Form of Note Purchase Agreement dated as of September 1, 2010 by and between Registrant and various institutional note purchasers with respect to the Registrants yen 10,000,000,000 principal amount 1.72% Series Notes due September 1, 2016

 

 

 

 

 

8.5. No Other Optional Prepayments or Purchase of Notes.

 

The Company will not, and will not permit any Affiliate to, prepay (whether directly or indirectly by purchase, redemption or other acquisition) any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Section 8.  The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Section 8 and no Notes may be issued in substitution or exchange for any such Notes.

 

8.6. Make-Whole Amount; Swap Reimbursement.

 

       (a) Make-Whole Amount with respect to Non-Swapped Notes

 

The term “Make-Whole Amount” means, with respect to any Non-Swapped Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Non-Swapped Note over the amount of such Called Principal, provided that such Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount with respect to any Non-Swapped Note, the following terms have the following meanings:

 

“Called Principal” means the principal of such Non-Swapped Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

 

“Discounted Value” means, with respect to the Called Principal of such Non-Swapped Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Non-Swapped Note is payable) equal to the Reinvestment Yield with respect to such Called Principal.

 

“Non-Swapped Note” means any Note other than a Swapped Note.

 

“Recognized Yen Market Maker” means any financial institution that makes regular markets in Japanese Government Bonds and Japanese Government Bond-based securities and financial products, as shall be agreed between the Required Holders and the Guarantor or, following the occurrence and continuance of an Event of Default, as reasonably determined by the Required Holders.

 

 

 

“Reinvestment Yield” means, with respect to the Called Principal of such Non-Swapped Note, the sum of 0.50% per annum plus the yield to maturity implied by (i) the yields reported as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the displays designated as Bloomberg Financial Markets News Screen BTMM-JN (or such other display as may replace such Bloomberg Financial Markets News Screen) for the most recently issued actively traded Japanese Government Bonds having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (inclu ding by way of interpolation), the average of the yields for such securities as determined by two Recognized Yen Market Makers.

 

In the case of each determination under clause (i) or (ii), as the case may be, of the preceding paragraph, such implied yield will be determined, if necessary, by (a) converting Japanese Government Bond quotations to bond equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded Japanese Government Bonds with the maturity closest to and greater than such Remaining Average Life and (2) the applicable actively traded Japanese Government Bonds with the maturity closest to and less than such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of such Non-Swapped Note.

 

“Remaining Average Life” means, with respect to any Called Principal of such Non-Swapped Note, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

 

“Remaining Scheduled Payments” means, with respect to the Called Principal of such Non-Swapped Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which an interest payment is due to be made under the terms of such Non-Swapped Note, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or Section 12.1.

 

“Settlement Date” means, with respect to the Called Principal of such Non-Swapped Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

 

          (b) Make-Whole Amount with respect to Swapped Notes

 

 

 

The term “Make-Whole Amount” means, with respect to any Swapped Note, an amount equal to the excess, if any, of the Swapped Note Discounted Value with respect to the Swapped Note Called Notional Amount related to such Swapped Note over such Swapped Note Called Notional Amount, provided the Make-Whole Amount may in no event be less than zero. All payments of Make-Whole Amount in respect of any Swapped Note shall be made in U.S. Dollars. For the purposes of determining the Make-Whole Amount with respect to any Swapped Note, the following terms have the following meanings:

 

“New Swap Agreement” means any cross-currency swap agreement pursuant to which the holder of a Swapped Note is to receive payment in U.S. Dollars and which is entered into in full or partial replacement of an Original Swap Agreement as a result of such Original Swap Agreement having terminated for any reason other than a non-scheduled prepayment or a repayment of such Swapped Note prior to its scheduled maturity.  The terms of a New Swap Agreement with respect to any Swapped Note do not have to be identical to those of the Original Swap Agreement with respect to such Swapped Note.

 

“Original Swap Agreement” means, with respect to any Swapped Note, (x) a cross-currency swap agreement and annexes and schedules thereto (an “Initial Swap Agreement”) that is entered into on an arm’s length basis by the original purchaser of such Swapped Note (or any affiliate thereof) in connection with the execution of this Agreement and the purchase of such Swapped Note and relates to the scheduled payments by the Company of interest and principal on such Swapped Note, under which the holder of such Swapped Note is to receive payments from the counterparty thereunder in U.S. Dollars and which is more particularly described on Schedule 8.6 hereto, (y) any Initial Swap Agreement that has been assumed (without any waiver, amendment, deletion or replacement of any material economic term or provision thereof) by a holder of a Swapped Note in connection with a transfer of such Swapped Note and (z) any Replacement Swap Agreement; and a “Replacement Swap Agreement” means, with respect to any Swapped Note, a cross-currency swap agreement and annexes and schedules thereto with payment terms and provisions (other than a reduction in notional amount, if applicable) identical to those of the Initial Swap Agreement with respect to such Swapped Note that is entered into on an arm’s length basis by the holder of such Swapped Note in full or partial replacement (by amendment, modification or otherwise) of such Initial Swap Agreement (or any subsequent Replacement Swap Agreement) in a notional amount not exceeding the outstanding principal amount of such Swapped Note following a non-scheduled prepayment or a repayment of such Swapped Note prior to its scheduled maturity. Any holder of a Swapped Note that enters into, assumes or terminates an Initial Swap Agreement or Replacement Swap Agreement shall within a reasonable period of time thereafter deliver to the Company a copy of the confirmation, assumption or termination related thereto.

