portion of the Obligations.

“ Agreement ” means the Credit Agreement to which this Schedule 1.1 is attached.

“ Applicable Inventory Percentage ” means (i) 104.5% from the Closing Date until December 15, 2019, (ii) 104.25% from December 16, 2019 until March 30, 2020, and (iii)

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thereafter reducing as of the first day of each subsequent Fiscal Quarter by 0.25% until the Applicable Inventory Percentage reaches 102.5% where it shall remain until the Maturity Date;

“ Applicable Margin ” means 8.25% per annum; provided however, that following the delivery of the Borrower’s audited financial statements as at March 30, 2019, the Applicable Margin shall be reduced to 7.75% per annum for any Fiscal Quarter that the Modified Fixed Charge Coverage Ratio for the twelve month period ended as of each such Fiscal Quarter is equal to or greater than 1.0 to 1.0 for such period. The Applicable Margin will be reset quarterly based on the Modified Fixed Charge Coverage Ratio for the immediately preceding Fiscal Quarter, provided that, upon the occurrence of an Event of Default which is continuing, the Applicable Margin shall be 8.25% per annum.

“ Applicable Premium Trigger Event ” means (i) any prepayment 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 refinancing thereof), 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 or the 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 the definition 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 date on 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 or investing 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 more Approved Funds managed by the same investment advisor.

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“ Assignment and Acceptance ” means an Assignment and Acceptance Agreement substantially in the form of Exhibit A-1 to the Agreement.

“ Authorized Person ” 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 January 20 of any given Fiscal Year, $9,500,000, or (B) from January 21 to February 20 of any given Fiscal Year, $4,500,000.

“ Bankruptcy Code ” means title 11 of the United States Code, as in effect from time to time.

“ Board of Directors ” means, as to any 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 any successor).

“ 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 Agent in the case of a Protective Advance.

“ Borrowing Availability ” means the lesser of (i) the sum of the “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 result of:

(a) 102.5% of the amount of Eligible Credit Card Receivables of Borrower, plus

(b) 102.5% of the amount of Eligible Accounts of Borrower, provided that the amount thereof 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 Recovery Percentage of the relevant Eligible Inventory Category identified in the most recent Inventory appraisal ordered and obtained by either the Revolving

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Agent pursuant to the Revolving Credit Agreement or Agent by the cost (based on GAAP) of such Eligible 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 Priority Payables 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 the calculation 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 or required to close in the State of New York or the Provinces of Ontario or Quebec.

“ 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, without limitation, 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 Canadian legislation in effect from time to time.

“ Canadian Defined Benefit 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 Dollar Equivalent ” means, at any time, (a) with respect to any amount denominated in Canadian Dollars, 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 most recent 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 recent applicable Borrowing Base Certificate delivered by Borrower to Agent) may reflect such adjustments.

“ Canadian Dollars ”, “ Dollars ”, “ Cdn $ ” or “ $ ” means the lawful currency of Canada, as in effect from time to time.

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“ Canadian Multi-Employer Plan ” means a “multi-employer pension plan”, as such term is defined under 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 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 or provincial 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 the Quebec Pension Plan as maintained by the Government of Canada or the Province of Quebec, respectively.

“ Canadian Priority 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 obligation to 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 other Taxes 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 more of 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 have priority 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 in priority 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 with the 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 Security Agreement, the Canadian Trademark Security Agreement,

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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 Security Agreement.

“ Capital Adequacy Regulation ” means any law, rule, regulation, guideline, request or directive 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 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 of 12 months or less 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 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.

“ Capitalized Lease Obligation ” means that portion of the obligations under a Capital Lease that is required to be capitalized in accordance with GAAP.

“ Capital Lease ” means a lease that is required to be capitalized 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, 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 direct obligations 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 acquisition thereof 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 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

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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 the laws 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 more than 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 any commercial 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.

“ 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, a majority 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, 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 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 foreign regulatory 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 the Agreement.

“ Code ” means the New York Uniform Commercial Code, as in effect from time to time.

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“ Collateral ” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by 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 any lessor, 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 and substance 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 Total Outstandings.

“ Commitment ” means, with respect to each Lender, its Commitment, and, with respect to all Lenders, 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 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 provisions of Section 9.1 of the Agreement or otherwise reduced in accordance with the terms of this Agreement.

“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 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 the Agreement delivered by a Financial Officer of Borrower to Agent.