 

“Swap Agreement” means, with respect to any Swapped Note, an Original Swap Agreement or a New Swap Agreement, as the case may be.

 

 

“Swapped Note” means any Note that as of the date of the Closing is subject to a Swap Agreement. A “Swapped Note” shall no longer be deemed a “Swapped Note” at such time as the related Swap Agreement ceases to be in force in respect thereof.

 

“Swapped Note Applicable Percentage” means 0.50%.

 

“Swapped Note Called Notional Amount” means, with respect to any Swapped Note Called Principal of any Swapped Note, the payment in U.S. Dollars due to the holder of such Swapped Note under the terms of the Swap Agreement to which such holder is a party, attributable to and in exchange for such Swapped Note Called Principal and assuming that such Swapped Note Called Principal is paid on its scheduled maturity date, provided that if such Swap Agreement is not an Initial Swap Agreement, then the “Swapped Note Called Notional Amount” in respect of such Swapped Note shall not exceed the amount in U.S. Dollars which would have been due to the holder of such Swapped Note under the terms of the Initial Swap Agreement to which such holder was a party (or if such h older was never party to an Initial Swap Agreement, then the last Initial Swap Agreement to which the most recent predecessor in interest to such holder as a holder of such Swapped Note was a party), attributable to and in exchange for such Swapped Note Called Principal and assuming that such Swapped Note Called Principal is paid on its scheduled maturity date.

 

“Swapped Note Called Principal” means, with respect to any Swapped Note, the principal of such Swapped Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

 

“Swapped Note Discounted Value” means, with respect to the Swapped Note Called Notional Amount of any Swapped Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires, the amount obtained by discounting all Swapped Note Remaining Scheduled Swap Payments corresponding to the Swapped Note Called Notional Amount of such Swapped Note from their respective scheduled due dates to the Swapped Note Settlement Date with respect to such Swapped Note Called Notional Amount, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on such Swapped Note is payable) equal to the Swapped Note Reinvestm ent Yield with respect to such Swapped Note Called Notional Amount.

 

“Swapped Note Reinvestment Yield” means, with respect to the Swapped Note Called Notional Amount of any Swapped Note, the sum of (x) Swapped Note Applicable Percentage plus (y) the yield to maturity implied by (1) the yields reported, as of 10.00 A.M. (New York City time) on the second Business Day preceding the Swapped Note Settlement Date with respect to such Swapped Note Called Notional Amount, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on the Bloomberg Financial Markets for the most recently issued actively traded on the run U.S. Treasury securities having a maturity equal to the Swapped Note Remaining Average Life of such Swapped Note Called Notional Amount as of such Swapped Note Settlement Date, or (2) i f such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported for the latest day for which such yields have been so reported as of the second Business Day preceding the Swapped Note Settlement Date with respect to such Swapped Note Called Notional Amount, in U.S. Federal Reserve Statistical Release H.15 (or any comparable successor publication) for applicable U.S. Treasury securities having a constant maturity equal to the Swapped Note Remaining Average Life of such Swapped Note Called Notional Amount as of such Swapped Note Settlement Date.

 

 

 

In the case of each determination under clause (1) or (2), as the case may be, of the preceding paragraph such implied yield will be determined, if necessary, by (A) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (B) interpolating linearly between (i) the applicable U.S. Treasury security with the maturity closest to and greater than the Swapped Note Remaining Average Life of such Swapped Note Called Notional Amount and (ii) the applicable U.S. Treasury security with the maturity closest to and less than such Swapped Note Remaining Average Life. The Swapped Note Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of such Swapped Note.

 

“Swapped Note Remaining Average Life” means, with respect to any Swapped Note Called Notional Amount, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (x) such Swapped Note Called Notional Amount into (y) the sum of the products obtained by multiplying (1) the principal component of each Swapped Note Remaining Scheduled Swap Payments with respect to such Swapped Note Called Notional Amount by (2) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Swapped Note Settlement Date with respect to such Swapped Note Called Notional Amount and the scheduled due date of such Swapped Note Remaining Scheduled Payments.

 

“Swapped Note Remaining Scheduled Swap Payments” means, with respect to the Swapped Note Called Notional Amount relating to any Swapped Note, the payments due to the holder of such Swapped Note in U.S. Dollars under the terms of the Swap Agreement to which such holder is a party which correspond to all payments of the Swapped Note Called Principal of such Swapped Note corresponding to such Swapped Note Called Notional Amount and interest on such Swapped Note Called Principal (other than that portion of the payment due under such Swap Agreement corresponding to the interest accrued on the Swapped Note Called Principal to the Swapped Note Settlement Date) that would be due after the Swapped Note Settlement Date in respect of such Swapped Note Called Notional Amount ass uming that no payment of such Swapped Note Called Principal is made prior to its originally scheduled payment date.

 

“Swapped Note Settlement Date” means, with respect to the Swapped Note Called Notional Amount of any Swapped Note Called Principal of any Swapped Note, the date on which such Swapped Note Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

 

 

 

 

8.7. Swap Breakage.

 

If any Swapped Note is prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, then (a) any resulting Net Loss in connection therewith shall be reimbursed to the holder of such Swapped Note by the Company in U.S. Dollars upon any such prepayment or repayment of such Swapped Note (such amount payable herein referred to as the “Swap Reimbursement Amount”) and (b) any resulting Net Gain in connection therewith shall be deducted (i) from the Make-Whole Amount, if any, or any principal or interest to be paid to the holder of such Swapped Note by the Company upon any such prepayment of such Swapped Note pursuant to Section 8.2 or (ii) from the Make-Whole Amount, if any, to be paid to the holder of such Swapped Note by the Company upon any such repayment of such Swapped Note pursuant to Section 12.1, provided that, in either case, the Make-Whole Amount in respect of such Swapped Note may not in any event be less than zero. Each holder of a Swapped Note shall be responsible for calculating its own Net Loss or Net Gain, as the case may be, and Swap Breakage Amount in U.S. Dollars upon the prepayment or repayment of all or any portion of such Swapped Note, and such calculations as reported to the Company in reasonable detail shall be binding on the Company absent demonstrable error (subject to compliance by the relevant holder with the requirements of the second succeeding paragraph with respect to its calculation of the Swap Breakage Amount).  Any Net Gain in excess of the Make-Whole Amount to be applied to principal or interest pursuant to clause (b)(i) of this Section 8.7 shall be (a) converted by the holder of the affected Swapped Note from U.S. Dollars to Japanese Yen at the Japanese Yen/U.S. Dollar ex change rate, as determined as of 10:00 A.M. (New York City time) on the day such Swapped Note is prepaid as indicated on the applicable screen of Bloomberg Financial Markets and any such calculation shall be reported to the Company in reasonable detail and shall be binding on the Company absent demonstrable error, and (b) applied in the following order of priority: (i) first, to any accrued and unpaid interest due on the day such Swapped Note is prepaid or repaid, (ii) second, to any principal due on the day such Swapped Note is prepaid or repaid, (iii) third, to any accrued interest on the principal amount outstanding after giving effect to any such prepayment, and (iv) fourth, to any principal outstanding after giving effect to any such prepayment.

 

As used in this Section 8.7 with respect to any Swapped Note that is prepaid or accelerated: “Net Loss” means the amount, if any, by which the Swapped Note Called Notional Amount exceeds the sum of (x) the Swapped Note Called Principal plus (or minus in the case of an amount paid) (y) the Swap Breakage Amount received (or paid) by the holder of such Swapped Note; and “Net Gain” means the amount, if any, by which the Swapped Note Called Notional Amount is exceeded by the sum of (x) the Swapped Note Called Principal plus (or minus in the case of an amount paid) (y) the Swap Breakage Amount received (or paid) by such holder. For purposes of any determination of any “Net Loss” or “Net Ga in,” the Swapped Note Called Principal shall be determined by the holder of the affected Swapped Note by converting Japanese Yen into U.S. Dollars at the current Japanese Yen/U.S. Dollar exchange rate, as determined as of 10:00 A.M. (New York City time) on the day such Swapped Note is prepaid or accelerated as indicated on the applicable screen of Bloomberg Financial Markets and any such calculation shall be reported to the Company in reasonable detail and shall be binding on the Company absent demonstrable error.

 

 

 

 