“ Confidential Information ” has the meaning specified therefor in Section 17.8(a) of the Agreement.

“ 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 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 extent included 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 with this 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 expenses incurred 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

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to Section 6.7(d) , (x) impairment of goodwill 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 extent covered 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 Integration Costs 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 in the 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 Consolidated Net 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 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 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 Fixed Charges ” 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 sum, without duplication, of (a) Consolidated Interest Expense paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash Consolidated Interest 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 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 be in amounts agreed by the Agent and Borrower.

“ Consolidated Interest Expense ” means, for any period, the aggregate 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 Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP after deduction for any non-controlling interest 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 US and 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 it becomes a Subsidiary of Borrower or is merged into or amalgamated or consolidated with

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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 of Borrower 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-cash extraordinary 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 and substance 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).

“ Credit Card Issuer ” shall mean any person (other than a Borrower 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., Visa International, 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 of such 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 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 sales transactions involving credit card or debit card purchases by customers using credit cards or debit cards issued by any Credit Card Issuer.

“ Credit Card Notifications ” has the meaning provided in Section 5.18 .

“ 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 cards issued 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.

“ 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.

“ 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, (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 under the

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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 its 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 date that 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 subject of 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 or appointment.

“ Deposit Account ” means any deposit account maintained in Canada for the deposit of funds with a Canadian Bank reasonably acceptable to Agent.

“ Disqualified Equity Interests ” means any Equity Interests 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 mandatorily redeemable (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 change of 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 that would 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 Closing Date up to (but not including) the date that is the first anniversary of the Closing 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 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; (ii) during the period of time from and after the first anniversary of the Closing Date up to (but not including) the date that is the second anniversary of the Closing Date, an amount equal to one and one half percent (1.5%) of the principal 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 ratable account of the Lenders; (iii) during the period of time from and after the second anniversary of the Closing Date up to (but not including) the date that is the third anniversary of the Closing Date, an amount equal to one half of one percent (0.5%) of the principal 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

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the Agent for the ratable account of the Lenders, and (iv) from and after the third anniversary of the Closing 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 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 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 not include the following:

(a) Accounts that the Account Debtor 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 a customer of the Borrower after the Closing Date) or within 60 days of due date,

(b) Accounts owed by an Account 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 agent of any Loan Party or any Affiliate of any Loan Party,

(d) Accounts arising in a transaction wherein goods are 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 executive office 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 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 §3727), (ii) any state of the United States, or (iii) a Governmental Authority of Canada or any province thereof (exclusive, however, of Accounts

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with respect to which Borrower has complied, to the reasonable satisfaction of Agent, with any applicable assignment of claims statute, including the Financial Administration Act (Canada)),

(h) Accounts with respect to which the Account 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 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 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 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 and billed 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 prior to the completion of performance by Borrower of the subject contract for goods or services.

“ Eligible Credit Card 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, as determined 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’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, to qualify 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 be reduced 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

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allowances, price adjustments, finance charges or other 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 aggregate amount 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 not constitute 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 for more than five Business Days from the date of sale;

(c) Credit Card Receivables that are not subject to a valid 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 2.2(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 under certain 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 any bankruptcy or insolvency proceedings;

(g) Credit Card Receivables which are not a valid, legally enforceable 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 the Credit 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 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 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,

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(b) Borrower does not have actual and exclusive possession thereof unless such Inventory is Eligible Non-Possessory Inventory,

(c) it is not located at one of the locations in Canada 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 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 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 is segregated 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 Liens having 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 goods that 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 satisfied that 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 other categories 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 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

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		Eligible Inventory Category
		Giftware
		Loose Stones
		Silver
		Gold
		Service
		Rolex Watches
		Patek Philippe
		Graff

“ Eligible Non-Possessory Inventory ” means Inventory 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 acceptable to 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 Borrower identified 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 as required 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 otherwise separately identifiable from goods of others, if any, held by the Person in possession of such Inventory

(d) Agent in its Permitted Discretion (i) has established such Reserves (including Reserves for processing and 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 than those 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 any Lender (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 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 is organized 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 $250,000,000; (c) any other entity (other than a natural person) that is an

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“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 financing companies, 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 not include (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 in violation 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, including any 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, in each case as amended from time to time.

“ Environmental Liabilities ” means all liabilities, monetary obligations, 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 incurred as 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 therefor in Section 8 of the Agreement.