As used in this Section 8.7, “Swap Breakage Amount” means, with respect to the Swap Agreement associated with any Swapped Note, in determining the Net Loss or Net Gain, the amount that would be received (in which case the Swap Breakage Amount shall be positive) or paid (in which case the Swap Breakage Amount shall be negative) by the holder of such Swapped Note as if such Swap Agreement had terminated due to the occurrence of an event of default or termination, which shall be an amount equal to the “Settlement Amount” (or “Close-out Amount” or analogous term, as applicable) as defined by the International Swap and Derivatives Associat ion’s (“ISDA”) 1992 Multi-Currency Cross Border Master Agreement or any applicable ISDA agreement (including, without limitation, the 2002 Master Agreement) which is the successor or replacement to the foregoing (the “ISDA Master Agreement”); provided, however, that if such holder (or its predecessor in interest with respect to such Swapped Note) was, but is not at the time, a party to an Original Swap Agreement but is a party to a New Swap Agreement, then the Swap Breakage Amount shall mean the lesser of (x) the gain or loss (if any) which would have been received or incurred (by payment, through off-set or netting or otherwise) by the holder of such Swapped Note under the terms of the Original Swap Agreement (if any) in respect of such Swapped Note to which such holder (or any affiliate thereof) was a party (or if such holder was never a party to an Original Swap Agr eement, then the last Original Swap Agreement to which the most recent predecessor in interest to such holder as a holder of a Swapped Note was a party) and which would have arisen as a result of the payment of the Swapped Note Called Principal on the Swapped Note Settlement Date and (y) the gain or loss (if any) actually received or incurred by the holder of such Swapped Note, in connection with the payment of such Swapped Note Called Principal on the Swapped Note Settlement Date, under the terms of the New Swap Agreement to which such holder (or any affiliate thereof) is a party.  The holder of such Swapped Note will make all calculations related to the Swap Breakage Amount in good faith and in accordance with its customary practices for calculating such amounts under the ISDA Master Agreement pursuant to which such Swap Agreement shall have been entered into and assuming for the purpose of such calculation that there are no other transactions entered into pursuant to such ISDA Master Agreement ( other than such Swap Agreement).

 

The Swap Breakage Amount shall be payable in U.S. Dollars.

 

9.	AFFIRMATIVE COVENANTS.

 

The Company covenants that so long as any of the Notes are outstanding:

 

9.1. Compliance with Law.

 

The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, the Anti-Terrorism Order and Public Law 107-56 (USA Patriot Act), and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

 

 

9.2. Insurance.

 

The Company will and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

 

9.3. Maintenance of Properties.

 

The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if the Company has concluded that such discontinuance is desirable in the conduct of its business and that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

9.4. Payment of Taxes and Claims.

 

The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes, assessments, charges or levies have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Com pany or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes, assessments, charges and levies in the aggregate could not reasonably be expected to have a Material Adverse Effect.

 

9.5. Corporate Existence, etc.

 

Subject to Section 10.5(c), the Company will at all times preserve and keep in full force and effect its corporate existence.  Subject to Sections 10.5 and 10.6, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect.

 

 

 

 

9.6. Subsequent Guarantors.

 

The Company covenants that if at any time after the date of this Agreement any Subsidiary which is not already a Guarantor at such time, shall be or become a party to a Guaranty (whether as a borrower or an obligor) of all or any part of the Indebtedness of the Company or its Subsidiaries under, or in respect of, the Credit Agreement, the Company will cause each such Subsidiary, contemporaneously with entering into any such Guaranty (and in any event no later than 30 days thereafter), to execute and deliver to the holders of the Notes (a) a Guaranty of the Company’s obligations under the Notes and this Agreement, in substantially the form of the Guaranty Agreement attached as Exhibit 4.7 to this Agreement to the extent permitted under local law, and (b) to the extent an opinion of counsel is delivered with respect to such Guaran ty of such Indebtedness under, or in respect of, the Credit Agreement, an opinion of counsel for such Subsidiary with respect to such Guaranty in substantially the form of the opinion of counsel so delivered under, or in respect of, the Credit Agreement.

 

10.	NEGATIVE COVENANTS.

 

The Company covenants that so long as any of the Notes are outstanding:

 

10.1. Transactions with Affiliates.

 

The Company will not, and will not permit any Subsidiary to, enter into directly or indirectly any transaction or group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except pursuant to the reasonable requirements of the Company’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.

 

10.2. Line of Business.

 

The Company will not, and will not permit any of its Subsidiaries to, engage in any business if, as a result, the general nature of the business in which the Company and its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and its Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended January 31, 2010, except for vertical, horizontal or geographical expansion of any such business so engaged in, whether under the Tiffany & Co. name or any other name.  Any such expansion may include, but shall not be limited to, additional manufacturing of jewelry products, trading in and processing of diamonds and the acquisition/operation of additional retail operations under other tradenames.

 

 

 

 

10.3. Limitation on Debt.

 

(a) Incurrence of Debt.  The Company will not, and will not permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Debt, unless on the date the Company or such Subsidiary becomes liable with respect to any such Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt,

 

(i) no Default or Event of Default would exist,

 

(ii) Consolidated Total Debt would not exceed 60% of Consolidated Total Capitalization, and

 

(iii) the Fixed Charge Coverage Ratio in respect of such Debt at such time would be greater than or equal to 2.0 to 1.0.

 

(b) Incurrence of Priority Debt.  The Company will not, and will not permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Priority Debt, unless on the date the Company or such Subsidiary becomes liable with respect to any such Priority Debt and immediately after giving effect thereto and the concurrent retirement of any other Priority Debt,

 

(i) no Default or Event of Default would exist; and

 

(ii) Priority Debt would not exceed 20% of Consolidated Net Worth.