“ Excess Availability ” means, as of any date of determination, the Borrowing Availability less the then Combined Total Outstandings.

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“ Excluded Taxes ” 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 authority thereof) 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 a result 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, delivered or 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 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 new lending 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 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 other decision 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 of the 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 of any 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 a Loan Party.

“ Fee Letter ” means that certain fee letter, dated as of even date with the Agreement, among Borrower and Agent, 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) chief executive 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 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).

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“ 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, where applicable, 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 component of 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, or prepayment 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 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 the relevant 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 statements of 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 historical financial 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 period immediately prior to the proposed date of consummation of such proposed Acquisition 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. Notwithstanding the 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 of the Income Tax Act (Canada) for the purposes of Part XIII of the Income Tax Act (Canada).

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“ 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 the government 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 entity exercising 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 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 classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances 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 gas liquids, 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 any radioactive 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 derivative transactions, 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 forward bond 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 such transaction 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 published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement.

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“ Hedge Provider ” means any Revolving Lender or any of its Affiliates which is a party to a Hedge Agreement in accordance with the Revolving Credit Agreement.

“ Hedge Termination Value ” means, in respect of any one 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 and termination 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, as determined 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) all obligations 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 obligations of 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 date of 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 of credit 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 to the 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 Value as 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 or other 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 such Indebtedness, 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 such obligation.

“ Indemnified Liabilities ” has the meaning specified therefor in Section 10.3 of the Agreement.

“ Indemnified Person ” has the meaning specified therefor in Section 10.3 of the Agreement.

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“ Indemnified Taxes ” means (a) Taxes, other than 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 and Insolvency 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 to propose 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 or under 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 assignments for 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 a compromise of the claims of its creditors.

“ Intellectual Property ” means all intellectual and similar Property 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; all embodiments 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) that any 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 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 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 Intercreditor Agreement dated on or about the date hereof, by and among the Agent and the Revolving 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 the month immediately following the Closing Date and continuing thereafter until the Maturity Date.

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“ 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 Inventory Category, 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 to each 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) those Reserves 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) 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 or substantially 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 a balance 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 or decreases 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.

“ 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 applicable law, 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 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 and Agent, or any one or more of them.

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“ Lender Group Expenses ” means all (a) costs or expenses (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-pocket fees 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 in connection 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 the receipt 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 charges imposed or incurred by Agent resulting from the 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 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 portion thereof, 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 the amount of any limitation provided in Section 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 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 the Collateral, 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 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, DXSyndicate™, 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 (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 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 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 a lawsuit or other

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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 the Agreement.

“ Lender-Related Person ” means, with respect to any Lender, such Lender, together with such Lender’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, 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 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 having substantially the same economic effect as any of the foregoing.

“ Loan ” means the Term Loan, made (or to be made) hereunder.

“ Loan Documents ” means the Agreement, the Control Agreements, any Borrowing Base Certificate, 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 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 Reserves ” - as of the date of determination by the Agent, from time to time an 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 to Value 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 Credit Agreement.

“ Management Agreement ” means that certain Management Consulting 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 and indemnification expenses) of Borrower to Gestofi S.A. pursuant to the Management Agreement.

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“ Management Subordination 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 otherwise modified with the consent of Agent.

“ Margin Stock ” as defined in Regulation U of the Board of Governors of the Federal Reserve System of the United States as in effect from time to time.

“ Material Adverse Effect ” 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 their payment 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 taken or 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 is party (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 the Canadian 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 Loan Documents (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) any Additional Subordinated Debt Documents; and (vii) the US Divestiture Agreements.

“ Maturity Date ” means October 21, 2022.

“ 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 Borrower and 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 Capital Expenditures 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 Sàrl.

“ Montrovest Debt ” means all Indebtedness owing to Montrovest under the Montrovest Debt Documents that constitutes Permitted Indebtedness.

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“ Montrovest Debt 2017 ” means Montrovest Debt incurred by the Borrower 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 Agreement dated 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 between Borrower 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 Montel Sàrl.

“ Montrovest Subordination Agreement ” 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 Amended and Restated Postponement and Subordination Agreement, dated as of the Closing Date, among the 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 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 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 and any 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 Insolvency Proceeding), 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 any Loan 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 any Loan 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

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the Agreement or any of the other Loan Documents and 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 amounts that 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 obligation to 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 ” means The 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 specified therefor 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 the Closing Date by a Borrower or another Loan Party so long as:

(a) no Default or Event of Default shall have occurred 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 proposal acquisition 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, including forecasted balance sheets, profit and loss statements, and

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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 if audited 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 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 the consummation 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 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 the acquisition 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 its Subsidiaries’ 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 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 United States or Canada,

(h) the subject assets or Equity Interests, as applicable, are being acquired directly by a 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 case of 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 the proposed 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 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 or no longer used or useful in the ordinary course of

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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 to buyers in the ordinary course of business (for avoidance of doubt, excluding sales by a Loan Party to another Loan Party),

(c) the use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of the Agreement 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 of Permitted 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, or confiscation or requisition of use of property,

(h) (i) the sale or issuance of Qualified Equity Interests 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 a Loan 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 not economically 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 of Permitted Investments that are expressly permitted to be made pursuant to the Agreement.

(l) so long as no Event 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 any other Subsidiary of Borrower,

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(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 applicable law,

(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 Borrower or 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 the fair 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 the ordinary 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 Factoring Facility; and

(t) Permitted Sale Leaseback Transactions.

“ Permitted Factoring Facility ” means an unsecured factoring facility established by the Borrower which provides for the sale of Permitted Factoring Facility Accounts on a non- recourse basis.

“ Permitted Factoring Facility 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 the amount 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 the Revolving 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,

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(d) endorsement for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business,

(e) the Quebec Subordinated Debt in an outstanding amount not to exceed $2,000,000 at any time and solely to the extent that such Indebtedness is subject to the Quebec Subordination Agreement; provided that (i) the Quebec Subordinated Debt Documents shall be in form and substance reasonably satisfactory to the Agent and the Required Lenders and (ii) the Quebec Subordinated Debt shall be subject to the Quebec Subordination Agreement,

(f) the incurrence 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 its Subsidiaries’ 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,

(g) Permitted Intercompany Advances,

(h) Indebtedness incurred after the Closing Date in connection with the acquisition, lease or leasing 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 that the 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 Management Subordination Agreement,

(j) secured Indebtedness in an aggregate amount not to exceed $7,500,000 at any time, 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 outstanding amount not to exceed $15,000,000 at any one time; and

(l) Indebtedness under any Permitted Factoring Facility.

“ Permitted Intercompany Advances ” means loans and other Investments 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 Loan Party, 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) except as 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:

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(a) Investments in cash and Cash Equivalents,

(b) Investments in negotiable instruments deposited or to be deposited for collection in the ordinary course of business,

(c) advances or extensions of credit made in connection with purchases of goods or services in the ordinary course of business,

(d) Investments received in settlement of amounts due to any Loan Party or any 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 favor of a Loan Party or any of its Subsidiaries,

(e) Investments owned by any Loan Party or any of its Subsidiaries 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 except by 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 guarantees entered 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 of Indebtedness 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 in the ordinary course of business,

(j) Permitted Acquisitions,

(k) Investments resulting from entering into agreements relative 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 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 were not made in contemplation of or in connection with such Permitted Acquisition and were in existence on the date of such Permitted Acquisition,

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(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 for the 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 of its 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 other Investments 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 cash proceeds 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, and

(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 or consolidation.

“ Permitted Liens ” means:

(a) Liens granted to, or for the benefit of, Agent to secure the Obligations,

(b) Liens securing the Revolving Loan Debt, subject to the provisions of the Intercreditor Agreement;

(c) Liens or claims for unpaid Taxes that either (i) are not yet delinquent, or (ii) do not have 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 or awards that do not constitute an Event of Default under Section 8.3 of the Agreement,

(e) Liens set 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 any Refinancing Indebtedness in respect thereof,

(f) the interests of lessors under operating leases and non-exclusive licensors under license agreements,

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(g) Capital Leases and other Permitted Purchase Money Indebtedness 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 in connection with workers’ compensation or other unemployment insurance,

(j) Liens on amounts deposited to 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’ reimbursement obligations with respect to surety or appeal bonds obtained in the ordinary course of business,

(l) with respect 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 the ordinary course of business,

(n) Liens that are replacements of Permitted Liens to the extent 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 depository institutions, 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 the financing 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 customs duties in connection with the importation of goods,

(r) Liens solely on any cash earnest money deposits made 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 secure Acquired Indebtedness,

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(t) Liens arising from precautionary PPSA financing statements or similar filings made in respect of operating leases entered into by any Loan Party,

(u) Leases or subleases granted to others 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 public authorities 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 the sale 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 any assets 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 and Purchase 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 of Permitted 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 provided that such Liens shall, at all times, be subordinate and junior in priority to the Liens securing the Obligations; and

(aa) Liens on Permitted Factoring Facility Accounts securing a Permitted Factoring Facility.