 

(c) Deemed Incurrence.  For the purposes of this Section 10.3, any Person becoming a Subsidiary after the date hereof shall be deemed, at the time it becomes a Subsidiary, to have incurred all of its then outstanding Debt, and any Person extending, renewing or refunding any Debt shall be deemed to have incurred such Debt at the time of such extension, renewal or refunding.

 

10.4. Liens.

 

The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly create, assume, incur or suffer to be created, assumed or incurred or to exist, any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits (unless it makes, or causes to be made, effective provision whereby the Notes will be equally and ratably secured with any and all other obligations thereby secured, pursuant to an agreement or agreements reasonably satisfactory to the Required Holders and, in any such case, the Notes shall have the benefit, to the fullest extent that, and with such priority as, the holders of the Notes may be entitled under applicable law, of an equitable Lien on such property), except:

 

 

 

 

(a) Taxes, etc. -- Liens for taxes, assessments or other governmental charges that are not yet due and payable or the payment of which is not at the time required by Section 9.4;

 

(b) Legal Proceedings -- Liens

 

(i) arising from judicial attachments and judgments,

 

(ii) securing appeal bonds, supersedeas bonds, and

 

(iii) arising in connection with court proceedings (including, without limitation, surety bonds and letters of credit or any other instrument serving a similar purpose),

 

provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings, and in respect of which adequate reserves shall have been established on the books of the Company and its Subsidiaries in accordance with GAAP;

 

(c) Ordinary Course Liens -- Liens incidental to the normal conduct of the business of the Company or any Subsidiary or the ownership of their properties or assets which are not incurred in connection with the incurrence of Debt and which do not in the aggregate materially impair the use of such properties in the operation of the business of the Company and its Subsidiaries taken as a whole or materially impair the value of such properties for the purpose of such business, including, without limitation, Liens

 

(i) in connection with workers’ compensation, unemployment insurance, social security and other like laws,

 

(ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety and performance bonds (of a type other than set forth in Section 10.4(b)), bids, leases (other than Capital Leases), purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property,

 

(iii) to secure the claims or demands of materialmen, mechanics, carriers, warehousemen, vendors, repairmen, landlords, lessors and other like Persons, arising in the ordinary course of business, and

 

(iv) in the nature of reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions or encumbrances affecting real property,

 

provided that any amounts secured by such Liens are not overdue;

 

 

 

 

(d) (i)           Existing Liens -- Liens in existence securing Debt and listed in Schedule 5.15, and

 

              (ii) Renewals -- Liens securing renewals, extensions (as to time) and refinancings of Debt secured by the

          Liens listed in Schedule 5.15, provided that (A) the amount of Debt secured by each such Lien is not increased in

          excess of the amount of Debt outstanding on the date of such renewal, extension or refinancing, (B) none of such Liens is

          extended to include any additional property of the Company or any Subsidiary, and (C) immediately after giving effect

          thereto, no Default or Event of Default would exist;

 

(e) Intra-Group Liens -- Liens on property of the Company or any of its Subsidiaries securing Debt owing to the Company or to any of its Subsidiaries; provided that any such Lien does not materially and adversely affect the interests of the holders of the Notes under the Financing Documents;

 

(f) Purchase Money Liens -- Liens on fixed assets (or any improvement thereon) or in rights relating thereto, in each case, acquired or constructed by the Company or any Subsidiary after the Closing Day to secure Debt of the Company or such Subsidiary incurred in connection with such acquisition or construction, provided that

 

(i) no such Lien shall extend to or cover any property other than the property (or improvement thereon) being acquired or constructed,

 

(ii) the amount of Debt secured by any such Lien shall not exceed an amount equal to the lesser of (A) the cost to the Company or such Subsidiary of the property (or improvement thereon) being acquired or constructed or (B) the Fair Market Value (as determined in good faith by the Company) of such property, determined at the time of such acquisition or at the time of substantial completion of such construction, and

 

(iii) such Lien shall be created concurrently with or within 120 days after such acquisition or the substantial completion of such construction;

 

(g) Acquisition Liens -- Liens existing on property of a Person immediately prior to its being consolidated with or merged into the Company or a Subsidiary or its becoming a Subsidiary, or any Lien existing on any property acquired by the Company or any Subsidiary at the time such property is so acquired (whether or not the Debt secured thereby shall have been assumed), provided that

 

(i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person’s becoming a Subsidiary or such acquisition of property,

 

(ii) each such Lien shall extend solely to the item or items of property so acquired and, if required by the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property, and

 

 

 

 

(iii) the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to the Fair Market Value (as determined in good faith by the board of directors of the Company or such Subsidiary) of such property (or improvement thereon) at the time of such transaction;

 

(h) Consignment Liens -- Liens incurred in the ordinary course of business not securing Debt in favor of Persons supplying the Company or any Subsidiary with precious metals, precious gems or jewelry on a consignment basis, provided that such Liens cover only the following property of the Company or such Subsidiary which shall have been supplied by such Persons:

 

(i) gold and silver bullion, gold and silver granule and other gold, silver, platinum or precious metals and precious gems or jewelry in whatever form including all substitutions, replacements and products in which any gold, silver, platinum or precious metals and precious gems or jewelry are incorporated or into which gold, silver, platinum or precious metals and precious gems or jewelry are processed or converted, whether now or hereafter owned or acquired by the Company or such Subsidiary or in which the Company or such Subsidiary now or hereafter acquires an interest, and all proceeds and products of and accessions to the foregoing, and

 

(ii) all inventory now or hereafter owned by the Company or such Subsidiary or in which the Company or such Subsidiary now or hereafter acquires an interest, including all merchandise, returned and repossessed goods, raw materials, goods in process, finished goods and proceeds therefor, and all accounts of the Company or such Subsidiary including all accounts receivable, notes, drafts, acceptances and other forms of obligations and receivables now owned or hereafter arising from such inventory sold or otherwise disposed of by the Company or such Subsidiary and proceeds thereof and all contract rights and proceeds of the foregoing; and

 

(i) Other Liens -- Liens securing Debt of the Company or any Subsidiary and not otherwise permitted by clauses (a) through (h) inclusive, of this Section 10.4 (other than Liens securing Debt under the Credit Agreement), but only to the extent that the Debt secured by such Lien is, at the time of the incurrence of such Debt, permitted to be incurred under Section 10.3(b).

 

10.5. Merger, Consolidation, etc.

 

The Company will not, and will not permit any Subsidiary to, directly or indirectly, consolidate with, or merge into, any other Person or permit any other Person to consolidate with, or merge into, it, or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person, except that

 

 

 

(a) any Subsidiary (other than a Guarantor) may consolidate with, or merge into, the Company or another Subsidiary if, immediately after, and after giving effect to, such transaction, no Default or Event of Default shall exist;

 

(b) any Subsidiary (other than a Guarantor) may consolidate with, or merge into, any other Person, or allow any other Person to consolidate with, or merge into, it, if

 

(i) in the case of any consolidation or merger in which the successor or surviving corporation is a Subsidiary, immediately after, and after giving effect to, such transaction,

 

(A) no Default or Event of Default would exist, and

 

(B) the successor or surviving corporation would be permitted to incur at least $1.00 of additional Debt by the provisions of Section 10.3(a) and at least $1.00 of additional Priority Debt by the provisions of Section 10.3(b) (in each case, other than Debt owing to the Company or a Subsidiary), and

 

(ii) in the case of any consolidation or merger in which the successor or surviving corporation is not a Subsidiary, such transaction would be permitted under the provisions of Section 10.6(a)(iii) (deeming such consolidation or merger to be a Transfer of all of the assets and liabilities of such Subsidiary) and immediately after, and after giving effect to, such transaction, no Default or Event of Default would exist; and

 

(c) the Company or any Guarantor may consolidate with, or merge into, any other Person, or permit any other Person to consolidate with, or merge into, it, if

 

(i) the successor or surviving corporation (the “Successor Corporation”) shall be a solvent corporation organized under the laws of any state of the United States of America,

 

(ii) the Successor Corporation, if not the Company or such Guarantor, shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of the obligations of the Company under this Agreement and the Notes, or of such Guarantor under the Guaranty Agreement, as the case may be, including, without limitation, all covenants herein and therein contained, and the Company shall cause to be delivered to each holder of a Note an opinion of outside counsel (such counsel to be reasonably satisfactory to the Required Holders) confirming the enforceability of such assumption, and

 

(iii) immediately after, and after giving effect to, such transaction,

 

(A) no Default or Event of Default would exist, and

 

 

(B) the Successor Corporation would be permitted to incur at least $1.00 of additional Debt by the provisions of Section 10.3(a) and at least $1.00 of additional Priority Debt by the provisions of Section 10.3(b) (in each case, other than Debt owing to the Company or a Subsidiary).

 

10.6. Sale of Assets.

 

(a) Sale of Assets.  The Company will not, and will not permit any of its Subsidiaries to, make any Transfer, provided that the foregoing restriction does not apply to a Transfer if:

 

(i) the property that is the subject of such Transfer constitutes either (A) inventory held for sale, or (B) equipment, fixtures, supplies or materials no longer required, in the opinion of the Company or such Subsidiary, in the operation of the business of the Company or such Subsidiary or that is obsolete, and, in the case of any Transfer described in clause (A) or clause (B), such Transfer is in the ordinary course of business (an “Ordinary Course Transfer”); or

 

(ii) either

 

(A) such Transfer is from a Subsidiary to the Company or a Wholly-Owned Subsidiary;

 

(B) such Transfer is from the Company to a Wholly-Owned Subsidiary; or

 

(C) such Transfer is from a Wholly-Owned Subsidiary to the Company or any other Wholly-Owned Subsidiary;

 

so long as immediately before and immediately after the consummation of such transaction, and after giving effect thereto,

 

(I) no Default or Event of Default exists or would exist, and

 

(II) the Company would be permitted to incur at least $1.00 of additional Debt by the provisions of Section 10.3(a) and at least $1.00 of additional Priority Debt by the provisions of Section 10.3(b) (in each case other than Debt owing to the Company or a Subsidiary)

 

(each such Transfer, collectively with any Ordinary Course Transfers, “Excluded Transfers”); or

 

(iii) such Transfer is not an Excluded Transfer and does not involve a Substantial Portion of the property of the Company and its Subsidiaries, so long as immediately before and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist.

 

 

(b) Debt Prepayment Applications and Reinvested Transfers.

 

(i) Notwithstanding the provisions of Section 10.6(a), the determination of whether a Transfer involves a Substantial Portion of the property of the Company and its Subsidiaries, as provided in Section 10.6(a)(iii) and Section 10.6(c)(iii), shall be made without taking into account the same proportion of the book value attributable to the property subject to such Transfer as shall be equal to the proportion (the “Designated Portion”) of the Net Asset Sale Proceeds Amount with respect to such Transfer to be applied to either a Debt Prepayment Application with respect to such Transfer o r the acquisition of assets of at least equivalent value that are similar to the assets which were the subject of such Transfer (a “Reinvested Transfer”) within 365 days of the consummation of such Transfer, as specified in an Officer’s Certificate delivered to each holder of Notes prior to, or contemporaneously with, the consummation of such Transfer.

 

(ii) If, notwithstanding the certificate referred to in the foregoing clause (i), the Company shall fail to apply the entire amount of the Designated Portion as specified in such certificate within the period stated in Section 10.6(b)(i), the computation of whether such Transfer involved a Substantial Portion of the property of the Company and its Subsidiaries shall be recomputed, as of the date of such Transfer, by taking into account the same proportion of the book value attributable to the property subject to such Transfer as shall be equal to the proportion of the Net Asset Sale Proceeds Amount actually applied to either a Debt Prepayment Application or a Reinvested Transfer within such period.  If, upon the recomputa tion provided for in the preceding sentence, such Transfer involved a Substantial Portion of the property of the Company and the Subsidiaries, an Event of Default shall be deemed to have existed as of the expiration of such period.

 

(c) Certain Definitions.  The following terms have the following meanings:

 

(i) “Debt Prepayment Application” means, with respect to any Transfer of property by the Company or any Subsidiary, the application by the Company or such Subsidiary of cash in an amount equal to the Net Asset Sale Proceeds Amount with respect to such Transfer to pay Senior Debt of the Company or such Subsidiary (other than Senior Debt owing to any of the Subsidiaries or any Affiliate and Senior Debt in respect of any revolving credit or similar facility providing the Company or such Subsidiary with the right to obtain loans or other extensions of credit from time to time, except to the extent that in connection with such payment of Senior Debt the availability of credit under such credit facility is permanently reduced by an amount not less than the amount of such proceeds applied to the payment of such Senior Debt), provided that in the course of making such application the Company shall offer to prepay each outstanding Note in accordance with Section 8.2 in a principal amount that equals the Ratable Portion for such Note.  A holder of Notes may accept or reject such offer to prepay by causing a notice of such acceptance or rejection to be delivered to the Company at least two Business Days prior to the prepayment date specified by the Company in such offer.  If a holder of Notes has not responded to such offer by a date which is at least two Business Days prior to such specified prepayment date, such holder shall be deemed to have accepted such offer of prepayment.  If any holder of a Note rejects such offer of prepayment, then, for purposes of the preceding s entence only, the Company nevertheless will be deemed to have paid Senior Debt in an amount equal to the Ratable Portion for such Note.

 

 

 

As used in this definition,

 

“Ratable Portion” means, for any Note, an amount equal to the product of

 

(A) the Net Asset Sale Proceeds Amount being so offered to be applied to the payment of Senior Debt, multiplied by

 

(B) a fraction the numerator of which is the outstanding principal amount of such Note and the denominator of which is the aggregate outstanding principal amount of Senior Debt of the Company and its Subsidiaries, after eliminating all offsetting debits and credits between the Company and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP.

 

(ii) “Disposition Value” means, at any time, with respect to any Transfer of property,

 

(A) in the case of property that does not constitute Capital Stock of a Subsidiary, the book value thereof, valued at the amount taken into account (or which would be taken into account) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1, and

 

(B) in the case of property that constitutes Capital Stock of a Subsidiary, an amount equal to that percentage of the book value of the assets of the Subsidiary that issued such Capital Stock as is equal to the percentage that the book value of such Capital Stock represents of the book value of all of the outstanding Capital Stock of such Subsidiary (assuming, in making such calculations, that all securities convertible into such Capital Stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion), determined as of the date of the balance sheet referred to in the foregoing clause (A).

 

 

(iii) “Substantial Portion” means, at any time, any property subject to a Transfer if

 

(A) the Disposition Value of such property, when added to the Disposition Value of all other property of the Company and its Subsidiaries that shall have been the subject of a Transfer (other than an Excluded Transfer and subject, with respect to both such property and all such other property, to the provisions of Section 10.6(b)) during the then current fiscal year of the Company, exceeds an amount equal to 15% of Consolidated Total Assets as reflected (or as would be reflected) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1, or

 

(B) the Disposition Value of such property, when added to the Disposition Value of all other property of the Company and its Subsidiaries that shall have been the subject of a Transfer (other than an Excluded Transfer and subject, with respect to both such property and all such other property, to the provisions of Section 10.6(b)) during the period beginning on the date of this Agreement and ending on and including the date of the consummation of such Transfer, exceeds an amount equal to 30% of Consolidated Total Assets as reflected (or as would be reflected) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1.

 

(iv) “Transfer” means, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including, without limitation, Capital Stock of any other Person, but does not include any such transaction subject to the provisions of Section 10.5 (other than Section 10.5(b)(ii)).

 

10.7. Most Favored Lender Status.

 

(a) If the Company agrees to any addition, amendment, waiver, deletion, termination or other modification of any affirmative or negative covenant, default, event of default or comparable provision (however named or designated) set forth in the Credit Agreement then in effect (a “Credit Agreement Modification”) which is more or less restrictive on the Company or any Subsidiary than the provisions contained in this Agreement (including, without limitation, those set forth on Schedule 10.7), then the Company shall, within five (5) Business Days of such Credit Agreement Modification, provide a notice to the holders of the Notes in respect of each suc h Credit Agreement Modification.  Each of the provisions set forth on Schedule 10.7 are on the date hereof, and immediately upon the effectiveness of a Credit Agreement Modification the terms of such Credit Agreement Modification shall be, automatically incorporated by reference into this Agreement (each such Credit Agreement Modification and each of such provisions set forth on Schedule 10.7 as so incorporated is herein referred to as an “Incorporated Provision”), mutatis mutandis, as if set forth fully herein; provided, that at any time as a Default or Event of Default has occurred and is continuing, no Credit Agreement Modification which is less restrictive on the Company or any Subsidiary will be deemed incorporated into this Agreement without the prior written consent of the Required Holders, wh ich written consent shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, in no event shall an Incorporated Provision amend or modify any provision otherwise set forth herein to make such provision less restrictive as to the Company or any Subsidiary than the corresponding provision set forth in the 2002 Note Agreement, as in effect on the Closing Day.

 

 

 

(b) Except as contemplated by Section 10.7(a), no Incorporated Provision shall be modified unless such Incorporated Provision is amended or waived in accordance with the provisions of Section 17 and then only to the extent of such amendment or waiver.

 

(c) In connection with any Credit Agreement Modification, the Company and the Required Holders agree within 30 days of the written request of either the Company or the Required Holders, to enter into a formal amendment to this Agreement, in form and substance satisfactory to the Required Holders, acting reasonably, to document the applicable amendments to this Agreement arising from any such Credit Agreement Modification. If any fee, supplemental or additional interest or other consideration is given to any lender under a Credit Agreement Modification as consideration for or as an inducement to enter into any Credit Agreement Modification, the equivalent of such fee, supplemental or additional interest or other consideration shall b e paid to the holders of the Notes with respect to such Credit Agreement Modification that is incorporated into this Agreement at the same time as such fee, supplemental or additional interest or other consideration is paid to such lender.  For the avoidance of doubt, the amount of any payment (whether as fee or interest) to any holder of Notes then being made shall be deemed equivalent to any similar payment under the Credit Agreement if such payment to such holder of Notes represents the same percentage of the then outstanding principal amount of such Notes as the percentage of all then outstanding Debt under the Credit Agreement represented by the aggregate amount of such similar payments under the Credit Agreement.

 

11.	EVENTS OF DEFAULT.

 

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

 

(a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, or Swap Reimbursement Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

 

(b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or

 

(c) the Company defaults in the performance of or compliance with any term contained in any of Sections 10.3 through Section 10.6, inclusive, any Incorporated Provision that amends, or is otherwise of the type set forth in such Sections 10.3 through 10.6 or is a negative covenant or Section 7.1(d); or

 

 

(d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this paragraph (d) of Section 11); or

 

(e) any representation or warranty made in writing by or on behalf of the Company or any Guarantor or by any officer of the Company or any Guarantor in this Agreement or the Guaranty Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or

 

(f)     (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness (other than Indebtedness under this Agreement and the Notes) beyond any period of grace provided with respect thereto, that individually or together with such other Indebtedness as to which any such default exists has an aggregate outstanding principal amount of at least $20,000,000, or

 

(ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness (other than Indebtedness under this Agreement and the Notes), that individually or together with such other Indebtedness as to which any such default exists has an aggregate outstanding principal amount of at least $25,000,000, or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or