“ Permitted Protest ” means the right of Borrower 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 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 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 no impairment of the enforceability, validity, or priority of any of Agent’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

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acquisition 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 under paragraph (g) of the definition of Permitted Indebtedness.

“ Permitted Sale Leaseback Transactions ” means Sale Leaseback Transactions that constitute Permitted Indebtedness pursuant to paragraph (g) of the definition of Permitted Indebtedness.

“ Permitted Store Closings ” 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 by the 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 political subdivisions thereof.

“ Platform ” has the meaning specified therefor in Section 17.8(c) of the Agreement.

“ PLCW Accounts ” means Accounts due on the private label credit 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 by Agent 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 such Accounts 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 in Canada 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 such attachment, perfection or priority and for the definitions related to such provisions.

“ 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 monthly Excess Availability for the relevant period.

“ Pro Rata Share ” means, as of any date of determination:

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(a) with respect to a Lender’s obligation to make all or a portion of the Term Loan, with respect to such 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 by dividing (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 the indemnification 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 the aggregate 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 Commitments have 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 their repayment, collateralization, or termination.

“ Protective Advances ” has the meaning specified therefor in 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 in personal 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 personal property 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 or more 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, and each as amended, restated, supplemented or modified from time to time.

“ Quebec Subordinated Debt ” means collectively, (i) all Indebtedness owing to Investissement Québec (successor in interest to La Financière du Québec by virtue of decree 315-2004) under the Quebec Subordinated Debt Documents in the original aggregate maximum principal amount of $19,900,000, of which a balance in the aggregate principal amount not to exceed $3,024,918 remains outstanding as of the Closing Date, and subject to the Quebec Subordination Agreement and (ii) all other Indebtedness owing to Investissement Québec under the Quebec Subordinated Debt Documents or otherwise, in each case, which Indebtedness shall be expressly subordinate to payment in full of the Obligations pursuant to the Quebec Subordination Agreement.

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“ Quebec Subordinated Debt Documents ” means, collectively, (i) that certain Offre de Prêt (Loan Offer) from Investissement Québec to Borrower on August 30, 2013, in respect of a term loan in the original maximum principal amount of $5,000,000, and all security and other accessory documents or instruments thereto at any time, and subject at all times to the Quebec Subordination Agreement, (ii) that certain Offre de Prêt (Loan Offer) from Investissement Québec to the Canadian Borrower on July 25, 2014, in respect of a term loan in the original maximum principal amount of Cdn. $2,000,000, and all security and other accessory documents or instruments thereto at any time, and subject at all times to the Quebec Subordination Agreement 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.

“ Quebec Subordination Agreement ” means the subordination agreement dated as of the Closing Date between Investissement Québec and 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 Borrower or one of its Subsidiaries and the improvements thereto.

“ Real Property Collateral ” means (a) the Real 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 or appropriate, 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 or other 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 not result 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 unfunded commitments with respect thereto,

(b) such refinancings, renewals, or extensions 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 the Indebtedness 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

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least as 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 on account 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.

“ 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 that administers, advises or manages a Lender.

“ Related Real Property Documents ” 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 Party after 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 binder therefor) 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, estoppel letters, 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 the Real 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 insurance in 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 the Agents 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 with respect 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 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 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 Hazardous Materials required by Environmental Laws.

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“ 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 of all 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 Lenders shall be comprised of at least two (2) non-Affiliate Lenders.

“ Reserves ” means, as of any date of determination, 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 or appropriate, 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 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 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 or deemed 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 or distribution, 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 the direct 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 solely in 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, amalgamation or 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 other rights 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 other equity 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 the Borrower 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 of management,

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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 period ending 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 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 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 the Fixed 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) no Default 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 a certificate 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 and integration 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 system establishment 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 outstanding Revolving 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 Revolving Credit Agreement.

“ Revolving Credit Agreement ” means the Credit Agreement dated as of October 23, 2017, by and between, among others, Wells Fargo Canada Corporation, as administrative agent, the Revolving Lenders party thereto from time to time, as lenders, and the Borrower, as borrower, as same may be amended 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 other Revolving Loan Documents.

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“ 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) owing to the Revolving Secured Parties under the Revolving Loan Documents.

“ Revolving Loan Documents ” means the “Loan Documents” under and as defined in the Revolving Credit Agreement.

“ Revolving Secured Parties ” means the “Secured Parties”, as defined in the Revolving Credit Agreement.

“ 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 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 of June 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 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 between the 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 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 the Required Lenders, and addressed to the Agent from Rolex Canada Ltd. and acknowledged by Borrower.

“ Sale Leaseback 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

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consideration in an amount not less than the fair value of such fixed or capital 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 or capital 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 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 Subsidiary which 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 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 be resident 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 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 of Sanctions, (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 Persons described 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. Department of 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) any other Governmental Authority 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 any Hedge Provider that constitutes Permitted Indebtedness hereunder and is secured by the Revolving Agent’s Liens.

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“ Secured Hedging Obligations ” means all Indebtedness and other obligations of Borrower arising under, or otherwise with respect to, any Secured Hedging Agreement.

“ Securities Account ” means a securities account (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 the board, 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.

“ 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 Person are 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 believe that 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 terms and 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 of all 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 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 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. (New York 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 does not have as of the date of determination a spot buying rate for any such currency.

“ STA ” means an Act 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 “Permitted Dispositions”.

“ Subordinated Debt ” means collectively, the Management Debt, the Quebec Subordinated Debt, the Montrovest Debt and any Additional Subordinated Debt.

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“ 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 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 of Directors of such corporation, partnership, limited liability company, or other 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 now or 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.

“ Termination Date ” means, the earliest to occur of (i) the Maturity Date, (ii) the date on which the 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 to the 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 balance of the Term Loan owing to all Lenders.

“ United States ” means the United States of America.

“ US Divestiture ” means the sale of all of the shares of Mayor’s Jewelers, Inc., by Borrower pursuant to the US Divestiture Agreements.

“ US Divestiture Agreements ” 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 US Divestiture.

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“ 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 8.1

LIST OF SUBSIDIARIES OF BIRKS GROUP INC.


Name		Jurisdiction of Incorporation

Cash, Gold & Silver USA, Inc.		Delaware
Cash, Gold & Silver Inc.		Canada
Birks Jewellers Limited		Hong Kong

Exhibit 12.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jean-Christophe Bédos, 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 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 material respects 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 under our 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 be designed 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 our conclusions 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 during the 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 financial reporting, 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 financial reporting 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 the company’s internal control over financial reporting.


Date: July 3, 2018		/s/ Jean-Christophe Bédos

		Jean-Christophe Bédos,
		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, Pat Di Lillo, certify that:

1. I have reviewed this Annual Report on Form 20-F of Birks Group Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.


Date: July 3, 2018		/s/ Pasquale (Pat) Di Lillo

		Pasquale (Pat) Di Lillo,
		Vice President, Chief Financial & Administrative 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 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jean-Christophe Bédos, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted 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) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: July 3, 2018		/s/ Jean-Christophe Bédos

		Jean-Christophe Bédos,
		President and Chief Executive Office r

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 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Pat Di Lillo, Vice President, Chief Financial & Administrative Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted 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) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: July 3, 2018		/s/ Pasquale (Pat) Di Lillo

		Pasquale (Pat) Di Lillo
		Vice President, Chief Financial & Administrative Officer

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Birks Group Inc.

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-218932, 333-139613, 333-133561, and 333-171138) and the Registration Statement on Form F-3 (No. 333-173110) of Birks Group Inc. of our report dated June 29, 2018, with respect to the consolidated balance sheets of Birks Group Inc. as of March 31, 2018 and March 25, 2017, and the related consolidated statements of operations, other comprehensive income, stockholders’ equity and cash flows for the years ended March 31, 2018, March 25, 2017, and March 26, 2016, and the related notes (collectively, the “financial statements”),which appears in the March 31, 2018 Annual Report on Form 20-F of Birks Group Inc.

/s/ KPMG LLP*

July 3, 2018

Montreal, Canada


*CPA auditor, CA, public accountancy permit No. A125211		KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of Independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP.